[Federal Register Volume 89, Number 183 (Friday, September 20, 2024)]
[Rules and Regulations]
[Pages 77244-77443]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-19037]



[[Page 77243]]

Vol. 89

Friday,

No. 183

September 20, 2024

Part II





Federal Communications Commission





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47 CFR Parts 14 and 64





Incarcerated People's Communication Services; Implementation of the 
Martha Wright-Reed Act; Rates for Interstate Inmate Calling Services; 
Final Rule

  Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / 
Rules and Regulations  

[[Page 77244]]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 14, 64

[WC Docket Nos. 12-375, 23-62; FCC 24-75; FR ID 237400]


Incarcerated People's Communication Services; Implementation of 
the Martha Wright-Reed Act; Rates for Interstate Inmate Calling 
Services

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) adopts rules addressing all intrastate, interstate, and 
international audio and video incarcerated people's communication 
services (IPCS), including video visitation services. The reforms 
include adopting permanent rate caps for audio IPCS and interim rate 
caps for video; prohibiting IPCS providers from making site commission 
payments associated with IPCS and preempting state and local laws and 
regulations requiring such commissions; prohibiting IPCS providers from 
imposing any separate ancillary service charges on IPCS consumers; 
strengthening the Commission's requirements for access to IPCS by 
incarcerated people with disabilities; permitting IPCS providers to 
offer optional alternate pricing plans that comply with the rate caps; 
strengthening existing consumer disclosure and inactive account 
requirements; revising the existing annual reporting and certification 
requirements; facilitating enforcement of the new IPCS rules; and 
delegating authority to the Commission's Wireline Competition Bureau 
(WCB), Consumer and Governmental Affairs Bureau (CGB), and Office of 
Economics and Analytics (OEA).

DATES: 
    Effective date: This rule is effective November 19, 2024, except 
for amendatory instruction 7 (Sec. Sec.  64.611(l)(2), (3), (5), (6)); 
amendatory instruction 15 (Sec.  64.6040(f)); amendatory instruction 17 
(Sec.  64.6060); amendatory instruction 20 (Sec.  64.6090); amendatory 
instruction 22 (Sec.  64.6110); amendatory instruction 23 (Sec.  
64.6120); amendatory instruction 25 (Sec.  64.6130(d) through (f), and 
(h) through (k)); amendatory instruction 27 (Sec.  64.6140(c), (d), 
(e)(2) through (4), (f)(2), and (f)(4)), which are delayed 
indefinitely. The Federal Communications Commission will publish a 
document in the Federal Register announcing the effective date of these 
provisions.
    Delegation of authority: The delegations of authority to WCB, CGB, 
and OEA are effective on November 19, 2024.

ADDRESSES: Federal Communications Commission, 45 L Street NE, 
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 and Governmental Affairs Bureau at (202) 418-0530 
(voice) or (202) 418-0432 (TTY).

FOR FURTHER INFORMATION CONTACT: Stephen Meil, Pricing Policy Division 
of the Wireline Competition Bureau, at (202) 418-7233 or via email at 
[email protected], regarding the portions of this document relating 
to matters other than communications services for incarcerated people 
with disabilities, and Michael Scott, Disability Rights Office of the 
Consumer and Governmental Affairs Bureau, at (202) 418-1264 or via 
email at [email protected], regarding the portions of this document 
relating to communications services for incarcerated people with 
disabilities.

SUPPLEMENTARY INFORMATION: This is a summary of the Federal 
Communications Commission's (Commission's) Report and Order, document 
FCC 24-75, adopted on July 18, 2024 and released on July 22, 2024, in 
WC Docket Nos. 12-375 and 23-62. This summary is based on the public 
redacted version of the document, the full text of which can be 
obtained from the Commission's Electronic Document Management System 
(EDOCS) website at www.fcc.gov/edocs or via the Commission's Electronic 
Comment Filing System (ECFS) website at www.fcc.gov/ecfs, or is 
available at the following internet address: https://docs.fcc.gov/public/attachments/FCC-24-75A1.pdf.

Synopsis

I. Introduction

    1. Today we take the most significant steps thus far to fulfill the 
dream of Martha Wright-Reed, who advocated tirelessly to ensure that 
incarcerated people would be able to communicate with family and loved 
ones at just and reasonable rates. While this document implements the 
requirements of the Martha Wright-Reed Just and Reasonable 
Communications Act of 2022 (Martha Wright-Reed Act or Act), this 
proceeding began over twenty years ago when a determined grandmother 
petitioned the Federal Communications Commission to take action against 
the egregiously high telephone rates and charges that were impeding 
incarcerated people's ability to stay connected with their families and 
friends. Martha Wright-Reed championed the idea of easing the financial 
burdens imposed on incarcerated people and their families simply to 
make a phone call. As a blind elderly woman, who could neither write 
letters nor travel such long distances for in-person visits, she often 
spent hundreds of dollars a month in long distance phone calls to stay 
in touch with her incarcerated grandson. In her honor, and in the face 
of years of litigation frustrating the Commission's reform efforts in 
this area, Congress passed the Martha Wright-Reed Act, significantly 
expanding the Commission's jurisdiction over incarcerated people's 
communications services (IPCS) and directing the Commission to 
``establish a compensation plan to . . . ensure just and reasonable 
charges for telephone and advanced communications services in 
correctional and detention facilities.''
    2. In this item, we exercise the authority granted the Commission 
by Congress and adopt comprehensive reforms that will significantly 
reduce the financial burdens incarcerated people face to communicate 
with their loved ones. We first reduce existing rate caps for all 
incarcerated people's audio communication services, by implementing a 
methodology specifically permitted by Congress in the Act, and 
establish, for the first time, interim rate caps for incarcerated 
people's video communications services. We also materially reduce the 
prices consumers pay for IPCS by limiting the costs that can be 
recovered through IPCS rates to only costs that the Commission finds 
are used and useful in the provision of IPCS. We also permit states to 
maintain rates lower than the Commission's rate caps. We next end IPCS 
providers' long-standing practice of making site commission payments to 
carceral facilities, the costs of which were passed through to 
consumers via higher IPCS rates. We further strengthen the requirements 
for access to IPCS by incarcerated people with disabilities, and adopt 
stronger consumer protection rules. We also permit providers, for the 
first time, to offer optional alternate pricing plans, subject to 
conditions to protect and benefit IPCS consumers.

A. Executive Summary

    3. The Report and Order implements the expanded authority granted 
to the Commission by the Martha Wright-Reed Act to establish a 
compensation plan that ensures both just and reasonable rates and 
charges for incarcerated

[[Page 77245]]

people's audio and video communications services and fair compensation 
for incarcerated people's communications service providers. The Report 
and Order fundamentally reforms the regulation of IPCS in all 
correctional facilities, regardless of the technology used to deliver 
these services, and significantly lowers the IPCS rates that 
incarcerated people and their loved ones will pay. These comprehensive 
reforms:
     Utilize the expanded authority Congress granted the 
Commission, in conjunction with the FCC's preexisting statutory 
authority, to adopt just and reasonable IPCS rates and charges for all 
intrastate, interstate, and international audio and video IPCS, 
including video visitation services;
     Lower existing per-minute rate caps for audio IPCS and 
establish initial interim per-minute rate caps for video IPCS, based on 
industry-wide cost data submitted by IPCS providers, while permitting 
states to maintain IPCS rates lower than the Commission's rate caps;
     Lower the overall prices consumers pay for IPCS and 
simplify the pricing structure by incorporating the costs of ancillary 
services in the rate caps and prohibiting providers from imposing any 
separate ancillary service charges on IPCS consumers;
     Prohibit IPCS providers from making site commission 
payments for IPCS and preempt state and local laws and regulations 
requiring such commissions;
     Limit the costs associated with safety and security 
measures that can be recovered in the per-minute rates to only those 
costs that the Commission finds are used and useful in the provision of 
IPCS;
     Allow, subject to conditions, IPCS providers to offer 
alternate pricing plans for IPCS that comply with the rate caps we 
establish;
     Revise and strengthen accessibility requirements for IPCS 
for incarcerated people with disabilities;
     Revise and strengthen existing consumer disclosure and 
inactive account requirements; and
     Revise the existing annual reporting and certification 
requirements.
    4. We adopt the following rate caps:

                                        Table One--New Rate Caps by Tier
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                                                  Audio (permanent) (per minute)   Video (interim) (per minute)
                   Tier (ADP)                    ---------------------------------------------------------------
                                                   Current caps      New caps      Current caps      New caps
----------------------------------------------------------------------------------------------------------------
Prisons (any ADP)...............................         * $0.14           $0.06             N/A           $0.16
Large Jails (1,000+)............................          * 0.16            0.06             N/A            0.11
Med. Jails (350 to 999).........................            0.21            0.07             N/A            0.12
Small Jails (100 to 349)........................            0.21            0.09             N/A            0.14
Very Small Jails (0 to 99)......................            0.21            0.12             N/A            0.25
----------------------------------------------------------------------------------------------------------------
* Current cap figures that include a $0.02 additive for facility costs, which equates to the allowance made for
  facility-incurred IPCS costs reflected in contractually-prescribed site commissions, the closest available
  comparison.

II. Background

A. The Martha Wright-Reed Just and Reasonable Communications Act of 
2022

    5. The Martha Wright-Reed Just and Reasonable Communications Act of 
2022 (Martha Wright-Reed Act or Act), was enacted on January 5, 2023. 
It represents the culmination of a years-long effort to comprehensively 
address unreasonably high rates and charges that incarcerated people 
and their families pay for communications services. The Act expands and 
clarifies the scope of the Commission's authority over IPCS under 
section 276 of the Communications Act of 1934, as amended 
(Communications Act) by modifying section 276 to require the Commission 
to ensure that the rates and charges for incarcerated people's 
intrastate and interstate communications services be just and 
reasonable. It also modifies the requirement in section 276(b)(1)(A) 
that providers be fairly compensated by eliminating the requirement 
that compensation occur on a ``per call'' basis and for ``each and 
every [call].'' Thus, with the new amendments, section 276(b)(1)(A) 
directs the Commission to establish a compensation plan to ``ensure 
that all payphone service providers are fairly compensated and all 
rates and charges are just and reasonable for completed intrastate and 
interstate communications using their payphone or other calling 
device.'' The Act further augments the Commission's jurisdiction by 
modifying the Communications Act to expand the definition of payphone 
service in correctional institutions to encompass advanced 
communications services, including ``any audio or video communications 
service used by inmates . . . regardless of technology used.''
    6. The Martha Wright-Reed Act also amends section 2(b) of the 
Communications Act to reinforce that the Commission's jurisdiction 
extends to intrastate, as well as interstate and international, 
communications services used by incarcerated people. The Communications 
Act generally allocates regulatory authority over intrastate, 
interstate, and international communications services between the 
Commission and the states. It grants authority to the Commission to 
ensure that ``[a]ll charges, practices, classifications, and 
regulations for and in connection with'' interstate or international 
common carrier communications services are ``just and reasonable,'' and 
directs the Commission to ``prescribe such rules and regulations as may 
be necessary in the public interest to carry out'' this mandate.
    7. Section 2(b) of the Communications Act generally preserves 
states' jurisdiction over ``charges, classifications, practices, 
services, facilities, or regulations for or in connection with 
intrastate communication service.'' The Commission is thus ``generally 
forbidden'' from regulating ``intrastate communication service, which 
remains the province of the states.'' Stated differently, section 2(b) 
``erects a presumption against the Commission's assertion of regulatory 
authority over intrastate communications.'' But Congress can enact 
statutory provisions that overcome this presumption, including by 
expressly excluding provisions of the Communications Act from section 
2(b). Section 276 of the Communications Act always has been

[[Page 77246]]

clear that the Commission has authority to establish compensation plans 
for ``intrastate and interstate'' payphone calls, and the Martha 
Wright-Reed Act also specifically modified section 2(b) to include 
section 276, as amended, in an explicit exception. This amendment makes 
abundantly clear that the Commission's authority under section 276 
encompasses intrastate IPCS.
    8. In direct response to the D.C. Circuit's decision in GTL v. FCC, 
the Act expressly allows the Commission to ``use industry-wide average 
costs,'' as well as the ``average costs of service of a communications 
service provider'' in setting just and reasonable rates and charges. In 
implementing the Act, the Commission is required to consider the 
``costs associated with any safety and security measures necessary to 
provide'' telephone service and advanced communications services. 
Finally, the statute directs the Commission to promulgate regulations 
necessary to implement the statutory provisions not earlier than 18 
months and not later than 24 months after its January 5, 2023 enactment 
date.

B. Early Reform Efforts

    9. Prior to the enactment of the Martha Wright-Reed Act, the 
Commission had previously taken a number of steps to reform 
communications services for incarcerated people. In 2012, the 
Commission initiated its inmate calling services (ICS) rulemaking 
principally in response to petitions filed by Martha Wright and her 
fellow petitioners seeking relief from ``excessive'' inmate calling 
services rates. In the 2013 ICS Order, the Commission found that rates 
for calling services for incarcerated people greatly exceeded the 
reasonable costs of providing those services and adopted interim 
interstate rate caps of $0.21 per minute for debit and prepaid calls, 
and $0.25 per minute for collect calls. The Commission also launched 
its First Mandatory Data Collection to obtain industry cost data to 
help develop permanent rate caps. In 2014, the Commission sought 
comment on establishing permanent rate caps for both interstate and 
intrastate calls and on reforming charges for services ancillary to the 
provision of inmate calling services.
    10. In 2015, the Commission adopted a comprehensive regulatory 
framework for interstate and intrastate inmate calling services that 
included permanent rate caps for interstate and intrastate inmate 
calling services calls, and imposed limits on ancillary service 
charges. Specifically, the 2015 ICS Order set tiered rate caps for 
interstate calls based on the type and size of correctional facilities 
and calculated these caps using industry-wide average costs as reported 
in the First Mandatory Data Collection. The Commission excluded all 
site commission payments from industry costs, having found such 
payments were not reasonably related to the provision of inmate calling 
services. The Commission also extended the interim interstate rate caps 
it had adopted in 2013 to intrastate calls, pending the effectiveness 
of the new rate caps, and sought comment on rate regulation of 
international inmate calling services calls. Finally, the 2015 ICS 
Order established a Second Mandatory Data Collection to guide further 
reforms, and began an annual filing obligation to collect information 
on providers' interstate, intrastate, and international rates, as well 
as their ancillary service charges, among other information.
    11. While an appeal of the 2015 ICS Order was still pending, the 
Commission reconsidered the full exclusion of site commission payments 
from its permanent rate cap calculations. The Commission's 2016 ICS 
Reconsideration Order increased the permanent rate caps adopted in the 
2015 ICS Order to account for claims that certain correctional facility 
costs reflected in site commission payments are directly and reasonably 
related to the provision of inmate calling services.

C. The GTL v. FCC Decision

    12. The permanent rate caps adopted in the 2015 ICS Order were 
vacated by the D.C. Circuit in GTL v. FCC in 2017 on three principal 
grounds. First, the panel majority held that the Commission lacked the 
statutory authority to cap intrastate calling services rates because 
the Commission's authority over intrastate calls under section 276 of 
the Communications Act did not authorize it to impose intrastate rate 
caps, and the Commission's authority under section 201(b) of the 
Communications Act did not extend to intrastate rates. Second, the D.C. 
Circuit concluded that the Commission had erred by categorically 
excluding site commissions from inmate calling services providers' 
costs used to set rate caps. Because some site commissions were 
``mandated by state statute,'' while others were ``required by state 
correctional institutions,'' the court concluded that some portion of 
site commissions might be legitimately included in provider costs, and 
remanded to the Commission to determine what portion of site 
commissions were directly related to the provision of inmate calling 
services. Third, the court found that the Commission's use of a 
weighted average per-minute cost in setting rate caps, on the existing 
record as analyzed in the 2015 ICS Order, was arbitrary and capricious, 
in part because this approach, as the Commission had applied it, 
rendered calls with above-average costs unprofitable and thus did ``not 
fulfill the mandate of [section] 276 that `each and every' '' call be 
fairly compensated.
    13. The D.C. Circuit also remanded the Commission's ancillary 
service charge caps, finding that--on the available record--the 
Commission ``had no authority to impose ancillary fee caps with respect 
to intrastate calls.'' Although the court found ancillary service 
charge caps on interstate calls ``justified,'' it could not ``discern 
from the record whether ancillary fees [could] be segregated between 
interstate and intrastate calls,'' and remanded the issue for the 
Commission to determine whether it could segregate ancillary service 
fee caps between interstate calls and intrastate calls. The court also 
vacated the video visitation annual reporting requirements adopted in 
the 2015 ICS Order as ``beyond the statutory authority of the 
Commission.''
    14. In a related case decided later that year, the D.C. Circuit 
``summarily vacated'' the 2016 ICS Reconsideration Order ``insofar as 
it purports to set rate caps on inmate calling service'' because the 
revised rate caps in that order were ``premised on the same legal 
framework and mathematical methodology'' rejected by the court in GTL 
v. FCC. As a result of the D.C. Circuit's decisions in GTL and Securus 
Techs. v. FCC, the interim rate caps that the Commission adopted in 
2013 ($0.21 per minute for debit/prepaid calls and $0.25 per minute for 
collect calls) remained in effect for interstate inmate calling 
services calls.

D. More Recent Reform Efforts

    15. Following the D.C. Circuit's remand in GTL v. FCC, the 
Commission took additional actions to address unreasonable rates and 
charges for communications services for incarcerated people. In 
February 2020, the Wireline Competition Bureau (Bureau or WCB) issued a 
document seeking to refresh the record on issues related to ancillary 
service charges to respond to the D.C. Circuit's remand. The Bureau 
sought comment on whether ancillary service charges may be ``segregated 
between interstate and intrastate calls and, if so, how.'' It also 
sought comment on the definition of jurisdictionally mixed services and 
how the Commission should proceed if any

[[Page 77247]]

permitted ancillary service is deemed jurisdictionally mixed.
    16. In August 2020, the Commission adopted the 2020 ICS Order on 
Remand (85 FR 67450 (Oct. 23, 2020)), in which it found that ancillary 
service charges generally are jurisdictionally mixed and cannot be 
practicably segregated between the interstate and intrastate 
jurisdictions, except in a limited number of cases. The Commission 
therefore concluded that inmate calling services providers are 
generally prohibited from imposing ancillary service charges other than 
those permitted by the Commission's rules, and from imposing charges in 
excess of the Commission's ancillary service fee caps. In an 
accompanying document, the Commission proposed reform of the inmate 
calling services rates then within its jurisdiction based on its 
analysis of industry data collected in the Second Mandatory Data 
Collection, as well as information collected in the 2020 Annual 
Reports.
    17. In May 2021, the Commission adopted the 2021 ICS Order, which, 
among other actions, set new interim interstate rate caps for prisons 
and larger jails, reformed the treatment of site commissions, and 
capped international calling rates. The Commission first eliminated 
separate rate caps for all collect calls and retained the existing 
$0.21 per minute interstate rate cap for debit and prepaid calls for 
correctional facilities with average daily populations below 1,000. The 
Commission then lowered the interstate interim rate caps from $0.21 per 
minute for debit and prepaid calls to $0.12 per minute for prisons and 
$0.14 per minute for jails with average daily populations of 1,000 or 
more incarcerated people. It allowed site commission payments mandated 
by federal, state, or local law, to be passed through to consumers, 
without any markup, and capped other site commission payments that 
result from contractual obligations or negotiations with providers to 
no more than $0.02 per minute for prisons and jails with average daily 
populations of 1,000 or more. The Commission adopted a modified waiver 
process that permits providers to seek waivers of the rate and 
ancillary services fee caps on a facility-by-facility or contract-by-
contract basis. The Commission also delegated authority to WCB and the 
Office of Economics and Analytics (OEA) to conduct a Third Mandatory 
Data Collection to collect uniform cost data to use in setting 
permanent rate and ancillary services fee caps that more closely 
reflect inmate service providers' costs of providing service.
    18. In 2021, the Commission sought comment on, among other matters, 
the provision of communications services to incarcerated people with 
disabilities, and the methodology to be employed in setting permanent 
interstate and international rate caps. It also sought comment on 
general reform of the treatment of site commission payments in 
connection with interstate and international calls, and additional 
reforms to the Commission's ancillary service charges rules.
    19. In September 2022, the Commission issued the 2022 ICS Order, 
which adopted requirements to improve access to communications services 
for incarcerated people with disabilities and to reduce certain charges 
and curtail abusive practices related to ICS. The Commission required 
inmate calling services providers to provide access to substantially 
all relay services eligible for Telecommunications Relay Services (TRS) 
Fund support in any correctional facility where broadband is available 
and where the average daily population incarcerated in that 
jurisdiction (i.e., in that city, county, state, or the United States) 
totals 50 or more persons. It also required that where inmate calling 
services providers are required to provide access to substantially all 
forms of TRS, they also must provide access to American Sign Language 
(ASL) direct, or point-to-point, video communication. Additionally, the 
Commission lowered its caps on certain provider charges and barred 
certain abusive practices to lessen the financial burden on 
incarcerated people and their loved ones when using calling services.
    20. The Commission also issued 2022 seeking stakeholder input and 
evidence relating to additional reforms concerning incarcerated people 
with disabilities. It sought further comment on reforms concerning 
providers' rates, charges, and practices in connection with interstate 
and international calling services, including further refining the 
Commission's rules concerning the treatment of balances in inactive 
accounts, expanding the breadth and scope of the Commission's consumer 
disclosure requirements, using the Commission's data collections to 
establish just and reasonable permanent caps on interstate and 
international rates and associated ancillary service charges, and 
allowing providers to offer pilot programs for alternative pricing 
structures.

E. Implementation of Martha Wright-Reed Act

    21. Following the enactment of the Martha Wright-Reed Act in 
January 2023, the Commission issued 2023 and 2023 IPCS Order in March 
2023 to begin the process of implementing that Act. In 2023, the 
Commission sought comment on how it should interpret the Martha Wright-
Reed Act's provisions expanding the Commission's authority over 
communications services for incarcerated people, including the Act's 
requirement that rates and charges for incarcerated people's 
communications services be just and reasonable, the Act's expansion of 
the Commission's authority to include advanced communications services, 
including video services, the expansion of the Commission's 
jurisdiction to include intrastate communications services, and other 
aspects of the Act. It also sought comment on how the Martha Wright-
Reed Act affects the Commission's ability to ensure that IPCS services 
and associated equipment are accessible to and usable by people with 
disabilities. Finally, 2023 incorporated unresolved issues previously 
raised in WC Docket No. 12-375 into the current dual-captioned 
proceeding.
    22. In the 2023 IPCS Order, the Commission reaffirmed its prior 
delegation of data collection authority to WCB and OEA, and directed 
them to update and restructure their most recent data collection as 
appropriate in light of the requirements of the new statute. In July 
2023, WCB and OEA exercised this delegated authority and adopted the 
2023 Mandatory Data Collection Order (88 FR 27850, May 3, 2023) to 
collect information on the additional services and providers subject to 
the Commission's newly expanded authority and address the Act's other 
provisions where necessary.

III. Discussion

A. Unique Marketplace for Incarcerated People's Communications Services

    23. The history of this proceeding makes crystal clear that the 
IPCS marketplace ``is not a well functioning market with competitive 
forces that would drive prices towards costs.'' Once a provider 
successfully competes for a contract to serve a facility, it has a 
monopoly over the provision of IPCS at that facility. Incarcerated 
people play no role in the process of selecting IPCS providers or the 
services they offer and have no choice but to pay the rates and charges 
imposed if they wish to call their family or other loved ones. 
Consumers have no means of switching to another provider and no means 
of redress even if the IPCS provider ``raises rates, imposes additional 
fees, adopts unreasonable terms and conditions for use of the service, 
or offers inferior

[[Page 77248]]

service.'' As a result, there are no competitive forces to constrain 
providers from imposing rates and charges that far exceed the costs 
required to provide the services. This absence of competitive 
alternatives to discipline IPCS rates justifies rate regulation 
independent of the problematic role that site commissions historically 
have played. We thus reject arguments that the elimination of site 
commission payments calls into question the need for rate regulations. 
In stating its preference for relying on competition and market forces 
to discipline prices, the Commission has acknowledged ``there is little 
dispute that the [IPCS] market is a prime example of market failure.'' 
This market failure persists today. Indeed, one provider aptly 
summarizes the IPCS market dynamics today as follows:

    Fundamentally, due to the inherent structure of the [IPCS] 
marketplace, [IPCS] providers' rational economic incentive is to 
entice confinement facilities to award the provider a service 
contract as the facility, and confinement facilities' rational 
economic incentive is to award contracts to [IPCS] providers who 
provide the greatest payments (monetary or otherwise) to the 
facility. Notably absent from the foregoing calculus are the [IPCS] 
consumers themselves, despite the fact that they are the ones who 
ultimately pay for [IPCS] service.

    24. Despite Commission actions over the years to constrain rates 
and charges in the audio IPCS marketplace, the monopolistic nature of 
the marketplace has not changed, and remains ``characterized by 
increasing rates, with no competitive pressures to reduce rates.'' The 
``unusual market dynamics'' of the IPCS marketplace and the ``inability 
of market forces to constrain IPCS rates'' are also evident in a still 
nascent portion of the marketplace--video IPCS, making clear that 
``some form of regulatory constraint . . . is needed to ensure that end 
user rates are just and reasonable.'' The bipartisan Martha Wright-Reed 
Act is a directive that the Commission provide such regulatory 
constraint on the IPCS marketplace through ensuring ``just and 
reasonable charges for telephone and advanced communications services 
in correctional and detention facilities.''
    25. Some commenters argue that the IPCS marketplace is competitive 
because contracts are awarded based on a bidding process, an argument 
that appears challenging to square with Congress's enactment of the 
Martha Wright-Reed Act. Independently, the Commission has not been 
persuaded by such arguments in the past, and we find no further 
evidence in the record that might warrant a departure from this 
conclusion. Instead, we continue to find that ``because correctional 
officials typically allow only one provider to serve any given facility 
. . . there are no competitive constraints on a provider's rates once 
it has entered into a contract to serve a particular facility.'' 
Indeed, the Commission has found that providers' cost data reflect this 
lack of competition in the industry. And the Commission has explained 
how factors such as site commissions ` ``distort[ ] the [IPCS] 
marketplace' by creating incentives for the facilities to select 
providers that pay the highest site commissions, even if those 
providers do not offer the best service or lowest rates.'' Thus, even 
if there is ``competition'' in the bidding market as some providers 
assert, it is not the type of competition the Commission recognizes as 
having an ability to ``exert downward pressure on rates for 
consumers.''

B. Impact on Consumers and Society

    26. The Commission has long recognized--and worked to combat--the 
negative consequences that unreasonable communications rates and 
charges have on incarcerated people, their families and loved ones, and 
society at large. The record in this proceeding provides overwhelming 
evidence of the substantial burden excessive communications rates have 
on the ability of incarcerated people to stay connected and maintain 
the vital, human bonds that sustain families and friends when a loved 
one is incarcerated. In fact, ``[t]he high costs of keeping in contact 
drive more than 1 in 3 families, who are already financially burdened, 
into debt for phone calls and visits with their loved ones.'' As the 
Prison Policy Initiative explains, ``[t]he cost of everyday 
communication is arguably the worst price-gouging that people behind 
bars and their loved ones face.'' Color of Change highlights these 
burdens through the story of Maria Marshall, who, ``after spending $120 
in just two weeks to maintain contact with both her teenage son and her 
ex-husband behind bars, was forced to make the difficult choice between 
the two, as she struggled to pay exorbitant phone rates and could only 
afford one of their accounts.'' Brian Howard, a formerly incarcerated 
person, speaks for all too many in stating, ``though we have committed 
a crime and became incarcerated, we incarcerate our family as well.''
    27. The Commission held several public listening sessions to learn 
firsthand from individuals directly impacted by unreasonable IPCS rates 
and charges. In these sessions, witnesses testified to the high cost of 
communications as being the primary barrier to keeping families 
connected--despite the well documented benefits of ``maintaining 
communication with loved ones during incarceration.'' Universally, 
testimony from formerly incarcerated individuals stresses the burden 
that unreasonable communications rates and charges have had on their 
ability to communicate with their families. For example, Colette Payne, 
both formerly incarcerated and having an incarcerated son, relates how, 
because of the cost of phone calls, ``I wasn't always able to speak 
with my own children during my incarceration.'' Kim Thomas, a formerly 
incarcerated person, explains the anguish of mothers ``who gave birth 
while incarcerated and did not get to see their child for 18 months, 
physically or in any other way.'' Other formerly incarcerated people 
emphasize how the high cost of communications prevents mothers from 
regularly speaking to their children. One grandmother, whose daughter 
is incarcerated, details how her four young grandchildren are only able 
to speak to their mother every ``week and a half and two weeks if 
that'' because communications are so expensive. Jada Cochran, who gave 
birth in prison and whose mother raised her four young children while 
she was incarcerated, cried as she lamented that her mother could not 
afford many calls, despite the fact they were her ``lifeline to my 
family, to my children.'' Brione Smith, a teenager whose father is 
incarcerated, describes being devastated when she could not reach her 
father after her best friend and grandfather died within a few weeks of 
each other.
    28. Participants at the Commission's listening sessions explain how 
the unreasonably high communications rates at times force incarcerated 
people and their families to choose between basic necessities, such as 
between food, and communications. For example, Deon Nowell reports at 
the Chicago listening session how some incarcerated people had to beg 
for food to reserve enough money to call their families. Ana Navarro 
describes how families must choose between communication or rent, food, 
or school supplies. Kim Thomas, a formerly incarcerated person, 
explains how incarcerated people earn ``about 15 cents an hour. . . . 
So if you calculate that out, it's not very much money, and you choose 
to make a phone call or buy soap.'' Incarcerated people with 
disabilities that impact their ability to communicate continually 
experience barriers to access because ``prison

[[Page 77249]]

administrators fail to understand their communication needs.''
    29. The benefits of communications between incarcerated people and 
their families are wide-ranging and well-documented. For decades, 
studies have linked regular contact with family with lowering rates of 
recidivism and increasing likelihood of successful reentry into society 
after release. During the listening sessions, the formerly incarcerated 
emphasized how communication with family decreases recidivism and 
sustains hope. Children who have regular communications with an 
incarcerated parent have ``better relationships with that parent.'' 
Without these connections, incarcerated people tend to lose contact 
with the outside world and can lose hope of reengaging with society and 
their loved ones. Others suggest that unlawful activities within 
correctional facilities would likely decrease if communications 
services were affordable and accessible. Rosalind Akins, whose grandson 
was formerly incarcerated, describes how ``[p]eople become induced 
mentally ill because they can't communicate.'' Deon Nowell explains 
that lower communications rates will ``help [the incarcerated people] 
make the right decision. That's why it's called rehabilitation. Help 
[the incarcerated people] to make the right decision, especially when 
it deals with the costs of communications.''
    30. The Martha Wright-Reed Act charges us with evaluating and 
breaking down the financial barriers to communications between 
incarcerated people and their families, consequently lessening the 
burden of having to choose between buying food and communicating with 
their family members, and helping facilitate a successful transition to 
a life outside of correctional facilities. The Act gives us the tools 
we need to meet these objectives. We anticipate that by lessening the 
financial burdens of staying connected, the reforms we adopt today will 
promote increased communication--allowing the preservation of essential 
family ties, keeping vital family connections alive by enabling 
incarcerated people to parent their children and connect with their 
spouses, and helping families stay intact.

C. Interpreting the Martha Wright-Reed Act and the Commission's 
Authority Thereunder

1. Purpose and Scope of the Martha Wright-Reed Act
    31. In the Martha Wright-Reed Act, Congress gave the Commission a 
clear mandate to fix a ``broken system,'' one in which the rates and 
charges that incarcerated people pay to communicate with those they 
love far exceed the amounts other Americans pay. The 2023 IPCS Notice 
of Proposed Rulemaking (NPRM) (88 FR 20804, April 7, 2023) sought 
comment on the proper interpretation of the scope and purpose of the 
Martha Wright-Reed Act's amendments. We conclude that the Martha 
Wright-Reed Act, taken as whole, fundamentally validates the 
Commission's broad exercise of authority over IPCS. The record reflects 
widespread agreement that the Martha Wright-Reed Act ``confers plenary 
authority on the Commission'' to regulate a wide range of 
communications services, including telephone and certain advanced 
communications services, provided to incarcerated people regardless of 
the technology or device used or a communication's status as interstate 
or intrastate. More specifically, as certain commenters observe, the 
Martha Wright-Reed Act's amendments to section 276 of the 
Communications Act provide the Commission with authority over all IPCS 
rates and charges, complemented by the Commission's section 201(b) of 
the Communications Act authority over interstate and international 
IPCS. The Commission has previously interpreted ``interstate,'' as used 
in section 276 of the Communications Act, to include international 
calling services. Consistent with our historical understanding of our 
statutory authority--including in the IPCS context in the near-term 
lead-up to the enactment of the Martha Wright-Reed Act--we adopt that 
interpretation today, a step that no commenter opposes. Independently, 
insofar as our rules treat international IPCS calls the same as 
domestic IPCS calls, the record does not persuade us that it would be 
practicable to make the sort of real-time jurisdictional determinations 
that would enable our rules to distinguish international calls from 
domestic calls in those scenarios, in any event. Congress's directives 
guide our implementation of the Commission's responsibilities as 
described in further detail below.
    32. IPCS providers, state and local officials, and public interest 
advocates broadly agree that this expanded authority over 
communications services provided to incarcerated people includes not 
just audio services, but also certain advanced communications services 
that were previously outside the Commission's ratemaking authority. No 
commenter challenges this overall interpretation of the purpose and 
scope of the Martha Wright-Reed Act or suggests a more limited view of 
the Commission's authority. We find no basis for disagreeing with this 
consensus view, and thus, we exercise the full degree of our authority 
in this regard to adopt a compensation plan ensuring just and 
reasonable rates and charges, as well as fair compensation for 
providers of incarcerated people's audio and video communications 
services. We analyze below the specific amendments to section 276 of 
the Communications Act included in the Martha Wright-Reed Act that 
collectively expand our jurisdiction over IPCS and interpret each 
amendment, consistent with the overarching goal of the Act--just and 
reasonable rates for IPCS consumers and fair compensation for IPCS 
providers.
2. Addition of ``Other Calling Device[s]''
    33. At the outset of our analysis, we address the fact that the 
Martha Wright-Reed Act extends the Commission's authority over IPCS to 
include not just communications using traditional payphones, but also 
communications using ``other calling device[s].'' As amended, section 
276(b)(1)(A) of the Communications Act directs the Commission to 
establish a compensation plan so all payphone service providers are 
fairly compensated for communications ``using their payphone or other 
calling device.'' Based on the record and consistent with the 
Commission's proposal in 2023, we interpret the term ``other calling 
device[s]'' in the Martha Wright-Reed Act broadly to encompass all 
devices that incarcerated people either use presently or may use in the 
future to engage in covered communications with individuals not 
confined within their correctional institutions. Our interpretation is 
further confirmed by Congress's expansion of our authority over 
advanced communications services in section 3(1)(E) of the 
Communications Act, to include ``any audio or video communications 
service used by inmates . . . regardless of technology used.''
    34. There is support in the record for this expansive 
interpretation. As the Public Interest Parties explain, ``Congress 
chose to use expansive language covering `any technology used' to grant 
the Commission authority as broadly as possible, intending to cover any 
and all technologies that an incarcerated person may use to communicate 
[by audio or video] today or in the future.'' The breadth of Congress's 
language and the ``absence of additional qualifying language'' limiting 
the scope of the term ``other calling

[[Page 77250]]

device[s]'' persuades us that a broad reading of this term is intended. 
Under this reading, the Commission's authority extends to ``all types 
of calling devices'' that incarcerated people may now or in the future 
use to communicate by audio or video with those not confined in the 
incarcerated person's correctional institution. Furthermore, the 
Commission has long understood section 276(b)(1)(A) of the 
Communications Act to set requirements governing TRS communications 
using TRS devices in correctional facilities. Given that backdrop, 
coupled with the fact that TRS is designed to ensure service 
functionally equivalent to telephone service, we conclude that 
``payphone[s]'' and ``other calling devices'' under section 
276(b)(1)(A) include devices that people with disabilities use for 
purposes of ``communications'' regardless of whether the devices convey 
those communications using audio and/or video, or also (or instead) 
text, braille, or another communications medium.
    35. To be clear, as proposed in 2023, the interpretation of ``other 
calling device[s]'' we adopt today encompasses all wireline and 
wireless phones, computers, tablets, and other communications equipment 
capable of sending or receiving audio or video communications described 
in section 276(d) of the Communications Act, regardless of transmission 
format. And, ``[c]onsistent with the Commission's mandate to provide 
Telecommunications Relay Service (`TRS') for incarcerated people with 
disabilities,'' this statutory phrase also includes all wireline and 
wireless equipment, whether audio, video, text, other communications 
medium, or some combination thereof that incarcerated people with 
disabilities presently use to communicate, through any payphone 
service, with the non-incarcerated, including but not limited to 
videophones, captioned telephones, and peripheral devices for 
accessibility, such as braille display readers, screen readers, and 
TTYs.
    36. Finally, as proposed in 2023, our interpretation of ``other 
calling device[s]'' includes other potential devices, not yet in use, 
to the extent incarcerated people, including those with disabilities, 
use them for covered communications in the future. Such a future-
oriented interpretation is necessary to ensure that IPCS rates and 
charges remain just and reasonable, and that providers continue to be 
fairly compensated, as IPCS technology evolves. It also will, to the 
extent possible, keep IPCS providers from shifting ``exploitative 
practices to spaces left unregulated'' by our actions today.
3. The Requirement To Establish a Compensation Plan
    37. The Martha Wright-Reed Act preserved the requirement in section 
276(b) of the Communications Act that the Commission ``establish a 
compensation plan'' as a principal means of achieving the statutory 
goals with regard to IPCS. As amended, section 276(b)(1)(A) requires 
that this compensation plan ensure that ``all payphone service 
providers are fairly compensated'' for completed communications and 
that ``all rates and charges [for those communications] are just and 
reasonable.'' The statute further requires the Commission to implement 
this statutory directive by rule. We now turn to the legal framework 
envisioned by the statute for establishing a compensation plan that 
will realize these statutory goals.
a. Addition of the ``Just and Reasonable'' Requirement to Section 
276(b)(1)(A)
    38. We adopt the Commission's proposal that the term ``just and 
reasonable,'' added to section 276(b)(1)(A) of the Communications Act 
by the Martha Wright-Reed Act, be interpreted as having the same 
meaning as the term ``just and reasonable'' in section 201(b) of the 
Communications Act. Prior to the Martha Wright-Reed Act, section 
276(b)(1)(A) contained no ``just and reasonable'' requirement. Instead, 
that section required the Commission to evaluate payphone rates on a 
per-call basis and to ensure that providers were fairly compensated for 
each and every completed call. Congress, however, modified this 
approach in the Act by removing the ``per call'' and ``each and every'' 
completed call language from section 276(b)(1)(A), which instead now 
requires that all payphone service providers be fairly compensated, and 
that all rates and charges imposed by those providers be ``just and 
reasonable.'' Not only is there strong support in the record for the 
conclusion that ``just and reasonable'' for the purposes of revised 
section 276(b)(1)(A) has the same meaning as ``just and reasonable'' in 
section 201(b), but the rules of statutory construction and judicial 
precedent buttress this finding.
    39. By way of example, the Public Interest Parties explain, and we 
agree, that ``[t]racking the Section 201(b) meaning is the most sound 
reading of the statute and of congressional intent,'' consistent with 
the understanding ``that Congress was aware of the Section 201(b) 
standard--and the Commission's decades of relevant precedent 
interpreting it--when it chose to add the identical term to Section 
276.'' The Supreme Court likewise explained in FCC v. AT&T that 
``identical words and phrases within the same statute should normally 
be given the same meaning.'' Both of these tenets have particular force 
here. The identical terms ``just and reasonable'' appear in section 
201(b) and have now been added to section 276(b)(1)(A), both sections 
of Title II of the Communications Act, to describe the required end 
result of our ratemaking. The Martha Wright-Reed Act also was enacted 
against the regulatory backdrop of--and in response to--the GTL v. FCC 
decision, where the D.C. Circuit found that the Commission unreasonably 
relied on the ``just and reasonable'' standard of section 201(b) when 
implementing the differently-worded language of section 276. Further, 
in the wake of GTL v. FCC, the Commission continued to regulate rates 
and practices for interstate and international IPCS services under its 
section 201(b) ``just and reasonable'' authority, informed by the 
obligation to ensure ``fair'' compensation under section 276(b)(1)(B).
    40. Nothing in the text of the Martha Wright-Reed Act leads us to 
believe that Congress intended to alter that general regulatory 
approach in our implementation of section 276(b)(1)(A) in the case of 
services we previously have regulated under section 201(b). Instead, 
that regulatory backdrop reinforces our conclusion that ``just and 
reasonable'' is best interpreted in a manner that harmonizes the 
application of that standard in sections 201(b) and 276(b)(1)(A). The 
record also provides no reason to interpret ``just and reasonable'' 
differently in the two sections of the Communications Act. We thus find 
that ``just and reasonable'' has the same meaning in both statutory 
provisions and regardless of the services to which the phrase is 
applied.
    41. The Used and Useful Framework. As Congress has imported section 
201(b)'s ``just and reasonable'' standard into section 276(b)(1)(A), we 
next find that the standard the Commission has used to determine just 
and reasonable rates under 201(b) should also apply to our ratemaking 
under section 276(b)(1)(A). Historically, the ``used and useful'' 
framework has ``both informed the Commission's regulatory cost 
accounting and ratemaking rules and operated to protect the interests 
of ratepayers and carriers.'' The record supports our conclusion that 
this framework provides the most appropriate mechanism for ensuring 
just and reasonable rates and charges for

[[Page 77251]]

IPCS, and therefore applies to all IPCS over which we now have 
authority.
    42. Accordingly, we rely on ``the `used and useful' doctrine and 
its associated prudent expenditure standard'' to assess the costs that 
should either be included or excluded from our rate cap calculations to 
ensure just and reasonable rates and charges for IPCS. Under this 
framework, the determination of just and reasonable rates focuses on 
affording regulated entities an opportunity to recover their 
``prudently incurred investments and expenses that are `used and 
useful' in the provision of the regulated service for which rates are 
being set.'' The used and useful framework permits regulated entities 
to earn a reasonable return on their resources dedicated to public use 
but it does not allow them to include a markup for profit beyond that. 
This ``used and useful'' framework, which ``is rooted in American legal 
theory and particularly in the constitutional limitations on the taking 
of private property for public use,'' balances the ``equitable 
principle that public utilities must be compensated for the use of 
their property in providing service to the public'' with the 
``[e]qually central . . . equitable principle that the ratepayers may 
not fairly be forced to pay a return except on investment which can be 
shown directly to benefit them.'' In this Order, we use the term ``used 
and useful framework'' to refer collectively to the ``used and useful'' 
standard and the ``prudent expenditure'' standard. In applying these 
principles, ``the Commission considers whether the investment or 
expense `promotes customer benefits, or is primarily for the benefit of 
the carrier.' '' There are several elements of the Commission's used 
and useful analysis. First, the Commission considers the need to 
compensate providers ``for the use of their property and expenses 
incurred in providing the regulated service.'' Second, the Commission 
looks to the ``equitable principle that ratepayers should not be forced 
to pay a return except on investments that can be shown to benefit 
them.'' In this regard, the Commission considers ``whether the expense 
was necessary to the provision of'' the services subject to the ``just 
and reasonable''. And third, the Commission considers ``whether a 
carrier's investments and expenses were prudent (rather than 
excessive).'' As the Commission has explained, ``[t]he used and useful 
and prudent investment standards allow into the rate base portions of 
plant that directly benefit the ratepayer, and exclude any imprudent, 
fraudulent, or extravagant outlays.''
    43. As one commenter suggests, the used and useful framework allows 
us to recognize all IPCS costs that benefit IPCS users, including any 
such costs incurred by correctional facilities, as costs that should be 
recovered though IPCS rates and charges. Conversely, that framework 
allows us to exclude from that recovery any costs that do not benefit 
IPCS users, either because they were imprudent or because they were for 
non-IPCS products or services, regardless of whether the provider or 
the facility incurred them. In short, the used and useful framework 
functions as an ``equitable principle'' that prevents ratepayers from 
having to pay for costs that are ``primarily for the benefit of the 
carrier,'' while allowing regulated entities to be compensated for 
providing service.
    44. Some commenters express concerns over our reliance on the used 
and useful framework in the IPCS context, describing the framework as 
being ``a vestige of rate-of-return regulation.'' To the contrary, we 
find that the framework remains the most practical and effective method 
for determining the costs providers and facilities reasonably incur in 
providing IPCS. As historically applied by the Commission, the used and 
useful framework limits the costs recoverable through regulated rates 
and charges to ``prudently incurred investments and expenses that are 
`used and useful' in the provision of the regulated service.'' Contrary 
to Pay Tel's and Securus's representations, our application of the used 
and useful standard is not ``novel'' or otherwise inappropriate as 
applied in the Report and Order. The used and useful standard is ``a 
standard regulatory agencies have been using for decades'' to 
``determine whether a regulated company's expenses are justified. 
Nothing about the Commission's approach here is novel. Instead, it 
reflects the familiar ratemaking exercise the Commission routinely 
undertakes to determine those capital costs and expenses that may be 
recovered through regulated rates. To the extent Pay Tel's argument is 
premised on the notion that the used and useful standard ``is nowhere 
specified in the Martha Wright-Reed Act or in Section 276,'' we explain 
above that as Congress has imported section 201(b)'s ``just and 
reasonable'' standard into section 276(b)(1)(A), the used and useful 
framework that the Commission's has used to determine just and 
reasonable rates under section 201(b) provides the most appropriate 
mechanism for determining just and reasonable rates under section 
276(b)(1)(A). And, in any event, section 201(b) is similarly silent on 
the applicability of the used and useful standard. Further, we do not, 
as Pay Tel suggests, rely on the used and useful framework ``to the 
exclusion of `fair compensation.' '' As we explain below, the text of 
section 276(b)(1)(A), as amended by the Martha Wright-Reed Act, 
requires the Commission to implement both provisions in tandem, which 
we do in setting rate caps using a zone of reasonableness approach. We 
disagree with those commenters who argue that competition in the IPCS 
market makes application of the used and useful standard unnecessary. 
That argument conflates the bidding market (i.e., the market in which 
IPCS providers compete against each other to win contracts with 
correctional facilities) with the retail market (i.e., the market in 
which IPCS consumers pay rates and charges for the communications 
services that we must ensure are just and reasonable). Indeed, the 
Commission has previously determined that ``even if there is 
competition in the bidding market . . . it is not the type of 
competition the Commission recognizes as having an ability to exert 
downward pressure on rates for consumers.'' Pay Tel and ViaPath contend 
that ``IPCS providers [should be] free to best determine how to manage 
their investments and expenses.'' Allowing providers such complete 
flexibility would run contrary to the plain text in the Martha Wright-
Reed Act and congressional directive to the Commission. Moreover, this 
type of behavior has thus far resulted in unreasonable IPCS rates and 
charges for consumers, underscoring the need for us to apply the used 
and useful (or a similar) framework to prevent the inclusion of 
imprudent and non-IPCS costs in IPCS rates and charges.
    45. We also find unpersuasive arguments that we should allow all 
prudently incurred ``operating expenses'' to be recovered through IPCS 
rates and charges even if those expenses are not used and useful in the 
provision of IPCS and related ancillary services. The National 
Sheriffs' Association, in particular, expresses concern that the costs 
of some expenditures that correctional officials find prudent, 
including expenditures for certain safety and security measures, will 
be excluded from our ratemaking calculus. It claims that relying on the 
used and useful standard is inconsistent with section 4 of Martha 
Wright-Reed Act, which specifies that ``[n]othing in the Act shall be 
construed to . . . prohibit the

[[Page 77252]]

implementation of any safety and security measures'' related to IPCS 
``at a State or local prison, jail, or detention facility.''
    46. The National Sheriffs' Association's reasoning, however, does 
not fully comport with the language of the Martha Wright-Reed Act 
addressing safety and security measures. Section 3(b)(2) of that Act 
requires that we ``consider costs associated with any safety and 
security measures necessary to provide'' IPCS in promulgating 
implementing rules and in ``determining just and reasonable rates'' for 
IPCS. But neither section 3(b)(2) nor any other provision of the Martha 
Wright-Reed Act concludes or requires that every safety and security 
measure that a correctional institution chooses to implement in 
connection with IPCS is ``necessary to provide'' IPCS, or mandate that 
we require consumers to pay for all those measures through IPCS rates.
    47. Rather, when read in conjunction with section 3(b)(2) and the 
other provisions of the Martha Wright-Reed Act, section 4 simply makes 
clear that, in directing the Commission to develop a compensation plan 
to ensure just and reasonable IPCS rates and charges, Congress did not 
intend to intrude on the ability of correctional institutions to 
``adopt policies that, in their judgment, are needed to preserve safety 
and security.'' Our actions in this Order make no such intrusion. We do 
not prohibit any correctional institution from implementing any safety 
and security measure that it deems appropriate or desirable. We do, 
however, ensure that IPCS consumers do not bear the costs of those 
safety and security measures that are not necessary to provide IPCS 
regardless of how desirable these measures may be to correctional 
institutions. Section 4 does not preclude such an outcome.
    48. The Commission has relied on the used and useful framework to 
ensure just and reasonable rates for decades. Our decision to apply 
that framework in determining which costs should be recoverable from 
consumers through IPCS rates and charges is fully consistent with the 
Communications Act, as amended by the Martha Wright-Reed Act, as well 
as with Commission precedent, including Commission regulation of IPCS 
rates that formed the regulatory backdrop to the enactment of the 
Martha Wright-Reed Act. The used and useful framework, including its 
prudent expenditure component, embodies core ratemaking principles that 
the Commission has long used to separate the costs that captive 
ratepayers should pay for regulated services from those that are either 
properly attributable to other products or services or excessive. In 
applying that framework, along with the ``necessary'' standard that 
section 3(b)(2) of the Martha Wright-Reed Act specifies for the costs 
of safety and security measures and the other standards set forth in 
that Act, we discharge our statutory duties, consistent with record 
support, without intruding into matters outside our authority.
b. Effect on Other Laws
    49. Section 4 of the Martha Wright-Reed Act provides additional 
direction regarding the effect of the Act on existing laws. Section 4 
consists of two clauses that are meant to guide the interpretation of 
the remainder of the Act. The first clause of section 4 of the Act 
specifies that ``[n]othing in this Act shall be construed to modify or 
affect any Federal, State or local law to require telephone service or 
advanced communications services at a State or local prison, jail, or 
detention facility.'' We interpret ``this Act,'' as used in section 4 
of the Martha Wright-Reed Act, as referring the Martha Wright-Reed Act, 
rather than the Communications Act. All parties commenting on the 
meaning of section 4 accept this interpretation. In 2023, the 
Commission sought comment on the meaning of this statutory language. 
The Commission asked whether ``the language of this clause simply 
mean[s] that the Martha Wright-Reed Act does not create any new 
obligation for state or local facilities to provide any form of 
incarcerated people's calling services.'' The National Sheriffs' 
Association supports this interpretation, adding that the language of 
the Martha Wright-Reed Act would not support ``any new requirement to 
make IPCS available.'' The United Church of Christ and Public Knowledge 
likewise agree that ``this provision demonstrates that the Act does not 
affirmatively require any additional service offerings'' at 
correctional institutions. No commenter disputes this interpretation of 
the first clause of section 4. We conclude that this clause means that 
the Martha Wright-Reed Act neither expressly nor by implication 
modifies any federal, state or local law in a manner that would require 
the provision of any new or additional incarcerated people's 
communications services at any state or local correctional institution.
    50. The second clause of section 4 specifies that nothing in the 
Martha Wright-Reed Act ``shall be construed to . . . prohibit the 
implementation of any safety and security measures related to'' 
telephone service or advanced communications services at a State or 
local prison, jail, or detention facility. In 2023, the Commission 
sought comment on how to interpret this clause and asked, in 
particular, whether the clause means that the Martha Wright-Reed Act, 
with its focus on ``just and reasonable ratemaking'' was ``not intended 
to interfere with any correctional official's decision on whether to 
implement any type of safety or security measure that the official 
desires in conjunction with audio or video communications services.'' 
Two commenters support this interpretation of the second clause of 
section 4. In contrast, the United Church of Christ and Public 
Knowledge contend more narrowly that ``this provision demonstrates that 
the Act does not . . . prohibit safety and security measures.''
    51. While the Commission's initial request for comment seems to 
suggest the more expansive reading of the second clause of section 4 
that the National Sheriffs' Association supports, we now conclude that 
a narrower reading of that clause will more closely reflect the limited 
scope of the statutory language. We find that the National Sheriffs' 
Association's interpretation is overbroad and would expand the reach of 
the second clause beyond its intended scope. When read in conjunction 
with the other provisions of the Martha Wright-Reed Act, the second 
clause of section 4 of that Act simply makes clear that, in directing 
the Commission to develop a compensation plan to ensure just and 
reasonable IPCS rates and charges, Congress did not intend to prohibit 
correctional institutions from implementing policies that, in their 
judgment, are needed to preserve safety and security. Consistent with 
that interpretation and the specific language of section 4, we 
interpret the second clause of section 4 as precluding us from 
construing any provision of that Act as making such a prohibition 
regarding the implementation of any safety and security measures at any 
federal, state, or local correctional institution.
    51. The National Sheriffs' Association expresses concern that the 
costs of some expenditures for certain safety and security measures 
will be excluded from our ratemaking calculus. The National Sheriffs' 
Association relies on its broader interpretation of section 4 to assert 
that the Commission must not ``interfere with the operation of jails by 
eliminating their ability to recover [safety and security] costs'' 
through IPCS rates. Although the National Sheriffs' Association admits 
that excluding certain safety and security costs from IPCS rates ``is 
not a prohibition per se,'' it claims that, in

[[Page 77253]]

practice, disallowing any costs associated with safety and security 
measures that law enforcement officials have approved effectively 
prohibits the measures from being implemented.
    53. The National Sheriffs' Association's reasoning, however, does 
not comport with the broader statutory context of the Martha Wright-
Reed Act addressing safety and security measures. In particular, 
section 3(b)(2) of that Act requires that we ``consider costs 
associated with any safety and security measures necessary to provide'' 
IPCS in promulgating implementing rules and in ``determining just and 
reasonable rates'' for IPCS. The best interpretation of the Martha 
Wright-Reed Act will ensure a meaningful role for both section 3(b)(2) 
and section 4.
    54. If section 3(b)(2), of its own force, required the Commission 
to allow recovery of all costs identified by providers or correctional 
facilities as safety and security costs in regulated rates, as some 
commenters suggest, then there would seem to be little to no possible 
risk that such safety and security measures could be ``prohibited'' 
because they would, instead, be affirmatively funded by IPCS 
ratepayers. That would leave section 4 with little or no risk to 
address in that regard, and thus the relevant language of section 4 
would be of substantially diminished significance. We reject Securus' 
suggestion that failure to find all safety and security measures 
``necessary'' and recoverable would violate the Administrative 
Procedure Act (APA). As revealed by our consideration of the relevant 
issues and the record before us on safety and security issues below, we 
fully ensure that we have ``acted within a zone of reasonableness and, 
in particular, ha[ve] reasonably considered the relevant issues and 
reasonably explained the decision.'' We recognize that section 3(b)(2) 
is focused on ``costs associated with any safety and security measures 
necessary to provide'' IPCS, Martha Wright-Reed Act Sec.  3(b)(2) 
(emphasis added), while section 4 is focused on ``safety and security 
measures related to'' IPCS. Martha Wright-Reed Act Sec.  4 (emphasis 
added). Despite the potential that ``necessary'' in section 3(b)(2) is 
a narrower standard than ``related to'' in section 4, it is not clear 
how much practical significance that would have if, as some commenters 
contend, the Commission is required to simply defer to providers' and/
or correctional facilities' on what safety and security costs must be 
recoverable in IPCS rates. But even under a stricter standard, we are 
persuaded that mandatory recovery through IPCS rates of all ``costs 
associated with any safety and security measures necessary to provide'' 
IPCS would leave the relevant proviso of section 4 of substantially 
diminished significance.
    55. Conversely, if section 4 were read to require recovery of the 
full array of safety and security costs--deferring to the correctional 
facilities' decision to approve the use of particular measures when 
doing so--there would seem to be little meaningful left for the 
Commission to ``consider'' in that regard under section 3(b)(2). 
Matters such as identifying the magnitude of such costs and how they 
should be allocated already would be necessitated by the ``just and 
reasonable'' requirement in section 276(b)(1)(A) of the Communications 
Act, as amended by the Martha Wright-Reed Act, if section 4 were 
interpreted to require such recovery. That, in turn, would leave 
section 3(b)(2) of substantially diminished significance.
    56. Our interpretation of those provisions, by contrast, preserves 
a meaningful role for each, particularly when understood in light of 
the relevant regulatory backdrop. In the years leading up to the 
enactment of the Martha Wright-Reed Act, one of the most-debated issues 
was the recovery through IPCS rates of payments providers made to 
correctional facilities, ostensibly--at least in some instances--
associated with safety and security measures. Some parties argued for a 
categorical prohibition on any such recovery, while other parties 
advocated for full recovery through IPCS rates of virtually any such 
asserted costs or payments. For its part, the Commission sought to 
navigate these competing claims by seeking to use the best available 
evidence to assess whether there were costs--such as safety and 
security costs--with a sufficient nexus to IPCS to potentially warrant 
recovery of those costs in IPCS rates; using the best available data to 
seek to quantify those costs; and continuing to evaluate additional 
tools it might use to address the continued concerns about such cost 
recovery, including possible preemption. Our reading of section 3(b)(2) 
reflects an approach to safety and security costs analogous to the 
middle path the Commission historically has sought to take. By 
requiring that such costs be ``considered''--but only that they be 
``considered''--the Martha Wright-Reed Act makes clear that it is not 
putting a thumb on the scale of either extreme position by 
categorically precluding or categorically allowing recovery of claimed 
safety and security costs through regulated IPCS rates. At the same 
time, section 4 of the Martha Wright-Reed Act makes clear that the 
Commission cannot use that Act as a basis to go so far as outright 
``prohibit[ing] the implementation of any safety and security measures 
related to'' IPCS--such as by preempting even the implementation of 
such measures--while not foreclosing the possibility that correctional 
facilities ultimately must look elsewhere besides IPCS provider 
payments passed through in IPCS rates to fund some (or many) of those 
measures.
    57. Our actions in this Order do not prohibit any correctional 
institution from implementing any safety and security measure that it 
deems appropriate or desirable. We do, however, ensure that IPCS 
consumers do not bear the costs of those safety and security measures 
that are not used and useful or necessary to provide IPCS regardless of 
how desirable these measures may be to correctional institutions. 
Section 4 does not preclude such an outcome.
    58. In addition, without conceding the factual merits of the 
National Sheriffs' Association's claim regarding our ability to exclude 
costs of safety and security measures that are neither used and useful 
nor necessary from our ratemaking analysis, as a statutory matter we 
observe that in other contexts where Congress wanted to prevent not 
only the prohibition of certain conduct, but even things that 
effectively prohibit such conduct, it has done so explicitly. 
Particularly because our interpretation best reconciles sections 
3(b)(2) and 4 of the Martha Wright-Reed Act, we are not persuaded to 
infer a de facto prohibition--a prohibition in fact--from the language 
of section 4 as the National Sheriffs' Association suggests. With 
respect to the factual merits of the National Sheriffs' Association 
claims, we have provided for the recovery generally of used and useful 
costs, including costs for necessary safety and security measures, 
through the rate caps we adopt today. We find our actions adequately 
address concerns about a de facto prohibition of safety and security 
measures in this context.
c. Implementation of the ``Fairly Compensated'' Standard in Section 
276(b)(1)(A)
    59. We now turn to the requirement that we establish a compensation 
plan to ensure IPCS providers are fairly compensated. We conclude that, 
in addition to ensuring ``just and reasonable'' rates and charges, our 
compensation plan for IPCS must accord meaning to the ``fairly 
compensated'' clause in section 276(b)(1)(A) and its relationship to 
the

[[Page 77254]]

``just and reasonable'' rates and charges mandate.
    60. Meaning of the Fair Compensation Standard. We conclude that our 
compensation plan for IPCS must give full effect to both the ``just and 
reasonable'' and the ``fairly compensated'' clauses in section 
276(b)(1)(A). In 2023, the Commission sought comment on how it should 
balance the interests of both consumers and industry in giving effect 
to both clauses. As proposed in 2023, we determine that giving effect 
to both standards requires a balanced approach that ``emphas[izes] 
consumers' (particularly incarcerated people's) and providers' right to 
just and reasonable rates and charges for each audio and video 
communications service now encompassed within the statutory definition 
of `payphone service,' '' as well as ensuring that such rates ensure 
that ``all payphone providers are fairly compensated.'' We thus reject 
Securus's claim that the Order ``simply collapses the fair compensation 
standard into the just and reasonable standard.'' As we explain, our 
rate-making methodology and statutory interpretation of the Martha 
Wright-Reed Act ensure that both standards are given full effect.
    61. We view these clauses as imposing two interdependent statutory 
mandates, each of which we must seek to fully implement. As discussed 
below, as a general matter a range of possible outcomes potentially can 
be found ``just and reasonable'' and a range of possible outcomes 
potentially can be found to ``fairly compensate'' IPCS providers. 
Because of that, we anticipate being able to find areas of overlap in 
those two ranges that will satisfy both statutory mandates. We find 
this expectation particularly reasonable given that the ``just and 
reasonable'' precedent under section 201(b)--which we carry into our 
application of section 276(b)(1)(A)--already involves a balancing that 
accounts for the service provider's interests.
    62. With respect to the ``just and reasonable'' mandate, as 
discussed above, that directive leads us to balance the ``equitable 
principle that public utilities must be compensated for the use of 
their property in providing service to the public'' with the 
``[e]qually central . . . equitable principle that the ratepayers may 
not fairly be forced to pay a return except on investment which can be 
shown directly to benefit them,'' drawing on Commission precedent under 
section 201(b). In determining rates that are ``just and reasonable'' 
we look to whether costs to be recovered were prudently incurred and 
used and useful in the provision of the services at issue. That 
framework does not inevitably lead to a single ``just and reasonable'' 
rate, however, but allows for a range of rates with the agency 
potentially able to find any rate with that zone to be ``just and 
reasonable.''
    63. There also is a body of precedent regarding the interpretation 
of the ``fairly compensated'' mandate historically present in section 
276(b)(1)(A)--but our approach here must account for certain ways in 
which the Martha Wright-Reed Act altered the operative statutory 
approach, necessitating related departures from that historical 
precedent. Under that precedent, regulated rate levels historically 
were viewed as in accordance with the ``fairly compensated'' standard 
if they ``allow providers to generate sufficient revenue from each 
interstate and international call--including any ancillary service fees 
attributable to that call--(1) to recover the direct costs of that 
call; and (2) to make a reasonable contribution to the provider's 
indirect costs related to inmate calling services.'' As the Commission 
recognized in the 2002 Pay Telephone Order--and recognized again in the 
2021 ICS Order--the ``lion's share of payphone costs are those that are 
`shared' or `common' to all services,'' and there are ``no logical or 
economic rules that assign these common costs to `each and every call.' 
'' As a result, ``a wide range of compensation amounts may be 
considered `fair.' '' Securus argues that we have departed from the 
2002 Pay Telephone Order's fair compensation determination based on 
overall profitability to determine fair compensation evaluating 
``profitability on a call-by-call basis.'' We disagree. Further, 
Securus has not explained the difference between these two views of 
profitability, and has not articulated why a provider would not be 
profitable overall if it were profitable on a call-by-call basis.
    64. The Continued Role of the Fair Compensation Standard. Prior to 
the enactment of the Martha Wright-Reed Act, section 276(b)(1)(A) of 
the Communications Act required that the Commission ``establish a per 
call compensation plan'' ensuring that service providers be ``fairly 
compensated for each and every completed'' call. The Martha Wright-Reed 
Act eliminated the ``per call'' and ``each and every'' call 
requirements and added a new dimension to section 276 by requiring that 
our compensation plan for IPCS ``ensure that . . . all rates and 
charges'' for incarcerated people's communications services ``are just 
and reasonable.'' We disagree with UCC's argument that it would be 
``arbitrary and capricious'' to require fair compensation for 
providers. This is contrary to the explicit statutory text of section 
276(b)(1)(A) that requires fair compensation. In 2023, the Commission 
sought comment on how the Martha Wright-Reed Act's amendments to 
section 276(b)(1)(A) affect the ``fairly compensated'' requirement in 
that section. In particular, the Commission sought comment on 
Congress's intent in striking the ``per call'' and ``each and every 
[call]'' language from section 276(b)(1)(A) and the effect of its 
removal on the ``fairly compensated'' requirement, particularly in 
light of the Martha Wright-Reed Act's new requirement that all IPCS 
rates and charges be just and reasonable.
    65. The record persuades us that in striking the ``per call'' and 
``each and every [call]'' language, Congress modified but did not 
eliminate the requirement that providers be fairly compensated for 
completed intrastate and interstate communications. Instead, as Pay Tel 
explains, the fair compensation requirement ``was left as an 
independent requirement by the Martha Wright-Reed Act, reflecting a 
purposeful decision by Congress to retain the requirement as an 
essential component of [IPCS] reform.'' We agree that we should not 
``effectively read the requirement out of the statute or diminish its 
importance.'' Instead, we address the fair compensation and just and 
reasonable standards as interdependent standards as we implement the 
requirements of section 276(b)(1)(A).
    66. At the same time, we reject suggestions that the ``just and 
reasonable'' mandate could be treated as subsidiary to the ``fairly 
compensated'' mandate. We therefore reject any argument that IPCS rates 
or ancillary services charges ``must be higher than they otherwise 
would be under a `just and reasonable' '' analysis in order ``to 
achieve `fairness.' '' The text of section 276(b)(1)(A) as amended by 
the Martha Wright-Reed Act requires the Commission to implement both 
provisions in tandem. And because the two mandates potentially can be 
satisfied through a range of outcomes, the record here does not 
persuade us that we will be forced into a situation where one mandate 
must yield for the other mandate to be met.
    67. Interpreting the Fair Compensation Standard in Light of the 
Martha Wright-Reed Act. While we conclude that our compensation plan 
for IPCS must accord meaning to the ``fairly compensated'' clause in 
section 276(b)(1)(A), we also conclude that the

[[Page 77255]]

Martha Wright-Reed Act alters our interpretation and application of 
that clause in certain key ways. For one, deletion of the ``per call'' 
and ``each and every [call]'' language from section 276(b)(1)(A) 
fundamentally changes the requirements of that clause. Consistent with 
the Commission's preliminary interpretation in 2023, we find that these 
statutory amendments signal ``Congress's intent to restrict the 
application of the `fairly compensated' requirement with respect to 
[IPCS] by no longer requiring the Commission to ensure that its 
compensation plan allows for `fair' compensation for `each and every' 
completed call.'' Thus, while we must ensure that providers receive 
fair compensation for completed intrastate and interstate 
communications, we are not obliged to establish a per-call based 
compensation plan, as section 276(b)(1)(A) previously required.
    68. The Martha Wright-Reed Act also affects how we implement 
section 276(b)(1)(A)'s directive that our compensation plan for IPCS 
``ensure that all payphone service providers are fairly compensated'' 
for completed communications, consistent with the Act's amendments to 
section 276(b)(1)(A). Section 3(b)(1) of the Martha Wright-Reed Act 
grants us explicit authority to use ``industry-wide average costs.'' 
Use of industry-wide average costs, of necessity, evaluates provider 
compensation on a more aggregated--rather than provider-by-provider--
basis. Section 3(b)(1) expressly permits the use of such data in 
``determining just and reasonable rates'' as one permissible example, 
alongside more general authority to use industry-wide average costs 
``[i]n implementing this Act and the amendments made by this Act,'' and 
``promulgating regulations under'' the Martha Wright-Reed Act's 
amendments to the Communications Act. Nothing in the Martha Wright-Reed 
Act compels the Commission to use ``the average costs of service of a 
communications service provider'' in determining just and reasonable 
rates. Martha Wright-Reed Act Sec.  3(b)(1). We thus reject Securus's 
argument that the Commission somehow ``ignored'' the possibility of 
using such costs in setting its rate caps. Based on that language we 
interpret Congress as authorizing us to rely on industry-wide average 
costs in implementing the ``fairly compensated'' mandate--and its 
interplay with the ``just and reasonable'' mandate--as amended and 
codified in section 276(b)(1)(A) by the Martha Wright-Reed Act. We 
consequently interpret Congress' permission to use industry-wide 
average costs to mean that rate caps based on costs evaluated on an 
aggregated basis generally will satisfy the requirement that all 
payphone service providers be fairly compensated. The record supports 
this interpretation. Consistent with the Martha Wright-Reed Act, and 
its amendments to section 276(b)(1)(A), we therefore adopt rate caps 
based on industry-wide average cost data submitted by IPCS providers in 
response to the Commission's 2023 Mandatory Data Collection, as 
described below.
    69. We also observe that these provisions of the Martha Wright-Reed 
Act respond directly to the D.C. Circuit's holding in GTL v. FCC that 
setting rate caps based on industry-wide average costs was ``patently 
unreasonable'' because ``calls with above-average costs'' would not be 
fairly compensated on a per call basis. The elimination by Congress of 
the ``per call'' and ``each and every [call]'' language from section 
276(b)(1)(A) leads to the interpretation that compensation need not be 
evaluated on a per-call basis. In addition, our reading of section 
3(b)(1) of the Martha Wright-Reed Act persuades us that fair 
compensation need not be evaluated on a provider-by-provider basis--
still subject, of course, to Constitutional limits on rate regulation 
as applied to individual providers.
    70. At the same time, the flexibility in evaluating costs described 
in section 3(b)(1) of the Martha Wright-Reed Act is tempered by certain 
requirements to consider particular costs or cost characteristics under 
section 3(b)(2) of that Act. Section 3(b)(2) provides that the 
Commission ``shall consider costs associated with any safety and 
security measures necessary to provide a service.'' Under that 
provision, the Commission also must consider cost differences 
associated with ``small, medium, or large facilities or other 
characteristics.'' Consistent with that provision, we therefore also 
evaluate such costs considerations in the rate caps we adopt, as 
described below.
    71. Consistent with the Commission's analysis in the 2021 ICS 
Order, we find that a provider will be fairly compensated within the 
meaning of section 276(b)(1)(A), as amended by the Martha Wright-Reed 
Act, if the rates and charges we find just and reasonable afford it an 
opportunity to be fairly compensated at the level of the contract, 
regardless of the contributions that any particular communication or 
service makes toward the provider's shared and common costs, ensuring 
efficient providers have an opportunity to obtain fair compensation 
when bidding on contracts. We decline to set rate caps that ensure cost 
recovery for providers with unusually high costs because to let unusual 
cases determine rates generally would result in unjust and unreasonable 
rates. Instead, if such providers exist, they can seek a waiver. In 
that Order, the Commission found that compensation could be fair, when 
measured on a per-call basis, even if ``each and every completed call'' 
did not ``make the same contribution to a provider's indirect costs'' 
(i.e., costs shared among, or common to, groups of calls) and even if 
the provider did not ``recover the total `cost' it claims in connection 
with each and every separate inmate calling services call.'' Instead, 
the Commission recognized that ``the lion's share'' of inmate calling 
services costs were shared or common costs and that there were a range 
of economically sound methods of assigning these costs to individual 
calls. Under this approach, a provider will be fairly compensated if 
the rates and fees it is permitted to charge will afford it an 
opportunity to recover industry-average costs associated with prudent 
investments used and useful in providing IPCS and associated ancillary 
services at the facilities the provider serves.
d. Rates and Charges
    72. We interpret the statutory language ``rates and charges'' to 
encompass the amounts imposed on consumers by IPCS providers as the 
Commission proposed in 2023. Section 276(b)(1)(A), as amended by the 
Act, requires that ``all rates and charges'' imposed by providers for 
the eligible communications are just and reasonable. The 2023 IPCS NPRM 
proposed to interpret ``rates'' to include ``the amounts paid by 
consumers of incarcerated people's communications services for calls or 
other audio or video communications covered by the statute or [the 
Commission's] rules.'' And 2023 proposed to interpret ``charges'' to 
include ``all other amounts assessed on consumers of incarcerated 
people's communications services'' including ``ancillary service 
charges, authorized fees, mandatory taxes and fees, and any other 
charges a provider may seek to impose on consumers.'' The record 
supports these interpretations. We are persuaded that the statutory 
language ``rates and charges'' encompasses the amounts imposed on IPCS 
consumers, as we proposed in 2023, whether ``rates'' and ``charges'' 
are interpreted individually or if ``rates and charges'' is understood 
as an all-encompassing category.

[[Page 77256]]

    73. The regulation of ``rates and charges'' lies at the core of the 
Martha Wright-Reed Act, and the amendments to section 276. Prior to the 
enactment of the Martha Wright-Reed Act, the Commission's rules 
commonly used the term ``rates'' when referring to the amounts 
consumers paid for inmate calling services calls, while at other times 
referring to such amounts as ``charges.'' The Commission's rules also 
at times use the term ``rates'' in connection with ancillary service 
charges. Nonetheless, on balance we conclude that under our rules in 
place at the time of the enactment of the Martha Wright-Reed Act, the 
term ``rates'' should be understood as referring to the amounts paid by 
consumers of incarcerated people's communications services for calls, 
supporting our adoption of the interpretation of that term proposed in 
2023. Our interpretation also comports with the broad ordinary meaning 
of the term ``rate.''
    74. We also conclude that ``charge[s]'' properly are interpreted as 
including ancillary services charges, mandatory taxes, mandatory fees, 
and authorized fees. The Commission's rules at the time of the Martha 
Wright-Reed Act's enactment defined ``Ancillary Service Charge'' as 
``any charge Consumers may be assessed for, or in connection with, the 
interstate or international use of Inmate Calling Services that are not 
included in the per-minute charges assessed for such individual 
calls.'' Although the ancillary service charges that were permitted to 
be assessed under the Commission's rules were limited to five discrete 
categories, Congress notably did not use the term ``ancillary service 
charges'' in the Martha Wright-Reed Act, instead using the more generic 
term ``charges.'' Consequently, we do not find it appropriate to focus 
narrowly on the scope of ancillary service charges specifically 
permitted to be assessed under the Commission's rules. Rather, 
consistent with Congress's use of the broader term ``charges,'' we look 
to the distinction drawn between per-minute rates and any other 
``charge[s] Consumers may be assessed for, or in connection with, the 
interstate or international use of Inmate Calling Services.'' That 
encompasses not only ancillary service charges permitted under the 
Commission's rules, but the other amounts identified in 2023 such as 
mandatory taxes, mandatory fees, and authorized fees. This 
interpretation likewise comports with the broad ordinary meaning of the 
term ``charge.''
    75. As an alternative basis for our decision, we conclude that 
``rates and charges'' can be interpreted collectively as reflecting a 
``belt and suspenders'' approach to the Commission's regulatory 
authority under section 276(b)(1)(A) that encompasses the full array of 
amounts assessed on IPCS customers discussed above. The statutory 
context and regulatory history are consistent with that understanding. 
For example, leading up to the enactment of the Martha Wright-Reed Act, 
the Commission relied on authority under section 201(b)--which refers 
to ``charges'' but includes no express reference to ``rates''--to adopt 
rules governing ``rates and charges'' for IPCS. Treating ``rates and 
charges'' as a doublet that emphasizes that meaning of these 
overlapping terms also harmonizes section 3(b) of the Martha Wright-
Reed Act--which addresses the Commission's consideration of certain 
cost information when, among other things, ``determining just and 
reasonable rates''--with the fact that the Act amended section 
276(b)(1)(A) to include a mandate that the Commission ensure that 
``rates and charges are just and reasonable'' for IPCS. This 
understanding of ``rates and charges'' also is understandable given the 
Commission's own sometimes inconsistent usage of ``rates'' and 
``charges'' in its IPCS rules in effect at the time of enactment of the 
Martha Wright-Reed Act. Given that statutory context and regulatory 
history, ``rates and charges'' need not necessarily be understood as 
embodying two distinct concepts, but rather as ensuring that Congress 
collectively encompassed the full range of amounts assessed on IPCS 
customers over which it wanted the Commission to have authority. 
Further, this interpretation of ``rates and charges'' reflects the 
substantial overlap in the ordinary meaning of those terms.
    76. Notably, section 276(b)(1)(A) also specifies that ``all rates 
and charges'' be just and reasonable. By specifying that ``all,'' as 
opposed to some smaller subset of ``rates and charges,'' are to be just 
and reasonable, Congress obviously intended to grant us broad 
regulatory oversight of ``rates and charges.'' We find that the 
requirement that ``all'' rates and charges be just and reasonable 
applies both to the rates providers impose and the rates consumers 
ultimately pay. Thus, the totality of the rates and charges a provider 
assesses on or collects from consumers must be just and reasonable. We 
find support for this in the record and judicial precedent.
    77. Thus, we disagree with ViaPath that we should interpret ``rates 
and charges'' as excluding mandatory taxes, mandatory fees, and 
authorized fees. ViaPath contends that our ``current IPCS rules 
acknowledge'' that ``authorized fees and mandatory taxes and fees are 
separate and apart from ancillary service charges.'' As we explain 
above, the Martha Wright-Reed Act uses a broader term than ``ancillary 
service charges,'' and we conclude it best effectuates Congress' choice 
for our interpretation to sweep more broadly than the specific 
categories of ancillary service charges permitted under our existing 
rules. Nor are we persuaded by ViaPath's efforts to rely on rules and 
precedent from the operator services context. We find the statutory and 
regulatory considerations that we have described here to be much more 
pertinent to understanding Congress's actions against that precise 
legal backdrop than precedent and rules cited by ViaPath that were 
adopted in a context that we find at most tangentially related to our 
regulation of IPCS as relevant here.
    78. To exclude any tax or fee that a provider might impose on IPCS 
consumers from the term ``all rates and charges'' would risk opening 
the door to assessments that could undercut the requirement of section 
26(b)(1)(A) that amounts IPCS providers impose--and that IPCS customers 
pay--be just and reasonable. Indeed, the Commission recognized as much 
in the 2015 ICS Order (80 FR 79135, December 18, 2015) when it 
repeatedly referred to mandatory taxes, mandatory fees, and authorized 
fees as charges and banned all inmate calling services ``fees or 
charges beyond mandatory taxes and fees, and authorized fees that the 
carrier has the discretion to pass through to consumers without any 
mark up.'' The Commission concluded that this ban would help ensure 
just and reasonable rates for inmate calling services. The record at 
that time demonstrated that providers had been marking up taxes and 
regulatory fees before passing them on to consumers and that those 
inflated fees had contributed to unreasonable inmate calling services 
rates and charges. Given the history of inflated ICS charges, there can 
be no assurance of a just and reasonable end result for IPCS if the 
definition of rates and charges were limited in the manner ViaPath 
proposes, which would allow providers to impose additional charges on 
consumers or to mark up their authorized fees, mandatory taxes, or 
mandatory fees before recovering them from consumers. Indeed, a recent 
class action lawsuit alleges that an IPCS provider charges consumers 
inflated fees under the guise of taxes. The rules we adopt today do not 
alter the circumstances in which providers may pass authorized fees, 
mandatory taxes,

[[Page 77257]]

and mandatory fees through to consumers. We therefore conclude that the 
statute requires us to consider the totality of the rates and charges a 
provider assesses or collects from consumers to ensure that all IPCS 
rates and charges are just and reasonable.
e. Authority To Regulate IPCS Providers' Practices
    79. In 2023, the Commission sought comment on whether section 
276(b)(1)(A)'s mandate that we ``establish a compensation plan to 
ensure that . . . all rates and charges'' for incarcerated people's 
communications services be ``just and reasonable'' extends to ensuring 
that the providers' practices, classifications, and regulations for or 
in connection with those services are just and reasonable. The 
Commission also asked for comment on the extent of its section 
276(b)(1)(A) authority, if any, to address providers' practices, 
classifications, and regulations, as well as any limitations on that 
authority. Based on the record, we conclude that the Martha Wright-Reed 
Act provides us with limited authority to regulate IPCS providers' 
practices, classifications, and regulations (collectively, 
``practices'') as a necessary part of our obligation to establish a 
compensation plan to ensure fair IPCS compensation to providers and 
just and reasonable rates and charges for IPCS consumers and providers 
under section 276(b)(1)(A). In addition, section 201(b)'s grant of 
authority over practices for or in connection with interstate and 
international common carrier incarcerated people's communications 
services enables us to act in certain circumstances, as well. We 
address these two sources of authority below.
    80. Section 276(b)(1)(A) Compensation Plan Requirement. We conclude 
that the section 276 requirement that the Commission ``establish a 
compensation plan'' to achieve the goals of fair compensation for 
providers and just and reasonable rates and charges for consumers and 
providers, requires more of the Commission than the simple act of 
setting rates and charges. When implementing section 276(b)(1)(A) 
historically, the Commission has not limited itself just to the 
regulation of rate levels when seeking to effectuate the ``fairly 
compensated'' requirement that preceded the Martha Wright-Reed Act. By 
adding the ``just and reasonable'' mandate, while leaving the directive 
to establish a ``compensation plan'' unaltered, we understand Congress 
to intend that the Commission undertake an integrated set of actions 
designed to work in concert to achieve the statute's central goals of 
fair compensation and just and reasonable rates and charges.
    81. Long prior to the enactment of the Martha Wright-Reed Act, the 
Commission implemented section 276(b)(1)(A)'s mandate to establish a 
compensation plan to ensure payphone providers are fairly compensated 
by addressing the practical details associated with charging for, and 
receiving payment for, payphone services. In its implementation of 
section 276(b)(1)(A) over time, the Commission adopted various 
requirements in particular payphone contexts apart from simply rate 
setting. Such requirements have included, among other things: (1) 
requiring the transmission of information to enable tracking of calls 
from payphones; (2) allocating responsibility for paying compensation 
for payphone calls; and (3) defining the permissible arrangements 
between payphone providers and the carriers paying them compensation 
for payphone calls. A unifying premise of these requirements is that 
their inclusion in a compensation plan enabled the Commission to 
advance the fair compensation mandate in section 276(b)(1)(A).
    82. In light of the Martha Wright-Reed Act's addition of the ``just 
and reasonable'' mandate in section 276(b)(1)(A), we find that the 
statute's direction to establish a compensation plan likewise 
necessarily carries with it the authority to prescribe regulations to 
govern providers' practices to the extent that those practices 
implicate the Commission's ability to ensure that rates and charges are 
just and reasonable. In this way, the ``compensation plan'' 
requirement--which the Martha Wright-Reed Act left unaltered--gives the 
Commission authority in the case of the ``just and reasonable'' mandate 
that is comparable to what it historically has possessed when crafting 
compensation plans to account for the ``fairly compensated'' mandate. 
As the Public Interest Parties indicate, the responsibility to 
establish a comprehensive plan ensuring just and reasonable rates and 
charges ``necessarily encompasses a corresponding responsibility to 
ensure that IPCS providers do not evade [the Commission's rate and fee] 
caps through their other practices, classifications, and regulations.'' 
Given the mandate of the Martha Wright-Reed Act and its revisions to 
section 276(b)(1)(A), we find that the Commission's authority over 
rates and charges necessarily extends to practices that affect our 
ability to ensure that rates and charges are just and reasonable, as 
well as that providers are fairly compensated.
    83. If section 276(b)(1)(A) instead were read only to allow us to 
regulate IPCS rate levels, providers' practices could thwart Congress' 
direction to ensure just and reasonable rates and charges for consumers 
and fair compensation for IPCS providers. The risk that providers' 
practices could subvert the goals of the statute is not speculative. 
For example, in light of evidence that inmate calling services 
providers were ``engaging in unjust and unreasonable practices and 
imposing unfair rates by instituting minimum or maximum amounts that 
may be deposited for prepaid calling accounts,'' the Commission 
prohibited providers from instituting prepaid account minimums and 
required that any provider that limits deposits set the maximum 
purchase amount at no less than $50 per transaction. Securus asks that 
we ``set minimum funding amounts to allow [IPCS providers] to better 
manage costs. We decline on the record before us to adopt its proposal, 
but will continue to monitor its concerns. And, more recently, the 
Commission concluded that all funds deposited into a debit-calling or 
prepaid calling account and not spent on products or services are 
generally the property of the account holder and that any action 
inconsistent with this finding is an unjust and unreasonable practice. 
The Commission also has found affirmative requirements, such as 
consumer disclosure rules, necessary to ensure that rates and charges 
as implemented are just and reasonable as applied to consumers. In sum, 
we find that section 276, as amended by the Martha Wright-Reed Act, 
gives us authority over providers' practices to the extent they may 
affect the Commission's ability to ensure just and reasonable IPCS 
rates and charges and fair compensation for all incarcerated people's 
communications services. Those services include the full range of 
services now subject to Commission authority as a result of the Martha 
Wright-Reed Act, including intrastate IPCS and the advanced 
communications services now included in the statutory definition of 
``payphone service.''
    84. We agree with commenters insofar as they note that Congress did 
not incorporate the entirety of the section 201(b) legal framework to 
ensure just and reasonable practices, classification, and regulations 
into section 276(b)(1)(A). At the same time, we reject claims that we 
lack any authority at all over IPCS provider practices under section 
276(b)(1)(A). In particular, we reject arguments that our 
interpretation

[[Page 77258]]

fails to properly credit Congress' decision to use different language 
in section 201(b) and section 276(b)(1)(A). To the contrary, we honor 
Congress's choice because we do not interpret our section 276(b)(1)(A) 
authority over IPCS practices to be as extensive as the Commission's 
authority over common carrier practices under section 201(b). At the 
same time, we also must honor Congress's choice to leave intact the 
requirement that the Commission ``establish a compensation plan'' in 
the regulation mandated by section 276(b)(1)(A). As indicated by our 
analysis above, the compensation plan provision goes beyond the 
establishment of individual rates and necessarily entails a harmonized 
set of requirements that act as a coordinated whole to achieve the new 
statutory mandate of just and reasonable rates and charges.
    85. Section 201(b) Authority Over Interstate and International 
Practices. Apart from the statutory directives in section 276 taken as 
a whole that support our finding of jurisdiction over certain IPCS 
practices to the extent they bear on just and reasonable rates and 
charges, we conclude that section 201(b) provides an independent 
statutory basis for regulating providers' practices with regard to 
IPCS. This authority explicitly extends to IPCS-related practices for 
or in connection to the interstate and international telecommunications 
services that are within our section 201(b) authority, as well as to 
practices for or in connection with other IPCS services within our 
section 276 authority to the extent those practices cannot practicably 
be separated from practices applicable to services within our section 
201(b) authority.
    86. Section 201(b) grants the Commission jurisdiction over 
``practices, classifications, and regulations'' of carriers ``for or in 
connection with'' interstate and international communications services, 
including those services used to provide IPCS. That authority has been 
interpreted by the Commission to extend ``to the intrastate portion of 
jurisdictionally mixed services `where it is impossible or impractical 
to separate the service's intrastate from interstate components' and 
state regulation of the intrastate component would interfere with valid 
federal rules applicable to the interstate component.'' In 2023, the 
Commission sought comment on whether it could use this ``impossibility 
exception'' to regulate practices for or in connection with 
incarcerated people's intrastate communications services and to audio 
and video services that were unregulated prior to the enactment of the 
Martha Wright-Reed Act. The record is mixed on this issue.
    87. The Commission has previously applied section 201(b) and the 
impossibility exception to regulate providers' practices that affect 
both interstate and intrastate inmate calling services. In the 2020 ICS 
Remand Order, the Commission relied on section 201(b) in adopting rules 
applicable to both interstate and intrastate ancillary service charges, 
finding that ``ancillary service charges generally cannot be 
practically segregated between the interstate and intrastate 
jurisdiction except in the limited number of cases where, at the time a 
charge is imposed and the consumer accepts the charge, the call to 
which the service is ancillary is a clearly intrastate-only call.'' In 
the 2022 ICS Order, the Commission exercised its 201(b) authority to 
prohibit provider seizure of outstanding balances in inactive accounts 
that could be used to pay for interstate, intrastate, and nonregulated 
services, and to set limitations on ancillary service fees in order to 
curtail the incentives for providers to engage in revenue-sharing 
schemes that drive up prices charged to inmate calling services 
consumers.
    88. Consistent with this precedent, we conclude that our section 
201(b) authority over providers' practices extends to the full range of 
``payphone service[s],'' as defined in section 276(d), to the extent 
the practices for or in connection with the payphone services outside 
of our separate section 201(b) authority cannot practicably be 
separated from the practices for or in connection with the payphone 
services within that authority. Consistent with the Commission's 
finding in the 2020 ICS Remand Order, we find that this inseverability 
generally extends to providers' rate and ancillary services charge 
practices in connection with interstate and intrastate IPCS to the 
extent that IPCS-related practices cannot practicably be separated into 
interstate, intrastate or non-section 201(b) regulated services 
components.
4. Amendment to Section 2(b) of the Communications Act
    89. In the next step of our analysis, we address the Martha Wright-
Reed Act's confirmation of our jurisdiction to regulate the rates of 
all forms of intrastate IPCS to ensure they are not unreasonably high. 
Section 276(b)(1)(A) always has been clear that the Commission has 
authority to establish compensation plans for ``intrastate and 
interstate'' payphone calls, and as explained above, the Martha Wright-
Reed Act amended that provision to clearly establish the Commission's 
authority to ensure just and reasonable rates for both intrastate and 
interstate communications, as newly encompassed by section 276(d). 
Above and beyond that, the Martha Wright-Reed Act added section 276 to 
the express exceptions to the general preservation of state authority 
in section 2(b) of the Act. Consistent with the Commission's proposal 
in 2023, we conclude that the collective effect of the amendments to 
section 276 as to intrastate communications, when coupled with the 
Martha Wright-Reed Act's amendment to section 2(b) of the 
Communications Act, is to remove any doubt that our authority over IPCS 
includes both interstate and intrastate jurisdiction.
5. Inclusion of Advanced Communications Services Within the Definition 
of Payphone Service
    90. In 2023, the Commission recognized that the Martha Wright-Reed 
Act had expanded its section 276 authority over ``payphone service'' in 
correctional institutions to include ``advanced communications 
services,'' as defined in sections 3(1)(A), 3(1)(B), 3(1)(D), and new 
(3)(1)(E) of the Communications Act. The Commission asked how this 
expansion of statutory authority applies to each type of enumerated 
advanced communications service for incarcerated people. We conclude 
that the Martha Wright-Reed Act not only retains the Commission's 
preexisting authority over audio communications in the carceral 
setting, but extends that authority to include four categories of 
advanced communications services--``interconnected VoIP service,'' 
``non-interconnected VoIP service,'' ``interoperable video conferencing 
service,'' and ``any audio or video communications service used by 
inmates for the purpose of communicating with individuals outside the 
correctional institution where the inmate is held, regardless of 
technology used''--within the definition of ``payphone service. We also 
conclude, as proposed in 2023, that the language in the new statute 
confers on the Commission broad jurisdiction to develop a compensation 
plan for the categories of audio and video communications included in 
the definition of ``payphone service'' in order to ensure that IPCS 
providers are fairly compensated and all IPCS rates and charges are 
just and reasonable. We likewise find that the expansion of the types 
of services and devices over which we have authority correspondingly 
includes entities that may not have previously been subject to

[[Page 77259]]

our rules and that now fall under our regulatory oversight. Below, we 
discuss, in turn, the four types of advanced communications services 
now included in the definition of ``payphone service.''
a. Interconnected and Non-Interconnected VoIP Services (47 U.S.C. 
153(1)(A) to (B))
    91. The Martha Wright-Reed Act expressly confirms the Commission's 
authority over interconnected and non-interconnected VoIP services, 
adding interconnected and non-interconnected VoIP services, as 
referenced in sections 3(1)(A) and 3(1)(B) of the Communications Act, 
to section 276(d)'s definition of ``payphone service.'' Based on 
universal support in the record, we find that this authority includes 
audio services using interconnected or non-interconnected VoIP, and 
extends to each entity that provides IPCS via interconnected or non-
interconnected VoIP, including entities that provide those services via 
non-traditional equipment such as tablets or kiosks. As the Commission 
has observed, ``[s]ection 276 makes no mention of the technology used 
to provide payphone service. . . . Thus, the use of VoIP or any other 
technology for any or all of an ICS provider's service does not affect 
our authority under section 276.'' Our authority over inmate calling 
services is therefore unaffected by the application of VoIP technology; 
rather, the expansion of our inmate calling services authority to 
include VoIP technology reflects the Commission's long-held 
understanding of inmate calling services as inherently technology 
neutral. If a particular service meets the relevant definition in the 
Commission's rules, it is a form of inmate calling services and subject 
to the Commission's inmate calling services rules. To the extent an 
entity provides any of these services in ``correctional institutions,'' 
it will be subject to the rules we adopt in the Report and Order.
b. Interoperable Video Conferencing Service (47 U.S.C. 153(1)(D))
    92. The Martha Wright-Reed Act extends our section 276 authority to 
``interoperable video conferencing service'' by adding a reference to 
sub-paragraph 3(1)(D) of the Communications Act to the definition of 
``payphone service'' in section 276(d). The Communications Act defines 
``interoperable video conferencing service'' as ``a service that 
provides real-time video communications, including audio, to enable 
users to share information of the user's choosing.'' This definition 
encompasses video conferencing applications commonly in use outside the 
incarceration context, including applications that rely on transmission 
over the internet; and the rules we adopt in the Report and Order 
extend to such applications and similar applications should they be 
used in the incarceration context.
    93. One commenter suggests that ``[i]n the absence of a Commission 
adopted definition of `interoperable,' it is difficult to identify 
which video services made available to incarcerated persons qualify for 
potential rate regulation.'' That argument is outdated. In the Access 
to Video Conferencing Order, the Commission revisited its previous 
views regarding the interpretation of the statutory term 
``interoperable video conferencing service'' and concluded that there 
was ``no persuasive reason to modify or limit the scope of the 
statutory definition of this term.'' There, the Commission explained 
that the statutory definition of ``interoperable video conferencing 
service'' encompasses a variety of video communication services that 
are commonly used today, or that may be used in the future, to enable 
two or more users to share information with one another. In 2011, the 
Commission interpreted a qualifying phrase in the definition--``to 
enable users to share information of the user's choosing''--to mean 
that services ``provid[ing] real-time video communications, including 
audio, between two or more users'' would be included, ``even if they 
can also be used for video broadcasting purposes (only from one 
user).'' It rejected arguments that the term ``interoperable'' had 
meaning independent of the statutory definition or in some way limited 
the scope of the statutory definition of the service. It concluded that 
the term interoperable ``may simply reflect the fact that any video 
service satisfying [the statutory] definition . . . necessarily 
involves some level of interoperability among the particular devices 
and software employed by users of that service.'' We find arguments to 
the contrary to have been fully addressed by the Commission's actions 
in the Access to Video Conferencing proceeding.
    94. As the Commission has explained, the definition of 
interoperable video conferencing services does not reflect an intention 
to exclude any service based on whether it is used primarily for point-
to-point or multi-point conversations, or based on the type of device 
used to access the service. Likewise, the definition does not depend on 
the options offered to users for connecting to a video conference 
(e.g., through a dial-up telephone connection or by broadband, through 
a downloadable app or a web browser), what operating systems or 
browsers users' devices may employ, whether the service works with more 
than one operating system, or whether the service may be classified as 
offered to the public or to a private group of users (such as a 
telehealth platform). The Commission concluded that the important 
characteristic is that two or more people can use the service to share 
information with one another in real-time, via video.
    95. Our section 276 authority over interoperable video conferencing 
services in the IPCS context therefore includes all options offered to 
users for connecting to a video conference, regardless of what 
operating systems or browsers their devices may use, whether the 
service works with more than one operating system, or whether the 
service may be classified as offered to the public or to a private 
group of users. Where two or more people can use a video conferencing 
service to share information with one another in real-time, that 
service is subject to our section 276 authority in the incarceration 
context. This authority also extends to educational, vocational, or 
other video programming in which incarcerated people participate in 
real-time in the incarceration context. To be clear, entertainment and 
other forms of content that are not real-time communications services 
are not included in our authority over interoperable video 
conferencing. They may, however, be subject to our authority under 
section 3(1)(E), which is not limited to real-time communications 
services.
    96. We disagree that this interpretation somehow constitutes an 
assertion of authority over internet content. Notwithstanding certain 
parties' comments suggesting otherwise, we have not proposed to 
regulate internet content, nor do we do so in the Report and Order. The 
rules we adopt today are content-neutral, and our authority over 
interoperable video conferencing services, like our authority over 
traditional payphone services, is independent of the information 
communicated though those services. Neither the Communications Act nor 
the Martha Wright-Reed Act includes any language limiting the content 
or information that may be offered through interoperable video 
conferencing, and we do not impose any such limitations in our rules.
    97. Interoperable Video Conferencing Service for People with 
Disabilities. Under section 716 of the Communications Act, as amended 
by the Twenty-First Century

[[Page 77260]]

Communications and Video Accessibility Act of 2010 (CVAA), 
interoperable video conferencing service and equipment used for 
interoperable video conferencing service must be accessible to and 
usable by people with disabilities, unless those requirements are not 
achievable. Consistent with the Commission's analysis in the Access to 
Video Conferencing Order, we find no persuasive reason to modify or 
limit the scope of these accessibility requirements as they apply in 
the IPCS context. Instead, we conclude that the accessibility 
requirements in section 716 of the Communications Act and part 14 of 
our rules apply, without limitation, to all interoperable video 
conferencing services provided in correctional institutions and to all 
equipment that people with disabilities use to access those services. 
As explained in more detail below, in the 2011 ACS Order the Commission 
assumed that the word ``interoperable'' needed to be defined 
independently of the term ``interoperable video conferencing service.'' 
In the Access to Video Conferencing Order, the Commission revisited 
this issue and rejected arguments that the term ``interoperable'' had 
meaning independent of the statutory definition or in some way limited 
the scope of the statutory definition of the service. The Commission 
explained that the statutory definition of ``interoperable video 
conferencing service'' encompasses a variety of video communication 
services that are commonly used today, or that may be used in the 
future, to enable two or more users to share information with one 
another.
c. Any Audio or Video Communications Service (47 U.S.C. 153(1)(E))
    98. The Martha Wright-Reed Act added new subsection (E) to section 
3(1) of the Communications Act to expand the definition of ``advanced 
communications services'' to include ``any audio or video 
communications service used by inmates for the purpose of communicating 
with individuals outside the correctional institution where the inmate 
is held, regardless of technology used.'' It also included these same 
services in the definition of payphone service in section 276(d), 
expanding the scope of the Commission's authority over incarcerated 
people's communications services. As proposed in 2023, we interpret the 
phrase ``any audio or video communications service'' in subsection 
3(1)(E) as encompassing every method that incarcerated people may 
presently, or in the future, use to communicate, by wire or radio, by 
voice, sign language,'' or other audio or video media, without 
qualification. The record strongly supports this interpretation. In 
doing so, we fulfill Congress's intent that a broad range of 
communications services and technologies be available to incarcerated 
persons and their loved ones at just and reasonable rates. Congress 
included all aspects of the section 3(1) definition of advanced 
communications services in the section 276(d) definition of payphone 
services with the exception of electronic messaging services defined in 
section 3(1)(C). Certain commenters address the exclusion of electronic 
messaging services from the Commission's regulatory jurisdiction in the 
record, particularly to the extent audio or video communications may be 
sent via electronic messaging service. On the limited record before us, 
we decline at this time to determine what is or is not an electronic 
messaging service for purposes of excluding such services from the 
scope of the Act's implementation mandate. While we decline to make a 
determination, we reiterate that under section 716 of the 
Communications Act, electronic messaging service is required to be 
accessible to and usable by people with disabilities, including those 
in carceral facilities. Separately, some commenters argue that the 
Commission should assert authority over voicemail. Other commenters 
argue that the Commission may not regulate voicemail because the 
Commission treats voicemail as an information service. The record in 
this regard is underdeveloped. Thus, at this time, we decline to 
address the Commission's regulatory jurisdiction over voicemail in the 
IPCS context.
    99. Our interpretation encompasses technology used by people with 
disabilities. We find that, consistent with our mandate to provide TRS 
to incarcerated persons with disabilities, ``any audio or video 
communications services,'' as used in section 3(1)(E) includes all 
services currently provided in correctional institutions that an 
incarcerated person who is deaf, hard of hearing, deafblind, or has 
speech or other disabilities may use to communicate with individuals 
outside the correctional institution where the incarcerated person is 
held, and incorporates all future services and technologies that will 
assist incarcerated people with disabilities to communicate with the 
non-incarcerated--or incarcerated people to communicate with non-
incarcerated people with disabilities--so long as it involves audio or 
video communications services.
    100. We interpret ``audio or video communications services'' to 
encompass not only services that are audio and/or video at both ends of 
the communication, but also services that are audio and/or video at 
only one end of the communication or otherwise involve audio and/or 
video for only a segment or portion of the communication. The focus of 
section 3(1)(E) is not on whether a particular party to a communication 
is communicating in audio and/or video form, but rather on whether the 
service is an ``audio or video communications service.'' So long as the 
communications service involves audio and/or video in at least some 
respect, we conclude the ``audio or video communications service'' 
criterion is satisfied. The breadth of this interpretation, which may 
be of particular relevance where communications involving people with 
disabilities are concerned, is further supported by the fact that 
Congress chose to include that service within the category of 
``advanced communications services'' that are subject to various 
disability access requirements, along with the recognition in section 
276(b)(1)(A) that the communications services covered by that provision 
would include TRS.
    101. Unlike some other services included within the section 3(1) 
definition of advanced communications services, the services included 
in section 3(1)(E) are not expressly restricted to real-time or near 
real-time communications services. We interpret Congress' omission of 
such limiting language for the comprehensive set of IPCS services 
covered by section 3(1)(E) as bringing non-real-time communications 
services generally within the ambit of our IPCS jurisdiction, to the 
extent an incarcerated person may use them to communicate with the non-
incarcerated.
    102. While Congress included no limitations to the range of audio 
and video communications services encompassed in section 3(1)(E), it 
addressed the parties involved by limiting the definition to audio or 
video services used for communications between two classes of users, 
i.e., ``inmates'' and ``individuals outside the correctional 
institution where the inmate is held.'' While there is no dispute in 
the record regarding the meaning of the statute's reference to inmates, 
parties do dispute the meaning of the latter phrase.
    103. Consistent with one of the alternatives raised in the 
Commission's discussion in 2023, we interpret the phrase ``individuals 
outside the correctional institution where the inmate is held'' to 
mean, not the precise physical location of the individual with whom the 
incarcerated person is

[[Page 77261]]

communicating, but instead the status of that individual as someone who 
is ``neither confined in nor employed by the institution, even if [they 
are] temporarily located on the premises of the institution for 
purposes of communicating with incarcerated individuals through some 
form of audio or video communications service.'' The record supports 
this interpretation. As the Public Interest Parties recognize, 
``although the term `outside the correctional institution' can mean 
`not physically within the structure,' it can equally mean `not held 
within the institution.' '' The relevant statutory language appears 
very similar to part of the Commission's longstanding definition of 
``inmate calling service,'' which likewise refers to ``individuals 
outside the Correctional Facility where the Inmate is being held.'' 
Although the Commission did not definitively interpret the meaning of 
the ``outside'' language in its IPCS rules prior to the enactment of 
the Martha Wright-Reed Act, in the inmate calling context it regularly 
used the term ``outside'' of a correctional facility when referring to 
the status--rather than the physical location--of the party with whom 
the inmate was communicating. We recognize that the FCC Form 
established for purposes of a proposed collection of data on video 
visitation services described ``Off-Site Video Visitation'' as ``a call 
that allows an Inmate to communicate via video with another party (or 
parties) located outside the Facility where the Inmate is being 
detained.'' That limited example does not overcome our understanding of 
the broader usage of ``outside'' in Commission decisions in this 
context, particularly where it referred to communications to another 
party ``located'' outside the relevant correctional facility--a 
qualifier signaling physical location that is not present in either the 
Commission's definition of ICS or the text of section 3(1)(E) of the 
Communications Act. Because our interpretation is both consistent with 
the ordinary meaning of ``outside'' and accords with the trend we 
discern in the regulatory backdrop relevant here, we find that the best 
reading of ``outside the correctional institution'' in section 3(1)(E) 
refers to a party's status rather than its physical location. 
Consistent with the arguments of a number of commenters, we thus 
conclude that communications with ``individuals outside the 
correctional institution where the inmate is held'' is best understood 
to mean communications with individuals who are neither incarcerated 
in, nor employed by, the incarcerated person's correctional 
institution, i.e., ``outside'' of the institution's framework, 
regardless of the physical location where they can use the 
communication service. By the same token, our analysis leads us to 
reject claims that we must interpret ``outside the correctional 
institution'' to refer to the physical location of the party with whom 
the inmate is communicating. These commenters do not persuade us that 
anything in the statutory text itself counsels against our 
interpretation, and insofar as they otherwise have a narrow view of 
congressional intent underlying the language it adopted, we are not 
persuaded by that either, as discussed more below.
    104. Our interpretation also is supported by our view of 
congressional intent and associated policy considerations. We agree 
with Worth Rises that ``[t]here is no evidence that Congress intended 
for a miniscule regulatory cut-out that leaves IPCS ratepayers 
unprotected from rate regulation when they are physically located 
within a building that is property of the correctional authority. 
Whether the outside called party is on their mobile phone in the lobby 
of a correctional facility or sitting at a video kiosk booth in the on-
site video calling room, they should be protected by the Commission's 
ratemaking authority.'' This reinforces our conclusion that the best 
reading of the statutory language is that it refers to the non-
incarcerated status of the individual with whom the incarcerated person 
is communicating, rather than the physical location of individuals with 
whom an inmate can communicate using a given service.
    105. The ordinary tools of statutory interpretation strongly 
support the view that the qualifier, ``individuals outside the 
correctional institution where the inmate is held,'' in section 3(1)(E) 
should be limited to services that only meet the definition of advanced 
communications services under that specific provision. Section 3(1) 
consistently has been understood as a disjunctive list of services such 
that meeting any one of those categories is sufficient to render a 
service an advanced communications service. While several commenters 
agree with this interpretation, one commenter contends that ``the 
limiting phrase of new subsection 3(1)(E)'' applies to all of the 
services included in section 3(1) ``in the context of IPCS.'' While the 
scope of section 3(1)(E) outside of the phrase in question is 
sufficiently expansive to encompass virtually all communications 
services, the National Sheriffs' Association points to nothing in the 
Martha Wright-Reed Act or the amended text of section 3(1) that would 
suggest that Congress intended to override the preexisting operative 
structure of that provision or subsume the definitions of 
interconnected VoIP service, non-interconnected VoIP service, and 
interoperable video conferencing service within section 3(1)(E). 
Indeed, if the relevant qualifier in section 3(1)(E) either were 
interpreted to apply to sections 3(1)(A), (B), and (D) or if section 
3(1)(E) were read as subsuming sections 3(1)(A), (B), and (D), it is 
not clear what remaining practical significances sections 3(1)(A), (B), 
and (D) would have given the existence of section 3(1)(E). Under 
ordinary canons of statutory interpretation, such an outcome cuts 
against that reading. Had Congress intended the ``outside the 
correctional institution'' language in section 3(1)(E) to apply to 
other advanced communications services, it could have included that 
language in section 3(1) as a whole, appended it to other subsections 
of section 3(1) as it deemed appropriate, or incorporated that language 
into section 276(d). It did none of these things.
    106. Nor can the National Sheriffs' Association's interpretation be 
reconciled with the broader statutory context. The definition of 
``advanced communications service'' in section 3(1) does not owe its 
existence solely to IPCS regulation under section 276 of the 
Communications Act. Indeed, section 3(1) includes ``electronic 
messaging service,'' 47 U.S.C. 153(1)(C), which was not included as a 
specified category of service covered by amended section 276(d) of the 
Communications Act. Rather, a range of statutory provisions rely on 
that definition. Interpreting section 3(1) to mean that each of the 
individual audio and video services listed in sections 3(1)(A), (B), 
and (D) are subject to the limitation in (E) would result in a 
substantial narrowing of preexisting statutory requirements dealing 
with matters such as disability access.
    107. Likewise, the National Sheriffs' Association's interpretation 
cannot readily be squared with section 276(d) as amended by the Martha 
Wright-Reed Act. In pertinent part, that provision as originally 
enacted defined ``payphone service'' subject to Commission authority 
under section 276 as encompassing ``the provision of inmate telephone 
service in correctional institutions.'' When Congress amended that 
definition in the Martha Wright-Reed Act to include certain advanced 
communications services, it made those services subject to the ``in 
correctional institutions'' limitation, as well. Yet if

[[Page 77262]]

the relevant terms in section 3(1) all already were subject to the 
limitation in 3(1)(E), it is not clear how much work would be left for 
the section 276(d) qualifier ``in correctional institutions'' to 
perform. At a minimum, Congress's deliberate choice to subject the 
advanced communications services covered by section 276(d) to the ``in 
correctional institutions'' qualifier provides good reason to pause 
before inferring arguably similar limitations in section 3(1) in a 
manner that appears contrary to that statutory text.
    108. Consequently, we adopt the proposal in 2023 that the language 
requiring that communications involve ``individuals outside the 
correctional institution where the inmate is held'' applies only with 
regard to subparagraph 3(1)(E). We therefore agree with other 
commenters that the phrase ``outside the correctional institution where 
the inmate is held'' does not apply outside the context of section 
3(1)(E).
6. Onsite Video Visitation
    109. In 2023, the Commission sought comment on whether its expanded 
authority over IPCS extends to onsite video visitation services. The 
widespread use of onsite video visitation is a relatively recent 
phenomenon, initially driven by significant health risks posed by the 
COVID-19 pandemic. During the pandemic, ``nearly every jail and 
prison'' shifted from in-person visitation to onsite video services to 
prevent exposure to and the spread of coronavirus. In many instances, 
correctional institutions continue to restrict onsite visits to video 
communications in lieu of in-person visits.
    110. Consistent with the description in 2023, we define onsite 
video visitation services as services that enable video communications 
between a person incarcerated in a correctional institution and a non-
incarcerated person visiting that institution. We find that our 
authority over incarcerated peoples' advanced communications services 
extends to onsite video visitation on two independent grounds: (a) 
onsite video visitation's status as an ``interoperable video 
conferencing service'' within the meaning of section 3(1)(D); and (b) 
its status as an ``audio or video communications service used by 
inmates for the purpose of communicating with individuals outside the 
correctional institution where the inmate is held, regardless of 
technology used'' within the meaning of section 3(1)(E).
    111. Onsite Video Visitation as an Interoperable Video Conferencing 
Service under Section Sec.  3(1)(D). We conclude that onsite video 
visitation includes each of the elements of the definition of 
interoperable video conferencing service in section 3(27) of the 
Communications Act and that it is therefore a ``payphone service'' 
within the meaning of section 276(d) when provided in correctional 
institutions. Section 3(27) defines ``interoperable video conferencing 
service'' as ``a service that provides real-time video communications, 
including audio, to enable users to share information of the user's 
choosing.'' Onsite video visitation meets those criteria: it is a real-
time service that involves video communications, including audio, and 
that enables the incarcerated and the non-incarcerated to share 
information of their choosing. Notwithstanding the National Sheriffs' 
Association's advocacy to the contrary, we find above that the 
limitation to ``individuals outside the correctional institution'' 
included in section 3(1)(E) is specific to the grant of authority in 
that section and is not generally applicable to section 3(1) as a 
whole. Thus, to the extent it were relevant in a given scenario, we 
observe that the definition of interoperable video conferencing service 
does not include any limitation or requirement that the communications 
be with individuals outside the correctional institution. Instead, we 
find the statute best interpreted to mean that any interoperable video 
conferencing service, a service that includes onsite video visitation, 
is a payphone service, and therefore subject to our authority under 
section 276(b)(1)(A), to the extent it is provided in correctional 
institutions. Onsite video visitation uses the same or functionally 
similar technology and equipment as is used generally for video IPCS.
    112. We also find that Congress intended our authority under 
section 276 to extend to the full range of interoperable video 
conferencing services, including onsite video visitation services, 
given the inclusion of section 3(1)(D) in section 276(d). By this 
inclusion, Congress eliminated doubt that video visitation was subject 
to the Commission's authority in response to the D.C. Circuit's GTL v. 
FCC decision casting doubt on whether video visitation reporting 
requirements were within the Commission's authority. As amended by the 
Martha Wright-Reed Act, the definition of ``payphone service'' in 
section 276(d) of the Communications Act now includes all interoperable 
video conferencing services, without qualification, to the extent they 
are provided in correctional institutions. Given this statutory 
language, we conclude that our authority under section 276(b)(1)(A) 
extends to all onsite video visitation services.
    113. Our conclusion does not change regardless of whether onsite 
video visitation is offered free of charge. Though one commenter argues 
that we should limit our oversight because ``the industry has no 
history of charging for such services, we find that because such 
services meet the definition of ``payphone service'' in section 276(d), 
they fall within the Commission's jurisdiction. We affirm that onsite 
video visitation services are interoperable video conferencing 
services, and as such, are subject to our section 276 jurisdiction and 
the rules we adopt herein.
    114. Onsite Video Visitation as a Video Communications Service 
under Section 3(1)(E). In 2023, the Commission sought comment on 
whether onsite video visitation services constitute ``video 
communications service[s]'' within the meaning of section 3(1)(E). As 
an initial matter, we find that, based on the record in response to 
2023, onsite video visitation is a video communications service under 
section 3(1)(E), giving us an alternative basis for exercising section 
276 authority over those services independent of section 3(1)(D). We 
are persuaded by commenters' explanations that ``[o]n-site video 
visitation service used by an incarcerated person for the purpose of 
communicating with those neither confined nor employed by the 
correctional facility fits plainly within the statutory language in 
section 3(1)(E), as the service is used by incarcerated persons to 
communicate with . . . persons not held within the institution.''
    115. Nor do we find any ``reasonable justification to interpret the 
Act to allow the Commission to regulate [remote video services] but 
[not onsite video services].'' We are not persuaded by suggestions that 
Congress intended to include a limitation based on the physical 
location of the non-incarcerated person involved in the communication 
such that we have no authority over onsite video visitation under 
section 3(1)(E). As discussed above, the language of the statute is 
best read as focused on the status of the individuals involved in an 
audio or video communication--not on the physical location of the 
called party at the time of the communication. Indeed, even assuming 
arguendo that the qualifier in section 3(1)(E) were interpreted to 
apply to the physical

[[Page 77263]]

location rather than status of the individuals with whom an inmate is 
communicating, the relevant statutory question would be where the 
service can be used, and not where a given communication occurs. If an 
audio or video communications service can be used by inmates for the 
purpose of communicating with individuals outside the correctional 
institution where the inmate is held, the details associated with a 
given individual communication using that service would be irrelevant.
    116. Policy considerations likewise support our interpretation. We 
find it compelling that ``[b]oth remote and on-premises video calls are 
typically operated by the same IPCS providers, involve the same 
technological systems, and have the same functions and equipment for 
the incarcerated user, regardless of the location of the person with 
whom they are communicating.'' While some providers offer such service 
for free today, it does not follow that consumers never would or could 
need the protection of the ``just and reasonable'' standard provided by 
the Martha Wright-Reed Act for these video communications. Absent 
Commission oversight of onsite video visitation, both facilities and 
IPCS providers could, for example, have ``a perverse incentive . . . to 
reduce the availability of other forms of IPCS as well as in-person 
visitation.'' We are persuaded that, because these services share 
providers, equipment, and other technology systems, the only difference 
between onsite and remote video communications is the location of the 
non-incarcerated party with whom the incarcerated individual is 
communicating. We therefore agree that ``[t]here is no reasonable 
justification to interpret the Act to allow the Commission to regulate 
one but not the other.''

D. Rate Caps

    117. After carefully considering our expanded statutory authority, 
the data received in response to the 2023 Mandatory Data Collection, 
and the record developed from the 2023 and the precursor requests for 
comment, we take a series of actions to establish just and reasonable 
rates for IPCS while also ensuring fair compensation for providers. 
Specifically, we adopt the Commission's proposals to set separate rate 
caps for audio IPCS and video IPCS, and to treat interstate and 
intrastate communications uniformly, as supported by both the record 
and provider responses to the 2023 Mandatory Data Collection. We also 
revise our rate cap tiers, and adopt separate per-minute rate caps 
within each of those tiers for audio IPCS and video IPCS. Collectively, 
these steps will achieve the dual directives of the statute to ensure 
just and reasonable rates for consumers and providers and fair 
compensation for providers.
    118. These actions reflect our application of the ``used and 
useful'' framework in evaluating the costs of providing IPCS, 
consistent with the Commission's proposal in 2023. Under this 
framework, the determination of just and reasonable rates focuses on 
affording regulated entities an opportunity to recover their 
``prudently incurred investments and expenses that are `used and 
useful' in the provision'' of the regulated service. In applying this 
framework, we use provider-submitted data and other information from 
the record to estimate the costs incurred in providing IPCS, including 
any safety and security measures used and useful in the provision of 
these services. Our rate cap calculations incorporate the costs 
providers reported as their costs of providing ancillary services, 
consistent with our decision to eliminate separate charges for 
ancillary services. Finally, our rate caps reflect our best estimate of 
the costs incurred in implementing the TRS reforms adopted in the 2022 
ICS Order and our best estimate of the costs facilities incur in the 
provision of IPCS.
    119. Accordingly, we adopt the following permanent rate caps for 
audio IPCS, and interim rate caps for video IPCS:
     For all prisons, $0.06 per minute for audio 
communications, and $0.16 per minute for video communications;
     For jails with an average daily population (ADP) greater 
than or equal to 1,000 incarcerated people, $0.06 per minute for audio 
communications and $0.11 per minute for video communications;
     For jails with an ADP between and including 350 and 999 
incarcerated people, $0.07 per minute for audio communications and 
$0.12 per minute for video communications; and
     For jails with an ADP between and including 100 and 349 
incarcerated people, $0.09 per minute for audio communications and 
$0.14 per minute for video communications.
     For jails with an ADP with 99 or fewer incarcerated 
people, $0.12 per minute for audio communications and $0.25 per minute 
for video communications.
    We establish these rate caps using a zone of reasonableness 
approach. This approach allows us to respond to the limitations of the 
cost-of-service data before us in a manner that appropriately balances 
fair compensation for IPCS providers with just and reasonable rates and 
charges for consumers and providers. Through this approach, we afford 
providers an opportunity to recover the used and useful costs incurred 
to provide IPCS and also keep IPCS rates affordable for incarcerated 
people and their loved ones.
1. Rate Cap Structure
    120. Adopting Rate Caps as the Regulatory Mechanism. We conclude 
that rate caps are the appropriate mechanism for ensuring that all 
rates for IPCS are just and reasonable. Consistent with the 
Commission's prior ratemaking with regard to inmate calling services, 
we find that rate caps provide the best overall rate structure for IPCS 
because of the flexibility that rate caps afford providers while still 
ensuring that the incarcerated individual and their loved ones are 
protected from unreasonably high rates and charges. We also find that 
rate caps are preferable to prescriptive rate setting for IPCS because 
a rate cap approach does not preclude or prevent providers and parties 
representing facilities from negotiating and entering into agreements 
to provide IPCS at lower or no cost to incarcerated people and their 
friends and family, as is shown in the record. The record strongly 
supports the use of rate caps rather than prescriptive rate setting. 
Rate caps also allow providers to be responsive to the differing needs 
of each facility, and ``protect ratepayers as a group from high prices 
and provide carriers with an incentive to increase productivity.'' As 
the IPCS industry continues to develop and offer advanced 
communications services including video communications, we find that 
flexibility in pricing and in service offerings will be important to 
ensure that providers and incarcerated people and their friends, 
families, and loved ones benefit from the rate caps we adopt today.
    121. Separate Rate Caps for Audio IPCS and Video IPCS. With the 
Martha Wright-Reed Act's expansion of the Commission's authority to 
regulate advanced communications services, and in keeping with the 
Commission's obligation to ensure just and reasonable rates, we adopt 
separate rate caps for audio IPCS and video IPCS. In adopting these 
rate caps, we do not intend any modification of the requirements of 
Sec.  64.6040(d) of our rules, which addresses TRS and certain related 
services (TTY-to-TTY communications and point-to-point video 
communication in American Sign Language). For IP CTS, CTS, and point-
to-point video communication in ASL, an IPCS provider may assess 
charges

[[Page 77264]]

that do not exceed its charges for an equivalent voice telephone call. 
Thus, charges for these services will be effectively capped at the 
applicable rate cap for audio communications. For TTY-to-TTY 
communication, an IPCS provider may assess a charge that does not 
exceed 25 percent of the applicable per-minute rate for a voice call. 
Thus, such charges are effectively capped at 25 percent of the 
applicable per-minute rate for a voice call. We find the record, 
including the 2023 Mandatory Data Collection data, overwhelmingly 
support this approach. Record comments support separate rate caps 
because of the materially different cost structures of offering audio 
and video IPCS, and we agree. The data show that video communications 
typically require more expensive equipment, and even when comparing 
audio and video communications made using the same equipment, the data 
suggest that video communications are more expensive to provide. This 
difference in costs justifies the need to adopt separate rate caps for 
these services to satisfy our obligations for both providers and 
consumers of IPCS. Accordingly, we separately analyze audio and video 
IPCS costs and develop separate rate caps at each tier for both 
services.
    122. As proposed in 2021 and 2023, we adopt permanent rate caps for 
audio IPCS. The Commission has previously been constrained to adopt 
only interim rates for these services given persistent limitations of 
the industry data available to it. We now find that the audio cost data 
received in response to our most recent data collection provide a 
sufficient basis for setting permanent audio IPCS rate caps.
    123. By contrast, video IPCS involves relatively new services in an 
emerging market for the correctional industry, and one which the 
Commission has not previously had the authority to regulate. The 
reported costs show a marked differential between audio and video costs 
per minute, which may be attributable, in part, to the respective 
difference in maturity of the two types of service offerings. As a 
result of the relative nascency of the video IPCS market generally, the 
wide variations among facilities in the per-minute costs of providing 
IPCS, and the likely need to revise any video rate caps in the future 
to account for growth and evolution of the video IPCS marketplace, we 
find that the reported costs and demand for video IPCS are best suited 
for interim rate caps. We find that the video data present similarities 
to the data that the Commission reviewed in 2021, when the Commission 
was faced with data that it determined was unreliable, resulting in the 
adoption of interim rate caps. NCIC argues that the Commission should 
``delay the adoption of interim rates until it receives comprehensive 
data from all video visitation providers, and deliver immediate relief 
by simply prohibiting flat-rate billing, which is currently being 
offered at up to $12.99 per session''). While we recognize that the 
video marketplace is in its nascent stages, we find that the available 
data sufficiently support the interim rate caps we adopt today. In 
addition, as we note below, interim rate caps for video are necessary 
to curb abuses identified in the record concerning other existing rate 
structures in the video market.
    124. Per-Minute Rate Caps for Audio IPCS and Video IPCS. We adopt 
the Commission's proposal to set rate caps for audio and video IPCS on 
a per-minute basis as the foundation of our efforts to ensure just and 
reasonable IPCS rates and charges. The record provides no basis to 
abandon the long-standing per-minute rate caps for audio IPCS, and we 
find no reason to deviate from this approach. The Commission has 
historically set per-minute rate caps for audio IPCS. This decision is 
further supported by our adoption today of rules to permit alternate 
pricing plans subject to specified conditions. Similarly, given the 
per-minute rate structure we adopt for audio calls, we find that taking 
a consistent approach for video communications would offer several 
benefits for IPCS consumers. First, per-minute rates are simple to 
understand and reflect the actual duration of the call or 
communication. As a matter of policy, the Commission has stated that 
transparency regarding the charges for IPCS ``is critical because it 
ensures that incarcerated persons and their families understand the 
prices they are, or will be, charged for the services they use, 
enabling them to make informed decisions when purchasing those 
services.'' We find that consistent use of per-minute rates for audio 
and video IPCS will result in an easier to understand and more 
transparent regulatory framework. We therefore reject proposals to use 
other rate metrics, such as per-session charges, in the rate caps that 
serve as the foundation for ensuring just and reasonable IPCS rates. 
Per-minute rates also provide greater transparency and offer greater 
familiarity and flexibility for both industry and consumers.
    125. Establishing interim per-minute rate caps for video IPCS is 
also responsive to concerns voiced in the record about the need to curb 
abusive practices associated with other existing rate structures for 
video IPCS. At the same time, however, our new rules permitting 
providers to deploy alternate pricing plans for both audio and video 
IPCS, subject to certain conditions, including, in particular, 
compliance with the overall rate caps adopted here, will permit 
providers to experiment with optional rate structures that may be 
beneficial and desirable for IPCS consumers. Taken together, we find 
these actions satisfy two goals: our default per-minute rates will 
ensure just and reasonable rates for IPCS consumers and providers and 
fair compensation for providers; and our optional alternate pricing 
plan rules will provide some measure of flexibility for the industry, 
allowing providers and customers to voluntarily opt-in to other pricing 
arrangements that may be mutually beneficial. The Commission has 
previously found that when providers used flat-rate charges for audio 
calls, if the duration of the audio call was less than the maximum time 
allowable, ``the price for that call is disproportionately high.'' 
Receiving no record evidence to the contrary, we find that a similar 
result is likely in the case of per-call or per-session charges for 
video IPCS.
    126. We decline to adopt a model carrier approach to establish the 
rates for either audio or video IPCS. As proposed in the record, a 
model carrier approach would set rates by reference to general 
telecommunications industry-average costs for non-IPCS calls, including 
a predetermined return, ``and then potentially adjust for costs that 
may be particular to the provision of service in incarceration 
facilities.'' Although the Commission has employed a similar approach 
in other circumstances, we find that our tiered approach based on the 
currently available IPCS-provider data provides a more accurate 
estimate of just and reasonable IPCS rates and will better reflect the 
size variance and the economies of scale in the IPCS market rather than 
relying on a uniform general telecommunications industry rate setting 
approach. We find further that the marketplace is still adapting to the 
requirements of IPCS video communications, which counsels in favor of 
allowing more time before adopting a model carrier approach. Because we 
do not base our analysis on the model carrier approach, we find it 
unnecessary to address arguments concerning the Commission's authority 
in this respect. At the same time, a model carrier based approach is 
useful for comparative analysis, and as explained further in a 
technical appendix, can be used to confirm our

[[Page 77265]]

understanding of certain aspects of providers' cost data.
    127. Adopting Rate Caps Derived from Industry Average Costs. As 
permitted by the Martha Wright-Reed Act, we use industry average costs 
reported by IPCS providers at the company-wide and facility levels in 
response to the 2023 Mandatory Data Collection as the basis for 
developing the IPCS rate caps we adopt today. In 2021, the Commission 
sought comment on whether to ``calculate industry-wide mean contract 
costs per paid minute of use,'' or to ``analyze costs at the facility 
level.'' We resolve this question by confirming that we analyze costs 
at the facility level, in the interest of evaluating providers' costs 
as accurately as possible, consistent with the facility-level cost data 
staff sought and obtained through the 2023 Mandatory Data Collection. 
The Commission previously used industry average costs to set inmate 
calling services rate caps, but the D.C. Circuit rejected that approach 
as not providing fair compensation for providers on a ``per call'' 
basis for ``each and every call,'' as was then required by the language 
of section 276(b)(1)(a) of the Communications Act. The Martha Wright-
Reed Act removed the ``each and every call'' language from section 
276(b)(1)(a) and authorized the Commission to use ``industry-wide 
average costs'' in determining just and reasonable rates. We can only 
conclude, and commenters concur, that the Act thereby removed the 
limitations set forth in the D.C. Circuit's decision. We also believe 
that using industry average costs to set rates will best ensure rates 
that are just and reasonable for consumers and providers and provide 
fair compensation for providers.
    128. We further find that the Act's elimination of the requirement 
that ``each and every'' completed communication be fairly compensated 
means that we are no longer required to establish a per-call based 
compensation plan. Commenters agree. Rate caps based on costs evaluated 
on an aggregated basis generally will satisfy the requirement that all 
payphone service providers be fairly compensated. Based on our 
interpretation of the Act in light of the D.C. Circuit's holding in GTL 
v. FCC, as well as the Act's explicit terms, we further find that 
setting the upper and lower bounds of our zone of reasonableness based 
on industry-wide average costs at each tier of facilities--without the 
need to consider one standard deviation or any other measure of 
deviance from the average--will satisfy this requirement. We find that 
Congress's express permission to use industry average costs in setting 
rate caps encompasses the specific approach to using industry average 
costs that the Commission adopted in the 2015 ICS Order: setting rate 
caps at the level of the weighted average of providers' reported costs 
at each tier. The regulatory history--particularly our understanding of 
the ways that the Martha Wright-Reed Act sought to respond to the D.C. 
Circuit's decision in GTL, including with specific respect to the use 
of industry average costs--reinforces the reasonableness of our 
interpretation.
a. Rate Caps Based on Total Costs
    129. Consistent with the changes to our authority, we adopt the 
proposal to set rate caps that incorporate total IPCS costs by 
including all relevant costs incurred in the provision of IPCS in our 
calculations of average provider costs. In implementing that approach, 
we depart from the Commission's previous approach to allowing and 
capping separate charges for certain ancillary services and instead 
include the costs related to the provision of those ancillary services 
in our IPCS rate caps. We also depart from the Commission's use of 
separate rate additives for facility-incurred costs in the 2021 ICS 
Order, in favor of including those costs, to the extent recoverable, in 
our per-minute rate caps. This will substantially simplify our cap 
structure. Pay Tel proposes that we account for facility costs 
``through an explicit additive to IPCS rate caps,'' as this will 
``incentivize facilities to compare service-based, competitive market 
factors when awarding contracts.'' We find that the approach we adopt 
here will obtain a fundamentally similar result. After analyzing 
providers' cost data, we find that the data for calendar year 2022 
collected in response to the 2023 Mandatory Data Collection, together 
with other record evidence, provide a sufficient and reasoned basis on 
which to take these steps in establishing our rate caps. One commenter 
notes that we should consider ``free video calls through off-the-shelf 
video platforms,'' such as Microsoft Teams, Zoom, and Ameelio, as part 
of the industry-wide definition of IPCS providers. We find that these 
video platform business models are substantially different from those 
of most IPCS providers, and we decline at this time to do so. Taken 
together, reforming our ancillary services charge rules, and including 
costs incurred by facilities to provide IPCS and TRS-related costs into 
our rate caps, result in a total cost approach to setting IPCS rate 
caps which is more straightforward, results in rates which are easier 
to understand, and will empower incarcerated persons and their loved 
ones to make better informed choices. We address each of these steps 
below. Lastly, we disagree with commenters that suggest that we 
incorporate an inflation factor into our methodology for setting rate 
caps. Secretariat Economists' data show that, historically, growth in 
the Telecommunications PPI has been lower, on average, than general 
measures of inflation. Over the last decade, the average annual change 
of the Telecommunications PPI was 0.7%, as compared to the average 
annual change of the broader GDP Deflator over the same time period of 
2.6%. Those commenters generally fail to acknowledge the role that 
productivity increases play in offsetting inflation. Neither study 
includes data on the rates of increase in productivity in the 
telecommunications industry. We also note that the data in the 
Secretariat Economists May 8, 2023 Report shows that inflation in the 
telecommunications industry has generally been lower than the broader 
measure of inflation. We find that they fail to establish that 
productivity increases did not offset the inflation that has incurred 
since 2022, much less that inflation will outpace productivity gains in 
the future.
    130. Incorporating Costs Associated with Ancillary Services. We 
find that the five types of ancillary services addressed by our rules 
are intrinsic to the provision of IPCS, and we incorporate the costs of 
providing these services into our per-minute rate caps for a number of 
reasons. For one, incorporating the costs of these services into a 
single rate cap--rather than allowing providers to assess a separate 
ancillary service charge for each ancillary service--will result in 
rates and charges that are easier for consumers to understand and 
easier for providers to administer, while still allowing providers to 
recover the average costs associated with these ancillary services 
through our per-minute rates.
    131. In addition, in the 2021 ICS Order, the Commission found that, 
based on record data, there was ``no reliable way to exclude ancillary 
service costs'' from the calculations for the provider-related rate cap 
component, resulting in interim rate caps that included the costs that 
consumers already paid for through separate ancillary services fees. To 
address this issue, in 2022 the Commission asked whether ``some or all 
of [the ancillary] services'' for which separate charges were permitted 
are ``an inherent part of providing inmate calling services,'' such 
that the Commission should continue to

[[Page 77266]]

``include these costs in [the] per-minute rate cap calculations and 
eliminate some or all charges for ancillary services.'' As the record 
shows, all of these fees ``relate to payment and billing,'' and other 
than the paper bill fee, all of these fees address consumers' means of 
paying for the service they rely upon. Put otherwise, consumers may pay 
for IPCS via a payment card or a third-party money transmitter, with 
the assistance of a live agent, and/or may pay to complete a 
communication without setting up an account. Although these ancillary 
services may have qualified as a ``convenience'' in 2015 when the 
Commission first identified them in its rules, the record indicates 
that they are now the predominant means by which consumers gain access 
to IPCS. While alternative methods of funding an account remain 
available (e.g., by check or money order), we find that automated 
payment or money transmitter services are ``an intrinsic part'' of 
accessing the service, like most other services in the 21st-century 
economy. Indeed, one provider has pointed to the decline in one 
alternative payment mechanism--collect calls--in support of its 
proposal that the Commission eliminate the fee for paper statements. In 
short, ``incarcerated people and their families must either incur 
[these charges] when making a call or forego contact with their loved 
ones.''
    132. Our decision to incorporate the costs of ancillary service 
functions in our rate caps also reflects the limitations in the cost 
data providers submitted for their ancillary services. Like the 
Commission found in the 2021 ICS Order, we still cannot reliably 
isolate the costs of providing each type of ancillary service from 
other IPCS costs. In contrast to the Second Mandatory Data Collection, 
the instructions for the 2023 Mandatory Data Collection required 
providers to report their costs of each ancillary service separately. 
Nevertheless, we find that providers failed to reliably or consistently 
allocate their costs among the various ancillary services, or even 
between ancillary services and other IPCS costs. Incorporating all of 
these reported costs into the rate cap avoids the risk of setting 
individual fee caps for each ancillary service that misestimate 
providers' actual costs. We therefore find that incorporating ancillary 
service costs into our rate caps is the best means of recovering the 
aggregated ancillary services costs reported by providers and ensuring 
just and reasonable IPCS rates. We find that this approach is 
preferable to allowing double recovery of the same costs by adopting 
separate rates and charges.
    133. Incorporating the costs of providing ancillary services into 
our rate caps will provide several benefits to IPCS consumers and 
respond to concerns raised in the record. First, this rate cap 
structure will eliminate the incentive and ability for providers to 
charge multiple fees for the same transaction, as a way of exacting 
revenue from consumers that far exceeds their actual costs of 
completing the transaction, a problem that is well-documented in the 
record. The comment record reflects substantial debate (even confusion) 
as to whether--and if so, under what circumstances--multiple fees can 
be charged for a single transaction, and more generally, what activity 
the payment-related fees were intended to encompass. By folding the 
costs of all ancillary services into our rate caps and eliminating 
providers' ability to charge for them separately, we also remove the 
incentive for providers to ``double dip'' in this manner, effectively 
mooting related concerns under our new rules, and mitigate consumer 
confusion arising from these practices. Certain providers contend that 
any circumstances in which they have charged multiple fees are 
legitimate. Because the rate cap structure we adopt enables providers 
to recover their average costs of providing ancillary services, as 
permitted by the Martha Wright-Reed Act, we find it unnecessary to 
resolve this dispute in this rulemaking. The record also shows that 
such practices have engendered consumer confusion. We similarly 
eliminate the ability of providers to engage in other rent-seeking 
activity described in the record, including concerns that providers may 
``steer'' consumers to a more expensive single-call option for an 
incarcerated person's initial call after incarceration in an effort to 
artificially inflate revenues through single-call fees. These practices 
undermine the intent of our rules, and inflate providers' revenues well 
beyond costs, at the expense of consumers, all while providing no 
additional consumer value. Indeed, by removing such incentives, we find 
that the rate cap structure we adopt in this Order may, for example, 
motivate providers to make it easier to set up an account when 
consumers receive an IPCS communication for the first time.
    134. We likewise find that incorporating ancillary service costs 
into our rate caps will align rates and charges more fairly with actual 
user activity. Several commenters point out the seeming 
unreasonableness and disproportionality of charging a $3.00 fee for a 
call that may only last one minute, or passing through similar fees for 
small deposits, causing consumers to ``lose a significant amount'' of 
their account deposits paying such fees. By incorporating ancillary 
service costs into our rate caps, we ensure that the cost of any 
particular communication for any IPCS consumer is more proportionate to 
its duration. We also eliminate certain distortions that our current 
fee structure may perpetuate, such as avoiding a live agent, or 
transferring funds to relatives less frequently in an effort to avoid 
such charges. Our actions today reduce these barriers to communication.
    135. Incorporating ancillary service costs into our rate caps will 
also simplify the billing process, easing the administrative burden on 
providers and clarifying the bills and general operational process for 
consumers. We agree that these changes will ``simplify matters for 
consumers.'' Similarly, with respect to paper billing fees, by 
incorporating the costs of these bills into our rate caps we align IPCS 
billing practices more closely with consumers' experiences for other 
forms of telecommunications service outside of the carceral context, 
where separate charges are not assessed for paper bills.
    136. Finally, we find that incorporating ancillary service costs 
into our rate caps aligns our rate and fee structure more effectively 
with broader patterns in the industry and the diminishing utility of 
certain ancillary services. As the Commission has previously observed, 
several jurisdictions have already banned ancillary service charges, 
either piecemeal or outright. The record affirms that several of these 
services are declining in use. For example, several providers assert 
they rarely charge a paper bill fee as few consumers require paper 
bills, even proposing outright that this fee be eliminated. At least 
one provider no longer charges a live agent fee, having switched to an 
automated system during the pandemic. Meanwhile, providers have shifted 
from offering single-call services through third parties (as defined in 
our rules) to instead provide these services themselves. The record 
further suggests that the single-call service, which ostensibly offers 
the convenience of completing initial contact without setting up an 
account, may in practice--like paper billing--offer little benefit to 
consumers, as they still have to enter their payment card information 
to accept the call. The record does not establish the marginal 
difference between single-call payment and account creation, and we are 
not

[[Page 77267]]

convinced that the margin would be great enough to significantly deter 
interested consumers.
    137. Some commenters object to the approach of incorporating 
ancillary service costs into the rate caps. Those commenters argue that 
this methodology ``does not reflect the manner in which costs are 
caused by users of the service,'' and ``would impose costs for payment 
processing on all consumers, rather than just those consumers directly 
responsible for the cost.'' We are unpersuaded. We find that most of 
these functions have become ``an intrinsic part of providing'' IPCS 
because they provide IPCS consumers the means to obtain IPCS, such that 
consumers typically ``must either incur [these charges] when making a 
call or forego contact with their loved ones.'' For the same reason, we 
are not persuaded by Securus's implicit argument that the current 
ancillary fees are offered ``as a convenience to incarcerated persons 
or their friends and family and are not intrinsic to the provision of 
ICS.'' The sole fee unrelated to paying for IPCS, the paper bill fee, 
is sufficiently rarely used that it has a negligible impact on the per-
minute rate caps. It is not necessary that these services be used by 
``all consumers''; the fact that these services operate as a threshold 
to most IPCS communications, coupled with the many factors identified 
above in support of ancillary service cost recovery through our per-
minute IPCS rate caps, establishes that our regulatory approach 
provides for just and reasonable rates for consumers and providers, 
while also providing appropriate cost recovery for providers. In the 
2015 ICS Order, the Commission found that single-call services were not 
``reasonably and directly related to the provision of ICS'' because 
they ``inflate the effective price end users pay for ICS and result in 
excessive compensation to providers.'' We find that this pattern has 
been ameliorated, in part, by the changes to single-call fees adopted 
in the 2021 ICS Order and 2022 ICS Order; we also recognize that 
providers incur some amount of legitimate costs for providing this 
service, which for at least some consumers may offer a crucial means of 
completing an IPCS communication. At the same time, we find that the 
continuing abuse of this fee described in the record supports 
elimination of the single-call fee as an independent charge--and 
suggests that our analysis of ancillary service costs may actually 
overestimate providers' actual costs. We also find unpersuasive the 
argument that we should abstain from ``[f]urther changes to, or 
eliminating, ancillary fees'' because this ``likely will cause new 
efforts to subvert the FCC's ancillary fee caps.'' NCIC also argues 
that changes to, or elimination of, ancillary fees would ``require ICS 
providers to spend thousands of hours renegotiating contracts to comply 
with a new fee structure.'' The rate caps we adopt today will require 
contract amendments or renegotiations regardless, and NCIC does not 
provide evidence or elaboration to support its conclusory assertions 
regarding the implications of the particular change associated with 
ancillary fees, so we find this argument unpersuasive. The history of 
this proceeding demonstrates that ``efforts to subvert [our] ancillary 
fee caps'' or otherwise abuse ancillary fees is merely an endemic 
feature of the market. The record contains no evidence that eliminating 
separate ancillary service fees would amplify this pattern; indeed, the 
record suggests, and logic supports the fact, that eliminating separate 
fees would eliminate entirely the incentive and ability to subvert 
them. For example, the 2015 ICS Order banned several types of ancillary 
service charges, e.g., ``account set-up, maintenance, closure, and 
refund fees.'' The record is bereft of any evidence that the 
elimination of these fees has encouraged providers to attempt to 
subvert the Commission's rules.
    138. Incorporating Facility Costs in IPCS Rate Caps. We also 
include in our rate caps an estimate of the costs that correctional 
facilities incur that are used and useful in the provision of IPCS. 
Previously, the Commission found that correctional facilities incur 
certain costs that are ``reasonably and directly related'' to the 
provision of IPCS. However, despite repeated efforts to collect data 
from which to reliably measure such costs, we find that neither the 
collected data nor the record before us allow us to identify those 
costs with reasonable certainty. At best, the record discussion 
concerning IPCS costs which facilities may bear falls short of the sort 
of quantitative evidence which would ordinarily support the 
Commission's ratemaking efforts. Further, requiring accurate cost 
accounting of facilities' costs would unreasonably burden facilities, 
and facilities have declined to provide such data voluntarily. 
Consequently, as proposed in 2023, we make generalized findings based 
on the available record information before us. Our rate caps, 
therefore, include our best estimate of the used and useful facility 
costs incurred in the provision of IPCS.
    139. Incorporating TRS Costs in IPCS Rate Caps. We also include in 
our IPCS rate caps an estimate of the costs associated with providing 
TRS in correctional facilities as required by the 2022 ICS Order to the 
extent that they are not recoverable through TRS support mechanisms. 
Industry and stakeholders overwhelmingly support the provision of 
communications services to incarcerated people with hearing or speech 
disabilities, but the record indicates that, in the carceral 
environment, enabling these services imposes certain costs upon IPCS 
providers. We find that our inclusion of a TRS cost estimate into our 
zones of reasonableness accounts for providers' concerns about the 
imposition of costs at smaller facilities; and further, we disagree 
that ensuring the availability of functionally equivalent communication 
services provides ``little'' benefit to those who rely on such services 
to communicate with their friends, families, and loved ones. We find, 
as the record demonstrates, that these costs to provide TRS are 
particularly challenging to recover at the smallest facilities. In 
light of that record and informed by responses to the 2023 Mandatory 
Data Collection, we now include cost recovery for the additional 
infrastructure and hardware costs to deliver TRS in the carceral 
environment in our rate caps, estimated based on the best available 
data.
b. Additional Components of Rate Cap Structure
    140. Single Rate Cap for Audio IPCS. Consistent with the proposal 
in 2023 and the record, we find that the costs to provide interstate 
and intrastate audio IPCS are not materially different from each other 
and therefore adopt a single rate cap that applies to both interstate 
and intrastate audio IPCS communications at each tier. The Martha 
Wright-Reed Act's directive to set rates and charges that are ``just 
and reasonable'' for interstate and intrastate IPCS establishes the 
framework for our analysis. Examining the record through this lens, we 
find support for treating the costs of providing interstate and 
intrastate audio IPCS as functionally identical. The record indicates 
that providers do not distinguish between the costs of providing 
interstate and intrastate audio IPCS communications, and we find no 
reason to do otherwise. We thus set a single rate cap for these 
communications, and find that this simplified approach will benefit 
consumers and providers alike. The record supports our conclusion that 
the adoption of identical rate caps for interstate and intrastate audio 
IPCS communications will benefit the public interest. For example, one 
commenter

[[Page 77268]]

suggests that adopting a single rate cap for interstate and intrastate 
audio IPCS communications will benefit providers by ``ensur[ing] a 
consistent regulatory approach,'' and benefit consumers ``by 
simplifying and unifying rate structures in a manner more consistent 
with today's consumer expectations and experiences with other 
telecommunications services.'' Indeed, at least one provider has 
already independently set a unitary rate for interstate and intrastate 
IPCS communications, reflecting that providers are likely to benefit 
from the implementation of a single rate cap. We agree that a simple 
unified rate cap will benefit both providers and consumers, and this 
finding further supports our action today.
    141. Our action today is consistent with the Commission's previous 
findings that provider cost data failed to identify meaningful 
differences between interstate and intrastate audio IPCS costs. In the 
Third Mandatory Data Collection, the Bureau offered providers the 
option to allocate their expenses so as to reflect any cost differences 
between providing interstate and intrastate ICS, and no providers 
exercised this option. This fact suggests either that no providers had 
differences to report, or that any such differences were de minimis. 
Commenters have subsequently recognized the same, and emphasized that 
providers declined to distinguish between costs for interstate and 
intrastate audio IPCS in responding to prior mandatory data 
collections.
    142. More recently, 2023 sought comment on whether to ``treat costs 
for interstate voice services and intrastate voice services as having 
identical per-unit costs.'' All commenters to address the subject 
support this approach. Several commenters state that there is no 
material cost difference between providing interstate and intrastate 
audio IPCS. Subsequently, in the 2023 Mandatory Data Collection, the 
Bureau again offered providers the option to allocate their costs 
between intrastate and interstate audio IPCS. Once more, providers 
declined to exercise this option. In short, nothing in the record 
suggests any material differences between interstate and intrastate 
audio IPCS costs, and we therefore adopt a single unified rate cap for 
each facility tier. Independently, our adoption of identical rates 
based on an analysis of the collective (i.e., aggregate of both 
interstate and intrastate) average costs of providing IPCS is further 
underpinned by the Martha Wright-Reed Act's authorization to ``use 
industry-wide average costs'' in setting rates.
    143. Single Rate Cap for Video IPCS. We also find that interstate 
and intrastate video IPCS communications have costs that are not 
materially different, and adopt a single rate cap for interstate and 
intrastate video IPCS communications at each tier. As with audio IPCS, 
the adoption of a unified rate cap for interstate and intrastate video 
IPCS communications is uniformly supported by the record and fully 
consistent with the treatment of interstate and intrastate video 
services by providers.
    144. In 2023, the Commission sought comment on whether to assume 
that the average costs for intrastate and interstate video 
communications services are identical. All commenters to address the 
subject support taking this approach. Several commenters observe that 
there are no material cost differences between interstate and 
intrastate video IPCS, while others note that providers do not separate 
costs between interstate and intrastate video IPCS internally and will 
likely face challenges in separating such costs.
    145. In the 2023 Mandatory Data Collection, the Bureau offered 
providers the option to allocate their video IPCS expenses to reflect 
any cost differences between providing interstate and intrastate video 
IPCS. No providers exercised this option, supporting our view that such 
costs are materially indistinguishable between the two jurisdictions. 
In the absence of any demonstrated material differences between 
interstate and intrastate video IPCS costs or record data supporting 
such a distinction, we adopt a single unified rate cap for video IPCS 
communications for each tier as well. Similar to audio IPCS, setting a 
single rate cap for video IPCS will benefit both providers and 
consumers by establishing an efficient and simplified mechanism for 
video IPCS rate regulation.
c. Rate Cap Tiers
    146. In light of the directives established by the Martha Wright-
Reed Act and record support, we adopt a rate cap structure that first 
distinguishes between two types of facilities (jails and prisons) and 
then four tiers of jails based on size. We agree with commenters that 
continuing to ``distinguish[ ] between the type of facility (jails vs. 
prisons), as well as, for jails, between different size facilities'' is 
a reasonable approach. While one commenter supports differentiation 
between prisons and jails, it also suggests that myriad factors may be 
``glossed over'' by our reliance upon industry averages. As set out in 
a technical appendix and explained below, we believe this tiering 
structure best captures the costs across the various types and sizes of 
facilities, and the record does not establish that such other factors 
are more cost-causative. The record and the data also support rate cap 
distinctions based on the ``differences in the costs'' of providing 
IPCS that relate to facility size and ``other characteristics.'' We 
adopt the following rate cap tiers to reflect the cost characteristics 
attributable to differences in facility type and size:
    (1) Jails with an average daily population of 0 to 99;
    (2) Jails with an average daily population between and including 
100 to 349;
    (3) Jails with an average daily population between and including 
350 to 999;
    (4) Jails with an average daily population of 1,000 or more; and
    (5) A separate tier for all prisons regardless of average daily 
population.
    We also revise the definition for average daily population in our 
rules by establishing a date certain each year by which the jail 
population during the preceding calendar year must be determined. 
Specifically, we set April 30 as the date on which the annual 
recalculation of average daily population becomes effective, in order 
to promote greater uniformity in its application. We find that the 
combination of size and type rate tiers that we adopt reflect the most 
critical factors driving providers' costs, and will result in both just 
and reasonable rates for consumers and providers and fair compensation 
for providers.
    147. Facility Size. The Martha Wright-Reed Act directs the 
Commission to ``consider . . . differences in the costs'' incurred to 
provide IPCS ``by small, medium, or large facilities'' in setting rates 
for IPCS. We note that, by requiring only that we ``consider'' cost 
differences ``by small, medium, or large facilities or other 
characteristics,'' the statute does not require the Commission to set 
rate tiers based on facility size or other applicable factors where, 
after appropriate consideration, we determine that there are not 
meaningful cost differences attributable to these factors. For example, 
as discussed below, we do not find support in the record or the data 
for establishing different size tiers for prisons, and so decline to 
adopt such tiers. In 2023, the Commission sought comment on how to 
interpret the requirement imposed by the Martha Wright-Reed Act to 
``consider . . . differences in the costs . . . by small, medium, or 
large facilities or other characteristics'' in

[[Page 77269]]

determining rates. The Commission asked for comment on what size 
categories to adopt and where to set the size thresholds for each 
category. The Commission proposed that the rate structure adopted in 
the 2021 ICS Order, which ``establish[ed] separate caps for prisons and 
jails, as well as separate rate tiers for different-sized jails,'' 
seemed consistent with this provision of the Act. However, the 
Commission sought comment on whether the Act required any change to the 
approach of analyzing providers' costs ``based on the type and size of 
correctional institution being served,'' such as by implementing more 
or fewer rate tiers based on facility type or size.
    148. The record nearly uniformly supports maintaining a rate cap 
structure that distinguishes among jails based on facility size. For 
administrative simplicity, we decline to apply size tiering to prisons 
for several reasons. First, as the Commission has previously observed, 
``prisons are almost uniformly large,'' allowing them to enjoy greater 
economies of scale than jails. Second, the data filed in response to 
the 2023 Mandatory Data Collection do not indicate significant 
differences in the costs of serving different prison facilities. 
Finally, only one commenter raised the prospect of tiered rates for 
prisons. All commenters addressing the issue agree that the Act permits 
us to maintain this general tiering structure. Several commenters 
contend that the available data do, in fact, indicate significant 
variations in costs due to facility size, and that we should therefore 
set rate tiers accounting for these variations. Indeed, the record in 
this proceeding ``contains extensive documentation of [the] cost 
differences, and the reasons for those differences,'' in providing 
audio and video IPCS among different sizes of jails. Several factors 
contribute to these cost disparities, particularly the economies of 
scale associated with serving larger facilities and the fact that 
smaller facilities are often located in more rural areas. As set forth 
in Appendices D and G, our data analysis indicates that there remain 
statistically significant differences in the costs of providing audio 
and video IPCS among jails of different sizes. The data submitted in 
response to the Third Mandatory Data Collection further support this 
conclusion. The record supports adopting four size tiers of jails, 
expanding the categories contemplated by the Martha Wright-Reed Act. 
Although we find that the present record and data support establishing 
rate caps that vary with size tiers for jails, we reiterate that the 
statute does not require us to set rate tiers as described. After 
appropriate consideration, however, we determine that the record and 
data do support a tiering structure for prisons. Specifically, we find 
evidence that providers incur progressively greater costs in serving 
jails at the lower tiers of ADP than at the highest tier that we adopt. 
We found in the 2021 ICS Order that the available data suggested that 
``providers incur higher costs per minute for jails with [ADPs] below 
1,000 than for larger jails.'' The data submitted for the 2023 
Mandatory Data Collection continues to reflect this pattern. However, 
at that time we deferred on further rate cap setting with respect to 
jails with ADPs below 1,000 ``because the available data [did] not 
allow us to quantify the extent to which providers' costs of serving 
[such] jails . . . exceed the industry average.'' With the data 
submitted for the 2023 Mandatory Data Collection, we are now able to 
determine with greater accuracy the cost differential of providing 
service to jails with ADPs below 1,000. Consequently, we adopt average 
daily population cutoffs of 100, 350, and 1,000 incarcerated persons in 
order to distinguish among different sizes of jails. Although certain 
commenters suggest other size thresholds, we find that the size tiers 
we adopt here best fit the data submitted for the 2023 Mandatory Data 
Collection.
    149. While the Martha Wright-Reed Act specifies that we consider 
cost differences among three sizes of facilities (``small, medium, and 
large''), we do not interpret that specification as a directive that 
limits our actions to only three size tiers that correspond to the 
terms referenced in the statute. Instead, we interpret Congress' intent 
as mandating that the Commission analyze the relevant data to assess 
the cost characteristics of different-sized facilities, including those 
referenced in the statute, and then to reflect that analysis in the 
rate cap structure the Commission ultimately adopts. Pursuant to their 
delegated authority, WCB and OEA structured the 2023 Mandatory Data 
Collection to ensure it included the requisite facility-level data 
needed to support this analysis. After ``consider[ing] . . . 
differences in the costs'' incurred to provide IPCS ``by small, medium, 
or large facilities'' as directed by the Act, we find that the data do 
reflect size differences among jails--and that the data further support 
distinguishing a further, fourth size tier of jails to best ensure just 
and reasonable rates for consumers and providers and fair compensation 
for providers.
    150. We find that the record supports adopting a more granular 
tiering structure than that referenced in the Act or established by our 
current rules to better capture cost differences among ``small, medium, 
and large facilities,'' in addition to creating a separate tier for 
very small jails. The record supports adopting this tiering arrangement 
to better reflect the ``differences in the costs'' of serving various 
sizes of jails, particularly where the record distinguishes jails of 
the smallest sizes as subject to special per-unit cost differences. Our 
adoption of an additional tier for very small jails is consistent with 
the statutory directive to consider cost differences for ``small, 
medium, and large'' facilities as well as an ``other characteristic'' 
for which to account. This rate cap structure finds further support in 
the rate cap tiers previously adopted by the Commission, which also 
distinguished among facilities based on facility type and size based on 
average daily population. In the 2015 ICS Order, the Commission found 
that there was ``substantial record support'' from commenters for 
``rate tiering based on differences between jails and prisons as well 
as population size'' given the differences in provider costs arising 
from these factors, a conclusion supported by the Commission's analysis 
of the First Mandatory Data Collection. The Commission therefore 
adopted rate cap tiers based on facility type and size, to ``account[ ] 
for the differences in costs to ICS providers'' and to avoid ``over-
compensating ICS providers serving larger, lower-cost facilities.'' In 
the 2021 ICS Order, following similar reasoning, the Commission again 
adopted a rate cap structure distinguishing between prisons and jails 
and among jails based on size. We also seek comment in the Further 
Notice on whether obtaining more granular data from providers serving 
very small jails would allow us to further disaggregate this size tier 
to better reflect the variability of provider costs and other 
characteristics in our rate tiers.
    151. Other Characteristics. In addition to the three specified 
sizes of facilities, the Martha Wright-Reed Act also directs the 
Commission to ``consider . . . differences in the costs'' incurred to 
provide IPCS due to ``other characteristics.'' The Commission sought 
comment on whether it should continue to use the type of facility as 
another characteristic in determining its IPCS rate cap structure. 
Several commenters propose that we maintain a rate cap structure that 
incorporates

[[Page 77270]]

facility type as one of these ``other characteristics,'' by 
distinguishing between prisons and jails. One commenter also proposes 
that we consider several other factors that impact providers' costs, 
including the variations in facilities' costs associated with providing 
IPCS, the different IPCS systems employed by different facilities, and 
the fact that facilities in rural areas may be more costly to serve.
    152. All commenters that address the ``other characteristics'' 
language agree that the Act permits the Commission to maintain a 
distinction between prisons and jails. Several commenters contend that 
the available data indicate significant variations in costs due to 
facility type, and that the Commission should therefore set rate tiers 
to account for these variations. We agree that the record ``contains 
extensive documentation of [the] cost differences, and the reasons for 
those differences,'' of providing audio IPCS between prisons and jails. 
Several factors contribute to these cost disparities, particularly the 
higher turnover in jails than in prisons, economies of scale associated 
with serving larger facilities (as prisons tend to be larger than 
jails), and the fact that jails are often located in more rural areas. 
Many of these cost differences stem from the fact that prisons, in 
contrast to jails, are ``used primarily to confine individuals . . . 
sentenced to terms in excess of one year.'' The consequent differences 
in average durations of stay and turnover rates between prisons and 
jails account for much of the disparities in costs between the two 
types of facilities. As set forth in a technical appendix, our data 
analysis indicates that there remain statistically significant 
differences in the costs of providing audio IPCS in prisons versus 
jails, as well as greater variations from mean costs for jails than for 
prisons. The data submitted in response to the Third Mandatory Data 
Collection further support this conclusion. The same pattern applies to 
the costs of providing video IPCS. We find this evidence credible and 
sufficient to support incorporating facility type, by adopting separate 
rate cap tiers for prisons and jails, as an ``other characteristic'' 
contemplated by the Martha Wright-Reed Act.
    153. One commenter proposed specific additional factors beyond 
facility size and type. The National Sheriffs' Association identifies 
several other factors that may impact the costs of providing IPCS: that 
facility staff ``provide more functions in some cases tha[n] in others 
and that the hourly wage and benefits of jail employees varies by state 
and locality''; that ``different facilities employ different IPCS 
systems,'' and ``require different security measures,'' with attendant 
variation in costs; that ``jails in rural areas are more costly to 
serve''; and that ``jails allow different amounts of inmate calling.'' 
Another commenter claims there are no significant differences after 
accounting for facility size. However, after controlling for provider 
and state, we find that the main predictors of providers' costs per 
minute are facility size and type. By contrast, other variables provide 
negligible independent predictive value. Consequently, we find that 
such factors are best accommodated through the use of rate caps based 
on industry-wide average costs, which enable the provision of IPCS to 
be commercially viable across the tiers we adopt. In sum, we find that 
incorporating these attributes into our rate caps would provide little 
benefit in terms of meaningfully reflecting providers' costs, while 
imposing additional administrative burden on providers and potentially 
introducing consumer confusion. We also find that, in the absence of 
any data indicating otherwise, many of the factors identified by the 
National Sheriffs' Association are simply not well suited for direct 
incorporation into a rate cap structure. Because these factors vary in 
a nonlinear manner, they are ill-suited to a tiered rate cap structure, 
and incorporating them into our rate caps would necessitate an 
exceedingly granular and therefore intractable system. The National 
Sheriffs' Association does not point to any concrete data that might 
reflect the impact of any of these factors on providers' costs. After 
``consider[ing] . . . other characteristics'' proposed by commenters as 
directed by the statute, we decline to incorporate any other additional 
characteristics in our IPCS rate cap structure. We have insufficient 
data to evaluate the cost-causative impact of variations in the 
services provided or staffing costs incurred by facilities. In the 2023 
Mandatory Data Collection, we asked providers to submit ``any 
verifiable, reliable, and accurate information'' they have regarding 
any expenses incurred by facilities to provide IPCS. However, no 
provider submitted any information on facilities' costs in response to 
this request. Given this limitation, we address the role of costs 
incurred by facilities in providing IPCS separately.
    154. Alternative Proposals. Not all commenters agree with the 
tiering structure we adopt in the Report and Order. The National 
Sheriffs' Association supports adopting three size tiers of jails, 
proposing that the thresholds be set at ADPs of 350 and 2,500. 
Conversely, ViaPath argues that the rate caps adopted in the 2021 ICS 
Order do not require any modification other than ``necessary 
adjustments for market changes.'' We disagree, and find that neither 
proposal takes into account the wider record; nor do they incorporate 
the data provided in response to the 2023 Mandatory Data Collection. 
The National Sheriffs' Association relies on data from its 2015 cost 
survey, which we have previously distinguished. Meanwhile, the rate 
structure adopted in the 2021 ICS Order was based on data from the 
Second Mandatory Data Collection. Furthermore, in the 2021 ICS Order, 
the Commission explicitly deferred on setting rate caps for jails with 
ADPs below 1,000 because the available data did not enable accurate 
calculation of the relative costs of such facilities--a gap that, as 
noted above, has been rectified with the data submitted for the 2023 
Mandatory Data Collection. Consequently, we find that both of these 
proposals fail to accurately account for the current differences in the 
costs that we observe.
    155. For similar reasons, we decline to adopt the proposals from 
NCIC and ViaPath that we adopt a single rate cap, either for all jails 
(with a separate rate cap for prisons) or for all facilities. As 
several commenters observe, setting a single rate cap for all 
facilities, or even all jails, would almost certainly result in either 
unreasonably low rates in smaller facilities, such that providers may 
be unable to recover the costs of providing service to these higher-
cost facilities, or else a windfall for those serving prisons and 
larger jails at the cost of those incarcerated in such facilities. We 
find that these consequences would outweigh any benefits from adopting 
a single rate cap. We agree with commenters that, given our analysis of 
the data, adopting a single rate cap ``will run counter to'' the goals 
of section 276 as well as the Martha Wright-Reed Act, and would less 
effectively address the implications of our consideration of the 
``differences in the costs . . . by small, medium, or large facilities 
or other characteristics.'' Indeed, in the 2015 ICS Order, the 
Commission thoroughly examined the negative consequences of 
establishing a single rate cap in the context of data indicating that 
costs of providing IPCS vary by facility size and type. Once again, we 
find that the commenters proposing a single rate cap ``provide no real 
evidence or support for why rate tiers would be any more

[[Page 77271]]

difficult or challenging than'' the current approach.
    156. Definition and Use of Average Daily Population. In 2023, the 
Commission sought comment on the ``use of average daily population as 
the primary metric'' for the size of correctional institutions, 
including whether there were ``compelling reasons to adopt a different 
metric for determining size.'' The Commission also incorporated prior 
calls for comments on how ADP should factor into our rate caps, 
including on whether the definition for ADP in the Commission's rules 
``sufficiently addresses fluctuations in jail populations and 
variations in how correctional facilities determine average daily 
populations.'' The record confirms that ADP continues to be the most 
practical metric for determining the size of correctional facilities 
for the purposes of applying our rate caps. However, the record 
reflects a need for ``a clear date and a clear standard by which the 
ADP is measured,'' so that all parties can uniformly determine 
``whether a particular jail must comply with'' different rate caps than 
in the prior year. Additionally, we find that the definition for 
average daily population under our rules, which requires the 
measurement of all incarcerated persons ``in a facility'' (rather than 
those merely within that facility's jurisdiction), over a ``calendar 
year,'' effectively addresses related concerns that states and 
localities may track population figures differently. Accordingly, we 
revise the definition for average daily population in our rules by 
establishing April 30 as the date on which the annual recalculation of 
ADP reflecting data from the prior calendar year (and, as applicable, 
the new corresponding rate cap) becomes effective.
    157. Adopting a specific date on which the annual ADP recalculation 
must be performed--and by which providers must implement new rates to 
comply with the appropriate rate cap, where applicable--will yield 
greater uniformity and accountability in the application of this 
metric, and address related concerns raised in the record. A uniform 
effective date for implementing each year's newly recalculated ADP (and 
corresponding rate caps) will help consumers ``to determine which jails 
must comply with [each of] the FCC's new rate caps,'' and will help 
providers by establishing a more predictable and consistent calculation 
process. We select April 30 as the effective date for the annual ADP 
recalculation because, as Securus points out, providers need to obtain 
data from correctional officials in order to determine each jail's 
average daily population during the preceding calendar year. To the 
extent they have not already done so, providers should ensure that 
their contracts with correctional facilities provide for the providers' 
timely receipt of all information they need to recalculate average 
daily populations in accordance with our rules. Our rules already 
require providers to report that information in their annual reports, 
which are due each year on April 1. An April 30 date for determining 
each jail's rate cap tier going forward avoids the imposition of any 
additional burden on providers, while providing a ``realistic 
timeframe'' for providers to collect and process data on average daily 
populations as part of the mandated annual review and updating of rate 
cap tiers.
    158. ViaPath cites the ``concerns [raised] about consistency and 
variations in population'' and suggests that the current requirement 
for annual calculation of ADP ``could require negotiated per-minute 
IPCS rates to increase or decrease each year due to changes in facility 
population year-to-year.'' To address this concern, and aid 
consistency, ViaPath proposes that we redefine ADP to permit it to be 
``calculated and applied for the initial term of an IPCS contract, and 
thereafter recalculated and applied for each renewal term of a 
contract.'' We decline to adopt ViaPath's proposal. We are concerned 
that this approach would incentivize providers to commence or renew 
contract terms at times of unusually low populations to ``lock in'' the 
consequently higher rates for the full contract term. ViaPath's 
proposal may not even meaningfully improve consistency in the 
calculation of ADP, given the substantial variation in IPCS contract 
terms. Although we recognize that requiring ADP to be recalculated 
annually may entail a near-term administrative burden, the record fails 
to suggest that this burden outweighs the benefit of IPCS rates that 
correspond to the costs associated with different size jails. No other 
commenter addresses the issue of the yearly recalculation requirement 
for ADP, suggesting that this requirement does not impose a 
disproportionate burden. We also find that the revision we adopt today, 
which grants providers a full month to calculate and (where necessary) 
implement the newly-applicable ADP figures each year, will help to 
ameliorate this burden. For similar reasons, we decline to adopt Talton 
Communications' proposal that ADP be calculated quarterly ``by taking 
an average of the population of detainees across all facilities 
serviced by a single ICS provider.'' First, we find that this proposal 
risks generating either insufficient returns or excessive returns for a 
given provider, depending on the nature of the facilities it serves. 
Second, we find that it would also make the rates imposed on any given 
consumer relatively arbitrary, based purely on the portfolio of the 
IPCS provider serving their respective facility rather than the actual 
costs of providing service. Finally, this proposal would ultimately 
require updating the applicable rates even more frequently than under 
our current rules, imposing greater administrative burdens on providers 
and greater inconsistency on consumers. And over the longer term, 
contracting will occur against the backdrop of our rule providing 
certainty regarding the timing of ADP calculations and from the outset 
such contracts can be tailored accordingly as needed.
2. Preliminary Costing Issues
    159. To assess the costs that should be included in or excluded 
from our rate cap calculations to ensure just and reasonable rates for 
IPCS, we rely on the ``used and useful'' framework and its associated 
prudent expenditure standard. Under the used and useful framework the 
Commission first considers the need to compensate providers ``for the 
use of their property and expenses incurred in providing the regulated 
service.'' Second, the Commission looks to the ``equitable principle 
that ratepayers should not be forced to pay a return except on 
investments that can be shown to benefit them.'' In this regard, the 
Commission considers ``whether the expense was necessary to the 
provision of'' the regulated service. And third, the Commission 
considers ``whether a carrier's investments and expenses were prudent 
(rather than excessive),'' and has found that ``imprudent or excess 
investment . . . is the responsibility and coincident burden of the 
investor, not the ratepayer.'' Although the Commission has identified 
these ``general principles regarding what constitutes `used and useful' 
investment,'' it ``has recognized `that these guidelines are general 
and subject to modification, addition, or deletion' '' and that `` 
`[t]he particular facts of each case must be ascertained in order to 
determine what part of a utility's investment is used and useful.' '' 
The Commission ``may, in its reasonable discretion, fashion an 
appropriate resolution that is tailored to the specific circumstances 
before it.''
    160. We apply this framework in evaluating the costs and expenses 
to be included in our IPCS rate cap

[[Page 77272]]

calculations. As described below, we rely on a zone of reasonableness 
approach to adopt separate rate caps for audio and video IPCS by 
facility size and type. As applied here, our approach begins by looking 
to the record to identify an upper limit for each rate category that 
corresponds to a rate level above which rates would clearly be unjustly 
and unreasonably high. We then make adjustments to that upper limit 
based on the record to remove costs that are not used and useful for 
the provision of IPCS in order to identify the lower limit of our zone 
of reasonableness. Between the upper and lower limits of that zone, we 
then seek to identify a particular rate level that will best reflect 
the proper balancing of the equitable interests that ratepayers only 
bear costs or expenses that reasonably benefit them and that providers 
earn a reasonable return when their property is used in the provision 
of regulated services. The particular rate level we identify within 
that zone of reasonableness is then adopted as the relevant rate cap 
for that rate category.
    161. The upper bounds we adopt include all reported provider costs, 
including those categories that we generally find are not ``used and 
useful'' in the provision of IPCS. We are confident based on this 
record that rate caps set above the upper bound clearly would be 
unjustly and unreasonably high. In turn, we rely on the used and useful 
framework to make reasonable adjustments to those upper bound costs to 
establish the lower bounds of the zones of reasonableness. By deriving 
our rate caps from the ``used and useful'' framework, our approach 
reflects the Commission's longstanding methodology for ensuring that 
providers are able to obtain recovery for the costs and expenses that 
demonstrably benefit ratepayers. At the same time, including all 
reported provider costs to establish the upper bound reflects a 
conservative approach. As a result, we are confident that setting rates 
within that zone of reasonableness will yield rate caps designed to 
afford fair compensation to IPCS providers.
    162. Next, our interpretation of section 3(b)(2) of the Martha 
Wright-Reed Act requires us to examine available evidence of ``costs 
associated with any safety and security measures necessary to provide'' 
IPCS which, along with the other costs, we review and use to arrive at 
a reasoned conclusion regarding the recoverability of those costs. To 
conduct that examination--including with respect to safety and security 
costs--we employ the ``used and useful'' framework. In doing so, we 
consider all relevant cost evidence in the record before us that could 
conceivably fall within the scope of costs of safety and security 
measures required to be considered as ``necessary'' under section 
3(b)(2) of the Martha Wright-Reed Act. As we discuss below, we 
therefore have no need to more precisely define the ultimate scope and 
contours of the term ``necessary'' under section 3(b)(2) at this time.
3. Accounting for Correctional Facility Costs
    163. To account for the possibility that some correctional 
facilities may incur--and IPCS providers may reimburse--used and useful 
costs in allowing access to IPCS, we incorporate into our zones of 
reasonableness the Commission's best estimate of IPCS costs that 
correctional facilities may incur. To facilitate recovery of any used 
and useful costs--but only such costs--that correctional facilities 
incur, we permit IPCS providers to reimburse correctional facilities 
for the used and useful costs they may incur as those costs have been 
identified in the Report and Order. Together, these measures ensure 
that we account for used and useful correctional facility costs in our 
ratemaking calculations to the extent the record allows. Finally, our 
actions also ensure that rates and charges for IPCS will be just and 
reasonable as required by the Martha Wright-Reed Act, while also 
ensuring fair compensation for providers to the extent justified by the 
record here.
    164. Our treatment of correctional facility costs reflects a 
careful balancing of two competing factors. First, certain commenters 
generally assert--though largely without support or current data--that 
correctional facilities may incur some used and useful costs in 
providing access to IPCS. While the nature and extent of such costs is 
unclear on the current record, Worth Rises explains that ``[w]hile 
exceedingly rare in the provision of IPCS, correctional facilities may 
incur used and useful costs which the Commission could include within 
rates.'' These assertions and the Commission's prior recognition that 
correctional facilities may incur some costs in allowing access to IPCS 
persuade us to recognize a measure of these costs in our ratemaking 
calculus to the extent the record permits.
    165. Second, despite some commenters' assertions that correctional 
facilities incur costs in their administration of IPCS, the available 
cost data (i.e., the 2015 survey data submitted by the National 
Sheriffs' Association) do not allow us to quantify what those costs are 
with any level of exactitude. This issue is not new. In the 2020 ICS 
Notice, the Commission asked ``correctional facilities to provide 
detailed information concerning the specific costs they incur in 
connection with the provision of interstate inmate calling services.'' 
In the 2021 ICS Order, the Commission observed that despite this 
request, ``nothing more current was submitted'' into the record 
regarding correctional facility costs. Again the Commission, in 2021, 
sought broad comment on correctional facility costs, including 
methodologies to estimate such costs and how to obtain reliable data. 
And, in an effort to understand potential cost differentials between 
prisons and jails of differing sizes, the Commission also sought 
specific comment on facility costs for each type of correctional 
facility. Finally, in the 2023 Mandatory Data Collection, WCB and OEA 
directed IPCS providers to report ``any verifiable, reliable, and 
accurate information'' in their possession showing the costs incurred 
by correctional facilities.
    166. Despite these numerous and repeated public attempts to obtain 
relevant data, commenters have neither provided updated facility cost 
data nor proposed a methodology that would allow the Commission to 
accurately estimate used and useful correctional facility costs. 
Instead, the National Sheriffs' Association continues to rely on its 
2015 cost survey as a ``reasonable proxy'' for facility costs, while a 
single provider simply lists various tasks for which correctional 
facilities allegedly incur costs but provides no supporting data as to 
what those costs are. Given the state of the record, it is reasonable 
for us to conclude that no allowance for correctional facility costs is 
warranted in our lower bounds. In particular, the failure of providers 
and facilities--which would have the relevant data--to provide such 
data to the Commission despite repeated calls for them to do so 
warrants an adverse inference that actual information would not support 
the case for recovery. However, out of an abundance of caution, and in 
recognition of those commenters that continue to assert that 
correctional facilities may incur used and useful costs in allowing 
access to IPCS, we conclude that we should incorporate some allowance 
for such costs into the upper bounds of the zones of reasonableness. 
Specifically, based on data from a 2015 cost survey provided by the 
National Sheriffs' Association we incorporate $0.02 into the upper 
bounds of our zones of reasonableness for all facilities. We do not 
include an estimate of correctional facility costs in the lower

[[Page 77273]]

bounds of our zones of reasonableness as neither the record nor 
providers' cost data reported in the 2023 Mandatory Data Collection 
adequately or consistently support the inclusion of any specific level 
of cost.
    167. To that end, there are two sources of data we can look to in 
determining whether and how to incorporate a measure of correctional 
facility costs into our ratemaking calculus. The first is the 2015 cost 
survey from the National Sheriffs' Association, upon which the National 
Sheriffs' Association and Pay Tel ask us to rely. The Commission 
relied, in part, on data from that survey in the 2021 ICS Order when it 
adopted a $0.02 interim cap for recovery of IPCS providers' 
contractually prescribed site commission payments. Although the 
Commission expressed concerns about the National Sheriffs' Association 
survey data at that time, it explained that ``they are the best data 
available from correctional facility representatives regarding their 
estimated costs.'' That remains true today. As the Prison Policy 
Initiative observes, the National Sheriffs' Association survey relies 
``entirely on self-reported data from correctional facilities'' and 
involves ``inappropriately expansive descriptions'' of IPCS-related 
tasks. Such infirmities make it very likely that the National Sheriffs' 
Association data overstated correctional facility costs at the time of 
the survey, and severely limit the data's value as a proxy for current 
facility costs. Indeed, neither correctional facilities nor IPCS 
providers have an incentive ``to understate their costs in the context 
of a rate proceeding, lest the Commission adopts rates that are below 
cost.'' But, as the Commission has explained, ``an agency may 
reasonably rely on the best data available where perfect information is 
unavailable.'' The National Sheriffs' Association survey data are the 
best data available from correctional facility representatives which we 
may, and do, reasonably consider in determining how to account for used 
and useful correctional facility costs in our ratemaking calculations.
    168. The second source of data we consider in determining whether 
and to what extent correctional facility costs may incur used and 
useful costs is the data providers reported regarding their site 
commission payments in response to the 2023 Mandatory Data Collection. 
A technical appendix compares the costs per minute that providers 
reported for contracts requiring the payment of monetary site 
commissions with the costs per minute that providers reported for 
contracts not requiring the payment of monetary site commissions. We 
find this comparison potentially helpful because both facilities and 
providers have explained that some portions of some site commission 
payments may compensate facilities for costs they incur in permitting 
access to IPCS. If we saw lower per-minute costs for providers at 
facilities with site monetary commission payments than for facilities 
without monetary site commission payments, we might reasonably infer 
(or at least hypothesize, subject to further analysis) that facilities 
may be incurring such significant levels of used and useful costs as to 
require an approach materially different from our approach in this 
Order. Our comparison, however, shows higher per-minute costs for 
providers at facilities with monetary site commission payments than for 
facilities without monetary site commission payments. Previously, the 
Commission relied in part on a similar analysis of earlier provider 
data--in conjunction with the National Sheriffs' Association data--as 
grounds for a $0.02 per minute interim allowance for reasonable 
correctional facility costs. However, even the 2021 data analysis 
suggested that the $0.02 per minute interim allowance might have been 
too high. And our analysis of the data from the 2023 Mandatory Data 
Collection ultimately provides no basis to identify an amount of 
correctional facility costs that should be recoverable through 
regulated IPCS rates. In particular, performing the same comparison 
used in 2021, but updated to reflect the latest data, discloses that 
providers actually incur greater costs per minute to serve facilities 
for which they pay monetary site commissions, providing no 
substantiation of certain commenters' suggestion that site commissions 
operate to compensate for the transfer of some costs of service from 
providers to facilities. We conclude that because providers report 
greater costs per minute for contracts requiring the payment of 
monetary site commissions versus those that do not, our approach of 
including a $0.02 per-minute additive for facility costs in the upper 
bounds of our zones of reasonableness, but no additive for facility 
costs in the lower bounds of those zones, is the best approach given 
the record before us. This balancing reflects our recognition, on the 
one hand, that correctional facilities may well incur used and useful 
costs in allowing access to IPCS, with the absence of any basis in the 
record that would enable us to estimate those costs with any degree of 
precision.
    169. In accounting for correctional facility costs in this manner, 
we decline requests that we instead account for those costs by adding a 
specific amount per-minute to our rate caps based on data from the 
National Sheriffs' Association cost survey. These data do not enable us 
to quantify such costs with anything near the level of specificity that 
would be required to adopt a specific ``just and reasonable'' additive 
reflecting used and useful correctional facility costs. Commenters 
supporting a rate additive have failed to explain a connection between 
their proposed additives and the National Sheriffs' Association 2015 
cost survey data. Nor have they explained the methodology used to 
derive the additives they propose or, indeed, any alternative 
additives. We therefore cannot accept at face value the proposed rate 
additives, or adopt any alternative additive, based on these data and 
simultaneously ensure that the rate caps we adopt are just and 
reasonable and fairly compensatory. Given the state of the record, we 
conclude that our approach, as described below, strikes the best 
balance.
    170. Incorporating A Measure of Correctional Facility Costs Into 
the Upper Bounds of the Zones of Reasonableness. In establishing the 
upper bounds of our zones of reasonableness, we use providers' 
unadjusted reported IPCS costs. Ordinarily, we would undertake the same 
exercise to incorporate correctional facility costs into our upper 
bounds. But as detailed above, we have no reliable reported 
correctional facility cost data, which requires us to find a reasonable 
substitute. Because the National Sheriffs' Association 2015 cost survey 
is the only available correctional facility cost data reported by 
correctional facility representatives in the record, we rely on those 
data to incorporate $0.02 into the upper bounds of our zones of 
reasonableness for all facilities. The $0.02 figure derives from the 
Commission's prior analysis of the amount of used and useful 
correctional facility costs the National Sheriffs' Association's cost 
survey reasonably supported. In the 2021 ICS Order, the Commission 
relied, in part, on these data to conclude that $0.02 was a reasonable 
estimate of the used and useful correctional facility costs recovered 
through IPCS providers' contractually prescribed site commission 
payments for prisons and for jails with average daily populations of 
1,000 or more. The Commission explained that the majority of prisons 
and large jails that responded to the National Sheriffs' Association 
survey reported ``average total costs per minute

[[Page 77274]]

of less than $0.02'' but declined to adopt a lower figure, reflecting 
the Commission's ``conservative approach'' to estimating correctional 
facility costs in setting interim rate caps based on these data. The 
Commission, nevertheless, continued to express concerns about the data.
    171. The record has not developed in any meaningful way since the 
Commission determined that the National Sheriffs' Association data 
supported, at most, a $0.02 allowance for correctional facility cost at 
prisons and jails with average daily populations of 1,000 or more. We 
sought to identify in using data from the 2023 Mandatory Data 
Collection the extent to which correctional facilities bear costs by 
seeking to determine how much providers' reported expenses decline when 
they pay monetary site commissions, but found providers' reported 
expenses increase in a statistically significant manner when they pay 
such commissions. We thus see no principled or reasonable basis on 
which to depart from that determination so as to find a higher cost 
justified now. As one commenter explains, instead of ``refreshing the 
record or seriously engaging on the merits of the Commission's 
inquiry,'' the National Sheriffs' Association ``simply continues its 
years-long practice of rote repetition of the cost categories 
identified in its 2015 survey findings.'' The National Sheriffs' 
Association contends that because the Commission found its cost survey 
``credible'' in the 2016 ICS Reconsideration Order, there is ``no 
basis'' to change that conclusion now. This argument is unpersuasive. 
The Commission made a credibility determination in the 2016 ICS 
Reconsideration Order in the context of a record on facility costs that 
the Commission acknowledged was lacking. The National Sheriffs' 
Association's arguments do not acknowledge the very specific 
circumstances under which the Commission relied on the 2015 survey 
data, and do not provide sufficient basis for the Commission to deviate 
from its subsequent findings in the 2021 ICS Order.
    172. The National Sheriffs' Association acknowledges the 
imprecision of the data it provided but argues that the ``wide 
unexplained variations'' in costs that the Commission observed in the 
data are attributable to the fact that ``there are different hourly 
rates for Sheriffs' and jail employees'' and that different facilities 
use different IPCS systems and require different administrative and 
security measures. These arguments do not provide us with a methodology 
that would let us verify or isolate costs used and useful in the 
provision of IPCS from the other costs that correctional facilities 
incur and that are reflected in the survey data. Rather, the National 
Sheriffs' Association's statements concede that correctional facilities 
do not incur costs uniformly, making it even more likely these data 
overstate correctional facility costs. The National Sheriffs' 
Association also continues to maintain that the costs reported in its 
cost survey should be fully recoverable. These include costs related to 
various safety, security, surveillance, and administrative tasks. The 
National Sheriffs' Association explains that without these functions no 
IPCS would be provided in certain correctional facilities and, 
conversely, without IPCS, correctional facilities would not incur costs 
associated with the administrative and security tasks it lists. We find 
the argument that IPCS would not be provided in certain facilities as 
the National Sheriffs' Association and FDC claim to be unsubstantiated. 
In effect, then, the National Sheriffs' Association's argues that 
because IPCS is made available to incarcerated people, the costs that 
it has put into record are necessarily used and useful and therefore 
recoverable in full. This argument misses the mark. Simply because some 
tasks ``are sometimes performed does not end the Commission's 
inquiry.'' But simply because certain tasks are performed by facilities 
or sheriffs does not automatically mean that such tasks are related to 
communications services. If anything, the fact that certain tasks may 
be performed by the correctional facilities suggests that these are 
costs of incarceration, not of IPCS. For example, the fact that a 
correctional facility might elect to undertake certain activities given 
the existence of IPCS in that facility does not automatically mean that 
the activities are of sufficient benefit to IPCS ratepayers to warrant 
their bearing the activities' costs through IPCS rates. We instead must 
undertake a more nuanced analysis to determine the types of costs that 
are allowable in IPCS rates. And we do so by applying the used and 
useful framework the Commission has relied on for decades. Employing 
that approach, we incorporate, to the extent the record provides 
meaningful data, the used and useful costs incurred in the provision of 
IPCS into our rate cap calculations, regardless of whether those costs 
are incurred directly by IPCS providers or instead incurred directly by 
correctional facilities and subject to IPCS provider reimbursement. As 
to costs that we do not find used and useful in the provision of IPCS, 
IPCS ratepayers should not be forced to bear them--nor should IPCS 
providers be compelled to do so themselves. Thus, while correctional 
facilities remain free to engage in (or employ) activities or functions 
that are not used and useful in the provision of IPCS, they must look 
elsewhere besides regulated IPCS rates to fund them.
    174. Fundamentally, the costs reflected in the National Sheriffs' 
Association survey are, for the most part, ``cost[s] of operating 
prisons and jails, not providing communication service'' and, as such, 
do not benefit IPCS consumers sufficiently to render them used and 
useful in the provision of IPCS. Stated differently, ``[t]he presence 
or absence'' of these tasks ``does not actually prevent or enable 
communication.'' Subject to those costs we conclude are used and useful 
in the provision of IPCS as reflected in our ratemaking calculus, we 
agree. But outside of the costs we do allow, the National Sheriffs' 
Association cost survey fails to support the inclusion of any amount 
greater than $0.02 to account for used and useful correctional facility 
costs.
    175. We decline to give any weight to the survey provided by Pay 
Tel's outside consultant, which purports to quantify ``an estimate of 
the [s]afety and [s]ecurity costs incurred by confinement facilities 
that are specifically caused by making IPCS available at that 
facility.'' We find this survey to be unreliable. First, the survey is 
unrepresentative. As the consultant concedes, the ``sample size of 
[the] data collection effort is limited.'' It encompasses 30 
correctional facilities, which is less than 1% of all facilities 
included in the 2023 Mandatory Data Collection, and covers only ``small 
county jails and large regional facilities'' thereby excluding prisons 
and large jails. Second, the survey does not attempt to account for the 
nuances of how safety and security measures are administered and, in 
particular, the division of labor between correctional facilities and 
IPCS providers. The record is clear that these and other functions and 
activities for which correctional facilities allegedly incur costs are 
sometimes performed by the IPCS provider and sometimes performed by the 
correctional facility. What is more, certain IPCS providers have stated 
that they offer comprehensive services, that include safety and 
security services, as part of a unified platform they sell to 
correctional facilities.
    Thus, we find it unlikely that the information provided in the Pay 
Tel consultant's survey is representative of

[[Page 77275]]

the costs incurred by correctional facilities in connection with safety 
and security measures across the IPCS industry. As such, we decline to 
rely on it to estimate used and useful correctional facility costs. 
Even if we were to find the data reliable enough to be decisional, it 
would support the $0.02 that we incorporate into the upper bounds of 
our zones of reasonableness based on the National Sheriffs' Association 
survey. The June 7, 2024 Wood Report, which is based on information 
self-reported by correctional facilities across seven categories of 
safety and security measures, suggests that the ``average reported cost 
for these 30 facilities in $0.08 per MOU.'' However, this estimate 
includes three categories of safety and security measures that we 
conclude today are not used and useful in the provision of IPCS, 
including ``Routine Preventative Call Monitoring,'' ``Call Recording 
Review'' and ``Enrolling Inmates for Voice Biometrics.'' These three 
categories account for a total of 74% of the average reported costs of 
safety and security measures in the Wood June 7, 2024 Report (38% for 
routine preventative call monitoring, 28% for call recording review, 
and 8% for enrolling inmates for voice biometrics). Removing costs 
associated with those measures reduces the $0.08 per minute figure that 
the report argues represents facilities' safety and security costs by 
74%, yielding an average cost of approximately $0.0208 per minute. 
Thus, in excluding categories of safety and security costs that we 
conclude are generally not used and useful from the amount in the Wood 
June 7, 2024 Report, we arrive at essentially the same $0.02 that we 
incorporate into the upper bounds of our zones of reasonableness.
    176. Therefore, we adopt the $0.02 allowance for correctional 
facility costs in the upper bounds of our zones of reasonableness for 
all facilities. In the 2021 ICS Order, the Commission limited the 
applicability of the $0.02 cap for recovery of contractually prescribed 
site commissions to prisons and jails with average daily populations of 
1,000 or more individuals ``in response to criticism that this value 
would not be sufficient to recover the alleged higher facility-related 
costs'' of smaller facilities. Because commenters ``did not provide 
sufficient evidence to enable [the Commission] to quantify'' the 
allegedly higher costs incurred by smaller correctional facilities, the 
Commission sought comment on that issue in 2021. The Commission further 
explained that the National Sheriffs' Association data varied too 
widely to determine whether correctional facility costs were indeed 
higher for smaller facilities.
    177. Here, too, commenters have not substantiated their claims that 
correctional facility costs are higher in smaller facilities. The 
National Sheriffs' Association argues that the Commission's concerns 
about its data concerning smaller facilities ``contradict the 
Commission's finding in the 2016 ICS Reconsideration Order.'' They also 
argue that ``a wide variation in data is not disqualifying when there 
is an explanation for the variation,'' which they claim the survey data 
provide. Prior statements from the National Sheriffs' Association 
potentially account for the variation in costs for smaller facilities, 
including differences in employee time spent on certain tasks, 
compensation rates, and differences in minutes of use. And the 
Commission noted that ``there are many potential variables that impact 
facilities' costs'' and sought ``detailed comment on those variables'' 
in an attempt to obtain a clearer record on costs for smaller 
facilities. Yet commenters have not provided any such details to 
explain the wide variation in facility costs for smaller facilities 
reflected in the National Sheriffs' Association survey. In short, the 
record does not support the inclusion of an amount greater than $0.02 
into the upper bounds of the zones of reasonableness for all 
facilities.
    178. Correctional Facility Costs in the Lower Bounds of the Zones 
of Reasonableness. The lower bounds of our zones of reasonableness 
reflect only those costs that the record affirmatively establishes as 
generally being used and useful in the provision of IPCS. Due to the 
lack of any reliable data concerning correctional facility costs in 
connection with IPCS, we rely on data reported by IPCS providers in the 
2023 Mandatory Data Collection in connection with providers' site 
commission payments. While we recognize that correctional facilities do 
incur used and useful costs in allowing access to IPCS, the record 
provides no data that would allow us to estimate those costs with any 
degree of precision. Accordingly, we include no estimate for such costs 
in the lower bounds of our zones of reasonableness. We decline to rely 
on the National Sheriffs' Association cost survey in connection with 
our evaluation of whether and how to incorporate correctional facility 
costs into the lower bounds of our zones of reasonableness. As 
discussed above, we find that the National Sheriffs' Association survey 
data that we use to incorporate correctional facility costs into the 
upper bounds of the zones of reasonableness do not enable us to 
quantify such costs with any level of specificity. The same applies to 
the Wood June 7, 2024 Report. As discussed above, that ``limited'' 
report covers only 30 correctional facilities and only includes ``small 
county jails and large regional facilities,'' rendering the survey far 
too unrepresentative as a measure of correctional facility costs across 
the industry. We therefore conclude that we cannot meaningfully adjust 
the data providers reported for purposes of establishing the lower 
bounds.
    179. We reach our decision regarding correctional facility costs in 
the lower bounds based on the absence of a record quantifying such 
costs, and supported by the analysis described in a technical appendix. 
This analysis, which is based on the Commission's analysis in the 2021 
ICS Order, takes providers' cost and site commission data reported in 
response to the 2023 Mandatory Data Collection and compares providers' 
relative costs per minute for contracts with and without site 
commissions. That analysis indicates that contracts with site 
commissions exhibit greater costs per minute than those without site 
commissions, which provides no support for the assertion that site 
commissions operate to transfer some costs of service from providers to 
facilities. If the opposite were true, and site commissions did recover 
facility costs used and useful in the provision of IPCS, we would 
expect to see higher costs to the provider for contracts without site 
commissions. Because providers' responses to the 2023 Mandatory Data 
Collection ``incorporate[ ] no correctional facility-provided cost 
data,'' we find that our approach of including a $0.02 per-minute 
additive for facility costs in the upper bounds of our zones of 
reasonableness, but no additive for facility costs in the lower bounds 
of those zones, properly balances our recognition that correctional 
facilities may well incur used and useful costs in allowing access to 
IPCS with the absence of any basis in the record that would enable us 
to estimate those costs with any degree of precision. Pay Tel argues 
that not including a measure of facility costs in the lower bound 
``reflects a misunderstanding of the evidence in the record and in no 
way justifies withholding cost recovery from facilities.'' Yet Pay Tel 
does not contend with the inadequacies of the record data we have 
identified in any meaningful way beyond asserting that they show that 
correctional facilities incur costs associated with making IPCS 
available. As we explain above, the available

[[Page 77276]]

correctional facility cost data are unreliable for purposes of 
including a measure of correctional facility costs in the lower bounds 
of our zones of reasonableness. Furthermore, we do not withhold cost 
recovery from facilities by declining to include a measure of 
correctional facility costs in the lower bounds. As explained below, we 
take the fact that our lower bounds may not reflect all used and useful 
costs into account in setting rate caps, and we allow IPCS providers to 
reimburse correctional facilities for the used and useful costs they 
may incur, if any. And because the available provider data do not 
enable us to quantify the extent to which providers' site commission 
payments compensate facilities for any costs that they incur that are 
used and useful in the provision of IPCS, we do not incorporate 
correctional facility costs into the lower bounds of our zones of 
reasonableness.
    180. We acknowledge that because we do not incorporate a measure of 
correctional facility costs in the lower bounds of our zones of 
reasonableness, those bounds may understate the used and useful costs 
of providing IPCS. As discussed above, none of the data in the record 
concerning correctional facility costs allow the Commission to quantify 
these costs with any level of precision and, as such, preclude any 
adjustment to the lower bounds. We account for that fact in choosing 
rate caps at levels that exceed the lower bounds, as discussed below.
    181. Reimbursement for Used and Useful Correctional Facility Costs. 
Despite the limitations in our data reflecting facilities' costs, we 
nevertheless take measures to ensure that correctional facilities have 
a mechanism to recover their used and useful costs, if any, in the 
provision of IPCS. To that end, we permit IPCS providers to reimburse 
correctional facilities for such used and useful costs, if it is 
apparent that such costs are, indeed, incurred by a facility. The IPCS 
rate caps we adopt today reflect, based on the record before us, all of 
the used and useful costs incurred in the provision of IPCS regardless 
of whether such costs are incurred by IPCS providers or correctional 
facilities. Thus, the rate caps recognize, consistent with the record, 
that correctional facilities may incur some used and useful costs in 
allowing access to IPCS. Pay Tel's contention that the Commission 
``fail[s] to allow for a mechanism by which facilities may recover 
their costs associated with making IPCS available'' is contradicted by 
our explicit allowance for such a mechanism here. Pay Tel's argument 
appears to be grounded in its preference for an ``express additive to 
IPCS rate caps'' rather than the reimbursement mechanism permitted by 
the Report and Order. As we explain above, the available data do not 
enable us to quantify correctional facility costs in a way that would 
allow us to disaggregate our rate caps into just and reasonable 
provider components and facility components, and Pay Tel has not 
supplied more robust data or otherwise attempted to cure the defects in 
the available data. As a result, we rely on our rate caps, which 
reflect all of the used and useful costs incurred in the provision of 
IPCS, and therefore ``allow IPCS providers to recover facility costs,'' 
despite Pay Tel's argument to the contrary. Because we eliminate site 
commissions below, which have historically been the primary means by 
which correctional facilities may have, to some extent, recovered used 
and useful costs they may incur in allowing access to IPCS, 
correctional facilities would have no means to recover those costs 
absent that further action to allow a level of provider reimbursements.
    182. The reimbursement we allow extends only to those costs that 
are used and useful in the provision of IPCS as reflected in the Report 
and Order. Given the over-arching problems associated with site 
commission payments, if a correctional facility seeks reimbursement 
from an IPCS provider for an allegedly used and useful cost, the IPCS 
provider should determine whether the cost for which the correctional 
facility seeks reimbursement is a cost that the Commission has 
determined to be used and useful and thus properly reimbursable under 
the standard set forth in the Report and Order. We otherwise leave the 
details of any reimbursement transaction to the parties to resolve. 
IPCS providers and their correctional facility customers are well aware 
of the types of costs that are used and useful in the provision of IPCS 
and are in the best position to negotiate reimbursement as they see 
fit. We also clarify that while we permit IPCS providers to reimburse 
correctional facilities for their used and useful costs in allowing 
access to IPCS, nothing in the Report and Order should be interpreted 
to require IPCS providers to do so. To the extent a correctional 
facility incurs used and useful costs in allowing access to IPCS, the 
correctional facility and the IPCS provider are free to negotiate such 
reimbursement in accordance with the Report and Order. ICSolutions asks 
whether, within the rate caps, IPCS providers can ``pay correctional 
facilities up to the $0.02/minute for reasonable corrections 
facilities' costs'' and, if so, whether the $0.02 per minute is a safe 
harbor. ICSolutions July 12, 2024 Ex Parte at 1. We do not establish a 
safe harbor. The $0.02 figure to which ICSolutions presumably refers 
reflects the Commission's best estimate of used and useful correctional 
facility costs for the purpose of calculating the upper bounds of our 
zones of reasonableness. That figure is not meant to suggest that $0.02 
per minute would be an appropriate reimbursement amount and does not 
establish a safe harbor for purposes of the reimbursement we permit. 
For example, ``[i]f a correctional facility were to pay for internet 
installation and maintenance to enable the provision of IPCS,'' that 
payment would be considered used and useful in the provision of IPCS. 
In that case, the IPCS provider could reimburse the correctional 
facility for its costs from the revenue collected by the IPCS provider 
since the cost of internet installation is included in our rate caps. 
In contrast, IPCS providers may not reimburse correctional facilities 
for costs that we find not to be used and useful in the provision of 
IPCS, such as costs for certain safety and security measures that we 
conclude are not used and useful in the provision of IPCS. Finally, 
under no circumstances may reimbursement result in IPCS consumers being 
charged more than the rate caps we adopt today.
4. Adopting Audio and Video Incarcerated People's Communications 
Services Rate Caps
    183. We adopt permanent audio IPCS and interim video IPCS rate caps 
by employing a zone of reasonableness approach, similar to the 
Commission's previous efforts. We find that adopting zones of 
reasonableness, updated from the Commission's approach in the 2021 ICS 
Order, is the best means of establishing rate caps in which IPCS rates 
are ``just and reasonable'' and, in conjunction with our ban on site 
commissions, providers are ``fairly compensated.'' We further find that 
the data collected in the 2023 Mandatory Data Collection offers a 
sufficient basis from which to derive the zones and rate caps, despite 
the limitations of the reported cost data. We reject cursory claims 
that our rate caps will be unreasonable because our rules ``impose[ ] 
significant and new operational obligations and changes on all 
providers'' but ``fails to account for the costs of these new 
obligations.'' Securus does not quantify or otherwise substantiate this 
claim, nor does it demonstrate that the waiver process

[[Page 77277]]

would be inadequate to address any unusual implementation costs that 
theoretically might arise for a given provider. We derive the upper 
bounds and lower bounds of the zones for each facility tier by 
evaluating and analyzing the data and other information received in 
response to the 2023 Mandatory Data Collection.
    184. Reliance on Data from the 2023 Mandatory Data Collection. The 
2023 Mandatory Data Collection, which updated and supplemented the 
Third Mandatory Data Collection, is the most comprehensive data 
collection in the IPCS proceeding to date, building upon the lessons 
learned from each previous effort. As instructed by the Commission, WCB 
and OEA structured this data collection to strike a balance between 
meeting the statutory timeline directed by the Martha Wright-Reed Act 
and simultaneously reducing the burdens on providers to respond to an 
expanded collection, such as by limiting the information requested, 
lowering reporting requirements, and making other changes associated 
with reducing burdens through the notice and comment process. To reduce 
the time required and the burdens associated with responding to the 
2023 Mandatory Data Collection, it was decided to only require parties 
to report data collected in the ordinary course of their business, to 
require at least GAAP consistency for financial reporting, and to allow 
providers to develop cost allocations based on their knowledge of their 
businesses and accounts, rather than imposing a regulatory set of 
accounts on providers. These decisions traded minimizing burdens off 
against obtaining useful data. Staff experience acknowledged that 
different providers would take different approaches, would have 
different business models, and would differ in other important ways, 
and accordingly, questions designed to provide necessary context to 
understanding these differences were updated and included as well. We 
agree with commenters who assert that the currently available data are 
of substantially greater quality than that available in 2021 when we 
established interim rates, and we find the most recent reported data 
continued to improve in the same fashion. These data are derivative of 
the cost allocation instructions for this data collection, which have 
been improved and refined themselves. Even so, the data from the 2023 
Mandatory Data Collection are imperfect. While we afforded providers 
the leeway to report data collected in the ordinary course of business 
rather than imposing a regulatory set of accounts upon them, the 
absence of a uniform system of accounting rules engenders variance in 
the reported data. We likewise acknowledge that providers are 
incentivized to report their data in ways that produce higher IPCS 
costs, that providers are differently situated and may interpret our 
data requests differently, and that cost allocation, as a general 
matter, can be difficult. While the record raises some questions as to 
whether these data accurately capture IPCS expenses, we have sought to 
account for that risk as best we can, including by using a range of 
other record sources or publicly available information beyond our data 
collection.
    185. Nevertheless, we find the data from the 2023 Mandatory Data 
Collection sufficient to support our actions today. As stated 
previously, agencies may reasonably rely on the best available data 
where perfect information is unavailable. The Supreme Court has 
recognized that ``[i]t is not infrequent that the available data does 
not settle a regulatory issue,'' and in such cases, ``the agency must 
then exercise its judgment in moving from the facts and probabilities 
on the record to a policy conclusion.'' Having ``explain[ed] the 
evidence which is available,'' we apply our judgment to the record and 
reach results that provide a ``rational connection between the facts 
found and the choice made.'' In doing so, we minimize our reliance on 
data that we find inaccurate or unreliable by setting lower bounds that 
adjust for anomalies in the reported data. Under the circumstances, we 
choose ``to use the best available data, and to make whatever 
adjustments appear[ ] necessary and feasible'' to ensure that audio and 
video IPCS rates are just and reasonable. NCIC argues that ``nearly 
half of the current video visitation service providers'' did not 
respond to the 2023 Mandatory Data Collection, and so urges the 
Commission to ``delay the adoption of interim rates until it receives 
comprehensive data from all video visitation providers, and deliver 
immediate relief by simply prohibiting flat-rate billing.'' In effect, 
NCIC asks that we pursue ``the perfect at the expense of the 
achievable.'' For the reasons set forth herein, we find it appropriate 
to address the limitations in providers' video IPCS data by making 
appropriate adjustments to our upper and lower bounds and in setting 
interim rate caps, rather than abandoning the effort to set rate caps 
altogether in contravention of Congress's mandate. We have undertaken a 
comprehensive analysis of the available data, explained our concerns 
with the imperfections that we have identified, and fully explicated 
the basis for the rate methodology that we adopt in light of the 
relative merits of the data. We also provide our reasoning for 
excluding certain data from our analysis, based on both flaws in the 
data and the directives of the Martha Wright-Reed Act.
    186. Implementing the Zone of Reasonableness Approach. In 2023, the 
Commission sought comment on the approach to ratemaking and the 
statutory directive that we may use industry-wide average costs. The 
zone of reasonableness approach is well-suited to reconcile competing 
concerns, such as those reflected by the Martha Wright-Reed Act's 
respective obligations to set ``just and reasonable'' rates that 
``fairly compensate[ ]'' providers. This approach helps avoid ``giving 
undue weight to the assumptions that would lead to either unduly high 
or unduly low per-minute rate caps,'' and helps us balance the 
respective competing interests of providers and consumers. Precedent 
establishes that we are ``free, within the limitations imposed by 
pertinent constitutional and statutory commands, to devise methods of 
regulation capable of equitably reconciling diverse and competing 
interests.'' It also gives us the flexibility to effectively address 
imperfections in the data and ultimately select rate caps that satisfy 
both statutory standards. Indeed, the D.C. Circuit has emphasized the 
``basic principle'' that ``rate orders that fall within a `zone of 
reasonableness,' where rates are neither `less than compensatory' nor 
`excessive,' '' are ``just and reasonable.'' We reiterate, ``[i]t is 
well-established that rates are lawful if they fall within a zone of 
reasonableness.''
    187. The record supports this approach. As certain commenters 
observe, the zone of reasonableness approach ``allowed the Commission 
to take into account the different approaches to cost reflected in the 
Second Mandatory Data Collection,'' and it ``continues to be the 
appropriate method for establishing permanent rates based on the data 
submitted in response to the Third Mandatory Data Collection.'' 
Commenters add that the zone of reasonableness remains appropriate 
under the Martha Wright-Reed Act, which ``embraces the use of industry-
wide average costs to set rate caps for IPCS'' and ``adjust[ing] those 
costs as necessary.''
    188. Not all commenters agree, however. A few argue that the zone 
of reasonableness approach is unnecessary with higher quality data and 
advocate for us to employ a statistical method paradigm. While the data 
collected in

[[Page 77278]]

the 2023 Mandatory Data Collection are more comprehensive and reliable 
than the data from prior data collections, we disagree that the 
improvement in the collected data requires us to change our approach. 
As we discuss elsewhere, the market for video IPCS is still developing, 
which strengthens the case for applying the zone of reasonableness to 
the data before us. Nor have those commenters persuaded us that their 
alternative approaches to rate regulation would be an improvement. The 
alternative statistical methods advanced by providers, including using 
a mean plus standard deviation or an interquartile range, ignore the 
limitations of the data and the likelihood that providers have 
overstated their costs, problems which the zone of reasonableness 
approach helps us address. We also find that the zone of reasonableness 
approach remains particularly apt for balancing the directives 
established by the Martha Wright-Reed Act on the basis of the data 
before us. NCIC separately criticizes the zone of reasonableness as 
``overly complicated,'' and suggests that it ``may well be impossible 
to monitor at small- and medium-sized facilities that have frequently 
fluctuating populations with varying lengths of incarceration.'' We are 
unpersuaded. The resultant caps are straightforward, and NCIC fails to 
explain how monitoring rates at individual facilities (regardless of 
size) is problematic. Indeed, providers are required to track and 
report the rates they charge, and neither providers nor facilities have 
any role (much less any responsibility) in the ``zone of 
reasonableness'' calculation process. Nor has NCIC explained how 
population turnover impacts the zone of reasonableness calculation 
process. As we explain in a technical appendix, by distinguishing 
between prisons and jails, our rate-setting methodology helps account 
for turnover to the extent relevant, and NCIC's comments do not 
demonstrate what, if anything, more is justified in that regard.
a. Establishing the Zones of Reasonableness
    189. Our zone of reasonableness approach involves three distinct 
steps which echo the approach the Commission took in the 2021 ICS 
Order. First, we establish ceilings, or upper bounds, for our zones for 
each audio and video tier by using the data that providers submitted in 
response to the 2023 Mandatory Data Collection. To reach these 
ceilings, we also add all reported safety and security costs to the 
industry averages reflected by the reported data without regard to 
whether those costs are used and useful, and include estimates of 
facility costs and TRS costs. Second, we make reasonable, conservative 
adjustments to the reported data, including by reducing the types of 
safety and security costs and amount of facility costs we incorporate 
into our industry average cost calculation, among other steps. We use 
those adjusted data to establish reasonable floors, which become the 
lower bounds of our zones of reasonableness. In determining the upper 
and lower bounds, we calculate industry average costs across the sum of 
both billed and unbilled minutes, as we find that this sum (rather than 
billed minutes alone) more accurately reflects providers' average 
costs. Finally, we rely on record evidence and on our agency expertise 
to pick reasonable rate caps for each tier from within those zones for 
both audio and video IPCS communications.
    190. Determining Upper Bounds for the Zones of Reasonableness. We 
begin our determination of the upper bounds for our permanent audio 
rate caps and our interim video rate caps by identifying the weighted 
average of providers' reported IPCS costs at each tier. To do this, we 
exclude those submissions we find incomplete or otherwise unusable, and 
we otherwise accept providers' costs as reported. Because reported 
costs include costs which we find are not used and useful in the 
provision of IPCS, our upper bounds mark the upper limits of what might 
be considered ``industry-wide average costs'' within the meaning of 
section 3(b)(1) of the Martha Wright-Reed Act.
    191. In keeping with our acceptance of providers' IPCS costs as 
reported, we also include all reported safety and security costs in our 
upper bounds of the zones of reasonableness. We do so for several 
reasons. First, we recognize that while questions were pending 
surrounding the inclusion of such costs in our IPCS rates, providers 
continued to develop and offer safety and security measures for the 
benefit of and use by authorized personnel in the carceral environment. 
This suggests that historically, IPCS providers were able to provide 
service without certain safety and security services which have been 
more recently developed. In developing our upper bounds, however, we 
decline to weigh the various categories of safety and security 
measures, and instead give providers the benefit of the doubt by 
treating all such measures as used and useful IPCS costs, regardless of 
whether such measures are of the type that were historically used and 
useful in the provision of IPCS. Second, because of limitations in the 
reported data, we cannot further disaggregate or distinguish costs for 
individual safety and security measures with precision. Rather than 
attempt to remove costs for specific constituent safety and security 
measures which are not used and useful in the provision of IPCS, we 
take a conservative approach and include all reported safety and 
security measures costs within the upper bounds.
    192. Next, we incorporate an estimate of the separate IPCS costs 
which facilities may incur in allowing access to IPCS. First, as we 
explain above, we adopt an estimate of $0.02 per minute for the 
proposed caps at each tier for our upper bounds to reflect any used and 
useful costs facilities may incur. As we have explained, the record 
does not sufficiently quantify the amount of such costs, particularly 
at smaller facilities. Although the Commission has repeatedly sought 
more recent and more accurate data, the record before us is lacking. We 
derive an estimate of these costs from the facility cost additive the 
Commission used in its 2021 ICS Order, which previously applied to 
prisons and large jails, depending on the existence of contractually 
prescribed site commissions related to a given facility. This $0.02 
estimate continues to reflect the best data available concerning 
facility costs despite outstanding questions. The use of this additive 
did not generate any waiver requests in the interim, suggesting that 
the estimate was not unduly low. Without better data from which to 
determine how facilities' IPCS costs may differ, if at all, between 
facilities of different sizes and types, we apply this same estimate 
uniformly across all tiers.
    193. Finally, we also include an estimate of the costs incurred by 
providers to implement the changes to TRS services required under the 
2022 ICS Order. These changes did not take effect until January 9, 
2023, and the costs of implementing them therefore were not reflected 
in the data filed in response to the 2023 Mandatory Data Collection, 
which are for calendar year 2022. We understand that the costs to 
provide TRS in the carceral environment may frequently exceed the 
support available to TRS providers because of the specialized equipment 
and networks often required to deploy these services inside of prisons 
or jails. We include this estimate so that our rate caps will cover 
these excesses and fully compensate providers for the costs of 
providing these services. However, the record quantifying these costs 
is once again scant. The only available data in the 2023 Mandatory Data 
Collection stems from the response of a single provider, which suggest 
that these costs

[[Page 77279]]

may be $0.002 per minute. Without more data on which to rely, we 
incorporate that estimate into both our upper and lower bounds.
    194. As we explain in a technical appendix, we find that the upper 
bounds overstate providers' actual costs of providing both audio IPCS 
and video IPCS, likely by a significant margin. This conclusion echoes 
the reasoning in the Commission's 2021 ICS Order. In addition to the 
overinclusion of safety and security costs and facility costs which we 
discuss above, all providers have reasons to overstate their general 
IPCS costs in response to our data collection, as higher costs could 
lead to higher cost-based rate caps, and thus higher profits.
    195. Additionally, our upper bounds also incorporate the weighted 
average cost of capital (WACC) as reported by providers, another factor 
which heightens the likelihood that they are overstated. The 
instructions to the 2023 Mandatory Data Collection included the caveat 
that the Commission would apply a WACC figure of 9.75% for any provider 
that failed to justify the application of an alternative figure. 
Generally, 9.75% is the Commission's currently authorized rate of 
return for incumbent local exchange carriers regulated on a rate-of-
return basis. Of all providers, only Securus and ViaPath reported 
higher costs of capital than the standard 9.75% rate of return. We find 
Securus and ViaPath failed to justify the higher costs of capital they 
reported and therefore use 9.75% in determining our lower bounds. 
Particularly because the weighted average cost of capital has a 
cascading effect upon reported costs, accepting these figures as 
reported tends to overstate the upper bounds.
    196. There are also distinct attributes of the video IPCS market 
which reinforce our conclusion that the upper bounds likely overstate 
providers' used and useful costs. One overarching attribute is that 
video IPCS remains a developing marketplace--in fact, providers report 
offering video IPCS at less than half of all facilities where they 
offer audio IPCS. Currently, video IPCS is being deployed at 49.24% of 
facilities in the dataset. There are significant indicia that the 
reported data reflect high upfront costs to develop and deploy video 
IPCS across the nation's carceral facilities, which costs should 
decrease over time. For example, many facilities represented in the 
dataset have extraordinarily high costs per minute for video IPCS, yet 
very low relative demand, which is consistent with newly deployed 
services. Further, the variation in providers' reported data for almost 
every aspect of video communication is substantially higher than for 
audio, suggesting that video supply in 2022 was in an early 
developmental stage, and that providers will likely become more 
efficient over time, resulting in lower unit costs. Keeping in mind the 
rate caps that we adopt today reflect data from 2022, we expect 
providers have become more efficient in supplying video services and 
will continue to do so. We also expect usage of video IPCS to increase 
and hence, as providers reap economies of scale, for costs relative to 
demand to decrease over time.
    197. In light of the above, we calculate the upper bounds for audio 
and video IPCS rate caps for each tier as follows:
     Prisons: $0.107 per minute for audio communications and 
$0.326 per minute for video communications;
     Large Jails: $0.098 per minute for audio communications 
and $0.223 per minute for video communications;
     Medium Jails: $0.110 per minute for audio communications 
and $0.216 per minute for video communications;
     Small Jails: $0.121 per minute for audio communications 
and $0.208 per minute for video communications; and
     Very Small Jails: $0.151 per minute for audio 
communications and $0.288 per minute for video communications.
    Taken together, these upper bounds form a reasonable, yet 
cautiously overstated, edifice from which to continue our calculation 
of the zones of reasonableness.
    198. Determining Lower Bounds of the Zone of Reasonableness. Our 
lower bound calculations begin by incorporating the results of our 
upper bound analysis, which ``provides an appropriate starting point 
for determining the lower bounds of the zones.'' We then make 
reasonable adjustments to the upper bound figures to ``minimize our 
reliance on data that we find inaccurate or unreliable.'' We also 
adjust the upper bound figures to remove the costs of those categories 
of safety and security measures that we find generally are not used and 
useful in the provision of IPCS.
    199. Our lower bound adjustments to providers' reported costs 
entail several modifications beyond those applied to reach our upper 
bound figures. Nevertheless, we find that several significant anomalies 
in providers' reported data justify these modifications. Most 
critically, providers' total reported costs across the industry for 
2022 exceed their total reported revenues by approximately $219 
million. This represents a deficit amounting to over 16% of the total 
size of the IPCS market. This pattern applies individually as well as 
in the aggregate, with half of the providers making up our database 
reporting cost-revenue deficits for 2022, including four of the top 
five providers by market share, a result ``inconsistent with the record 
evidence establishing that providers are able to achieve significant 
economies of scale.'' The existence of such a disparity, let alone its 
magnitude, strongly suggests that reported costs are inflated, given 
that rational firms are profit seeking. Nor have any providers offered 
an explanation of why costs might reasonably exceed revenues at such a 
magnitude, either in their responses to the 2023 Mandatory Data 
Collection or otherwise in the record. Consequently, we find that even 
the more impactful modifications that we adopt to establish our lower 
bounds represent reasonable, conservative adjustments, which help 
account for this deficit, in addition to addressing the other anomalies 
in the reported data we detail further below.
    200. The construction of the lower bounds is driven by removing the 
costs of those categories of safety and security measures that we find 
generally are not used and useful in the provision of IPCS. As 
discussed above, we find that only two of the seven categories of 
safety and security measures identified in the 2023 Mandatory Data 
Collection are generally used and useful in the provision of IPCS: the 
Communications Assistance for Law Enforcement Act (CALEA) compliance 
measures and communication security services. By incorporating the 
costs reported for these service categories into our lower bounds, we 
retain a significant portion of providers' reported safety and security 
costs, i.e., $180 million. This sum is equivalent to nearly half of 
providers' reported costs of providing audio and video IPCS (even 
before applying the additional adjustments addressed below). 
Additionally, as discussed above, several commenters contend that none 
of the costs of providing safety and security measures should be 
incorporated into our rate caps, arguing that these measures are not 
``used and useful'' to IPCS consumers but instead merely ``elective 
features,'' and that incorporating these costs into our caps 
effectively requires consumers to finance the conditions of their own 
confinement as a condition of communicating with loved ones. We 
disagree, and find that allowing a portion of such costs results in 
just and reasonable rate caps. Conversely, incorporating the costs of 
the five remaining categories would run counter to the purposes and 
language of the Martha Wright-Reed Act and would fail

[[Page 77280]]

to yield just and reasonable rates. Excluding these costs reduces 
industry-wide total costs by approximately $326 million. By excluding 
these costs from our lower bound figures, we ``ensure that IPCS 
consumers do not bear the costs of those safety and security measures 
that are not necessary to provide IPCS.''
    201. Next, we revisit our per-minute estimate of the IPCS related 
costs that facilities incur, and set the estimate of such costs at zero 
for the lower bounds. Again, the lower bounds of our zones of 
reasonableness include only those costs we find are used and useful; 
with respect to the costs facilities may incur to provide IPCS, the 
limited record and the lack of quantifying data persuade us to estimate 
that there are no facility costs that we should consider used and 
useful in IPCS. Given the likelihood that the estimate we accepted for 
the upper bounds is overstated, we find that using a lower estimate of 
these costs at the lower bounds minimizes reliance on flawed data while 
we still provide for the opportunity to recover costs for providing 
IPCS through our process for determining rate caps. In sum, we conclude 
from both the record and the reported cost data that it is reasonable 
to estimate facility costs to be zero in our lower bounds. And because 
we do not permit--let alone require--IPCS providers to reimburse 
correctional facilities for costs those facilities incur that are not 
used and useful in the provision of IPCS and not allowed in regulated 
IPCS rates, or to otherwise provide in-kind site commissions to 
correctional facilities, providers will not face the prospect of paying 
unrecoverable site commissions to correctional facilities that might 
deny the providers fair compensation.
    202. We do, however, continue to incorporate the same estimate for 
TRS costs in our lower bounds as we did in our calculation of the upper 
bounds. There is nothing in the record that suggests a range for these 
costs.
    203. We also revise the weighted average cost of capital (WACC) for 
ViaPath and Securus, the only two companies which elected to estimate 
an alternative WACC figure. ViaPath and Securus adopted a weighted 
average cost of capital of 14.86% and 11.43%, respectively, well above 
the 9.75% rate which every other reporting provider adopted. We find 
that neither provider offered sufficient justification to support their 
proposed alternatives to the Commission's 9.75% WACC. Both providers 
rely on several assumptions which we find lacking and which 
consistently favor material overestimation of the ultimate WACC figure. 
For example, certain components of the WACC calculation are supposed to 
rely on data assimilated from a ``demonstrably comparable group of 
firms.'' Both providers assembled groups of firms that we find, on 
balance, are not ``demonstrably comparable.'' Furthermore, ViaPath 
failed to document its underlying calculations and processes with the 
requisite detail, rendering its approach nonreplicable--a flaw that not 
only undermines the reliability of such calculations, but also makes 
them impossible to validate. Given these concerns, we find that Securus 
and ViaPath failed to meet their burden of justifying the alternative 
WACCs they propose and that the most reasonable approach for factoring 
the WACC into our lower bounds is to apply the default WACC figure of 
9.75% for both providers. This default 9.75% WACC is equal to the 
Commission's authorized rate of return for local exchange carrier 
services subject to rate-of-return on rate base regulation, which 
reflects comprehensive analyses of capital structures and the costs of 
debt and equity, and is designed to compensate these carriers for their 
cost of capital.
    204. Finally, we adjust Securus's reported video cost data downward 
in order to address significant and unresolvable, on the record before 
us, issues with those data. Unadjusted, Securus's reported video cost 
data stand apart from those reported by the rest of the industry. For 
example, Securus reports average video IPCS costs per minute that 
exceed the average of the rest of the industry by anywhere from 100% to 
over 250%, depending on the facility tier. Across all facilities, 
Securus's reported per-minute video IPCS costs are over four times the 
average of all other providers: an anomalous result, given that we 
would expect Securus--as one of the two largest providers in the IPCS 
market--to benefit from economies of scale and scope. Indeed, Securus's 
reported cost data for audio IPCS reflect such economies of scale--with 
substantially lower costs per minute at each tier than the industry 
average--which only raises further concerns with the reliability of its 
reported video IPCS costs. This situation is analogous to the situation 
the Commission confronted in 2021; as the Commission then concluded 
with respect to ViaPath, Securus ``should be better enabled to spread 
its fixed costs over a relatively large portfolio of contracts relative 
to other providers,'' but ``[i]nstead, taking [its] reported costs at 
face value would imply that it does not achieve economies of scale.'' 
Indeed, Securus's reported video IPCS costs are even more out of 
proportion than ViaPath's reported costs examined in the 2021 ICS 
Order. This conclusion is strengthened by comparing Securus's and 
ViaPath's reported costs to their respective minutes of use. Instead, 
we find that Securus's reported video IPCS data likely reflect 
substantial initial investment in fixed assets that, while presumably 
proportionate to the number of video IPCS minutes over which this 
investment may eventually be spread, is disproportionate to the number 
of video IPCS minutes Securus provided in 2022, the year covered by the 
2023 Mandatory Data Collection. Incorporating Securus's video cost data 
as reported would therefore inaccurately skew the industry's mean above 
what it is likely to be as demand grows significantly over time. At 
base, we find that Securus's per-minute video IPCS costs are simply 
non-representative for the industry at large. We disagree that it is 
appropriate to set rates for the IPCS industry based on per-minute cost 
data so heavily skewed by one provider's outsized investment in upfront 
costs for a nascent service offering; to do so would lead to recovery 
in excess of long run average costs, failing to meet our obligations 
for just and reasonable rates.
    205. We conclude that the best way to address this anomaly is to 
follow an approach similar to that adopted in the 2021 ICS Order, and 
adjust Securus's video expenses to align more closely with their 
competitors. Specifically, we set Securus's video IPCS cost per minute 
equal to the weighted average for all other providers and estimate 
Securus's new annual total expense for video. We then calculate the 
percentage reduction in Securus's annual total expenses as a result of 
this adjustment, and reduce the cost per-minute data reported for each 
facility at which Securus provides video IPCS by the same percentage, 
in order to retain Securus's relative allocations of video expenses. We 
describe this method in greater detail and show its application to 
Securus's data in a technical appendix. In the 2021 ICS Order, the 
Commission applied the k-nearest neighbor method to determine 
appropriate substitutes for ViaPath's reported cost data. This approach 
reasonably preserves the non-cost information that Securus reported for 
the facilities it serves (e.g., average daily population, facility 
type, and total video IPCS minutes of use), while reducing its 
anomalous reported cost data to fit the industry norm. We also 
considered removing all of Securus's data from our lower bound 
calculations; however, we

[[Page 77281]]

find this approach too sweeping because it would exclude all of 
Securus's video cost data from our analysis. Given the developing 
nature of the video IPCS market, and the role which Securus plays 
within it, excluding its data would create an incomplete picture of the 
video IPCS industry. However, we recognize that this adjustment may 
still overestimate Securus's costs per minute, particularly given 
certain attributes of the nascent market for video IPCS. These flaws in 
providers' video IPCS cost data (both industry-wide and for Securus in 
particular), as well as evidence suggesting that this market has 
significant room for future growth, confirm that it is appropriate to 
adopt interim video rate caps to effectively account for these 
conditions. Conversely, the fact that we do not implement any 
adjustments specific to any provider's reported audio IPCS costs 
further reflects our confidence in our approach to audio IPCS and our 
incrementally greater confidence in the underlying data, such that we 
do not apply the ``interim'' descriptor to the rate caps that we adopt 
for audio IPCS. In particular, the more established marketplace for 
audio IPCS, coupled with our experience with audio IPCS data analysis 
in the past, gives us sufficient confidence that our overall rate-
setting approach will appropriately account for the remaining 
limitations in those data sufficient to justify rate caps that will 
apply indefinitely. Although our audio IPCS rate caps are in that sense 
``permanent'' rate caps, they naturally remain subject to reevaluation 
if warranted in the future based on new developments or new 
information.
    206. Following the aforementioned steps, we calculate the lower 
bounds for audio and video IPCS rate caps for each tier as follows:
     Prisons: $0.049 per minute for audio communications and 
$0.122 per minute for video communications;
     Large Jails: $0.047 per minute for audio communications 
and $0.087 per minute for video communications;
     Medium Jails: $0.061 per minute for audio communications 
and $0.102 per minute for video communications;
     Small Jails: $0.080 per minute for audio communications 
and $0.126 per minute for video communications; and
     Very Small Jails: $0.109 per minute for audio 
communications and $0.214 per minute for video communications.
b. Determining Permanent Rate Caps for Audio IPCS and Interim Rate Caps 
for Video IPCS
    207. Based on our analysis of the available information, we find 
that the following rate caps within the zones of reasonableness for 
each tier of facilities will provide just and reasonable rates while 
ensuring fair compensation:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Audio (per minute)                              Video (per minute)
                                                         -----------------------------------------------------------------------------------------------
                       Tier (ADP)                                           Audio rate                                     Interim video
                                                            Lower bound        caps         Upper bound     Lower bound      rate caps      Upper bound
--------------------------------------------------------------------------------------------------------------------------------------------------------
Prisons (any ADP).......................................          $0.049           $0.06          $0.107          $0.122           $0.16          $0.326
Large Jails (1,000+)....................................           0.047            0.06           0.098           0.087            0.11           0.223
Med. Jails (350 to 999).................................           0.061            0.07           0.110           0.102            0.12           0.216
Small Jails (100 to 349)................................           0.080            0.09           0.121           0.126            0.14           0.208
Very Small Jails (0 to 99)..............................           0.109            0.12           0.151           0.214            0.25           0.288
--------------------------------------------------------------------------------------------------------------------------------------------------------

    208. We settle on these rate caps through our examination of the 
record, our analyses of the available data, and on the basis of our 
extensive regulatory experience in this market. As discussed above, the 
Commission has been engaged in an ongoing process of examining and 
regulating various aspects of the IPCS market for over a decade, in the 
course of which the Commission has conducted several notice and comment 
cycles and supporting data collections (and analyses of the data 
produced therefor).
    209. Lower Bounds as an Accurate Metric for Used and Useful Costs. 
We begin by considering the midpoint in each of the zones of 
reasonableness, and whether the record and evidence suggest the 
appropriate cap lies above or below those midpoints. On balance, we 
find that just and reasonable rates are likely below the midpoint of 
each tier for both audio and video IPCS. As discussed above, we find 
that only those categories of safety and security costs included in the 
lower bounds generally are truly used and useful in the provision of 
IPCS. Setting rate caps at the midpoint, which would give equal weight 
to both upper and lower bounds would risk incorporating costs that we 
find are ultimately highly unlikely to benefit the ratepayer and, 
therefore, produce rates that are not ``just and reasonable.'' This 
risk is nontrivial: the adjustment made for safety and security costs 
accounts for 84% of the overall reduction in audio costs and 50% of the 
overall reduction in video costs between the upper and lower bounds, 
such that even a minor increase above our midpoint is likely to 
incorporate a significant portion of costs we find are properly 
excluded from the rate caps. The record suggests that some providers 
may have had difficulty isolating and properly allocating their safety 
and security expenses, a difficulty which would increase reported IPCS 
costs where providers were unable to report these costs separately. 
Consequently, we find that the lower bounds operate as a more accurate 
reference point for providers' used and useful costs. As discussed 
further below, we recognize that, given the limitations inherent in the 
2023 Mandatory Data Collection and providers' responses to the data 
collection, our estimate of providers' safety and security costs may 
not incorporate all costs that are used and useful in providing IPCS. 
While we find that this warrants setting rate caps marginally above the 
lower bounds, it does not fundamentally change our conclusion here. The 
substantive evidence in support of the other adjustments we make in 
setting our lower bounds warrants a similar conclusion: that we must 
set rate caps well below the midpoint if we are to obtain an accurate 
estimate of those costs that are used and useful in providing IPCS.
    210. Unaccounted Factors Which Support Choosing Lower Rate Caps. 
Our calculation of the lower bound left several other factors 
unaccounted for, which collectively reinforce our decision to set caps 
below the midpoints. While we were unable to precisely quantify the 
effect of these factors upon reported industry costs, the factors 
nevertheless indicate that providers' reported costs are likely 
inflated. At the outset, we reiterate that total industry reported 
costs exceeded total industry revenues by $219 million. Without 
context, this might indicate that the IPCS industry at large is 
unprofitable, and suggests that rational

[[Page 77282]]

firms might exit the market, results inconsistent with the fact that 
there is no evidence that any provider is not an ongoing viable 
operation. This is also inconsistent with the lack of competition and 
competitive pressures that we have documented above. While some of the 
observed cost-revenue gap for the industry can be explained by the 
nascent state of the video IPCS marketplace as providers continue to 
develop and deploy video IPCS, investing heavily in fixed assets needed 
to provide those services, this does not explain the gulf, which 
strongly suggests that costs are overstated. As discussed elsewhere, 
the high per-minute video costs attributable to nascency do not reflect 
the efficient costs of the industry in a steady-state.
    211. There are also several factors that we find are likely to 
decrease providers' costs per minute going forward, suggesting that 
their reported costs tend to overestimate future costs. As the 
Commission has previously observed, ``[w]hen prices fall, quantity 
demanded increases.'' NSA points out that the increase in minutes of 
use will also result in an increase in ``associated safety and security 
costs.'' Our rate cap structure accounts for this demand-driven basis 
of safety and security costs by basing the recovery of those costs that 
we find used and useful in the provision of IPCS on relative demand, 
i.e., via the incorporation of such costs into the per-minute rate 
caps. We find that the increase in communications generated by the 
reductions in price which our rate caps will achieve should reduce 
providers' average costs, other things being equal. And incorporation 
of ancillary service charges into our rate caps (which, as noted above, 
should reduce overall prices) will only amplify this effect. This 
effect should be further augmented to the extent that the growth in 
market-wide minutes of use from 2021 to 2022 reflects an independent 
trend of increased demand, unrelated to the impact of the decrease in 
rates resulting from the 2021 ICS Order. Similarly, video IPCS, as a 
service, is still in its nascent stages, and it may be that the 
reported figures overstate costs (as providers, in addition to Securus, 
make large capital investments that will be depreciated over time) and 
understate demand compared to what could be expected in a more mature 
market. We expect that, as the video IPCS market approaches a more 
stable equilibrium, cost per minute will decline. The record suggests 
that the hardware used by providers in deploying video IPCS (including 
both tablets and network infrastructure) may also be used to provide, 
or improve the service for, audio IPCS. Thus, as providers continue to 
invest in capital as part of the expansion of their video IPCS 
offerings, these investments will cross-subsidize costs for audio IPCS, 
reducing the net costs of providing IPCS.
    212. Several elements of providers' responses to the 2023 Mandatory 
Data Collection also indicate that providers accounted for costs in a 
way that likely overestimated the costs attributable to IPCS and 
ancillary services. For example, several providers recognize 
substantial amounts of goodwill. The size of these amounts, whether 
these amounts are amortized or written down upon being tested for 
impairment, and how these amounts are allocated can significantly 
impact reported IPCS costs. Goodwill represents the difference between 
the purchase price of a company and the company's fair market value at 
the time of purchase. Under the Generally Accepted Accounting 
Principles (GAAP), until 2021, private companies were required to elect 
either to amortize goodwill on a straight-line basis over a period of 
up to ten years, or to conduct annual impairment testing. The threshold 
step of the impairment testing process is a qualitative assessment of 
whether the goodwill carried on a company's balance sheet likely 
exceeds its fair market value, which takes into account several factors 
including macroeconomic developments and regulatory changes. Since the 
goodwill reported by these providers was first recorded on their 
balance sheets, several events have transpired that would seem likely 
to have triggered the impairment testing process, potentially leading 
to a significant write down of these amounts: most notably, the Covid-
19 pandemic, several orders issued in this proceeding and by certain 
state Commissions, and the passage of the Martha Wright-Reed Act. We 
question whether providers' goodwill figures are overstated as none 
recorded any significant write down of the goodwill on its balance 
sheet notwithstanding these events, and thus we find their reported 
goodwill figures unreliable. These providers left their allocations of 
goodwill largely unexplained, which makes it difficult to assess to 
what extent it is properly attributable to IPCS. The instructions for 
the 2023 Mandatory Data Collection require providers to comply with 
GAAP in calculating their goodwill figures attributable to IPCS. 
However, GAAP does not necessarily entail distinguishing between 
goodwill attributable to IPCS and IPCS-related services versus 
nonregulated services. A similar principle applies to providers' 
incentives to over-allocate costs that support both video IPCS and 
nonregulated services to IPCS, particularly where the Commission has no 
effective means of auditing these allocations. Providers often offer 
IPCS using the same platform as nonregulated services (and thus the 
platform costs are shared between these services). The instructions to 
the 2023 Mandatory Data Collection, despite a high level of specificity 
left providers with substantial leeway in choosing precisely how to 
allocate costs that support both video IPCS and nonregulated services 
(e.g., tablet and app development expenses) between video IPCS (and 
ancillary services) and nonregulated services. For example, providers' 
Word template responses illustrate that they may have failed to 
disaggregate platform development costs, reporting the full costs of 
development as a video IPCS expense even where the platform provides 
non-IPCS services. Such expenses can be significant, and misallocating 
them could readily skew costs toward IPCS. Each of these factors tend 
to inflate reported costs--and therefore suggests our rate caps should 
be lowered--for reasons entirely unrelated to the costs of service.
    213. Factors Supporting Rates Above the Lower Bounds. We also 
recognize a series of factors which support setting the rate caps above 
our lower bound. As a general matter, we find it appropriate to set 
rates somewhat above the lower bounds to minimize reliance on the 
imperfect data on which we base our rate caps, which will better ensure 
that providers will have the opportunity to recover the costs of 
providing IPCS, consistent with both the equitable considerations 
underlying just and reasonable rates and the fair compensation mandate 
of section 276(b)(1)(A). Setting rate caps above the lower bounds will 
help to account for the possibility that the adjustments we applied to 
providers' reported costs to obtain the lower bound estimates were too 
aggressive, to account for the possibility that aspects of our 
evaluation of used and useful costs to provide IPCS may be inaccurate 
to some degree, to account for any inflation not offset by productivity 
growth, and to ensure that providers will be better able to recover 
their costs of providing TRS.
    214. We also recognize several specific factors that guide us to 
select rate caps above our lower bounds. In particular, we find that 
the data submitted for the costs of providing safety and security 
measures are imperfect and imprecise; we recognize

[[Page 77283]]

these flaws are likely attributable, at least in part, to the 
inevitable imprecision of the allocations required to comply with the 
2023 Mandatory Data Collection. For example, providers generally 
declined to provide further detail on the costs attributable to each 
individual function. The questions regarding safety and security costs 
in the 2023 Mandatory Data Collection necessarily reflected some 
imprecision for at least two reasons. First, the Commission was 
operating with limited information on this subject, given the limited 
detail obtained on this subject in prior data collections. Second, the 
Commission took efforts to avoid imposing an outsize burden on 
providers in reporting specific details of their safety and security 
costs, particularly in light of the comment record suggesting that 
providers have not historically accounted for the costs of their safety 
and security measures in particularly discrete detail. Due to the 
aggregation of the submitted data within each category, we are unable 
to meaningfully identify the specific costs for the various functions 
within each safety and security category enumerated in the data 
collection. Consequently, we recognize the possibility that providers 
may have misallocated the costs of providing certain component 
functions, causing those costs to be improperly excluded from the 
calculation of the lower bounds. For example, NCIC {[REDACTED]{time} . 
Material that is set off by double brackets {[ ]{time}  is subject to a 
request for confidential treatment and is redacted from the public 
version of this document. Given the limitations in the data provided, 
we are unable to ascertain costs for any of these individual services. 
The costs of any such services, to the extent they exist, would have 
been improperly excluded from the calculation of the lower bounds. 
Similarly, we recognize that facilities may incur certain costs that 
are used and useful in the provision of IPCS but the lack of reliable 
data in the record makes it impossible to quantify those costs with any 
degree of precision. Finally, although we exclude one-time 
implementation costs which are inappropriate for inclusion in permanent 
rate caps, providers' ongoing costs of implementing the Report and 
Order may, on balance, exceed their ongoing savings from, for example, 
not having to process site commission payments. We thus take the 
conservative approach of setting our rates somewhat above the lower 
bounds to account for facilities' used and useful costs. Additionally, 
as noted above, the record and the data make clear that video IPCS is 
still a developing market. Given this context, we find it appropriate 
to set interim rates above the lower bounds for video IPCS in 
particular, to afford providers flexibility in responding to the cost 
and demand uncertainties inherent to such markets. As discussed above, 
we recognize that the developing nature of the video IPCS market also 
suggests that providers' reported costs per minute may be higher than 
similar figures would be in a more mature market. We account for both 
of these implications of the nascent market in selecting our rate caps.
    215. Collectively, these reasons counsel in favor of setting our 
rate caps higher than the lower bounds. But we find that these factors 
are generally outweighed by countervailing factors, including the 
providers' incentive to overstate their costs and the lack of evidence 
that the upper bounds accurately capture providers' actual costs of 
providing IPCS. Accordingly, we find it appropriate to set our rate 
caps at levels nearer to, but still above, the lower bounds, to more 
accurately account for all of these factors. We reiterate, however, 
that even these lower bounds largely reflect providers' costs as 
reported. The rate caps we set reflect our reasonable balancing of 
these considerations.
    216. Commercial Viability and Cost Recovery. Applying these rate 
caps to each provider's reported minutes of use allows us to calculate 
their potential revenues under these caps. In making this 
determination, we refer to providers' reported costs, net of those 
categories of costs that we identify in this Order as unrelated to the 
provision of IPCS: i.e., site commissions, and the five excluded 
categories of safety and security costs discussed above. The fact that 
several states and smaller jurisdictions have adopted rate caps equal 
to or lower than those we adopt today--with no evidence in the record 
indicating that these rates have made the provision of IPCS 
unprofitable--lends further support to our findings as to providers' 
commercial viability. Potential revenues for eight out of 12 IPCS 
providers exceed their total reported costs when excluding site 
commissions and safety and security categories that generally are not 
used and useful in the provision of IPCS. Because our estimates of 
providers' average costs are likely overstated, we find it unlikely 
that any provider will be unable to recover its individual average 
costs of providing audio and video IPCS. In the event providers are 
unable to recover their used and useful IPCS costs, providers remain 
free to seek a waiver of our rules, a process we revise herein. These 
eight firms represent over 90 percent of revenue, 96 percent of ADP, 
and 96 percent of billed and unbilled minutes in the dataset. An 
alternate method to estimate potential revenue under the rate caps sums 
reported IPCS and ancillary services for audio and video by facility, 
reducing these values, if applicable to match potential revenues under 
the rate caps. Under this method, the projected revenues of the same 8 
of 12 providers exceed their costs. In the 2021 ICS Order, the 
Commission conducted a similar analysis at the facility-specific level. 
However, in light of the Martha Wright-Reed Act's amendments to section 
276, and its authorization to use both ``industry-wide average costs'' 
and the ``average costs of service of a communications service 
provider'' in setting rates, we find it more appropriate to conduct 
this analysis across each provider's full portfolio of facilities 
served and, more generally, across the full IPCS industry.
    217. We reiterate that our rate caps likely overestimate providers' 
actual costs of providing IPCS, for the reasons set forth above. 
Additionally, our rate caps, by lowering prices, will likely increase 
communications volumes (and so decrease average costs per minute), as 
will providers' continuing expansion of and investment into their video 
IPCS services. Taken together, we find that these reasons demonstrate 
that this number is conservative, and that we likely underestimate the 
extent to which providers will be able to recover their costs under our 
rate caps. We anticipate that, over time, revenues for additional 
providers will exceed their total actual costs even beyond those 
already identified in our analysis above. Our analysis of the 
underlying facility-level data corroborates this conclusion. 
{[REDACTED]{time}  of facilities report per-minute revenues net of site 
commissions under our rate caps, meaning that providers will be able to 
recover the same per-minute revenues at these facilities under our rate 
caps. Assuming that these facilities are generally profitable (as 
profit-maximizing firms are unlikely to bid for unprofitable 
contracts), our rate caps will therefore not undermine providers' 
profitability for these facilities. However, this does not mean that 
the remaining facilities would not recover their costs under our rate 
caps, as detailed further in a technical appendix (for example, per-
minute revenues net of site commissions likely exceed providers' per-
minute costs net of site commissions).
    218. Finally, we find that our rate caps do not threaten providers' 
financial

[[Page 77284]]

integrity such that they could be considered confiscatory, even in 
those anomalous circumstances where a provider cannot recover its costs 
under our rate caps. Further, we find the fact that providers negotiate 
for per-minute rates lower than our choice of caps to support our 
conclusion that these rate caps do not threaten providers' financial 
integrity. The rate caps are based on data supplied by providers and 
correctional facilities. As the Commission has previously observed, 
neither of these parties ``have incentives to understate their costs in 
the context of a rate proceeding, lest the Commission adopts rates that 
are below cost.'' Rather, providers had ``every incentive to represent 
their [IPCS] costs fully, and possibly, in some instances, even to 
overstate these costs.'' Further, our rate caps explicitly account for 
all costs of providing IPCS identified in the record, including costs 
incurred by correctional facilities, costs of necessary safety and 
security measures, and cost variations attributable to facility size 
and type. Additionally, as the Commission has repeatedly observed, the 
offering of IPCS ``is voluntary on the part of the [IPCS] providers, 
who are in the best position to decide whether to bid to offer service 
subject to the contours of the request for proposal''; IPCS providers 
have no obligation ``to submit bids or to do so at rates that would be 
insufficient to meet the costs of serving the facility or that result 
in unfair compensation.''
c. Consistency With Statutory Requirements
    219. Section 276(b)(1)(A) of the Communications Act, as amended by 
the Martha Wright-Reed Act, requires the Commission to ``establish a 
compensation plan to ensure that all payphone service providers are 
fairly compensated and all rates and charges are just and reasonable 
for completed intrastate and interstate communications.'' We conclude 
that the rate caps and waiver process we adopt in the Report and Order 
fully satisfy this mandate. We find that rates will be just and 
reasonable if they afford providers an opportunity to recover their 
``prudently incurred investments and expenses that are `used and 
useful' in the provision of the regulated service for which rates are 
being set,'' and upon reflection of the amendments to section 276, we 
find that a provider will be fairly compensated if it is afforded an 
opportunity to recover the industry average of those costs on a 
company-wide basis. Securus argues that the Martha Wright-Reed Act 
requires that each provider be able to recover its average costs. We 
conclude the Act does not require such particularized analysis and 
reiterate that rate caps based on costs evaluated on an aggregated 
basis generally will satisfy the requirement that all payphone service 
providers be fairly compensated. And as the Public Interest Parties 
explain, ``for a service provider to be `fairly compensated' for its 
services would signify that it is paid an amount that reasonably 
reflects the value of the services that it provides. . . . The standard 
does not require every carrier to be profitable, but rather for rates 
to be set at a level where carriers receive compensation that would 
allow a well-run and prudent IPCS carrier to realize a fair rate of 
return.'' Securus argues that our rate caps fail to ensure that ``all'' 
providers are fairly compensated, threatening the competitiveness of 
the IPCS marketplace, because our industry average-based rate caps do 
not account for costs on a provider-by-provider basis. We disagree. 
Securus interprets the term ``all payphone service providers'' in 
section 276(b)(1)(A) to mean ``each payphone service provider,'' and 
ignores the fact that fair compensation does not require the Commission 
to adopt rate caps which allow for the recovery of inefficiently 
incurred costs.
    220. Across the industry, these rate caps will allow providers to 
generate sufficient revenue from the audio and video communications 
they provide (1) to recover the actual, direct costs of each 
communication, and (2) to make a reasonable contribution to their 
indirect costs related to IPCS. Because they reflect what we have 
determined are the industry average costs incurred to provide IPCS, 
falling ``squarely within the zones of reasonableness,'' the rate caps 
we adopt today meet this standard. Indeed, by setting our rate caps 
above our lower bounds, ``[o]ur approach incorporates assumptions and 
actions that lean toward over-recovery of costs.'' At the same time, 
these rate caps reflect our best estimate of providers' actual costs of 
providing IPCS, therefore limiting the recoverable costs to those costs 
``that directly benefit the ratepayer'' and excluding ``any imprudent, 
fraudulent, or extravagant outlays.'' Direct Action for Rights and 
Equality, et al., argue that our caps ``remain far from `just and 
reasonable' for indigent individuals and communities,'' and so 
``encourage the Commission to propose even lower caps--the lowest 
possible caps for voice and video communications. However, these 
commenters fail to identify what rate caps would be more appropriate, 
or how such rate caps would both be ``just and reasonable'' and ensure 
that providers are ``fairly compensated.''
    221. The rate caps we adopt in the Report and Order also meet the 
separate rate-making evaluation requirements set out by the Martha 
Wright-Reed Act. The Act requires that we ``shall consider costs 
associated with any safety and security measures necessary to provide'' 
IPCS, as well as the ``differences in costs'' of providing IPCS ``by 
small, medium, or large facilities or other characteristics.'' We 
disagree that ``small facility cost[s]'' are not adequately captured by 
our use of industry averages. Because we set our caps on the basis of 
several tiers, costs for facilities of various sizes are captured at 
the respective tier. WCB and OEA directed providers to explain the 
nature of their safety and security costs in their responses to the 
2023 Mandatory Data Collection, and we sought comment on these issues 
in 2023. Having examined the data and the record on these issues, we 
have incorporated into our rate caps the costs of those safety and 
security measures we find are, in fact, used and useful in the 
provision of IPCS, as well as the most critical factors driving the 
differences in providers' costs, including facility size. Our analysis 
therefore takes into account all of the factors identified in the 
record and the data that ``account[ ] for cost discrepancies among 
providers,'' and addresses certain commenters' concerns that our use of 
average costs ``must take into account size and type differences.'' We 
find that any cost variation that is not accounted for by the tiers we 
adopt (and not reflective of ``imprudent, fraudulent, or extravagant 
outlays'' by individual providers) is accommodated by our use of a rate 
cap structure. Accordingly, our rate caps meet these requirements 
imposed by section 3 of the Act. The Act also requires that we 
``promulgate any regulations necessary'' to implement the Act ``[n]ot 
earlier than 18 months and not later than 24 months after the date of 
[its] enactment.'' The Act was enacted on January 5, 2023, requiring 
the adoption of implementing regulations between July 5, 2024 and 
January 5, 2025.
    222. Our regulatory approach also includes measures to ensure that 
providers are not forced to bear unrecoverable costs, through our 
actions to prohibit all monetary and in-kind site commissions at all 
facilities. Thus, outside the context of reimbursements paid to 
correctional facilities for costs or expenses that we find used and 
useful in the provision of IPCS--and for which we allow recovery in 
IPCS rates--providers will not be permitted or

[[Page 77285]]

required to make monetary payments or in-kind contributions to 
correctional facilities that arguably could represent unrecoverable 
costs at odds with section 276(b)(1)(A)'s fair compensation mandate. To 
the extent that providers voluntarily elect to incur other costs or 
expenses that are not used and useful in the provision of IPCS and 
subject to recovery under the rate caps we adopt (or the associated 
waiver process), that voluntary assumption of costs or expenses does 
not give rise to a burden on the Commission to provide for recovery 
under the fair compensation mandate of section 276(b)(1)(A). In the 
event that a provider is not afforded the opportunity to recover its 
costs for providing IPCS under our caps, that provider may seek a 
waiver of those caps in accordance with our revised waiver procedures 
adopted in the Report and Order. The combination of our regulatory 
actions here, including our rate caps and our revised waiver process, 
consequently will afford all providers the opportunity to be fairly 
compensated at just and reasonable rates for providing IPCS consistent 
with section 276(b)(1)(A). Our approach of setting rate caps that we 
find reasonable based on general conclusions from the industry as a 
whole, while leaving providers the opportunity to make provider-
specific showing that additional recovery should be permitted, thus 
does not ``preclude[ ] a[ ] `provider-by-provider' assessment'' as some 
contend. The regulatory approach we employ also is consistent with 
regulatory approaches the Commission has employed in setting just and 
reasonable rates in other contexts in the past.
5. Preemption
    223. Consistent with section 2(b) of the Communications Act, as 
amended by the Martha Wright-Reed Act, and section 276(c) of the 
Communications Act, we preempt state and local laws and regulations 
that require IPCS rates that exceed the rate caps we adopt today. We 
similarly preempt state and local laws and regulations requiring 
separate ancillary service fees. We decline, however, to preempt state 
and local laws and regulations requiring IPCS rates below the rate caps 
we adopt today.
    224. It is well established that ``a federal agency may pre-empt 
state law only when and if it is acting within the scope of its 
congressionally delegated authority.'' Section 276(b)(1)(A) always has 
been clear that the Commission has authority to establish compensation 
plans for ``intrastate and interstate'' payphone calls, and as 
explained above, the Martha Wright-Reed Act amended that provision to 
clearly establish the Commission's authority to ensure just and 
reasonable rates for both intrastate and interstate communications, as 
newly expanded under section 276(d). Above and beyond that, the Martha 
Wright-Reed Act added section 276 to the express exceptions to the 
general preservation of state authority in section 2(b) of the Act. 
Commenters uniformly agree that this demonstrates Congress's intent to 
grant the Commission authority to ensure just and reasonable rates for 
all intrastate IPCS, firmly anchoring the Commission's authority over 
such services. Furthermore, while the Martha Wright-Reed Act decisively 
expanded the scope of the Commission's authority over IPCS, it retained 
the express preemption provision in section 276(c), which provides 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.''
    225. We find that state and local laws and regulations that require 
IPCS rates that exceed the rate caps we adopt today or that require 
separate ancillary service charges conflict with the Commission's 
regulations adopted in the Report and Order to ensure just and 
reasonable rates and charges for intrastate and interstate IPCS and 
fair compensation for IPCS providers under section 276(b)(1)(A). 
Pursuant to section 276(b)(1)(A), as amended by the Martha Wright-Reed 
Act, the compensation plan the Commission adopts today includes IPCS 
rate caps carefully calibrated to ensure that all payphone service 
providers are fairly compensated and all rates and charges are just and 
reasonable for all IPCS, including intrastate. These rate caps are 
ceilings limiting what IPCS providers may charge for intrastate and 
interstate audio and video communications. To the extent state and 
local laws or regulations require IPCS rates that exceed those 
ceilings, such state and local laws or regulations would, by 
definition, lead to unjust and unreasonable IPCS rates and charges. In 
connection with ancillary service charges, as noted above, our rate 
caps incorporate the costs of providing these services. Thus, to the 
extent state or local laws and regulations require separate ancillary 
service charges, such charges would also be unjust and unreasonable as 
they would exceed the Commission's IPCS rate caps.
    226. Commenters broadly agree that state and local requirements 
mandating IPCS rates and charges that are higher than the rate caps we 
adopt today are subject to preemption. No commenter argues that the 
Commission lacks authority to preempt such state and local requirements 
or should not do so. As noted above, the Communications Act provides 
the Commission the necessary authority to adopt regulations ensuring 
just and reasonable rates and charges for intrastate and interstate 
IPCS, which requires preemption of state and local laws and regulations 
requiring IPCS rates that exceed the Commission's adopted rate caps or 
that require separate ancillary service charges.
    227. Preemption of State Requirements. When a federal law contains 
an express preemption clause, the courts ``focus on the plain wording 
of the clause, which necessarily contains the best evidence of 
Congress' preemptive intent.'' The Supreme Court has explained that 
where a ``statute `contains an express pre-emption clause,' we do not 
invoke any presumption against pre-emption but instead `focus on the 
plain wording of the clause, which necessarily contains the best 
evidence of Congress' pre-emptive intent.' '' Independently, even 
assuming arguendo that any preemption analysis should begin ``with the 
assumption that the historic police powers of the States [are] not to 
be superseded by the Federal Act unless that was the clear and manifest 
purpose of Congress''--particularly where ``Congress has `legislated . 
. . in a field which the States have traditionally occupied' ''--it 
nonetheless remains the case that ``Congress' intent, of course, 
primarily is discerned from the language of the pre-emption statute and 
the `statutory framework' surrounding it.''
    228. Here, the express preemption clause in section 276(c) applies 
to ``State requirements'' to the extent they are ``inconsistent with 
the Commission's regulations.'' ViaPath argues the Commission should 
``preempt any existing state rates that are higher than the 
Commission's rates as well as all future state regulation of voice 
IPCS.'' As stated herein, the Report and Order preempts state 
regulations which mandate prices above the caps we set today. As also 
discussed, we see no rationale for disturbing state regulations which 
require pricing below our caps, nor has ViaPath offered any, and we 
decline to preempt such regulations at this time. ViaPath also suggests 
that the Commission should preempt state regulation of all video IPCS 
because it has ``historically been treated under the law as inherently 
interstate.'' We are unpersuaded. Our exercise of our preemption 
authority does not require

[[Page 77286]]

such a categorical approach. The term ``state requirements'' in express 
preemption provisions has been interpreted by the Supreme Court more 
broadly than terms like ``laws or regulations.'' For example, the Court 
has concluded that ``[a]bsent other indication, reference to a State's 
`requirements' in an express preemption provision includes its common-
law duties.'' By contrast, the Court has found that references to state 
``laws or regulations'' preempt only ``positive enactments.'' 
Consistent with this precedent, we find that the reference to ``state 
requirements'' in section 276(c) is broad enough to reach state laws 
and regulations requiring IPCS rates that exceed the rate caps we adopt 
today.
    229. The surrounding statutory framework also demonstrates that 
preemption of laws and regulations requiring IPCS rates that exceed the 
rate caps we adopt today is authorized by section 276(c). As noted 
above, section 276(b)(1)(A) always has been clear that the Commission 
has authority to establish compensation plans for ``intrastate and 
interstate'' payphone calls, and as explained above, the Martha Wright-
Reed Act amended that provision to clearly establish the Commission's 
authority to ensure just and reasonable rates for all communications 
now encompassed by section 276(d). In amending section 276, Congress 
left the express preemption provision in section 276(c) unaltered, 
revealing Congress' understanding that Commission regulations 
implementing the full scope of amended section 276(b)(1)(A) would be 
subject to that express preemption provision.
    230. This point was further emphasized by the amendment of section 
2(b) of the Communications Act to expressly exempt section 276 from the 
preservation of state authority over intrastate communications under 
that provision. In the Martha Wright-Reed Act, Congress expressly 
considered the potential effect of that statute on other laws, and only 
disclaimed the intent to ``modify or affect any'' state or local law 
``to require telephone service or advanced communications services at a 
State or local prison, jail, or detention facility or prohibit the 
implementation of any safety and security measures related to such 
services at such facilities.'' That narrow express preservation of 
existing law is not implicated by our preemption here. The statutory 
context provided by section 276 as a whole, coupled with the Martha 
Wright-Reed Act, thus reinforces our understanding of the scope of 
preemption encompassed by section 276(c).
    231. Relatedly, we conclude that preemption is consistent with 
section 4 of the Martha Wright-Reed Act, which states that nothing in 
that Act ``shall be construed to modify or affect any Federal, State, 
or local law to require telephone service or advanced communications 
services at a State or local prison, jail, or detention facility or 
prohibit the implementation of any safety and security measures related 
to such services at such facilities.'' We preempt only those state laws 
and regulations that require IPCS rates that exceed the rate caps we 
adopt today or that require separate ancillary service charges. To the 
extent federal, state, or local laws or regulations require IPCS to be 
provided to incarcerated people at state or local correctional 
facilities, such laws and regulations are not preempted by our actions 
here. Similarly, we do not prohibit the implementation of any safety 
and security measures related to IPCS at any state or local 
correctional facility. As we explain above, section 4 of the Martha 
Wright-Reed Act is ``not intended to interfere with any correctional 
official's decision on whether to implement any type of safety and 
security measure that the official desires in conjunction with audio or 
video communications services.'' Consistent with that interpretation, 
here we preempt state laws and regulations requiring IPCS rate caps 
that exceed the Commission's adopted caps or that require separate 
ancillary service charges, a pre-emption that we conclude is necessary 
to achieve the statutory requirements of section 276(b)(1)(A) to ensure 
just and reasonable rates and charges for IPCS consumers and fair 
compensation for providers. Correctional officials remain free to 
implement desired safety and security measures.
    232. Preemption of Local Requirements. Our analysis of our 
preemptive authority is somewhat different when it comes to local 
requirements that may require IPCS rates and charges that exceed the 
Commission's rate caps because section 276(c) does not expressly 
reference ``local'' laws or regulations. Nonetheless, we conclude that 
principles of conflict preemption allow us to also preempt such local 
laws and regulations. As an initial matter, we note that ``for the 
purposes of the Supremacy Clause, the constitutionality of local 
ordinances is analyzed in the same way as that of statewide laws.'' 
Thus, relevant precedent concerning state law is equally applicable to 
local law.
    233. As a threshold matter, we find that local laws and regulations 
that require IPCS rates and charges that exceed the Commission's IPCS 
rate caps or that require separate ancillary service charges stand as 
an obstacle to our regulation of IPCS. We explained above the conflict 
that occurs as a result of state requirements, and that conclusion is 
not altered if the requirements originate instead at the local level. 
Consequently, under section 276(b)(1)(A) coupled with standard conflict 
preemption principles we preempt local laws and regulations that 
require IPCS rates and charges exceeding the Commission's caps or that 
require separate ancillary service charges.
    234. Our conflict preemption determination is bolstered by the 
enactment of the Martha Wright-Reed Act, which modified the 
Communications Act in a manner that we see as intended to establish a 
uniform system of federal regulation for all IPCS under section 
276(b)(1)(A). As explained above, the Martha Wright-Reed Act was 
enacted against the regulatory backdrop of--and in response to--the GTL 
v. FCC decision, where the D.C. Circuit found that the Commission had 
unreasonably relied on the ``just and reasonable'' standard of section 
201(b) when implementing the differently-worded language of section 
276. Insofar as that left the Commission to rely on section 201(b) to 
ensure IPCS rates and charges were not too high, it generally precluded 
the Commission from addressing excessive intrastate IPCS rates. The 
Martha Wright-Reed Act's amendment of section 276(b)(1)(A) gave the 
Commission clear authority to ensure just and reasonable rates under 
that provision, which always has encompassed both intrastate and 
interstate services. Given the legal and regulatory backdrop, that 
persuades us that Congress envisioned a uniform system of federal 
regulation as far as IPCS rates and charges are concerned.
    235. Scope of Preemption. At this time, our preemption extends only 
to those state and local laws and regulations that require IPCS rates 
and charges exceeding the Commission's rate caps or that require 
separate ancillary service charges. The record is mixed as to whether 
the Commission should or must also preempt state and local laws or 
regulations that set IPCS rates and charges that are below the 
Commission's caps. For example, Pay Tel and Securus assert that the 
Commission must preempt these lower rates. They argue that the 
Commission must adopt rates for intrastate and interstate IPCS that 
ensure fair compensation for IPCS providers, and state rate caps that 
are below the

[[Page 77287]]

Commission's caps are necessarily ``inconsistent'' with the 
Commission's regulation of IPCS since such caps would be below cost and 
thus not afford fair compensation. These commenters assert that below-
cost intrastate rate caps are problematic insofar as they may require 
``increases in federal rates to defray costs which are not being 
recovered at the state level'' and lead to cross-subsidization between 
states because ``[i]f consumers in one state pay less than the rate the 
Commission has determined is necessary to fairly compensate providers . 
. . consumers in other states may end up making a larger contribution 
to the company's costs.'' They add that below-cost intrastate rates 
``may lessen the willingness of providers to bid for facilities, 
depress market participation (particularly by smaller, regional 
providers), and reduce investment in new technologies'' while also 
raising the ``very real possibility of confiscatory rates,'' 
particularly if rates are set using a zone of reasonableness approach. 
We address concerns about confiscatory rates in connection with our 
zone of reasonableness analysis above.
    236. On the other hand, state commenters and public interest 
advocates argue that the Commission is not required to preempt state 
rates that are lower than the Commission's caps. The California Public 
Utilities Commission explains that ``states and local governments are 
in a better position to assess what a reasonable rate would be for the 
provision of services in their geographic locations.'' The Public 
Interest Parties assert that state and local laws that require 
intrastate rates to be lower than the Commission's rate caps are not 
inconsistent with the Commission's regulations ``because any intrastate 
rates lower than the Commission's rate cap would not violate any 
specific provision of the Communications Act and lower rates are 
consistent with the underlying purpose of the MWRA.'' Both the 
California Public Utilities Commission and the Public Interest Parties 
explain that to the extent the Commission's rate caps act as ceilings 
and not floors, the Commission should not preempt lower state rates. We 
agree. State IPCS rate proceedings are designed to look at cost data 
and market conditions unique to that particular state, a much smaller 
geographic area and a much more disaggregated basis than the ratemaking 
analysis the Commission was required to undertake on a national level 
which covered the entire country. It is entirely possible that cost 
data reflecting a smaller subset of the national footprint of 
facilities targeted to only certain state specific facilities could 
yield fair compensation for providers operating in that state at those 
facilities at lower rates than reflected by the Commission's rate caps 
adopted today.
    237. We decline to preempt state or local laws and regulations 
requiring rates lower than the caps we adopt today. As the California 
Public Utilities Commission explains, the argument from Securus and Pay 
Tel that lower intrastate rates is necessarily inconsistent with the 
Commission's regulation of IPCS is ``question-begging'' as it ``assumes 
that the FCC's regulations do not allow rates below the federal cap.'' 
The rate caps we adopt today establish ceilings, rather than floors 
that inherently would limit potential state action. These rate caps, 
which are based on provider-supplied data, appropriately balance the 
need to ensure just and reasonable rates and charges for IPCS consumers 
based on industry averages and fair compensation for IPCS providers. 
More generally, it is well established that rates can be lawful if they 
fall within a zone of reasonableness. Thus, a state's intrastate rate 
cap might fall within that zone even if it is lower than the 
Commission's specified rate caps.
    238. We also find that state or local requirements that mandate 
intrastate IPCS rates or charges below the Commission's caps are 
consistent with the ``underlying purpose of the [Martha Wright-Reed 
Act]'' to fundamentally reform the IPCS marketplace and eliminate, to 
the greatest extent possible, decades of exorbitant rates for 
communications services used and paid for by incarcerated people and 
their loved ones. Finally, this approach is also consistent with the 
policy the Commission established when it considered this issue in the 
2021 ICS Order. In light of considerable state-level reform efforts, 
the Commission decided that the ``federal requirements will operate as 
ceilings'' for jurisdictionally mixed calling services.
    239. Should an IPCS provider claim that a state or local 
requirement leads to unfair compensation, that provider may seek 
appropriate relief in the relevant state or locality or from the 
Commission by submitting a petition for preemption.
    240. Our approach to state or local requirements mandating lower 
IPCS rates is consistent with the legal and regulatory backdrop here. 
When the Commission undertook regulation of intrastate inmate calling 
services rates in the 2015 ICS Order, the Commission adopted an 
analogous approach to preemption--it declined requests to treat state 
or local requirements mandating rates below the FCC's caps as 
inherently in conflict with the Communications Act or Commission rules, 
instead leaving providers to seek relief on a case-by-case basis should 
they be able to demonstrate in a particular scenario that they were not 
being fairly compensated. Although the D.C. Circuit in GTL subsequently 
rejected the Commission's claim of statutory authority to cap 
intrastate calling services rates under section 276, the Martha Wright-
Reed Act made clear the Commission's authority to ensure just and 
reasonable rates for intrastate IPCS under section 276(b)(1)(A). Yet 
Congress left section 276(c)'s express preemption of conflicting state 
laws unchanged relative to the provision in place when the Commission 
acted in 2015. Nor does the amended text of section 276(b)(1)(A) 
expressly mandate the exclusivity of the Commission's implementing 
rules. Thus, in acting consistent with the general approach to 
preemption adopted in 2015, we are acting consistent with the 
Commission's historical regulatory approach, which we see no intent by 
Congress to displace through the Martha Wright-Reed Act.
    241. Finally, we decline to adopt Securus's proposal that the 
Commission preempt lower state rates unless a state can ``make a 
showing to the Commission that IPCS costs in the state justify a lower 
rate and that the lower rate satisfies the statutory standard that 
providers are fairly compensated and that rates and charges are just 
and reasonable.'' We also decline to pursue Securus's recommendation 
that ``states should be required to adopt a waiver process.'' We see no 
basis on which we could mandate that states or localities adopt such a 
process and Securus offers none. Under this proposal, ``a lower state 
rate cap would not take effect until the Commission first finds that 
the state had met its burden of demonstrating that the lower rate 
complies with the statutory standard.'' Securus's proposal would have 
us begin from the premise that lower state rates and charges are 
necessarily inconsistent with the Commission's regulations and preempt 
them. In order to reverse this preemption decision, the onus would then 
be on the state or locality to justify why its lower rates or charges 
are consistent with the statutory standard in that they provide fair 
compensation for providers and just and reasonable rates for consumers. 
We decline to make a determination ex ante that state and local rates 
and charges below our caps are inconsistent with a fair compensation 
plan. As we explain above, we do not find lower state rates

[[Page 77288]]

to be inconsistent with the Commission's IPCS regulations.
6. Site Commissions
a. Introduction
    242. We next comprehensively reform the Commission's treatment of 
site commission payments associated with IPCS to implement the 
requirements of the Martha Wright-Reed Act. Our actions today continue 
to allow IPCS provider reimbursement of correctional facilities for 
costs used and useful in providing IPCS while decoupling other IPCS 
provider payments to correctional facilities, which constitutes what we 
henceforth refer to as ``site commissions.'' We then end the practice 
of paying site commissions associated with IPCS.
    243. In 2021, the Commission highlighted the difficulties in 
accounting for and isolating the portion of site commission payments, 
if any, that may be used and useful in the provision of audio calling 
services for incarcerated people. The Commission sought comment on 
whether it should prohibit providers from entering into contracts 
requiring the payment of site commissions and whether it should preempt 
state or local laws and regulations that require such payments. The 
Commission also questioned the propriety of allowing providers to 
recover the costs of their site commission payments from consumers.
    244. After carefully considering the record in these proceedings 
and the Martha Wright-Reed Act, we find that site commission payments--
payments from IPCS providers to correctional facilities that are not 
used and useful in the provision of IPCS--are fundamentally 
incompatible with our mandate under section 276(b)(1)(A), as amended, 
to ensure both just and reasonable IPCS rates and charges for IPCS 
consumers and providers as well as fair compensation for IPCS 
providers. Considering the requirements of the Martha Wright-Reed Act 
and the demonstrated negative effects of site commission payments, 
particularly with regard to consumer affordability, we conclude that we 
must eliminate site commissions associated with IPCS.
    245. Accordingly, we prohibit all IPCS providers from paying site 
commissions of any kind associated with intrastate, interstate, 
international, jurisdictionally mixed, and jurisdictionally 
indeterminate audio and video IPCS, including all monetary and in-kind 
site commissions, at all facilities. To implement this prohibition, and 
consistent with the record and the Commission's proposals in 2021, we 
preempt all state and local laws and regulations requiring or allowing 
IPCS providers to pay site commissions associated with IPCS and 
prohibit IPCS providers from entering into contracts requiring or 
allowing them to pay site commissions associated with IPCS. Compliance 
with our reforms associated with site commission payments will be 
required by the dates specified in Section III.H below.
    246. Although we eliminate site commissions associated with IPCS, 
we do not deny correctional facilities the opportunity to be reimbursed 
by IPCS providers for any costs the correctional facilities incur that 
are used and useful in the provision of IPCS. The IPCS rate caps we 
adopt today reflect, based on the record before us, all of the used and 
useful costs incurred in the provision of IPCS regardless of whether 
such costs are incurred by IPCS providers or correctional facilities. 
Consistent with that record, the rate caps account for used and useful 
costs associated with IPCS providers' provision of IPCS incurred by 
correctional facilities. Therefore, we permit IPCS providers to 
reimburse correctional facilities for the used and useful costs the 
facilities incur to enable the provision of IPCS. We therefore find 
without merit the National Sheriffs' Association's argument that 
``[t]he proposals to arbitrarily disallow legitimate costs and preclude 
their recovery is contrary to the Communications Act requirement to set 
reasonable rates, the Commission's statutory mandate to promote access 
to ICS, and court precedent.'' The Commission has identified the used 
and useful costs, including a measure of facility costs for safety and 
security measures, in the rate caps it adopts today. The Commission is 
thus fully in accordance with ``rate-making principles that require the 
allowance of legitimate costs in rates.'' We also find the National 
Sheriffs' Association's argument that ``[f]acility compensation through 
rates also is consistent with the Commission's precedent that costs 
should be recovered from the cost causer'' to be moot given our 
allowance for facility-related cost recovery in our rate caps. We are 
unpersuaded by the National Sheriffs' Association's assertion that the 
Commission has ``found that the calling and called party are the cost 
causer and the beneficiary of calls'' such that the costs of calls 
should be recovered from the ratepayers. The Commission made that cost-
causation determination in the context of certain intercarrier 
compensation reforms, not with respect to IPCS, which occurs in a 
fundamentally different context where the users of the service have no 
choice in the provider they use--and the choice of provider can 
significantly affect the cost of service. In any case, costs that are 
not used and useful in the provision of IPCS are not caused by IPCS 
communications, and thus neither party to such communications 
reasonably can be seen as causing those costs through the use of IPCS. 
To the extent a correctional facility performs a function that is used 
and useful in the provision of IPCS under the standards set forth in 
the Report and Order, the IPCS provider may reimburse the correctional 
facility for that function's cost. As we explain above, any costs that 
facilities incur to provide ``safety and security measures necessary'' 
for the provision of IPCS are also used and useful in the provision of 
IPCS. This reimbursement therefore encompasses any costs a correctional 
facility incurs in performing safety and security measure functions 
that are necessary for the provision of IPCS. We emphasize, however, 
that the cost recovery we permit extends only to costs that the 
Commission has classified as used and useful in the Report and Order. 
Costs that the Commission has not found to be used and useful in the 
provision of IPCS may not be recovered from IPCS providers through 
revenues under the rate caps we establish. And under no circumstances 
may reimbursement result in IPCS consumers being charged more than the 
rate caps we adopt today.
b. Background
(i) Site Commissions and IPCS
    247. IPCS connect incarcerated people to their families, loved 
ones, clergy, and counsel. But unlike communications services offered 
to the general public outside of the correctional environment, IPCS 
providers have monopoly power in the facilities they serve. As the 
Commission has explained:

    [I]ncarcerated people have no choice in the selection of their 
calling services provider. The authorities responsible for prisons 
or jails typically negotiate with the providers of [IPCS]. Once the 
facility makes its choice--often resulting in contracts with 
providers lasting several years into the future--incarcerated people 
in such facilities have no means to switch to another provider, even 
if the chosen provider raises rates, imposes additional fees, adopts 
unreasonable terms and conditions for use of the service or offers 
inferior service.

    248. In many cases, correctional authorities award contracts for 
IPCS ``based in part on what portion of [IPCS] revenues a provider has 
offered to share with the facility.'' These payments, historically 
referred to as ``site

[[Page 77289]]

commissions,'' are salient components of the exclusive contracts 
between correctional authorities and IPCS providers. Site commissions 
broadly include ``any form of monetary payment, in-kind payment 
requirement, gift, exchange of services or goods, fee, technology 
allowance, product or the like.'' They can be expressed ``in a variety 
of ways, including as per-call or per-minute charges, a percentage of 
revenue or a flat fee.''
    249. Site commissions can arise in several different scenarios. 
First, a state or local statute or regulation ``that operate[s] 
independently of the [IPCS] contract process'' may mandate ``site 
commission payments at a specified level.'' Second, ``there can be 
situations where the correctional institution's request for proposal, 
or the like, asks bidders to agree to pay site commissions at a 
specified level.'' And third, there may be circumstances where no state 
or local law or regulation ``compels site commission payments and the 
correctional institution soliciting bids does not request any specific 
payment (even if it indicates that offers to pay site commissions will 
influence bid selection).'' Some state laws permit--but do not 
require--correctional institutions to collect site commissions while 
others may require site commissions but do not specify any particular 
level. In these circumstances, IPCS providers and correctional 
institutions may negotiate the amount of the site commission.
    250. In general, site commissions provide benefits to correctional 
authorities and the IPCS providers bidding on IPCS contracts. By 
providing a mechanism for correctional authorities to share in some 
portion of IPCS revenues, site commission payments allow correctional 
authorities to ``benefit financially from the contract that they sign 
with their [IPCS] provider.'' And ``by proposing higher prices'' during 
the bidding process, IPCS providers ``can pay more in commissions to 
the state, thereby increasing the probability with which they win the 
contract.'' It is due to these market dynamics that site commissions 
have sometimes been described as ``kickbacks'' or ``legal bribes.''
    251. Regardless of how they arise, site commissions, as 
historically understood, ``fund a wide and disparate range of 
activities.'' In some cases, site commission revenues may be used to 
fund programs related to ``education and reintegration into society.'' 
``In certain jurisdictions, state law requires that revenue from site 
commission payments, or a portion thereof, be deposited into welfare 
funds or the state's general treasury. In other cases, site commission 
payments may be used to ``defray costs of maintaining carceral 
facilities.'' Because site commission revenues can include many 
different types of payments, they may also be offered for the benefit 
of correctional officials, through, for example, campaign contributions 
or ``payments to influential sheriff-led associations'' or through in-
kind payments. In one instance, correctional officials were offered 
cruises as part of IPCS contracts. Finally, site commissions--as that 
term historically was understood--may also serve, in part, to 
``compensate correctional facilities for the costs they reasonably 
incur in the provision of [IPCS].'' Those facility-related costs may 
encompass various safety, security, surveillance, and administrative 
tasks. These functions and activities may be performed by correctional 
authorities or IPCS providers, depending on their mutually agreed 
arrangements.
    252. Regardless of the purposes for which site commissions may be 
used, they historically have been ``a significant driver of rates'' 
that incarcerated people and their loved ones pay. Specifically, site 
commissions have exerted and continue to exert ``upward pressure'' on 
rates. By imposing higher rates, IPCS providers historically could 
afford to pay more in commissions to correctional authorities. Thus, 
providers ultimately recovered the costs of their site commission 
payments through the rates they charged consumers. This means that 
incarcerated people and their loved ones, who cannot choose their own 
IPCS providers, were forced to bear the financial burden imposed by 
site commissions in the rates they pay, thereby subsidizing the tasks 
or activities that correctional officials or, in some cases, state law, 
dictate associated with the use of site commission revenue. As 
explained above, this subsidization could have extended to tasks and 
activities that have nothing to with enabling communication between 
incarcerated people and their loved ones, including funding ``inmate 
welfare programs . . . salaries and benefits of correctional 
facilities, states' general revenue funds, and personnel training.''
    253. These historical consumer costs could be substantial. Site 
commissions historically could account for ``33 percent of the out-of-
pocket consumer call charges on average'' and rising ``to more than 70 
percent in some jurisdictions.'' Collectively, as set forth in a 
technical appendix, providers reported total industry site commissions 
of over $446 million. Relatedly, in jurisdictions that have eliminated 
site commissions, IPCS rates have ``decreased significantly.'' In 
short, there is ``no question'' that the site commissions result in 
higher consumer prices.
    254. At the same time, site commissions have distorted the IPCS 
marketplace. Each correctional facility has ``a single provider of 
[IPCS] that operates as a monopolist within that facility,'' and very 
often ``correctional authorities award the monopoly franchise for 
[IPCS] based in part on what portion of inmate calling services 
revenues a provider has offered to share with the facility.'' Such 
scenarios can create ``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).'' 
Thus, as a matter of historical practice, ``providers bidding for a 
facility's monopoly franchise compete to offer the highest site 
commission payments,'' instead of competing on ``service-based, 
competitive market factors'' such as price or quality of service that 
would ultimately benefit incarcerated people and their loved ones. 
While reverse competition occurs in other contexts, it has been ``at 
its most pernicious in the inmate phone service context because buyers 
not only do not have a choice of service providers, they also have 
strong reasons not to forego using the service entirely.'' What is 
more, once a contract is signed, ``the terms of the contract are set in 
stone'' in that they need not be renegotiated by the IPCS provider 
absent a change in law and, because the provider then has monopoly 
power, it ``[does] not have to worry about'' lowering its prices ``in 
order to stay competitive.'' As a result in such scenarios, ``at any 
given time, the end-users are not necessarily benefitting from the 
lowest possible'' IPCS prices.
(ii) The Commission's Regulation of Recovery for Site Commission 
Payments
    255. The Commission has historically viewed site commission 
payments as ``a division of locational monopoly profit'' and not a cost 
of providing payphone service. This characterization led the Commission 
to exclude site commission costs from the costs it used to set interim 
calling services rate caps in the 2013 ICS Order and permanent rate 
caps in the 2015 ICS Order. Over time, however, the Commission 
recognized that ``some portion of [site commission payments] may be 
attributable to legitimate facility costs.'' Thus, in the 2016 ICS 
Reconsideration Order (81 FR 62818, September 13, 2016), the

[[Page 77290]]

Commission explained that ``some facilities likely incur costs that are 
directly related to the provision of ICS,'' and determined that ``it is 
reasonable for those facilities to expect ICS providers to compensate 
them for those costs . . . [as] a legitimate cost of ICS that should be 
accounted for in [the] rate cap calculations.'' As a result, the 
Commission reconsidered its decision to entirely exclude site 
commission payments from its 2015 rate caps and adopted additives to 
those caps ``to account for claims that certain correctional facility 
costs reflected in site commission payments are directly and reasonably 
related to the provision of inmate calling services.''
    256. In the 2017 GTL v. FCC opinion, the D.C. Circuit held that the 
``wholesale exclusion of site commission payments from the FCC's cost 
calculus'' in the 2015 ICS Order was ``devoid of reasoned decision-
making and thus arbitrary and capricious.'' The court was unpersuaded 
by the Commission's assertion that site commissions have nothing to do 
with the provision of calling services, reasoning that ``[i]n some 
instances, commissions are mandated by state statute'' while in others 
``commissions [are] required by state correctional institutions as a 
condition of doing business with ICS providers.'' The court also 
explained that because the Commission acknowledged that some portion of 
some providers' site commission payments might represent ``legitimate'' 
costs of providing inmate calling services, the Commission could not 
``categorically exclude[ ] site commissions and then set rate caps at 
below cost.'' ``Ignoring costs that the Commission acknowledges to be 
legitimate,'' the court explained, ``is implausible.'' But the court 
left it to the Commission on remand to determine ``which portions of 
site commissions might be directly related to the provision of ICS and 
therefore legitimate, and which are not.''
    257. In 2020, the Commission proposed rate reform of the inmate 
calling services then within its jurisdiction with the 2020 ICS Notice. 
Based on extensive analysis of the data the Commission collected in the 
Second Mandatory Data Collection, the Commission proposed to lower the 
interstate rate caps to $0.14 per minute for debit, prepaid, and 
collect calls from prisons and $0.16 per minute for debit, prepaid, and 
collect calls from jails. Consistent with the D.C. Circuit's opinion in 
GTL v. FCC, the Commission also proposed to include ``an allowance for 
site commission payments in the interstate rate caps to the extent 
those payments represent legitimate correctional facility costs that 
are directly related to the provision of inmate calling services.'' The 
Commission proposed an allowance of $0.02 per minute, which reflected 
the Commission's ``analysis of the costs correctional facilities incur 
that are directly related to providing inmate calling services and that 
the facilities recover from inmate calling services providers as 
reflected by comparing provider cost data for facilities with and 
without site commission requirements.'' Recognizing that facility costs 
for contracts covering only jails with low average daily populations 
might exceed the proposed $0.02, the Commission invited comment on 
adopting higher allowances for correctional facility costs for such 
contracts if the record supported such allowances.
(iii) 2021 Rate Structure Reforms
    258. In the 2021 ICS Order, the Commission adopted interim inmate 
calling services rate caps that included an allowance for site 
commission payments ``consistent with section 276's fair compensation 
provision'' as interpreted by the D.C. Circuit's decision in GTL v. 
FCC. In relevant part, the Commission adopted two facility-related rate 
components reflecting different types of site commissions for prisons 
and larger jails: legally mandated site commission payments that 
providers are obligated to pay under laws or regulations; and 
contractually prescribed site commission payments that providers agree, 
by contract, to make. The Commission did not adopt facility-related 
rate components for jails with average daily populations below 1,000, 
which remained subject to the existing $0.21 per-minute total rate cap. 
This outcome reflected, in part, record arguments suggesting that 
``legitimate facility costs related to [IPCS] may indeed be higher for 
smaller facilities.'' Because commenters ``did not provide sufficient 
evidence to enable [the Commission] to quantify any such costs,'' the 
Commission sought comment on facility costs for smaller jails as part 
of 2021. The Commission permitted providers to recover the costs of 
their legally mandated site commission payments, without any markup, as 
an additive to the interim interstate per-minute rate caps up to a 
total rate cap of $0.21 per minute. Where site commission payments 
resulted from contractual obligations or negotiations between providers 
and correctional officials, the Commission permitted providers to 
recover no more than $0.02 per minute for prisons and larger jails.
    259. In evaluating cost recovery for site commissions in the 2021 
ICS Order, the Commission emphasized that full recovery of site 
commission payments is not required by the D.C. Circuit's decision in 
GTL v. FCC, given that the court made clear that the Commission may 
``assess on remand which portions of site commissions might be directly 
related to the provision of [inmate calling services] and therefore 
legitimate, and which are not.'' The Commission reasoned that full 
recovery of site commissions ``cannot be reconciled with [the 
Commission's] statutory duty to ensure that incarcerated people and the 
people with whom they speak are charged `just and reasonable' rates for 
inmate calling services.'' At the same time, the Commission concluded 
that it could not, consistent with the record before it at that time 
and ``current law and policy'' treat all site commissions solely as a 
division of locational monopoly profit and therefore deny any recovery 
of such payments.
    260. The Commission relied on its section 201(b) authority over 
interstate and international rates and charges in the 2021 ICS Order in 
analyzing cost recovery separately for legally mandated and 
contractually prescribed site commissions. As to legally mandated site 
commissions payments, the Commission recognized them ``as a cost that 
providers must incur to provide calling services, consistent with 
section 276's fair compensation provision.'' Thus, the Commission found 
legally mandated site commission payments ``to be used and useful in 
the provision of interstate and international inmate calling services 
at least as long as the Commission continues to permit providers of 
interstate and international inmate calling services to continue to 
make these site commission payments.''
    261. The Commission next found that contractually prescribed site 
commission payments ``reflect[ ] not only correctional officials' 
discretion as to whether to request site commission payments . . . but 
also providers' voluntary decisions to offer payments to facilities 
that are mutually beneficial in the course of the bidding and 
subsequent contracting process.'' The Commission also recognized that 
contractually prescribed site commissions payments that ``simply 
compensate a correctional institution for the costs (if any) an 
institution incurs to enable interstate and international inmate 
calling services'' were ``prudently incurred expenses used and useful 
in the provision of interstate and international inmate calling 
services.'' Contractually prescribed site

[[Page 77291]]

commission payments were deemed not recoverable, however, ``insofar as 
they exceed[ed] the level needed to compensate a correctional 
institution for the costs (if any) an institution incurs to enable 
interstate and international inmate calling services.''
    262. Ultimately, the Commission arrived at the $0.02 per minute 
allowance for prisons and larger jails on two independent bases. First, 
it estimated ``the portion of site commissions that are legitimately 
related to inmate calling services'' based on a comparison of per-
minute costs for facilities that receive site commission payments and 
those that do not from cost and site commission data that providers 
reported in response to the Second Mandatory Data Collection. The 
Commission first used this methodology in Appendix E of the 2020 ICS 
Notice but updated it with corrected cost data in Appendix B of the 
2021 ICS Order. Because those data ``incorporated no correctional 
facility-provided cost data,'' the Commission's methodology ``reflected 
its reasoned judgment as to the best estimation of legitimate facility 
costs related to inmate calling services in the absence of cost data 
from correctional facilities themselves.'' The Commission agreed with 
commenters that it is ``difficult to disentangle which part of the site 
commission payment goes towards reasonable facility costs and which 
portion is due to the transfer of market power.'' The Commission 
emphasized that its own analysis ``reflect[ed] even lower estimates for 
legitimate facility costs'' but declined to adopt an allowance lower 
than $0.02 at that time.
    263. Second, data from a survey of facilities' inmate calling 
services costs that the National Sheriffs' Association had conducted in 
2015 independently supported the $0.02 allowance for correctional 
facility costs at prisons and larger jails. Though the Commission had 
previously relied on these data in the absence of any other data, the 
Commission expressed continuing concern about their reliability because 
``some of the facilities included in the . . . survey [had] report[ed] 
an exceedingly high number of hours of correctional facility officials' 
time compared to most other reporting facilities.'' The Commission 
flagged one facility with an average daily population of approximately 
1,500, which reported approximately 694 total hours per week on inmate 
calling services-related activities, which was ``roughly 400 hours more 
than the next highest facility with an equal or lower average daily 
population.'' The Commission did ``not find these data credible when 
comparing them to data of similarly sized reporting facilities that 
have no incentive to under-report their hours or costs.'' 
Notwithstanding these issues, the Commission concluded that they were 
``the best data available from correctional facility representatives'' 
that allowed the Commission to balance the ``objectives to ensure just 
and reasonable rates under section 201 of the Act with the requirement 
to ensure fair compensation under section 276 of the Act.'' The 
Commission therefore relied on the data from the National Sheriffs' 
Association survey in addressing providers' site commissions payments 
to prisons and larger jails. The Commission found, however, that the 
survey data for jails having average daily populations of fewer than 
1,000 incarcerated people ``varied far too widely to comfortably 
estimate any values'' for correctional facility costs ``that would 
withstand scrutiny today'' (i.e., in May 2021). The Commission 
circumscribed its interim treatment of site commissions based on the 
record and regulatory backdrop at that time, and confirmed that nothing 
in the 2021 ICS Order would limit its ``ability, on a more complete 
record and with sufficient notice, to reconsider [its] treatment of 
site commission payments.''
    264. In 2021, adopted at the same time as the 2021 ICS Order, the 
Commission sought comment on how and where to draw the line between 
legitimate and illegitimate portions of site commission payments and 
asked for specific data concerning legitimate portions of those costs, 
if any. Additionally, the Commission asked commenters to provide 
methodologies that the Commission could use to identify legitimate site 
commission expenses. The Commission also sought comment on 
``prohibiting providers from entering into any contract requiring the 
payment of contractually prescribed site commissions for interstate and 
international calling services'' and ``preempting state or local laws 
that impose [legally mandated site commission] payments on interstate 
or international calling services.''
(iv) The Martha Wright-Reed Act and 2023 Request for Comment
    265. On December 22, 2022, Congress passed the Martha Wright-Reed 
Act, which was signed into law on January 5, 2023. Just slightly over 
two months later, the Commission adopted 2023, in which it sought 
comment on several aspects of the effect of the Martha Wright-Reed Act 
on the Commission's consideration of site commission payments. First, 
as a general matter, the Commission incorporated its prior questions on 
site commissions from 2021 into 2023. In particular, the Commission 
asked whether its ratemaking calculations should ``include providers' 
site commission payments only to the extent, if any, that they 
compensate facilities for used and useful costs that the facilities 
themselves incur.'' Second, the Commission requested comment on how the 
dual requirements of section 276(b)(1)(A) to ensure just and reasonable 
rates and charges for IPCS consumers and providers and fair 
compensation for IPCS providers should affect its treatment of site 
commission payments including any decision on whether to preempt state 
and local laws and regulations that impose site commissions. And third, 
the Commission invited comment ``on the relationship, if any, between 
safety and security measures and site commission payments.''
(v) Other Trends in the Treatment of Site Commissions
    266. Broadly, the ``structure of the market for providing 
communications services to incarcerated persons has changed and 
continues to change.'' This is particularly true in the case of site 
commissions. Indeed, ``[t]here is already a growing trend to eliminate 
the use of site commissions.'' One IPCS provider explains that it 
offers ``commission-less options in its proposals to correctional 
authorities'' to ``improve affordability for consumers.'' In addition 
to provider-led efforts, ``a number of states have banned site 
commissions'' or have made IPCS free to end users driven, at least in 
part, by the goal of protecting incarcerated people and their loved 
ones ``from detrimental practices by private corporations providing 
goods and services to people confined in carceral facilities.'' States 
that have eliminated site commissions include California, Michigan, 
Missouri, Nebraska, New Mexico, New York, Rhode Island, and South 
Carolina. And five states--Massachusetts, Connecticut, California, 
Minnesota, and Colorado have now enacted legislation providing for free 
communications services for incarcerated people, meaning that IPCS 
consumers now pay nothing for IPCS site commissions. More recently, 
other states have introduced legislation requiring IPCS to be provided 
free of charge to incarcerated people and their loved ones or have 
eliminated site commission payments. This is also true for some 
municipalities, for example, San Diego and San Francisco. Together, 
these trends point to a decreasing

[[Page 77292]]

reliance on site commission payments in providing IPCS.
c. Discussion
(i) Overview of Our Approach to Site Commissions
    267. In the Report and Order, we only permit IPCS provider payments 
to correctional facilities for costs used and useful in the provision 
of IPCS. As Pay Tel explains, facility cost recovery and site 
commissions are ``two separate (but currently interrelated) issues.'' 
Pay Tel emphasizes that ``site commission payments often ultimately 
provide facilities with necessary cost recovery for their role in 
administering ICS'' but that ``does not mean site commission payments 
are necessary for--i.e., the only means of ensuring--facility cost 
recovery.'' We agree. Decoupling the conceptually distinct category of 
IPCS provider payments to correctional facilities for costs used and 
useful in the provision of IPCS from other payments IPCS providers have 
been asked--or required--to make to correctional facilities (i.e., 
``site commissions'') illuminates how those markedly different 
categories of IPCS provider payments can and should be treated under 
our new regulatory approach.
    268. We find that our rate caps will allow for IPCS provider 
reimbursements to correctional facilities for costs used and useful in 
the provision of regulated IPCS. In particular, we enable facilities to 
be reimbursed for these costs by including them in our rate caps and 
allowing providers to compensate facilities for them. At this time, we 
do not see the need to amend the Commission's definition of site 
commission to carve out the reimbursement we permit. By adopting a 
mechanism that enables correctional facility cost recovery extending 
only to used and useful costs reimbursed by IPCS providers, we ensure 
that correctional facilities will not be without recourse to recover 
their legitimate costs from providers within the bounds of the rate 
caps we adopt today. We also ensure that providers' obligations to 
reimburse correctional facilities will be limited to the used and 
useful costs associated with the provision of IPCS that they actually 
incur.
    269. We take a different approach with respect to site commissions. 
Today we conclude, based on the record and consistent with precedent, 
that site commission payments are not used and useful in the provision 
of IPCS and must therefore be excluded from the calculation of the 
Commission's rate caps. We further prohibit site commission payments to 
all facilities to the extent those payments are associated with 
intrastate, interstate, international, jurisdictionally mixed, and 
jurisdictionally indeterminate audio and video IPCS, including all 
monetary and in-kind site commissions. To effectuate this prohibition 
we take two actions consistent with 2021 and 2023. First, we preempt 
state and local laws and regulations allowing or requiring site 
commission payments for IPCS. And second, we prohibit IPCS providers 
from entering into contracts allowing or requiring the payment of site 
commissions. We emphasize that the actions we take today in eliminating 
site commissions apply to all correctional institutions: prisons, 
larger jails, smaller jails, and other types of correctional 
institutions.
(ii) Site Commissions Are Not Used and Useful in the Provision of IPCS
    270. Based on the record and core ratemaking precedent, we find 
that site commission payments are not used and useful in the provision 
of IPCS and must therefore be excluded from our rate and fee cap 
calculations. As discussed below, site commissions, whether legally 
mandated or contractually prescribed, do not satisfy any prong of the 
used and useful framework as that framework is applied by courts and 
the Commission.
    271. Securus argues that the used and useful framework ``is 
unsuited for the purpose of determining cost recovery for site 
commission payments'' and is not an ``appropriate basis'' to restrict 
or eliminate site commissions. Securus explains that the used and 
useful framework ``potentially leads to unreasonable outcomes where the 
entity that sets the requirements for service, the correctional 
institution, is different from the ``rate payer.'' In Securus's view, 
correctional facilities, not incarcerated people, are the ``direct 
customer[s]'' of IPCS and, as such, prescribe the ``features and 
functions'' they deem used and useful to provide the service. It is 
thus ``untenable,'' Securus argues, to suggest that all features a 
correctional facility deems used and useful must ``inure directly to 
the benefit of each caller.''
    272. While it is true that correctional authorities contract with 
IPCS providers for the provision of IPCS in their facilities, we are 
not persuaded by Securus's arguments. IPCS are used and paid for by 
incarcerated people and their loved ones. In implementing section 
276(b)(1)(A)'s just and reasonable and fair compensation standards, 
``[t]he Commission's duty is to protect IPCS ratepayers and ensure 
reasonable compensation for providers, not to protect the interests and 
demands of non-ratepaying stakeholders.'' And it is through the used 
and useful framework that the Commission balances the ``equitable 
principle that public utilities must be compensated for the use of 
their property in providing service to the public'' with the 
``[e]qually central . . . equitable principle that the ratepayers may 
not fairly be forced to pay a return except on investment which can be 
shown directly to benefit them.'' It is therefore entirely appropriate 
to evaluate site commission payments under the used and useful 
framework.
    273. To the extent Securus is concerned that applying the used and 
useful framework will somehow interfere with the discretion of 
correctional officials, we find those concerns overstated. We do not 
limit the ability of a correctional authority to ``prescribe[ ] the 
features and functions it deems necessary to provide the service in its 
facilities.'' Correctional authorities remain free to contract for the 
``equipment, network facilities, operations and services'' they deem 
appropriate. All we do here is evaluate site commission payments under 
long-standing principles the Commission uses in evaluating whether 
rates and charges are just and reasonable and conclude, based on the 
record developed over many years in these proceedings, that those 
payments are not used and useful in the provision of IPCS and must 
therefore be excluded from our rate cap calculations. Doing so ensures 
that incarcerated people and their loved ones ``bear only legitimate 
costs of providing service to them.''
    274. Securus also contends that the ``used and useful'' framework 
is ``inapplicable to site commissions for the further reason that it is 
a feature of rate of return regulation'' that is ``unsuited for the 
purpose of determining cost recovery for site commission payments.'' 
Securus explains that the role of the ``used and useful'' framework 
under rate-of-return regulation is ``to determine the rate base, 
defined as net investment in plant and equipment'' and ``plays no role 
in determining appropriate operating expenses, such as site 
commissions,'' which may be recovered ``unless totally unrelated to the 
provision of service or excessive.'' Securus claims that because the 
Commission has opted to use ``a form of price cap,'' rather than ``rate 
of return regulation to set incarcerated communications services rate 
caps,'' the used and useful framework should be inapplicable. And even 
in the context of rate-of-return regulation, Securus asserts

[[Page 77293]]

that regulators are not required to apply the used and useful framework 
and may instead use the prudent investment rule.
    275. We find Securus's arguments in this regard unpersuasive. 
First, as the Commission has explained, it has ``not only . . . applied 
[the used and useful framework] in the context of carriers operating 
under rate-of-return regulation, but rates set on that basis were also 
used as the foundation for the price caps.'' Indeed, the Commission's 
price cap regime for incumbent local exchange carriers started with 
rates ``generated by the conventional cost-of-service formula,'' an 
approach that has become, over time, the prevailing methodology to 
determine the rate base and allowable expenses under rate-of-return 
regulation. Setting price caps therefore involves some measure of the 
cost of service that is the hallmark of rate-of-return regulation. 
Fundamentally, setting IPCS rates is an ``exercise in cost-based 
ratemaking'' that ``requires a determination of the costs providers 
incur in providing those services.'' And the used and useful framework 
is the standard the Commission has historically applied to ``exclude[ ] 
certain impermissible costs from any rate methodology.'' Accordingly, 
we conclude that we may apply the used and useful framework to 
providers' site commission payments.
    276. Second, the used and useful standard, and the just and 
reasonable ratemaking standard more broadly, are fundamentally 
concerned with balancing the interests of ratepayers with the need to 
compensate public utilities for the use of their property. The policy 
of allowing only investments and expenses which are ``used and useful'' 
to be recovered from ratepayers ``is intended to ensure that current 
ratepayers bear only legitimate costs of providing service to them.'' 
The concept thus is not inherently limited to physical plant owned by 
the provider and irrelevant to expenses. The Commission's previous 
employment of the ``used and useful'' framework to evaluate recovery of 
site commissions through just and reasonable rates as part of the 
regulatory backdrop to the Martha Wright-Reed Act's addition of the 
``just and reasonable'' mandate to section 276(b)(1)(A) reinforces our 
conclusion that it is reasonable for us to rely on that approach again 
here. And the standard is necessarily flexible, allowing the Commission 
to analyze ``[t]he particular facts of each case . . . in order to 
determine what part of a utility's investment is used and useful.'' We 
rely on this flexibility to ensure that IPCS consumers bear ``only 
legitimate costs of providing service to them.'' Importantly, however, 
we do not rely solely on the used and useful framework to eliminate 
site commissions. Instead, our actions stem principally from the 
requirements of section 276(b)(1)(A), as amended by the Martha Wright-
Reed Act, that we ensure just and reasonable rates and charges for 
consumers and providers and fair compensation for providers. In doing 
so, we do as Securus requests, which is to exercise ``the full degree 
of [our] authority'' to prohibit site commission payments entirely.
(a) Used and Useful Assessment
    277. In the 2021 ICS Order, the Commission conducted a used and 
useful analysis applying a prudent investment standard and ultimately 
permitted providers to pass through to consumers, on an interim basis, 
the full amount of their legally mandated site commission payments up 
to a total interstate rate cap of $0.21 per minute and no more than 
$0.02 per minute for their contractually prescribed site commission 
payments for prisons and larger jails. In conducting its cost recovery 
analysis under the used and useful framework, the Commission explained 
that it did not consider site commission payments of any kind to 
``involve[e] the use of provider property and investment in a manner 
analogous to the circumstances addressed in [its] provider-based rate 
caps.'' The Commission reasoned that the site commission payments, or 
the portions thereof, that it allowed providers to recover on an 
interim basis were ``akin to exogenous costs.'' Separately, the 
Commission independently justified its decision ``as a matter of the 
flexibility provided by the `just and reasonable' framework of section 
201(b) of the [Communications] Act under the particular 
circumstances.'' The Commission concluded that allowing only a pass-
through of site commission expenses it found to be prudently incurred 
and used and useful ``adequately accounts for the use of providers' 
property . . . balanced with the equitable interest of customers of 
interstate and international inmate calling services.''
    278. Our approach here differs from the Commission's 2021 interim 
reforms in which the Commission concluded that a portion of some site 
commission payments was used and useful in the provision of calling 
services, and therefore compensable for purposes of the used and useful 
analysis. For one, we separate out from our definition of ``site 
commissions'' the reimbursement IPCS providers make to correctional 
facilities for costs those facilities incur that we have already found 
to be used and useful in the provision of IPCS under our analysis 
above. The question then turns to whether site commissions as defined 
here separately are used and useful in the provision of IPCS and thus 
separately compensable under the just and reasonable standard. We 
conclude that they are not. Thus, in developing the IPCS rate caps we 
adopt today, we have identified, based on the record, all of the used 
and useful costs and expenses in the provision of intrastate, 
interstate, international, and jurisdictionally mixed audio and video 
IPCS, regardless of whether those costs are incurred by IPCS providers 
or correctional facilities. Accordingly, we have considered, consistent 
with this element of the used and useful framework, what is required to 
compensate IPCS providers for offering IPCS while safeguarding the 
interests of incarcerated people and their loved ones under the just 
and reasonable mandate.
    279. On the record now before us and considering the requirements 
of section 276(b)(1)(A), as amended by the Martha Wright-Reed Act, we 
find that, to the extent they exceed the costs correctional 
institutions prudently incur in the provision of IPCS, site 
commissions, whether contractually prescribed or legally mandated, are 
not used and useful in the provision of IPCS because there is no 
indication that such payments benefit IPCS consumers. To begin with, 
the Commission predicated its 2021 interim reforms on the assumption 
that a portion of providers' site commission payments provided a 
benefit to IPCS consumers and was thus recoverable ``at least as long 
as the Commission continues to permit providers . . . to make site 
commission payments.'' That is, the Commission assumed, on the record 
before it, that some portion of providers' site commission payments 
compensated correctional facilities for the costs they incurred in 
enabling the provision of ICS. But even in the 2021 ICS Order, the 
Commission concluded that site commission payments above that level 
were not used and useful and/or not prudently incurred and should not 
be subject to recovery in order to ensure just and reasonable rates. 
Nothing in the record here persuades us to change our mind in that 
respect, and we thus again conclude that such costs are not used and 
useful and/or prudently incurred, and thus not recoverable through just 
and reasonable rates. And, as discussed below, absent any viable data 
that demonstrate any portion of a site commission in this context 
provides compensable costs, we find that site

[[Page 77294]]

commissions are in their entirety not recoverable.
    280. As to those site commission payments the Commission did allow 
to be recovered under its used and useful and prudent investment 
analysis in the 2021 ICS Order, the Commission relied, in part, on the 
National Sheriffs' Association 2015 survey as the best available proxy 
for those costs and limited recovery for contractually prescribed site 
commission payments to no more than $0.02 per minute at prisons and 
larger jails, even though the Commission's independent estimates of the 
portion of site commissions that were legitimately related to inmate 
calling services supported ``even lower potential estimates for 
legitimate facility costs.'' With respect to legally mandated site 
commission payments, the Commission assumed, on the record before it at 
that time, that legally mandated site commission payments at the level 
required by the relevant statute or regulation were used and useful. We 
address certain particularities with respect to legally mandated site 
commissions below. The Commission chose to rely on the National 
Sheriffs' Association data--despite significant reservations about 
their accuracy--in large part due to ``the absence of any other 
facility-provided data'' in the record. Rather than delay much-needed 
relief, the Commission chose to rely on the ``best data available'' to 
estimate facility costs used and useful in the provision of 
communications services ``until more updated facility-related data are 
submitted into the record.'' As discussed above, however, no commenter 
or other stakeholder has provided updated facility-related cost data 
sufficient to enable the Commission to isolate the portions of 
providers' site commission payments, if any, that actually compensate 
correctional facilities for the costs they incur in the provision of 
IPCS. Accordingly, we decline to rely on those data here to allow 
additional recovery for providers' site commission payments.
    281. Putting aside the lack of reliable data, the record persuades 
us that site commission payments primarily compensate correctional 
facilities for the transfer of their market power over IPCS at a given 
facility or are used by providers to ``overcome . . . competitors to 
become the exclusive provider of multiple services, including 
nonregulated services at a correctional facility'' while providing no 
clear benefit to IPCS consumers. In the 2021 ICS Order, the Commission 
identified a collective action problem ``that makes providers, as a 
group, reluctant to limit or omit site commission payments in their 
bids for fear that competitors fail to do so, and that correctional 
institutions will select competitors that do offer site commissions (or 
offer higher site commissions) instead.'' Securus confirms that ``[t]he 
problem identified by the Commission is real,'' suggesting that 
providers cannot ``unilaterally end the established practice of many 
local governments in seeking site commission payments in their 
negotiations with providers.'' Thus, it appears that ``when providers 
offer site commission payments as part of their bids, they do so to 
gain a benefit for themselves, rather than to satisfy a formal 
precondition of access to a correctional facility.''
    282. Consider, for example, monetary site commission payments. In 
certain cases, contract language requiring the payment of monetary site 
commissions demonstrates that such payments compensate correctional 
facilities ``for the transfer of their market power over [IPCS] to the 
[IPCS] provider'' and cannot be shown to directly benefit consumers of 
incarcerated people's communications services. For example, the 
language in a contract between CenturyLink Public Communications, Inc., 
a former provider of incarcerated people's communications services, and 
Milwaukee County, Wisconsin, explains that ``[i]n consideration of 
being granted the right and obligation to operate the Inmate Pay 
Telephone Concession at the Correctional Facilities, CenturyLink shall 
pay County a commission rate equal to 70.1% of the Gross Revenue 
generated from completed or accepted calls made at the CenturyLink pay 
phones covered by this agreement.'' In another case, the contract calls 
for the payment of a percentage of gross revenue ``in return for the 
exclusive right to install and operate the [p]hones in the premises.''
    283. Provisions like these illustrate that the site commission 
payments benefit the facilities insofar as they receive compensation 
for allowing the provider (instead of the correctional authority) to 
offer communications services at the facility or facilities covered by 
the contract. And, the site commission payments benefit the providers, 
which receive the exclusive right to offer communication services for 
the duration of the contract. There is nothing in these contracts, or 
the record generally, suggesting that such site commission payments are 
conditioned on, for example, improved service quality or lower prices 
for consumers of calling services or compensating the correctional 
facility for any costs it incurs in allowing IPCS. Thus, the benefits 
flow first to the facility and then to the provider, ``all to the 
detriment of [IPCS] customers.''
    284. Record evidence submitted by Pay Tel also demonstrates the way 
in which site commissions may be used by IPCS providers to ``increase 
the probability with which they win [a] contract.'' Pay Tel provides 
documentation relating to recent requests for proposals ``in which Pay 
Tel competed but ultimately lost due to site commission payment 
amounts.'' Pay Tel notes that, in two instances, it ranked higher in 
each scoring category except for the site commission category but still 
lost the bids. Indeed, the winning bidders had proposed to pay site 
commissions of 90% and 88.8% on all calls. Thus, Pay Tel at least 
plausibly lost those bids on the basis of its site commission offerings 
indicating that ``providers may feel compelled to offer site 
commissions in order to remain competitive'' rather than to compensate 
correctional facilities for the costs, if any, they incur in making 
IPCS available. To the extent these site commissions were, in fact, 
related to any legitimate IPCS costs, we would have expected to see 
similar offers from the other bidders. But we do not. Instead, it 
appears that the winning bidder used its site commission offerings in 
this context ``to overcome its competitors'' in the bidding process.
    285. The National Sheriffs' Association offers a different 
explanation of Pay Tel's data. It claims that a high site commission 
percentage does not ``necessarily mean the commission payment exceeds 
the cost to the facility of allowing ICS or that the rate charged for 
ICS service at the facility is unreasonable.'' In its view, Pay Tel's 
experience ``may show that the cost to serve the specific facility is 
below the Commission's nationwide average rate and the dollar amount of 
the revenues is significant enough that ICS providers are willing to 
offer a greater percentage of their profits to capture that specific 
contract.'' Or, it ``may also reflect the fact that ICS providers are 
not required to bid on facility contracts or provide ICS at all 
facilities and . . . can boost profit by declining to provide service 
in higher cost facilities.'' These alternative explanations are 
speculative and otherwise unsupported by record evidence. In contrast, 
Pay Tel provides concrete evidence, including bid evaluation forms used 
by the correctional authorities, that portrays a compelling, first-hand 
account of how site commissions factored into the bid evaluation 
processes. We find it highly persuasive that Pay Tel obtained higher

[[Page 77295]]

scores across all bid scoring categories except site commissions but 
still lost those contracts. We believe these outcomes clearly 
illustrate ``the current incentive for facilities to award contracts 
based primarily (or, at times, exclusively) on site commission 
offerings'' rather than on the basis of price or quality of service, to 
the detriment of IPCS consumers.
    286. In-kind payments also demonstrate that site commissions 
primarily benefit correctional authorities and IPCS providers but not 
IPCS consumers, as they are often wholly unrelated to the provision of 
IPCS. This is because in-kind payments from the IPCS provider can take 
varied forms, including software packages, {[REDACTED]{time}  campaign 
contributions, ``payments to influential sheriff-led associations,'' or 
anything else of value to the correctional authority. One provider 
describes the fluid nature of in-kind site commissions noting that they 
``{[REDACTED]{time} .'' For example, Smart Communications offered, 
among other inducements, an ``Annual Technology Training Summit 
Cruise'' as part of its proposal to a sheriff's office. Those cruises 
had a value of over $84,000 over the contract term. Because these in-
kind contributions are often offered at low or no cost to the 
correctional authority, they clearly benefit the correctional 
authority, which receives something of value from the IPCS provider. 
And such inducements also benefit the IPCS provider to the extent they 
allow that provider to surpass its competitors in the bidding process. 
In contrast, there is nothing in the record showing the extent, if any, 
to which these types of in-kind site commissions, whatever form they 
may take, are used and useful in the provision of IPCS and thus benefit 
incarcerated people and other ratepayers. Indeed, no commenter has 
suggested as such. Rather, such payments are more accurately understood 
as inducements ``designed to influence a correctional authority's 
selection of its monopoly service provider.'' This is the kind of 
``excess investment'' that should not be recoverable from ratepayers 
under the used and useful framework.
    287. We acknowledge, however, that some portion of providers' site 
commission payments, whether contractually prescribed or legally 
mandated, may be used for socially beneficial purposes when viewed from 
a broader perspective. These may include ``inmate health and welfare 
programs such as rehabilitation and educational programs; programs to 
assist inmates once they are released; law libraries; recreation 
supplies; alcohol and drug treatment programs; transportation vouchers 
for inmates being released from custody; or other activities.'' These 
causes, while worthy, are unrelated to the provision of IPCS and as 
such IPCS consumers do not bear the responsibility to bear their costs 
under the Communications Act. As commenters have observed, such 
programs could instead ``be paid for from general revenue sources'' or 
other state or local funding, enabling state and local governments to 
continue to advance the objectives of ``reducing recidivism and 
providing basic care'' consistent with their existing efforts in those 
areas. We agree. And as the Commission has observed, the Communications 
Act ``does not provide a mechanism for funding social welfare programs 
or other costs unrelated to the provision of ICS, no matter how 
successful or worthy.'' As such, we do not dispute the notion that 
``there are many factors that may be indicative of a legitimate 
penological interest'' such as ``crime interdiction, deterrence, inmate 
management and . . . revenue generation'' but the costs associated with 
pursuing these interests are not costs used and useful in the provision 
of communications services for incarcerated people under the 
Communications Act. Were we to find such non-IPCS costs used and useful 
in the provision of IPCS and therefore recoverable from consumers, we 
would be unable to ensure just and reasonable IPCS rates and charges 
consistent with section 276(b)(1)(A), as amended by the Martha Wright-
Reed Act. We recognize that in GTL v. FCC, the D.C. Circuit concluded 
that ``it does not matter that the states may use commissions for 
purposes unrelated to the activities of correctional facilities.'' But, 
as we explain below, the GTL decision was premised on IPCS providers 
actually paying site commissions as a condition of doing business. In 
contrast, our actions today prohibit the payment of site commissions, 
thus eliminating the concern expressed by the D.C. Circuit about the 
use of site commissions as a precondition to providing service in 
correctional facilities. We therefore conclude that we may, under these 
circumstances, consider how site commissions are used.
    288. While we conclude that site commissions, whether legally 
mandated or contractually prescribed, are not used and useful because 
they do not benefit consumers, some further discussion of legally 
mandated site commissions in this context is necessary in light of the 
Commission's 2021 interim reforms. In the 2021 ICS Order, the 
Commission assumed that legally mandated site commission payments that 
``exceed the level that simply compensates a correctional institution 
for any costs the institution incurs to enable interstate and 
international inmate calling service'' were prudent expenses because 
there was ``no evidence that either the provider or the correctional 
institution could agree to a lower amount (or no site commissions at 
all) based on the current record and current law.'' Thus, the 
Commission concluded, on an interim basis, that legally mandated site 
commissions ``at the level required by the relevant statute or rule to 
be used and useful in the provision of interstate and international 
inmate calling services at least as long as the Commission continues to 
permit providers . . . to continue to make these site commission 
payments.'' The Commission made no determination regarding how legally 
mandated site commissions may ``impact [the Commission's] ability to 
ensure just and reasonable . . . rates.'' The Commission also 
emphasized that ``this [was] a close question'' and that the record 
developed in response to 2021 ``may persuade [the Commission] to reach 
a different conclusion'' in addressing site commissions on a permanent 
basis. The Commission's interim approach to legally mandated site 
commission payments in the 2021 ICS Order thus turned in significant 
part on the legal backdrop that the Commission took as given at that 
time, namely: (1) legally mandated site commissions could not be 
avoided; and (2) IPCS providers were allowed to make those payments.
    289. We no longer believe our used and useful analysis should 
proceed based on those assumptions. For one, the Martha Wright-Reed Act 
added to section 276(b)(1)(A) the requirement that the Commission's 
compensation plan ``ensure that . . . all rates and charges'' for 
intrastate and interstate IPCS are ``just and reasonable,'' putting 
that legal mandate on equal footing with the preexisting ``fair 
compensation'' requirement and bringing it within the purview of the 
express preemption provision in section 276(c). In addition, the 
Commission sought comment and developed a record on whether to prohibit 
site commission payments and preempt contrary state and local laws and 
regulations in light of that updated legal authority. Because we 
conclude that we are substantively and procedurally in a position to 
prohibit site commission payments and preempt contrary state and local 
laws and regulations, the better course is to approach the used and 
useful analysis

[[Page 77296]]

without the presumption of inevitability that so significantly 
influenced the Commission's prior assessment of legally mandated site 
commission payments.
    290. Nothing in the record persuades us that legally mandated site 
commissions ``reflect[ ] the actual costs associated with the provision 
of [IPCS], separate and apart from the legal compulsion for facilities 
to collect it.'' Particularly given that we no longer find it warranted 
to assume the existence or continuation of such a legal requirement, we 
agree that ``[t]here is nothing with respect to [a] statutory 
obligation that makes such a charge `used and useful' under the 
Commission's obligation to ensure rates are just and reasonable.'' We 
also see no evidence or support for the notion that legally mandated 
site commissions flow through to benefits in IPCS such that users of 
those services should be expected to bear those costs under a used and 
useful analysis. This is particularly true where state or local law or 
regulation requires site commission payments as a percentage of gross 
(i.e., total) revenue for a group of services that is not restricted to 
IPCS. It is difficult to see how a site commission based on such a 
formula reflects any relation to the underlying costs of providing 
IPCS. But, on the record before us, it is similarly difficult to tie 
other types of site commissions, such as those framed as per-call 
charges, to any legitimate IPCS costs. In sum, the record is devoid of 
any indication that legally mandated site commissions are set at levels 
that are designed simply to reimburse correctional facilities for the 
costs they incur in making IPCS available such that their payment would 
affect the provision of IPCS and that IPCS customers reasonably should 
bear those costs.
    291. If anything, the record suggests that legally mandated site 
commission payments support activities that quite clearly do not enable 
the provision of the underlying communication services that IPCS 
consumers pay for. In Tennessee, for example, per-call fees are 
required to be remitted by the provider to the state treasurer on a 
quarterly basis ``and credited to a special account in the state 
general fund designated as the local correctional officer training fund 
to be used exclusively to fund certification training provided through 
the institute for local correctional personnel within the state.'' It 
is difficult to see how funding officer certification training enables 
or improves the communications services incarcerated people and their 
loved ones use. Indeed, the training of correctional officials is 
plainly necessary to the general operation of a correctional 
institution separate and apart from the presence or absence of IPCS. 
And yet, at least under Tennessee law, IPCS consumers are subsidizing 
these efforts. To allow such costs to be recovered from those consumers 
would be ``at odds with well-established principles of ratemaking'' and 
directly ``impact our ability to ensure just and reasonable . . . 
rates.'' Thus, given the state of the record and the requirements of 
the Martha Wright-Reed Act, we conclude that because there is no 
indication that legally mandated site commission payments provide any 
benefit to incarcerated people and their loved ones who are the 
customers of IPCS, they are not used and useful in the provision of 
IPCS.
    292. In concluding that legally mandated site commissions are not 
used and useful in the provision of IPCS, we are mindful of the 
Commission's observations in the 2021 ICS Order, that in jurisdictions 
that require legally mandated site commission payments, ``facilities 
have no immediate ability to entertain offers from providers that wish 
to supply a facility without paying the site commission demanded'' and 
that ``absent further legislative process to amend the government 
statute, facilities would appear to have to forgo making 
[communication] services available.'' Rather than taking that as a 
given, today we exercise our authority to preempt state and local laws 
and regulations that require IPCS providers to pay site commissions 
associated with IPCS. Such preemption will alleviate the concerns the 
Commission expressed in the 2021 ICS Order as to both IPCS providers 
and the correctional facilities themselves. Thus, both providers and 
correctional facilities may pursue commission-free contracts without 
running afoul of contrary legal mandates.
(b) Prudent Expenditure Analysis
    293. Finally, because the forgoing analysis demonstrates that site 
commissions are not used and useful in the provision of IPCS, that is 
sufficient to exclude them from just and reasonable rates. At times, 
the Commission might elect to consider the prudence of investments and 
expenses as an independent alternative to its decision that particular 
costs are not used and useful. But the prudent investment inquiry does 
not provide an alternative ground for including costs in provider rates 
when they are not used and useful. In other words, once we have 
determined that site commissions are not used and useful, any provider 
payment of site commissions is necessarily imprudent.
(iii) Prohibiting Site Commission Payments Associated With IPCS
    294. Having found that site commissions do not recover costs or 
expenses used and useful in the provision of IPCS, we now evaluate the 
interplay between that determination and the broader regulatory 
framework specified by the Communications Act. We conclude that the 
payment of site commissions, whether legally mandated or contractually 
prescribed, would create a conflict between the dual statutory 
requirements of ensuring fair compensation for providers and just and 
reasonable IPCS rates and charges for consumers and providers. 
Accordingly, pursuant to sections 276(b)(1)(A), 276(c), and 201(b) of 
the Communications Act, we reconcile these statutory objectives by 
prohibiting site commissions associated with intrastate, interstate, 
international, jurisdictionally mixed, and jurisdictionally 
indeterminate audio and video IPCS.
    295. Our Approach Best Reconciles Our Statutory Duties In Light of 
the Harms of Site Commissions. The Martha Wright-Reed Act added to 
section 276(b)(1)(A) the requirement that the Commission's compensation 
plan ``ensure that . . . all rates and charges'' for intrastate and 
interstate IPCS are ``just and reasonable.'' Thus, section 
276(b)(1)(A), as amended by the Martha Wright-Reed Act, requires the 
Commission to establish a compensation plan to ensure that all IPCS 
providers are ``fairly compensated'' and that ``all [IPCS] rates and 
charges are just and reasonable.'' As stated above, we view the ``just 
and reasonable'' and ``fairly compensated'' requirements as 
interdependent and complementary statutory mandates, which we must 
fully implement. Section 201(b) of the Communications Act also requires 
just and reasonable rates and charges for interstate and international 
IPCS.
    296. Site commissions interfere with the Commission's ability to 
implement these dual requirements of determining ``just and 
reasonable'' rates and charges and ``fair[ ] compensat[ion]'' for IPCS 
providers. To the extent that IPCS providers face a legal necessity to 
pay site commissions, the D.C. Circuit's decision in GTL v. FCC 
suggests that the fair compensation requirement in section 276(b)(1)(A) 
requires that IPCS providers be able to recover those payments through 
IPCS rates and charges. We thus reject the argument that a prohibition 
on site commissions

[[Page 77297]]

is beyond the scope of the Commission's authority. As we explain, the 
prohibition on site commissions best reconciles our statutory duties to 
ensure both just and reasonable rates and charges for IPCS consumers 
and providers and fair compensation for IPCS providers. Yet, allowing 
that recovery would lead to unjust and unreasonable IPCS rates and 
charges given our finding that providers' site commission payments are 
expenditures that are not used and useful in the provision of IPCS. 
Even beyond that, payment of site commissions introduces competitive 
distortions in the bidding market for IPCS. Thus, site commissions 
create conflict between the fair compensation and the just and 
reasonable requirements in section 276(b)(1)(A). The policy harms 
arising from site commissions likewise frustrate the Commission's 
ability to alleviate competitive distortions and foster greater 
competition in the IPCS marketplace.
    297. Site commissions historically have been a major driver of 
excessive IPCS rates. As discussed above, site commissions have exerted 
``upward pressure'' on IPCS rates because by proposing higher rates, 
IPCS providers can afford to pay more in site commissions to 
correctional authorities. Site commission payments, however, are used 
to fund a ``wide and disparate'' range of activities, including 
educational and welfare programs, the state or local government's 
general revenue fund, the costs of maintaining correctional 
institutions, and, in extreme cases, campaign contributions or 
entertainment for correctional officials. And ``most or all'' of these 
functions ``have no reasonable and direct relation to the provision of 
ICS--a historical assessment confirmed by our used and useful analysis 
above. Because IPCS consumers ``are forced to absorb . . . site 
commissions in the rates they pay,'' they ``subsidize everything from 
inmate welfare programs, to salaries and benefits of correctional 
facilities, states' general revenue funds, and personnel training.'' As 
the Commission has observed, ``[p]assing the non-ICS-related costs that 
comprise site commission payments . . . onto inmates and their families 
. . . result[s] in rates . . . that are not just and reasonable.''
    298. Site commissions also historically have distorted the IPCS 
marketplace. Commenters and the Commission have long recognized that 
site commissions undermine the integrity of the bidding process for 
IPCS. In a properly functioning marketplace, correctional institutions 
would select an IPCS provider based on the quality of service the 
provider offered and on the rates the provider would charge. But the 
interests of correctional institutions diverge from the interests of 
consumers using IPCS. While IPCS consumers are interested in lower 
prices for IPCS, correctional institutions have an incentive to 
maximize the revenues they receive from providing access to the 
correctional facility to an IPCS provider. IPCS providers historically 
responded to this state of affairs in the marketplace by increasing 
IPCS rates, thereby enabling them to offer higher site commissions and 
increasing the likelihood they would be chosen as the monopoly provider 
for a facility for the term of a multi-year contract. This market 
distortion results in higher IPCS rates for consumers, providing an 
additional, independent basis for concluding that site commissions are 
unjust and unreasonable.
    299. Securus acknowledges that ``[t]here is no question that site 
commissions continue to play a role in the bidding process'' but argues 
that the Commission ``overstates the case . . . to the extent it claims 
that awards always go to the provider offering the highest site 
commissions.'' Securus provides a study based on data analyzing ``the 
contribution of price and site commissions to the scoring criteria 
utilized'' by facilities. The study finds that ``[c]ontrary to what we 
may expect based on suggestions that the entity bidding the highest 
site commission payment always or generally wins, the bid evaluation 
criteria used by most RFP issuers reflect a strong preference for bids 
with high levels of performance on the qualitative aspects of a bid, 
not necessarily based on price or site commission proposals.'' Securus 
also argues that site commissions ``may actually play some role in 
fostering competition by enabling smaller providers to successfully 
compete against larger providers, particularly for smaller facilities 
that may rely more on site commission revenue.''
    300. At the same time, however, Securus argues that ``[t]o the 
extent site commissions continue to distort competition in the bidding 
market, the solution is to further regulate site commissions.'' We 
agree. Even if site commissions do not always or exclusively result in 
problematic distortions in the IPCS marketplace, the record confirms 
that site commissions create incentives ``for facilities to award 
contracts based primarily (or at times, exclusively) on site commission 
offerings.'' Even if some correctional facilities do not fully act on 
those incentives at given points in time, as long as those incentives 
remain the risk of marketplace distortions will persist based on 
factors--i.e., correctional facility decision-making preferences--that 
are outside the control of the Commission and IPCS consumers. And where 
facilities do act on those financial incentives, even assuming there 
was perfect competition in the IPCS bidding market, ``[t]he benefit 
would be to . . . providers and to facilities offering the contracts, 
not to the people paying.'' The solution, then, is to remove the 
incentive to award contracts ``based in whole or in part on site 
commissions.'' That is what we do today. Doing so ``leave[s] facilities 
with only service-based, competitive market factors [to consider] when 
awarding contracts.'' This, in turn, pushes providers to ``compete to 
provide the best service for the lowest consumer cost as the only way 
to distinguish themselves and win bids.'' Our action to alleviate 
competitive distortions in the IPCS market through the elimination of 
site commission payments thus advances the purpose of section 276 to 
``promote competition among payphone service providers and promote 
widespread deployment of payphone services to the benefit of the 
general public.'' Securus argues that the Commission has not accounted 
for the market effects of eliminating site commissions. Securus 
explains that ``the Commission has pointed to the existence of site 
commissions and their alleged impact on the IPCS market as creating the 
conditions that require additional regulation.'' In eliminating site 
commissions, Securus contends that the Commission ``removes the 
condition purportedly justifying regulation over the IPCS market and 
then proceeds to continue and expand upon the regulation that is 
allegedly justified by the existence of site commissions that are now 
removed.'' Securus argues that the Commission ``should at least proffer 
some justification why permanent, highly prescriptive rate regulation 
must continue even though it believes it has created the conditions for 
a properly functioning, competitive marketplace.'' While the Commission 
has identified site commissions as ``the primary reason'' IPCS rates 
can be unjust and unreasonable, the Commission has never stated that 
they are the only reason that IPCS rates can be unjust and 
unreasonable. Indeed, the Commission has specifically recognized that 
rate regulation is needed because ``no competitive forces within the 
[correctional] facility constrain providers from charging rates that 
far exceed the costs . . . providers incur in

[[Page 77298]]

offering service.'' Rate regulation is thus clearly necessary to, for 
example, prevent IPCS providers from overcharging consumers even in the 
absence of site commission payments. To suggest that the elimination of 
site commissions should be the basis for reduced rate regulation also 
ignores abusive ancillary service charging practices that have 
historically plagued the industry.
    301. There is significant support in the record for our approach. 
In 2021, recognizing ``the difficulties and complexities . . . in 
accounting for and isolating what portion of site commission payments 
may be related to legitimate facility costs,'' the Commission sought 
comment on prohibiting providers from entering contracts requiring the 
payment of site commissions and preempting state and local laws and 
regulations requiring providers to pay site commissions. A variety of 
commenters support a prohibition, primarily based on their view that a 
rule against site commissions is needed to ensure just and reasonable 
IPCS rates and charges. As Securus observes, ``the use of site 
commissions is inimical to the shared goals of all stakeholders of 
improving access to, and affordability of, communications services for 
incarcerated persons and their families.'' Many of these same 
commenters support the Commission's identification of options in 2021 
to prohibit IPCS providers from entering into contracts requiring the 
payment of site commissions and preempting state and local laws and 
regulations requiring site commissions.
    302. Consistent with the record and the Martha Wright-Reed Act, we 
prohibit all site commission payments associated with IPCS. To 
effectuate this prohibition we take two actions consistent with 2023 
and 2021. First, we preempt state and local laws and regulations 
allowing or requiring site commission payments for IPCS. And second, we 
prohibit IPCS providers from entering into contracts allowing or 
requiring the payment of site commissions. The scope of site 
commissions subject to the prohibition and preemption include all 
monetary payments, including lump-sum or upfront payments, payments 
based on percentage of revenue, and per-call payments associated with 
IPCS or associated ancillary services. It also includes all in-kind 
payments and contributions providers may offer associated with IPCS or 
associated ancillary services, including technology grants, equipment, 
training programs, or any other payment, gift, or donation offered by 
an IPCS provider to a correctional institution or a representative of a 
correctional institution.
    303. In contrast, a minority of commenters oppose further site 
commission reforms. Praeses and NCIC argue that rate caps sufficiently 
protect consumers against unjust and unreasonable rates while also 
allowing facilities to recover the costs they incur in providing IPCS. 
Praeses contends that the Commission should continue to adhere to its 
historically ``permissive position'' towards site commissions in which 
it concluded that it did not need to prohibit or otherwise regulate 
site commissions. NCIC and Praeses further assert that the continued 
use of rate caps ``will necessarily lead to fair and reasonable site 
commissions'' and will protect consumers from unjust and unreasonable 
rates and charges. And the National Sheriffs' Association asserts that 
preempting laws requiring site commissions and prohibiting providers 
from entering into contracts requiring the payment of site commissions 
is not ``appropriate'' because ``facilities incur costs to allow ICS in 
jails and . . . jails require commission payments in connection with 
allowing ICS in jails.''
    304. Restricting the recovery of IPCS provider payments to 
correctional facilities through regulated rates is at best a highly 
imperfect tool so long as site commissions are allowed to be paid. For 
one, as discussed above, if IPCS providers face a legal obligation to 
pay site commissions, the D.C. Circuit's decision in GTL v. FCC 
suggests that the fair compensation requirement in section 276(b)(1)(A) 
requires that IPCS providers be able to recover those payments through 
IPCS rates and charges. That scenario leaves the door open to the full 
panoply of excessive rates and charges along with the marketplace 
distortions that historically have plagued IPCS.
    305. Marketplace distortions also are likely to remain so long as 
site commissions are permissible. Rate caps set based on industry-wide 
average costs are likely to leave headroom for additional profit by 
providers with below-average costs. As long as site commissions remain 
permissible, such providers can use that headroom to, in effect, pay 
higher site commissions by using excess revenues earned from regulated 
rates. This is likely to result in marketplace distortions similar to 
those historically experienced in the IPCS marketplace, as discussed 
above--i.e., correctional facilities choosing providers for paying 
higher site commissions, and the benefits of efficiency improvements 
and cost savings thus flowing to correctional facilities and winning 
bidders but not IPCS consumers. These harmful effects would be even 
more extreme if, rather than relying on industry-wide average costs, 
the Commission relied on costs just from higher-cost or highest-cost 
providers. These effects could be mitigated to some degree by the use 
of more granular categories of providers when averaging costs and 
setting rates if that resulted in less disparity in the range between 
the highest- and lowest-cost providers included in the category. But to 
go further in mitigating those concerns would require a shift to 
provider-by-provider, ongoing rate-of-return rate regulation. However, 
the Commission has previously disavowed any willingness to conduct 
full-blown rate regulation for individual IPCS providers, nor is it 
clear how viable provider-by-provider rate-of-return regulation even 
would be in a context where rates typically are specified in multi-year 
RFPs rather than biennial (or more frequent) tariff filings. Thus, we 
think it is all too likely that, despite our best efforts, distortions 
in the IPCS marketplace would remain as long as the traditional array 
of site commission payments are allowed.
    306. We also disagree with Praeses that the Commission should 
continue to decline to prohibit site commissions as it has in the past. 
Praeses contends that the Commission has ``repeatedly and expressly 
declined to interfere with the often complex and multi-faceted private 
contractual negotiations between Providers and Facilities.'' It relies 
on statements in the 2013 ICS Order, 2015 ICS Order, and the 2016 ICS 
Reconsideration Order, in which the Commission concluded that it did 
not need to prohibit or otherwise directly regulate site commissions. 
But those decisions were a function of the circumstances and limited 
record before the Commission during that period. The Commission's 
previous decisions not to prohibit site commissions do not foreclose it 
from doing so on the basis of the circumstances and the record before 
it now, particularly in light of the requirements of the Martha Wright-
Reed Act to ensure that IPCS providers are fairly compensated and that 
all rates and charges are just and reasonable. As our analysis above 
indicates, we now are persuaded that simply regulating recovery of site 
commission payments through regulated rates to the extent permitted by 
the ``fair compensation'' standard--while leaving IPCS providers free 
to pay site commission as a general matter--would not be ``just and 
reasonable.'' Nor are we persuaded that

[[Page 77299]]

it would be workable to address such concerns through case-by-case 
evaluations. Our analysis indicates that legally-mandated site 
commissions lead to the full array of harms historically experienced in 
this context. And even in the case of contractually-prescribed site 
commissions, case-by-case evaluations would be burdensome for everyone 
involved--including the Commission and private parties. Further, it is 
not clear how such case-by-case evaluations could be sufficiently 
timely to avoid delaying the typical RFP process yet still guard 
against the risk of marketplace distortions before they occur. Thus, we 
conclude that our bright-line prohibition on site commissions reflects 
the best way of dealing with these problems.
    307. Our Approach Is Consistent with GTL v. FCC. Some commenters 
argue that the Commission's actions today conflict with GTL v. FCC. 
These commenters contend that the D.C. Circuit ``expressly recognized 
that site commissions are legitimate costs of ICS providers'' and thus 
the Commission could not categorically exclude them from its rate 
methodology. This has led some to argue that ``[t]he Commission must . 
. . ensure its rate caps allow ICS providers to recover all of their 
costs associated with the payment of site commissions.'' But, as the 
Wright Petitioners explain, the decision in GTL v. FCC ``was made 
against background conditions in which ICS providers were actually 
paying those site commissions pursuant to negotiated agreements to 
provide ICS at facilities or in compliance with legal mandates'' and 
not in a regulatory environment in which site commissions were 
prohibited. The court had ``no occasion to consider the Commission's 
authority to prohibit negotiated agreements . . . or its authority to 
preempt state and local requirements.'' And the court ``never suggested 
that the Commission lacked authority to take such actions to fulfill 
its statutory mandate.'' By precluding providers from paying site 
commissions altogether, we eliminate the factual predicate--the payment 
of site commissions as a condition precedent to providing IPCS--which 
led the court in GTL to hold that site commissions could not be wholly 
excluded from the Commission's ratemaking calculus. Thus, we conclude 
that GTL v. FCC is no bar to our actions today, particularly since our 
rate cap calculations incorporate, to the extent the record permits, 
the costs facilities incur that are used and useful and/or necessary in 
providing IPCS. And, in any event, the Martha Wright-Reed Act is an 
intervening development that reinforces the Commission's mandate to 
ensure just and reasonable rates and charges for IPCS that also afford 
fair compensation.
    308. Our Approach Accounts For Legitimate Interests of Correctional 
Facilities Associated with IPCS. Separate from the issue of site 
commission payments, the rate caps we adopt today recognize, consistent 
with the record, that correctional facilities may incur some used and 
useful costs in their provision of IPCS. Because we allow providers to 
reimburse correctional facilities for the used and useful costs, if 
any, they incur, we have thus afforded correctional facilities an 
avenue to facilitate recovery of their used and useful costs associated 
with allowing access to IPCS in their facilities.
    309. We emphasize that the actions we take today in eliminating 
site commissions apply to all correctional institutions: prisons, 
larger and smaller jails, and other correctional institutions. The 
facility-related rate components that the Commission adopted in the 
2021 ICS Order apply only to prisons and jails with average daily 
populations of 1,000 or more incarcerated people. Because of the 
``concern raised in the record about facility size variations in 
facility-related costs for [smaller] jails'' the Commission left the 
existing $0.21 per-minute rate cap in effect for facilities whose 
average daily populations were below 1,000 incarcerated people. Thus, 
providers serving these relatively small jails could continue to 
recover site commissions as long as they did not exceed the $0.21 cap 
applicable to those jails. The Commission, however, sought comment in 
2021 on facility costs for jails with average daily populations below 
1,000, and asked commenters to ``provide detailed descriptions and 
analyses of the cost drivers'' for these facilities. The National 
Sheriffs' Association and Pay Tel assert that facility costs per 
incarcerated person are higher for smaller jails than for larger jails. 
They urge continued reliance on the National Sheriffs' Association 2015 
survey to justify higher facility-related cost recovery for smaller 
jails, but otherwise provide no responsive data. For the reasons 
discussed above, we reject continued reliance on the National Sheriffs' 
Association 2015 survey. Because we now can accommodate smaller jails 
in the same overall regulatory approach as prisons and larger jails, it 
best advances our statutory mandates of ensuring just and reasonable 
rates and charges consistent with fair compensation for IPCS providers 
for us to do so.
    310. To the extent commenters' arguments against the elimination of 
site commissions are premised on the loss or depletion of state 
programs currently funded by site commission payments, the ``just and 
reasonable'' standard of the Communications Act does not contemplate 
funding such programs that are unrelated to the provision of IPCS 
through regulated rates, regardless of how worthy those programs may 
be. In support of site commissions, ViaPath contends that ``IPCS 
`providers who are required to pay site commissions as a condition of 
doing business have no control over the funds once they are paid,' 
which does not change the record evidence that site commissions are a 
cost of providing IPCS.'' ViaPath has not articulated why provider-
control over such funds after payment has been made has any bearing on 
why the practice is beneficial, nor why the practice should continue. 
We find this argument unpersuasive. And, in any event, we expect that 
the implementation period applicable to the reforms we adopt today will 
be sufficient to allow state and local governments time to adjust to an 
environment without site commissions.
    311. Given the availability of reimbursement from IPCS providers 
for costs that are used and useful in the provision of IPCS, consistent 
with our statutory duties, we see no reason to believe that 
correctional institutions will decrease or limit access to IPCS as some 
commenters assert. Some commenters allege that ``if compensation for . 
. . providers and Sheriffs is not adequate, access to ICS is likely to 
decrease'' or be disallowed. In NCIC's view, ``there is almost no 
scenario in which a correctional agency could lose site commission 
revenue and continue to provide the critical services and programs 
funded by that revenue.''
    312. We find it highly unlikely that correctional facilities would 
limit or deny access to IPCS as a result of the elimination of site 
commission payments. As the Commission has observed, there are ``well-
documented benefits, for communities and correctional institutions 
alike, in allowing incarcerated people access to'' IPCS. Further, the 
record contains no indication that IPCS deployment has decreased or 
been eliminated in states that have eliminated site commissions. And, 
as the Commission has previously noted, arguments premised on a denial 
or reduction of access to IPCS are likely to elicit an ``intensely 
negative backlash.'' Thus, we see no reason to believe that 
correctional institutions

[[Page 77300]]

will curtail or eliminate access to IPCS simply because they no longer 
receive site commission payments. In fact, given the generally lower 
rates we adopt in the Report and Order, it is reasonable for us to 
anticipate increased usage of IPCS once the Report and Order takes 
effect.
(a) Preempting State and Local Laws and Regulations Requiring or 
Allowing Site Commissions Associated With IPCS
    313. As part of the overall prohibition on site commissions we 
adopt today, we preempt state and local laws and regulations allowing 
or requiring the payment of monetary site commissions or the provision 
of in-kind site commissions associated with the provision of IPCS 
regulated pursuant to sections 201(b) and 276(c) of the Communications 
Act and consistent with 2023 and 2021. As explained above, our actions 
preempting state and local laws and regulations allowing or requiring 
the payment of monetary site commissions or the provision of in-kind 
site commissions associated with the provision of IPCS and prohibiting 
IPCS providers from entering into contracts requiring or allowing them 
to pay site commissions are necessary because they best ensure the 
harmonization of both the ``just and reasonable'' and ``fair 
compensation'' mandates of section 276(b)(1)(A). Our actions not only 
benefit individual ratepayers, but also the public and the IPCS 
marketplace more generally. As an additional matter, we note that our 
actions also give timely effect to our findings under section 
276(b)(1)(A), consistent with Congress' objective as revealed by its 
establishment of a statutory deadline for the Commission to 
``promulgate any regulations necessary to implement this Act and any 
amendments made by this Act.'' It is well established that ``a federal 
agency may pre-empt state law only when and if it is acting within the 
scope of its congressionally delegated authority.'' Section 201(b) of 
the Communications Act gives the Commission authority over interstate 
and international IPCS. And as explained above, the Martha Wright-Reed 
Act amended section 276(b)(1)(A) to clearly establish the Commission's 
authority to ensure just and reasonable rates for intrastate as well as 
other jurisdictional inmate communications. The Martha Wright-Reed Act 
also expanded the Commission's section 276 authority over ``payphone 
service'' in correctional institutions to include ``advanced 
communications services,'' as defined in sections 3(1)(A), 3(1)(B), 
3(1)(D), and new (3)(1)(E) of the Communications Act. Furthermore, 
while the Martha Wright-Reed Act decisively expands the scope of the 
Commission's authority over IPCS, it retained section 276(c), which 
provides 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.'' 
Further, the record also reflects that a variety of stakeholders 
believe the Commission should preempt state and local laws that require 
or allow site commissions.
    314. We find that state and local laws and regulations authorizing 
or requiring site commissions conflict with the Commission's 
regulations adopted in the Report and Order to ensure just and 
reasonable rates and charges for IPCS and fair compensation for IPCS 
providers under section 276(b)(1)(A) and to ensure just and reasonable 
rates and charges for interstate and international IPCS under section 
201(b) of the Communications Act. In particular, state and local laws 
and regulations requiring or allowing providers to pay site commissions 
associated with IPCS lead to unjust and unreasonable rates and charges 
insofar as consumers are being charged for non-IPCS costs where 
providers pay site commissions. Those laws and regulations also lead to 
unjust and unreasonable rates and charges through the resulting 
marketplace distortions. Such laws and regulations are therefore in 
conflict with the ``just and reasonable'' requirement in section 
276(b)(1)(A) of the Communications Act and our implementation of those 
mandates through regulations adopted in the Report and Order. 
Precluding providers from paying site commissions pursuant to state and 
local law will enable us to address one of the ``primary reason[s] 
[IPCS] rates are unjust and unreasonable.'' We therefore agree with 
those commenters arguing that the Commission should exercise its 
authority to preempt laws and regulations that require providers to pay 
site commissions associated with IPCS.
    315. At the same time, commenters point out that preemption is 
relevant to ensuring that IPCS providers are fairly compensated as 
required by section 276(b)(1)(A), as interpreted by the D.C. Circuit in 
GTL v. FCC. Commenters explain that ``[a]s long as local governments 
are allowed to require site commissions as a condition of providing 
service . . . GTL teaches that section 276 and section 201 require that 
they be recoverable.'' Separately, experience has shown that when 
recovery of site commissions associated with IPCS is constrained by 
regulation, correctional facilities can attempt to maintain those 
revenue streams by shifting the nature of site commission arrangements. 
Absent a prohibition on site commissions, we anticipate correctional 
facilities seeking increasingly creative ways to maintain monetary or 
in-kind payments, with the Commission (and IPCS providers) playing an 
endless game of `whack-a-mole' in an effort to enforce section 
276(b)(1)(A)'s fair compensation mandate. Thus, preemption is 
``preferable to the Commission's efforts to regulate . . . site 
commissions through regulation of provider rates'' alone. Indeed, 
according to Securus ``[d]irectly addressing site commissions through 
preemption is . . . consistent with GTL.'' We agree.
    316. Commenters have extensively reviewed the Commission's 
authority to preempt site commissions in these proceedings. Prior to 
the enactment of the Martha Wright-Reed Act, arguments regarding the 
Commission's preemption authority focused on the Commission's 
jurisdiction over interstate and international communications under 
section 2(a) of the Communications Act. Other commenters have argued 
that section 276(c) gives the Commission ``express authority'' to 
preempt inconsistent state requirements. The Wright Petitioners explain 
that ``[s]ection 276 of the Communications Act gives the Commission the 
authority to preempt state requirements that are `inconsistent with the 
Commission's regulations.' '' As explained below, we are persuaded that 
the Communications Act provides the Commission the necessary authority 
to adopt regulations addressing the problems caused by site commissions 
in the IPCS marketplace, which requires preemption of state and local 
laws and regulations requiring or authorizing the site commission 
payments.
    317. Preemption of State Requirements. Section 276(c) contains an 
express preemption provision upon which we rely to preempt state laws 
and regulations that allow or require the payment of site commissions 
associated with IPCS. Because we conclude that section 276(c) provides 
the Commission the necessary preemption authority, we decline to invoke 
the Commission's authority under section 253, including the preemption 
provision of section 253(d). Section 276(c) states 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.'' As part of the reforms we 
adopt today, we adopt a rule prohibiting the payment of site 
commissions as set forth in the

[[Page 77301]]

Report and Order. When a federal law contains an express preemption 
clause, the courts ``focus on the plain wording of the clause, which 
necessarily contains the best evidence of Congress' preemptive 
intent.'' The Supreme Court has explained that where a ``statute 
`contains an express pre-emption clause,' we do not invoke any 
presumption against pre-emption but instead `focus on the plain wording 
of the clause, which necessarily contains the best evidence of 
Congress' pre-emptive intent.' '' Independently, even assuming arguendo 
that any preemption analysis should begin ``with the assumption that 
the historic police powers of the States [are] not to be superseded by 
the Federal Act unless that was the clear and manifest purpose of 
Congress''--particularly where ``Congress has `legislated . . . in a 
field which the States have traditionally occupied' ''--it nonetheless 
remains the case that ``Congress' intent, of course, primarily is 
discerned from the language of the pre-emption statute and the 
`statutory framework' surrounding it.''
    318. Here, the express preemption clause in section 276(c) applies 
to ``State requirements'' to the extent they are ``inconsistent with 
the Commission's regulations.'' This is consistent with how the 
Commission has applied section 276(c) in the past. The term ``state 
requirements'' in express preemption provisions has been interpreted by 
the Supreme Court more broadly than terms like ``laws or regulations.'' 
For example, the Court has concluded that ``[a]bsent other indication, 
reference to a State's `requirements' in an express preemption 
provision includes its common-law duties.'' By contrast, the Court has 
found that references to state ``laws or regulations'' preempt only 
``positive enactments.'' Consistent with this precedent, we find that 
the reference to ``state requirements'' in section 276(c) is broad 
enough to reach state laws and regulations requiring or allowing the 
payment of site commissions associated with IPCS.
    319. The surrounding statutory framework also demonstrates that 
preemption of laws and regulations requiring or allowing site 
commissions is authorized by section 276(c). Section 276(b)(1)(A) 
always has been clear that the Commission has authority to establish 
compensation plans for ``intrastate and interstate'' payphone calls, 
and as explained above, the Martha Wright-Reed Act amended that 
provision to clearly establish the Commission's authority to ensure 
just and reasonable rates for all communications now encompassed by 
section 276(d). And as we have found, the regulations authorized under 
section 276(b)(1)(A) to ``establish a compensation plan'' to achieve 
the goals of fair compensation for providers and just and reasonable 
rates and charges for consumers and providers requires more of the 
Commission than the simple act of capping rates and charges. In 
amending section 276, Congress left the express preemption provision in 
section 276(c) unaltered, revealing Congress' understanding that 
Commission regulations implementing the full scope of amended section 
276(b)(1)(A) would be subject to that express preemption provision.
    320. This point was further emphasized by the amendment of section 
2(b) of the Communications Act to expressly exempt section 276 from the 
preservation of state authority over intrastate communications under 
that provision. In the Martha Wright-Reed Act, Congress expressly 
considered the potential effect of that statute on other laws, and only 
disclaimed the intent to ``modify or affect any'' state or local law 
``to require telephone service or advanced communications services at a 
State or local prison, jail, or detention facility or prohibit the 
implementation of any safety and security measures related to such 
services at such facilities.'' That narrow express preservation of 
existing law--which is not implicated by our preemption here--came 
against the backdrop of Commission and judicial grappling with the 
interplay between site commission payments and IPCS rates and charges, 
as well as longstanding Commission consideration of whether and when to 
prohibit and preempt site commissions. The statutory context provided 
by section 276 as a whole, coupled with the Martha Wright-Reed Act, 
thus reinforces our understanding of the scope of preemption 
encompassed by section 276(c).
    321. Relatedly, we conclude that preemption is consistent with 
section 4 of the Martha Wright-Reed Act, which states that nothing in 
that Act ``shall be construed to modify or affect any Federal, State, 
or local law to require telephone service or advanced communications 
services at a State or local prison, jail, or detention facility or 
prohibit the implementation of any safety and security measures related 
to such services at such facilities.'' We preempt only those state laws 
and regulations that require or permit the payment of monetary site 
commissions or the provision of in-kind site commissions associated 
with IPCS. To the extent federal, state, or local laws or regulations 
require IPCS to be provided to incarcerated people at state or local 
correctional facilities, such laws and regulations are not preempted by 
our actions here. Similarly, we do not prohibit the implementation of 
any safety and security measures related to IPCS at any state or local 
correctional facility. As we explain above, section 4 of the Martha 
Wright-Reed Act is ``not intended to interfere with any correctional 
official's decision on whether to implement any type of safety and 
security measure that the official desires in conjunction with audio or 
video communications services.'' Consistent with that interpretation, 
here we preempt state laws and regulations requiring or allowing the 
payment of site commissions associated with IPCS, a pre-emption that we 
conclude is necessary to achieve the statutory requirements of section 
276(b)(1)(A) to ensure just and reasonable rates and charges for IPCS 
consumers and fair compensation for providers. Correctional officials 
remain free to implement desired safety and security measures.
    322. The conflict between IPCS providers' payment of site 
commissions and the ``just and reasonable'' mandate implicates the 
Commission's oversight of interstate and international IPCS under 
section 201(b), as well. The Supreme Court has explained that ``[e]ven 
where Congress has not completely displaced state regulation in a 
specific area, state law is nullified to the extent that it actually 
conflicts with federal law.'' Such a conflict can arise when a law 
``stands as an obstacle to the accomplishment and execution of the full 
purposes and objectives of Congress.'' While there are no ``precise 
guidelines'' governing when state law creates such an obstacle, the 
Supreme Court has acknowledged that federal agencies ``have a unique 
understanding of the statutes they administer and an attendant ability 
to make informed determinations about how state requirements may pose'' 
such an obstacle. Additionally, the Supreme Court has found that the 
inquiry into whether state law poses an obstacle sufficient to allow 
preemption requires consideration of ``the relationship between state 
and federal laws as they are interpreted and applied, not merely as 
they are written.'' One situation in which the Supreme Court has 
determined that state law can interfere with federal goals is when such 
a law is at odds with Congress's intent to create a uniform system of 
federal regulation.
    323. Furthermore, a federal agency acting within the scope of its 
authority may preempt state law. ``[I]n a situation

[[Page 77302]]

where state law is claimed to be pre-empted by federal regulation, a 
`narrow focus on Congress' intent to supersede state law [is] 
misdirected,' for `[a] pre-emptive regulation's force does not depend 
on express congressional authorization to displace state law.' '' 
Instead, the question is whether Congress has delegated the authority 
to act in a sphere, and whether the agency has exercised that authority 
in a manner that preempts state law. The Supreme Court also has 
explained that ``an `assumption' of nonpre-emption [sic] is not 
triggered when the State regulates in an area where there has been a 
history of significant federal presence.''
    324. The Commission undoubtedly has authority under section 201(b) 
to ensure that rates and practices for and in connection with certain 
interstate and international incarcerated people's communications 
services are just and reasonable. The Commission's actions in this 
regard also involve an area that has long been subject to extensive 
federal regulation. Since the original enactment of the Communications 
Act, section 2(a) has made clear that the Communications Act applies to 
``all interstate and foreign communication by wire or radio,'' and 
section 201(b) has directed the Commission to ensure that rates and 
practices for and in connection with interstate and foreign 
communication services are just and reasonable. We thus find that 
section 201(b) provides us with independent authority, alternative to 
section 276, to preempt laws and regulations allowing or requiring site 
commissions associated with interstate and international 
telecommunications for incarcerated people.
    325. Preemption of Local Requirements. Our analysis of our 
preemptive authority is somewhat different when it comes to local 
requirements that may permit or require the payment of site commissions 
because section 276(c) does not expressly reference ``local'' laws or 
regulations. Nonetheless, we conclude that principles of conflict 
preemption allow us to also preempt local laws and regulations 
requiring or authorizing IPCS providers to pay site commissions 
associated with IPCS. As an initial matter, we note that ``for purposes 
of the Supremacy Clause, the constitutionality of local ordinances is 
analyzed in the same way as that of statewide laws.'' Thus, relevant 
precedent concerning state law is equally applicable to local law.
    326. As a threshold matter, we find that local laws and regulations 
requiring or authorizing site commissions stand as an obstacle to our 
regulation of IPCS. We explained above the conflict that occurs as a 
result of state requirements, and that conclusion is not altered if the 
requirements originate instead at the local level. Consequently, under 
sections 276(b)(1)(A) and 201(b)--coupled with standard conflict 
preemption principles--we preempt local laws and regulations that 
permit or require site commissions.
    327. Our conflict preemption determination is bolstered by the 
enactment of the Martha Wright-Reed Act, which modified the 
Communications Act in a manner that we see as intended to establish a 
uniform system of federal regulation for all IPCS under section 
276(b)(1)(A). As explained above, the Martha Wright-Reed Act was 
enacted against the regulatory backdrop of--and in response to--the GTL 
v. FCC decision, where the D.C. Circuit found that the Commission had 
unreasonably relied on the ``just and reasonable'' standard of section 
201(b) when implementing the differently-worded language of section 
276. Insofar as that left the Commission to rely on section 201(b) to 
ensure IPCS rates and charges were not too high, it generally precluded 
the Commission from addressing excessive intrastate IPCS rates. The 
Martha Wright-Reed Act's amendment of section 276(b)(1)(A) gave the 
Commission clear authority to ensure just and reasonable rates under 
that provision, which always has encompassed both intrastate and 
interstate services. Given the legal and regulatory backdrop, that 
persuades us that Congress envisioned a uniform system of federal 
regulation as far as IPCS rates and charges are concerned.
    328. Scope of Preemption. At this time, our preemption extends only 
to those state and local laws and regulations that permit or require 
IPCS providers to pay site commissions associated with IPCS, and does 
not extend to site commissions associated with other services or 
activities insofar as the effect of those site commissions can be 
segregated from the IPCS subject to Commission regulation. To the 
extent there are laws and regulations that permit or require the 
payment of site commissions associated with non-IPCS services, 
including nonregulated services, we do not preempt those laws or 
regulations, provided that neither the costs of such services nor any 
site commissions associated with them are passed on to IPCS consumers 
through IPCS rates or charges, and that the offering of non-IPCS 
services is not a precondition to offering IPCS at a correctional 
institution. Consistent with this policy, if there are state 
requirements that encompass both IPCS and non-IPCS services, our 
preemption actions extend only to the part of such requirements 
implicating IPCS. At this time, we are not persuaded that site 
commissions in those scenarios are likely to directly affect the 
reasonableness of rates and charges and fairness of compensation for 
the IPCS we regulate, either directly (through inflated IPCS rates and 
charges) or indirectly (through competitive distortions in the IPCS 
marketplace). Our approach flows from the conditions we adopt to ensure 
that such site commissions do not implicate IPCS. And it also flows in 
part from the broad scope of IPCS subject to our regulation, which, at 
this time, leaves a much smaller universe of services or activity 
potentially subject to site commissions, which we currently expect to 
have minimal potential to distort the IPCS marketplace, particularly 
given the segregation from IPCS that we adopt. Should circumstances 
warrant, we can revisit this issue in the future.
    329. Additionally, as explained above, today we adopt IPCS rate 
caps that account for all used and useful IPCS costs, whether they are 
incurred by providers or correctional facilities. To facilitate the 
ability of correctional facilities to recover used and useful IPCS 
costs they may incur, we permit IPCS providers to reimburse 
correctional facilities for the used and useful costs they prudently 
incur in the provision of IPCS, as calculated in accordance with the 
standards set forth in the Report and Order. Such reimbursements fall 
outside the scope of what we describe as ``site commissions'' under the 
regulatory framework of the Report and Order. To the extent state laws 
or regulations allow or require correctional facilities to obtain 
reimbursement from providers for those costs that fall outside the 
scope of our understanding of ``site commissions'' (whatever 
terminology the state law or regulation might use), we do not preempt 
such laws or regulations.
(b) Prohibiting IPCS Providers From Entering Into Contracts Allowing or 
Requiring Them To Pay Site Commissions Associated With IPCS
    330. As part of the prohibition against paying site commissions we 
adopt today, we also prohibit providers from entering into contracts 
allowing or requiring them to pay site commissions associated with 
IPCS, consistent with 2021. We agree with the Wright Petitioners that 
doing so is ``the simplest and most-wide ranging method to ensure IPCS 
rates are just and reasonable and fairly compensate providers.'' As 
discussed above, we

[[Page 77303]]

have concluded that the Martha Wright-Reed Act provides us with limited 
authority to regulate IPCS providers' practices, classifications, and 
regulations (collectively, ``practices'') associated with IPCS as a 
necessary part of our obligation to establish a compensation plan to 
ensure fair compensation to providers and just and reasonable rates and 
charges for consumers. This authority derives from section 
276(b)(1)(A)'s mandate that we establish a compensation plan addressing 
IPCS and, in certain circumstances, we also exercise section 201(b)'s 
grant of authority over practices associated with interstate and 
international IPCS. We address these two sources of authority below.
    331. In defining the contours of the prohibition on paying site 
commissions, we mirror the carve-outs specified in the case of our 
preemption of laws and regulations permitting or requiring site 
commissions. In particular, IPCS providers remain free to contract for 
the provision of non-IPCS services with correctional institutions 
following our actions today. However, under no circumstances may 
providers enter into a contract with a correctional facility for the 
provision of IPCS where, as a condition precedent to providing IPCS, 
the provider must agree to pay a site commission of any kind. To the 
extent IPCS providers contract with correctional institutions for the 
provision of non-IPCS services, neither the costs of those services nor 
any site commissions associated with them may be passed on to consumers 
through IPCS rates or charges. Such limitations are necessary to 
protect IPCS consumers from unjust and unreasonable IPCS rates and to 
ensure that providers receive fair compensation, consistent with 
section 276(b)(1)(A) as amended by the Martha Wright-Reed Act, as well 
as our obligation to ensure just and reasonable rates under section 
201(b). Finally, consistent with our policy of allowing IPCS providers 
to reimburse correctional facilities for their used and useful costs 
consistent with the standards in the Report and Order, we do not bar 
contractual provisions that require such reimbursement.
(i) Section 276(b)(1)(A)
    332. We conclude that the practice of paying site commissions 
undermines the Commission's ability to establish just and reasonable 
rates for IPCS consumers and providers and ensure fair compensation for 
providers. To best ensure fair compensation and just and reasonable 
rates and charges for IPCS, we thus adopt a compensation plan under 
section 276(b)(1)(A) that precludes IPCS providers from paying site 
commissions associated with IPCS subject to that provision. As we 
explain above, the section 276 requirement that the Commission 
establish a compensation plan to ensure fair compensation for IPCS 
providers and just and reasonable rates and charges for consumers 
necessarily carries with it the authority to prescribe regulations 
governing providers' practices to the extent those practices relate to 
the rates and charges applied to consumers. This authority not only 
allows us to preclude practices that work to undermine the rate and fee 
caps we set but also allows us to adopt affirmative requirements that 
help ensure that rates and charges as implemented are just and 
reasonable as applied to consumers. Accordingly, in specifying a 
compensation plan to implement section 276(b)(1)(A), as amended by the 
Martha Wright-Reed Act, we find it necessary to preclude providers from 
entering into contracts that require or allow them to pay site 
commissions associated with IPCS.
    333. Commenters highlight that the Commission ``has exercised 
similar authority over telecommunications service providers by barring 
their entry into contracts, or enforcing existing contracts, with 
entities over whom the Commission has no direct jurisdiction in order 
to promote the Commission's regulatory objectives.'' In the context of 
multiple tenant environments, the Commission has long prohibited 
providers of certain communications services from entering or enforcing 
agreements with property owners that grant the provider exclusive 
access and rights to provide service to the multiple tenant 
environment. Multiple tenant environments are ``commercial or 
residential premises such as apartment buildings, condominium 
buildings, shopping malls, or cooperatives that are occupied by 
multiple entities.'' The Commission has also adopted rules prohibiting 
telecommunications carriers and multichannel video programming 
distributors from entering into or enforcing certain types of revenue 
sharing agreements with the owners or multiple tenant environments. 
And, in the international settlements context, the Commission has 
limited the settlement rates that U.S. carriers may pay foreign 
carriers to terminate international traffic originating in the United 
States. In each of these cases, the Commission's regulation of the 
entities subject to its jurisdiction has affected entities over which 
the Commission has no direct jurisdiction. More importantly, where 
challenged by parties claiming that the Commission was impermissibly 
regulating parties over which it has no jurisdiction, the D.C. Circuit 
has upheld the Commission's actions.
    334. While we prohibit IPCS providers from entering into contracts 
requiring or allowing them to pay site commissions associated with 
IPCS, we recognize that there are likely enforceable contracts that 
currently require the payment of site commissions. In such 
circumstances, we rely on contractual change of law provisions. 
Commenters and the Commission have noted that IPCS contracts 
``typically include change of law provisions.'' We expect that our site 
commission reforms adopted in the Report and Order ``constitute 
regulatory changes sufficient to trigger contractual change-in-law 
provisions that will allow [IPCS] providers to void, modify or 
renegotiate aspects of their existing contract to the extent necessary 
to comply'' with our reforms today. As we explain, providers and 
correctional authorities have long been on notice that the Commission 
might act to prohibit site commissions. To the extent, however, that 
providers ``have entered into contracts without change-of-law 
provisions,'' those providers ``did so with full knowledge'' that the 
Commission might act to prohibit site commissions, and have been on 
notice that the Commission could act in this regard, particularly in 
light of 2021. Thus, we believe that relevant change-of-law provisions 
will enable parties to amend their contracts to the extent necessary 
and we strongly encourage parties to work cooperatively to resolve any 
issues. To the extent contractual disputes arise, including in 
circumstances where contracts do not have change-of-law provisions, 
parties may seek resolution of those disputes in court. We reject 
NCIC's suggestion that our actions ``abrogate'' contracts. To the 
contrary, even for contracts that lack change-of-law provisions, the 
failure to pay a site commission required by a still-valid contract 
term is an issue to be resolved through a breach of contract action in 
court if the parties cannot negotiate a resolution on their own. In 
addition, since 2013, the Commission has proceeded with IPCS reforms 
notwithstanding the potential interplay with existing IPCS agreements. 
Continuing to do so here is consistent with Commission precedent, 
including our decision to defer to change-of-law provisions or 
otherwise-applicable legal frameworks governing the enforcement of 
existing contracts.
    335. Praeses contends that section 276(b)(1)(A) does not give the 
Commission authority over ``private contractual payments'' by IPCS

[[Page 77304]]

providers and correctional institutions. Praeses focuses on statements 
from GTL v. FCC in which the D.C. Circuit explained that section 276 
``merely'' directs the Commission ensure that providers are fairly 
compensated. Praeses' comments, however, do not account for the 
amendments to section 276(b)(1)(A) made by the Martha Wright-Reed Act. 
Rather than focusing solely on fair compensation, the Martha Wright-
Reed Act added the requirement that the Commission ensure that all 
rates and charges are just and reasonable. We find that the best way to 
reconcile both requirements is to prohibit site commission payments as 
part of our compensation plan implementing section 276(b)(1)(A). This 
persuades us that we have authority to prohibit providers from entering 
into contracts requiring or permitting the payment of site commissions. 
Separately, however, we are unpersuaded by Praeses' argument given the 
Commission's history, detailed above, of exercising similar authority 
over providers in the past.
(ii) Section 201(b)
    336. Separately, we conclude that paying site commissions is an 
unjust and unreasonable practice pursuant to our authority under 
section 201(b) and the impossibility exception. Section 201(b) of the 
Communications Act provides an independent statutory basis for 
regulating providers' practices for or in connection with the 
interstate and international telecommunications services that are 
within our section 201(b) authority. Acting pursuant to section 201(b) 
of the Communications Act, the Commission has generally found carrier 
practices unjust and unreasonable where necessary to protect 
competition and consumers against carrier practices for which there was 
either no cognizable justification or where the public interest in 
banning the practice outweighed any countervailing policy concerns. As 
explained above, allowing recovery of site commissions would lead to 
unjust and unreasonable IPCS rates and charges given our finding that 
the providers' site commission payments are expenditures that are not 
used and useful in the provision of IPCS. Even beyond that, payment of 
site commissions introduces competitive distortions in the bidding 
market for IPCS. Although some commenters argue that site commissions 
may enable correctional facilities to recover the costs they incur in 
making IPCS available, as we have discussed above, these commenters 
have not been able to precisely articulate these costs to the 
Commission. Over the course of the many years that the Commission has 
been examining this issue, commenters have failed to come forward with 
meaningful data regarding the portions of providers' site commission 
payments that may be used and useful. Under these circumstances, we 
find no countervailing policy concerns or cognizable justification for 
the practice of paying site commissions given their detrimental effects 
on consumers and on the IPCS market in general. For these reasons, we 
conclude that the practice of paying site commissions associated with 
interstate and international telecommunications services is an unjust 
and unreasonable practice and prohibit it.
    337. Our section 201(b) authority also enables us to regulate 
practices associated with other IPCS services within our section 276 
authority to the extent those practices cannot be practicably separated 
from practices applicable to services within our section 201(b) 
authority, pursuant to the impossibility exception. For example, when 
the Commission exercised its section 201(b) authority to prohibit 
carriers from entering or enforcing exclusivity provisions in contracts 
with residential building owners, the Commission applied that ban even 
where agreements affected the viability of competitors offering bundles 
of services--of which telecommunications services were only one part--
in order to fully address practices for or in connection with the 
telecommunications services directly subject to section 201(b). Thus, 
the Commission's section 201(b) authority extends to the full range of 
``payphone service[s],'' as defined in section 276(d), to the extent 
the practices for or in connection with the payphone services outside 
of our separate section 201(b) authority cannot be separated from 
practices for or in connection with the payphone services within this 
authority.
    338. The record contains no evidence that IPCS providers can 
practicably separate the practice of paying site commissions in 
connection with the interstate and international payphone services 
within our section 201(b) authority from the practice of paying site 
commissions for or in connection with the other payphone services 
within the Commission's section 276(d) authority, including advanced 
communications services, in order to isolate the harms of such 
practices. As explained above, payment of site commissions undermines 
just and reasonable rates not only when providers directly increase 
IPCS rates to pass through site commission payments, but also through 
the marketplace distortions that result. There is no evidence that the 
marketplace distortions arising from the practice of paying site 
commissions can practicably be separated into interstate, intrastate, 
international or non-section 201(b) regulated services components. 
Indeed, as the Wright Petitioners explain, ``IPCS providers cannot 
practicably separate the general practices that may apply broadly to 
IPCS providers, which all offer both interstate and intrastate 
services, themselves into interstate and intrastate components.'' 
Further, we anticipate that enough aggregate revenues are potentially 
at stake for those services outside of our direct authority under 
section 201(b) that even allowing carriers' continued payments of site 
commissions only associated with those services is likely to lead to 
marketplace distortions that undermine our ability to ensure just and 
reasonable interstate and international IPCS rates. Thus, consistent 
with the precedent discussed above, we conclude that this 
inseverability allows us to prohibit the practice of paying site 
commissions in connection with intrastate, interstate, international, 
jurisdictionally mixed, or jurisdictionally indeterminate audio or 
video IPCS under section 201(b).
7. Safety and Security Costs
    339. Historically, the Commission has recognized that 
communications services for incarcerated people are different than 
communications services offered to the general public due, in part, to 
certain safety and security measures needed to adapt communications 
services to the carceral context. The Martha Wright-Reed Act not only 
requires that the Commission adopt a compensation plan ensuring that 
IPCS rates and charges are just and reasonable, but also mandates that 
in determining those rates the Commission ``shall consider costs 
associated with any safety and security measures necessary to provide'' 
IPCS. We find that, in order to give effect to the requirements of the 
Martha Wright-Reed Act, we must apply the Commission's traditional 
ratemaking standard, the used and useful standard, to determine whether 
any costs of safety and security measures are properly recoverable 
through regulated rates. Based on the record and data submitted in 
response to the 2023 Mandatory Data Collection, we determine that 
safety and security costs related to compliance with CALEA, as well as 
those incurred for communications security services, are generally 
appropriate for recovery through regulated IPCS rates, consistent with 
the Martha Wright-Reed Act. In the instructions to the 2023 Mandatory 
Data

[[Page 77305]]

Collection, WCB and OEA divided potential safety and security measures 
into seven categories and requested that providers submit data 
allocating their safety and security costs among the categories. We 
also find that other types of safety and security measures, including 
law enforcement support services, communications recording services, 
communications monitoring services, and voice biometrics services, are 
generally not appropriate for recovery through regulated IPCS rates. 
Finally, learning from the 2023 Mandatory Data Collection, we make 
modest adjustments in our rate-setting process to ensure that the costs 
of all safety and security measures that are properly included in 
regulated IPCS rates are, in fact, recoverable.
a. Background
    340. Prior to the 1984 breakup of AT&T, pricing for communications 
for incarcerated people largely mirrored that of the broader market. 
After the breakup, however, former safety and security service 
providers began providing communications services, using ``their 
security and surveillance services to carve out this niche micro-market 
for themselves.'' As Worth Rises explains, since that time, ``the 
corrections landscape [has seen] the widespread adoption of an 
increasing array of security and surveillance services, with IPCS 
consumers bearing the costs.'' As the 2023 Mandatory Data Collection 
amply demonstrates, costs broadly understood as reflecting safety and 
security measures now represent the largest single component of 
reported costs in the IPCS industry.
(i) The Commission's Historical Consideration of Safety and Security 
Measures
    341. The Commission first began to assess the role safety and 
security measures play in the provision of inmate calling services in 
the 1990s. In a 1996 declaratory ruling, it determined the proper 
regulatory treatment of certain safety and security measures such as 
call blocking, restricting called parties, and call tracking under the 
then-relevant regulatory framework. The then-relevant regulatory 
framework, commonly known as the Computer II framework, distinguished 
between two types of computer processing applications offered over 
common carrier transmission facilities: ``basic services,'' which were 
defined ``as the provision of `pure transmission capability over a 
communications path that is virtually transparent in terms of its 
interaction with customer supplied information''; and ``enhanced 
services,'' which were defined as services that ``employ computer 
processing applications that act on the format, content, code, protocol 
or similar aspects of the subscriber's transmitted information; provide 
the subscriber additional, different, or restructured information; or 
involve subscriber interaction with stored information.'' In analyzing 
these functionalities, the Commission framed such measures as services 
that ``essentially help[ ] corrections officials to determine whether a 
transmission path may be established.'' The Commission compared 
``screening and blocking features employed by correctional officials to 
monitor inmate telephone usage'' to ``services offered in the network 
that help customers screen or pre-select callers for acceptance or 
rejection do not go beyond providing a basic transmission channel and 
facilitating the customer's use of that transmission channel.'' The 
Commission viewed these services as contributing to the provision of 
the underlying communications service. In that same timeframe, however, 
the Commission began to raise concerns about the costs of safety and 
security measures when it sought comment on whether it should implement 
``rate caps, to remedy high charges to the billed party for collect 
calls initiated by prison inmates.'' The Commission described possible 
security measures as including call blocking, approved number lists, 
call length limitations, and total calls permitted to specific 
individuals. It contemplated that ``[p]risons may also need to be able 
to monitor calls and even tape them.''
    342. A few years later, in the 2002 Pay Telephone Order (67 FR 
17009, April 9, 2002), the Commission began to address the increasing 
number and type of safety and security measures available to 
correctional facilities and their associated costs. While the 
Commission considered traditional security measures, such as call 
blocking, restrictions on three-way calling, and approved number lists, 
the Commission addressed, for the first time, security services that 
primarily served basic law enforcement functions such as providing 
``detailed, customized reports for correctional facility officials.'' 
The record then before the Commission showed a shift from selective, 
targeted surveillance services to requirements for ``listening and 
recording capabilities for all calls.'' The Commission also addressed 
the issue of the costs of these measures. While recognizing that ``the 
provision of inmate calling services implicates important security 
concerns and, therefore, involves costs unique to the prison 
environment,'' the Commission nonetheless declined to raise rates 
relating to inmate calling services based on safety and security costs, 
expressing the hope that lower rates might lead to ``more cost-
effective security protections.'' Raising concerns about the imposition 
of ``expensive security costs,'' the Commission sought comment on 
``inmate calling service practices that may serve legitimate security 
needs but have the unintended, and perhaps unnecessary, effect of 
increasing the costs incurred by inmates and their families.'' The 
Commission likewise sought comment on ``alternatives to collect calling 
in the inmate environment that might result in lower rates for inmate 
calls while continuing to satisfy security concerns.''
    343. In the 2013 ICS Order, the Commission again acknowledged the 
importance of security features in the provision of inmate calling 
services, while emphasizing that ``ICS rate reform has not compromised 
the security requirements of correctional facilities.'' In establishing 
``conservative'' interim ICS rates, the Commission, on the record 
before it, took into account ``security needs as part of the ICS rates 
as well as the statutory commitment to fair compensation.'' These 
interim rates were based on the requirement of fair compensation in the 
language of section 276 at the time. Based on data in the record, the 
interim rates ``demonstrate[d] the feasibility of providing ICS on an 
on-going basis to hundreds of thousands of inmates without compromising 
the levels of security.'' The record led the Commission to include in 
the rates the costs of ``sophisticated security features--including 
biometric caller verification based on voice analysis, and 
sophisticated tracking tools for law enforcement.'' While traditional 
security measures were still deployed virtually universally, the record 
indicated that additional security features had become available and 
were primarily designed to assist law enforcement in discharging its 
core functions, including investigative work, gathering evidence, 
storing call recordings for use in court proceedings, and preparing 
reports for facilities. The Commission was cognizant of the ``critical 
security needs of correctional facilities,'' particularly used to aid 
law enforcement in the successful prosecution of ``hundreds'' of 
crimes. The Commission nevertheless added the limiting principle that 
security costs must have an appropriate nexus to the provision of ICS 
to be recoverable through ICS rates. Such

[[Page 77306]]

costs likely included the costs of security features inherent in the 
network, including ``the costs of recording and screening calls, as 
well as the blocking mechanisms the ICS provider must employ to ensure 
that inmates cannot call prohibited parties.'' The Commission also 
referenced ``more sophisticated security features'' such as ``biometric 
caller verification based on voice analysis and sophisticated tracking 
tools for law enforcement.'' While the Commission ultimately included 
the costs of advanced security features such as continuous voice 
biometric identification in the interim rates it adopted, it did so on 
the basis of limited data on industry costs since the Commission had 
not yet conducted a data collection to obtain comprehensive industry 
data. Contrary to what Securus claims, we do not improperly reverse 
findings in the 2013 ICS Order regarding safety and security costs with 
our actions today. Given the nature of the highly circumscribed record 
at the time of the 2013 ICS Order, it does not follow--and the Martha 
Wright-Reed Act does not say--that the Commission must include safety 
and security costs it has previously included in the rates in the rate 
caps it adopts today pursuant to the Martha Wright-Reed Act. In any 
event, as set forth in the analysis that follows, the record now before 
us, which is far more robust than the record that existed at the time 
of the 2013 ICS Order, persuades us to reach a different conclusion 
regarding certain safety and security measures than the Commission may 
have reached previously.
    344. By 2020, the Commission had begun to give increased scrutiny 
to the role safety and security measures played in the provision of 
IPCS and the extent to which cost recovery for the increasing array of 
security and surveillance measures was appropriate through inmate 
calling services rates. In the 2020 ICS Notice, the Commission sought 
comment on whether ``safety and surveillance costs in connection with 
inmate calling services should be recovered through inmate calling 
service rates.'' It noted that ``[a]s public interest groups [had] 
pointed out, correctional facilities did not pass on the costs of other 
security measures, such as scrutinizing physical mail, to incarcerated 
people and their families.''
    345. In the 2021 ICS Order, the Commission observed that the record 
provided in response to the 2020 ICS Notice did not allow it to 
determine ``whether security and surveillance costs that correctional 
facilities claim to incur in providing inmate calling services are 
`legitimate' inmate calling services costs that should be 
recoverable.'' Some commenters encouraged the Commission to exclude all 
such costs, arguing that security services were ``not related to the 
provision of communication service and provide[d] no benefit to 
consumers'' and ``not related to [the] `communications functions' '' of 
ICS. Certain providers and the National Sheriffs' Association called 
for the opposite, arguing that ``correctional facilities incur 
administrative and security costs to provide incarcerated people with 
access to [inmate calling services]'' and that these costs should be 
recovered through calling rates. The Commission found, however, that 
the data provided in support of this position did not allow it to 
``isolate legitimate telephone calling-related'' costs from ``general 
security and surveillance costs in correctional facilities that would 
exist regardless of inmate calling services.'' Based on the 
unreliability of the data provided, the Commission found that it had no 
``plausible method'' for determining recoverable security and 
surveillance costs.
    346. At the same time, in 2021, the Commission sought comment on 
security and surveillance costs and specifically whether some security-
related costs should ``more appropriately be deemed to be general 
security services that are added on to inmate calling services but not 
actually necessary to the provision of the calling service itself.'' 
The Commission asked whether providers are in fact providing ``two 
different services,'' including ``a communication service that enables 
incarcerated people to make telephone calls'' and ``a separate security 
service that aids the facility's general security efforts but would 
more appropriately be paid for directly by the facility rather than by 
the users of the communications service who receive no benefit from 
these security features that are unnecessary to enable them to use the 
calling service.'' The Commission also referenced a representation made 
by one provider listing the basic security measures required to provide 
service and acknowledging that ``anything more than this is not 
required for secure calling and that additional products are `gold-
plated offerings.'' The provider suggested that ``a basic phone system 
requires security related to identifying the incarcerated individual 
placing a call, restricting who that individual can and cannot call, 
providing the called party with the ability to accept, reject, or block 
the caller, and providing the facility with the ability to monitor and 
record calls.'' As a result, the Commission sought comment on 
``legitimate'' security features, how to distinguish such features from 
security relating to the facility as a whole, and how to isolate and 
quantify such costs. In 2022, the Commission reiterated these requests 
for comment and asked about the extent to which ``the security and 
surveillance costs that providers [had] included'' in their responses 
to the Third Mandatory Data Collection ``relate[d] to functions that 
meet the used and useful standard.''
(ii) The Martha Wright-Reed Act and Safety and Security
    347. Section 3(b)(2) of the Martha Wright-Reed Act requires that 
the Commission, in implementing the Act including promulgating 
regulations and determining just and reasonable rates, ``consider costs 
associated with any safety and security measures necessary to provide'' 
IPCS. As a result, in 2023, the Commission sought comment on this 
directive. It requested comment on how the term ``necessary'' should be 
interpreted, particularly asking whether it should follow D.C. Circuit 
precedent finding that ``necessary'' ``must be construed in a fashion 
that is consistent with the ordinary and fair meaning of the word, 
i.e., so as to limit `necessary' to that which is required to achieve a 
desired goal.'' The Commission also asked for detailed, specific 
comment on which safety and security measures are ``necessary,'' as 
contemplated by the Act, to the provision of IPCS and why those 
measures are ``necessary.'' Finally, it sought comment on whether it 
``should interpret the Martha Wright-Reed Act's use of the term `safety 
and security' as having the same or different meaning as the term 
`security and surveillance' previously used in this proceeding.''
(iii) 2023 Mandatory Data Collection
    348. Pursuant to a delegation of authority from the Commission, WCB 
and OEA gathered data to attempt to understand what safety and security 
measures were offered by IPCS providers, as well as their functions and 
costs, among other purposes. The data collection required that the 
providers isolate the costs they incur in providing safety and security 
measures from their other costs, and then allocate their safety and 
security measure costs into seven categories on a company-wide level, 
with an accompanying narrative description of the services included in 
each category. Providers were required ``to allocate the annual total 
expenses they incurred in providing safety and security measures among 
seven categories using the provider's best

[[Page 77307]]

estimate of the percentage of those expenses attributable to each 
category.'' The providers were then required to allocate all reported 
safety and security costs at the facility level. Additionally, they 
were required to allocate the expenses in each category to four types 
of services--audio IPCS, video IPCS, ancillary services, and other 
products and services.
    349. These seven categories were designed to ``provide a 
comprehensive and workable framework for dividing safety and security 
measure costs into reasonably homogenous groupings that `should capture 
all [safety and] security costs,' particularly with the addition of 
multiple examples of costs for each category.'' A catch-all category 
for any costs that did not fit within the other categories was also 
added to ensure completeness. The categories are: (1) CALEA compliance 
measures, (2) law enforcement support services, (3) communications 
security services, (4) communication recording services, (5) 
communication monitoring services, (6) voice biometrics services, and 
(7) other safety and security measures.
    350. Providers were required to submit information regarding safety 
and security measures in both cost data format and narrative responses 
to an excel and word template. For purposes of the collection, ``safety 
and security measures'' were defined as:
    [A]ny safety or security surveillance system, product, or service, 
including any such system, product, or service that helps the Facility 
ensure that Incarcerated People do not communicate with persons they 
are not allowed to communicate with; helps monitor and record on-going 
communications; or inspects and analyzes recorded communications. 
Safety and Security Measures also include other related systems, 
products, and services, such as a voice biometrics system, a personal 
identification number system, or a system concerning the administration 
of subpoenas concerning communications. The classification of a system, 
product, or service as a Safety and Security Measure does not mean that 
it is part of a Provider's IPCS-Related Operations.
    351. Providers were then instructed to provide a variety of 
information, including whether safety and security measures differed 
among facilities, contracts, audio/video services, or other factors. 
Total annual expenses, billed revenues, company-wide financial 
information, and service-specific financial information were requested, 
as well as allocations of such data among the seven safety and security 
categories. Providers were instructed ``to report in the Excel 
template, for each category, the Company's best estimate of the 
percentage of its total Annual Total Expenses for Safety and Security 
Measures that is attributable to the measures within that category.'' 
Safety and security measures were to be identified and described based 
on these categories.
    352. Providers' responses give for the first time a comprehensive 
picture of the dominant role that the costs of safety and security 
measures now play in the IPCS industry's cost structure. Reported 
safety and security measure costs now represent the single largest 
category of reported costs. The industry reported total safety and 
security costs of approximately {[REDACTED]{time} . The providers' data 
show that those costs now represent approximately {[REDACTED]{time}  of 
all reported IPCS costs and that reported safety and security measure 
costs significantly exceed the total costs of providing both audio and 
video IPCS combined. Audio and video IPCS combined represent 
approximately {[REDACTED]{time}  of all reported IPCS costs, inclusive 
of site commissions. On a total industry cost per-minute basis, 
reported safety and security costs are {[REDACTED]{time} , while 
reported costs of providing IPCS are {[REDACTED]{time} .
    353. The reported data also indicate that different-sized providers 
incur markedly different safety and security measure costs on a per-
minute basis. For example, the two largest providers reported incurring 
{[REDACTED]{time}  per minute in costs for safety and security 
measures, whereas the range for the rest of the industry is between 
$0.001 and $0.006 per minute for audio IPCS and between $0.0001 and 
$0.024 per minute for video IPCS.
(b) Our Approach To Considering Safety and Security Costs Under Section 
3(b)(2) of the Martha Wright-Reed Act
    354. Before reaching our assessment of providers' separately 
reported costs of safety and security measures, we address the 
statutory interpretation underlying our consideration of these matters 
under the Martha Wright-Reed Act and the Communications Act.
(i) The Directive To ``Consider'' Safety and Security Costs Under 
Section 3(b)(2) of the Martha Wright-Reed Act
    355. Pursuant to section 3(b)(2) of the Martha Wright-Reed Act, we 
will evaluate as part of our ratemaking exercise under section 
276(b)(1)(A) of the Communications Act ``costs associated with any 
safety and security measures necessary to provide'' IPCS. This is a 
familiar task of the sort the Commission has long undertaken when 
seeking to ensure just and reasonable rates, where it has evaluated 
costs and expenses of various kinds for which providers sought recovery 
through regulated rates. The Commission likewise has historical 
experience with similar assessments of safety and security measures 
raised in the IPCS context specifically. Our conclusion that section 
3(b)(2) of the Martha Wright-Reed Act simply informs how we approach 
our traditional rate-setting function--rather than establishing some 
kind of unique or anomalous approach specific to safety and security--
flows from the statutory text and context, along with the relevant 
regulatory history that served as the backdrop to the Martha Wright-
Reed Act.
    356. In 2023, the Commission sought comment on the meaning of 
``shall consider'' as used in section 3(b)(2) of the Martha Wright-Reed 
Act, and on what discretion, if any, that phrase gives the Commission 
in its ratemaking determinations. We agree with Pay Tel that the word 
``shall,'' is mandatory, not permissive, such that we ``must consider 
costs associated with necessary safety and security measures in setting 
just and reasonable rates.'' We conclude that the requirement that we 
``consider'' the costs of safety and security measures means that we 
must ``reach . . . express and reasoned conclusion[s]'' regarding such 
costs--as relevant here, as part of the process of determining just and 
reasonable rates for IPCS. Consistent with prior interpretations of 
similar statutory language, we do not read section 3(b)(2) of the 
Martha Wright-Reed Act as a directive mandating the recovery of the 
costs of all safety and security measures identified by providers or 
facilities; or as inherently requiring the Commission ``to give any 
specific weight'' to such costs as a statutory matter. Instead, the 
text of that provision merely requires us to examine available evidence 
regarding ``costs associated with any safety and security measures 
necessary to provide'' IPCS along with the various other cost claims we 
review as part of our overall approach to ensuring just and reasonable 
rates and charges for IPCS that also yield fair compensation for 
providers. Contrary to the National Sheriffs' Association's 
characterization of 2023, nowhere in that Notice did we interpret 
``consider'' to mean that we are ``required to treat all safety and 
security costs identified by providers . . . as costs recoverable 
through rates for communications services for incarcerated people.'' 
Rather, the Commission sought comment on

[[Page 77308]]

whether such an interpretation would be appropriate, or whether 
another, contrary interpretation would be correct.
    357. Commenters generally support this interpretation. As the 
Public Interest Parties explain, Congress did not say that the 
Commission `must include' or `shall allow for the recovery of' the 
safety and security costs claimed by IPCS providers. Instead, it 
deferred to the Commission's expertise and discretion, requiring only 
that it consider costs associated with safety and security measures 
when developing rate caps. While the Commission must therefore consider 
these costs, it is plainly not obligated to pass them through in the 
rate caps ultimately adopted.
    We agree with these views.
    358. Our interpretation of section 3(b)(2) is reinforced by the 
broader statutory context. In particular, section 4 of the Martha 
Wright-Reed Act provides that nothing in that Act ``shall be construed 
to . . . prohibit the implementation of any safety and security 
measures related to [IPCS] services at [correctional] facilities.'' As 
we explain above, when read together, section 3(b)(2) of the Martha 
Wright-Reed Act is best understood as merely requiring the Commission 
to evaluate such costs as part of its just and reasonable rate 
analysis, while section 4 simply makes clear that, in directing the 
Commission to develop a compensation plan to ensure just and reasonable 
IPCS rates and charges, Congress did not intend to prohibit 
correctional institutions from adopting policies that, in their 
judgment, are needed to preserve safety and security.
    359. Our understanding of section 3(b)(2) harmonizes it with the 
broader regulatory history here, as well. Considering costs associated 
with any safety and security measures necessary to provide IPCS as part 
of our used and useful analysis reflects a continuation of the sort of 
analyses the Commission has long undertaken in the IPCS context. And 
even apart from that particular sort of evaluation, the Commission 
otherwise also has long been involved in assessing the technological 
relationship between communications service and safety and security 
measures associated with IPCS. For example, in the 2013 ICS Order, the 
Commission explained that it would ``likely'' find it appropriate to 
include costs--including some safety and security costs--``that are 
closely related to the provision of interstate ICS'' in setting rates. 
And, in 2021, to help it determine the extent to which certain security 
and surveillance costs may be recovered through calling services rates, 
the Commission sought comment on the ``types of security and 
surveillance functions, if any, [that] are appropriately and directly 
related to inmate calling.'' Thus, the focus of the Commission's 
inquiry has been to identify costs associated with safety and security 
measures that have a sufficient nexus to IPCS to justify recovery of 
the relevant costs or expenses through IPCS rates.
    360. The Commission's evaluation of the nexus between safety and 
security measures and the provision of IPCS evolved over time as the 
industry's use of such measures increased. The Commission also has 
grappled with limited data and record comment in attempting these 
analyses. For instance, in setting interim rate caps in the 2021 ICS 
Order, the Commission recognized that the record then before it made it 
impossible to determine the extent to which security and surveillance 
costs should be recovered through inmate calling services rates. The 
Commission therefore sought comment in 2021 on the extent to which the 
services that providers and facilities had identified as security-
related services should ``be deemed to be general security services 
that are added onto inmate calling services but not actually necessary 
to the provision of the calling service itself.'' The Commission also 
sought comment in that Notice on methodologies that would help it 
isolate and quantify ``calling-related security and surveillance costs 
from general security and surveillance costs'' that providers and 
facilities incur. In 2022 the Commission reiterated its requests for 
comment that would help it identify, and quantify, the distinction 
between safety and security measures directly related to the provision 
of communications services in correctional institutions and the general 
provision of safety and security in those institutions.
    361. In sum, we read section 3(b)(2) simply to direct the 
Commission to evaluate the evidence before it regarding the costs 
associated with any safety and security measures necessary to provide 
IPCS and make a reasoned judgment about whether and to what extent such 
costs should be included in just and reasonable IPCS rates, consistent 
with fair compensation for providers. This flows from the statutory 
text and context, and represents a continuation of the ratemaking role 
the Commission long has played in this context (and others).
    362. In light of what we see as the best reading of section 3(b)(2) 
of the Martha Wright-Reed Act, we are unpersuaded by arguments that, as 
a statutory matter, we must allow recovery of all costs associated with 
safety and security measures in IPCS rates. Some commenters 
misunderstand section 3(b)(2) and argue that all safety and security 
measures a facility identifies are automatically necessary and 
recoverable through regulated rates by virtue of being selected by 
``experts.'' The National Sheriffs' Association argues that ``[t]he 
fact that a security or safety measure is implemented in connection 
with IPCS service makes it a recoverable cost.'' We disagree with these 
contentions. Although section 3(b)(2) requires the Commission to 
``consider'' costs associated with safety and security measures 
necessary in providing IPCS when determining just and reasonable rates, 
commenters do not persuasively demonstrate that, as a textual matter, 
this requires more than evaluating the available information in the 
record and reaching a reasoned decision. Consequently, we reject 
commenters' contrary interpretations insofar as they would, as a 
statutory matter, necessarily require recovery through regulated IPCS 
rates of all costs of safety and security measures ``necessary'' within 
the meaning of section 3(b)(2), irrespective of the specific basis for 
that ``necessary'' determination--whether giving preclusive weight to 
correctional facilities' judgements, or some other level of weight, or 
making the determination on other grounds. And as discussed above, our 
reading of section 3(b)(2) best accords with the statutory context and 
the relevant regulatory history. Indeed, contrary arguments would 
require us to interpret section 3(b)(2) as establishing an anomalous 
approach to ratemaking under the Communications Act that would, at 
least with respect to the costs of safety and security measures, 
effectively eliminate the role Congress intended the Commission to play 
in determining just and reasonable rates and, instead, place that role 
in the hands of the providers and facilities. While correctional 
authorities certainly have expertise on safety and security as a 
general matter, Congress has not vested the authority in them to decide 
which safety and security costs should be recoverable in IPCS rates--
and a contrary reading of section 3(b)(2) that took the issue of safety 
and security cost recovery through regulated IPCS rates out of the 
Commission's hands and placed it in the control of providers and 
facilities would raise private nondelegation concerns. The Constitution 
limits the government's ability to empower a private entity ``to 
regulate the affairs'' of other private parties. The Constitution

[[Page 77309]]

permits such an assignment of authority only if the entity 
``function[s] subordinately'' to a federal agency and is subject to the 
agency's ``authority and surveillance.'' Of course, correctional 
authorities remain free to determine and implement whatever safety and 
security measures they deem appropriate at the correctional facility. 
Contrary to assertions made by FDC, nothing in the Report and Order 
prevents facilities from implementing the safety and security measures 
of their choice. But under the statutory scheme, it is for the 
Commission to determine any extent to which the costs of such measures 
are recoverable through regulated IPCS rates. We consequently reject 
arguments that section 3(b)(2) of the Martha Wright-Reed Act requires 
recovery of all costs associated with safety and security measures in 
regulated IPCS rates.
(ii) The Scope of ``Safety and Security Measures'' Under Section 
3(b)(2) of the Martha Wright-Reed Act
    363. Section 3(b)(2) of the Martha Wright-Reed Act requires us to 
consider costs ``associated with any safety and security measures 
necessary to provide'' IPCS. In 2023, the Commission sought comment on 
whether it ``should interpret the Martha Wright-Reed Act's use of the 
term `safety and security' as having the same or different meaning as 
the term `security and surveillance' previously used in this 
proceeding.'' The Commission has at different times variously referred 
to the universe of measures at issue as ``security measures,'' 
``security features,'' ``monitoring,'' ``security monitoring,'' and 
``security and surveillance.'' The record before us is mixed. One 
commenter suggests that ``safety and security'' differs from ``security 
and surveillance'' such that ``it relieves the Commission of 
considering surveillance measures at all.'' Others argue that ``[t]he 
Commission should not interpret `safety and security' to mean something 
different than the term `security and surveillance' previously used in 
the Commission's IPCS proceedings.''
    364. We find that the best interpretation of the two phrases is 
that the ``security and surveillance'' measures of the sort that 
historically have been the focus of this proceeding fall within the 
scope of ``safety and security'' measures under section 3(b)(2), and 
that we need not go further at this time to more precisely define 
whether the two phrases are coextensive. The services previously at 
issue in the Inmate Calling Services proceeding, such as call blocking, 
recording, and monitoring, are now before us for consideration, and fit 
within the scope of ``safety and security.'' Although there is no 
express reference to ``surveillance'' measures in section 3(b)(2), the 
Commission not only has considered such costs in the proceedings that 
formed the backdrop for the Martha Wright-Reed Act, but at times 
suggested that ``security and surveillance'' measures collectively 
could be seen as involving ``security.'' Against that backdrop--and 
absent more detailed textual arguments that the language ``safety and 
security'' should not be read to encompass surveillance of the sort we 
historically have considered--we find such surveillance measures fall 
within the scope of ``safety and security measures'' under section 
3(b)(2) of the Martha Wright-Reed Act. Because we do, in fact, consider 
the relevant cost evidence in the record here that even arguably could 
fall within the scope of costs of ``safety and security measures'' 
under section 3(b)(2), we find it unnecessary to more precisely define 
the ultimate scope and contours of that statutory language at this 
time.
(iii) Which ``Safety and Security Measures'' Are ``Necessary To 
Provide'' IPCS Under Section 3(b)(2) of the Martha Wright-Reed Act
    365. Section 3(b)(2) of the Martha Wright-Reed Act mandates that, 
in ``promulgating regulations necessary to implement this Act and the 
amendments made by this Act'' and ``determining just and reasonable 
rates,'' the Commission ``shall consider costs associated with any 
safety and security measures necessary to provide'' IPCS. In 2023, the 
Commission requested comment on how it should interpret the term 
``necessary.'' Consistent with judicial precedent interpreting other 
statutory uses of the term ``necessary,'' we interpret the term 
``necessary'' in section 3(b)(2) to mean ``that which is required to 
achieve a desired goal.'' Commenters generally support this 
interpretation. Commenters rely on both judicial precedent and 
dictionary definitions of the term ``necessary.''
    366. Securus points out that this interpretation of ``necessary'' 
``requires identification of a desired goal.'' We agree and find that 
the Martha Wright-Reed Act identifies the ``desired goal.'' In 
pertinent part, section 3(b) of the Martha Wright-Reed Act states that 
in ``determining just and reasonable rates,'' the Commission ``shall 
consider costs associated with any safety and security measures 
necessary to provide'' IPCS. Those IPCS services, in turn, are 
``telephone service and advanced communications services.'' Based on 
this language, we conclude that, for a safety and security measure to 
be necessary, it must be required ``for the provision of telephone 
service and advanced communications services to incarcerated people.'' 
In other words, for a safety and security measure to be necessary, it 
must be required for the provision of communications services in 
correctional institutions.
    367. Some commenters claim that the goal of safety and security 
measures ``is to prevent communications services from being used to 
commit or facilitate potential crimes, fraud, or other abuses.'' 
Commenters focusing on the relationship between safety and security 
measures and the commission of crimes using IPCS fail to acknowledge 
the benefits that increased communications have on the incarcerated 
population and the resulting impact on facility safety. We do not 
dispute, and indeed the Commission has long recognized, that 
communications services for incarcerated people occur in a unique 
context that ``implicate[] important security concerns.'' To that end, 
the Commission has recognized that there are certain features that 
ensure these communications services are available to incarcerated 
people and can be used safely. The Martha Wright-Reed Act envisions 
such an outcome by directing the Commission to consider safety and 
security measures ``necessary to provide'' communications services ``in 
correctional institutions.''
    368. We part ways with ViaPath and other commenters who assert that 
all safety and security measures are necessary to provide IPCS. The 
Act's use of the limiting term ``necessary'' implies that Congress did 
not intend all safety and security measures would be treated as 
necessary but rather implicitly suggests some limitation on the scope 
of measures the Commission is to consider. Thus, while we do not 
dispute the notion that the general goal of safety and security 
measures is to ensure that IPCS are used safely, it does not follow 
that any and all safety and security measures are necessary to achieve 
that goal as Securus and others would suggest. We find certain 
commenters' invocation of ``contraband devices'' in connection with its 
discussion of safety and security for IPCS to be inapt. The issue of 
contraband devices in correctional institutions is the subject of a 
separate proceeding at the Commission and is unrelated to our 
implementation of the Martha Wright-Reed Act or the consideration of 
the costs of necessary safety and security measures for inclusion in 
just and reasonable rates for IPCS. Nevertheless, the record suggests 
that one of reasons for the proliferation of contraband devices are the 
high IPCS

[[Page 77310]]

rates that the families of incarcerated people cannot afford to pay. We 
similarly find inapposite the National Sheriffs' Association's 
contention that because ``security and safety measures protect inmates 
by reducing crime within the facility,'' such services are necessarily 
related to the provision of IPCS. Finally, we find inapposite some 
providers' contentions that the Commission has rejected the protection 
of the public as a permissible safety and security function. While 
section 1 of the Communications Act makes clear that the Commission was 
created to promote the public safety, among other purposes, those other 
purposes include ``mak[ing] available, so far as possible . . . 
communication service . . . at reasonable charges'' and promoting ``the 
national defense.'' It does not follow that in mandating that we ensure 
just and reasonable rates and charges for all incarcerated people's 
communication services and that we promote the ``widespread deployment 
of payphone services to the benefit of the general public,'' Congress 
intended that IPCS consumers should finance any measure that generally 
promotes public safety or the national defense. Instead, we think that 
Congress intended a narrower focus, one in which we determine which 
costs IPCS consumers can justly and reasonably be required to finance. 
That type of determination is one well known to the Commission and 
under which we must evaluate different types of capital costs and 
expenses to determine which are recoverable through regulated rates.
    369. Although commenters that address the interplay between the 
``necessary'' standard and ``used and useful'' framework contend that 
``necessary'' is more limited than ``used and useful,'' we need not 
resolve that ultimate interplay here. Although we agree with commenters 
that GTE Serv. Corp. is relevant precedent regarding the interpretation 
of the term ``necessary'' in a statute, we are not persuaded that it 
resolves the question of the interplay between ``necessary'' in section 
3(b)(2) of the Martha Wright-Reed Act and the ``used and useful'' 
standard we employ when setting just and reasonable rates. We see no 
indication on the face of that opinion that the Commission's use of the 
terminology ``used or useful'' in assessing whether collocation 
obligations should apply under section 251(c)(6) of the Communications 
Act was intended to draw upon, or overlap with, the ``used and useful'' 
analysis historically employed in the ratemaking context. 
Independently, the D.C. Circuit subsequently has read GTE Serv. Corp. 
(as well as Iowa Util. Board) as fully consistent with the notion that 
the statutory context is relevant when interpreting the term 
``necessary.'' And without definitively resolving the interplay of 
terms, we note that in a statutory context where Congress has directed 
the Commission to merely ``consider'' certain costs when setting just 
and reasonable rates, it would not be an absurd result for the universe 
of costs subject to consideration to be broader than the universe of 
costs ultimately allowed for recovery in regulated rates. Thus, 
although we find GTE Serv. Corp. to be relevant to the interpretation 
of ``necessary'' in a general way, we are not currently persuaded to 
rely on it in the more specific manner that some commenters have 
advocated. We disagree with Securus's claim that by not reaching a 
determination on which safety and security costs are ``necessary'' to 
the provision of IPCS, we have somehow ``render[ed] the entire 
`necessary' provision found at section 3(b)(2) of the MWR Act 
superfluous.'' As we have just explained, by considering all safety and 
security costs, it necessarily follows that we have complied with the 
Martha Wright-Reed Act's mandate that we ``consider costs associated 
with any safety and security measures necessary to provide'' IPCS in 
setting just and reasonable rates. Our mode of ``considering'' such 
costs via the ``used and useful'' framework thus is distinct from the 
identification of the universe costs to be considered in the first 
instance--and our approach therefore does not conflate the terms 
``necessary'' and ``used and useful'' as Securus contends. Consistent 
with our conclusion in the prior section regarding the interpretation 
of ``safety and security,'' we have no need to more precisely define 
the ultimate scope and contours of the statutory language ``necessary'' 
at this time because we do, in fact, consider the relevant cost 
evidence in the record here that even arguably could fall within the 
scope of costs of safety and security measures required to be 
considered as ``necessary'' under section 3(b)(2). Stated differently, 
the cost of any safety and security measure that even arguably could be 
viewed as necessary to the provision of IPCS--under any understanding 
of ``necessary''--is a cost that we evaluate, and reach a reasoned 
decision about, under the used and useful framework that we employ to 
determine just and reasonable IPCS rates in the Report and Order. 
Because we evaluate the costs of all safety and security measures that 
could arguably fall within the scope of the term ``necessary,'' we do 
not opine on the necessity of safety and security measures that 
correctional facilities may implement.
(iv) Consideration of Safety and Security Costs Under the Used and 
Useful Framework
    370. While section 3(b)(2) of the Martha Wright-Reed Act requires 
us to ``consider'' certain safety and security costs when determining 
just and reasonable rates, as we explain above, we employ the ``used 
and useful'' framework to determine what costs and expenses can be 
recovered through just and reasonable IPCS rates. Consequently, our 
consideration of safety and security costs as required by section 
3(b)(2)--and with respect to other safety and security costs raised in 
the record--occurs within the context of that ``used and useful'' 
analysis. In particular, we rely on the ``used and useful'' framework 
and its associated prudent expenditure standard to assess which costs 
should be included in the rate caps we adopt to determine just and 
reasonable IPCS rates. In applying the used and useful standard, we 
consider whether a cost ``promotes customer benefits, or is primarily 
for the benefit of the carrier,'' as well as whether that cost was 
prudently incurred. There are several elements of the Commission's used 
and useful analysis. First, the Commission considers the need to 
compensate providers ``for the use of their property and expenses 
incurred in providing the regulated service.'' Second, the Commission 
looks to the ``equitable principle that ratepayers should not be forced 
to pay a return except on investments that can be shown to benefit 
them.'' In this regard, the Commission considers ``whether the expense 
was necessary to the provision of'' the services subject to the ``just 
and reasonable'' standard. And third, the Commission considers 
``whether a carrier's investments and expenses were prudent (rather 
than excessive).'' We note that in considering whether expenses are 
``necessary to the provision of'' the services subject to the ``just 
and reasonable standard,'' the used and useful framework accords with 
the Commission's prior analysis of safety and security measures which 
sought to determine the extent to which those measures were ``directly 
related to the provision of IPCS.''
    371. Since 2002, the Commission has recognized the need to 
``balance the laudable goal of making calling services available to 
inmates at reasonable rates, so that they may contact their families

[[Page 77311]]

and attorneys, with necessary security measures and costs related to 
those measures.'' Security measures that might have ``the unintended, 
and perhaps unnecessary, effect of increasing the costs incurred by 
inmates and their families'' have long concerned the Commission, as has 
the lack of data to properly analyze these costs. For years, 
stakeholders have debated whether various safety and security measures 
are part of inmate calling services, as certain providers and the 
National Sheriffs' Association contend, or are ``not related to the 
provision of communication service'' and of ``no benefit to 
consumers.'' Prior deficiencies in the record, including the absence of 
any meaningful data on the costs incurred in providing safety and 
security measures, have prevented the Commission from determining the 
extent to which safety and security costs may be recovered through 
inmate calling services rates.
    372. We now have a sufficiently robust record to apply the used and 
useful framework for the first time to the safety and security measures 
that providers and the National Sheriffs' Association claim are part of 
IPCS and to quantify, to the extent the data permit, the costs 
providers and facilities incur in implementing those safety and 
security measures. Though far from perfect, that record allows us to 
establish zones of reasonableness that capture, for each rate cap tier, 
the approximate range within which the providers' and facilities' used 
and useful safety and security fall. The record provides discrete data 
on the costs providers claim to incur in providing seven categories of 
safety and security measures and allows us to make reasoned decisions 
about whether the measures in each category are generally used and 
useful in the provision of IPCS. And the record allows us to compensate 
for the imprecisions in the data before us--regarding both providers' 
and facilities' costs of providing used and useful safety and security 
measures--in selecting ``just and reasonable'' rate caps from within 
the zones of reasonableness. The record before us now thus provides far 
greater detail on the nature and purposes of the safety and security 
measures that providers deploy, the extent of that deployment, and the 
measures' underlying costs than was previously available to the 
Commission. Consistent with this expanded record, our analysis builds 
upon and, in certain instances where appropriate, departs from the 
Commission's prior analyses of safety and security measures in the 
inmate calling services context.
    373. As discussed below, application of the used and useful 
framework to the safety and security costs that providers and the 
National Sheriffs' Association claim are IPCS costs helps us balance 
the need to ensure reasonable recovery of providers' investments and 
expenses used in providing IPCS with the requirement that we provide 
for recovery through regulated rates when the costs incurred are used 
and useful to the provision of IPCS and therefore promote customer 
benefits. Securus criticizes the Commission's application of the used 
and useful framework to safety and security costs as being solely 
focused on whether a given cost or expense benefits IPCS consumers. We 
disagree. As previously explained, application of the used and useful 
framework balances the need to ensure that IPCS providers receive 
reasonable recovery of their investments and expenses in providing IPCS 
with the need to ensure that ratepayers bear only the costs of 
providing the regulated service to them. This is what we do here in 
evaluating all of the safety and security costs IPCS providers have 
reported and determining the extent to which tasks associated with 
those costs provide a benefit to IPCS consumers such that they may be 
recovered through regulated rates. In allowing, within the limits of 
the record before us, only those investments and expenses which are 
used and useful to be recovered from ratepayers, we ``ensure that 
current ratepayers bear only legitimate costs of providing service to 
them.'' As one commenter explains, ``[t]he Commission has applied the 
used and useful standard for decades when considering whether a 
provider can recover costs for an asset or service, or in this case, 
necessary safety and security measures.'' This is particularly relevant 
with regard to the safety and security measures that providers furnish 
pursuant to their contracts with correctional institutions, the 
purposes and scope of which have evolved from simply facilitating the 
provision of voice communications in correctional institutions to 
broader measures designed to detect potential criminal activity and 
enforce the criminal laws, among other non-communications purposes. For 
example, in responses to the 2023 Mandatory Data Collection, when asked 
to describe various safety and security measures, providers explain how 
these measures assist law enforcement in investigating potential 
criminal activity and building cases, create reports for facilities and 
law enforcement, analyze data, and store records for use in court. 
Securus makes clear that its subpoena and warrant services respond to 
requests by ``prosecutors, investigators, district attorneys, police 
officers, [and] detectives.''
    374. The record is replete with examples of costly services that 
are unrelated (or only marginally related) to providing IPCS and thus 
provide no (or only marginal) benefits to ratepayers in their capacity 
as consumers of IPCS. Safety and security measures that do not 
facilitate the provision of underlying communications services in 
correctional institutions are not used and useful. While law 
enforcement, correctional facilities, and the public at large may 
benefit from these measures, the Martha Wright-Reed Act mandates that 
we ensure just and reasonable IPCS rates for incarcerated people and 
their loved ones. Allowing the costs of measures that are not used and 
useful in the provision of IPCS to be recovered through IPCS rates 
would be inconsistent with that mandate. Similarly, the costs of safety 
and security measures that provide a dual purpose--that are both used 
and useful in providing IPCS and in furthering another purpose--should 
be borne by both ratepayers and facilities.
    375. Although the Commission has historically recognized that 
safety and security measures were, at least in some sense, inherent in 
providing communications services for incarcerated people, it has been 
clear from the outset that only certain safety and security costs 
should be recovered through regulated rates. In the 2013 ICS Order, for 
example, the Commission determined that recovery of the costs of safety 
and security measures should be limited to ``costs that are reasonably 
and directly related to the provision of ICS'' and indicated that such 
recovery ``would likely include . . . costs associated with security 
features relating to the provision of ICS,'' but that ``costs relating 
to general security features of the correctional facility unrelated to 
ICS'' would be excluded. This dichotomy has remained a staple of 
Commission decisions attempting to ``balance[e] the unique security 
needs related to providing telecommunications service in correctional 
institutions,'' with the statutory requirements of fair compensation 
for providers, and, to the extent interstate and international audio 
services were involved, just and reasonable rates for consumers and 
providers. The Commission did not then and has not since made a 
determination of which safety and security measure

[[Page 77312]]

costs should be recoverable in IPCS rates. We therefore reject 
Securus's suggestion that ``Commission precedent is crystal clear that 
the costs of safety and security measures such as recording, 
monitoring, biometrics, and related services are inherent in the 
provision of communications services to the incarcerated.'' The mandate 
in section 276(b)(1)(A) that we ensure just and reasonable rates for 
consumers, in conjunction with the Martha Wright-Reed Act's 
requirements that we consider safety and security costs ``necessary'' 
to the provision of IPCS, requires that we reevaluate this precedent at 
any rate.
    376. In arguing that all safety and security costs must be 
recoverable through IPCS rates, some commenters ignore the context of 
the Commission's prior discussion of safety and security measures. 
Instead, they rely on the fact that the Commission has previously 
recognized the relationship between safety and security measures and 
IPCS, but ignore that this relationship was always predicated on a 
direct link to the provision of the underlying communications service. 
Thus, while the Commission has previously recognized that 
communications services for incarcerated people ``implicate[ ] 
important security concerns,'' and that ``costs associated with 
security features relating to the provision of ICS'' may constitute 
recoverable costs, the Commission has never concluded that the costs of 
all--or even a substantial portion--of the safety and security measures 
that providers often voluntarily choose to offer or correctional 
facilities may choose to require should be recovered from consumers. On 
the contrary, while the precise formulation for inclusion has varied, 
Commission precedent establishes that only the costs of those safety 
and security measures with a sufficient nexus to the provision of IPCS 
should be recovered through inmate calling services rates. Allowing 
recovery of the costs associated with all safety and security measures 
that providers decide to offer or that facilities choose to deploy 
would be inconsistent with that precedent and, more broadly, with the 
requirement that our compensation plan for IPCS ensure ``just and 
reasonable'' rates and charges.
    377. We similarly find overbroad Securus's suggestion that we must 
``include safety and security costs in IPCS rates absent a finding that 
those costs bear no relation to the provision of telephone or video 
services.'' As an initial matter, nothing in the statute suggests such 
a presumption. In fact, the statute implies the opposite--while it 
requires the Commission to consider these costs, in doing so, it gives 
the Commission latitude to exercise its judgment regarding the ultimate 
just and reasonable rate determination. Thus, we agree with Securus 
that the Commission does not have ``unfettered discretion to reject 
necessary costs.'' And we do not reject any necessary costs that also 
satisfy the used and useful standard. As we explain above, we consider 
all cost evidence in the record regarding any safety and security 
measures that could be viewed as necessary to the provision of IPCS, 
under any understanding of the term ``necessary.'' We evaluate those 
costs under our traditional used and useful ratemaking standard to 
determine the extent to which those costs are recoverable from IPCS 
consumers through regulated rates. Securus's approach also incorrectly 
presumes that any cost that a provider or a correctional institution 
reports as having been incurred for safety and security measures must 
automatically be included in our rate cap calculations. We find instead 
that those calculations should reflect, to the extent the record 
permits us to make such a determination, only those costs that we 
affirmatively find are used and useful in the provision of IPCS. More 
fundamentally, Securus's test would require IPCS consumers to bear the 
full costs of safety and security measures that are not directly 
related to the provision of IPCS, but rather are more related to the 
costs of incarceration generally, or are used principally for broader 
law enforcement or investigative purposes.
    378. To the extent correctional facilities contract with IPCS 
providers for safety and security measures that do not facilitate the 
provision of communications services, the costs of those measures 
should not be passed on to IPCS consumers. We find overbroad the 
National Sheriffs' Association's argument that because jails generally 
have statutory obligations that require safety and security measures, 
that it necessarily follows that IPCS consumers must bear the cost of 
such measures. For example, the National Sheriff's Association 
concludes that because the Death in Custody Reporting Act requires 
facilities to ``report on the circumstances surrounding the death of an 
incarcerated person (such as whether the cause of death was mental 
health related),'' and because monitoring IPCS may identify persons 
having mental health crises that could lead to suicide, IPCS consumers 
must therefore pay for all safety and security costs related to 
monitoring. As discussed above, facilities' obligation to care for the 
safety and wellbeing of incarcerated people, as well as comply with 
statutes that are unrelated to the provision of communications, are the 
responsibility of facilities--as are the costs associated with such 
obligations. IPCS consumers are not required to shoulder the burden of 
paying for each and every facility cost whether related to the 
provision of communications or not. For similar reasons, we find 
inapposite some commenters' argument that not allowing the recovery of 
certain safety and security costs through IPCS rates would necessarily 
lead to ``increased taxes or an unnecessary reallocation of general 
funds.'' Aside from the speculative nature of this claim, we have 
explained why IPCS consumers should not bear the cost of services that 
are unrelated to the provision of IPCS, nor should they be responsible 
for services whose purpose is to serve law enforcement. For example, 
customized reports for correctional facilities, long term storage of 
recordings of communications, creating searchable databases of these 
recordings, and voice biometrics that are used for law enforcement 
purposes are measures that facilitate law enforcement but are not 
required to restrict communications to permitted individuals. If they 
were unavailable, incarcerated people would still be able to place 
telephone calls or use advanced communications because these safety and 
security measures serve almost exclusively law enforcement functions. 
As the United Church of Christ and Public Knowledge explain, ``[t]he 
customer of carceral functions is the carceral institution. The 
customers of the communication are the two people using a service to 
communicate with each other.'' Services that serve predominately law 
enforcement purposes provide only marginal benefits to incarcerated 
people and their families in their use of IPCS, and only a small 
portion of the costs of those services are used and useful in the 
provision of IPCS. The bulk of those costs related to incarceration, 
generally--like feeding and housing--and, like those costs, cannot 
justly and reasonably be imposed on incarcerated persons and their 
loved ones. Correctional facilities are free to adopt any safety and 
security measures they deem appropriate, but may not rely on IPCS 
ratepayers to defray all the costs providers and facilities incur in 
providing those measures. Instead, only the used and useful portion of 
those costs should be recovered through IPCS rates.

[[Page 77313]]

    379. Some commenters raise concerns that the used and useful 
standard is inappropriate specifically when applied to safety and 
security measures. We disagree. We are not persuaded that the 
application of the used and useful standard to safety and security 
costs would prohibit facilities' implementation of safety and security 
measures in violation of section 4 of the Martha Wright-Reed Act. 
Rather, we find that this argument conflates our authority over what 
the facility and its service providers may charge ratepayers with the 
facilities' authority over what safety and security measures ``the 
facility and its service providers may choose to employ at their own 
expense.'' Although section 4 of the Martha Wright-Reed Act bars the 
Commission from prohibiting safety and security measures related to 
IPCS in correctional facilities, nothing in the Martha Wright-Reed Act 
requires that IPCS consumers pay for such measures through IPCS rates. 
To the contrary, section 3(b)(2) of that Act indicates otherwise by 
obliging the Commission merely to ``consider'' such costs without 
requiring a particular outcome. While our rate-making process may 
result in changing how some of those measures are funded, our 
application of the used and useful framework in discharging this 
mandate simply does not prohibit correctional officials, law 
enforcement officials, or IPCS providers from implementing any safety 
and security measures at any correctional facility. Correctional 
facilities remain free to implement any safety and security measures of 
their choosing; they just cannot expect the IPCS consumer to bear the 
cost of all of those choices. The National Sheriffs' Association, in 
its arguments against relying on the used and useful standard, suggests 
that instead, ``the principle of cost causation, which states that 
those who cause costs should pay for them'' should be used. The 
National Sheriffs' Association argues that, for example, if a crime is 
committed using IPCS, the incarcerated person should pay for all 
related safety and security costs because without IPCS, the crime could 
not have been committed. The Commission has previously rejected such 
unpersuasive ``but for'' arguments, most recently in the Open Internet 
proceeding. The National Sheriffs' Association's logic is flawed. 
Simply because a crime occurred using a phone call does not mean that 
the phone call was the cause of the crime, nor that IPCS consumers are 
responsible for the associated safety and security costs. Law 
enforcement activities are the responsibility of law enforcement. As 
such, the costs associated with those activities are appropriately 
borne by correctional facilities, not IPCS consumers. The used and 
useful framework and cost causation principles both aim at ensuring 
that ratepayers do not bear costs that were not incurred for the 
ratepayers' benefit. Since the sole purpose of many of these safety and 
security measures is to benefit law enforcement, we would allocate the 
costs of these measures to the providers' non-IPCS operations even if 
we were to employ a cost causation approach.
    380. The ``Customer'' Under the Used and Useful Framework. In 
applying the used and useful framework, ``the Commission considers 
whether the investment or expense `promotes customer benefits, or is 
primarily for the benefit of the carrier.' '' In applying that 
framework to IPCS, we make clear that the ``customers'' referred to 
under this analysis are the IPCS ratepayers in their status as 
consumers of communications services in correctional institutions. 
Securus encourages a broader interpretation of ``customer'' that would 
include correctional facilities, as well as ratepayers, because 
correctional facilities are ``necessary part[ies]'' to IPCS. Under this 
logic, the providers themselves would also be included as beneficiaries 
in the used and useful test. It suggests that the Commission has a 
``general responsibility'' to protect the general public and ``ensure a 
safe environment'' for accessing communications services. Pay Tel 
mischaracterizes our rejection of Securus's overbroad interpretation of 
``customer'' as a more general rejection of the need to provide 
appropriate safety and security measures as part of the provision of 
IPCS. As discussed above, and consistent with section 1 of the 
Communications Act, the Commission has long embraced the inclusion of 
safety and security measures as an integral part of the provision of 
IPCS and incorporated the relevant costs in its approach to rates for 
these services. These arguments do not overcome our responsibility here 
where incarcerated people or their loved ones are the ones paying for 
and using IPCS subject to Commission-specified rate regulations. 
Although correctional institutions contract with providers for the 
provision of IPCS, such services are used, and paid for, by 
incarcerated people and their loved ones. As Worth Rises explains, the 
``Commission's duty is to protect IPCS ratepayers and ensure reasonable 
compensation for providers, not to protect the interests and demands of 
non-ratepaying stakeholders.'' We rely on the used and useful framework 
because it balances the ``equitable principle that the ratepayers may 
not fairly be forced to pay a return except on investment which can be 
shown directly to benefit them,'' with ensuring fair compensation for 
providers. It therefore would be inappropriate--and, ultimately 
inconsistent with our mandate to ensure just and reasonable IPCS 
rates--to evaluate safety and security costs under a framework that 
characterized correctional institutions as the customers. There are 
indeed scenarios where the facility or governmental body may be the 
customer in jurisdictions where free calling for incarcerated persons 
has been implemented. That is not the scenario we are addressing in 
this Order. Although Securus is correct that the used and useful 
framework is flexible, it is not all encompassing, and we decline to 
expand that framework to include non-ratepayers. Rather, we rely on 
this flexibility to ensure that IPCS consumers ``bear only legitimate 
costs of providing service to them.''
    381. Our focus on incarcerated people and their loved ones as the 
customers of IPCS has several cross-cutting implications for our 
application of the used and useful standard to safety and security 
measures broadly. For one, safety and security measures that serve 
predominantly law enforcement functions do not yield sufficient (if 
any) benefit to IPCS customers to warrant more than a marginal (or any) 
recovery through just and reasonable IPCS rates. In this vein, in the 
case of safety and security measures that are not universally or nearly 
universally employed by IPCS providers, we are not persuaded that they 
meet the used and useful standard for cost recovery through IPCS rates. 
As explained by the Public Interest Parties, ``safety and security 
features that are not universally used across facilities suggests that 
they cannot be `necessary,' as some providers do offer IPCS without 
needing to use such features.'' Safety and security measures cannot be 
both required to provide IPCS and elective. The National Sheriffs' 
Association unwittingly makes this point by explaining that ``different 
facilities have different security requirements.'' While we agree with 
the National Sheriffs' Association that correctional institutions that 
have relatively large proportions of ``violent offenders'' generally 
impose more extensive safety and security measures that other 
correctional institutions, the record contains no information tying 
those measures specifically to the provision of IPCS. Absent such 
information, we conclude that those

[[Page 77314]]

measures are part of the correctional institutions' overall safety and 
security operations, rather than an essential element of the provision 
of communications services in a correctional environment. Such a focus 
on safety and security measures shown to be deployed on a widespread 
basis makes most sense when setting IPCS rate caps, rather than 
prejudging whether and to what extent less commonly-employed measures 
ultimately might someday be proven of sufficient necessity--and benefit 
to IPCS customers--to warrant recovery in regulated IPCS rates and 
charges. Independently, we conclude that those atypical costs or 
expenses are excessive, and thus imprudent under the ``used and 
useful'' framework, and thus not appropriate for inclusion in regulated 
IPCS rates.
    382. We also find that safety and security features offered solely 
or chiefly to win contracts do not warrant recovery through regulated 
IPCS rates. It is not uncommon for providers responding to requests for 
proposals to offer enhanced safety and security measures that are not 
specifically demanded by the correctional authority. Measures that 
correctional institutions accept for free or in lieu of monetary site 
commissions payments do not become a benefit to IPCS ratepayers by 
virtue of that correctional facility's acceptance. Features not 
included in requests for bids were clearly not considered critical to 
IPCS by the correctional institutions themselves. We find persuasive 
Worth Rises' reasoning that ``[t]he broad spectrum of elective safety 
and security measures that IPCS providers offer'' have ``no 
demonstrated, or at times even articulated, public benefit. These other 
elective measures are nice-to-haves for corrections agencies, law 
enforcement, and prosecutors and vary from agency to agency.'' Indeed, 
we find that the costs of ``safety and security [that] are for the 
benefit of `investigators, correctional administrators, prosecutors, 
and other law enforcement officers''' are not appropriately borne by 
IPCS ratepayers. We note that such features are also not used and 
useful. Our evaluation of the 2023 Mandatory Data Collection responses 
also supports assertions in the record that offering advanced safety 
and security measures has become a chief means by which the largest 
providers dominate the process correctional institutions use to select 
IPCS providers. Indeed, while certain safety and security measures are 
undoubtedly both used and useful in, and necessary for, the provision 
of IPCS, the data raise questions whether and to what extent many of 
the advanced safety and security measures may be more reflective of the 
broken nature of competition in the dysfunctional IPCS marketplace and 
tools certain providers use to gain advantages in winning contracts.
c. Assessing the Costs of Safety and Security Measures
    383. Applying the standards described above, we reach reasoned 
conclusions regarding the safety and security measures that primarily 
benefit consumers and appropriately are included in regulated rates 
under our used and useful analysis. Measures that serve only a law 
enforcement function or provide no benefit to IPCS consumers are not 
used and useful in the provision of IPCS. Costs that are used and 
useful are used to calculate just and reasonable IPCS rate caps. Thus, 
we do not exclude all safety and security costs from our ratemaking 
calculus.
(i) Application of the Used and Useful Framework
    384. We evaluate whether the costs of the seven categories of 
safety and security measures set forth in the 2023 Mandatory Data 
Collection should be included in IPCS rates by applying the used and 
useful framework. As an initial matter, we reiterate that the used and 
useful framework is flexible. Although the Commission has identified 
``general principles regarding what constitutes `used and useful' 
investment,'' it ``has recognized `that these guidelines are general 
and subject to modification, addition, or deletion.'' The Commission 
emphasized that ``[t]he particular facts of each case must be 
ascertained in order to determine what part of a utility's investment 
is used and useful.' '' The Commission ``may, in its reasonable 
discretion, fashion an appropriate resolution that is tailored to the 
specific circumstances before it.'' Moreover, courts typically defer to 
the Commission's discretion on rate-related determinations. Pay Tel 
overlooks this flexibility in arguing we have applied a ``newly-minted 
`user benefit' standard'' in our application of the used and useful 
framework to safety and security measures. As we have explained, the 
used and useful framework, as applied for decades by the Commission in 
its familiar ratemaking functions, is an equitable principle that 
prevents ratepayers from having to pay for costs that are primarily 
incurred for the benefit of the provider, while allowing regulated 
entities to be compensated for providing service. We do not, as Pay Tel 
suggests, depart from these core ratemaking principles in evaluating 
safety and security measures under the used and useful framework here.
    385. Additionally, to account for the facts that the categories of 
safety and security costs in the 2023 Mandatory Data Collection are 
imprecise, and that providers' allocations of their safety and security 
costs are at times inexact among these categories, we evaluate 
categories based on the nature of the preponderance of tasks or 
functions within each category. If the predominant use of tasks and 
functions within a category are not used and useful, the entire 
category will be treated as not used and useful and excluded from the 
lower bound of our zone of reasonableness. In addition to relying on 
this procedure only for setting the lower bound for our range of 
reasonable rates, we also note that we are adopting a waiver process to 
accommodate providers in atypical circumstances that can demonstrate 
grounds for recovery beyond that provided by our rate caps. We 
acknowledge that the nature of safety and security measures is evolving 
such that some measures that we determine are not generally used and 
useful may be ``second or third generation implementations of the same 
measures'' the Commission has found to be used and useful. As we 
explain below, however, our conclusions in this regard are part of the 
larger task of setting IPCS rate caps that are just and reasonable for 
consumers and providers and that afford fair compensation to providers. 
This task necessarily requires us to arrive at a reasonable end result 
based on the record before us. And due to the imprecise nature of the 
categories of safety and security measures and providers' reporting of 
those costs, we find that, based on the record and core ratemaking 
precedent, some costs of safety and security measures are not generally 
used and useful. This is particularly true in situations where 
providers allege that additional safety and security measures are 
necessary to ensure that the safety and security measures we conclude 
are used and useful function properly. We are skeptical of such claims. 
For example, while certain providers claim that voice biometrics 
services can be used to prevent fraud or the circumvention of calling 
restrictions, the record does not indicate that voice biometrics 
services primarily ensure the proper functioning of providers' 
communications security services.
    386. We find two categories of safety and security costs to be 
generally used and useful--Category 1: CALEA compliance measures; and 
Category 3: communications security services. We

[[Page 77315]]

conclude that the remaining five categories of safety and security 
measures should not be treated as used and useful in setting a lower 
bound on the range of reasonable rates. Specifically, categories 2 (law 
enforcement support services); 4 (communication recording services); 5 
(communication monitoring services); 6 (voice biometrics services); and 
7 (other safety and security measures). In particular, in setting IPCS 
rate caps, we include the costs of all safety and security categories 
in the upper bounds of our zones of reasonableness, but include only 
the costs of the two categories found to be generally used and useful 
in the lower bounds of our zones of reasonableness.
    387. We also adjust our rate setting within the zones of 
reasonableness to develop overall rate caps that recognize the 
imprecision of both the seven defined safety and security categories in 
the 2023 Mandatory Data Collection, and the inconsistencies in the 
narrative descriptions and varied allocations made in provider 
responses. Securus overlooks this fact in complaining that the 
Commission relies on the seven defined safety and security categories 
in the 2023 Mandatory Data Collection. To the extent Securus's issue is 
with the seven categories of safety and security measures from the 2023 
Mandatory Data Collection, Securus and other interested parties were 
free at any time, but particularly in response to the Commission's 
Public Notice seeking comment on the 2023 Mandatory Data Collection, to 
propose another method of collecting cost data regarding safety and 
security measures. But Securus did not do so and actually conceded that 
the cost categories the Commission proposed were ``similar to 
categories employed in the Third Mandatory Data Collection.'' To the 
extent IPCS providers did not allocate costs to those seven categories 
(despite being instructed to perform allocations using their best 
estimate), they did so with full knowledge that the Commission would 
use the results of the data collection as a critical part of its 
efforts to fulfill its obligations under the Martha Wright-Reed Act. 
For example, IPCS providers' narrative responses to our request for 
CALEA compliance information revealed confusion regarding which safety 
and security measures were related to CALEA compliance, and few 
providers identified any associated costs. CALEA requires that 
telecommunications carriers and manufacturers of telecommunications 
equipment design their equipment, facilities, and services to ensure 
that they have the necessary surveillance capabilities to comply with 
legal requests for information. Telecommunications carriers must 
``ensure that [they] are capable of accommodating simultaneously the 
number of interceptions, pen registers, and trap and trace devices'' as 
requested by the Attorney General. The Commission has found that 
interconnected VoIP providers also must comply with CALEA requirements. 
However, it appears that some providers have allocated certain 
functions, such as portions of call monitoring and recording, to other 
categories, i.e., Category 4 (communications recording services) and 
Category 5 (communications monitoring services), that likely should 
have been allocated to the CALEA category insofar as they facilitate 
the type of electronic surveillance required by CALEA. As referenced 
above, CALEA was designed to ensure that law enforcement could conduct 
electronic surveillance by requiring telecommunications carriers and 
manufacturers of telecommunications equipment to ensure they have the 
necessary surveillance capabilities. Because we are unable to 
disaggregate the costs reported to these other categories to identify 
precisely which portions of call monitoring and recording costs should 
have been appropriately included in the CALEA category, we account for 
these under-reported CALEA costs in setting our overall rate caps, 
which have been adjusted accordingly. The same is true for safety and 
security measures that providers have described as ``inherent'' or 
built into their systems such that they do not have separate costs to 
allocate. Because our upper and lower bounds include the costs of 
safety and security measures that are inherent in IPCS providers' 
platforms and which serve both IPCS-related and other purposes, we make 
adjustments in setting our rate caps to reasonably attempt to ensure 
that those caps do not over-recover or under-recover the costs of 
safety and security measures.
    388. In sum, we find that this three-step process--including all 
reported safety and security measure costs in our upper bounds, 
including only a portion of those costs in our lower bounds, and taking 
the imprecision of those bounds into account in setting rate caps--
reasonably applies the used and useful framework to the record before 
us. The resulting rate caps--the ``end result'' of our ratemaking--
reflect a balance that recognizes both the merits and shortcomings of 
the commenters' positions on whether the costs of safety and security 
measures should be recovered through IPCS rates. At one end of the 
spectrum, some commenters urge us to set rate caps at levels that would 
allow providers and facilities to recover all (or virtually all) the 
costs they incur in providing safety and security measures. These 
commenters correctly recognize that, for the most part, the safety and 
security measures on which we need to make a judgment contribute toward 
the provision of ``inmate telephone services and advanced 
communications services'' in correctional institutions. But these 
commenters fail to recognize that many of these measures also 
contribute toward other purposes, including law enforcement and 
investigative purposes that are only circumstantially related to the 
provision of IPCS. At the other end of the spectrum, other commenters 
would exclude virtually all safety and security measure costs from our 
ratemaking calculus. These commenters focus on the law enforcement and 
investigative purposes served by the safety and security measures 
before us, while deemphasizing or ignoring the contributions the 
measures make toward the safe provision of IPCS.
    389. We do not adopt either extreme position. Instead, we apply the 
used and useful standard, as articulated in core ratemaking precedent, 
to evaluate all of the arguably recoverable costs in the record, 
including costs associated with safety and security measures, to 
distinguish those costs that should be included in our ratemaking 
calculus from those that should not. In doing so, we arrive at a middle 
ground that properly balances the ``equitable principle that public 
utilities must be compensated for the use of their property in 
providing service to the public'' with the ``[e]qually central . . . 
equitable principle that the ratepayers may not fairly be forced to pay 
a return except on investment which can be shown directly to benefit 
them.''
    390. Contrary to the characterizations of some commenters, our 
actions today, and in particular our actions regarding safety and 
security measures, are about fulfilling our obligation under the Martha 
Wright-Reed Act to adopt a compensation plan for IPCS that ensures just 
and reasonable rates and charges for IPCS consumers and providers and 
fair compensation for IPCS providers. Our actions are not about 
questioning or overriding the judgment of correctional officials or 
``evaluat[ing] the credibility of [correctional officials'] decisions 
regarding safety and security of [their] institutions.'' Nor do our 
actions bar correctional authorities from

[[Page 77316]]

implementing any safety and security measures they deem necessary. Our 
task is a narrow one: to determine the extent to which claimed IPCS 
costs can be recovered through regulated rates charged to consumers. 
And that is exactly what we do in applying bedrock ratemaking precedent 
to evaluate all of the claimed IPCS costs and expenses in the record 
before us to determine the extent to which consumers should bear those 
costs. We reject as unsupported and speculative suggestions that our 
approach to safety and security measures will result in less security 
of IPCS communications generally and will facilitate criminal activity 
using IPCS. We next discuss the application of the used and useful 
standard to each category of safety and security costs.
    391. Category 1: CALEA Compliance Measures. The instructions for 
the 2023 Mandatory Data Collection directed providers to identify and 
describe each of the safety and security measures that they took to 
comply with CALEA. CALEA mandates that certain communications services 
providers ``ensure that [their] equipment, facilities, or services that 
provide a customer or subscriber with the ability to originate, 
terminate, or direct communications are capable of'' intercepting 
communications, providing the Federal government with access call-
identifying information, and delivering intercepted communications and 
call-identifying information to the Federal government. Although we are 
not persuaded that the functionalities associated with CALEA compliance 
generally would directly benefit IPCS users, under the current 
regulatory status quo we nonetheless find that the costs related to 
CALEA compliance measures are used and useful in the provision of IPCS. 
Pay Tel takes issue with the Commission's determination that costs 
associated with CALEA compliance measures are used and useful while 
indicating that these measures generally may not directly benefit IPCS 
consumers. As we note above, however, the used and useful standard is a 
flexible standard, allowing the Commission to ``fashion an appropriate 
resolution that is tailored to the specific circumstances before it.'' 
Here, given the legal obligations associated with CALEA, we determine 
that such costs are used and useful in the provision of IPCS. Pay Tel 
further argues that in the same way CALEA is a legal requirement, IPCS 
providers ``are also required by the facilities which they seek to 
serve to employ a range of safety and security measures.'' This 
argument is unavailing. A requirement imposed by a law passed by 
Congress is quite different from a contractual ``requirement'' that 
results from the commercial negotiations between parties to a contract. 
First, without CALEA compliance, IPCS providers could not offer their 
audio or certain advanced communications services. CALEA requires that 
telecommunications carriers and manufacturers of telecommunications 
equipment design their equipment, facilities, and services to ensure 
that they have the necessary surveillance capabilities to comply with 
legal requests for information. The Commission has found that 
interconnected VoIP providers also must comply with CALEA requirements. 
We thus disagree that IPCS providers, to the extent they provide 
telecommunications services and VoIP services, are exempt from CALEA 
compliance. When the Commission considered payphone providers, 
generally, as exempt from CALEA, the Commission was not intending to 
sweep in those same payphone providers to the extent they were also 
telecommunications services providers or VoIP providers. Contrary to 
Securus's claim that we have departed from Commission precedent without 
proper notice, we are not modifying such precedent. To the extent that 
IPCS providers offer both payphone services and audio communications 
services, including telecommunications services and VoIP, they have 
been, and remain, subject to CALEA requirements. This includes the 
ability to enable the government to monitor and record communications 
``pursuant to a court order or other lawful authorization.'' We note 
that the monitoring and recording requirements associated with CALEA 
are significantly more limited than those services included in 
Categories 4 and 5. We find the costs of those limited monitoring or 
recording services to be used and useful in the provision of IPCS. This 
is in stark contrast to the constant and pervasive communications 
recording and monitoring within correctional facilities for all 
communications--services that far exceed the requirements of CALEA. As 
Worth Rises explains, ``CALEA compliance is required of all 
telecommunications carriers and providers of interconnected voice over 
internet protocol services, not just providers of IPCS.''
    392. Second, under the regulatory status quo the Commission 
previously has held that CALEA compliance costs appropriately can be 
recovered through user charges. In particular, the Commission has 
previously held that telecommunications carriers and interconnected 
VoIP providers ``may absorb the costs of CALEA compliance as a 
necessary cost of doing business, or, where appropriate, recover some 
portion of their CALEA . . . implementation costs from their 
subscribers'' for compliance measures taken after January 1, 1995. To 
the extent IPCS providers obtain transmission services from third 
parties, the rates they pay likely include charges for those third 
parties' CALEA compliance costs.
    393. IPCS providers also may be required to perform discrete tasks 
to comply with CALEA. Any such tasks also facilitate the provision of 
IPCS because IPCS providers must comply with CALEA as a precondition to 
offering audio services and certain advanced communications. We, 
therefore, conclude, based on the record, that costs providers incur as 
a result of CALEA compliance are used and useful in the provision of 
IPCS. Securus argues that the Commission's conclusion that CALEA costs 
are used and useful ``adds nothing to the rate caps'' because providers 
allocated relatively small amounts of such costs to CALEA in the 2023 
Mandatory Data Collection. Simply because providers did not allocate 
significant amounts to CALEA compliance is not a basis on which to 
conclude that such costs are irrelevant to our ratemaking. As noted 
above, we evaluate all safety and security cost data in the record 
before us. For the same reasons, we also conclude that costs IPCS 
providers incur in complying with CALEA are prudently incurred.
    394. Category 2: Law Enforcement Support Services. The instructions 
for the 2023 Mandatory Data Collection directed providers to identify 
and describe each of their safety and security measures that they 
classified as a law enforcement support service. These ``services 
include, but are not limited to, the administration of subpoenas, the 
administration of crime tip lines, the administration of informant 
lines, and the maintenance of data repositories for use by law 
enforcement personnel.'' In their responses to the 2023 Mandatory Data 
Collection, providers identified certain law enforcement support 
services. We find that law enforcement support services are generally 
not used and useful in the provision of IPCS because they do not 
facilitate the provision of IPCS. Rather, as the record makes clear, 
these services are primarily intended to serve law enforcement 
purposes. Providers' own descriptions of their law

[[Page 77317]]

enforcement support services support this conclusion. For example, the 
record shows that such services include tasks such as ``search warrant 
processing'' and ``Freedom of Information Act (FOIA) request 
processing.'' Also included in this category are call transcription 
services, which are primarily used to create databases for law 
enforcement to conduct investigations and assist with case building. 
Some commenters claim these services assist in minimizing crime and 
identifying potential violators, functions that primarily serve law 
enforcement purposes and do not facilitate or enable the provision of 
IPCS. We recognize that some functions within this category may provide 
a benefit to incarcerated people, such as the administration of 
tiplines to anonymously report crimes and connect incarcerated people 
with Prison Rape Elimination Act (PREA) report centers; however, they 
do not facilitate the provision of IPCS and are therefore not used and 
useful in the provision of IPCS. In other words, communications 
services for incarcerated people are able to take place without these 
services and we generally do not find that these functions benefit IPCS 
users in their use of IPCS in a way that makes it equitable for them to 
bear the costs of these functions in regulated IPCS rates.
    395. Category 3: Communications Security Services. The instructions 
for the 2023 Mandatory Data Collection directed providers to identify 
and describe each of their safety and security measures that they 
classified as a communications security service. These ``services 
include, but are not limited to, implementing measures that allow an 
Incarcerated Person to call only certain individuals or numbers; 
implementing measures that limit the individuals or numbers an 
incarcerated person may call; providing personal identification numbers 
(PINs) to incarcerated people; providing disclaimers to called parties 
regarding communication origination; implementing communication-
acceptance procedures; preventing three-way communications; preventing 
chain communications; dual-tone multifrequency detection; manual call 
control for the Facility; tracking frequently called numbers; 
implementing incoming communication restrictions; and fraud 
management.'' In their 2023 Mandatory Data Collection responses, 
providers identified certain communications security services. Based on 
the record, we find that the functions included in the communications 
security services category are generally used and useful in the 
provision of IPCS. Most of the functions that providers classify as 
communications security services are safety and security measures that 
the Commission has traditionally found to be ``inherent'' in 
communications services for incarcerated people. Such functions include 
the development of pre-approved ``allow'' lists, preventing three-way 
communications, and fraud management. These basic functions are 
directly related to the underlying communications service and do not go 
beyond that required to enable or appropriately limit the customer's 
use of the underlying communications service in a correctional 
institution. These basic safety and security functions prevent witness 
tampering and violations of no-contact orders, and protect consumer 
accounts from being used unlawfully. They also benefit consumers of 
IPCS by ensuring that communications services can be safely and 
securely offered in an incarceration setting. Contrary to Securus's 
claim that we ignore the benefits of such safety and security measures 
to ``incarcerated people and their friends and family,'' we recognize 
that the ``establishment of PIN numbers, limiting calls to certain 
preapproved numbers, and preventing call forwarding or three-way 
calling'' are used and useful to the provision of IPCS and are 
recoverable in our rate caps. We find that costs associated with this 
category of basic safety and security measures are generally used and 
useful. At the same time, the record does not provide a reason to 
question the communications security services costs reported in the 
2023 Mandatory Data Collection or otherwise determine them imprudent.
    396. The Commission has long held that there are legitimate reasons 
for certain safety and security measures that facilitate or enable the 
provision of communications services in the correctional environment. 
Services in this category appear to be universally offered by IPCS 
providers and are a standard part of all IPCS offerings. Based on the 
record before us, and consistent with the Commission's previous 
discussions, we find that these communications security services are 
inherent in the provision of IPCS and are the key factors 
distinguishing IPCS communications from those communications of the 
general public, which do not require such services. For example, 
measures such as pre-approved numbers lists, blocking three-way 
communications, and the use of PIN numbers to help ensure that the 
incarcerated individual associated with the account is initiating the 
communication facilitate the provision of communications services in 
correctional institutions by preventing calls to inappropriate parties 
such as judges or witnesses and protecting against fraud. These 
functions are distinguished however from other duplicative and 
expensive functions that go way beyond what is necessary to accomplish 
these objectives and that we consider not used and useful.
    397. One commenter argues that communications security services are 
not used and useful ``as they are designed and intended to restrict the 
access that incarcerated people and their loved ones have to 
communications.'' While we agree that call blocking functionalities 
impose restrictions on who incarcerated people can communicate with, 
such measures are required to facilitate the provision of 
communications services in the carceral setting. As the Commission 
explained in the 2013 ICS Order, ``a disproportionately large 
percentage of ICS-enabled crimes target and victimize vulnerable 
populations consisting of victims, witnesses, jurors, inmates, and 
family members of these individuals.'' We find that the safety and 
security measures included in the communications security services 
category, such as blocking mechanisms and call allow lists, ensure the 
safety and security of IPCS by appropriately balancing the need to 
protect public safety against ensuring that incarcerated people can 
stay connected with their loved ones.
    398. Category 4: Communications Recording Services. The 
instructions for the 2023 Mandatory Data Collection directed providers 
to identify and describe each of their safety and security measures 
that they classified as a communications recording service. These 
category 4 services ``include, but are not limited to, providing a 
disclaimer regarding recording of communications, recording of 
communications, and storage of recorded communications.'' In their 2023 
Mandatory Data Collection responses, providers identified a number of 
specific communications recording services. We find that communications 
recording services included in this category generally are not used and 
useful in the provision of IPCS. These services are primarily used to 
police the contents of all communications or to gather information for 
law enforcement purposes. Providers describe these services as 
including functions such as storing recorded communications, 
transcribing such recordings, and converting recordings into digital

[[Page 77318]]

formats to support investigation and litigation activities. None of 
these services actually facilitate the provision of IPCS. Further, 
certain providers' communications recordings services 
{[REDACTED]{time}  and create downloadable recordings of all IPCS in a 
variety of digital formats. These latter functions are wholly avoidable 
to the provision of communications services in correctional 
institutions and are therefore not used and useful.
    399. Some commenters explain that the cost of storing these 
recordings is ever increasing, particularly for video communications. 
Although the Commission suggested in the 2013 ICS Order that it would 
``likely find the costs of the storage of inmate call recordings'' 
recoverable in the context of those recordings being used in court 
proceedings, the Commission subsequently questioned that position based 
on several factors reflecting the significant evolution of the industry 
since that time. First, the Commission could not have predicted that 
audio recordings would be stored for years or in perpetuity and the 
cost of that storage would be rolled into IPCS consumer rates. Also, 
video communications were not even within the scope of the Commission's 
inmate calling services regulations; nor was the use of video 
communications as prevalent as it is today. Finally, the Commission has 
a considerably more developed perspective on the industry given the 
current, more extensive record, including its recent mandatory data 
collections. With this more complete record and exercising our full 
authority over video communications services consistent with the Martha 
Wright-Reed Act, we are not persuaded that the costs of storing 
communications recordings for which we are not generally including the 
costs of the recordings in the first place, are generally used and 
useful in the provision of IPCS. Similarly, we share Worth Rises's 
concerns that the high cost of storage could incentivize providers to 
``artificially cause calls to drop, which allows them to collect the 
full cost of a video call and save on the storage that full video call 
recording would cost them.'' Nor do we conclude that the rising costs 
of these features justify including them in the rates paid by the IPCS 
consumers.
    400. Next, some providers argue that communications recording 
services facilitate the provision of IPCS. For example, one provider 
explains that it uses ``call recording analysis'' to ensure that 
incarcerated people are not using its communications services to 
intimidate judges and witnesses. Other providers use call recordings to 
verify that the incarcerated person participating in a communication 
was the person whose PIN was used to originate the communication and to 
resolve complaints regarding the charges for specific communications. 
While such uses of communication recording services may be generally 
beneficial, the record contains no evidence to suggest that these 
services actually facilitate the provision of IPCS and are not just 
redundant features to the blocking and PIN number administration 
purposes that we do recognize as recoverable costs. On balance, then, 
we conclude that for the most part these functions suit general law 
enforcement needs rather than providing capabilities necessary or 
beneficial to IPCS ratepayers in their capacity as IPCS users. 
Consequently, we conclude this category generally fails to meet the 
used and useful test. As an independent, alternative basis for our 
decision, to the extent that these features are supplemental ways of 
addressing concerns already addressed by safety and security measures 
the costs of which we have found used and useful above, we conclude 
that incurring these additional costs to serve the same ends are 
excessive as far as IPCS is concerned, and thus imprudent.
    401. Category 5: Communications Monitoring Services. The 
instructions for the 2023 Mandatory Data Collection directed providers 
to identify and describe each of their safety and security measures 
that they classified as a communications monitoring service. These 
services ``include, but are not limited to, live or real-time 
monitoring of communications; automatic word detection; communication 
transcription; and analysis of recordings, which may also include 
keyword searches.'' In their 2023 Mandatory Data Collection responses, 
providers identified a number of specific communications monitoring 
services. We find that communications monitoring services generally are 
not used and useful in the provision of IPCS because they primarily 
serve a law enforcement purpose, not a communications purpose, and they 
generally do not benefit ratepayers in their capacity as consumers of 
IPCS. As the record makes clear, communications monitoring costs are 
``part of carceral functions, not communications functions.'' Indeed, 
IPCS providers ``advertise their surveillance add-ons as 
`investigative' tools `designed to identify potential criminal 
activity.' '' And, despite claiming that ``surveillance fits 
comfortably within the rubric of safety and security measures,'' the 
National Sheriffs' Association acknowledges that ``surveillance is not 
necessarily conducted expressly or solely for safety or security 
purposes.''
    402. One commenter notes that the Commission has previously 
recognized that `` `security features such as call recording and 
monitoring' . . . `advance[ ] the safety and security of the general 
public.' '' The National Sheriffs' Association argues that 
``surveillance fits comfortably within the rubric of safety and 
security measures.'' We find the National Sheriffs' Association's 
reliance on the Second Circuit's decision in Amen to be misplaced. That 
court's finding, after considering the Fourth Amendment, that there is 
a legitimate security concern linked to call monitoring is distinct 
from whether the IPCS consumers must pay for call monitoring costs 
through IPCS rates. For the same reason, we find unpersuasive FDC's 
reliance on other judicial precedent and Florida law for the same 
reason. While we accept as true that the Florida legislature has 
granted FDC jurisdiction over all matters related to correctional 
institutions in Florida, nothing in these cases or Florida law requires 
that IPCS consumers bear the costs of any particular safety and 
security measure that facilities choose to implement. The Commission 
has also described the monitoring of frequently called numbers to 
prevent incarcerated people from ``evad[ing] calling restrictions via 
call-forwarding or three-way calling'' as being part of inmate calling 
services. We are not persuaded by these arguments because these 
statements were based on the record at the time they were made and do 
not reflect the evolution of the industry and the proliferation of such 
services during the course of this proceeding.
    403. The current record, including data and information submitted 
by IPCS providers, reveals that call monitoring has evolved and 
expanded significantly and is now predominantly ``used to aid 
investigations related to detention facilities,'' ``aid corrections 
agencies and law enforcement in `investigation and litigation 
activities,' '' and ``provide[ ] for skilled investigators.'' One 
provider describes its audio monitoring services as including an alert 
system ``mostly configured before the incarcerated person has been 
prosecuted and evidence is still being gathered.'' Not surprisingly, 
the data submitted by IPCS providers demonstrate that communications 
monitoring services have become a significant profit center for at 
least some providers. While communications monitoring services are 
argued to be a tool for keeping

[[Page 77319]]

incarcerated people from calling blocked numbers and from engaging in 
three-way calling, enabling the full recovery of costs for these 
monitoring services would amount to significant over-recovery for 
providers, given that we already include the recovery for the costs of 
providing the call blocking and limitation on three-way calling 
capabilities in our rate caps. We find, on balance, that call 
monitoring services, for the most part, are primarily used for law 
enforcement or investigative purposes, and therefore are generally not 
used and useful in the provision of IPCS. As an independent, 
alternative basis for our decision, to the extent that call monitoring 
services are, in part, used to supplement measures like call blocking 
and limitation on three-way calling capabilities for which we already 
allow recovery, we conclude that incurring these additional costs to 
serve the same ends are excessive as far as IPCS is concerned, and thus 
imprudent.
    404. Category 6: Voice Biometrics Services. The instructions for 
the 2023 Mandatory Data Collection directed providers to identify and 
describe each of their safety and security measures that they 
classified as a voice biometrics service. These category 6 services 
``include, but are not limited to, voice printing, voice 
identification, continuous voice verification, and voice databasing. In 
their 2023 Mandatory Data Collection responses, providers identified a 
number of specific voice biometrics services. We next conclude that 
voice biometrics services are elective safety and security measures 
used predominantly for general law enforcement purposes that do not 
facilitate the provision of IPCS. Inmate calling services pre-date the 
availability of Voice Biometrics. Voice biometrics services are 
likewise not used, or even offered, universally, in many cases being an 
elective feature only. As such, they generally are not used and useful 
in the provision of IPCS. This treatment of voice biometrics services 
is also supported by several commenters that expressly oppose recovery 
of the costs of voice biometrics services through our rate caps.
    405. Certain providers claim that their voice biometrics services 
are used and useful in the provision of IPCS in that they help prevent 
fraud and the circumvention of calling restrictions by preventing 
incarcerated people from passing a call to another person, and they 
help validate that the ``rightful owner of [a] PIN'' is placing the 
call. Some of those same providers, however, also describe using these 
services as furthering more general law enforcement purposes, including 
``generati[ng] targeted investigative leads,'' ``help[ing] 
investigators find correlations among calls,'' and {[REDACTED]{time} . 
Voice biometrics recordings also are subject to being rolled up into 
voice print databases and marketed as a broader investigative tool for 
general law enforcement and surveillance purposes.
    406. As Securus explains, ``[e]arly IPCS was typically provided by 
on-site operators that would handle the approval and connection of 
collect calls placed by incarcerated persons.'' Over time, the market 
for safety and security measures has evolved with one of those 
``advances'' being the development of voice biometrics. The fact that 
IPCS has historically been offered without capabilities like voice 
biometrics undercuts the notion that these capabilities are required 
for the provision of IPCS. And, as Securus notes, demand for features 
like voice biometrics ``has largely been driven by facilities,'' 
suggesting that these measures are elective and do not actually prevent 
consumers from using IPCS if they are not available or used. For these 
reasons, we find that voice biometrics services as a category generally 
are not used and useful in the provision of IPCS. As an independent, 
alternative basis for our decision, to the extent that voice biometrics 
services are, in part, used to supplement fraud prevention and calling 
restriction measures for which we already allow recovery, we conclude 
that incurring these additional costs to serve the same ends are 
excessive as far as IPCS is concerned, and thus imprudent.
    407. Category 7: Other Safety and Security Measures. The 
instructions for the 2023 Mandatory Data Collection directed providers 
to identify and describe each of their safety and security measures 
that were not included in any of the prior six categories. These 
services ``include, but are not limited to, reporting obligations, 
acquisition of patents to support safety and security technologies, and 
research and development of new safety and security technologies.'' In 
their 2023 Mandatory Data Collection responses, providers identified a 
number of specific safety and security measures. We find that other 
safety and security measures as a category are generally not used and 
useful in the provision of IPCS. The instructions to the 2023 Mandatory 
Data Collection established this category as a catch-all category for 
providers to allocate the costs of safety and security measures that 
did not fit into the other categories and to ensure that providers 
reported the costs of all their safety and security measures. As a 
result, the tasks or functions reported in this category are varied and 
diverse. However, few, if any, of the safety and security measures 
reported in this category serve even a nominal communications function. 
For example, one provider includes access to a free law library, while 
another reports that it provides ``a postal mail scanning service in 
some facilities.'' These services also ``help[ ] correctional agencies 
generate targeted investigative leads . . . create `actionable 
intelligence' for federal law enforcement . . . [and] flag calls in 
which incarcerated people discussed contacting media about cover-ups of 
COVID-19 outbreaks.'' Based on the record, we are persuaded that the 
safety and security measures included in this category either largely 
serve a law enforcement function or, to the extent they do not serve a 
law enforcement function, also do not facilitate the provision of IPCS. 
As a result, we conclude that the safety and security measures included 
in this category generally are not used and useful.
8. Ancillary Service Charges
    408. We eliminate all separately assessed ancillary service charges 
for IPCS and, instead, allow for the recovery of the costs of ancillary 
services as reported by providers through the rate caps we adopt today. 
In 2022, the Commission sought comment on whether some or all ancillary 
services are inherently part of inmate calling services and, if so, 
whether it should include the costs of those services in its rate cap 
calculations and preclude providers from imposing separate charges in 
connection with those services. Based on the record, we conclude that 
the best means of discharging our mandate to establish a compensation 
plan that ensures both just and reasonable IPCS rates and charges, as 
well as fair compensation for providers is to allow recovery of the 
costs of ancillary services within our overall IPCS rate caps. In doing 
so, we eliminate a source of consumer confusion and detrimental 
provider practices while ensuring that providers have the opportunity 
to recover their used and useful costs of providing ancillary services.
a. The Commission's Prior Treatment of Ancillary Service Charges
    409. The Commission has long recognized the economic burden that 
unreasonably high ancillary service charges impose on incarcerated 
people and their loved ones. Those charges have been a continuous 
source of confusion and gamesmanship, significantly increasing the 
costs of IPCS

[[Page 77320]]

``because incarcerated people and their families must either incur them 
when making a call or forego contact with their loved ones.'' As one 
commenter explains, ancillary service charges ``can increase the cost 
of staying in touch with loved ones by 40%.'' Deposits consumers make 
in their accounts can be ``consumed'' by ancillary service charges, 
which can dramatically reduce the amount of call time available to 
consumers for a given amount of account funds.
    410. The Commission's prior reform efforts limited the ancillary 
services for which providers could assess separate charges and capped 
those ``permissible'' charges, in an effort to foreclose providers' 
``incentive and ability to continue to extract unjust and unreasonable 
ancillary service charges.'' The Commission permitted five types of 
ancillary service charges--automated payment fees, third-party 
financial transaction fees, live agent fees, paper bill/statement fees, 
and single-call and related services fees. As examples, under the 2015 
ICS Order, the cap for single-call and related services was ``the exact 
transaction fee charged by the third-party provider, with no markup, 
plus the adopted per-minute rate,'' and the capped third-party 
financial transaction fee was ``the exact fees, with no markup that 
result from the transaction.'' The Commission cautioned that it was 
``mindful of and concerned about the potential for continued abuse of 
ancillary service charges, and [would] monitor the implementation of 
these caps and determine if additional reforms are necessary in the 
future.''
    411. In the 2021 ICS Order, in response to allegations of inmate 
calling service provider abuses, the Commission responded to the need 
for further ancillary service charge reform specifically for the third-
party fees for single-call and related services and third-party 
financial transactions. The Commission reasoned that fixed, interim 
caps of ``$6.95 per transaction'' were necessary to discourage 
providers from seeking out, as part of revenue-sharing schemes, 
artificially high rates for these services from third parties. In 2021, 
the Commission highlighted record evidence concerning the assessment of 
duplicate ancillary service charges for individual transactions and 
sought comment on whether providers were assessing both automated 
payment fees and third-party transaction fees for individual credit 
card or debit card transactions. The Commission expressed concern that 
providers were exploiting ambiguities in the rules to engage in such 
``double dipping,'' and sought comment on whether the Commission's 
rules were sufficiently clear in prohibiting providers from assessing 
multiple ancillary service charges per transaction or should be amended 
to implement such a prohibition.
    412. In the 2022 ICS Order, in response to further allegations of 
harmful provider practices associated with third-party fees, the 
Commission set $3.00 as the maximum amount that providers could pass 
through to consumers for single-call and related services and any 
third-party financial transactions where the transaction involves the 
use of an automated payment system, and set $5.95 as the maximum pass-
through amount where the transaction involves the use of a live agent. 
In setting these caps, the Commission sought to address concerns raised 
by commenters that the caps on third-party fees adopted in 2021 
``simply encourage[d] some carriers to steer customers toward 
unnecessarily expensive calling options.''
    413. In 2022, the Commission sought comment on whether it should 
eliminate ancillary service charges as separate fees and instead 
include the costs of those services in its overall rate cap 
calculations. The Commission also sought comment on how it might use 
data from the Third Mandatory Data Collection to set reasonable 
ancillary service caps in the event it decided to continue to allow 
separate ancillary service charges. The Commission asked, in 
particular, whether the data providers had submitted in response to the 
Third Mandatory Data Collection ``provide[d] a reasonable allocation of 
costs between inmate calling services and various ancillary services'' 
that would allow it to set reasonable cost-based ancillary service 
caps. Finally, the Commission asked how it should revise its rules to 
prevent detrimental practices, such as ``double dipping,'' associated 
with any ancillary service charges that it continued to permit. In 
2023, the Commission reiterated these requests for comment in light of 
enactment of the Martha Wright-Reed Act, and sought comment on whether 
ancillary service charge caps should apply uniformly to all audio and 
video incarcerated people's communications services.
b. Eliminating All Separate Ancillary Service Charges
    414. We conclude that our compensation plan for IPCS should allow 
providers to recover their costs of providing ancillary services 
through per-minute rate caps, rather than through separate ancillary 
service charges. We therefore eliminate all separately assessed 
ancillary service charges for IPCS, including any ancillary service 
charges associated with intrastate IPCS. To the extent that providers 
assess ancillary services charges for their own services or on behalf 
of facilities, such fees are now prohibited. For example, in Arizona, 
``[a]ll adult visitors applying for in-person/phone, and video visits 
must pay a one time, non-refundable, $25.00 background check fee.'' To 
process this Visitation Application, some providers charge additional 
ancillary service fees. To ensure that providers have an opportunity to 
recover their costs of providing ancillary services, we include 
providers' reported ancillary service costs from the 2023 Mandatory 
Data Collection in the used and useful IPCS costs that we use to set 
the rate caps we adopt in the Report and Order.
    415. Recognizing that Ancillary Services Are Inherently Part of 
IPCS. These actions reflect four independently sufficient findings. 
These findings apply equally to audio and video IPCS because, as 
certain commenters explain, the utility and costs of providing 
ancillary services do not vary between types of services. First, we 
find that all ancillary services associated with IPCS, including the 
five types of ancillary services for which our inmate calling services 
rules presently permit separate charges, are inherent in the provision 
of IPCS. In 2022, the Commission sought comment on whether ``some or 
all'' of the permissible ancillary services are ``an inherent part of 
providing inmate calling services,'' such that the Commission should 
continue to ``include those costs in [the] per-minute rate cap 
calculations and eliminate some or all charges for ancillary 
services.'' To a large extent, the permissible ancillary services 
reflect routine internal business functions, such as internal computer 
processing and other back office, in-house functions inherent in 
providing a consumer-facing service. For example, automated payment 
fees are, by definition, fees for IPCS providers' internal ``credit 
card payment, debit card payment, and bill processing'' that are basic 
back office functions that are a routine part of providing a 
communications service. Given the historical backdrop of problems that 
have arisen from separately-imposed ancillary service charges in this 
context, we find that providers should not be allowed to treat payment 
for IPCS as a service--separate and apart from IPCS service itself--for 
which a separate charge is assessed.
    416. The other permissible ancillary services--third-party 
financial

[[Page 77321]]

transaction fees, live agent fees, paper bill/statement fees, and 
single-call and related services fees--relate primarily to how 
consumers are billed for and pay for IPCS, and thus also are inherently 
part of IPCS. Although these ancillary services may have qualified as a 
``convenience'' in 2015 when the Commission first identified them in 
its rules, the record indicates that they are now the predominant means 
by which consumers gain access to IPCS. While alternative methods of 
funding an account remain available (e.g., by check or money order), 
automated payment or money transmitter services are ``an intrinsic 
part'' of accessing and using IPCS, as is the case with most other 
services in the 21st-century economy. Indeed, one provider has pointed 
to the decreased usage of collect calls, and its alternative payment 
mechanisms, in support of its proposal that the Commission eliminate 
the fee for paper statements. In short, ``incarcerated people and their 
families must either incur [these charges] when making a call or forego 
contact with their loved ones.''
    417. We recognize, of course, that an IPCS user may contact a live 
agent, request a paper bill, or otherwise interact with an IPCS 
provider regarding matters other than routine billing and collection. 
For instance, an IPCS account holder may wish to speak with a live 
agent to complain about the service quality on video communications, to 
learn about the provider's alternate pricing plans, or to obtain a 
refund of money from an inactive account. We find that these other non-
billing and collection interactions also are inherent in the provision 
of IPCS, in much the same way that similar interactions are inherent in 
products and services provided outside the IPCS context. As such, we 
conclude that the costs of these interactions should be recovered 
through IPCS rates, rather than ancillary service charges that have 
been an ongoing source of harm in the IPCS context.
    418. Eliminating Incentives for Abuses. Second, we find that 
continuing to allow providers to impose separate ancillary service 
charges would create an incentive for providers to continue to engage 
in practices that unreasonably burden consumers and effectively raise 
the cost of IPCS. Although the Commission has previously restricted the 
type and amount of ancillary service charges, providers are still 
``motivated to exploit every available opportunity to continue deriving 
unreasonable profits from such fees.'' A rate structure that eliminates 
all separate ancillary service charges while still allowing providers 
to recover the costs of these functions will eliminate the incentive 
and ability for providers to charge multiple fees for the same 
transaction, as a way of exacting revenue from consumers that far 
exceeds their actual costs of completing the transaction, a problem 
that is well-documented in the record. The record reflects substantial 
debate or confusion as to whether--and if so, under what 
circumstances--multiple fees can be charged for a single transaction, 
and more generally, what activity the payment-related fees were 
intended to encompass. Because we eliminate all ancillary service 
charges associated with IPCS, we find it unnecessary to resolve this 
dispute in this rulemaking. By including providers' reported costs of 
all ancillary services into our rate caps and eliminating providers' 
ability to charge for them separately, we also remove the incentive for 
providers to ``double dip'' in this manner, mooting related concerns in 
regard to our existing rules and eliminating consumer confusion arising 
from these practices.
    419. We similarly eliminate the ability of providers to engage in 
other rent-seeking activity described in the record, including concerns 
that providers may ``steer'' consumers to a more expensive single-call 
option for an incarcerated person's initial call after incarceration in 
an effort to artificially inflate revenues through single-call fees. 
Commenters describe circumstances where providers charged multiple 
single-call fees when calls were disconnected and reconnected, or where 
a provider ``charge[d] a billing statement fee as a matter of course 
without offering an option of providing a free electronic copy,'' and 
several other rent-seeking practices. These practices undermine the 
intent of our rules and merely inflate providers' revenues well beyond 
costs at the expense of consumers while providing no additional 
consumer value.
    420. Recognizing the Limitations of Providers' Ancillary Services 
Cost Data. Third, we find that the limitations inherent in providers' 
reported ancillary service charge data preclude our setting reasonable, 
cost-based caps on individual ancillary service charges. In the 2021 
ICS Order, the Commission found that the data before it provided ``no 
reliable way to exclude ancillary service costs'' from the calculations 
for the provider-related rate cap component, resulting in interim rate 
caps that included the costs that consumers were also paying through 
ancillary service fees. The Commission was unable to ``isolate with any 
degree of accuracy'' the costs of providing ancillary services because 
the instructions for the Second Mandatory Data Collection required 
providers to report certain ancillary service revenues separately, but 
did not require providers to report their ancillary service costs 
separately from other inmate calling services costs. Further, those 
instructions did not require providers to separately report costs 
relating to any specific ancillary service, and no commenter suggested 
a way of identifying the providers' ancillary service costs. To correct 
for this problem, in the 2023 Mandatory Data Collection, providers were 
required to follow detailed instructions in allocating their costs to, 
and among, their permissible ancillary services. In contrast to the 
Second Mandatory Data Collection, the instructions for the 2023 
Mandatory Data Collection required providers to report their costs of 
each ancillary service separately. But, as made clear in a technical 
appendix, providers failed to reliably or consistently allocate their 
costs among the various ancillary services. This makes it impossible 
for us to assess reliable costs for each individual ancillary service. 
Incorporating all of these reported costs into our rate cap 
calculations avoids the risk of setting individual caps for each 
ancillary service charge that fail to reflect providers' actual costs, 
while still ensuring the providers are able to recover their costs 
through our rates. By incorporating providers' reported ancillary 
service charge costs into our rate cap calculations, we ensure they 
have an opportunity to recover, but not double recover, their actual 
costs of providing ancillary services. Additionally, by including 
providers' costs of providing ancillary services in our rate caps, we 
effectively exclude from our rate cap calculations the amount by which 
providers' revenues from ancillary service charges unreasonably 
exceeded their costs.
    421. Additional Benefits. Fourth, we find that incorporating 
providers' ancillary service costs into our rate cap calculations will 
benefit both consumers and providers. As an initial matter, that 
approach will result in a rate structure that will be easier for 
consumers to understand and for providers to administer, while still 
allowing providers to recover any used and useful costs they incur in 
providing ancillary services. It will simplify providers' record 
keeping and billing processes, easing the administrative burdens on 
providers and reducing the burdens on consumers as they seek to

[[Page 77322]]

understand any charges to their IPCS accounts.
    422. We likewise find that incorporating ancillary service costs 
into our rate cap calculations will align rates and charges more fairly 
with actual user activity. Commenters point out the seeming 
unreasonableness and disproportionality of imposing a $3.00 fee for 
automated single call and related services for a call that may be of 
short duration, or passing through similar fees for smaller deposits, 
causing consumers to ``lose a significant amount'' of their account 
deposits through such fees. Incorporating ancillary service costs into 
our rate caps spreads those costs across all calls and communications, 
ensuring that the cost of any particular communication for any IPCS 
consumer is more proportionate to its duration.
    423. Even beyond those direct effects on IPCS rates and charges, we 
also eliminate certain incentives for consumer behavior that our 
current fee structure would perpetuate, such as avoiding a live agent 
or transferring funds to relatives less frequently in an effort to 
avoid such charges. Our actions today reduce these barriers to 
communication, resulting in a compensation plan ensuring just and 
reasonable rates and charges--and fair compensation for providers--in a 
way that best benefits the general public. Our actions also better 
align with similar services in the non-carceral communications context. 
As one commenter explains, ``[m]ost telephone corporations and other 
utilities provide customer services for free, including services such 
as speaking with a live agent to set up an account, adding money to an 
account, or assisting with making a call.'' Similarly, by incorporating 
the reported costs of paper bills into our rate cap calculations, we 
align IPCS billing practices more closely with telecommunications 
billing practices outside of the carceral context, where separate 
charges typically are not assessed for paper bills.
    424. Finally, we find that incorporating ancillary service costs 
into our rate cap calculations aligns our rate and fee structure more 
effectively with broader patterns in the IPCS industry while 
recognizing the diminishing usage of certain ancillary services. As the 
Commission has previously observed, several states have already banned 
ancillary service charges, either piecemeal or outright. For example, 
several providers assert they rarely charge a paper bill fee as few 
consumers require paper bills, even proposing that this fee be 
eliminated. At least one provider no longer charges a live agent fee, 
having switched to an automated system during the pandemic. Meanwhile, 
some providers have shifted from offering single-call services through 
third parties (as defined in our rules) to instead provide these 
services themselves. Other commenters propose eliminating the single-
call fee entirely. The record further suggests that the single-call 
service, which ostensibly offers the convenience of completing initial 
contact without setting up an account, may in practice offer little 
benefit to consumers, as the called parties still have to enter their 
payment card information to accept the call. Our actions are consistent 
with our recent initiative requiring cable and direct broadcasting 
satellite operators to offer ``all-in'' prices to consumers so that 
consumers have a transparent and accurate reflection of the total cost 
of services, inclusive of all additional fees.
    425. Some commenters object to the approach of incorporating 
ancillary service costs into our rate cap calculations. Those 
commenters argue that this methodology ``does not reflect the manner in 
which costs are caused by users of the service,'' and ``would impose 
costs for payment processing on all consumers, rather than just those 
consumers directly responsible for the cost.'' We are unpersuaded. We 
find that most of these functions have become ``an intrinsic part of 
providing'' IPCS because they provide IPCS consumers the means to 
obtain IPCS, such that consumers typically ``must either incur [these 
charges] when making a call or forego contact with their loved ones.'' 
For the same reason, we are not persuaded by Securus's implicit 
argument that the current ancillary fees are offered ``as a convenience 
to incarcerated persons or their friends and family and are not 
intrinsic to the provision of ICS.'' Certain ancillary service charges, 
for example those for automated payment services, are costs that are 
either universally or near universally incurred by consumers. But it is 
not necessary that these services be used by ``all consumers''; the 
fact that these services can operate as a threshold, coupled with the 
factors identified above that support ancillary service cost recovery 
through per-minute IPCS rate caps, will ensure that our approach 
provides for just and reasonable rates for consumers and providers, 
while also providing appropriate cost recovery for providers. In the 
2015 ICS Order, the Commission found that single-call services were not 
``reasonably and directly related to the provision of ICS'' because 
they ``inflate the effective price end users pay for ICS and result in 
excessive compensation to providers.'' We find that this pattern has 
been ameliorated, in part, by the changes to single-call fees adopted 
in the 2021 ICS Order and 2022 ICS Order; we also recognize that 
providers incur some amount of legitimate costs for providing this 
service, which for at least some consumers may offer a crucial means of 
completing an IPCS communication. At the same time, we find that the 
continuing abuse of this fee described in the comment record, supports 
elimination of the single-call fee as an independent charge.
    426. Further, commenters opposing the elimination of separate 
ancillary service charges ignore the other factors that make it the 
best means of ensuring just and reasonable IPCS rates and charges. As 
discussed above, each of the other factors supporting our approach--the 
need to eliminate incentives for providers to assess unreasonable 
ancillary service charges, the impossibility of setting reasonable 
ancillary service charge caps given the limitations on the data on 
ancillary service costs providers reported in response to the 2023 
Mandatory Data Collection, and the additional public interest benefits 
our approach will produce--fully and independently support our approach 
both individually, and in any combination.
9. Alternate Pricing Plans
a. Introduction
    427. The Commission has traditionally required IPCS providers to 
charge for interstate and international audio IPCS on a per-minute 
basis principally to safeguard consumers from potentially unreasonable 
rates and practices. The Commission's rules have long prohibited 
providers from using ``flat-rate calling'' that would require consumers 
to pay a flat rate per call regardless of the length of the call. By 
comparison, in recent years many telecommunications service plans in 
non-carceral settings have transitioned to flat-rate pricing for a 
specific quantity of, or an unlimited number of, minutes. At the same 
time, IPCS marketplace developments have also led to ``emerging pay 
models'' that more closely track the ``modern marketplace.'' In 
recognition of these developments and the pro-consumer benefits of 
allowing more flexible pricing programs, today we permit IPCS providers 
to offer incarcerated people and their friends and family IPCS via 
optional ``alternate pricing plans,'' subject to clearly defined 
safeguards to ensure that IPCS consumers are protected. The Commission 
previously

[[Page 77323]]

referred to these programs as ``pilot programs.'' These optional 
programs could, for example, consist of blocks of audio calls or video 
communications, or an unlimited quantity of either service, at a set 
monthly or weekly price.
    428. The record reflects that alternate pricing plans can provide 
meaningful benefits to IPCS consumers, including, but not limited to, 
increased utilization of IPCS, with all of its attendant benefits for 
reducing recidivism, and greater budgetary certainty for IPCS 
consumers. Nevertheless, we are mindful that alternate pricing plans 
may not be a good fit for every consumer and therefore include 
guardrails to protect against potential ``abuse and higher prices.'' We 
find that, on balance, the potential advantages of these plans are 
significant. We therefore permit IPCS providers to offer alternate 
pricing plans subject to rules and conditions to ensure that consumers 
that elect these plans have the information needed to make informed 
choices and are protected from unjust and unreasonable rates and 
charges. As explained above, the Martha Wright-Reed Act requires just 
and reasonable rates and charges, and provides us with limited 
authority to regulate IPCS providers' practices, classifications, and 
regulations that relate to IPCS rates and charges. Alternate pricing 
plans may include the full range of IPCS now subject to the 
Commission's authority, including intrastate IPCS and advanced 
communications services now included in the statutory definition of 
``payphone service'' in carceral facilities.
b. Background
    429. The Commission has previously invited comment on how its 
regulation of IPCS ``should evolve in light of marketplace developments 
to better accommodate the needs of incarcerated people,'' including 
through the use of ``alternative rate structures.'' In the 2020 ICS 
Notice, the Commission sought comment about ``alternative rate 
structures'' and whether it should change its rules ``to recognize 
industry innovations'' including new pay models. At that time, some 
commenters voiced support for such changes. Later, in 2021, the 
Commission asked whether it should consider ``alternative rate 
structures, such as one under which an incarcerated person would have a 
specified--or unlimited--number of monthly minutes of use for a 
predetermined monthly charge.'' Some commenters expressed support for 
``alternative rate structures'' while acknowledging the need to ensure 
incarcerated people and their loved ones are protected from unjust and 
unreasonable rates and charges. At that time, the Prison Policy 
Initiative asserted that alternate pricing plans were premature as a 
matter of law and fact, and requested that the Commission ensure that 
the alternate pricing plans be ``fair to consumers.''
    430. Shortly after seeking comment in 2021, Securus filed a 
Petition for Waiver of the Commission's rules so it and ``other 
providers'' could offer flat-rate calling packages for interstate audio 
IPCS. Securus had been offering subscription plans for intrastate audio 
service since December 2020. Under its subscription plans, Securus 
charged a flat rate for a fixed number of calls for a period of, for 
example, one month. In addition to the flat rate, Securus charged a 
``site commission[ ] (if applicable), plus $3.00 automated payment 
fee.'' Also, the plans were ``[d]esigned to be used only to call 
specific numbers from a specific facility.'' Calls made to other 
numbers that were not using Securus's subscription plan were charged at 
Securus's per-minute rates. The Bureau sought comment on the Securus 
Waiver Petition. While commenters did not object to alternate pricing 
plans in general, the responses were mixed, with some urging the 
Commission to grant the Securus Waiver Petition, and others expressing 
concern and suggesting that the Commission proceed slowly and adopt 
consumer protection measures applicable to such plans. Securus 
terminated its subscription plans later in 2021 due to its inability to 
determine the jurisdictional nature of the calls included in the plans.
    431. In 2022, and again in 2023, the Commission sought further 
comment on alternate pricing plans, conditions that may be placed on 
the plans, and consumer disclosures to ensure that providers accurately 
disclose the details of any alternate pricing plans. The record in 
response generally supports the agency permitting these alternate 
pricing plans but many commenters focused on requirements and 
protective measures related to these plans. ViaPath asks the Commission 
to refrain from adopting ``excessive and unnecessary conditions'' 
applicable to the plans. Securus requests flexibility in selecting the 
form of the plans, and recognizes that ``reasonable conditions'' will 
be necessary. The Public Interest Parties suggest that the Commission 
permit the plans subject to a number of conditions concerning, for 
example, rates and consumer information, to ensure that consumers are 
protected. Based on the foregoing suggestions, Pay Tel observes that 
the plans may have benefits ``in some settings for some customers.'' 
Stephen Raher requests a robust system of consumer disclosures. 
Subsequent ex parte filings provide additional detail on Securus's 
experience offering alternate pricing plans and discuss possible 
conditions on these plans.
c. Discussion
    432. We find that the record supports allowing IPCS providers to 
offer alternatives to per-minute pricing for IPCS subject to the rules 
and conditions adopted in the Report and Order. We therefore allow IPCS 
providers flexibility to offer pricing structures other than per-minute 
pricing as options for consumers in addition to offering standard per-
minute pricing plans. In reply comments to 2022, the Public Interest 
Parties request the Commission to defer consideration of alternate 
pricing plans due to the enactment of the Martha Wright-Reed Act in 
January 2023, and the circulation of the draft 2023 IPCS NPRM (which 
was released Mar. 17, 2023). Parties have had more than three years and 
several opportunities to comment on alternate pricing plans, including 
in response to further questions about such plans raised in connection 
with the Commission's implementation of the Martha Wright-Reed Act in 
2023. Given the potential benefits discussed herein, we see no reason 
to wait any longer to allow such plans. The record indicates both 
provider and consumer interest in such plans, and we find that these 
plans offer benefits that consumers want. For example, Securus's plans 
were ``developed as a direct result of consultations between Securus 
leadership and justice-involved families.'' After Securus terminated 
its subscription plans, consumers asked it to reinstate the plans, and 
emphasized their benefits. Former subscribers explained that Securus's 
subscription plans helped them be able to talk to loved ones, helped 
stabilize their mental health, and enabled an incarcerated person to 
help their children with their homework. The Director of Facility 
Operations at one carceral facility describes Securus's plan as ``the 
most economical option for communication [between incarcerated people 
and] their wives and children.'' Securus remarks that a ``key benefit'' 
to the individuals enrolled in its subscription plans ``was being able 
to better budget for calls by knowing in advance how much would be 
spent on calls during a given period.'' Demand for flat-rate monthly 
plans also was expressed in the California PUC's hearings on Regulating 
Telecommunications Services Used by Incarcerated People. Consumers 
mentioned the flat-rate monthly plans for cell phone usage, and 
streaming

[[Page 77324]]

services like Disney and Netflix, and asked whether flat-rate monthly 
plans could be provided for telephone calls with incarcerated people. 
To support its argument that fixed-rate pricing helps consumers budget 
for calls, Securus points to Connecticut, where the Department of 
Corrections (DOC) now pays for calls, thereby making the calls free to 
the consumers. Securus asserts that it charges the DOC for Securus's 
services on a per-incarcerated-person basis (rather than using per-
minute rates) to enable DOC to better budget for Securus's services.
    433. Additionally, data provided by Securus indicate that consumers 
experienced longer and less costly calls under its subscription plans. 
According to Securus, the average cost per call was $0.65 under its 
subscription plans (with an average call length of 14.51 minutes) 
compared to an average cost per call of $1.62 using Securus's per-
minute rates (with an average call length of 9.19 minutes). Securus 
explains that ``[c]osts decreased [an] average of 61% per call and 74% 
on a per-minute basis.'' ViaPath also predicts that alternate pricing 
plans ``will promote increased calling while reducing costs.''
    434. Nevertheless, other commenters urge caution regarding 
alternate pricing plans. For example, Pay Tel expresses concern that if 
a consumer does not use all of the minutes in a plan, the cost they pay 
for a plan would be greater than they would have paid at the per-minute 
rates offered by that provider. The Accessibility Advocacy and Research 
Organizations ask the Commission to take a ``cautious approach designed 
to ensure [alternate pricing plans] serve incarcerated people with 
disabilities' interests first, and not those of ICS providers looking 
for ways to circumvent their pricing obligations.'' Worth Rises points 
out that ``IPCS providers have a record of exploiting incarcerated 
people and their loved ones.'' Although Securus points out that 
``[s]ubscribers saved money at low levels of utilization: [15 to 
30%,]'' the data do not tell the complete story. The Public Interest 
Parties point out that a ``substantial number of participants'' (i.e., 
from 10% to 34% of the consumers) in Securus's nine subscription plans 
had low usage and as a result, paid more using the subscription plans 
than they would have paid under per-minute rates. The Public Interest 
Parties, and Securus's spreadsheet, reference the breakeven point for 
Securus's subscription plans. The breakeven point refers to the amount 
of usage required for a consumer to realize a rate that equals the 
provider's per-minute rate. Specifically, the ``breakeven point'' is 
the usage amount: (a) below which a consumer would pay more for the 
subscription plan than they would have paid under the provider's per-
minute rates, and (b) at or above which the cost of the subscription 
plan would be less than or equal to what the consumer would pay under 
the provider's per-minute rates. For example, Securus shows that 76% of 
its subscribers were above the breakeven point at one facility. In 
other words, 76% of the subscribers had usage high enough to justify 
the cost of the subscription plan whereas the remaining 24% of 
subscribers effectively paid more for the subscription plan than they 
would have paid if they had paid for the service at Securus's per-
minute rates.
    435. Given the apparent demand from consumers and the potential 
savings and increased communications that can result from alternate 
pricing plans, we will permit IPCS providers to offer such plans. 
However, to help make sure that consumers who enroll in the plans 
benefit from them and that IPCS providers do not use such plans to 
otherwise evade the Commission's IPCS rules, we require that these 
plans comply with the general rules applicable to all IPCS, and adopt 
specific consumer protection and disclosure rules for these plans. We 
expect the rules we adopt today will provide sufficient consumer 
protections, and in any event, the alternate pricing plans are optional 
for both providers and consumers.
    436. We acknowledge that our decision today represents an evolution 
in the Commission's thinking concerning permitted rate structures. We 
emphasize that IPCS alternate pricing plans are optional to consumers, 
and IPCS providers that offer such plans are still required to offer a 
per-minute pricing option to the consumers they serve. This ensures 
that consumers will always have the option of selecting per-minute 
pricing if traditional per-minute pricing offers greater value. In 
facilities where alternate pricing plans are offered, consumers will 
now have the ability to select the pricing models that best meet their 
needs and their budgets, similar to the flexibility afforded to 
consumers outside the carceral setting.
(i) General Parameters of Alternate Pricing Plans
    437. We allow IPCS providers the option to offer alternate pricing 
plans. We first define an ``alternate pricing plan'' as the offering of 
IPCS to consumers using a pricing structure other than per-minute 
pricing. An IPCS provider may determine whether to offer such a plan, 
which services to include, which format (i.e., the rates (subject to 
the applicable rate caps) and the number of minutes, calls or 
communications for example, included (or an unlimited number of 
minutes, calls or communications)), and where to offer the plan, as 
discussed below. We require IPCS providers that offer alternate pricing 
plans to comply with the rules specific to alternate pricing plans, as 
well as other rules applicable to all IPCS, to help ensure just and 
reasonable rates and charges. For example, the prohibitions and 
limitations on per-call, per-connection, and per-communication charges, 
site commissions, ancillary service charges, and taxes and fees as 
provided for in our rule revisions, also apply to alternate pricing 
plans.
    438. Optional to Consumers and to IPCS Providers. As a threshold 
matter, a consumer may enroll in an alternate pricing plan at their 
discretion. IPCS providers must not require a consumer to enroll in an 
alternate pricing plan. In 2021 and 2022, the Commission asked whether 
providers should be permitted to offer optional pricing structures as 
long as consumers would still have the ability to purchase service on a 
per-minute basis. In response, the Public Interest Parties and ViaPath 
agree that participation in an alternate pricing plan should be 
voluntary for the consumer. No commenter suggests that enrollment in a 
plan should be mandatory for a consumer.
    439. Similarly, we do not require IPCS providers to offer alternate 
pricing plans. An IPCS provider's decision to offer an alternate 
pricing plan is voluntary. Consistent with the record and to ensure the 
optional nature of alternate pricing plans particularly for consumers, 
we require providers offering alternate pricing plans to also continue 
offering per-minute pricing. We adopt revisions to section 64.6010(a) 
of our rules to incorporate this requirement. Consumers therefore will 
still have the option of paying for IPCS on a per-minute basis. As 
Worth Rises points out, ``[p]er minute pricing structures . . . protect 
ratepayers who may only make a few calls and do not want to be locked 
into paying for extended time periods.'' No commenter requested that 
the Commission mandate the offering of alternate pricing plans, or 
eliminate the per-minute option. Worth Rises asks the Commission to 
obtain more data before permitting providers to offer alternate pricing 
plans, but our requirements that alternate pricing plans to be optional 
for consumers, and that the plans comply with the other rules and 
conditions we adopt here

[[Page 77325]]

generally for IPCS, should resolve Worth Rises's concerns.
    440. Format. An IPCS provider may employ any format for its 
alternate pricing plans that complies with the Commission's generally 
applicable IPCS rules and the safeguards we adopt in the Report and 
Order, which, together, are designed to protect consumers from unjust 
and unreasonable rates and charges, consistent with the Martha Wright-
Reed Act. IPCS providers will have the flexibility to determine the 
format of their alternate pricing plans and may offer plans based on 
pricing by minutes of use, calls or communications made, or any other 
format. In 2022 and 2021, the Commission asked about plans that would 
offer a specific, or unlimited, number of minutes of use for audio 
services at a monthly charge, and the merits of different pricing 
structures and their impact on consumers and providers. Our decision to 
permit IPCS providers to offer alternate pricing plans based on a fixed 
or unlimited number of minutes, calls or communications seems to be 
inconsistent with the Commission's prior implication, in the 2022 ICS 
Order, that per-minute rates are preferable to per-call rates. But in 
the 2022 ICS Order, the Commission cited to a discussion in the 2021 
ICS Order concerning cost allocators, not rate setting. Thus, because 
our decision here is about rate setting, not cost allocation, that 
passage in the 2022 ICS Order does not apply. Some commenters oppose 
plans based on a specified number of calls due to concerns about 
dropped calls, which we address below. One commenter argues that the 
Commission's prohibition on flat-rate calling and per-call charges 
prohibits alternate pricing plans. As discussed below, we remove the 
rule prohibiting flat-rate calling, making this concern moot. In 
addition, the prohibition on per-call charges does not prohibit the 
provision of alternate pricing plans based on a specific number, or 
unlimited number of, calls or communications; the prohibition on per-
call charges just prohibits charges that are assessed in addition to 
the base rates for calls. As discussed above, we retain and amend the 
prohibition on per-call charges. Thus, the commenter's concern about 
per-call charges is misplaced. Because we now have authority to 
regulate rates for certain advanced communications services, including 
video services, alternate pricing plans may include advanced 
communications services, which likewise may be offered for a fixed 
number of or an unlimited number of minutes or communications, for a 
service period of a week or a month, among other formats.
    441. When determining the format of an alternate pricing plan, IPCS 
providers must consider the type and characteristics of the facilities 
they serve, including: (a) any limits on the number of and length of 
calls or communications imposed by the facility; (b) the availability 
of correctional staff to manage the use of the service; and (c) 
equipment availability for the calls or communications. The amount of 
communications equipment per facility varies but, as an example, the 
Public Interest Parties suggest that in 2023, the California Department 
of Corrections and Rehabilitation Facilities had an average of 1 
telephone for every 22 incarcerated people. Additionally, in the 
Genessee County Jail, ``[e]ach jail pod has only two video kiosks for 
roughly 60 to 70 people, and it is common for only one of the kiosks to 
be working at any given time.'' A provider's consideration of these 
factors will help ensure that consumers are reasonably able to make 
enough calls to reach the breakeven point for the specific plan as 
discussed below. We want to avoid IPCS providers, offering alternate 
pricing plans of, for example, 200 calls per month when because of 
equipment limitations or call length and frequency limitations the 
incarcerated individual could not possibly make 200 calls a month at 
their facility.
    442. Service Period. In 2022, the Commission asked parties to 
comment on the appropriate service period for alternate pricing plans. 
The Public Interest Parties and Securus suggest that ``consumers should 
not be required to sign up for long term commitments.'' PPI notes that 
in prisons, ``residents have a longer and more predictable length of 
stay (as compared to jails), allowing them to more effectively budget 
for recurring expenses like phone calls,'' whereas in jails, 
``populations are more transient and financial planning is more 
difficult.'' NCIC suggests that bulk packages for video could be 
offered as an option at longer-term facilities, but that ``per-minute 
billing would be the most cost-effective solution for short-term and 
county jails that may house incarcerated persons for an evening or 
weekend.'' Although these statements appear to assume that the consumer 
is the incarcerated person, the concern about the length of stay likely 
would similarly apply to the friends and family of the incarcerated 
person, if they are the consumers. We agree and therefore limit the 
service period IPCS providers may offer an alternate pricing plan to no 
longer than one month. When Securus offered its subscription plans, the 
services were offered for no more than one month at a time before 
renewal was required. One month is the length of a standard billing 
cycle used by IPCS providers in carceral facilities and 
telecommunications companies in non-carceral settings. Limiting 
alternate pricing plans to service periods of at most one month limits 
consumers' potential financial liability and permits flexibility for 
any changed circumstances. At the end of a service period, a consumer 
who is participating in the alternate pricing plan will need to renew 
their enrollment if they want to continue participating in the plan 
(unless the consumer previously has opted in to automatic renewals, if 
offered by the provider).
    443. Services Included. An alternate pricing plan may consist of: 
(a) a single service that is defined as IPCS (e.g., an audio or video 
communications service) or (b) any bundle of services for which each 
service is defined as IPCS. Our use of the word ``bundle'' in the 
context of alternate pricing plans refers only to a combination of 
services; it does not imply a discount. We also note that ``bundling'' 
is mentioned in the record in the context of services offered by a 
provider to a contracting authority. By comparison, ``bundling'' in 
alternate pricing plans concerns services offered by a provider to 
consumers.
    Most comments in the record focus on the provision of interstate 
audio IPCS, because most of the comments were filed before the 
enactment of the Martha Wright-Reed Act, which expanded the 
Commission's regulatory authority to include all audio and video 
communications services in carceral facilities. In the absence of 
regulation, we recognize that some providers have priced video services 
at flat rates, and others have priced video services by the minute. In 
2023, the Commission asked whether it should ``allow voice and video 
services to be offered as bundles.'' While not advocating for alternate 
pricing plans that would consist of combinations of services with 
prices based on broadband usage, Worth Rises previously suggested that 
the Commission consider such approaches and determine if they would 
protect consumers. In response, Securus urges the Commission to ``make 
clear'' that providers ``may bundle voice, video and other services'' 
in alternate pricing plans, and that the Commission could ``exercise 
oversight'' through reporting requirements. Additionally, the 
California Public Utilities Commission states that bundles should not 
be allowed ``unless the provider provides

[[Page 77326]]

transparency on the cost or what the rate entails.'' Our rate, 
reporting and other alternate pricing plan requirements should resolve 
these concerns.
    444. We recognize that services offered in combination under an 
alternate pricing plan may not be subject to the same rate caps. 
Nevertheless, services offered under an alternate pricing plan remain 
subject to the general IPCS rules, including the applicable rate caps 
for both audio and video services and the prohibition for levying 
separate ancillary service charges. To the extent a consumer purchasing 
services under an alternate pricing plan believes that the charge 
assessed for the bundled services resulted in the effective rate 
exceeding the applicable rate caps established in the Report and Order, 
the consumer would first need to show that their usage of each service 
in the bundle meets or exceeds the usages required to meet the 
specified breakeven point(s), and then the IPCS provider would bear the 
burden of demonstrating that the rate charged to that consumer under 
its alternate pricing plan is less than or equal to the applicable IPCS 
per-minute rate cap. The breakeven point refers to the amount of usage 
required for a consumer to realize a rate that equals the provider's 
applicable per-minute rate at the facility. Specifically, the 
``breakeven point'' is the usage amount: (a) below which a consumer 
would pay more for the subscription plan than they would have paid 
under the provider's per-minute rates, and (b) at or above which the 
cost of the subscription plan would be less than or equal to what the 
consumer would pay under the provider's per-minute rates.
    445. We do not permit alternate pricing plans that combine IPCS 
with non-regulated services, as requested by some IPCS providers. 
Several providers suggest that the Commission should permit bundling of 
non-IPCS with IPCS. NCIC explains that its accounting system is set up 
to support just subscription plans or just per-minute plans. Thus, if 
subscription plans include audio but not messaging, then a consumer 
would need to have two accounts with NCIC if they want both services--
and NCIC would need to modify its accounting platform to support the 
two accounts. NCIC is the only commenter that expresses concern about 
the cost of establishing subscription plans, and NCIC does not quantify 
that cost. However, NCIC does point out that other IPCS providers have 
separate accounts for separate services, and charge their customers 
varying fees for each of those accounts. NCIC is concerned that the FCC 
would ``mandate a subscription plan.'' Because we are making 
subscription plans optional to the provider, NCIC can choose to not 
offer such plans. As the Public Interest Parties observe, alternate 
pricing plans should not include non-IPCS ``which lack visibility and 
transparency in their pricing.'' A key premise in our decision to allow 
alternate pricing plans is the ability of IPCS users to make informed 
decisions about whether to choose such optional plans. Where the plans 
are limited to IPCS, users can make comparisons to the rate-regulated 
per-minute plans capped by Commission rules. By contrast, if non-
regulated services are included in alternate pricing plans, we are not 
confident that IPCS users consistently will have the same type of 
visibility and transparency in the pricing for those non-regulated 
services sufficient to make an informed decision whether to elect an 
alternate pricing plan.
    446. Facilities. Alternate pricing plans may be offered at any 
carceral facilities served by the IPCS provider, such as jails and 
prisons, where the relevant correctional authorities permit. Securus 
offered its subscription plans in eight jails and one prison. One of 
those facilities was a short-term detention facility where Securus 
offered a plan of just 25 calls per week, but that facility had low 
utilization. Securus consequently posits that ``[i]t may be that 
subscription plans are not optimal for short term facilities.'' By not 
specifying the types of facilities in which IPCS providers may offer 
alternate pricing plans, we allow providers the flexibility to 
determine where these plans would be most beneficial.
(ii) Rules and Conditions Specific to Alternate Pricing Plans
    447. Alternate pricing plans must comply with the rules generally 
applicable to IPCS, as well as specific rules and conditions designed 
to ensure that consumers that choose these pricing plans are protected. 
Requiring compliance with these comprehensive rules will serve to 
protect consumers and ensure just and reasonable rates and charges as 
required by the Communications Act and the Martha Wright-Reed Act.
a. Using a Consumer's Comparable Per-Minute Rate
    448. In 2021, the Commission asked about the appropriate rate of 
IPCS offered via an alternate pricing plan. In 2022, the Commission 
asked how to protect consumers from ``unreasonably high interstate and 
international rates in connection with pilot programs.'' Today, we 
require that any IPCS alternate pricing plan be offered at a rate that 
has a breakeven point equal to or less than the applicable rate cap. In 
2022, the Commission also asked whether it should require providers to 
offer consumers a discount compared to what they would pay for the same 
usage under the rate caps. Securus objects to being required to offer a 
discount because ``there [would be] little or no incentive to price 
these plans at a substantial price discount.'' We do not require that 
alternate pricing plans be offered at a discount from the Commission's 
per-minute rate caps. Providers can determine the details of their 
alternate pricing plans, subject to our rules and what the market will 
bear. The rates of alternate pricing plans that satisfy this 
requirement will be presumed lawful. We therefore ensure that providers 
cannot use alternate pricing plans to circumvent our rate caps, as 
commenters have cautioned.
    449. For purposes of demonstrating compliance with our rules in the 
event of a consumer complaint or investigation, an alternate pricing 
plan, whether offering bundled IPCS or a stand-alone service, must have 
a breakeven point that, when calculated on a per-minute basis, is less 
than or equal to the applicable rate caps. The IPCS provider bears the 
burden of demonstrating compliance with this condition if its alternate 
pricing plan is the subject of a complaint or an investigation by the 
Commission. Commenters agree that the providers should bear the burden 
of demonstrating their compliance with the Commission's rate caps and 
ancillary services caps, because ``IPCS providers . . . are in the best 
position to provide this information about usage to the Commission.'' A 
consumer complaint about the provider's alternate pricing plan rates 
will not be entertained under the alternate pricing plan rule in Sec.  
64.6140 unless the consumer's usage meets or exceeds the breakeven 
point(s) for the alternate pricing plan. This limitation does not 
restrict non-rate-related complaints about providers' alternate pricing 
plans, for example about dropped calls or billing issues, while it does 
strike a balance by limiting the number of rate complaints that can be 
brought to the Commission to those brought by consumers whose usage met 
the breakeven point.
    450. In 2022, the Commission also sought comment on whether a 
consumer's actual usage should be taken into account when determining 
whether

[[Page 77327]]

an alternate pricing plan is consistent with the rate caps. One 
commenter suggests that a plan's effective rate be calculated based on 
the usage data for a specific consumer. Other commenters propose using 
alternative methods such as a ``reasonable utilization'' of the 
allotted minutes, ``a reasonable assumption of usage,'' and an 
``average level of usage.'' Securus also suggests that no plan ``should 
be offered if its effective per-minute rate at full utilization is not 
below the applicable per-minute cap.'' Calculating a comparable per-
minute rate at full utilization assumes that a ``consumer will use 
every call and minute available,'' an assumption that defies the 
purpose of our requirement to calculate the consumer's effective rate. 
None of these commenters explain how these alternative methods would be 
implemented in practice. We find that comparing the amount of usage to 
meet the breakeven point to the consumer's actual usage of the 
alternate pricing plan will result in a more meaningful and accurate 
assessment than using the alternate methods proposed by commenters.
    451. Our rule requiring comparison of a consumer's actual usage to 
the alternate pricing plan's breakeven point makes the determination of 
whether a plan results in just and reasonable rates for a specific 
consumer straightforward. In the event of a challenge, the IPCS 
provider would need to use only the number of minutes used by the 
consumer challenging the lawfulness of the alternate pricing plan, 
without needing to analyze other consumers' usage to determine an 
``average'' or ``reasonable'' amount of usage. Securus cautions that 
the Commission ``be mindful . . . of not imposing excessive burdens on 
providers'' as it considers the calculation of a consumer's effective 
rate, but Securus does not explain what it thinks the ``burden'' may 
be. We find that requiring that a consumer's actual usage be used to 
determine the comparable per-minute rate for that consumer is less of a 
burden than Securus's suggestions that providers use a ``reasonable'' 
or ``average'' amount of usage.
(b) Complaints of Dropped Calls or Communications
    452. When using an alternate pricing plan based on a specific 
number of calls or communications, an IPCS consumer may be charged for 
more than one call or communication if an original call is dropped and 
the consumer is forced to reinitiate the call or communication to 
finish a conversation. We, therefore, address the issue of refunds or 
credits for such calls or communications when consumers are effectively 
charged for more than one call when a call is dropped. In the case of 
plans that charge on a per-call or per-communication basis, we expect 
refunds or credits to be provided in particular circumstances for 
dropped calls, and also require specific consumer disclosures to ensure 
that consumers are aware of the ability to request those refunds or 
credits.
    453. Complaints of dropped calls, and the attendant lost funds 
associated with those calls, have been a constant refrain since the 
beginning of the Commission's regulatory efforts to reform 
communications services for incarcerated persons. Then, in the 2015 ICS 
Order, the Commission prohibited per-call (and per-connection) charges, 
in part, due to the `` `assessment of multiple per-call charges for 
what was, in effect, a single conversation' '' that was interrupted 
when the call was dropped. Unfortunately, dropped calls continue to be 
a problem and are not limited to audio IPCS. In 2021, the Commission 
asked about preventing providers from assessing duplicative ancillary 
service charges when a call is dropped. In 2022, the Commission sought 
comment on adopting a requirement to provide credits or other remedies 
for dropped calls in the context of alternate pricing plans. At the 
October 27, 2023, and February 1, 2024, IPCS Listening Sessions, IPCS 
consumers also discussed the issue and the difficulty of having calls 
dropped.
    454. There are several possible reasons for an audio call or a 
video communication to drop. On the one hand, there could be a 
technical reason such as faulty equipment in the carceral facility, a 
problem in the IPCS provider's network, in the transmission network 
between the IPCS provider and the called party, or in the called 
party's network, in which instances we expect providers to take steps 
to provide appropriate refunds or credits. On the other hand, calls or 
communications can be intentionally disconnected for non-technical 
reasons related to security, such as stopping attempts to initiate a 
three-way call, for which refunds or credits would not be appropriate. 
For example, when it offered its subscription plan, Securus made 
refunds available upon request and acknowledged that refunds may be 
available ``for verified performance problems such as poor quality or 
outages caused by Securus systems.'' Upon receipt of a dropped call 
complaint, we similarly expect IPCS providers to investigate these 
claims in good faith and resolve them swiftly so as not to delay giving 
a refund or credit to the IPCS consumer when warranted. The record 
indicates that Securus monitored the incidences of dropped calls in its 
subscription plans, thereby suggesting that this task will not be 
overly burdensome for IPCS providers. Regardless, we will vigilantly 
monitor complaints about inappropriately dropped communications, and, 
if necessary, will adopt specific rules requiring refunds or credits in 
the instance of dropped calls or communications. We seek comment on 
call or communication service quality and the issue of dropped calls 
due to service quality in the accompanying document.
    455. We next require IPCS providers to clearly describe their 
policies regarding dropped calls or communications in plain language in 
their consumer disclosures, including explaining the types of dropped 
calls and communications for which a consumer can seek a refund or 
credit. The provider also must explain how the refund or credit for a 
dropped call or communication will be calculated. For example, if an 
alternate pricing plan is based on the number of calls or 
communications, then the IPCS provider could give a credit of at least 
one call or communication, if there is enough time left in the service 
period for the consumer to use that credit; otherwise, a pro-rated 
refund may be appropriate. If the alternate pricing plan consists of a 
fixed number of minutes, we suggest that the IPCS provider give the 
consumer a refund for the minutes used by the call or communication 
that was dropped. Finally, if the alternate pricing plan consists of 
unlimited calls or communications, or unlimited minutes, then no credit 
or refund would be needed. In its consumer disclosures, the IPCS 
provider must also clearly explain the method the consumer must use to 
make a complaint and request a refund or credit for a dropped call or 
communication, and that method must be easy for the consumer to 
complete. ViaPath suggests that complaints could be filed at the 
Commission. However, clearly informing consumers of a provider's 
policies regarding dropped calls or communications and providing an 
easy-to-use method for requesting a refund or credit will be a good 
first step toward resolving issues with dropped calls and 
communications.
(c) Automatic Renewals
    456. To protect consumers from being billed for additional service 
periods without their consent, we permit IPCS providers to offer 
automatic renewals of any alternate pricing plan but only on an opt-in 
basis, and subject to other

[[Page 77328]]

requirements discussed below. In 2022, the Commission sought comment on 
whether consumers should be able to opt out of automatic renewals for 
alternate pricing plans, citing concerns that without such protections, 
alternate pricing plans may default to renewals consumers do not intend 
to purchase or no longer need. In response, some commenters expressed 
similar concerns and even suggested prohibiting automatic renewals. 
Alternatively, Securus asserts that ``the consumer should have a 
readily accessible means to decline or cancel any renewal option.'' 
During Securus's subscription plans, when a consumer signed up using 
its website, Securus gave the choice between manual renewal and 
automatic renewal. PPI notes that Securus apparently did not give 
advance notice when a renewal occurred for its subscription plan; 
Securus notified customers only ``after their renewal payments have 
been processed.'' PPI also points out that although Securus stated that 
customers could receive a refund within 14 days of an unwanted and 
unused automatic renewal, Securus's contracts did not include these 
terms.
    457. We adopt rules to ensure that consumers are informed about 
their renewal options. These rules are intended to give consumers the 
option to select automatic renewal, and also an easy method and 
sufficient opportunity for consumers to cancel the service before a 
plan renews. We are guided by the record, and many other situations 
where the Commission has required service providers to educate their 
consumers and allow them to opt into or out of a service. These rules 
apply to all IPCS offered through an alternate pricing plan.
    458. We also require that IPCS providers offering automatic 
renewals for alternate pricing plans explain, in plain language, the 
terms and conditions of the automatic renewal both at the time that it 
initially offers the automatic renewal option to a consumer, and before 
any automatic renewal is about to occur by whatever method the IPCS 
provider has established for other consumer notifications. The notices 
must explain that if a consumer who requested automatic renewals does 
not later want the alternate pricing plan to be renewed, the consumer 
may cancel their participation within a reasonable grace period 
identified by the provider at the time service is initiated.
    459. The IPCS provider must give notice to the consumer of an 
upcoming renewal with sufficient time before the renewal date to ensure 
the consumer can cancel their enrollment in the alternate pricing plan 
prior to its renewal. The Prison Policy Initiative suggests that a 
notification two to three ``business days prior to renewal would help 
customers avoid potential overdraft fees and remind them to cancel 
their subscription if they have been meaning to do so but forgot.'' No 
other commenter mentions the notices to be provided before automatic 
renewals. We agree that this requirement will ensure that consumers 
have sufficient notice. Therefore, we require that providers give 
notice directly to consumers no later than three business days prior to 
the renewal date, and, to ensure receipt of the notice, we require 
providers use, at a minimum, the method of communication that consumers 
agreed to at the time they enrolled in the alternate pricing plan. For 
example, Securus used email to remind consumers when they were reaching 
the call limit of its subscription plans. PPI commends Securus for 
providing an online option for cancelling enrollment (although they 
suggest that the related terms and conditions were confusing).
(d) Cancellation by the Consumer
    460. A consumer must be able to cancel their enrollment in an 
alternate pricing plan at any time and revert to per-minute pricing. 
Refunds or credits must be made available to consumers in the 
circumstances detailed below. Providers should process the cancellation 
by the next business day after the cancellation request. In its 
consumer disclosures, the provider must clearly explain the process for 
requesting plan cancellation, which must include the ability to use the 
method the consumer used to enroll in the plan. Securus provided an 
online cancellation option but, according to PPI, did not tell 
consumers that procedure was available. The disclosures also must 
include an explanation of the option to request a specific termination 
date if different from the date that the provider processes the 
cancellation. For example, the consumer may want to request a 
cancellation because an incarcerated person is going to be transferred, 
and the consumer would want the plan to terminate after the date of 
transfer. The consumer disclosures also must include an explanation of 
the amount of the refund that will be provided in situations where the 
IPCS provider does give refunds under the circumstances surrounding 
cancellation. The provider must clearly explain that once the alternate 
pricing plan terminates, and where applicable, the provider will bill 
for its service(s) at the provider's per-minute rates for the 
service(s) by the first day after the termination date. For example, if 
the plan is cancelled due to the incarcerated person being released, 
then the ability for the incarcerated person to call their friends and 
family would no longer be needed. By comparison, if the cancellation is 
not due to one of the special circumstances, then the incarcerated 
person may still need to use the service of the provider and would pay 
for that service using the provider's per-minute rates. We do not 
require providers to roll over unused minutes, calls or communications.
    461. When Cancellation Is Allowed. IPCS providers must allow 
consumers to cancel their participation in an alternate pricing plan at 
any time during the service period and revert to per-minute pricing. 
This requirement applies regardless of whether the consumer has elected 
to permit the provider to automatically renew their participation in 
the plan. In 2022, the Commission sought comment on whether consumers 
should be permitted to cancel their enrollment in an alternate pricing 
plan before the end of their enrollment period. NCIC noted that people 
who are incarcerated for only a short period of time or are moved to 
another facility may not be able to ``receive the full benefit of the 
subscription plan.'' The Public Interest Parties assert that 
``[c]onsumers should . . . not be bound by any long-term commitments 
and should be free to switch to a per-minute structure upon request.'' 
The record also indicates that a consumer may want to cancel their 
enrollment if they have not used the service since the beginning of the 
service period or if their incarceration status has changed. There may 
also be ``special circumstances'' such as release or transfer under 
which a consumer may need to cancel their participation in an alternate 
pricing plan. Securus repeatedly states that consumers should be 
permitted to cancel at any time, and refers to easy cancellations as 
the ``ultimate consumer protection.'' We agree. Regardless of when a 
consumer wants to cancel their enrollment, the IPCS provider's 
procedures for cancelling the service must be easy to follow and use 
the same method to effectuate cancellation that the consumer used to 
enroll in the plan. As Securus points out, the method for cancelling 
service should be ``readily accessible.''
    462. Refunds Upon Cancellation. In the 2022 ICS Further Notice, the 
Commission asked whether IPCS providers should be required to offer 
refunds when consumers cancel an alternate pricing plan before the end 
of the ``subscription period.'' Securus

[[Page 77329]]

explains that under its subscription plan, ``refunds [were] available 
upon request,'' and suggests that refund options should be limited to 
special circumstances such as the transfer or release of the 
incarcerated person. Securus argues that requiring providers to 
otherwise give refunds to consumers who cancel during a service period 
``would deprive providers of the benefit of the bargain--low rates in 
exchange for a predictable revenue stream.'' We agree. Therefore, 
although consumers may cancel their enrollment in an alternate pricing 
plan at any time, IPCS providers are not required to refund the balance 
of the subscription amount except in the case of special circumstances. 
The special circumstances recognized by the IPCS provider shall include 
situations where the incarcerated person: (a) is released; (b) is 
transferred to another facility; or (c) is not permitted to make calls 
or communications for a substantial portion (for example 50% or more) 
of the subscription period of the alternate pricing plan. Under such 
circumstances, the consumer would not be able to make use of the 
alternate pricing plan, and thus not be able to receive the benefit of 
the services they paid for. The IPCS provider may also establish other 
special circumstances for which it will provide a refund when a 
consumer requests cancellation.
    463. Any refund provided due to special circumstances shall be no 
less than the pro-rated amount that corresponds to the unused portion 
of the service period remaining under the alternate pricing plan. For 
example, if a consumer is enrolled in an alternate pricing plan and has 
used 200 minutes of an allotted 600 minutes when the consumer cancels 
due to special circumstances, the consumer would have 400 minutes (= 
600 minutes-200 minutes) unused at the time of cancellation. The 
provider would give a refund of at least \2/3\ (= 400 minutes/600 
minutes) of the amount the consumer paid for the plan. These limited 
refund requirements strike the appropriate balance between protecting 
consumers in the case of changed circumstances while still making the 
plans attractive for IPCS providers. Although we do not require an IPCS 
provider to give a refund for the unused portion of the alternate 
pricing plan when a cancellation occurs in situations other than the 
special circumstances detailed here, an IPCS provider may offer a 
refund at the provider's option in other situations.
    464. No Required Rollovers. We do not require providers to roll 
over unused minutes, calls, or communications from one service period 
under an alternate pricing plan to another service period. One 
commenter observes that Securus's subscription plan did not allow for 
the rollover of unused minutes, thereby increasing the consumer's 
effective rate. Securus opposes a requirement for consumers to be able 
to roll over unused minutes because rollovers would convert alternate 
pricing plans into ``repackaged per-minute rate plans and prevent 
consumers from enjoying lower prices.'' Indeed, in Securus's 
subscription plan, Securus did not roll over unused calls. We agree 
that a rollover requirement may undermine IPCS providers' incentives to 
offer alternate pricing plans, and therefore refrain from requiring 
providers to roll over unused minutes, calls, or communications.
d. Other Issues
(i) Flat-Rate Calling
    465. Because we permit IPCS providers to offer alternate pricing 
plans at flat rates (e.g., $Y per month or $Y per week), we remove 
Sec.  64.6090 of the Commission's rules which prohibits the offering of 
IPCS via flat rates. That prohibition on ``flat-rate calling'' was 
adopted by the Commission in the 2015 ICS Order when some providers 
required consumers to pay for a 15-minute call even if the call ended 
prior to the expiration of the 15 minutes. The Commission concluded 
that flat-rate prices for such short calls were ``disproportionately 
high'' and therefore prohibited flat-rate calling. Today, IPCS 
providers offer their IPCS at per-minute pricing, and we permit them to 
offer flat-rated alternate pricing plans as an option to the per-minute 
pricing. Consequently, we no longer need to prohibit flat-rate calling 
to protect consumers. One commenter opposes flat-rate charges for IPCS 
video calling, providing examples where the flat-rate charges are the 
only way to pay for video calling. Because today we adopt per-minute 
rate caps for IPCS video calling and permit flat-rate charges for video 
calling only within the context of an optional alternate pricing plan, 
these concerns are mitigated. If a provider offers a flat rate option 
for IPCS, they would be offering an alternate pricing plan, and would 
be subject to our general IPCS rules as well as the alternate pricing 
plan rules which will serve to protect consumers.
(ii) Disability Access via Alternate Pricing Plans
    466. IPCS providers that offer alternate pricing plans must ensure 
that they comply with our rules concerning TRS and related 
communication services. In 2022 and 2023, the Commission sought comment 
regarding the features or attributes that should be included in 
alternate pricing plans, and what conditions it would need to impose to 
ensure just and reasonable rates for audio and video communications 
services relevant here. In 2023, the Commission also sought comment on 
the extent to which the Martha Wright-Reed Act expands its ability to 
ensure that any audio and video communications services used by 
incarcerated people are accessible to and usable by people with 
disabilities. The Accessibility Advocacy and Research Organizations 
urge the Commission to ``be proactive and aggressive in preventing'' 
providers from using alternate pricing plans to circumvent ``the 
prohibition on charges for certain TRS calls'' as well as providers' 
``pricing obligations.''
    467. In the 2022 ICS Order, the Commission amended Sec.  64.6040 of 
its rules to improve access to TRS and related communications services, 
and clarified and expanded the restrictions on charges for TRS calls. 
In the Report and Order, we amend Sec.  14.10 to reflect the Martha 
Wright-Reed Act's expansion of the Communications Act's definition of 
advanced communications service, making clear the obligations of IPCS 
providers to ensure their video and voice communications services are 
accessible to and usable by incarcerated people with disabilities, and 
we amend Sec.  64.611 to facilitate the provision of IP CTS to 
incarcerated people with disabilities. Here, we amend Sec.  64.6040 to 
clarify how calls or communications using TRS and related 
communications services shall be treated under an alternate pricing 
plan.
    468. An IPCS provider that offers an alternate pricing plan must 
treat the calls or communications made to use TRS and related 
communications services in accordance with new Sec.  64.6040(e). The 
requirements in new Sec.  64.6040(e) mirror the restrictions on charges 
for IPCS in Sec.  64.6040(d). If an alternate pricing plan offers an 
unlimited number of minutes or calls, then eligible TRS users must be 
allowed unlimited TRS, text-telephone-to-text-telephone (TTY-to-TTY), 
and point-to-point American Sign Language (ASL) video calls under the 
same plan. If an alternate pricing plan limits the number of calls or 
minutes that are allowed during a billing period, then: (1) Video Relay 
Service (VRS), internet Protocol Relay Service (IP Relay), and Speech-
to-Speech Relay Service (STS) calls or minutes shall not be counted for

[[Page 77330]]

purposes of such limits; (2) each internet Protocol Captioned Telephone 
Service (IP CTS) and Captioned Telephone Service (CTS) call or minute 
shall be counted as equal to a non-TRS audio call or minute; and (3) 
TTY-to-TTY calls (which under a per-minute rate plan must not be 
charged at more than 25% of the per-minute rate) shall be counted as 
single calls (under a plan that limits the number of calls) or counted 
at one fourth the number of minutes used (if the plan limits the number 
of minutes). Also, each point-to-point video call shall be counted as 
equal to an audio call. Regardless of the format of an alternate 
pricing plan, there shall be no charge or fee for any equipment used to 
access TRS and related communication services, and no charge or fee for 
the internet or data portion of an IP CTS or CTS call, or for any 
additional internet or other connections needed for services covered by 
Sec.  64.6040. For example, with CTS and IP CTS, a second telephone 
line or an internet connection--separate from the voice connection--is 
often used to connect the user's device with the IP CTS provider to 
enable the provision of captions. If an alternate pricing plan offers a 
fixed number of minutes for voice service, for example, then in 
applying such a limit to a CTS or IP CTS user, only the minutes handled 
by the voice service line may be counted. These rules will prevent IPCS 
providers that offer alternate pricing plans, from circumventing the 
requirements adopted in the 2022 ICS Order. The rules also will satisfy 
requests in the record, and our statutory duties to ensure that 
communications services are accessible to and usable by persons with 
disabilities.
(iii) Consistency With the Martha Wright-Reed Act
    469. We find that allowing alternate pricing plans subject to the 
requirements and rules we adopt today is consistent with the Martha 
Wright-Reed Act. In 2023, the Commission asked whether the Martha 
Wright-Reed Act precludes the Commission from permitting alternate 
pricing plans for audio or video communications. Only one commenter 
addressed this issue, asserting that nothing in the Martha Wright-Reed 
Act ``bars use of different pricing structures.'' Previously, in 
response to 2021, the Prison Policy Initiative argued that the 
effective rates of alternate pricing plans and the consumer disclosures 
provided at that time could violate the Commission's statutory duties 
under sections 201(b) and 276(b)(1)(A).Act. We find, however, the 
conditions we impose today on the offering of alternate pricing plans 
sufficiently address the fundamental concerns raised in the record. 
Because we limit the rates that may be charged for IPCS when offered 
through alternate pricing plans to the just and reasonable rate caps we 
adopt today on a per-minute basis--rate caps that ensure fair 
compensation to providers--alternate pricing plan rates and charges 
will also be just and reasonable and provide fair compensation 
consistent with the Martha Wright-Reed Act. While we find that the per-
minute rate caps we adopt today will ensure that IPCS providers are 
``fairly compensated,'' in accordance with section 276(b)(1)(A) of the 
Communications Act, an IPCS provider that chooses to offer an alternate 
pricing plan will bear the responsibility for ensuring that the plan 
will adequately compensate it for its services on a companywide basis.
(iv) Start Date and End Date
    470. Consistent with the voluntary nature of any IPCS alternate 
pricing plan, an IPCS provider that elects to offer an alternate 
pricing plan may choose when to offer the plan once the rules 
permitting such plans are effective. The Commission previously asked 
about possibly allowing alternate pricing plans on a temporary or pilot 
program basis only. We decline to limit providers' ability to offer 
these plans given that no IPCS user must choose such a plan, and given 
the other protections we adopt. Worth Rises suggests that the 
Commission permit a pilot program pursuant to a waiver for no longer 
than three months so that the Commission may collect data to ensure 
compliance with the rate caps before permitting the plan to continue. 
Conversely, Securus asserts that the Commission should not limit the 
length of time the plan can be offered and argues that ``[a]rtificially 
ending programs that may be providing substantial benefits would harm 
the very consumers the Commission wishes to protect.'' We also do not 
limit the time frame during which an alternate pricing plan may be 
offered due, in part, to the potential consumer benefits of these plans 
and to our adoption of rules and conditions that will ensure such 
benefits. However, we caution providers that if we see evidence of 
gamesmanship or that providers are otherwise taking advantage of 
consumers through these alternate pricing plans, we will not hesitate 
to revisit allowing IPCS providers to offer such plans.
    471. Just as we permit providers to determine when to offer an 
alternate pricing plan without prior approval from or notification to 
the Commission, we similarly permit providers to terminate a plan at 
their discretion, provided that sufficient notice is given to their 
consumers. We permit providers to determine what is reasonable notice 
of termination, and require notification to consumers in accordance 
with applicable consumer disclosure rules. For example, given that 
alternate pricing plans are limited to one month service periods, IPCS 
provider notification to affected consumers two weeks prior to it no 
longer offering a monthly plan exemplifies reasonable notice.
10. International Rate Caps
    472. In the 2021 ICS Order, the Commission first adopted interim 
rate caps on international audio IPCS communications comprised of the 
applicable interstate rate cap component for that facility plus an 
international termination component. The record and the data before us 
demonstrate that providers continue to incur termination charges for 
completing international audio communications. We therefore decline to 
disturb the rules for international calls on the record before us, and 
maintain our existing international rate cap structure for audio IPCS.
    473. In 2021, the Commission sought comment on whether and how it 
should further reform international rates, a request echoed in 
subsequent requests for comment. In response, certain commenters raised 
concerns with the formula for calculating international rates set forth 
in our rules, arguing that tracking multiple ``floating rates'' raises 
surveillance costs for providers and reduces predictability for 
consumers. We are unpersuaded. As an initial matter, we decline to 
establish a uniform safe harbor under which the termination component 
that would apply to all of a provider's international audio calls (or 
alternatively to all of the provider's international audio calls under 
a particular contract) would equal the average of the provider's 
international termination charges for the previous calendar year (or 
alternatively the average of such charges under the particular 
contract), as one commenter suggests. Because international termination 
charges vary significantly depending on the calls' destinations, any 
such approach would result in IPCS consumers being charged unreasonably 
high rates for calls to international destinations having relatively 
low termination charges. It is also hard to understand how 
predictability could decline when the international termination fees 
themselves change frequently, and the commenters have

[[Page 77331]]

not substantiated their claims of compliance difficulties with cost 
data. No commenter raises other concerns with the current international 
rate cap formula. At the same time, providers' submitted data are 
remarkably devoid of any data on the cost of providing international 
IPCS, with only one provider reporting such costs. We therefore find 
that both the data and the record are, at present, insufficient to 
support revisions to our rules, or to develop alternative approaches to 
international rate caps.
    474. We recognize that differences between audio IPCS and video 
IPCS may limit the applicability of these rules to video IPCS. Unlike 
audio IPCS, we have no record evidence that video communications 
services incur international termination charges. In fact, the data 
from the 2023 Mandatory Data Collection do not indicate that providers 
routinely or ordinarily incur termination charges for completing 
international video communications. In the absence of any record 
supporting the need for international video communications rate caps, 
we decline to adopt an international termination component for video 
IPCS at this time. In the absence of such a separate component for 
video IPCS, international video communications will be subject to the 
interstate video cap in effect for the relevant facility.

E. Waivers

    475. We adopt with modifications the waiver process previously 
adopted by the Commission in the 2021 ICS Order. The modifications 
reflect our full jurisdiction under the Martha Wright-Reed Act to 
include intrastate services and various advanced communications 
services, including video services and providers that offer them, in 
addition to the interstate and international services that previously 
were the focus of our IPCS rules. The modifications also reflect the 
Act's direction that the Commission may use a provider's average costs 
in determining just and reasonable IPCS rates. The waiver process we 
adopt will ensure that providers that may face unusually high costs to 
serve a particular facility or set of facilities covered by a contract 
will have the opportunity to demonstrate that those costs are, indeed, 
used and useful costs in their provision of IPCS and are therefore 
recoverable. As discussed above, we interpret and apply section 
276(b)(1)(A) in a manner that harmonizes the ``just and reasonable'' 
and ``fairly compensated'' criteria. Consequently, the used and useful 
analysis we employ will involve that harmonization of the ``just and 
reasonable'' and ``fairly compensated'' standards.
    476. The Commission's previous waiver process permitted an inmate 
calling service provider to file a petition for a waiver of our interim 
inmate calling services rate caps if the provider makes certain 
showings that it cannot recover its allowable costs under the 
Commission's interim inmate calling services rate caps. The portions of 
the 2015 ICS Order regarding the waiver process were unaltered by the 
GTL v. FCC court's 2017 vacatur. We modify that process to take into 
account the Commission's full authority under the Martha Wright-Reed 
Act to include intrastate services and advanced communications 
services. In addition, the Commission will evaluate waiver petitions in 
light of the Act's elimination of the section 276 requirements that 
providers be compensated on a ``per-call'' basis, and compensated for 
``each and every call,'' and in light of the addition of the 
requirement that the Commission ensure IPCS rates are just and 
reasonable while ensuring that providers are fairly compensated.
    477. To be granted a waiver under the rules adopted in 2021, 
providers are required to show that they faced ``unusually high costs 
in providing interstate or international inmate calling services at a 
particular facility or under a particular contract that are otherwise 
not recoverable through the per-minute charges for those services and 
through ancillary service fees associated with those services.'' When 
adopted, the Commission noted that various providers argued that 
reductions in inmate calling services rates would threaten their 
financial viability, imperiling their ability to provide service, and 
risk degrading or lowering their quality of service. It determined that 
those claims were best addressed on a case-by-case basis through a 
waiver process that focused on the costs the provider incurred in 
providing interstate and international inmate calling services, and any 
associated ancillary services, at an individual facility or under a 
specific contract.
    478. In 2023, the Commission sought comment on ``any other matters 
that may be relevant to our implementation of the Martha Wright-Reed 
Act to adopt just and reasonable rates and charges for incarcerated 
people's audio and video communications services.'' In the context of 
analyzing providers' site commission payments, it also asked for 
comment on the showing it should require to evaluate waivers seeking to 
recover the portion of those payments that compensate facilities for 
their used and useful costs of providing IPCS. Based on the record, we 
retain our current waiver process framework with modifications to 
reflect the provisions of the Martha Wright-Reed Act, including our new 
authority thereunder. We decline at this time to extend our waiver 
process to include pilot programs or to impose requirements on state 
rate-setting processes. State rate-setting processes (in contrast to 
site commission payment requirements) are not governed by our current 
IPCS rules, to the extent they do not result in state rates or charges 
exceeding our rate caps, and thus cannot be addressed by waiver in any 
case. And we decline to depart from our rules governing alternate 
pricing plans via waiver because we believe those rules already provide 
for appropriate flexibility, and adhering to that regulatory framework 
provides certainty regarding the parameters for any such 
experimentation that will occur, thereby facilitating appropriate 
Commission oversight and managing what IPCS users will be expected to 
understand about such plans, and the protections they will have under 
them.
    479. The IPCS rate cap methodology we adopt herein comprehensively 
accounts for providers' reported costs of providing IPCS as 
contemplated by the Act, and we therefore anticipate that instances 
where providers cannot recover their cost of service should be 
exceptional. To the extent such instances occur, however, we adopt a 
process that allows providers to seek waivers of our rate caps to 
ensure recovery of the used and useful costs of providing IPCS. We also 
expand the scope of our previous waiver process to allow providers to 
seek waivers related to the provision of advanced communications 
services, including video, as well as with respect to our overall IPCS 
rate caps which will now apply to international, interstate and 
intrastate services. Additionally, we remove any reference to ancillary 
services in our waiver rules because, as explained above, separately-
identified ancillary service fees have been prohibited, and the costs 
of providing ancillary services have instead been included in the 
overall rate caps. As was the case with our previous IPCS waiver 
process, providers may seek a waiver either on a facility basis or 
contract basis. We disagree with Securus that we should allow company-
wide waivers given that company-wide waivers would likely be too 
complex and time-consuming to provide adequate and timely relief for 
providers.
    480. Consistent with the Commission's previous waiver process and 
with its waiver processes generally,

[[Page 77332]]

petitioners will continue to bear the burden of proof to show that good 
cause exists to support waiver requests, but all waiver requests must 
now include a showing that the request will not result in unjust and 
unreasonable IPCS rates and charges. An IPCS provider filing a petition 
for waiver must clearly demonstrate that good cause exists for waiving 
our rate caps or other rules at a given facility or group of 
facilities, or under a particular contract, and that strict compliance 
with these caps would be inconsistent with the public interest. For any 
waiver request based on a particular facility or group of facilities, 
the provider must show that the costs of the entirety of its contract 
are not recoverable under the applicable rate caps, not merely the 
costs at an individual facility or group of facilities that are part of 
an otherwise profitable contract. As the Commission explained in the 
2021 ICS Order, conclusory assertions that the reductions in rates will 
harm the provider or make it difficult for the provider to expand its 
service offerings will not be sufficient to obtain a waiver. Providers 
requesting a waiver of our IPCS rules will continue to be required to 
provide a detailed explanation of their claims, including all relevant 
financial and operational data as referenced in our rules. In order to 
evaluate waivers, we also require a provider to submit its total 
company IPCS costs and revenues and other financial data and 
information, including justification for deviating from ``the average 
costs of service of a communications service provider'' to assess the 
merits of a petition. Failure to provide such information will prevent 
us from making a determination regarding the waiver request and will be 
grounds for dismissal without prejudice. Furthermore, the petitioner 
must provide any additional information requested by Commission staff 
to evaluate the waiver request during the course of its review.
    481. We caution petitioners that we will continue to evaluate 
waiver petitions thoroughly and waivers will not be routinely granted. 
The Commission previously delegated authority to the Bureau to review 
and rule on petitions for waivers, and we reaffirm that delegation of 
authority today. Waiver petitions will be placed on public requests for 
comment, and interested parties will be provided an opportunity for 
comment.

F. Communications Services for Incarcerated People With Disabilities

    482. We amend our rules to improve communications services for 
incarcerated people with disabilities. First, in response to comments 
on 2023, we amend our Part 14 rules as appropriate to reflect the 
Martha Wright-Reed Act's expansion of the Communications Act's 
definition of ``advanced communication service.'' Next, in response to 
comments on 2022, we amend our Part 64 TRS rules to allow a form of 
enterprise registration for the use of internet Protocol Captioned 
Telephone Service (IP CTS) in carceral facilities. We also amend the 
Part 64 IPCS rules to require that IPCS providers provide billing and 
other information regarding their services in accessible formats. We 
clarify that internet-based IPCS providers may provide access to 
traditional (TTY-based) TRS via real-time text. We defer action on 
setting a timeline to expand the scope of our IPCS rules on access to 
TRS and related services, pending the collection of further information 
on implementation of the current rules.
1. Part 14 Changes
    483. Advanced Communications Services Definition. We adopt the 
Commission's proposal, in 2023, to amend the definition of ``advanced 
communications services'' in our Part 14 rules to incorporate the 
amended statutory definition. Prior to the Martha Wright-Reed Act, the 
Communications Act (and Part 14 of our rules) defined ``advanced 
communications services'' to be: (1) interconnected VoIP service; (2) 
non-interconnected VoIP service; (3) electronic messaging service; and 
(4) interoperable video conferencing service. In light of the lengthy 
pendency of unsettled questions regarding the application of Part 14 to 
video conferencing, the Commission extended until September 3, 2024, 
the deadline for providers of such services to comply with the Part 14 
accessibility rules for advanced communications services. The Martha 
Wright-Reed Act amended this definition to add a fifth category: ``any 
audio or video communications services used by inmates for the purposes 
of communicating with individuals outside the correctional institution 
where the inmate is held, regardless of technology used.'' We now amend 
the definition of ``advanced communications services'' in our Part 14 
rules to include that category as well, aligning the definition in our 
rules with the amended statutory definition. One commenter agrees that 
the Commission should simply incorporate section 3's definition of ACS, 
as amended by the Martha Wright-Reed Act, into Part 14. No other 
commenters directly address the issue.
    484. Statutory Accessibility Requirements. Pursuant to section 716 
of the Communications Act, providers of advanced communications 
services and manufacturers of equipment used for such services 
(including end user equipment, network equipment, and software) must 
ensure that such services, equipment, and software are accessible to 
and usable by individuals with disabilities, unless doing so is ``not 
achievable.'' The term ``achievable'' means with reasonable effort or 
expense, as determined by the Commission. Section 716 of the 
Communications Act specifies that, in determining whether the 
requirements of a provision are achievable, the Commission shall 
consider the following factors: (1) the nature and cost of the steps 
needed to meet the requirements of this section with respect to the 
specific equipment or service in question; (2) the technical and 
economic impact on the operation of the manufacturer or provider and on 
the operation of the specific equipment or service in question, 
including on the development and deployment of new communications 
technologies; (3) the type of operations of the manufacturer or 
provider; and (4) the extent to which the service provider or 
manufacturer in question offers accessible services or equipment 
containing varying degrees of functionality and features, and offered 
at differing price points. Whenever those requirements are not 
achievable a manufacturer or provider must ensure that its equipment or 
service is compatible with existing peripheral devices or specialized 
customer premises equipment commonly used by individuals with 
disabilities to achieve access, unless such compatibility is not 
achievable. Providers of advanced communications services are also 
prohibited from installing network features, functions, or capabilities 
that impede accessibility or usability. The Commission has implemented 
section 716 by adopting performance objectives to ensure the 
accessibility, usability, and compatibility of advanced communications 
services and the associated equipment, recordkeeping requirements, and 
the consumer dispute assistance and informal and formal complaint 
processes. ``Manufacturers and service providers must consider [these 
performance objectives] at the design stage as early as possible and 
must implement such performance objectives, to the extent that they are 
achievable.'' In addition, ``[m]anufacturers and service providers must 
identify barriers to accessibility and usability as part of such 
evaluation.'' Covered service providers

[[Page 77333]]

and equipment manufacturers also must file certificates of compliance 
with applicable recordkeeping requirements, including contact 
information for persons authorized to resolve complaints regarding 
alleged violations of accessibility requirements.
    485. Effect of the Martha Wright-Reed Act on the Scope of Rules. In 
2023, the Commission sought comment on the extent to which the Martha 
Wright-Reed Act expands its ability to ensure that any audio and video 
communications services used by incarcerated people are accessible to 
and usable by people with disabilities. As a number of commenters 
recognize, prior to enactment of that legislation, voice services 
offered by IPCS providers were already subject to the requirements of 
section 716 or the related requirements of section 255 of the 
Communications Act. Section 255 imposes similar accessibility 
obligations on providers of telecommunications services and 
manufacturers of telecommunications equipment, and the Commission's 
regulations implementing section 255, 47 CFR part 6, also apply to 
providers of interconnected VoIP service. Accessibility of voicemail 
equipment and services are addressed in 47 CFR part 7. Overlap between 
sections 255 and 716 is avoided because section 716 provides that it 
does not apply to ``any equipment or services, including interconnected 
VoIP service, that [were] subject to the requirements of section 255'' 
of the Communications Act prior to the enactment of section 716. 
Accessibility of voicemail equipment and services are addressed in 47 
CFR part 7. Overlap between sections 255 and 716 is avoided because 
section 716 provides that it does not apply to ``any equipment or 
services, including interconnected VoIP service, that [were] subject to 
the requirements of section 255'' of the Communications Act prior to 
the enactment of section 716. Such services and equipment ``shall 
remain subject to the requirements of section 255'' of the 
Communications Act. However, the recordkeeping, certificate of 
compliance, consumer dispute assistance, and enforcement requirements 
of Part 14 apply to manufacturers and service providers covered by 
section 255 as well as those covered by section 716. Similarly, 
electronic messaging services and interoperable video conferencing 
services offered by IPCS providers were also subject to section 716 and 
the Part 14 rules. The record does not indicate to what extent, if at 
all, there are other audio and video communication services offered by 
IPCS providers that were not previously included in the definitions of 
``telecommunications service'' or ``advanced communications services,'' 
and that, accordingly, are newly subject to accessibility requirements 
under section 716 of the Communications Act and Part 14 of our rules. 
However, to the extent that any IPCS provider may have been uncertain 
whether accessibility requirements apply to a particular voice or video 
communication service that it provides for the use of incarcerated 
persons in communicating with non-incarcerated persons, the Martha 
Wright-Reed Act makes clear that the accessibility requirements of the 
Commission's rules apply to such services.
    486. Part 14 Performance Objectives. The 2023 IPCS NPRM also sought 
comment on whether the Commission should add or modify any performance 
objectives or recordkeeping requirements for application in the 
correctional facility context. At this time, we do not see a need to 
create new or different performance objectives for IPCS providers. As 
noted above, communications services offered by IPCS providers were 
already covered by section 255 or 716 of the Communications Act, and 
the record does not indicate that any audio and video communications 
services used by incarcerated people were not previously included in 
the statutory definitions of telecommunications services and advanced 
communications services. Further, while the communication challenges 
experienced by incarcerated people with disabilities may be more acute, 
the record does not indicate that they are different in kind from those 
of non-incarcerated people with disabilities. For example, to be 
accessible to a blind person, whether incarcerated or not, an advanced 
communications service should ``[p]rovide at least one mode that does 
not require user vision.''
    487. We decline, at this time, to impose a limitation on the use of 
automatic speech recognition (ASR) technology alone in the provision of 
IP CTS in carceral facilities. The Commission previously found the use 
of ASR-only captioning in the provision of IP CTS to be comparable in 
accuracy to CA-assisted IP CTS. While we continue to encourage 
providers to make CA-assisted IP CTS available, there is not a 
sufficient record in this proceeding to suggest that provision of ASR-
only IP CTS would discriminate against for example, people who speak 
dialects, have accented speech, or speech impediments, nor a record to 
suggest that CA-assisted IP CTS would cure or otherwise prevent such 
discrimination. The Commission will continue to collect data and 
information annually from IPCS providers and it has open dockets 
concerning advanced communications services and IP CTS where a record 
on the raised concerns may be developed to be addressed. In the 
interim, we proceed with ensuring the Commission's current 
accessibility rules are appropriately applied in the correctional 
facilities context.
    488. We are also not persuaded that it is necessary to modify Part 
14 performance objectives to address ``the unique challenges of 
offering internet-based IPCS and consistent with the Commission's 
existing IPCS accessibility rules,'' as recommended by Ameelio, a 
provider of internet-based IPCS. To the extent that security issues or 
other factors may affect the achievability of specific performance 
objectives, such concerns can be addressed consistently with the 
current Part 14 rules, as Part 14 obligations are expressly subject to 
the proviso ``unless the requirements of this [subsection/paragraph] 
are not achievable.'' We also note that some of the concerns raised by 
Ameelio appear to be based on a misunderstanding of the Commission's 
video conferencing proposals. For example, the Commission has proposed 
to modify the TRS ``privacy screen'' rule (redesignated 47 CFR 
64.604(d)(5)) to allow VRS providers to be compensated for providing 
VRS in a video conference in which some participants turn off their 
video cameras. However, nothing in the Commission's proposal suggests 
that the proposed rule would affect the ability of a video conferencing 
service provider or host to require participants to leave their cameras 
on, for security or other reasons.
2. Enterprise Registration for IP CTS and IP Relay
    489. Background. To prevent waste, fraud, and abuse and allow the 
collection of data on TRS usage, our rules generally condition TRS Fund 
support for VRS, IP CTS, and IP Relay on eligible users of these 
services being registered with a service provider. Certain personal 
data, as well as a self-certification of eligibility to use TRS, must 
be collected from each TRS user and--for VRS and IP CTS users--entered 
in the TRS User Registration Database (User Database), a central 
registry maintained by a Commission-designated administrator. The User 
Database has not yet been activated for IP CTS. Pending its activation, 
however, registration data and a self-certification of eligibility must 
be collected and maintained by the IP CTS provider. For VRS, however, 
the rules provide an alternative to individual registration for

[[Page 77334]]

videophones maintained by businesses, organizations, government 
agencies, or other entities and made available to their employees or 
clients as ``enterprise videophones.'' This ``enterprise registration'' 
alternative is not currently authorized for IP CTS or IP Relay. The 
Commission has previously granted a waiver of the TRS registration rule 
to allow TRS providers to provide IP CTS and IP Relay to federal 
government employees and on-premises contractors through a registration 
process similar to the VRS enterprise registration process.
    490. In the 2022 ICS Order, the Commission modified its 
registration rules for incarcerated people eligible to use TRS, 
simplifying the registration data that must be collected in that 
context to account for differences in the availability and source of 
registration information. IPCS providers are required to assist TRS 
providers in collecting registration information and documentation from 
incarcerated users and correctional authorities. The Commission also 
authorized a modified form of enterprise registration for VRS use in 
correctional facilities. In lieu of registering each videophone, the 
amended enterprise rule allows a VRS provider to assign a pool of 
telephone numbers to a correctional authority. The numbers may be used 
interchangeably with any videophone or other user device made available 
for the use of VRS within the correctional facility. In 2022, the 
Commission sought comment on whether to adopt a comparable form of 
enterprise registration for IP CTS in the incarceration context. All 
commenters addressing the issue support such a rule change. In 
addition, Securus urges that enterprise registration also be allowed 
for IP Relay in the carceral context, noting that ``the same logistical 
issues at the correction facility for individual registration of IP 
CTS'' extend to IP Relay.
    491. To further expedite access to TRS by incarcerated people, we 
amend our rules to allow enterprise registration for IP CTS and IP 
Relay in the incarceration context. The record indicates that the 
individual registration process can pose significant challenges for 
incarcerated people attempting to use IP CTS or IP Relay. When a person 
is initially confined and seeks to notify a family member or attorney 
of their situation, the need for individual registration may delay 
access to IP CTS or IP Relay for hours or days, with potentially 
serious consequences for the newly incarcerated person. For example, 
some of the required registration information and documentation may not 
be readily available at the time of initial incarceration, and 
assistance in collecting or preparing such information and 
documentation may not always be available from correctional 
authorities. Further, incarcerated persons, particularly those newly 
incarcerated, are often transferred between facilities. If a transferee 
must re-register (e.g., because the new facility is operated by a 
different correctional authority or a different TRS provider is 
providing a particular relay service), or if there is a delay in 
confirming an existing registration (e.g., because the TRS provider is 
not promptly informed of the transfer) access to TRS could be 
interrupted or even terminated. Additional registration issues may 
arise in juvenile detention facilities, where a parent or guardian 
would need to register on behalf of a minor who has been incarcerated.
    492. The record confirms that allowing enterprise registration for 
IP CTS and IP Relay in the carceral setting would not significantly 
increase the risk of TRS waste, fraud, or abuse. In the 2022 ICS Order, 
the Commission found that the security measures routinely applied to 
telephone service in correctional facilities limit any risk of waste, 
fraud, and abuse associated with enterprise registration for VRS, and 
those same security measures would tend to limit such risks in the case 
of IP CTS and IP Relay. Further, by allowing the assessment of charges 
for IP CTS that do not exceed those for an equivalent voice telephone 
call, we have limited the potential incentive of incarcerated people 
who do not need the service to seek to use it in lieu of ordinary voice 
service. Conversely, the limitation of IP CTS charges to those for an 
equivalent voice call limits any incentive for correctional authorities 
to allow or promote the use of IP CTS by incarcerated people with no 
need for the service. In IP Relay, no charges are permitted. However, 
with IP Relay, unlike IP CTS, the communications assistant mediates 
communication in both directions. As a result, IP Relay conversations 
tend to be substantially slower than the equivalent voice 
conversations, and there is accordingly less incentive for incarcerated 
people to request use of the service if they do not need it for 
functionally equivalent communication.
    493. The enterprise registration rule we adopt for IP CTS and IP 
Relay in the carceral context parallels the VRS enterprise registration 
rule, as modified for the carceral context. To make it easier to find 
the applicable requirements, we combine the existing requirements for 
carceral enterprise registration for VRS with the new requirements for 
such registration for IP CTS and IP Relay in a single new paragraph (l) 
of Sec.  64.611. For enterprise registration of a correctional facility 
or correctional authority, a TRS provider must transmit to the TRS User 
Registration Database administrator the following information: the TRS 
provider's name, the telephone numbers or other unique identifiers 
assigned to the correctional authority, the name and address of the 
correctional facility or correctional authority, the date of initiation 
of service to the correctional authority, and the name of the 
individual responsible for the device(s) used to access VRS, IP Relay, 
or IP CTS at the correctional facility or facilities involved. The 
existing rule for VRS allows enterprise registration of a single pool 
of telephone numbers for use by a correctional authority in all of its 
facilities. We allow the same flexibility for IP CTS. Such numbers may 
be assigned either by the IPCS provider or the TRS provider. As with 
the existing rule for VRS, the address may be the main or 
administrative address of the correctional authority. This individual 
may be an employee of either the correctional authority or the IPCS 
provider. When a TRS provider ceases providing relay service to a 
correctional authority via enterprise registration, the provider shall 
transmit the date of termination of such service.
    494. The TRS provider also must obtain a signed certification from 
the responsible individual attesting that he or she understands the 
functions of the devices used to access TRS and that the cost of TRS is 
financed by the federally regulated Interstate TRS Fund. The 
certification also must state that the correctional authority or IPCS 
provider will make reasonable efforts to ensure that for VRS and IP 
Relay only persons with a hearing or speech disability are permitted to 
access the service, and that for IP CTS only persons with hearing loss 
that necessitates the use of IP CTS to communicate by telephone are 
permitted to access IP CTS. A VRS or IP CTS provider must also obtain 
the responsible individual's consent to transmit this information to 
the TRS User Registration Database. At this time, the TRS rules do not 
require that IP Relay registration data be entered in the User 
Registration Database. Before obtaining such consent, the TRS provider 
must describe, using clear, easily understood language, the specific 
information being transmitted, that the information is being 
transmitted to the TRS User Registration Database to ensure proper 
administration of the TRS program, and that failure to provide consent 
will require individual

[[Page 77335]]

registration and self-certification by incarcerated persons. A TRS 
provider shall maintain the confidentiality of any registration and 
certification information obtained by the TRS provider, and shall not 
disclose such registration and certification information, or the 
content of such registration and certification information, except as 
required by law or regulation.
3. Other Issues
    495. Accessible Billing Formats. As also proposed in 2022, we amend 
our rules to require that any charges for IPCS be disclosed in 
accessible formats to incarcerated people with disabilities. The record 
in this proceeding generally supports this proposal. We do not agree 
with ViaPath that amendment of the Part 64 rules in this respect is 
unnecessary. Although our Part 6, 7, and 14 rules include requirements 
that information and documentation provided to customers regarding 
covered services be accessible to individuals with disabilities, those 
rules are subject to an achievability condition--which is not 
applicable to our Part 64 IPCS rules. Given the special importance of 
communication to incarcerated people with disabilities and the history 
of egregious telephone charges imposed on incarcerated people and their 
families, we decline to impose an achievability condition on access to 
billing information in the carceral setting.
    496. Charges for TRS-Related Services. As discussed above, we amend 
Sec.  64.6040 of our rules to clarify the treatment of TRS and related 
services under alternate pricing plans. We do not otherwise alter the 
provisions of Sec.  64.6040 regarding charges for TRS and related 
services. In particular, we decline Securus's request for modification 
of Sec.  64.6040(d)(3), which caps the permitted charges for point-to-
point video service used by incarcerated persons with disabilities who 
can use ASL, limiting such charges to the equivalent rate for an 
equivalent voice call. Securus recommends that, ``[n]ow that the 
Commission has set rate caps for video IPCS charges for video IPCS,'' 
the benchmark for point-to-point ASL video charges should be the 
charges for equivalent non-ASL video calls. We deny this request. 
Although ASL point-to-point video service is not relay service per se, 
it serves the same statutory purpose--``to provide the ability for an 
individual who is deaf, hard of hearing, deaf-blind, or who has a 
speech disability to engage in communication by wire or radio in a 
manner that is functionally equivalent to the ability of a hearing 
individual . . . to communicate using voice communication services.'' 
Therefore, access to this service is mandated for any facility covered 
by Sec.  64.6040(b)(2)(ii), even if video communication is not 
otherwise made available at such facility. Accordingly, in 2022, the 
Commission appropriately benchmarked the charges for the use of point-
to-point video to communicate in ASL at the charges for an equivalent 
voice call. Permitting the assessment of a higher video rate for such 
calls, instead of the equivalent voice rate at any correctional 
institution, would be inconsistent with the underlying statutory 
purpose--to make available communication that is functionally 
equivalent to voice communication.
    497. Analog TRS. In response to reply comments by Ameelio, an 
internet-based video IPCS provider, we clarify the application to such 
providers of the IPCS rules mandating the availability of traditional 
(TTY-based) TRS and STS. Noting that the internet does not support 
analog services, Ameelio ``proposes that the Commission update its IPCS 
accessibility rules to accommodate advanced communications services 
that . . . do not rely on the Public Switched Telephone Network (PSTN), 
by clarifying that app-based IPCS providers may comply with the IPCS 
accessibility rules by providing functional equivalents to the 
traditional accessibility services that rely on the legacy telephone 
network.'' As the Commission explained in the 2022 ICS Order, while TTY 
technology is incompatible with the IP protocol, TTY-based TRS and STS 
continue to be essential for ensuring that all segments of the TRS-
eligible population have access to functionally equivalent 
communications. In addition, U.S. Department of Justice regulations 
implementing Title II of the American with Disabilities Act currently 
require correctional authorities to furnish auxiliary aids and 
services, which are defined to include voice, text, and video-based 
telecommunications products and systems, including TTYs, videophones, 
and captioned telephones or equally effective telecommunications 
devices. However, rules the Commission adopted in 2016 allow mobile 
service providers to comply with TTY-related requirements by supporting 
real-time text, an IP-based protocol, as an alternative to TTY 
connection. We amend our codified IPCS rules to make clear that, 
similarly, IPCS providers may provide access to traditional TRS via 
real-time text, as an alternative to TTY transmissions, if real-time 
text transmission is supported by the available devices and reliable 
service can be provided by this method. Additionally, for IPCS 
providers to meet their requirement to provide access to traditional 
TTY-based TRS and STS, they need only ensure that incarcerated 
individuals eligible to use TRS can access at least one certified 
provider of each form of TRS. If an IPCS provider does not interconnect 
with the PSTN, it could rely on contracting or other arrangements with 
a correctional facility to ensure that TTY-based TRS and STS are made 
available.
    498. We also do not address at this time the Commission's proposal 
to expand the scope of coverage of the TRS Access Rule to include 
correctional facilities in jurisdictions with an ADP of fewer than 50 
incarcerated people. We recognize that the Communications Act directs 
us to ensure that TRS are available to all eligible persons in the 
United States, to the extent possible, and we reaffirm the Commission's 
belief that, to ensure the availability of TRS and point-to-point ASL 
video communication to the fullest extent possible, the TRS-related 
access obligations of incarcerated people's communications service 
providers should be at least coextensive with those of correctional 
authorities under federal disability rights law--which are not subject 
to any population size limitation. However, given that the current rule 
has been effective for less than a year, we believe that our 
determination of an appropriate timeline for the expansion of TRS 
access to those facilities not covered by the current rule may benefit 
from experience gained regarding the first year of implementation. 
Therefore, we will keep the record open for additional input on this 
matter.

G. Reform of Consumer Protection Rules

    499. In light of the expansion of our authority under the Martha 
Wright-Reed Act, we next revise our existing consumer protection rules 
to improve consumer disclosure requirements and to protect the funds of 
IPCS account-holders to ensure IPCS consumers fully benefit from the 
various reforms we adopt in the Report and Order. The Commission's 
consumer disclosure rules currently require providers to disclose their 
rates, ancillary service charges, and charges for terminating 
international calls to account holders and specify how certain charges 
should be displayed on billing statements. The existing inactive 
account rules bar providers, on an interim basis, from converting 
unused funds in inactive ICS

[[Page 77336]]

accounts to their own use and require them to make reasonable efforts 
to refund those funds. Based on the record, we expand these consumer 
protection rules to apply to the full scope of IPCS now subject to our 
ratemaking authority.
    500. We also address certain limitations in our existing rules 
which the record shows lack sufficient scope, clarity, and specificity 
to enable IPCS consumers--and the public--to make fully informed 
decisions regarding the rates, charges, and practices associated with 
providers' offerings. Some commenters also contend that the current 
rules are inadequate to ensure that IPCS consumers receive the 
information they need to verify charges to their accounts. Similarly, 
the record makes clear a need to revise and strengthen the interim 
inactive account rules to ensure that IPCS consumers are able to 
receive timely refunds of unused funds in IPCS accounts deemed to be 
inactive. In light of this, we decline to simply apply our existing 
consumer protection rules to the expanded list of services--video IPCS 
and other audio and video advanced communications services, including 
intrastate services--over which we now have jurisdiction under section 
276. Instead, we revise and strengthen those rules and apply them to 
all IPCS as set forth below.
    501. Section 276(b)(1)(A) of the Communications Act, as amended by 
the Martha Wright-Reed Act, requires that we develop a compensation 
plan ensuring just and reasonable rates and charges for consumers and 
providers, while providing fair compensation to providers. As set forth 
above, we interpret this requirement as giving us authority over 
providers' practices associated with IPCS to the extent they may affect 
our ability to ensure just and reasonable audio and video IPCS rates 
and charges and fair compensation for all IPCS. We exercise that 
authority to adopt rules requiring IPCS providers to timely and 
effectively disclose the information that IPCS consumers will need to 
make informed decisions in setting up and using their IPCS accounts as 
well as rules to facilitate refunds of funds remaining in accounts that 
have been deemed inactive.
1. Consumer Disclosure Rules
c. Disclosure of Rates, Charges, and Practices
    502. We revise and expand our consumer disclosure rules so all IPCS 
users and, where appropriate, the general public will have sufficient 
information to evaluate providers' IPCS rates, charges, terms and 
conditions. Expanding these rules will offer increased transparency and 
protection for consumers beyond those afforded by the Commission's 
existing rules, facilitating the monitoring and enforcement of our 
rules to ensure just and reasonable IPCS rates and charges. We expand 
the scope of our rules to include all IPCS providers subject to our 
expanded jurisdiction under the Martha Wright-Reed Act, including video 
IPCS and other advanced communications services. We also expand the 
scope of our rules to apply to the different stages of consumers' 
interaction with IPCS providers, from prior to the opening of an IPCS 
account to the closing of an inactive account. We conclude pursuant to 
our authority under section 276(b)(1)(A) of the Communications Act, as 
amended by the Martha Wright-Reed Act and, to the extent interstate or 
international telecommunications services are involved, pursuant to 
section 201(b) of the Communications Act, that the increased 
transparency we require is necessary to ensure just and reasonable IPCS 
rates and charges, and fair compensation as the Martha Wright-Reed Act 
mandates.
    503. Background. In the 2015 ICS Order, the Commission first 
required ICS providers to ``clearly, accurately, and conspicuously'' 
disclose their interstate, intrastate, and international rates and 
ancillary service charges to consumers ``on their websites or in 
another reasonable manner readily available to consumers.'' This rule 
is now codified at 47 CFR 64.6110(a). The Commission also stated that 
ICS providers that are non-dominant interexchange carriers must make 
their current rates, terms, and conditions available to the public via 
their company websites. In the 2021 ICS Order, the Commission required 
providers to separately disclose any charges for terminating 
international calls, and to ``clearly label'' as ``separate line 
item[s] on [c]onsumer bills'' any amounts charged consumers for site 
commissions and international calling.
    504. In 2022, the Commission sought comment on expanding the 
``breadth and scope'' of the existing consumer disclosure requirements 
to reach more ICS consumers and increase transparency regarding the 
rates and charges they pay for IPCS. In 2023, the Commission sought 
``renewed comment'' on these matters and asked what additional specific 
rule changes would be needed to implement the Martha Wright-Reed Act.
    505. Scope of Disclosure Requirements. We first expand the scope of 
our disclosure requirements to apply to all IPCS providers that provide 
any audio IPCS or video IPCS subject to our jurisdiction under the 
Martha Wright-Reed Act. This essential step in our implementation of 
the Act will ensure that all IPCS consumers will have the same 
transparency into their providers' rates, charges and practices 
regardless of the type of IPCS they use.
    506. Public website Disclosure. Section 64.6110 of our rules 
requires ICS providers to disclose certain information on their 
websites or in another reasonable manner readily available to IPCS 
consumers. The record suggests that this rule, as currently written, 
does not allow for adequate information for the public. Some providers 
suggest that they have already taken steps to make such information 
generally available. Therefore, to promote transparency regarding IPCS 
offerings, we revise our rules to require IPCS providers to disclose 
their IPCS rates, charges, and associated practices in an easily 
accessible manner on their publicly available websites. We note that 
the disclosure requirements we impose on publicly-available websites 
apply equally to IPCS providers that offer their IPCS services through 
web-based applications. This information must be available to all 
members of the public, including our state regulatory partners, and not 
just to consumers with a preexisting IPCS account with the provider at 
any particular facility. Providers must not require that website 
visitors open an account with the provider as a precondition to 
obtaining website access to the provider's rates and charges. This 
disclosure requirement will enable any consumer with internet access to 
make informed decisions regarding the provider's IPCS offerings both 
prior to opening an account and on an ongoing basis once an account has 
been created. It will also allow the Commission, our state 
counterparts, and the public to evaluate whether providers' rates, 
charges, and associated practices comply with the rules we adopt in the 
Report and Order. The Martha Wright-Reed Act makes clear our authority 
over intrastate IPCS, but such required public disclosure will allow us 
to benefit from the experience of our state regulatory partners. We 
anticipate that the additional public awareness will help consumers 
make informed choices and generally promote compliance with our IPCS 
rules.
    507. Building upon the Commission's previous efforts to ensure 
transparency of ICS rates and charges, providers are required to post 
on their public websites complete information about their IPCS 
offerings, including information on rates, charges, and associated 
practices. One commenter expressed concern that provider websites 
contain ``misleading

[[Page 77337]]

information'' that can cause consumers to select ``high priced 
service[s].'' Therefore, we amend our current rules to include 
information that will assist consumers in making informed decisions 
regarding IPCS. Specifically, we find that providers must include, on 
their publicly available websites, information on how to manage an 
account, fund accounts, close accounts, and how to obtain refunds of 
unused balances. The public website disclosures must also contain 
sufficient information to enable IPCS users ``to understand the cost of 
a call before picking up the phone.''
    508. Methods of Disclosure. To ensure consumers receive the 
information necessary to make informed decisions, IPCS providers must 
make consumer disclosures available: (a) via the provider's website in 
a form generally accessible to the public without needing to have an 
account with the provider; (b) via the provider's online and mobile 
application, if consumers use that application to enroll; and (c) on 
paper, upon request of the consumer. In doing so, we respond to the 
record which suggests that information about providers' service plans 
may already be provided this way. Likewise, by requiring different 
methods of disclosure, we recognize that consumers access these 
disclosures in different ways. For example, many incarcerated people 
may lack access to the internet, and therefore may have no way of 
learning of a provider's rates and charges where availability of these 
disclosures is limited to a website or online application. To ensure 
these consumers are able to access providers' disclosures, we require 
IPCS providers to make their disclosures available on paper if 
requested by a consumer, thereby ``devising a framework to ensure that 
all IPCS carriers provide such information in a concise, portable, and 
easy-to understand format.'' As one commenter explains, a 2022 study 
found that ``consumers comprehended and retained financial disclosures 
better when they read them on paper than on a computer screen; and 
study participants showed even worse retention and comprehension rates 
when they read the disclosures on smartphones.'' We anticipate that 
requiring these methods of making the necessary disclosures will be 
minimally burdensome to providers and relatively straightforward to 
implement, while also being familiar to IPCS users based on their 
experiences to date.
    509. Billing Statements and Statements of Accounts. Based on the 
record, we require providers to make available billing statements and 
statements of account to all IPCS account holders on a monthly basis, 
via the provider's website, or via the provider's mobile or online 
application, and in any event, via paper statements upon request. As 
demonstrated by the record, however, this is not occurring. Our new 
requirement will ensure that consumers receive the necessary 
disclosures. Our rules do not presently require providers to make 
billing statements and statements of account available to ICS users. In 
2022, the Commission proposed to modify the consumer disclosure rules 
to ensure consumers receive bills or statements of account from their 
providers. The record reveals a lack of consistency as to how IPCS 
providers disseminate information regarding their rates and charges to 
consumers. Securus contends that consumers and the general public have 
access to information on funding fees and taxes and the ``rates 
applicable to any facility that Securus serves.'' NCIC contends that 
online account access allows ICS providers to reduce customer service 
costs; consumers and family members no longer need to call customer 
service representatives or ask facility staff for ICS account 
information. Most providers offer rate and charge information online 
without providing periodic bills or statements of account, although a 
few, such as Pay Tel, issue monthly electronic statements to account 
holders via online accounts and mobile applications. We conclude that a 
consistently applied and transparent requirement is appropriate, and 
that all providers must make account-related disclosures to account 
holders monthly, which will foster consumer education and consumer 
protection.
    510. Receiving monthly billing statements or statements of account 
will place IPCS account holders on the same footing as consumers 
generally, who typically receive monthly bills or statements of account 
(either online or via paper statements). Indeed, this is even more 
crucial for incarcerated individuals because many do not have the 
freedom to check their accounts at regular intervals. We rely in 
particular on one commenter's assertion that information on websites or 
web applications ``of varying detail and salience'' is not a substitute 
for statements in concise, easy-to-read formats. Stephen Raher also 
proposes a model statement of account that would provide customized 
information based on a consumer's activity. We do not require this type 
of statement at this time. In addition, Mr. Raher proposes a working 
group for consumer disclosures and billing statements. We do not 
believe this is necessary, given our updates to the consumer disclosure 
requirements. Given that IPCS providers routinely track and maintain 
information on consumers' accounts, they should be able to generate 
monthly updates to consumers without undue burden as other 
communications service providers routinely do. Given concerns that 
certain consumers may not have access to the internet or may have 
accessibility issues, we also require providers to issue paper bills or 
statements of account upon request by a consumer. In fact, many 
providers already make paper statements available upon request. We find 
inapposite Pay Tel's opposition to providing paper billing statements 
or disclosures based on facility imposed ``restrictions or limits on 
paper usage, due to the cost of processing the resulting waste.'' Our 
billing statement and disclosure rules govern provider methods of 
dissemination; facility practices over paper use are irrelevant.
    511. Each IPCS provider is required to make available to account 
holders the information they will need to understand any transactions 
affecting their accounts. We do not dictate the format of the bills or 
statements of account, but require them to include the amount of any 
deposits to the account, the duration of any calls and communications 
charged to the account on a per-minute basis, the rates and charges 
applied to each call and communication for which a charge is assessed, 
and the balance remaining in the account after the deduction of those 
charges. We recognize that, in light of action we take in the Report 
and Order, site commission information does not have to be included. 
Whether a provider issues paper statements or online statements, the 
disclosures must include this same vital information.
    512. Billing Statements and Statements of Account for Alternate 
Pricing Plans. We find that additional information must be provided in 
billing statements and statements of account for alternate pricing 
plans. The billing statement or statement of account must provide for 
each service period: (a) call details, including the duration of each 
call, and the total minutes used for that service period, and the total 
charge including taxes and fees, with explanations of each tax or fee; 
(b) the total charges that would have been assessed using the 
provider's per-minute rate; (c) the calculated per-minute rate for the 
service period, calculated as the charge for the service period divided 
by the total minutes used by that consumer, with an

[[Page 77338]]

explanation of that rate; and (d) the breakeven point, with an 
explanation of the breakeven point. Also, as discussed above for 
billing statements and statements of account for services rendered on a 
per-minute basis, the billing statements and statements of account for 
an alternate pricing plan must provide information about deposits made 
to the consumer's account and the account balance.
    513. Repeal of Site Commission Disclosure Requirement. In light of 
our action today prohibiting the payment of site commissions related to 
IPCS, we repeal Sec.  64.6110(b) of the rules, which requires that 
providers ``clearly label'' as ``a separate line item on [c]onsumer 
bills'' any amounts charged consumers for facility costs included in 
the providers' site commission payments. Given our prohibition against 
IPCS providers paying site commissions of any kind associated with 
intrastate, interstate, international, jurisdictionally mixed, or 
jurisdictionally indeterminate audio and video IPCS, including all 
monetary and in-kind site commissions, we find that this rule is no 
longer needed. Similarly, given our elimination of ancillary service 
charges elsewhere in the Report and Order, we also repeal the portion 
of Sec.  64.6110(a) that requires providers to disclose those charges 
to consumers.
b. Effective Consumer Disclosures
    514. Just as we have required all prior consumer disclosures to be 
clear, accurate and conspicuous, we now conclude that all required IPCS 
provider disclosures, including those implementing our inactive account 
and alternate pricing plan rules, must be clear, accurate, and 
conspicuous--the same standard our current rules set for disclosure of 
audio rates and ancillary service charges. Adherence to these standards 
will allow a reasonable person to readily understand IPCS audio and 
video rates and charges. For example, a provider should price its 
products in dollars per minute, rather than in dollars per megabyte as 
one provider does and which would be confusing to consumers. In this 
manner, incarcerated people and their loved ones will be able to 
understand the rates and charges they are, or will be, assessed and the 
terms and conditions that will apply to a provider's IPCS offerings. 
This, in turn, will help them make informed decisions about which 
services to purchase and whether an alternate pricing plan would be 
beneficial.
    515. We expect that the requirement that disclosures be ``clear, 
accurate, and conspicuous'' and the other disclosure requirements we 
adopt in the Report and Order will ensure IPCS users and the public 
will timely receive clear and transparent information about providers' 
rates, charges, and practices. We therefore find that our revised 
disclosure rules give providers ``clear guidance'' regarding the 
information providers must disclose and how it must be disclosed, as 
certain commenters urge. These requirements will reduce consumer 
confusion when accessing provider websites which, while technically 
providing the information required by our rules, continue to be 
difficult for consumers to navigate. For example, as one commenter 
explains, one provider's ``terms and conditions and privacy policy 
collectively total almost 18,000 words,'' with ``the sheer volume and 
complexity of this information . . . not reasonably accommodate[ing] 
the actual needs of the average consumer.'' This same providers lists 
its rates and charges under a page called ``Tariffs.'' Securus's web 
page for ``Rates'' does not, in fact, include any rate information, 
instead merely stating that its ``rates are in compliance with 
applicable state and federal regulations.'' In order to find pricing 
information, consumers must navigate to a page labeled ``Tariffs'' 
which links to each individual state or federal tariff. Thus, the 
requested information is on its website, but we find it doubtful that 
consumers as a whole would understand what a tariff is and that that is 
the place in which they should look for pricing information. Another 
provider's rates and charges are included in a page labelled ``Legal 
and Privacy,'' giving no indication to consumers that this is the 
location of such information. Given these practices, we find that it is 
necessary to amend our current rules to ensure that consumers can 
easily understand and access such information by requiring that 
providers make their rates, charges, and associated practices available 
on their websites in a manner in which consumers can easily find the 
information. We also find that the disclosures we require with regard 
to alternate pricing plans ``should provide sufficient information to 
enable consumers to assess the value to them of the [alternate pricing] 
plan versus using standard per-minute rate plans.'' In view of these 
findings, we decline to adopt a specific ``IPCS label'' for billing 
statements and statements of account, as was proposed in the record. 
The Public Interest Parties assert that the Commission should adopt a 
version of the consumer broadband label adopted in the 2022 Broadband 
Label Order so that consumers can make informed decisions before making 
a call. They contend that the Commission should tailor a similar label 
for IPCS, ``and require . . . providers to make information about their 
rates, terms, and conditions of service, including information about 
site commissions and international rate components, available generally 
to the public in an easily accessed manner.'' We find such an approach 
overly prescriptive and unnecessary. To minimize unnecessary burdens on 
providers and to allow flexibility, we decline to prescribe a 
particular format for disclosures.
c. Accessible Formats for Consumer Disclosures
    516. All disclosures concerning IPCS, including disclosures 
pertaining to inactive accounts and alternate pricing plans, must be 
accessible to people with disabilities. In 2022, the Commission sought 
comment on the effectiveness of its rules in providing information 
regarding rates, charges, and fees to people who are deaf, hard of 
hearing, deaf-blind, or have a speech disability. The Commission 
proposed that all disclosures, including those regarding reporting 
requirements and charges, be made in an accessible format for 
incarcerated persons with disabilities, and invited comment on what 
steps it should take to implement that proposal.
    517. Based on the record, we revise our consumer disclosure rules 
to specify that consumer disclosures must be in accessible formats for 
people with disabilities. We agree with commenters that any website 
disclosures, billing statements, and statements of account must be in 
accessible formats. We do not prescribe specific mechanisms, but afford 
providers flexibility to respond to specific requests and make 
reasonable accommodations.
d. Alternate Pricing Plan Consumer Disclosure Requirements
    518. We adopt consumer disclosure requirements specific to 
alternate pricing plans, including disclosures prior to enrollment and 
on billing statements and statements of account. In 2022, the 
Commission asked ``[w]hat type of consumer outreach or education would 
be needed to ensure that consumers are able to choose the [alternate 
pricing plan] that best meets their needs.'' The Commission also asked 
``what information consumers would need about providers' pilot programs 
to help them make informed choices between a pilot program and 
traditional per-minute pricing,'' and whether it should require 
providers to inform consumers ``how a pilot

[[Page 77339]]

program's prices translate on a per-minute basis, to enable consumers 
to make an informed decision between the program and the traditional 
per-minute pricing model.'' These rules are in addition to the 
disclosure requirements generally applicable to IPCS.
    519. Several commenters discuss the benefits of enhanced consumer 
disclosure for alternate pricing plans. The Public Interest Parties 
assert that ``[e]nsuring that all fees are disclosed should help 
protect consumers against junk fees, hidden-fees pricing, and negative-
option subscriptions.'' PPI suggests that such information would allow 
consumers to ``consider their likely phone usage and compare 
subscription costs to what they would pay under per-minute pricing.'' 
The Leadership Conference requests the Commission to ``ensure that 
consumers are fully informed about alternative pricing structures so 
that they can make informed decisions about their choices.'' Securus 
suggests that the Commission ``[r]equire baseline disclosures so [the] 
consumer can make an informed choice,'' and that the disclosures 
include the ``offered terms, (e.g., X number of calls per month for 
$X).'' We agree that consumers need some essential information to 
assess whether a particular alternate pricing plan best meets their 
needs. For example, IPCS consumers should know the format of and 
charges for the alternate pricing plan prior to enrollment. Providers 
also should ensure that consumers know the terms, conditions and 
procedures for renewals, cancellations, and reporting dropped calls, so 
they will be in control of the length of time they are enrolled in the 
plan and know how to report dropped calls; the option to obtain service 
on a per-minute basis, so they are aware that enrollment in the plan is 
not the only option available to them; the breakeven point for the 
plan, so they will know what their usage level needs to be to benefit 
from the plan; and the availability of their usage and billing data 
upon request, so they can analyze their past usage and make decisions 
about their future enrollment in the plan. The disclosure of the 
breakeven point will especially be needed if a provider offers an 
alternate pricing plan that is designed for heavy users. A light user 
of IPCS, being told what the breakeven point is for such an alternate 
pricing plan, and being given an explanation of the breakeven point, 
would have information that could be used in deciding whether the plan 
makes sense for their circumstances. Accordingly, we find that 
providers offering alternate pricing plans must disclose the following 
information: (We are listing these items together here to give one list 
encompassing the details of alternate pricing plan disclosures.)

--The rates and any added taxes or fees, a detailed explanation of the 
taxes and fees, total charge, quantity of minutes, calls or 
communications included in the plan, the service period, and the 
beginning and end dates of the service period;
--Terms and conditions, including those concerning dropped calls and 
communications, automatic renewals and cancellations;
--An explanation that per-minute rates are always available as an 
option to an alternate pricing plan and that per-minute rates apply if 
the consumer exceeds the calls/communications allotted in the plan;
--The breakeven point, and an explanation in plain language that the 
breakeven point is the amount of plan usage the consumer must make to 
start to save money compared to the provider's applicable per-minute 
rate for the same type and amount of service; and
--The ability to obtain usage and billing data, upon request, for each 
of the most recent three service periods (where feasible), including 
total usage and total charges including taxes and fees. If the consumer 
had not been a customer of the provider during one or more of the three 
previous service periods, the provider must give the usage and billing 
data for whatever service periods the consumer did use the provider's 
services and for which the provider has retained the information. If 
the consumer has never been a customer of the provider, then this 
requirement does not apply. These disclosure requirements resolve 
Leadership Conference's concerns that consumers be informed about costs 
and refunds.

    520. ViaPath opposes the adoption of consumer disclosure rules 
specific to alternate pricing plans, arguing that the Commission's 
rules ``already facilitate significant transparency,'' and that 
``[c]onsumers are in the best position to determine whether alternative 
pricing arrangements meet their needs.'' ViaPath also asserts that 
expanded disclosures are not needed because ``[t]here is no record 
evidence that prior alternative pricing trials have resulted in 
anything other than satisfied customers.'' The evidence ViaPath refers 
to is testimony provided by Securus from a small subset of its 
customers--meaning we do not have information about how satisfied the 
remaining customers were, including the customers whose usage did not 
meet the breakeven points in Securus's plans. In particular, ViaPath 
cites to Sec.  64.710 of the Commission's rules which requires audible 
information about the cost of a call prior to call connection. However, 
Sec.  64.710 applies to interstate calls made from correctional 
facilities and therefore does not apply to intrastate IPCS calls over 
which the Commission now has jurisdiction. Because Sec.  64.710 was 
adopted over two decades ago, it does not require providers to give all 
the terms and conditions of alternate pricing plans. The other rule 
sections referenced by ViaPath--Sec. Sec.  42.10, 42.11, 64.2401 and 
64.6110--fare no better. Sections 42.10 and 42.11 of the Commission's 
rules do not apply to intrastate services. Also, Sec.  42.10 requires 
rate information to be publicly available at one physical location, 
which at a minimum, would not be useful to incarcerated people; and 
Sec.  42.11 requires the information to be available for submission to 
the Commission and state regulatory commissions, not the public or 
consumers. Section 64.2401 applies to telephone bills, not to 
disclosures at other times, such as when someone is trying to determine 
whether to enroll in an alternate pricing plan. Finally, ViaPath 
suggests that Sec.  64.6110, the section we are amending here, is 
sufficient. Section 64.6110 of the Commission's rules requires, among 
other things, that IPCS providers disclose their rates and fees on 
their websites or ``in another reasonable manner readily available to 
consumers.'' Compliance with this requirement appears less than ideal. 
For example, Securus has a website with an obscure URL, and which 
provides only rates, not taxes and fees. Another Securus website, 
accessed from a link at the bottom of securustech.net, apparently 
requires a user to have an account in order to view the rates. 
Additionally, despite ViaPath's contention that it is focused on 
transparency, simplification and clarity for consumers, an internet 
user would not find rates at https://www.viapath.com/ or http://gtl.com/. Links to rates are given at https://www.gtl.net/. From there, 
interstate rates are found via a link to a page entitled ``Federal 
Tariffs and Price Lists,'' which directs the user to a tariff-like 
document for ViaPath--which the average consumer could readily decide 
is too difficult to understand. Section 64.6110 currently does not 
apply to intrastate or video service for example, or the terms and 
conditions associated with alternate pricing plans which we are 
permitting for the first time. Taken together, the rule sections listed 
by

[[Page 77340]]

ViaPath do not require the disclosure of all of the terms and 
conditions for alternate pricing plans for intrastate, interstate, and 
international audio and video IPCS, with the consumer being either an 
incarcerated person or a friend or family member, with the disclosure 
being made before, during or after enrollment in a plan, and with the 
disclosure being made to the public, including the Commission. ViaPath 
also cites to sections 208 and 403 of the Communications Act, and Sec.  
1.711 of the Commission's rules. However, those sections concern the 
Commission's authority to address a provider's actions after the fact. 
They do not require disclosures to consumers. Thus, even if IPCS 
providers perfectly comply with the rule sections listed by ViaPath, 
the rules are insufficient to ensure consumers receive the kind of 
information needed to make well-informed decisions about participation 
in alternate pricing plans generally, and to inform the public so they 
may analyze the provider's compliance with our regulations. We find 
that the consumer disclosure requirements specific to alternate pricing 
plans that we adopt here are necessary to educate and protect 
consumers. PPI suggests that providers reveal information such as a 
requirement that the consumer has to pay money regardless of whether 
the incarcerated caller is allowed to make calls, or pointing out that 
subscriptions are not comparable to wireless plans which allow callers 
to communicate with anyone of their choosing. We find our consumer 
disclosure requirements sufficiently robust to enable consumers to 
determine whether a provider's alternate pricing plan is the right 
choice for them. Of course, IPCS providers readily may add additional 
information that is truthful and useful to consumers to the information 
that they are required to provide, at any time they interact with the 
consumers, and on website postings that are available to the public.
    521. Timing and Manner of Disclosures. In 2022, the Commission 
asked whether it should adopt rules ``governing how providers should 
disclose to consumers the rates, terms, and conditions associated with 
any'' alternate pricing plan. After reviewing the record, we adopt such 
requirements here, and conclude that an IPCS provider must make the 
alternate pricing plan disclosures identified above available: (a) 
before a consumer enrolls in the program (pre-enrollment); (b) upon 
request, at any time after enrollment; (c) with a billing statement or 
statement of account, and any related consumer communications; and (d) 
at the beginning of each call or communication.
    522. Pre-Enrollment Disclosures. Before a consumer first enrolls in 
an alternate pricing plan, the provider must ensure that the consumer 
is fully informed about the plan and the disclosure must provide all 
plan details. For example, if the plan consists of 60 calls per month 
for $30.00 plus permissible taxes and fees totaling $2.50, the 
disclosure must provide the total dollar amount of $32.50, and the 
amount of taxes and fees in detail. The terms and conditions also must 
give the total dollar amount that will be charged, in this example 
$32.50. The provider also must specify and explain the plan's 
``breakeven point,'' discussed above. Prior to the consumer's 
enrollment, the IPCS provider also must inform the consumer that usage 
and billing data will be available upon request before they enroll and 
after they enroll in the alternate pricing plan. These disclosures will 
enable a consumer to consider their own IPCS needs and the likelihood 
that their usage would reach the breakeven point before making a 
decision to enroll in the alternate pricing plan and give them comfort 
that they will continue to have access to the information they need 
over time to decide whether to remain enrolled in that alternate 
pricing plan.
    523. Disclosures Upon Request at Any Time. In addition to the 
disclosures being crucial to a consumer's decision about whether to 
enroll in a plan, having access to the disclosures also is important 
while a consumer is enrolled in the plan, and after enrollment has 
ended. During enrollment in a plan, a consumer may want to check the 
provider's procedures for handling dropped calls, for example, or 
compare a billing statement to the terms of the plan. After enrollment, 
a consumer may want to check their billing statements against the terms 
of the plan to ensure the charges were correct or use the information 
to determine if they want to enroll in an alternate pricing plan again.
    524. Providers must also make available the number of remaining 
minutes, calls or communications under the consumer's alternate pricing 
plan without the consumer having to initiate a call or communication 
that counts toward the minutes, calls or communications allotted in the 
plan. This can be achieved via the consumer's account on the provider's 
website or via the provider's mobile or online application, for 
example. For those without internet access a provider can give this 
information via its customer service line, or by whatever mechanism is 
permitted by the facility. This disclosure requirement will allow 
consumers to monitor their alternate pricing plan usage without 
deducting a minute, call, or communication from their plan. The record 
indicates that Securus offered this information to consumers of its 
subscription plan, suggesting this requirement will not be burdensome 
to providers. Therefore, we include this requirement in our alternate 
pricing plan consumer disclosure rules.
    525. Disclosures with a Billing Statement or Statement of Account. 
Each billing statement or statement of account should explain how the 
consumer may access the disclosures. The methods for obtaining the 
disclosures must include the ability to request a paper copy. The other 
methods could include a link to a website or a toll-free telephone 
number, or perhaps a complete copy of the disclosures that would be 
included with the billing statement or statement of account. With such 
access to the disclosures, consumers will be able to confirm the 
charges on the billing statement or statement of account, and make 
decisions about their continued use of the alternate pricing plan.
    526. Disclosures at the Beginning of a Call or Communication. In 
addition to disclosing all of the terms and conditions at other times 
and upon request, providers must make available, upon request of the 
consumer, specific disclosures at the beginning of a call made via an 
alternate pricing plan. For example, a provider could offer the option 
of this detailed information if a consumer were to ``press two'' at the 
beginning of a call. For example, the availability of the alternate 
pricing plan disclosures could be announced as part of the information 
at the beginning of a call, and the consumer could be told they can 
``press 2'' to hear how to obtain the disclosure information online, or 
``press 3'' to hear the disclosures read to them. This is similar to 
Pay Tel's use of voice prompts, such as by saying: ``For rate 
information, press 1 now.'' The IPCS provider must disclose the number 
of minutes, calls or communications remaining for the service period 
(for plans that have a finite number of minutes, calls, or 
communications). This will ensure that IPCS users have the information 
they need to determine whether to tailor their usage of IPCS in a given 
instance based on the details of the alternate pricing plan they are 
enrolled in. The requirement to provide disclosures at the beginning of 
a call is currently in Sec.  64.710 of the Commission's rules. Section 
64.710 as currently written, however, is insufficient to provide IPCS 
consumers

[[Page 77341]]

with adequate information to make an educated decision prior to making 
a call. For example, Sec.  64.710 applies to interstate calls made from 
correctional facilities, not intrastate calls, and that section 
necessarily does not require the provider to offer the disclosure of 
all the terms and conditions of alternate pricing plans which are 
permitted for the first time in the Report and Order. Therefore, we add 
to our rules disclosure requirements at the beginning of the call or 
communication which are specific to alternate pricing plans. Securus 
states that, for its subscription plans, consumers were informed of the 
number of calls remaining at the beginning of each call. Our rule 
amendments require providers to give specific information about the 
status of the alternate pricing plan, and are broader than Securus's 
practice, to ensure that consumers are fully informed about the status 
of their use of the plan.
    527. Billing and Usage Data. The alternate pricing plan 
disclosures--which primarily focus on the alternate pricing plan 
itself--also must inform consumers that their own prior usage and 
billing data (whether under per-minute pricing or an alternate pricing 
plan) are available upon request. This information will further assist 
a consumer in deciding whether to enroll in an alternate pricing plan. 
The availability of that information upon request while the consumer is 
enrolled in a plan will, in turn, enable IPCS consumers to evaluate 
whether to remain enrolled in that alternate pricing plan. It also will 
ensure that information is available in a manner that is timely for 
IPCS users--i.e., when they otherwise are in a position to make such 
evaluations, in the event that they have not retained such information 
when it otherwise is made available to them. Because we require 
disclosures of key information regarding alternate pricing plans in 
other circumstances, we anticipate that in many instances IPCS 
consumers already will have the information they need, and will not 
find it necessary to avail themselves of this option. That said, 
because the limited experience of IPCS consumers with such plans, IPCS 
consumers may not know what information they will want to have in order 
to make an assessment of whether to remain on an alternate pricing 
plan, they might not automatically have retained that particular 
information. As a result, we expect a consumer's ability to obtain this 
information upon request will provide an important backstop that will 
not unduly burden IPCS providers above and beyond the alternate pricing 
plan disclosures we otherwise require.
    528. The usage and billing data must show what the provider charged 
for each of the past three service periods (where feasible), including: 
(a) the minutes of use for each of the calls or communications made and 
the applicable per-minute rate that was charged (where applicable); (b) 
the total number of minutes; and (c) the totals charged including the 
details of any taxes and fees. The requirement applies only for those 
service periods for which the consumer was a customer of the provider. 
A service period could be, for example, a month or a week. If a 
consumer had been enrolled in an alternate pricing plan, the data must 
include the breakeven point for the alternate pricing plan(s), an 
explanation of the breakeven point in plain language, and the total 
that would have been due for each service period if the provider's per-
minute rate had been used. The consumer's prior usage and billing data 
could be made available when the consumer logs into their account on 
the provider's website and the provider's online and mobile 
applications, but must also be made available on paper upon request of 
the consumer, and be made available at any time, whether before, 
during, or after a consumer's enrollment in an alternate pricing plan. 
As discussed above, we require disclosures to be available on paper so 
that they are accessible to people who do not have internet access.
    529. These requirements respond to a record suggestion that ``a 
monthly accounting comparing the costs under a pilot program and the 
applicable per-minute rate would help IPCS consumers understand whether 
they will benefit or are benefitting from an alternative pricing 
structure.'' While one commenter advocates for disclosures of a 
consumer's historical IPCS usage and expenditures ``over a long 
period'' to ``account[ ] for periodic variations in usage,'' we limit 
the data IPCS providers must provide to the calling records for the 
most recent three service periods (where feasible) so as not to 
overwhelm consumers with large quantities of data, or create an overly 
burdensome requirement on providers. Although Securus stated that it 
made monthly statements of account available for 90 days for services 
outside of its subscription plan, we require data for at least the most 
recent three ``service periods'' so that the consumer can see their 
usage during three similar periods of time, and see the complete 
charges and taxes and fees for those service periods. The use of 
``three service periods'' also would be a more reasonable request for 
alternate pricing plans offered on a weekly basis, rather than 
requiring a provider deliver up to 90 days of data (equivalent to 
approximately 12 weeks of data) which may be overwhelming to the 
consumer and may be onerous for the provider. For an alternate pricing 
plan with a service period of one month, the data provided would be for 
three months--i.e., approximately 90 days. For an alternate pricing 
plan with a service period of one week, the data provided would be for 
three weeks--i.e., 21 days.
2. Treatment of Unused Balances in IPCS Accounts
a. Adoption of Permanent Rules
    530. We next adopt permanent rules addressing the treatment of 
unused funds in IPCS accounts that build upon the interim rules that 
the Commission adopted in the 2022 ICS Order. We now update our interim 
rules to reflect our expanded authority over IPCS, and adopt permanent 
rules to provide IPCS account holders with informational, procedural, 
and financial protections that help ensure that IPCS account holders 
are able to maintain control over the funds in their accounts and 
receive refunds of any unused funds in a timely manner. Collectively, 
these measures, consistent with several providers' affirmative 
statements that refunds are always available, remove obstacles that, as 
a practical matter, have largely prevented account holders from 
receiving refunds of unused funds.
    531. We take these actions pursuant to our authority under section 
276(b)(1)(A) of the Communications Act, as amended by the Martha 
Wright-Reed Act, and, to the extent the underlying accounts can be used 
for interstate or international telecommunications services, pursuant 
to section 201(b) of the Communications Act. We conclude that any 
action (whether by a provider, a provider's affiliate, or an entity 
acting on the provider's or the affiliate's behalf) inconsistent with 
our revised rules for unused IPCS account funds would unreasonably 
impede our ability to ensure just and reasonable IPCS rates and 
charges, as required by section 276(b)(1)(A), and to the extent 
interstate or international telecommunications services are involved, 
would constitute an unreasonable practice within the meaning of section 
201(b) of the Communications Act. We recognize that the 2022 ICS Order 
characterized the Commission's interim rules governing unused balances 
as guarding against ``unjust and unreasonable practice[s] within the 
meaning of section 201(b) of the [Communications] Act.'' Because

[[Page 77342]]

section 201(b) broadly addresses just and reasonable charges and 
practices for or in connection with interstate and international common 
carrier services, the Commission had no cause at that time to parse 
more closely the precise relationship between those rules and ensuring 
just and reasonable rates and charges for IPCS. Examining that issue 
more closely now, we conclude that rules addressing the treatment of 
unused funds in IPCS accounts bear on the effective rates or charges 
that IPCS users pay to establish and maintain an account and use IPCS 
services. In particular, we find that the risk that an IPCS user will 
lose funds they contributed to an IPCS account effectively increases 
the overall cost of IPCS by reducing the IPCS usage they can count on 
receiving for a given amount of funds in an IPCS account. We therefore 
conclude that these regulations--designed to mitigate that risk--
appropriately are part of a compensation plan designed to ensure just 
and reasonable rates and charges for IPCS within the meaning of section 
276(b)(1)(A). Notably, no commenter disputes the Commission's legal 
authority in this regard.
b. Background
    532. In the 2022 ICS Order, in response to allegations of abusive 
provider practices, the Commission adopted interim rules that prohibit 
providers from seizing or otherwise disposing of funds in inactive 
inmate calling services accounts until the accounts have been 
continuously inactive for at least 180 calendar days. The record at the 
time showed how providers would confiscate, for their own use, funds in 
accounts they deemed ``inactive'' after a certain period of time, 
resulting in significant windfalls. The Commission was concerned that 
by taking possession of unused funds in customers' accounts, providers 
were ``depriv[ing] consumers of money that is rightfully theirs.'' 
Under the interim rules, once the 180-day period has run, providers 
must make reasonable efforts to refund all funds in the accounts to the 
account holders and, if those efforts are unsuccessful, treat those 
funds in accordance with any controlling judicial or administrative 
mandate or applicable state law requirements. The Commission found, on 
an interim basis, that all funds deposited into any account that can be 
used to pay for interstate or international inmate calling services 
remain the property of the account holder unless or until they are 
either: (a) used to pay for products or services purchased by the 
account holder or the incarcerated person for whose benefit the account 
was established; or (b) disposed of in accordance with a controlling 
judicial or administrative mandate or applicable state law 
requirements, including, but not limited to, requirements governing 
unclaimed property. The Commission used its authority under section 
201(b) of the Communications Act to prohibit unjust and unreasonable 
practices, explaining that its ``actions extend to commingled accounts 
that can be used to pay for both interstate and international calling 
services and nonregulated services such as tablets and commissary 
services.''
    533. In the 2022 ICS Further Notice, the Commission sought comment 
on whether the Commission should adopt additional requirements 
regarding inactive accounts to protect consumers as it adopts final 
rules. Specifically, the Commission sought comment on the length of the 
time before an account could be deemed inactive, and the actions that 
would be sufficient to demonstrate activity. It also sought comment on 
other issues, including whether to require providers to issue refunds 
within a specified period of time once an account has been deemed 
inactive, whether providers should be required to collect contact 
information from and provide notice to account holders, and what types 
of mechanisms providers should use to refund amounts to consumers.
c. Discussion
(i) Consumers' Right to Funds
    534. The Commission's interim inactive account rules provide that 
``funds deposited into a debit calling or prepaid calling account . . . 
shall remain the property of the account holder unless or until the 
funds are'' used or disposed of in accordance with our rules, including 
as required by controlling adjudicatory decisions or state law. 
Building on that general foundation, the permanent rules for inactive 
accounts we adopt today are designed to safeguard the funds consumers 
deposit in IPCS accounts, thereby ensuring that the effective costs of 
IPCS are not unduly increased in a manner that is at odds with our 
mandate to ensure just and reasonable rates and charges for IPCS. Our 
permanent rules also reaffirm the Commission's interim rules that bar 
IPCS providers from improperly ``seiz[ing] or otherwise dispos[ing] of 
unused funds'' in inactive accounts,'' and require providers to 
undertake ``reasonable efforts'' to refund unused funds.
(ii) Scope of the Inactive Account Rules
    535. We now extend our rules to all accounts that can be used to 
pay an IPCS-related rate or charge, to the extent the provider or its 
affiliate controls the disposition of the funds in the accounts. The 
interim rules for inactive accounts apply to ``all funds deposited into 
a debit calling or prepaid calling account,'' as those terms are 
defined in the Commission's rules. While for all practical purposes our 
rules do not distinguish between debit and prepaid calling accounts, 
given the prevalence of the use of these terms in the industry, our 
rules continue to reference these terms in our definition of ``IPCS 
Account.'' We now conclude that our permanent rules for the treatment 
of balances in inactive IPCS accounts apply to any type of account, 
that can be used to pay for IPCS, to the extent the provider or its 
affiliate controls the disposition of the funds in the account. In 
other words, we find that our rules are applicable to all IPCS accounts 
generally to the extent they are controlled by providers or their 
affiliates. Our rules do not generally extend to payment mechanisms 
other than accounts. To the extent a provider offers only one payment 
mechanism to pay for IPCS rates and charges at a facility, that payment 
mechanism is subject to the inactive account requirements even if that 
mechanism is not an ``account.'' For example, NCIC asserts that 
``[s]ome companies sell virtual calling cards with `no refund' 
policies.' '' While we do not generally include prepaid calling cards 
for the payment of IPCS in our definition of an IPCS account, we 
nonetheless conclude that providers that do not offer consumers an 
alternative means of paying ongoing charges other than a prepaid 
calling card are nonetheless subject to the inactive account 
requirements we impose here.
    536. Our definition of ``IPCS account,'' and hence the 
applicability of our inactive accounts rules, extends to all accounts 
administered by, or directly or indirectly controlled by a provider or 
an affiliate, that can be used to pay IPCS rates or charges, including 
accounts where the incarcerated person is the account holder, 
regardless of whether those accounts can also be used to pay for 
nonregulated products or services such as tablets and commissary 
services. These accounts are used for ``debit calling'' under our 
current rules. This treatment is consistent with the Commission's 
decision, in the 2022 ICS Order, to extend its interim inactive account 
rules to commingled accounts that could be used to pay for regulated

[[Page 77343]]

and nonregulated charges if providers administered or controlled those 
accounts. Consistent with the Commission's analysis in the 2022 ICS 
Order, we conclude that where we have authority under section 201(b) 
and/or section 276 of the Communications Act to regulate the rates, 
charges, or practices associated with communications services, our 
authority extends to the nonregulated portion of a mixed service where 
it is impossible or impractical to separate the service's regulated and 
nonregulated components. Because the 2022 ICS Order was adopted before 
the enactment of the Martha Wright-Reed Act, the Commission's decision 
was based on section 201(b) of the Communications Act. The now-revised 
section 276 of the Communications Act provides additional authority for 
our decision here.
    537. In the 2020 ICS Order on Remand, the Commission found that 
ancillary service charges ``generally cannot be practically segregated 
between the interstate and intrastate jurisdiction'' except in a 
limited number of cases where the ancillary service charge clearly 
applies to an intrastate-only call. Applying the impossibility 
exception, the Commission concluded that providers generally may not 
impose any ancillary service charges other than those specified in the 
Commission's rules and are generally prohibited from imposing charges 
in excess of the ancillary service fee caps. Similarly, commingled 
accounts offered by providers contain funds that can be used to pay 
IPCS rates and charges, over which the Commission has jurisdiction, as 
well as charges for nonregulated products and services. Because we 
cannot practically segregate the portion of the funds in providers' 
commingled accounts that may be used to pay IPCS-related rates and 
charges from the portion that may be used to pay nonregulated charges, 
we conclude that commingled accounts should be subject to our permanent 
rules regarding the treatment of unused funds in inactive accounts. In 
the 2020 ICS Order on Remand, the Commission distinguished between 
automated payments made to fund an account before calls are completed 
and fees are incurred, from automated payments made after a call is 
made and therefore the jurisdiction has been determined. The funds at 
issue here are akin to the former situation where the funds cannot be 
separated by jurisdiction, so the Commission applied the inactive 
accounts rules to the corresponding automated payment fees.
(iii) Inactive Period
    538. We retain the requirement that 180 consecutive calendar days 
must pass before a provider may initiate the process of determining 
that an IPCS account has become inactive, except where state law 
affirmatively sets a shorter alternative period, or the incarcerated 
person for whom the account was established is released from 
confinement or transferred to another correctional institution. In 
2022, the Commission invited comment on whether the 180-day timeframe 
specified in our interim rules is the appropriate time frame before an 
IPCS provider may deem an account to be inactive and therefore begin 
the process of making reasonable efforts to refund the funds to the 
account holder. Consistent with the position of several commenters, we 
find that a 180-day time frame offers account holders an adequate 
window during which they may exert custody or control before their 
account is deemed inactive, without imposing unwarranted burdens on 
providers. In contrast, the 364-day inactive period proposed by one 
commenter, or any longer alternative period set by state law, would 
unnecessarily delay the refund to consumers of unused funds from 
accounts deemed inactive while imposing increased burdens on providers.
    539. In 2022, the Commission asked for comment on the release and 
transfer process ``to better understand the need for rules addressing 
those areas.'' Based on the record, we find that if a provider becomes 
aware that an incarcerated person has been released or transferred, the 
180 days of inactivity will presumptively be deemed to have run, 
requiring a provider to begin processing a refund in accordance with 
the requirements we adopt in the Report and Order subject to 
countervailing direction from the account holder. We agree with Securus 
that in situations where accounts ``are not specific to any facility or 
incarcerated person and may be used for calls from multiple 
facilities,'' the account holder ``may very reasonably wish to keep 
funds deposited in their . . . account to continue communicating with 
other individuals.'' To ensure that the account holder's preference is 
implemented in situations where the provider becomes aware that an 
incarcerated person has been released or transferred, we require that 
the provider contact the account holder prior to closing the account 
and refunding the remaining balance, to determine whether the account 
holder wishes to continue using the account, or to close it and obtain 
a refund from the provider in accordance with our requirements. If the 
account holder so requests, the account will be deemed inactive under 
our rules, and the provider must issue a refund in accordance with our 
requirements.
    540. Consistent with the 2022 ICS Order, our rules do not disturb 
the ability of account holders to obtain a refund upon request during 
the 180-day period of inactivity. Under no circumstances other than 
those described above, however, can a provider dispose of the funds in 
an IPCS account prior to 180 days of continuous inactivity without the 
account holder's affirmative consent. And, once the account holder 
provides that consent, the provider must refund any remaining funds in 
accordance with the requirements set forth below. Together, these steps 
will help ensure that account holders are not deprived of funds that 
are rightfully theirs, thereby effectively saddling account holders 
with unjust and unreasonable rates.
    541. The interim rules for inactive accounts required that the 
inactivity period be continuous and specified the actions by the 
account holder or the incarcerated person for whom the account had been 
established that would be sufficient to restart the inactivity period--
for example, adding or withdrawing funds from the account, expressing 
an interest in retaining the account, or otherwise exerting or 
attempting to exert control over the account. In 2022, the Commission 
invited comment on whether it should refine these rules and, in 
particular, on whether other actions by the account holder or the 
incarcerated person should restart the inactivity period. We retain the 
requirement that the inactivity period be continuous, as well as the 
requirement that the inactivity period restart when the account holder 
or the incarcerated person for whom the account is maintained: (a) 
deposits, credits, or otherwise adds funds to the account; (b) 
withdraws, spends, debits, transfers, or otherwise removes funds from 
an account; (c) expresses an interest to the IPCS Provider in 
retaining, receiving, or transferring the funds in an account; or (d) 
otherwise attempts to exert or exerts ownership or control over the 
account or the funds held in the account.
    542. We also clarify that an account holder may use any reasonable 
means to convey to a provider its interest in retaining, receiving, or 
transferring funds in an account, including by calling, emailing, or 
writing to the provider, or by affirmatively responding to a provider 
inquiry asking whether the

[[Page 77344]]

account should remain open. A means of communication is ``reasonable'' 
for this purpose if it is a means of communication between the provider 
and account holder otherwise used in other situations, or if the 
service agreement provides for it as an additional means of 
communication in the specific scenario of such communications. This 
will guard against the risk that mere difficulty in communicating with 
the provider would result in an account qualifying as inactive under 
our rules, triggering the need for the account holder to go back 
through the steps of (re)establishing an account and risking the 
inability to engage in IPCS communications in the meantime. At the same 
time, it only holds the provider accountable for using the means of 
communications with the account holder that they otherwise are using 
already, along with any additional means specified for these purposes 
in their service agreement.
    543. In addition, the record makes clear that providers often lack 
the information they will need to complete the refund process. To 
eliminate this potential roadblock, we urge providers to allow the 
account holder to specify an individual to which a refund should go to 
the extent the provider's existing systems can accommodate such a 
change. In the Further Notice, we invite comment on whether we should 
require that all providers follow this ``best practice.''
(iv) Required Refunds
    544. We now adopt permanent rules that reaffirm the requirement 
that, once an IPCS account is deemed inactive, providers must take 
proactive steps to issue a refund to the account holder in accordance 
with the requirements set forth below. The record makes clear that both 
a refund mandate and rules implementing that mandate are needed to keep 
providers from continuing to retain the funds in inactive accounts and 
appropriating them to their own uses, which increases the effective 
cost of IPCS to consumers contrary to our statutory mandate to adopt a 
compensation plan for IPCS that ensures just and reasonable rates and 
charges. The requirement to initiate a refund for inactive accounts is 
consistent with and in addition to the underlying obligation of 
providers to refund accounts generally upon request by an account 
holder.
    545. Both the refund mandate and our implementing rules will apply 
to all accounts within our definition of ``IPCS account.'' We find 
unavailing Securus's argument that we should not require refunds from 
accounts held by incarcerated people because the funds in them are not 
considered abandoned while the account holder remains incarcerated and 
``are routinely refunded upon transfer or release.'' We commend 
correctional institutions and certain providers for having procedures 
in place to ensure that all funds in an IPCS account are refunded once 
an incarcerated person is released or transferred. And, as Securus 
recognizes, providers typically rely on correctional institutions to 
advise them when an incarcerated person is released or transferred. 
Since correctional institutions do not always share that information 
with providers, Securus's argument underscores the need for providers 
to take proactive steps to ensure that account holders are aware that 
refunds are available once their accounts are deemed inactive. As we do 
in circumstances where a provider becomes aware that an incarcerated 
person has been transferred or released, we similarly require that when 
a refund otherwise becomes due under our rules at the expiration of the 
180-day inactivity period, the provider must contact the account holder 
prior to closing the account and refunding the remaining balance, to 
determine whether the account holder wishes to continue using the 
account, or to close it and obtain a refund from the provider in 
accordance with our requirements.
    546. We disagree with certain commenters' assertions that we should 
not require refunds from accounts that ``are never deemed inactive'' or 
``never expire.'' While such accounts in theory preserve the value of 
consumers' deposits, the longevity of these accounts is of no practical 
use to account holders if they are not aware that refunds are 
available. And even in situations where account holders are aware of 
the availability of refunds, the rules we adopt today ensure that they 
have a mechanism enabling them to have the amounts in those accounts 
returned to them. Thus, regardless of how providers may characterize 
IPCS accounts, under the rules we make permanent today, an account that 
can be used to pay for IPCS rates and charges becomes inactive after 
180 consecutive calendar days unless certain conditions are met.
    547. We conclude that, for purposes of the Commission's inactive 
account rules, regardless of whether an account remains open in 
perpetuity, the provider must take proactive steps to refund the entire 
balance of the account once it is deemed inactive within the meaning of 
our rules. The amount refunded must include the entire balance of the 
account, and, consistent with our elimination of ancillary service 
charges generally, the provider shall not impose fees or charges in 
order to process the refund. Additionally, in calculating the refund 
balance, the record supports requiring that the provider include in the 
refund any deductions it may have made in anticipation of taxes or 
other charges that it assessed when funds were deposited and that were 
not actually incurred. This will prevent providers from profiting from 
practices such as assessing taxes or fees upfront on deposited funds, 
rather than at the time of the account holder's actual payment for 
service.
(a) Timing of Refunds
    548. In 2022, the Commission invited comment on whether it should 
adopt a time frame for refunds to be issued and the length of time 
needed to process refunds. The Commission also asked for comment on 
reasonable time frames to issue refunds in response to requests for 
refunds received before an account became inactive, and how much time 
was needed to process such requests. Based on the record, we find that, 
as part of providers' duty to make reasonable efforts to refund 
balances in accounts deemed inactive, refunds must be issued within 30 
calendar days of an account being deemed inactive or within 30 calendar 
days of a request from an account holder. We find suggestions in the 
record that requests for refunds should be issued within five to seven 
business days to likely be too short a time period for providers to 
process refunds. We therefore find it reasonable instead to allow 30 
days for the completion of the refund process. While one commenter 
urges us to leave this time period open ended, because we now require 
that refunds be issued automatically once an account becomes inactive 
and the provider has contacted the account holder to determine whether 
the account holder prefers to keep the account active or receive a 
refund in accordance with our rules, it is reasonable to expect that 
refund issuances will be completed within 30 calendar days. Likewise, 
we find that our new requirements that providers gather contact 
information and the means of issuing refunds when an account is opened 
will streamline the refund process such that a longer, or 
indeterminate, time period is not reasonable. We note that a provider's 
duty to conduct a timely refund process is not contingent on an 
affirmative request by the account holder for a refund. The provider 
must make reasonable efforts in the prescribed timeframe, as described 
below, to give account holders a reasonable

[[Page 77345]]

opportunity to receive the refund or affirmatively request that the 
account be deemed active.
    549. Our rules require that ``[a]fter 180 days of continuous 
account inactivity have passed, or at the end of any alternative period 
set by state law, the provider must make reasonable efforts to refund 
the balance in the account to the account holder. In response to 
several commenters' suggestions, we take the opportunity to clarify 
that ``reasonable efforts'' include, but are not limited to: (a) 
notification to the account holder that the account has been deemed 
inactive; (b) the collection of contact information needed to process 
the refund; and (c) timely responses to account holders' inquiries 
regarding the refund process. It is self-evident that taking no steps 
to effectuate refunds is not reasonable.
    550. We agree with commenters that account balances should be 
automatically refunded once accounts have been deemed inactive. We find 
that requiring the account holder to affirmatively request a refund is 
inconsistent with the fact that the funds in the account are the 
account holder's property. As the Commission has recognized, providers 
``have strong incentives to retain these funds for themselves.'' Given 
these incentives, we find it appropriate to require providers to 
initiate and follow through on the refund process, including refunding 
all remaining money, once an account becomes inactive.
    551. We reject certain providers' suggestions that it is 
``impossible'' or overly burdensome for providers to make automatic 
refunds. These arguments are based on assertions that some providers 
presently lack the information needed to generate automatic refunds or 
have not yet established procedures to process automatic refunds. Those 
arguments are unavailing. We strongly disagree that ``mandating routine 
inactivity refunds rather than refunds upon release or transfer will 
impose costs and burdens that far outweigh any demonstrated benefit.'' 
The record of the abuses by providers retaining account holders' funds 
for their own use is extensive. Retention of those funds has functioned 
as an additional charge on consumers that, if continued, would 
undermine our efforts to establish a compensation plan that ensures 
just and reasonable IPCS rates and charges for consumers. While the 
benefits of automatic refunds may seem slight to some providers, the 
record makes clear the importance consumers place on receiving this 
money. In contrast to that substantial evidence of the benefits of such 
a requirement, providers have failed to adequately quantify the claimed 
burdens of compliance, let alone demonstrate outright impossibility of 
complying. To the extent that providers already issue refunds upon 
release or transfer, nothing in our rules prevents this practice from 
continuing and we support any efforts taken by providers to ensure 
refunds are promptly issued. Indeed, the fact that providers have 
demonstrated the ability to promptly issue refunds based on certain 
triggering events--such as release or transfer--gives us confidence 
that it will be reasonably feasible for them to establish the processes 
(if not already in place) in order to promptly issue refunds based on 
the triggering event of an account's inactivity under our rules. We 
thus require providers to collect whatever information and establish 
any procedures they will need to process refunds expeditiously as 
required by our new rules.
    552. We do, however, acknowledge commenters' concerns regarding the 
administrative burden of providing automatic refunds for inactive 
account balances that are below the cost of issuing the refund. As 
Securus explains, ``[i]ssuing refunds on small account balances will 
result in the ICS provider incurring costs to administer those funds 
exceeding the value of the amount refunded.'' The record contains 
relatively little quantitative data regarding the point at which 
issuing a refund would cost more than the balance in the account. Pay 
Tel suggests that an account balance of $1.00 might be a sufficient 
cutoff point, while Securus suggests that the Commission adopt a $1.50 
de minimis threshold. Additionally, the record suggests that there may 
be circumstances in which providers might effectuate refunds through 
third parties such as Western Union and that ``those third parties will 
charge for their role in issuing refunds.'' Given these choices, we 
adopt the more conservative of the two options provided to us in the 
record and therefore do not require automatic refunds where the balance 
in an inactive account is $1.50 or less. This de minimis threshold 
applies in the absence of ``a consumer's specific request'' for a 
refund. Thus, if an account holder requests a refund, providers must 
comply with such a request regardless of the amount of money remaining 
in the account. And, consistent with our rules, to the extent providers 
are unable to issue a refund, the provider shall treat such balances 
consistent with appliable state law, including applicable state 
unclaimed property law.
(b) Refund Mechanisms
    553. The record suggests that there are a variety of methods 
available to providers to refund the balances in inactive accounts. 
Rather than prescribe a specific mechanism, we suggest several options 
which providers may offer to account holders that are supported by the 
record. As a general matter, Securus asserts that it ``will tailor its 
refund method to the method used by the account holder to fund the 
account,'' which suggests that providers are able to offer different 
refund mechanisms. Indeed, Securus indicates that if an account is 
funded via a payment card, it will ``initiate a refund using the 
payment card information on file.'' For accounts funded using a check 
or money order, Securus indicates that it ``will issue a paper check 
that will be sent via postal mail using the address information on 
file.'' Other commenters similarly suggest that ``[r]efunds should be 
issued either to the account holder's original form of payment or to a 
credit or debit card provided by the account holder at the time of the 
request'' or through an electronic fund transfer to a bank account. 
Given record evidence of the availability of a variety of refund 
mechanisms, we find that providers must issue refunds in the original 
form of payment, an electronic transfer to a bank account, a check, or 
a debit card. We find that offering multiple refund mechanisms will 
ensure that barriers created by certain methods are avoided. While 
providers appear to use refund mechanisms that offer similar 
optionality to consumers, we emphasize that any refund mechanism that 
requires that an account holder affirmatively request a refund after 
the account has been inactive for 180 days would violate our rules. 
Such requirements may be appropriate when an account holder seeks a 
refund while an account is active, but cannot be a barrier to receiving 
a refund once an account is deemed inactive.
(v) Required Notices
    554. We conclude that additional requirements are needed to ensure 
that account holders maintain control over IPCS accounts and receive 
refunds in a timely manner. As discussed above, we impose certain 
disclosure requirements on providers, including requiring the posting 
of their terms and conditions of service on their publicly available 
websites, the posting of their obligation to refund unused balances 
upon request, and other more detailed disclosure requirements related 
to their inactive

[[Page 77346]]

account balance procedures. We now also require providers to provide 
account holders, through their billing statements and statements of 
account, notice of the status of IPCS accounts prior to their being 
deemed inactive. This notice shall initially be provided at least 60 
days prior to an account being deemed inactive. It shall be included in 
each billing statement, or statement of account, the provider sends, or 
makes available to, the account holder until either some action by the 
account holder results in the inactivity period being restarted or the 
account is deemed inactive. We agree with ViaPath that notices should 
be provided to the account holder only. This notice must describe how 
the account holder can keep the account active, as well as how the 
account holder may update the refund information associated with the 
account. We emphasize that providers may supplement their compliance 
with these requirements with any additional measures they deem 
appropriate to keep account holders informed of the status of their 
accounts and how to update their account information.
(vi) Controlling Judicial or Administrative Mandate
    555. We also adopt an exception to our permanent rules regarding 
the disposition of funds in inactive accounts that allows a provider to 
dispose of funds in inactive accounts in compliance with a controlling 
judicial or administrative mandate. Our interim rules included an 
identical exception, which the Commission proposed to retain in 2022, 
and was supported in the record. We also update the definition of 
``controlling judicial or administrative mandate'' from the interim 
rules to make clear that this exception to our rules regarding the 
disposition of funds in inactive accounts applies to all incarcerated 
people's communications services now subject to our authority. This 
revised definition encompasses any final court order that requires an 
incarcerated person to pay restitution, any fine imposed as part of a 
criminal sentence, and any fee imposed in connection with a criminal 
conviction to the extent that these payments are required to be made 
from an account that could be used to pay IPCS rates or charges. The 
revised definition also includes applicable state law requirements, 
including, but not limited to, requirements concerning unclaimed 
property in such accounts. Finally, the definition excludes from the 
scope of our final rules acts taken pursuant to a final court or 
administrative agency order adjudicating a valid contract between an 
IPCS provider and an IPCS account holder, entered into prior to the 
release date of the Report and Order, that allows or requires the 
provider to act in a manner that would otherwise violate our rules 
regarding the disposition of funds in inactive accounts.
    556. In 2022, we invited comment on ``the ultimate disposition of 
unclaimed funds in a debit calling or prepaid calling account in 
circumstances where a provider's refund efforts fail and state law does 
not affirmatively require any particular disposition.'' We conclude 
that the provider's inability to refund money remaining in an inactive 
account does not alter the account holder's entitlement to use them or 
ultimately have them refunded as a matter of our rules. Consequently, 
the account holder's preexisting entitlement to those funds would be 
altered only where controlling judicial or administrative mandate or 
state law affirmatively requires otherwise. Therefore, as advocated by 
some commenters, we find that if reasonable efforts by providers to 
refund the funds in inactive accounts fail, the ``provider should be 
required to treat remaining funds consistent with applicable state 
law,'' including applicable state unclaimed property laws. While some 
commenters urge us to adopt specific unclaimed property requirements to 
be applied at the state level, we find compliance with state law to be 
presumptively reasonable. We note, however, concerns raised in the 
record that providers will forum shop for favorable unclaimed property 
laws outside of the location where the account holder resides. We find 
instead that providers will be subject to the standards the courts have 
articulated for resolving choice-of-law questions generally and rely on 
courts to address abuse by providers regarding choice-of-law matters.

H. Other Matters

1. Rule Revisions
    557. In the Report and Order, we revise our rules pursuant to the 
direction of the Martha Wright-Reed Act. In particular, we amend our 
rules to make consistent use of the terms ``incarcerated people's 
communications services,'' ``IPCS,'' and ``incarcerated people,'' as 
opposed to ``inmate calling services,'' ``ICS,'' and ``inmates,'' terms 
previously used in this proceeding. In 2023, the Commission proposed to 
revise its rules to use the term ``incarcerated people's communications 
services'' or ``IPCS'' instead of ``inmate calling services'' or 
``ICS'' to refer to ``the broader range of communications services 
subject to the Commission's jurisdiction as a result of the [Martha 
Wright-Reed] Act.'' The Commission also proposed to ``change[ ] 
references to `inmates' to `incarcerated people,' '' as public interest 
advocates urge. Nearly all commenters addressing the subject support 
these revisions. Indeed, several commenters use the term ``IPCS'' in 
place of ``ICS'' in their comments, following the Commission's proposed 
approach. Additionally, we note that these changes are consistent with 
and advance the Commission's goal of digital equity for all.
    558. Securus argues that the ``the replacement of `calling 
services' with the broader, and [in Securus's view] somewhat ambiguous 
term `communications services' '' may ``engender confusion.'' Securus's 
concern appears to focus on ``retaining the distinction'' between audio 
communications and video communications, ``to avoid any suggestion that 
they may be subject to the same regulatory framework when in fact they 
are quite different services.'' Securus therefore suggests that we 
adopt the terms ``incarcerated calling services'' and ``incarcerated 
video services'' to refer to these respective types of communications 
services. We are not convinced that incorporating the term 
``incarcerated people's communications services'' into our rules would 
have this effect. First, the Act explicitly contemplates a unified 
regulatory framework for these services by granting the Commission 
authority over ``any audio or video communications service used by 
inmates.'' The language of section 276, as modified by the Act, also 
refers to these types of services collectively. Second, these 
respective services share, to a substantial extent, similar operating 
conditions as well as being commonly subject to critical aspects of our 
regulatory framework (consistent with the Act), which warrants the use 
of a single term that encompasses all services under our jurisdiction. 
To the extent that the treatment of these two types of services differ 
under our regulatory framework, this distinction is effectively 
encapsulated by our use of the terms ``audio IPCS'' and ``video IPCS.'' 
Accordingly, we revise our rules to change all references to ``inmate 
calling services'' or ``ICS'' to instead refer to ``incarcerated 
people's communications services'' or ``IPCS,'' respectively, and to 
change all references to ``inmates'' to ``incarcerated people.'' We 
will, however, continue to use the term ``inmate calling services'' or 
``ICS'' to refer to historic Commission actions in WC Docket No. 12-
375. We encourage

[[Page 77347]]

commenters and other participants in this proceeding to adopt these 
changes in their submissions going forward.
    559. We also revise our rules to incorporate terms used in the 
Martha Wright-Reed Act and to implement our actions in this Order. 
These revisions include changes to certain definitions in Sec.  64.6000 
of our rules, and reflect the extension of the application of our rules 
to intrastate IPCS, the addition of new rules addressing alternate 
pricing plans, and changes to our disability access, rate cap, 
ancillary service charge, annual report and certification, inactive 
account, and consumer rules.
2. Definitions of Prison and Jail
    560. In 2022, the Commission sought comment on modifying the 
definitions of ``Jail'' and ``Prison'' in its rules ``to ensure that 
they capture the full universe of confinement facilities'' such as 
civil commitment, residential, group and nursing facilities. Two 
commenters, the Accessibility Coalition and UCC Media Justice, filed ex 
partes agreeing that the Commission should expand the definitions of 
``Prison'' and ``Jail'' as suggested. In addition, the Commission 
sought comment on its authority to apply the inmate calling services 
rules, including those addressing communications access for people with 
disabilities, to these facilities. In addition, the Commission asked 
commenters to address whether residents of such facilities are able to 
access voice and other communications services through providers of 
their own choice, as opposed to being limited to the providers selected 
by third parties. In 2023, the Commission again invited comment about 
whether to expand the definitions of ``Jail'' and ``Prison'' to include 
these facilities, or any additional facilities, as part of the 
definitions of ``Jail,'' ``Prison,'' or ``Correctional Facility.''
    561. Numerous commenters support expanding the definition of 
``Jail'' to cover ``civil commitment facilities, residential 
facilities, group facilities, and nursing facilities in which people 
with disabilities, substance abuse problems, or other conditions are 
routinely detained.'' One commenter urges the Commission to continue to 
``expand protections for vulnerable populations subject to various 
forms of detention.'' Another asserts that ``[j]ust as incarcerated 
people with disabilities in prisons and jails, as currently defined in 
the Commission's rules, face inequitable access to communications 
services, so too do those confined to civil commitment facilities.'' 
Two commenters raise concerns that the definition of ``Jail,'' as 
amended in the 2022 ICS Order, ``did not fully capture the Commission's 
intent to include every type of facility where individuals can be 
incarcerated or detained,'' in particular immigrations detention 
facilities. Specifically, they point out that, although the Commission 
incorporated into its definition of ``Jail'' ``facilities used to 
detain individuals, operated directly by the Federal Bureau of Prisons 
or U.S. Immigration and Customs Enforcement, or pursuant to a contract 
with those agencies,'' it failed to include similar facilities operated 
by Customs and Border Protection (CBP) or the U.S. Marshals Service 
(USMS). Given the similar nature of these agencies and their 
corresponding facilities, theses commenters urge us to add detention 
facilities operated by, or pursuant to a contract with, CBP or USMS to 
the definition of ``Jail'' in our rules.
    562. Other commenters oppose expanding our definition of ``Jail'' 
as proposed. The National Sheriffs' Association questions whether the 
types of facilities the Commission sought comment on including in its 
definition of ``Jail'' fall within the scope of section 276 of the Act 
which applies to ``the provision of inmate telephone service in 
correctional institutions.'' One provider argues that our IPCS 
regulations ``should apply only to facilities that contract with ICS 
providers to install and maintain secure, corrections-type 
communications systems.'' The National Sheriffs' Association also 
contends that ``it is unlikely that calling services in [civil 
commitment, residential, group, and nursing] facilities have the same 
cost characteristics of providing calling services in jails and 
prisons.''
    563. Consistent with the Commission's intention in the 2022 ICS 
Order, we modify the definition of ``Jail'' to cover all immigration 
detention facilities. This definition therefore encompasses every 
immigration detention facility operated by, or pursuant to a contract 
with, ICE, CBP, USMS, or any other federal, state, city, county, or 
regional authority. This modification to the definition of ``Jail'' 
addresses this unintended gap in our rules and also follows the Martha 
Wright-Reed Act's directive that we ensure ``just and reasonable 
charges for telephone and advanced communications services in 
correctional and detention facilities.''
    564. We decline at this time to make further modifications to the 
definitions of ``Prison'' and ``Jail'' in our rules. While we agree 
with certain commenters that individuals in certain other facilities 
should benefit from the protections of the IPCS rate caps and other 
rules we adopt here, based on the current record, we find we lack 
sufficient information and data to address the issues raised in the 
record. Given our lack of data, particularly on the costs providers 
incur in providing service in these types of facilities, we do not find 
we have sufficient confidence at this time that the rate caps we adopt 
herein would fairly compensate providers for providing service to such 
facilities. We seek additional comment on these issues in the attached 
Notice.
3. Annual Reporting and Certification Requirement
    565. Since 2013, the Commission has required providers of 
communications service to incarcerated people to file certain pricing 
and related data and information annually to promote transparency and 
heighten providers' accountability. These annual reports enable the 
Commission and the public to monitor pricing practices and trends in 
the IPCS marketplace generally. Pursuant to our rules, ICS providers 
must file annual reports and certifications by April 1 of each year. 
The reports contain information and data about the services provided 
for the preceding calendar year, and an officer or director of the 
provider must certify that the information and data are accurate and 
complete. We now modify the scope and content of our annual reports to 
reflect the Martha Wright-Reed Act's expansion of Commission 
jurisdiction over other communications services in carceral facilities, 
including video IPCS and other advanced communications services, as 
well as intrastate IPCS, and the providers that offer these services.
a. Background
    566. The Commission's annual reporting requirements for providers 
of communications services to incarcerated people have changed over 
time reflecting the Commission's evolving perspective on the need for 
marketplace data. The Commission first adopted annual reporting and 
certification requirements for providers in its 2013 ICS Order. The 
information and data required in the reports included interstate and 
intrastate ICS rates, ancillary service charges, and the number of 
disconnected calls. An officer or director was required to certify to 
the accuracy of the data and information, ``including the requirement 
that ICS providers may not levy or collect an additional charge for any 
form of TRS call, and the requirement that ancillary charges be cost-
based.'' The Commission found that the certification requirement would 
facilitate

[[Page 77348]]

enforcement and ensure that ICS providers' rates and practices were 
just, reasonable, and fair, and in compliance with that Order. The 
Commission subsequently included additional reporting requirements 
relevant to industry oversight in 2015, and further amended its rules 
in 2022 to require data concerning various services for individuals 
with disabilities. The Commission added requirements to report data on: 
(a) site commissions; (b) the number of TTY-based ICS calls, the number 
of those calls that were dropped, and the number of complaints related 
to ICS made by TTY and TRS users; and (c) the usage, rates and 
ancillary service charges for video visitation services. In 2017, the 
D.C. Circuit vacated the reporting requirement for video visitation 
services, considering the requirement ``too attenuated to the 
Commission's statutory authority.'' In the 2020 ICS Order, the 
Commission removed Sec.  64.6060(a)(4)--the paragraph that had required 
ICS providers to submit data on video visitation services. The 
Commission required providers to report the number of calls and number 
of dropped calls for TTY-to-TTY ICS, for direct video calls placed or 
received by ASL users, and for each TRS available at a facility, as 
well as the number of complaints about dropped calls and poor call 
quality for these services. Additionally, the Commission determined 
that it was no longer necessary to collect data on dropped calls, so it 
adopted the proposed Sec.  64.6060(a)(5) to (6) without the requirement 
to report on dropped calls, and made a conforming modification to Sec.  
64.6060(a)(7) which requires reports about complaints from TTY and TRS 
users. The changes to the three paragraphs, Sec.  64.6060(a)(5) to (7), 
have not yet gone into effect.
    567. In the 2023 IPCS Order, the Commission reaffirmed and updated 
its prior delegation of authority to WCB and Consumer and Governmental 
Affairs Bureau (CGB) ``to modify, supplement, and update [the annual 
reporting] instructions and . . . template as appropriate to supplement 
the information [it would] be receiving in response to the Mandatory 
Data Collection.'' The Word and Excel templates are FCC Form 2301(a), 
and the certification is FCC Form 2301(b). The Commission also 
``delegate[d] to WCB and CGB the authority to conduct the requisite 
Paperwork Reduction Act analysis for any changes to the annual report 
requirements that were implemented pursuant to [the 2023 IPCS Order].'' 
In the accompanying 2023 IPCS NPRM, the Commission asked what rule 
changes or new rules would be necessary to effectuate the Martha 
Wright-Reed Act. No commenter addresses possible changes to the annual 
reporting and certification requirement.
    568. In the Aug. 3, 2023 IPCS Public Notice, WCB and CGB proposed 
revisions to the instructions and templates for the annual reports and 
annual certifications to implement the Martha Wright-Reed Act and 
reflect the changes that were adopted in the 2022 ICS Order. Commenters 
generally supported the Commission's efforts to track trends in the 
IPCS marketplace as long as the reporting requirements were not unduly 
burdensome. However, one commenter argued that it was premature to 
require reports on video and the expanded TRS obligations, because the 
Commission had not adopted video IPCS regulations, and the expanded TRS 
regulations had not yet gone into effect. In response, the Commission 
refrained from adopting any changes to the annual reporting 
requirements prior to this Order. The Apr. 1, 2024 annual reports and 
certifications used the same forms as were used previously.
b. Discussion
    569. We now modify our annual reporting and certification 
requirements, consistent with the Commission's expanded authority under 
the Martha Wright-Reed Act, to include the full scope of IPCS and all 
providers of IPCS. These modifications will provide greater visibility 
into the IPCS marketplace and provide an objective foundation for 
future Commission action to ensure IPCS rates are just and reasonable 
and IPCS providers are fairly compensated. We also provide WCB and CGB 
the flexibility to propose, seek comment on, and adopt further revised 
requirements in response to this Order and future IPCS marketplace 
developments in a timely fashion. Collectively, these modifications to 
our annual reporting requirements and our delegation of authority to 
WCB and CGB to implement these changes will enable the Commission to 
better ensure it meets its statutory directives.
    570. First, we make several modifications to the annual reporting 
and certification rule. Specifically, we revise Sec.  64.6060(a) so the 
annual reporting requirement now applies to IPCS providers, rather than 
ICS providers. Consistent with the revised definition of IPCS, this 
change makes providers of video IPCS and advanced communications 
services not previously covered by our IPCS rules subject to the annual 
reporting and certification rule. We also remove Sec.  64.6060(a)(2) to 
(3) which referred to ancillary service charges and site commissions to 
reflect the prohibition on those charges adopted in this Order. We 
retain the reporting requirements concerning TRS and related 
communications services in Sec.  64.6060(a)(5) to (7), but renumber 
them as Sec.  64.6060(2) to (4). These requirements were originally 
adopted in the 2022 ICS Order but have not yet gone into effect. When 
these paragraphs were adopted, the Commission found that the annual 
reports would provide ``valuable data showing to what extent the [TRS-
related] rules adopted [in that order] are successfully implemented.'' 
These requirements will allow us to monitor incarcerated peoples' 
access to TRS and related communications services. Finally, we modify 
the certification requirement in Sec.  64.6060(b) to now include 
examples of several executives of the provider that may make the 
certification, and for consistency. The current Annual Reporting and 
Certification Instructions, Word Template, Excel Template and 
Certification Form were adopted by WCB pursuant to authority delegated 
by the Commission and after public requests for comment and comment.
    571. Next, we give WCB and CGB flexibility in revising and updating 
the annual reports, as necessary to provide useful transparency into 
industry practices and guide Commission efforts to regulate the 
industry. We direct that WCB pay particular attention to how best to 
capture developments in the rapidly changing, but nascent video IPCS 
marketplace in updating the requirements for the annual reports. We 
also direct CGB to pay attention to not only the availability of TRS, 
but growth of both the user base and the use of TRS, capturing data on 
the number of individuals with disabilities who are requesting access 
to the additional forms of TRS in carceral facilities, changes in the 
monthly minutes of use for each type of TRS, and other useful metrics. 
WCB and CGB therefore will be able to respond to regulatory and 
marketplace conditions more readily than if every specific annual 
report change needed to be adopted first by the Commission. We direct 
WCB and CGB to seek comment on and adopt all necessary revisions to 
annual report instructions, templates and certifications consistent 
with past practices. For example, on December 15, 2021, WCB released a 
Public Notice proposing to revise the annual reports to reflect rule 
amendments adopted in the 2021 ICS Order. After considering the 
comments and replies submitted in

[[Page 77349]]

response to the Public Notice, WCB adopted an order that revised the 
instructions, reporting templates, and certification. The instructions, 
reporting template, and certification were made available online.
    572. We also reaffirm and update the Commission's prior delegation 
of authority to WCB and CGB to revise the annual reports. Accordingly, 
WCB and CGB can modify, supplement, and update the required contents of 
the annual reports and the manner in which they are to be submitted, 
including all necessary instructions, templates and the required 
certification form, to ensure the reports reflect the Commission's 
expanded authority under the Martha Wright-Reed Act and the other 
actions taken in this Order. For example, this delegation includes 
authority to WCB and CGB to modify the annual reports to include data 
and information regarding the provision of TRS and related 
communications services to reflect the expanded requirements adopted in 
the 2022 ICS Order, and our removal of Sec.  64.6060(a)(5) to (7) in 
this Order. We further delegate authority to WCB and CGB, independently 
or collectively, to require IPCS providers to submit information 
related to their IPCS offerings and practices upon request, to provide 
WCB and CGB flexibility to monitor compliance with our rules in a 
timely manner. Such requests for information could result from 
complaints being filed by providers or by consumers, or on the 
Commission's or WCB's own motion. In delegating authority to WCB and 
CGB in this regard, we do not directly or indirectly limit or modify 
the otherwise-existing authority delegated to the Enforcement Bureau. 
We find that this delegation is necessary because it is difficult in 
advance to determine what information will be needed on a case-by-case 
basis by the Commission to decide whether providers are in compliance 
with our rules. Our delegations of authority to WCB and CGB will be 
effective upon publication of this Order in the Federal Register, 
enabling WCB and CGB to move expeditiously in modifying, supplementing, 
and updating the annual reports and certification for the next 
reporting period and thereafter, to facilitate the Commission's 
implementation of the Martha Wright-Reed Act and this Order. We also 
direct the Bureaus to conduct and submit the requisite Paperwork 
Reduction Act analysis for any changes to the annual report and 
certification requirements that are implemented pursuant to this Order.
4. Reporting and Recordkeeping
    573. Additional Data Collection. We adopt an additional data 
collection obligation to collect the data and other information we will 
need to set permanent rate caps for video IPCS, reevaluate our rate 
caps for audio IPCS if necessary, and learn more about service quality, 
particularly the prevalence of dropped calls or communications. As the 
Commission explained in the 2023 IPCS Order, the Martha Wright-Reed Act 
contemplates, among other things, the collection and analysis of 
advanced communications services' costs and related data, including for 
video communications, among other information. The Commission therefore 
directed WCB and OEA to initiate an additional data collection--the 
2023 Mandatory Data Collection--to obtain the data and other 
information needed to implement the statute. Also, the record in this 
proceeding indicates that poor IPCS quality of service is a recurring 
issue. Therefore, in the accompanying Notice, we seek comment on 
adopting IPCS quality of service standards. Collecting more-detailed 
information about service quality, for example the frequency of dropped 
calls or communications, responds to concerns in the record and will 
help inform any future action the Commission may take regarding IPCS 
quality of service. We conclude that an additional data collection will 
be needed to set permanent rate caps for video IPCS and to update audio 
IPCS rate caps if necessary, including, as applicable, for the smallest 
size tier of jails. We therefore delegate to WCB and OEA the authority 
to conduct this data collection and direct them to structure an 
additional data collection as appropriate to enable us to accomplish 
these tasks.
    574. In designing and structuring this additional data collection, 
WCB and OEA should consider how best and when to collect data that 
demonstrate the evolving nature of the video IPCS marketplace. As our 
rate cap analysis recognizes, the video IPCS data from the 2023 
Mandatory Data Collection reflect conditions typical of a nascent 
market, including relatively high initial investment costs and 
relatively low initial demand. We anticipate that, as the video IPCS 
marketplace evolves, per-unit costs of providing video IPCS will fall 
significantly--a factor that we take into account in setting our 
interim rate caps for video IPCS. Given the importance of ensuring that 
the rate caps for video IPCS are just and reasonable and fairly 
compensatory over the longer term, WCB and OEA should collect not just 
updated data on video IPCS costs and demand, but also (to the extent 
practicable) how those costs and demand might change over time. In the 
2023 Mandatory Data Collection the Commission sought information on the 
``number of complaints regarding problems experienced with disability-
related calls.'' We now give WCB and OEA the flexibility to add more 
generally applicable questions regarding IPCS quality of service to the 
next data collection.
    575. Consistent with the above, we reaffirm the Commission's prior 
delegation of data collection authority to WCB and OEA to conduct an 
additional data collection to collect detailed data and other 
information, at the provider, contract and facility level, on audio and 
video IPCS from all providers subject to our expanded authority under 
the Martha Wright-Reed Act and the Communications Act. As part of their 
review of the providers' submissions in response to the additional 
collection, WCB and OEA should evaluate whether our permanent rate caps 
for audio IPCS remain just and reasonable and fairly compensatory. To 
allow for consistent data reporting, we direct WCB and OEA to make any 
appropriate modifications to the template and instructions for the 2023 
Mandatory Data Collection. We also grant WCB and OEA authority to 
determine the timing and scope of the data collection, provided that 
such collection shall be conducted as soon as practicable understanding 
the need to ensure that the Commission obtains data representative of a 
more mature video IPCS marketplace and an audio IPCS marketplace that 
has fully adapted to our actions in this Order. As part of their review 
of providers' submissions, WCB and OEA may require any provider to 
clarify and supplement its response to the data collection where 
appropriate to enable a full and meaningful evaluation of the 
providers' cost, demand, and revenue data and costing methodology.
    576. No Recurring Data Collection. We decline, at this time, to 
adopt a recurring data submission obligation for IPCS providers, as 
suggested in 2020 and 2021. The Commission invited comment on whether 
it should conduct data collections on a more routine, periodic basis, 
as opposed to relying on ad hoc data collections. While we agree with 
several commenters that a recurring data collection would potentially 
aid us in ensuring that IPCS rates and charges remain just and 
reasonable and fairly compensatory, we find that the burdens of a 
recurring data collection on providers would exceed any potential 
benefits. We also find that

[[Page 77350]]

the information we will obtain from our additional data collection, 
coupled with the information to be provided in the IPCS Annual Reports 
as revised pursuant to this Order, will allow us to respond to any 
changes in the IPCS marketplace in a timely manner without unduly 
burdening IPCS providers. We therefore conclude that, on balance, a 
recurring collection is not warranted at this time.
    577. No Accounting Requirements. We also decline, at this time, to 
impose accounting requirements on IPCS providers, as suggested in 2021. 
In that Notice, the Commission sought comment on specific types of 
accounting requirements that may be useful if it were to adopt a 
recurring data collection. Given that we decide not to adopt recurring 
data collections, we also conclude that we should refrain from imposing 
accounting requirements on IPCS providers at this time.
5. Payphones Outside the Incarceration Context
    578. We decline, at this time, to adopt new rules applicable to the 
provision of payphones outside the incarceration context. In 2023, the 
Commission observed that certain amendments that the Martha Wright-Reed 
Act made to section 276 of the Communications Act apply to payphones 
generally, including traditional payphones used outside the 
incarceration context. The Commission invited comment on whether 
section 3(a) of the Martha Wright-Reed Act required the adoption of new 
regulations applicable to traditional payphone services. In response, 
one commenter stated that the Commission did not need to address its 
traditional payphone compensation rules in this proceeding, but urged 
us to revisit our traditional payphone rules generally in a separate 
proceeding. We find that no modifications to our traditional payphone 
rules are necessary to implement the Martha Wright-Reed Act and its 
amendments to the Communications Act, and therefore decline to address 
those regulations in this proceeding.
6. Cost Benefit Analysis of Revised Interstate and Intrastate Rate Caps
    579. We perform an analysis of the relative costs and benefits of 
establishing revised, final rate caps for audio IPCS and new interim 
rate caps for video IPCS, and find that the benefits of our actions 
greatly exceed their cost. As in the 2021 ICS Order, we proceed by 
outlining the non-quantifiable but significant benefits to incarcerated 
persons and their families, the quantifiable benefits of expanded audio 
and video communications, and the likely implementation costs of our 
actions.
    580. Expected Non-Quantifiable Benefits. In the 2021 ICS Order, the 
Commission detailed the vast, but difficult-to-quantify, benefits of 
expanded incarcerated people's calling at lower IPCS rates, including 
maintaining incarcerated people's mental health, facilitating reentry, 
and improving the health and well-being of incarcerated people's 
families. We enlarge and extend all of these benefits as we again lower 
rate caps for interstate calls and mandate new, lower rate caps for 
intrastate and international calls, as well as video calls across all 
jurisdictions. Although we do not alter the termination component that 
can be added to the interstate rate cap in the case of international 
calls, because we are lowering the interstate rate cap that serves as 
the foundation for international rates, we anticipate an effective 
reduction in international rates as a result. Although we make no 
change to our rule allowing providers to add an amount to the rate caps 
to defray the costs of terminating international calls, because we are 
lowering the interstate rate caps that serve as the foundation for the 
international rate caps, we anticipate an effective reduction in 
international audio rates.
    581. Expected Quantitative Benefits of Expanded Call and Video 
Volumes. In the 2021 ICS Order, staff used available empirical evidence 
to estimate the responsiveness of incarcerated people's calling volumes 
to changes in inmate calling services rates, known as the price 
elasticity of demand for calling services. The available estimates led 
the Commission to conclude, conservatively, that inmate calling 
services have a demand elasticity of at least 0.3. No commenter 
disputed our elasticity estimate or the methodology underlying it. For 
the sake of consistency and simplicity, we continue to rely on this 
demand elasticity estimate and apply the same demand elasticity to 
audio and video incarcerated people's communications service. By the 
same token, we continue to rely on the conclusion drawn in the 2021 ICS 
Order that the incremental per-unit cost of audio IPCS is likely less 
than $0.01, and may be de minimis. A similar principle applies to video 
IPCS, where many of its direct costs are also ``independent of the need 
to carry additional call minutes,'' especially given its proportionally 
greater share of capital expenses versus operating expenses. Thus, 
although video IPCS exhibits greater costs per minute than audio IPCS, 
the incremental per-unit costs of both services should be less than 
their average costs--such that the increased demand driven by a 
reduction in prices should, holding other factors equal, reduce 
providers' average costs for both audio and video IPCS.
    582. The new, lower IPCS rate caps fall across two broad categories 
of call traffic--audio and video. The new rates for audio are: $0.06 
per minute for prisons, $0.06 per minute for large jails, $0.07 per 
minute for medium-size jails, $0.09 per minute for small jails, and 
$0.12 per minute for very small jails. The new rates for video are: 
$0.16 per minute for prisons, $0.11 per minute for large jails, $0.12 
per minute for medium-size jails, $0.14 per minute for small jails, and 
$0.25 per minute for very small jails. Our benefit estimation 
methodology for the new rate caps differs slightly from that used in 
the 2021 ICS Order. Previously, staff estimated welfare gains using the 
difference between the previous interim interstate rate caps and the 
then new, lower interim, interstate rate caps. The current rate 
structure in the IPCS industry is more complex. Some interstate IPCS 
traffic subject to the rate caps is priced below the caps, while the 
price of intrastate, international, and video IPCS call traffic that 
was previously beyond the reach of our rate caps can vary widely. To 
capture this complexity, we measure the welfare gains from increased 
call volumes using the difference between existing weighted average 
revenue per unit (ARPU) for the different call-traffic categories and 
the new rate caps. Staff computed the average revenues per unit (ARPUs) 
by dividing the total billed revenue for each type of traffic at each 
size facility by total billed minutes to yield average revenue per 
minute for intrastate audio calls for prisons, average revenue per 
minute for intrastate calls at large jails, and so on, enabling the 
compilation of a complete list of rate categories by traffic and 
facility type. Staff then computed percentage changes in price and 
quantity for each rate category using the differences between the ARPUs 
and the rate caps and our price elasticity. The net welfare gain (loss) 
is the gain (loss) in IPCS consumer surplus not captured by IPCS 
service providers. We divide 2022 billed revenues by billed minutes to 
determine the effective rate for IPCS, or ARPU. We then compare this 
effective rate to the new rate cap for IPCS to determine the change in 
price, because going forward billed customers will be billed a rate 
equal to this rate cap (assuming the provider sets its rate at the 
cap). We assume site commissions

[[Page 77351]]

are only paid to the extent they do not result in rates that exceed our 
caps. With this methodological change, we estimate a total net welfare 
gain to incarcerated persons and their friends, families, and legal 
teams of about $386 million. Of this, $362 million is a transfer from 
correctional facilities and providers, leaving $24 million as a welfare 
gain from which implementation costs must be subtracted. 
Unsurprisingly, the largest contribution of $12.5 million is from 
intrastate audio calls (5.6 billion minutes), not currently subject to 
rate caps, followed by: $7.8 million from interstate audio (4.8 billion 
minutes); $2.9 million from video (407 million minutes); and $0.5 
million from international audio (54 million minutes). We do not 
separately estimate welfare gains for video IPCS by jurisdiction 
because providers do not have a way to reliably record the jurisdiction 
associated with a video communication. Further, nothing in the record 
suggests providers charge video IPCS rates that vary by jurisdiction. 
As a matter of practice, providers charge a single rate without regard 
to the communication endpoint. The present value of a five-year stream 
of $24-million worth of benefits at a two percent discount rate exceeds 
$113 million.
    583. Benefits Weighted By Income Strata. Weighting according to OMB 
guidelines greatly increases the welfare gain. OMB Circular A-4 enables 
us to weight the benefits distributed to incarcerated persons by the 
ratio of median incarcerated people's income to the U.S. median income, 
raised to the negative power of the absolute value of the elasticity of 
income. To account for the diminishing marginal utility of goods and 
income, the revised circular suggests that agencies apply weights to 
the benefits and costs accruing to different groups when estimating 
aggregate net benefits. To determine the weights, OMB recommends a 
constant elasticity for subgroups defined by income. The weight for 
each group is: [Omega]i = (Ii/IUS)-[gamma] where [Omega]i is the weight 
for subgroup i, Ii is the median income for subgroup i, IUS is the U.S. 
median income, and [gamma] is the absolute value of the elasticity of 
marginal utility. Based on an average gleaned from the empirical 
literature, OMB recommends a constant elasticity of marginal utility of 
1.4. The impact of this could be large. Analyzing Bureau of Justice 
Statistics 2014 survey data for the month just prior to incarceration, 
researchers for the Prison Policy Initiative estimated a 2014 median 
annual income of $19,185 for incarcerated persons. U.S. median 
individual income for 2014 was $28,760. The resulting weight for 
incarcerated people's welfare gains is 1.76 (= ($19,185/
$28,760)-1.4), meaning that every dollar in welfare gain 
directly attributable to incarcerated people was worth $1.76 in 2014. 
If incarcerated people share equally in the total estimated net welfare 
gain, then about $12 million, or half, of the estimated $24 million is 
directly attributable to them, as opposed to friends and families. At 
the same time, if the average income of families and friends of 
incarcerated persons was that of the average American, then, under 
these assumptions, the net welfare gain is effectively worth about $33 
million (= ($12 million * 1.76) + $12 million = $21 million + $12 
million). This is likely an underestimate, as the average income of the 
families and friends of incarcerated persons is likely below the 
national average, but we do not know what this average is.
    584. Other Quantitative Benefits. In the 2021 ICS Order, the 
Commission estimated that expanded inmate calling services call volumes 
at the lowered interstate rate caps would help curtail recidivism, 
saving the U.S. economy $23 million over ten years and reducing costly 
foster-child placements. While we are certain that lowering IPCS rate 
caps further will increase these cost savings, we elect not to proffer 
precise estimates here, partly to avoid double-counting previous 
estimates.
    585. Costs of Reducing Rates for Interstate, Intrastate, and 
International Incarcerated People's Communications Services. In the 
2021 ICS Order, the Commission estimated that the cost of contract 
revisions needed to implement reduced interstate inmate calling 
services rates would total approximately $6 million. Adjusting for 
inflation, the industry cost for the same set of contract revisions--
simultaneously lowering interstate, intrastate, and international 
incarcerated people's communications services rates--would be about $7 
million as of April 2024. Lowering video calling rates, which we 
conservatively assume are contracted separately, would entail another 
$7 million in costs. We, therefore, estimate total implementation costs 
of $14 million.
    586. Comparison of Benefits and Costs. The benefits of lowering 
IPCS interstate rate caps and extending IPCS rate caps to intrastate 
and international audio and video call traffic far exceed the 
accompanying costs. Without either weighting by income strata or 
summing and discounting future benefits, readily quantifiable benefits 
exceed costs by $10 million (= $24-$14) in the inaugural year. 
Weighting by income strata and summing and discounting future benefits 
further increase the value of benefits relative to costs.

                                                          Table 1--Audio and Video Call Traffic
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Intrastate                              Interstate                          International
               Rate cap                -----------------------------------------------------------------------------------------------------------------
                                            Minutes        ARPU        Gain         Minutes        ARPU        Gain       Minutes      ARPU       Gain
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Audio Call Traffic
--------------------------------------------------------------------------------------------------------------------------------------------------------
Prisons, $0.06........................    3,095,089,972    $0.060        $884     3,179,735,362    $0.070    $704,910    34,290,298    $0.147   $266,659
Large Jails, $0.06....................      878,094,584     0.099   1,990,573       686,852,024     0.102   1,761,431     4,767,832     0.174     53,188
Medium Jails, $0.07...................      850,607,843     0.154   5,798,496       640,947,740     0.144   3,635,531    10,718,912     0.158     79,202
Small Jails, $0.09....................      587,159,107     0.182   4,094,384       243,197,254     0.173   1,461,041     3,373,724     0.250     51,747
Very Small Jails, $0.12...............      207,201,790     0.180     628,327        72,774,874     0.180     217,658       743,867     0.264      8,743
                                       -----------------------------------------------------------------------------------------------------------------
    Total.............................    5,618,153,296  ........  12,512,663     4,823,507,254  ........   7,780,571    53,894,633  ........    459,539
--------------------------------------------------------------------------------------------------------------------------------------------------------
                              Video Call Traffic
---------------------------------------
Prisons, $0.16........................       85,787,195     0.257     471,462
Large Jails, $0.11....................       60,592,954     0.230     567,352
Medium Jails, $0.12...................      123,936,702     0.273   1,597,262
Small Jails, $0.14....................      105,461,580     0.292   1,257,099
Very Small Jails, $0.25...............       31,454,733     0.294      30,692
                                       ----------------------------------------

[[Page 77352]]

 
    Total.............................      407,233,163  ........   2,885,053
--------------------------------------------------------------------------------------------------------------------------------------------------------

7. Effective Dates and Compliance Dates
    587. Our reforms eliminating site commissions and our new permanent 
audio and interim video rate caps will take effect 60 days after notice 
of them is published in the Federal Register, but compliance with those 
reforms will be required on a staggered basis, as set forth below:
     January 1, 2025 for all prisons and for jails with average 
daily populations of 1,000 or more incarcerated people, and April 1, 
2025 for jails with average daily populations of less than 1,000 
incarcerated people, subject to the following special provisions:
     Where a contract existing as of June 27, 2024 includes 
terms and conditions that would require material alteration through 
renegotiation due to a conflict with our new rules involving rates, 
contractually prescribed site commissions, or passthrough charges 
included in the rates, and the contract expires on or after January 1, 
2025 for prisons and for jails with average daily populations of 1,000 
or more incarcerated people, or on or after April 1, 2025 for jails 
with average daily populations of less than 1,000 incarcerated people, 
the compliance dates will be the earlier of the contract expiration 
date or January 1, 2026 for prisons and for jails with average daily 
populations of 1,000 or more incarcerated people, or the earlier of the 
contract expiration date or April 1, 2026 for jails with average daily 
populations of less than 1,000 incarcerated people. We choose a date 
certain, which is the date of public draft of the Report and Order. The 
public draft version set forth the Commission's new IPCS rate caps and 
site commission reforms, none of which have changed since that time. 
For purposes of the Report and Order, a contract expires after the 
expiration of its initial term in the contract without regard to any 
automatic extensions that might extend its validity.
     Where a contract existing as of June 27, 2024 includes 
terms and conditions that would require renegotiation due to a 
provision incorporating legally mandated site commission payments and 
the contract expires on or after July 1, 2025 for any size facility, 
the compliance date will be the earlier of the contract expiration date 
or April 1, 2026. To the extent any contract referenced here includes 
provisions that trigger automatic changes to contract terms in response 
to changes in the regulatory environment or, more specifically, changes 
in the Commission's rules such that renegotiation of contract terms 
would not be required, the compliance date extensions referenced in 
this paragraph do not apply.
    588. These timeframes recognize that, as a general matter, IPCS 
providers, governmental officials, and correctional officials may need 
additional time beyond January 1, 2025 or April 1, 2025 (depending on 
the type of facility and the terms of the contract) to renegotiate 
contracts in response to our actions today. They also recognize that 
jails with average daily populations below 1,000 may need more time 
than prisons and larger jails to implement the Commission's new IPCS 
rate caps and to transition away from site commission payments, 
particularly since the smaller facilities were largely not impacted by 
the Commission's 2021 interim rate cap reforms. The reforms applicable 
to jails with average daily populations of less than 1,000 adopted in 
the 2021 ICS Order were relatively modest, with ``the only rate cap 
change'' being a reduction of per-minute charges for collect calls from 
$0.25 to $0.21 per minute. In addition, by delaying the compliance date 
of our site commission and rate caps reforms at those correctional 
facilities where providers currently pay legally mandated site 
commissions, we recognize that more time may be needed to accommodate 
the legislative process to amend state or local laws and regulations 
that currently require site commission payments.
    589. We conclude that the compliance dates we adopt for our new 
audio and video rate caps and site commission reforms ``strike[ ] a 
reasonable balance between [ ] competing interests.'' On the one hand, 
we recognize the need to ``help alleviate the burden of unreasonably 
high . . . rates on incarcerated people and those they [communicate 
with].'' On the other hand, and as the Commission has previously 
recognized, IPCS providers and correctional officials ``will need more 
than 30 days to execute any contractual amendments necessary to 
implement the new . . . rate caps and otherwise adapt to those caps.'' 
And smaller facilities likely need more time than larger facilities to 
implement rate cap and other changes. Furthermore, we recognize that 
those facilities where IPCS providers currently pay legally mandated 
site commissions may likely need additional time to come into 
compliance with our reforms. Thus, requiring compliance with the 
Commission's rate cap and site commission reforms on a staggered basis 
properly balances the need for expedited reform contemplated by the 
Martha Wright-Reed Act with the need to allow IPCS providers and 
correctional facilities sufficient time to adapt to our rules.
    590. Except for those facilities where IPCS providers pay legally 
mandated site commissions, for prisons and jails with ADPs of 1,000 or 
more, we find that there will be ample time between adoption of this 
Order and January 1, 2025 for such prisons and jails with existing 
contracts expiring before the end of this year to comply with today's 
reforms and that the possible extension of this compliance date to 
January 1, 2026 as outlined above will be more than sufficient to 
accommodate the contract renegotiation process. In the 2021 ICS Order, 
the Commission established a 90-day transition period following Federal 
Register publication for all facilities. The Commission also adopted a 
90-day transition period for prisons in connection with implementing 
the reforms in the 2015 ICS Order. One provider supports adopting a 90-
day transition period. Here, given the comprehensive nature of the 
reforms we adopt to rate caps and site commissions, we adopt a 
transition period of slightly more than five months from the adoption 
date of the Report and Order and we permit additional time based on the 
extent there are existing contracts as of June 27, 2024 that require 
renegotiation due to a conflict with our new rules. This will allow 
providers and facilities significantly longer than the 30-day timeframe 
the Commission has previously recognized would be necessary to amend 
IPCS contracts.
    591. We also find that delaying the compliance date of our rate 
caps and site commission reforms for jails with ADPs below 1,000 except 
at those

[[Page 77353]]

correctional facilities where IPCS providers pay legally mandated site 
commissions until April 1, 2025 or, in the alternative, until April 1, 
2026 as described above, will afford IPCS providers and correctional 
officials sufficient extra time to adapt to these new rules. In the 
IPCS context, the Commission's use of the term ``smaller'' is focused 
on average daily population, and ``is not meant to imply'' that such 
facilities ``are small in any absolute sense.'' Here, we delay the 
compliance date of our rate cap and site commission reforms for 
correctional facilities with average daily populations below 1,000 
except at those correctional facilities where IPCS providers pay 
legally mandated site commissions by slightly more than eight months 
from the date of adoption of the Report and Order, which, to the extent 
there are existing contracts as of June 27, 2024 that require 
renegotiation due to a conflict with our new rules, can be extended. 
These timeframes will be more than sufficient to ensure that IPCS 
providers and correctional facilities are able to amend their contracts 
to account for our reforms today.
    592. Recent experience at the state level suggests that IPCS 
providers and correctional facilities should be able to adapt to 
regulatory changes in the allotted timeframes. For example, 
Massachusetts recently made IPCS free to consumers, and in doing so the 
state gave the industry and the state's prisons and jails less than 
five months to implement those changes--from July 31, 2023 to December 
1, 2023--to account for budgetary impacts. On July 31, 2023, the 
Massachusetts legislature enacted a bill requiring unlimited free phone 
calls to incarcerated people retroactive to July 1, 2023, as part of 
the state's appropriations bill for Fiscal Year 2024. The free calling 
bill, H.4052, was enacted as sections 50, 85, and 111 of the 
appropriations bill, H.4040. The governor returned portions of the 
appropriations bill, including the portions relating to free calling 
for incarcerated people noting that making those provisions retroactive 
to July 1 ``pos[ed] serious implementation challenges'' and were also 
``underfunded by $20M in the budget.'' The governor thereafter proposed 
that the effective date be delayed to December 1, 2023, which would 
avoid ``the need for retroactive reimbursements, provide[ ] time for 
the Department of Corrections and the Sheriff's Departments to manage 
vendor contracts more effectively, and address[ ] fiscal challenges 
while also ensuring that families will be able to connect with their 
incarcerated loved ones during the holiday season.'' The Massachusetts 
legislature eventually reenacted the free calling bill with a December 
1, 2023 effective date and the governor signed it on November 15, 2023. 
While one commenter advocates for a phase-out of site commission 
payments, partially in recognition of the fact many local governments 
continue to rely on site commission revenues, other commenters argue 
that implementing changes ``should be a relatively easy and 
straightforward process'' such that a more immediate compliance date 
might be appropriate. We find, on balance, that the record supports a 
longer transition period for smaller jails. The timeframe we adopt for 
smaller facilities is more generous than the timeframes the Commission 
has adopted for such facilities previously. Insofar as the transition 
we adopt for smaller jails today is longer than previous transitions 
the Commission has adopted, we are persuaded that this additional time 
is necessary but sufficient for both IPCS providers and correctional 
officials to adapt to our rules while also ensuring the most 
expeditious relief possible for incarcerated people and their loved 
ones, consistent with the Martha Wright-Reed Act.
    593. For all correctional facilities where IPCS providers currently 
pay legally mandated site commissions, we conclude that a longer 
transition period is justified such that compliance with our site 
commission reforms and our new rate caps will be required by July 1, 
2025 unless a contract existing as of June 27, 2024 includes terms and 
conditions that would require renegotiation due to a provision 
incorporating legally mandated site commission payments and the 
contract expires on or after July 1, 2025, in which case the compliance 
date will be the earlier of the contract expiration date or April 1, 
2026. For such facilities, in addition to any additional time necessary 
to facilitate contract renegotiation where applicable, additional time 
is also necessary to accommodate states' and localities' legislative 
and budgetary processes to make the adjustments necessary to comply 
with the Report and Order, including by amending or repealing relevant 
laws pursuant to state or local statutes or other formal legal 
processes. Because such processes may involve more than amending IPCS 
contracts, we expect that July 1, 2025 or, if applicable, April 1, 
2026, will afford sufficient time for all parties involved to make the 
necessary legislative and contractual arrangements sufficient to 
implement our reforms. This determination is distinct from the actions 
we take today in preempting state and local laws or regulations that 
require or allow site commission payments. We provide this extra time 
for state and local authorities to comply with legal or administrative 
processes that may be required to repeal existing laws or regulations. 
The lack of such a process does not negate our preemption actions in 
connection with site commission payments.
    594. We disagree that we should delay our compliance dates for site 
commission reform, in particular, beyond the timeframes established 
herein. We note that PPI's comments were made prior to the enactment of 
the Martha Wright-Reed Act, which gave the Commission authority over 
intrastate communications. Given that development and the fact that our 
reforms today sweep broadly to apply to all communications over which 
we now have jurisdiction, including intrastate communications, we 
conclude that the opportunities for the kind of arbitrage identified by 
PPI to be greatly reduced. IPCS providers and correctional authorities 
have been on notice since at least the 2014 ICS Notice that the 
Commission might eliminate site commissions. Against that regulatory 
backdrop, to the extent IPCS providers and correctional authorities 
have continued to rely on revenues from site commissions, they have 
done so at their own risk. In addition, as discussed above, a number of 
jurisdictions have eliminated site commissions, which presumably 
triggered state budgetary processes to account for the lost revenues. 
Our extended implementation deadlines here attempt to account for these 
state and local budgetary processes to the extent possible. Any further 
delays in requiring compliance with our rate cap and site commission 
reforms risks perpetuating unjust and unreasonable rates and charges 
for IPCS consumers or yielding unfair compensation for IPCS providers, 
contrary to the directives of the Martha Wright-Reed Act. Section 
276(b)(1)(A) of the Communications Act, as amended by the Martha 
Wright-Reed Act, directs the Commission to establish a compensation 
plan to ensure IPCS providers are ``fairly compensated'' and that ``all 
rates and charges are just and reasonable.''
    595. Other Deadlines. Except for rules and requirements subject to 
OMB review under the Paperwork Reduction Act, all other rules and 
requirements adopted in this Order also will take effect 60 days after 
notice is published in the Federal Register, except the removal of 
Sec.  64.6090, which will not

[[Page 77354]]

take effect until other rules requiring OMB review take effect. These 
timeframes are consistent with the terms of the Martha Wright-Reed Act, 
which requires the Commission to promulgate regulations necessary to 
implement the Act not earlier than 18 months and not later than 24 
months after the date of enactment. Martha Wright-Reed Act Sec.  3(a). 
Section 64.6090 prohibits flat-rate calling and will be removed to 
permit the offering of alternate pricing plans. With regard to reforms 
other than those related to our new rate caps and site commission 
prohibition that are not subject to the PRA, such as our rules 
pertaining to the seizing of balances in inactive accounts by 
providers, we find that making these changes effective 60 days after 
notice is published in the Federal Register best balances the need to 
bring these important, pro-consumer rules into effect expeditiously 
while affording IPCS providers sufficient time to implement any changes 
necessary to comply with our rules. Unlike our rate cap and site 
commission reforms, which may take longer to implement due to the need 
for contractual amendments or municipal budget adjustments, we do not 
view these other reforms as involving similar complexities such that a 
longer effective date period is necessary.
    596. Our delegations of authority to WCB and CGB to revise the 
annual reports will be effective upon publication of the Report and 
Order in the Federal Register, as will our delegations of authority to 
WCB and OEA to conduct an additional data collection.
8. Enforcement
    597. We will be vigilant in monitoring compliance with the reforms 
we adopt today and will take action to vigorously enforce our rules 
where appropriate. Compliance with the Commission's IPCS rules is 
essential to ensuring that incarcerated people and their loved ones 
receive the full range of benefits resulting from today's reforms. As 
NCIC illustrates, certain providers took advantage of our prior 
regulatory regime to engage in practices or other behavior in 
contravention of our rules. Robust enforcement is therefore necessary. 
To that end, we direct the Enforcement Bureau to work with CGB to 
develop a new IPCS complaint category, in addition to the existing 
informal consumer complaint process, within its existing intake system 
to ensure that IPCS industry providers, watchdogs, and other 
stakeholders have a mechanism for CGB to immediately bring any 
potential rule violations to the Enforcement Bureau's attention for 
investigation. We clarify that informal IPCS-related consumer inquiries 
and complaints should continue to be made to CGB, using established 
practices and procedures. Should the Commission observe or be made 
aware of practices, conduct, or other behavior that evades or is 
designed to evade our rules, we will not hesitate to take appropriate 
remedial action up to and including enforcement action, which may 
subject IPCS providers to, among other penalties, the imposition of 
monetary forfeitures. Thus, practices such as price gouging through, 
for example, charging rates above our rate caps, imposing ancillary 
service charges, or attempting to recover costs associated with the 
payment of site commissions, whether monetary or in-kind, through 
regulated rates may subject IPCS providers to investigation by the 
Commission's Enforcement Bureau and enforcement action. Similarly, 
practices that deprive consumers of funds in their IPCS accounts, 
circumvent the safeguards we adopt today governing alternate pricing 
plans or the Commission's disability access rules pertaining to IPCS 
may also subject IPCS providers to investigation and enforcement action 
by the Enforcement Bureau. At the same time, IPCS providers and other 
stakeholders are encouraged to provide the Commission with information 
at any time, whether through an informal complaint or otherwise, 
regarding attempts to skirt our rules or possible violations of our 
rules. In addition, the Commission will monitor providers' annual 
reports, which are due April 1 each year, for developments that may 
suggest noncompliance with our rules. Close scrutiny of these and other 
practices and behaviors, including through enforcement action where 
appropriate, will ensure that the reforms we adopt today are fully 
implemented.

I. Severability

    598. The rules and policies adopted in this Order are designed to 
ensure that the rates and charges for IPCS are both just and reasonable 
for consumers and provide fair compensation for providers, in 
accordance with section 276, as amended by the Martha Wright-Reed Act, 
along with section 201(b) of the Communications Act. Other rules and 
policies seek to improve communications services for incarcerated 
people with disabilities. Each of the separate reforms we undertake 
here serves a particular function towards these goals. Therefore, it is 
our intent that each of the rules and policies adopted herein shall be 
severable. If any of the rules or policies is declared invalid or 
unenforceable for any reason, the unaffected rules shall remain in full 
force and effect. We find premature ViaPath's request that we make 
clear that the rules and policies we adopt that are ``related to IPCS 
rates and charges'' are not severable from each other. In the unlikely 
event any of those rules or policies is declared invalid or 
unenforceable, interested parties are free to bring the matter to our 
attention or raise such arguments in court, as appropriate.

IV. Procedural Matters

    599. Final Regulatory Flexibility Analysis. As required by the 
Regulatory Flexibility Act of 1980, as amended (RFA), the Commission 
has prepared a Final Regulatory Flexibility Analysis (FRFA) relating to 
the Report and Order and this Order on Reconsideration, Clarification 
and Waiver. The FRFA is set forth in below.
    600. Congressional Review Act. The Commission has determined, and 
the Administrator of the Office of Information and Regulatory Affairs, 
Office of Management and Budget, concurs that this rule is ``major'' 
under the Congressional Review Act, 5 U.S.C. 804(2). The Commission 
will send a copy of this 2024 IPCS Order and 2024 IPCS Notice to 
Congress and the Government Accountability Office pursuant to 5 U.S.C. 
801(a)(1)(A).
    601. Paperwork Reduction Act Analysis. The 2024 IPCS Order may 
contain new or modified information collection requirements subject to 
the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. All such 
requirements will be submitted to the Office of Management and Budget 
(OMB) for review under Section 3507(d) of the PRA. OMB, the general 
public, and other federal agencies will be invited to comment on any 
new or modified information collection requirements contained in this 
proceeding. In addition, we note that pursuant to the Small Business 
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 
3506(c)(4), we previously sought specific comment on how the Commission 
might further reduce the information collection burden for small 
business concerns with fewer than 25 employees.
    602. In this present document, we have assessed the effects of the 
information collection burdens imposed on small businesses and, in 
particular, businesses with fewer than 25 employees as a result of the 
Report and Order. Those requirements include consumer disclosure and 
inactive account requirements. We find that those requirements, 
including the posting of certain information on

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publicly available websites, do not impose undue burdens on smaller 
businesses. We also find that obligations to collect and maintain 
consumer information in order to refund inactive account balances are 
commensurate with the number of customers served and therefore impose 
proportionate burdens on smaller businesses given the scale of their 
operations.
    603. Providing Accountability Through Transparency Act. Consistent 
with the Providing Accountability Through Transparency Act, Public Law 
118-9, a summary of the 2024 IPCS Order will be available on https://www.fcc.gov/proposed-rulemakings.
    604. OPEN Government Data Act. The OPEN Government Data Act, 
requires agencies to make ``public data assets'' available under an 
open license and as ``open Government data assets,'' i.e., in machine-
readable, open format, unencumbered by use restrictions other than 
intellectual property rights, and based on an open standard that is 
maintained by a standards organization. Congress enacted the OPEN 
Government Data Act as Title II of the Foundations for Evidence-Based 
Policymaking Act of 2018. This requirement is to be implemented ``in 
accordance with guidance by the Director'' of the OMB. OMB has not yet 
issued final guidance. The term ``public data asset'' means ``a data 
asset, or part thereof, maintained by the Federal Government that has 
been, or may be, released to the public, including any data asset, or 
part thereof, subject to disclosure under [the Freedom of Information 
Act (FOIA)].'' A ``data asset'' is ``a collection of data elements or 
data sets that may be grouped together,'' and ``data'' is ``recorded 
information, regardless of form or the media on which the data is 
recorded.'' We delegate authority to the Wireline Competition Bureau, 
in consultation with the agency's Chief Data and Analytics Officer and 
after seeking public comment to the extent it deems appropriate, to 
determine whether any data assets maintained or created by the 
Commission pursuant to the rules adopted in the 2024 IPCS Order are 
``public data assets'' and if so, to determine when and to what extent 
such information should be published as ``open Government data 
assets.'' In doing so, WCB shall take into account the extent to which 
such data assets should not be made publicly available because they are 
not subject to disclosure under the Freedom of Information Act. See, 
e.g., 5 U.S.C. 552(b)(4), (6) to (7) (exemptions concerning 
confidential commercial information, personal privacy, and information 
compiled for law enforcement purposes, respectively). We also seek 
comment in the 2024 IPCS Notice on whether any of the information 
proposed to be collected in the Notice would constitute ``data assets'' 
for purposes of the OPEN Government Data Act and, if so, whether such 
information should be published as ``open Government data assets.''
    605. 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 and Governmental Affairs Bureau at 202-418-0530.
    606. Availability of Documents. Comments, reply comments, and ex 
parte submissions will be publicly available online via ECFS.
    607. Further Information. For further information, contact Stephen 
Meil, at (202) 418-7233 or [email protected] or [email protected].

V. Final Regulatory Flexibility Analysis

    608. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), Initial Regulatory Flexibility Analyses (IRFAs) were 
incorporated in the Incarcerated People's Communications Services; 
Implementation of the Martha Wright-Reed Act; Rates for Interstate 
Inmate Calling Services, Notice of Proposed Rulemaking (Notice) in WC 
Docket Nos. 23-62 and 12-375 (released in March 2023), in the Sixth 
Further Notice of Proposed Rulemaking in WC Docket No. 12-375 (released 
in September 2022), and in the Fifth Further Notice of Proposed 
Rulemaking in WC Docket No. 12-375 (released in May 2021). The Federal 
Communications Commission (Commission) sought written public comment on 
the proposals in those Notices, including comment on the IRFAs. No 
comments were filed addressing the IRFA. This present Final Regulatory 
Flexibility Analysis (FRFA), relating to the Report and Order and the 
Order on Reconsideration, Clarification and Waiver (collectively, 
Report and Order), conforms to the RFA.

A. Need for, and Objectives of, the Report and Order

    609. The Report and Order implements the expanded authority granted 
to the Commission by the Martha Wright-Reed Act to establish a 
compensation plan that ensures both just and reasonable rates and 
charges for incarcerated people's audio and video communications 
services and fair compensation for incarcerated people's communication 
services (IPCS) providers. The Report and Order fundamentally reforms 
the regulation of IPCS in all correctional facilities, regardless of 
the technology used to deliver these services, and significantly lowers 
the IPCS rates that incarcerated people and their loved ones will pay.
    610. The reforms adopted by the Report and Order: (1) utilize the 
expanded authority granted the Commission, in conjunction with the 
Commission's preexisting statutory authority, to adopt just and 
reasonable IPCS rates and charges for all intrastate, interstate, and 
international audio and video IPCS, including video visitation 
services, that ensure fair compensation for providers; (2) lower 
existing per-minute rate caps for audio IPCS, based on industry-wide 
cost data submitted by IPCS providers, while permitting states to 
maintain IPCS rates lower than the Commission's rate caps; (3) lower 
the overall prices consumers pay for IPCS and simplify the pricing 
structure by incorporating the costs of ancillary services in the rate 
caps and prohibiting providers from imposing any separate ancillary 
service charges on IPCS consumers; (4) prohibit IPCS providers from 
making site commission payments for IPCS and preempt state and local 
laws and regulations requiring such commissions; (5) limit the costs 
associated with safety and security measures that can be recovered in 
the per-minute rates to only those costs that the Commission finds used 
and useful in the provision of IPCS; (6) allow, subject to conditions, 
IPCS providers to offer alternate pricing plans for IPCS that comply 
with the rate caps we establish; (7) revise and strengthen 
accessibility requirements for IPCS for incarcerated people with 
disabilities; (8) revise and strengthen existing consumer disclosure 
and inactive account requirements; and (9) revise the existing annual 
reporting and certification requirements. The Report and Order also 
addresses petitions for reconsideration, clarification and waiver 
pending in this proceeding.

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

    611. There were no comments filed that specifically addressed the 
proposed rules and policies presented in the IRFA.

C. Response to Comments by the Chief Counsel for Advocacy of the Small 
Business Administration

    612. Pursuant to the Small Business Jobs Act of 2010, which amended 
the RFA, the Commission is required to respond to any comments filed by 
the Chief Counsel for Advocacy of the Small

[[Page 77356]]

Business Administration (SBA), and to provide a detailed statement of 
any change made to the proposed rules as a result of those comments. 
The Chief Counsel did not file any comments in response to the proposed 
rules in this proceeding.

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

    613. The RFA directs agencies to provide a description of, and, 
where feasible, an estimate of, the number of small entities that may 
be affected by the rules they adopt. 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 Small Business 
Administration (SBA).
    614. Small Businesses, Small Organizations, Small Governmental 
Jurisdictions. Our actions, over time, may affect small entities that 
are not easily categorized at present. We therefore describe, at the 
outset, three broad groups of small entities that could be directly 
affected herein. First, while there are industry specific size 
standards for small businesses that are used in the regulatory 
flexibility analysis, according to data from the Small Business 
Administration's (SBA) Office of Advocacy, in general a small business 
is an independent business having fewer than 500 employees. These types 
of small businesses represent 99.9% of all businesses in the United 
States, which translates to 33.2 million businesses.
    615. Next, the type of small entity described as a ``small 
organization'' is generally ``any not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.'' 
The Internal Revenue Service (IRS) uses a revenue benchmark of $50,000 
or less to delineate its annual electronic filing requirements for 
small exempt organizations. Nationwide, for tax year 2022, there were 
approximately 530,109 small exempt organizations in the U.S. reporting 
revenues of $50,000 or less according to the registration and tax data 
for exempt organizations available from the IRS.
    616. Finally, the small entity described as a ``small governmental 
jurisdiction'' is defined generally as ``governments of cities, 
counties, towns, townships, villages, school districts, or special 
districts, with a population of less than fifty thousand.'' U.S. Census 
Bureau data from the 2022 Census of Governments indicate there were 
90,837 local governmental jurisdictions consisting of general purpose 
governments and special purpose governments in the United States. Of 
this number, there were 36,845 general purpose governments (county, 
municipal, and town or township) with populations of less than 50,000 
and 11,879 special purpose governments (independent school districts) 
with enrollment populations of less than 50,000. Accordingly, based on 
the 2022 U.S. Census of Governments data, we estimate that at least 
48,724 entities fall into the category of ``small governmental 
jurisdictions.''
    617. Wired Telecommunications Carriers. The U.S. Census Bureau 
defines this industry as establishments primarily engaged in operating 
and/or providing access to transmission facilities and infrastructure 
that they own and/or lease for the transmission of voice, data, text, 
sound, and video using wired communications networks. Transmission 
facilities may be based on a single technology or a combination of 
technologies. Establishments in this industry use the wired 
telecommunications network facilities that they operate to provide a 
variety of services, such as wired telephony services, including VoIP 
services, wired (cable) audio and video programming distribution, and 
wired broadband internet services. By exception, establishments 
providing satellite television distribution services using facilities 
and infrastructure that they operate are included in this industry. 
Wired Telecommunications Carriers are also referred to as wireline 
carriers or fixed local service providers.
    618. The SBA small business size standard for Wired 
Telecommunications Carriers classifies firms having 1,500 or fewer 
employees as small. U.S. Census Bureau data for 2017 show that there 
were 3,054 firms that operated in this industry for the entire year. Of 
this number, 2,964 firms operated with fewer than 250 employees. 
Additionally, based on Commission data in the 2022 Universal Service 
Monitoring Report, as of December 31, 2021, there were 4,590 providers 
that reported they were engaged in the provision of fixed local 
services. Of these providers, the Commission estimates that 4,146 
providers have 1,500 or fewer employees. Consequently, using the SBA's 
small business size standard, most of these providers can be considered 
small entities.
    619. Local Exchange Carriers (LECs). Neither the Commission nor the 
SBA has developed a size standard for small businesses specifically 
applicable to local exchange services. Providers of these services 
include both incumbent and competitive local exchange service 
providers. Wired Telecommunications Carriers is the closest industry 
with an SBA small business size standard. Wired Telecommunications 
Carriers are also referred to as wireline carriers or fixed local 
service providers. The SBA small business size standard for Wired 
Telecommunications Carriers classifies firms having 1,500 or fewer 
employees as small. U.S. Census Bureau data for 2017 show that there 
were 3,054 firms that operated in this industry for the entire year. Of 
this number, 2,964 firms operated with fewer than 250 employees. 
Additionally, based on Commission data in the 2022 Universal Service 
Monitoring Report, as of December 31, 2021, there were 4,590 providers 
that reported they were fixed local exchange service providers. Of 
these providers, the Commission estimates that 4,146 providers have 
1,500 or fewer employees. Consequently, using the SBA's small business 
size standard, most of these providers can be considered small 
entities.
    620. Incumbent Local Exchange Carriers (Incumbent LECs). Neither 
the Commission nor the SBA have developed a small business size 
standard specifically for incumbent local exchange carriers. Wired 
Telecommunications Carriers is the closest industry with an SBA small 
business size standard. The SBA small business size standard for Wired 
Telecommunications Carriers classifies firms having 1,500 or fewer 
employees as small. U.S. Census Bureau data for 2017 show that there 
were 3,054 firms in this industry that operated for the entire year. Of 
this number, 2,964 firms operated with fewer than 250 employees. 
Additionally, based on Commission data in the 2022 Universal Service 
Monitoring Report, as of December 31, 2021, there were 1,212 providers 
that reported they were incumbent local exchange service providers. Of 
these providers, the Commission estimates that 916 providers have 1,500 
or fewer employees. Consequently, using the SBA's small business size 
standard, the Commission estimates that the majority of incumbent local 
exchange carriers can be considered small entities.
    621. Competitive Local Exchange Carriers (CLECs). Neither the

[[Page 77357]]

Commission nor the SBA has developed a size standard for small 
businesses specifically applicable to local exchange services. 
Providers of these services include several types of competitive local 
exchange service providers. Wired Telecommunications Carriers is the 
closest industry with a SBA small business size standard. The SBA small 
business size standard for Wired Telecommunications Carriers classifies 
firms having 1,500 or fewer employees as small. U.S. Census Bureau data 
for 2017 show that there were 3,054 firms that operated in this 
industry for the entire year. Of this number, 2,964 firms operated with 
fewer than 250 employees. Additionally, based on Commission data in the 
2022 Universal Service Monitoring Report, as of December 31, 2021, 
there were 3,378 providers that reported they were competitive local 
service providers. Of these providers, the Commission estimates that 
3,230 providers have 1,500 or fewer employees. Consequently, using the 
SBA's small business size standard, most of these providers can be 
considered small entities.
    622. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA have developed a small business size standard specifically for 
Interexchange Carriers. Wired Telecommunications Carriers is the 
closest industry with a SBA small business size standard. The SBA small 
business size standard for Wired Telecommunications Carriers classifies 
firms having 1,500 or fewer employees as small. U.S. Census Bureau data 
for 2017 show that there were 3,054 firms that operated in this 
industry for the entire year. Of this number, 2,964 firms operated with 
fewer than 250 employees. Additionally, based on Commission data in the 
2022 Universal Service Monitoring Report, as of December 31, 2021, 
there were 127 providers that reported they were engaged in the 
provision of interexchange services. Of these providers, the Commission 
estimates that 109 providers have 1,500 or fewer employees. 
Consequently, using the SBA's small business size standard, the 
Commission estimates that the majority of providers in this industry 
can be considered small entities.
    623. Local Resellers. Neither the Commission nor the SBA have 
developed a small business size standard specifically for Local 
Resellers. Telecommunications Resellers is the closest industry with a 
SBA small business size standard. The Telecommunications Resellers 
industry comprises establishments engaged in purchasing access and 
network capacity from owners and operators of telecommunications 
networks and reselling wired and wireless telecommunications services 
(except satellite) to businesses and households. Establishments in this 
industry resell telecommunications; they do not operate transmission 
facilities and infrastructure. Mobile virtual network operators (MVNOs) 
are included in this industry. The SBA small business size standard for 
Telecommunications Resellers classifies a business as small if it has 
1,500 or fewer employees. U.S. Census Bureau data for 2017 show that 
1,386 firms in this industry provided resale services for the entire 
year. Of that number, 1,375 firms operated with fewer than 250 
employees. Additionally, based on Commission data in the 2022 Universal 
Service Monitoring Report, as of December 31, 2021, there were 207 
providers that reported they were engaged in the provision of local 
resale services. Of these providers, the Commission estimates that 202 
providers have 1,500 or fewer employees. Consequently, using the SBA's 
small business size standard, most of these providers can be considered 
small entities.
    624. Toll Resellers. Neither the Commission nor the SBA have 
developed a small business size standard specifically for Toll 
Resellers. Telecommunications Resellers is the closest industry with a 
SBA small business size standard. The Telecommunications Resellers 
industry comprises establishments engaged in purchasing access and 
network capacity from owners and operators of telecommunications 
networks and reselling wired and wireless telecommunications services 
(except satellite) to businesses and households. Establishments in this 
industry resell telecommunications; they do not operate transmission 
facilities and infrastructure. Mobile virtual network operators (MVNOs) 
are included in this industry. The SBA small business size standard for 
Telecommunications Resellers classifies a business as small if it has 
1,500 or fewer employees. U.S. Census Bureau data for 2017 show that 
1,386 firms in this industry provided resale services for the entire 
year. Of that number, 1,375 firms operated with fewer than 250 
employees. Additionally, based on Commission data in the 2022 Universal 
Service Monitoring Report, as of December 31, 2021, there were 457 
providers that reported they were engaged in the provision of toll 
services. Of these providers, the Commission estimates that 438 
providers have 1,500 or fewer employees. Consequently, using the SBA's 
small business size standard, most of these providers can be considered 
small entities.
    625. Other Toll Carriers. Neither the Commission nor the SBA has 
developed a definition 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. Wired Telecommunications Carriers is the closest 
industry with a SBA small business size standard. The SBA small 
business size standard for Wired Telecommunications Carriers classifies 
firms having 1,500 or fewer employees as small. U.S. Census Bureau data 
for 2017 show that there were 3,054 firms in this industry that 
operated for the entire year. Of this number, 2,964 firms operated with 
fewer than 250 employees. Additionally, based on Commission data in the 
2022 Universal Service Monitoring Report, as of December 31, 2021, 
there were 90 providers that reported they were engaged in the 
provision of other toll services. Of these providers, the Commission 
estimates that 87 providers have 1,500 or fewer employees. 
Consequently, using the SBA's small business size standard, most of 
these providers can be considered small entities.
    626. Payphone Service Providers (PSPs). Neither the Commission nor 
the SBA have developed a small business size standard specifically for 
payphone service providers, a group that includes incarcerated people's 
services providers. Telecommunications Resellers is the closest 
industry with a SBA small business size standard. The 
Telecommunications Resellers industry comprises establishments engaged 
in purchasing access and network capacity from owners and operators of 
telecommunications networks and reselling wired and wireless 
telecommunications services (except satellite) to businesses and 
households. Establishments in this industry resell telecommunications; 
they do not operate transmission facilities and infrastructure. Mobile 
virtual network operators (MVNOs) are included in this industry. The 
SBA small business size standard for Telecommunications Resellers 
classifies a business as small if it has 1,500 or fewer employees. U.S. 
Census Bureau data for 2017 show that 1,386 firms in this industry 
provided resale services for the entire year. Of that number, 1,375 
firms operated with fewer than 250 employees.

[[Page 77358]]

Additionally, based on Commission data in the 2022 Universal Service 
Monitoring Report, as of December 31, 2021, there were 36 providers 
that reported they were engaged in the provision of payphone services. 
Of these providers, the Commission estimates that 32 providers have 
1,500 or fewer employees. Consequently, using the SBA's small business 
size standard, most of these providers can be considered small 
entities.
    627. Telecommunications Relay Service (TRS) Providers. 
Telecommunications relay services enable individuals who are deaf, hard 
of hearing, deafblind, or who have a speech disability to communicate 
by telephone in a manner that is functionally equivalent to using voice 
communication services. Internet-based TRS connects an individual with 
a hearing or a speech disability to a TRS communications assistant 
using an internet Protocol-enabled device via the internet, rather than 
the public switched telephone network. Video Relay Service (VRS) one 
form of internet-based TRS, enables people with hearing or speech 
disabilities who use sign language to communicate with voice telephone 
users over a broadband connection using a video communication device. 
Internet Protocol Captioned Telephone Service (IP CTS) another form of 
internet-based TRS, permits a person with hearing loss to have a 
telephone conversation while reading captions of what the other party 
is saying on an internet-connected device. A third form of internet-
based TRS, Internet Protocol Relay Service (IP Relay), permits an 
individual with a hearing or a speech disability to communicate in text 
using an Internet Protocol-enabled device via the internet, rather than 
using a text telephone (TTY) and the public switched telephone network. 
Providers must be certified by the Commission to provide VRS and IP CTS 
and to receive compensation from the TRS Fund for TRS provided in 
accordance with applicable rules. Analog forms of TRS, text telephone 
(TTY), Speech-to-Speech Relay Service, and Captioned Telephone Service, 
are provided through state TRS programs, which also must be certified 
by the Commission.
    628. Neither the Commission nor the SBA have developed a small 
business size standard specifically for TRS Providers. All Other 
Telecommunications is the closest industry with a SBA small business 
size standard. Internet Service Providers (ISPs) and Voice over 
Internet Protocol (VoIP) services, via client-supplied 
telecommunications connections are included in this industry. The SBA 
small business size standard for this industry classifies firms with 
annual receipts of $35 million or less as small. U.S. Census Bureau 
data for 2017 show that there were 1,079 firms in this industry that 
operated for the entire year. Of those firms, 1,039 had revenue of less 
than $25 million. Based on Commission data there are 14 certified 
internet-based TRS providers and two analog forms of TRS providers. The 
Commission however does not compile financial information for these 
providers. Nevertheless, based on available information, the Commission 
estimates that most providers in this industry are small entities.
    629. All Other Telecommunications. This industry is comprised of 
establishments primarily engaged in providing specialized 
telecommunications services, such as satellite tracking, communications 
telemetry, and radar station operation. This industry also includes 
establishments primarily engaged in providing satellite terminal 
stations and associated facilities connected with one or more 
terrestrial systems and capable of transmitting telecommunications to, 
and receiving telecommunications from, satellite systems. Providers of 
internet services (e.g., dial-up ISPs) or Voice over Internet Protocol 
(VoIP) services, via client-supplied telecommunications connections are 
also included in this industry. The SBA small business size standard 
for this industry classifies firms with annual receipts of $40 million 
or less as small. U.S. Census Bureau data for 2017 show that there were 
1,079 firms in this industry that operated for the entire year. Of 
those firms, 1,039 had revenue of less than $25 million. Based on this 
data, the Commission estimates that the majority of ``All Other 
Telecommunications'' firms can be considered small.

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

    630. IPCS providers, including any that may be small entities, will 
need to change their operations, recordkeeping, and reporting to comply 
with the requirements of the Report and Order. These requirements 
include compliance with the rate caps the Report and Order establishes 
for IPCS. While the new rate cap structure is lower than the 
preexisting per-minute rate caps, given that the rate caps are based on 
cost data provided by IPCS providers, including smaller providers, 
small entities are likely to be able to recover their costs in the same 
manner as larger providers. Additionally, because the rate caps apply 
to both interstate and intrastate IPCS, the new rate cap structure 
reduces the recordkeeping and reporting burdens of complying with the 
Commission's rules with regards to audio IPCS because providers will no 
longer need to determine the jurisdictional nature of each call. The 
Report and Order's requirements also include a prohibition on the 
assessment of ancillary service charges associated with IPCS, which 
will greatly reduce the recordkeeping burdens on providers and simplify 
their billing operations.
    631. The Report and Order prohibits IPCS providers from paying site 
commissions of any kind associated with IPCS and eliminates the 
requirement under the Commission's rules for providers to label, and 
disclose the source of, those payments on consumers' bills. The Report 
and Order requires that, where facilities claim to incur costs related 
to IPCS, providers are to determine whether those costs are in fact 
used and useful in the provision of IPCS and are, therefore, 
reimbursable under the Commission's rules. These changes will reduce 
the burdens of the Commission's billing rules, while requiring that 
IPCS providers make determinations regarding whether cost claims 
submitted to them by facilities are consistent with Commission 
requirements.
    632. The Report and Order allows providers the option to offer 
alternate pricing plans in addition to providing IPCS at per-minute 
rates. IPCS providers may elect whether to offer such plans, and should 
they elect to do so, they may determine the format of such plans, 
provided that these plans comply with the Commission's generally 
applicable IPCS rules, certain specified limitations, and other 
safeguards adopted in the Report and Order. The Report and Order 
establishes additional requirements for alternative pricing plans 
regarding dropped communications, automatic renewals, and consumer 
cancellation.
    633. The Report and Order adopts consumer disclosure requirements 
applicable to all IPCS, including requirements that providers disclose 
their IPCS rates, charges, and associated practices on their publicly 
available websites in a manner that is easily accessible and available 
to all members of the public. Providers must also make these 
disclosures available via their online and mobile applications, if 
consumers use such applications to enroll, and on paper, upon a 
consumer's request. The Report and Order further requires providers to 
make available billing statements and statements of account to account 
holders on a monthly basis, and details regarding the timing, manner, 
and content

[[Page 77359]]

requirements for these and other disclosure documents for alternate 
pricing plans. The Report and Order also ensures that the consumer 
disclosure rules, as amended, apply to all IPCS providers subject to 
the Commission's expanded jurisdiction under the Martha Wright-Reed 
Act.
    634. The Report and Order extends the Commission's rules regarding 
inactive accounts to apply to all accounts that can be used to pay an 
IPCS-related rate or charge, to the extent they are controlled by IPCS 
providers or their affiliates. The Report and Order reaffirms that 
providers are barred from improperly disposing of unused funds in 
inactive accounts (which includes disposing of such funds before 180 
calendar days of continuous account inactivity has passed), and are 
required to undertake reasonable efforts to refund unused funds. The 
Report and Order expands upon these rules, including by requiring 
providers to (1) contact the relevant account holder if and when they 
become aware that an incarcerated person has been released or 
transferred or upon the expiration of the 180-day inactivity period, 
(2) issue refunds within 30 calendar days of a request from an account 
holder, or of an account being deemed inactive (even in the absence of 
such a request), and (3) notify account holders of the status of IPCS 
accounts prior to their being deemed inactive. However, the Report and 
Order limits the requirement for automatic refunds (i.e., in the 
absence of a consumer's specific request) to account balances of 
greater than $1.50. The Report and Order also clarifies what 
``reasonable efforts'' entail, the procedures to follow if ``reasonable 
efforts'' to refund inactive accounts fail, and which refund mechanisms 
providers may use. Additionally, the Report and Order reaffirms and 
clarifies the exception to these rules that allows a provider to 
dispose of funds in inactive accounts in compliance with a controlling 
judicial or administrative mandate.
    635. The Report and Order modifies the scope and content of the 
annual reporting requirements, to reflect the Commission's expanded 
jurisdiction under the Martha Wright-Reed Act, to include the full 
scope of IPCS and all providers of IPCS, and to reflect the changes to 
the Commission's rules adopted in the Report and Order. The Report and 
Order also amends the Commission's Part 14 rules as appropriate to 
reflect the Martha Wright-Reed Act's expansion of the Communications 
Act's definition of ``advanced communication service.'' It also 
modifies the Commission's rules to allow a form of enterprise 
registration for the use of Internet Protocol Captioned Telephone 
Service (IP CTS) in carceral facilities and clarifies that internet-
based IPCS providers may provide access to traditional (TTY-based) TRS 
via real-time text. The Report and Order on Reconsideration also amends 
the Commission's rules to require that VRS and IP CTS providers update 
an incarcerated person's registration information within 30 days of 
receiving written notification from such person, the correctional 
authority, or IPCS provider of an incarcerated person's release or 
transfer.

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

    636. The RFA requires an agency to provide, ``a description of the 
steps the agency has taken to minimize the significant economic impact 
on small entities . . . including a statement of the factual, policy, 
and legal reasons for selecting the alternative adopted in the final 
rule and why each one of the other significant alternatives to the rule 
considered by the agency which affect the impact on small entities was 
rejected.''
    637. In the Report and Order, the Commission adopts a new, more 
comprehensive set of rate caps that differentiate between prisons and 
jails, and between four different sizes of jails--large, medium, small 
and very small--based on average daily population (ADP). The use of 
four different size tiers is supported in the record and accounts for 
differences in costs incurred by providers serving these different 
facility sizes. The Commission conducts a cost analysis specific to 
each size tier using data submitted by IPCS providers and adopts new 
rate caps for each of these facility size and type categories for both 
audio and video IPCS. The Commission believes that these actions 
properly recognize that some jails may be more costly for providers to 
serve than prisons, and similarly that jails with smaller ADPs may be 
more costly for providers to serve than those with larger ADPs.
    638. Compliance with the Commission's new audio and video rate caps 
and its rules eliminating site commission payments will be required by 
January 1, 2025 for prisons and for jails with ADPs of 1,000 or above 
incarcerated persons where no site commissions mandated by law are 
currently paid; by April 1, 2025 for jails with ADPs less than 1,000 
where no site commissions mandated by law are currently paid; and by 
July 1, 2025 for all size facilities where site commissions mandated by 
law are currently paid. The Commission extended the compliance deadline 
for providers serving smaller jails to account for the additional time 
that these facilities, and the providers that serve them, may need to 
adapt to the changes adopted in the Report and Order.
    639. The Commission recognizes that it cannot foreclose the 
possibility that in certain limited instances, certain providers, 
possibly smaller providers with less ability to spread their costs over 
a larger number of facilities or minutes of use, may not be able to 
recover their costs of providing IPCS under the rate caps adopted in 
the Report and Order. To minimize the burden on such providers, the 
Commission retains, with modifications, its waiver process, which 
allows providers to seek relief from its rules at the facility or 
contract level if they can demonstrate that they are unable to recover 
their used and useful IPCS-related costs at that facility or for that 
contract. The Commission modifies this process to reflect the 
provisions of the Martha Wright-Reed Act, including its new authority 
thereunder. The waiver process will allow the Commission to review 
individual providers' data and potentially allow these providers to 
charge rates that enable them to recover their costs of providing IPCS 
at that facility or under that contract. This waiver process should 
benefit any IPCS providers that may be small businesses unable to 
recover their costs under the new rate caps.
    640. In the Report and Order, the Commission prohibits providers 
from assessing ancillary service charges in addition to per-minute 
rates for IPCS. The Commission incorporates the costs of providing 
ancillary services in its rate caps to allow providers the opportunity 
to recover their average costs of providing these ancillary services, 
while eliminating the burden of administering independent billing 
processes for each of these services. At the same time, eliminating all 
separately assessed ancillary service charges prevents providers from 
engaging in rent-seeking activity in their application of these 
charges, helping to ensure that IPCS rates and charges are just and 
reasonable.
    641. The Commission revises its rules to make clear that IPCS 
providers may meet the requirement to provide access to traditional TRS 
via real-time text, as an alternative to TTY transmissions, if real-
time text transmission is supported by the available devices and 
reliable

[[Page 77360]]

service can be provided by this method. Permitting this alternative 
affords providers further flexibility in conducting their operations, 
and accommodates the needs of smaller providers that may have 
insufficient resources to expand or otherwise adjust their service 
format and infrastructure to enable TTY transmission.
    642. The Commission revises its rules to permit providers to 
implement alternate pricing plans, other than per-minute pricing, 
subject to rules and conditions to protect IPCS consumers. Any provider 
that adopts these plans must offer them as a voluntary alternative to 
per-minute pricing. Providers are not required to offer such plans, but 
should they elect to do so, they will have the flexibility to determine 
the format of the plans they offer. Permitting this additional means of 
providing IPCS affords providers, including smaller providers, further 
flexibility in conducting their operations.
    643. The Commission's rate caps incorporate the costs of only a 
subset of the safety and security measures reported by providers. The 
rate caps incorporate the costs of the two categories that the 
Commission finds to be both used and useful in the provision of IPCS: 
Communications Assistance for Law Enforcement Act (CALEA) compliance 
measures and communications security services. Because cost recovery 
through the rate caps is only accommodated for a more limited set of 
such measures, providers, particularly smaller providers, may not need 
to be capable of offering more sophisticated safety and security 
services in order to successfully compete for IPCS contracts.

G. Report to Congress

    644. The Commission will send a copy of the Report and Order, 
including this FRFA, in a report to be sent to Congress pursuant to the 
Congressional Review Act. In addition, the Commission will send a copy 
of the Report and Order, including this FRFA, to the Chief Counsel for 
Advocacy of the SBA. A copy of the Report and Order and FRFA (or 
summaries thereof) will also be published in the Federal Register.

VI. Ordering Clauses

    645. Accordingly, it is ordered that, pursuant to the authority 
contained in sections 1, 2, 4(i) to (j), 201(b), 218, 220, 225, 255, 
276, 403, and 716 of the Communications Act of 1934, as amended, 47 
U.S.C. 151, 152, 154(i) to (j), 201(b), 218, 220, 225, 255, 276, 403, 
and 617, and the Martha Wright-Reed Just and Reasonable Communications 
Act of 2022, Public Law 117-338, 136 Stat 6156 (2022), the Report and 
Order, Order on Reconsideration, Clarification and Waiver, and Further 
Notice of Proposed Rulemaking are adopted.
    646. It is further ordered that, pursuant to the authority 
contained in sections 1, 2, 4(i) to (j), 201(b), 218, 220, 225, 255, 
276, 403, and 716, of the Communications Act of 1934, as amended, 47 
U.S.C. 151, 152, 154(i) to (j), 201(b), 218, 220, 225, 255, 276, 403, 
and 617, and the Martha Wright-Reed Just and Reasonable Communications 
Act of 2022, Public Law 117-338, 136 Stat 6156 (2022), the Report and 
Order shall be effective sixty (60) days after publication of a summary 
of it in the Federal Register, except as stated below. Amendments to 
sections 64.611(l)(2), (3), (5), (6); 64.6040(f); 64.6060; 64.6110; 
64.6120; 64.6130(d), (e), (f), (h) to (k); 64.6140(c), (d), (e)(2) to 
(4), (f)(2), and (f)(4) will not become effective until the Office of 
Management and Budget (OMB) completes any review that the Wireline 
Competition Bureau or the Consumer and Governmental Affairs Bureau 
determine is required under the Paperwork Reduction Act (PRA). The 
removal of Sec.  64.6090 will not become effective until after OMB 
completes any review of Sec.  64.6140. The Commission directs the 
Wireline Competition Bureau and Consumer and Governmental Affairs 
Bureau to announce effective dates for these sections by publication in 
the Federal Register and by subsequent Public Notice.
    647. It is further ordered that, pursuant to the authority 
contained in sections 1, 2, 4(i) to (j), 201(b), 218, 220, 225, 255, 
276, 403, and 716, of the Communications Act of 1934, as amended, 47 
U.S.C. 151, 152, 154(i) to (j), 201(b), 218, 220, 225, 255, 276, 403, 
and 617, and the Martha Wright-Reed Just and Reasonable Communications 
Act of 2022, Public Law 117-338, 136 Stat 6156 (2022), the delegations 
of authority to the Wireline Competition Bureau, Office of Economics 
and Analytics, and the Consumer and Governmental Affairs Bureau shall 
be effective upon publication in the Federal Register.
    648. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of the Report and Order and Further Notice of Proposed Rulemaking, 
including the Initial Regulatory Flexibility Analysis and the Final 
Regulatory Flexibility Analyses, to the Chief Counsel for Advocacy of 
the Small Business Administration.
    649. It is further ordered that the Office of the Managing 
Director, Performance Evaluation and Records Management, shall send a 
copy of the Report and Order and Further Notice of Proposed Rulemaking 
in a report to be sent to Congress and the Government Accountability 
Officer pursuant to the Congressional Review Act, 5 U.S.C. 
801(a)(1)(A).

List of Subjects in 47 CFR Parts 14 and 64

    Advanced Services, Communications, Communications common carriers, 
Communications equipment, Computer technology, Individuals with 
disabilities, Prisoners, Reporting and recordkeeping requirements, 
Security measures, Telecommunications, Telephone, Video, Waivers.

Federal Communications Commission.
Marlene Dortch,
Secretary.

Final Rules

    For the reasons set forth above, the Federal Communications 
Commission amends parts 14 and 64 of Title 47 of the Code of Federal 
Regulations as follows:

PART 14--ACCESS TO ADVANCED COMMUNICATIONS SERVICES AND EQUIPMENT 
BY PEOPLE WITH DISABILITIES

0
1. The authority citation for part 14 continues to read as follows:

    Authority: 47 U.S.C. 151-154, 255, 303, 403, 503, 617, 618, 619 
unless otherwise noted.


0
2. Amend Sec.  14.10 by revising paragraph (c) to read as follows:
* * * * *
    (c) The term advanced communications services means:
    (1) Interconnected VoIP service, as that term is defined in 
paragraph (l) of this section;
    (2) Non-interconnected VoIP service, as that term is defined in 
paragraph (q) of this section;
    (3) Electronic messaging service, as that term is defined in 
paragraph (i) of this section;
    (4) Interoperable video conferencing service, as that term is 
defined in paragraph (m) of this section; and
    (5) Any audio or video communications services used by inmates for 
the purposes of communicating with individuals outside the correctional 
institution where the inmate is held, regardless of technology used.
* * * * *

[[Page 77361]]

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

0
3. The authority citation for part 64 is revised to read as follows:

    Authority: 47 U.S.C. 151, 152, 154, 201, 202, 217, 218, 220, 
222, 225, 226, 227, 227b, 228, 251(a), 251(e), 254(k), 255, 262, 
276, 403(b)(2)(B), (c), 616, 620, 716, 1401-1473, unless otherwise 
noted; Pub. L. 115-141, Div. P, sec. 503, 132 Stat. 348, 1091; Pub. 
L. 117-338, 136 Stat. 6156.


0
4. The authority citation for subpart F is revised to read as follows:

    Authority: 47 U.S.C. 151-154, 225, 255, 303(r), 616, and 620; 
Pub. L. 117-338, 136 Stat. 6156.


0
5. Amend section 64.601 by redesignating paragraphs (a)(21) through 
(a)(56) as paragraphs (a)(23) through (a)(58) and adding paragraphs 
(a)(21) and (a)(22) to read as follows:
* * * * *
    (a) * * *
    (21) Incarcerated People's Communications Service or IPCS. The term 
``Incarcerated People's Communications Service'' or ``IPCS'' has the 
meaning given such term under Sec.  64.6000.
    (22) Incarcerated Person or Incarcerated People. The term 
``Incarcerated Person'' or ``Incarcerated People'' has the meaning 
given such term under Sec.  64.6000.
* * * * *

0
6. Amend section 64.611 by revising paragraph (k) and adding paragraph 
(l) to read as follows:


Sec.  64.611  Internet-based TRS registration.

* * * * *
    (k) Individual registration for use of TRS in correctional 
facilities--(1) Registration information and documentation. If an 
individual eligible to use TRS registers with an internet-based TRS 
provider while incarcerated, the provider shall collect and transmit to 
the TRS User Registration Database the information and documentation 
required by the applicable provisions of this section, except that:
    (i) The residential address specified for such Incarcerated Person 
shall be the name of the correctional authority with custody of that 
person along with the main or administrative address of such authority;
    (ii) A Registered Location need not be provided; and
    (iii) If an Incarcerated Person has no Social Security number or 
Tribal Identification number, an identification number assigned by the 
correctional authority along with the facility identification number, 
if there is one, may be provided in lieu of the last four digits of a 
Social Security number or a Tribal Identification number.
    (2) Verification of VRS and IP CTS registration data. An 
Incarcerated Person's identity and address may be verified pursuant to 
Sec.  64.615(a)(6) of this chapter, for purposes of VRS or IP CTS 
registration, based on documentation, such as a letter or statement, 
provided by an official of a correctional authority that states the 
name of the person; the person's identification number assigned by the 
correctional authority; the name of the correctional authority; and the 
address of the correctional facility. The VRS or IP CTS provider shall 
transmit such documentation to the TRS User Registration Database 
administrator.
    (3) Release or transfer of an Incarcerated Person. Upon release (or 
transfer to a different correction authority) of an Incarcerated Person 
who has registered for VRS or IP CTS, the VRS or IP CTS provider with 
which such person has registered shall update the person's registration 
information within 30 days of receiving written notification from such 
person or the correctional authority of such release or transfer. Such 
updated information shall include, in the case of release, the 
individual's full residential address, Registered Location (if required 
by this section or part 9 of this chapter), and any other registration 
information required by this section and not previously provided, and 
in the case of transfer shall include the information required by 
paragraph (k)(2) of this section.
    (4) Dial-around calls for VRS. VRS providers shall not allow dial-
around calls by Incarcerated People.
    (l) Enterprise registration for the use of TRS in correctional 
facilities.
    (1) Notwithstanding the other provisions of this section, a TRS 
provider may provide VRS, IP Relay, or IP CTS to an Incarcerated 
Person, without individual user registration, if the TRS provider has 
completed enterprise registration of the correctional facility or 
correctional authority for which service will be provided.
    (2) [Reserved]
    (3) [Reserved]
    (4) Confidentiality. The TRS provider shall maintain the 
confidentiality of any registration and certification information 
obtained by the TRS provider, and shall not disclose such registration 
and certification information, or the content of such registration and 
certification information, except as required by law or regulation.

0
7. Delayed indefinitely, amend Sec.  64.611 by adding paragraphs 
(l)(2), (3), (5) and (6) to read as follows:


Sec.  64.611  Internet-based TRS registration.

* * * * *
    (l) * * *
    (2) Signed certification--(i) VRS and IP Relay. For enterprise 
registration to use VRS or IP Relay, the TRS provider shall obtain a 
signed certification from the individual responsible for the devices 
used to access VRS or IP Relay (who may be an employee of the 
correctional authority or a provider of Incarcerated People's 
Communications Services), attesting that:
    (A) The individual understands the functions of the devices used to 
access the service and that the cost of this relay service is financed 
by the federally regulated Interstate TRS Fund; and
    (B) The correctional authority (or the provider of Incarcerated 
People's Communications Services, if the individual is employed by such 
a provider) will make reasonable efforts to ensure that only persons 
with a hearing or speech disability are permitted to use the service.
    (ii) IP CTS. For enterprise registration to use IP CTS, the TRS 
provider shall obtain a signed certification from the individual 
responsible for the devices used to access IP CTS (who may be an 
employee of the correctional authority or of a provider of Incarcerated 
People's Communications Services), attesting that:
    (A) The individual understands the functions of IP CTS and that the 
cost of IP CTS is supported by the federally regulated Interstate TRS 
Fund; and
    (B) The correctional authority (or the provider of Incarcerated 
People's Communications Services, if the individual is employed by such 
a provider) will make reasonable efforts to ensure that only persons 
with hearing loss that necessitates the use of IP CTS to communicate by 
telephone are permitted to use IP CTS.
    (iii) Electronic signatures. The certification required by 
paragraph (l)(2) of this section shall be made on a form separate from 
any other agreement or form, and must include a separate signature 
specific to the certification. For the purposes of this paragraph 
(l)(2)(iii), an electronic signature, defined by the Electronic 
Signatures in Global and National Commerce Act as an electronic sound, 
symbol, or process, attached to or logically associated with a contract 
or other record and executed or adopted by a person with the intent to 
sign the record, has the same legal effect as a written signature. For 
the purposes of this paragraph (l)(2)(iii), an

[[Page 77362]]

electronic record, defined by the Electronic Signatures in Global and 
National Commerce Act as a contract or other record created, generated, 
sent, communicated, received, or stored by electronic means, 
constitutes a record.
    (3) Consent for transmission of registration information. A VRS or 
IP CTS provider shall obtain consent from the individual making the 
certification described in paragraph (l)(2) of this section to transmit 
the information required by this section to the TRS User Registration 
Database. Before obtaining such consent, the TRS provider shall 
describe, using clear, easily understood language, the specific 
information being transmitted, that the information is being 
transmitted to the TRS User Registration Database to ensure proper 
administration of the TRS program, and that failure to provide consent 
will result in denial of service. The TRS provider shall obtain and 
keep a record of affirmative acknowledgment of such consent.
* * * * *
    (5) Registration data. To complete enterprise registration, a VRS 
or IP CTS provider shall collect and transmit to the TRS User 
Registration Database, in a format prescribed by the Database 
administrator:
    (i) The TRS provider's name;
    (ii) The telephone numbers or unique identifiers assigned to the 
relevant TRS device(s) at the correctional facility or correctional 
authority;
    (iii) The name and address of the affected correctional facility or 
correctional authority;
    (iv) The date of initiation of service and;
    (v) The name of the individual executing the certification required 
by paragraph (l)(2) of this section, and the date the certification was 
obtained.
    (6) When a VRS or IP CTS provider ceases providing relay service to 
a correctional authority via enterprise registration, the provider 
shall transmit the date of termination of such service to the TRS User 
Registration Database Administrator.

0
8. Revise the heading to subpart FF to read as follows:

Subpart FF--Incarcerated People's Communications Services

0
9. Revise Sec.  64.6000 to read as follows:


Sec.  64.6000  Definitions.

    As used in this subpart:
    Alternate Pricing Plan or Plan means the offering of Incarcerated 
People's Communications Services to Consumers using a pricing structure 
other than per-minute pricing.
    Ancillary Service Charge means any charge to Consumers associated 
with the provision or use of Incarcerated People's Communications 
Services that is not:
    (1) Included in the per-minute charges assessed, in accordance with 
Sec. Sec.  64.6010 and 64.6030, for individual Incarcerated People's 
Communications Services;
    (2) Included in the charges assessed, in accordance with Sec.  
64.6140, in connection with an Alternate Pricing Plan; or
    (3) An Authorized Fee, a Mandatory Fee, or a Mandatory Tax.
    Authorized Fee means a government authorized, but discretionary, 
fee which a Provider must remit to a federal, state, or local 
government, and which a Provider is permitted, but not required, to 
pass through to Consumers for or in connection with intrastate, 
interstate, or international Incarcerated People's Communications 
Services. An Authorized Fee may not include a markup, unless the markup 
is specifically authorized by a federal, state, or local statute, rule, 
or regulation.
    Average Daily Population or ADP means the sum of all Incarcerated 
People in a Correctional Facility for each day of the preceding 
calendar year divided by the number of days in that year, calculated 
each year on or before April 30.
    Billing Statement or Statement of Account means the vehicle by 
which IPCS Account information is provided to the Consumer on a monthly 
basis, regardless of IPCS Account type, including: (a) the amount of 
any deposits in the IPCS Account; (b) the duration of any call(s) or 
communication(s) for which a charge is assessed; and (c) the balance 
remaining in the IPCS Account after deduction of those charges.
    Breakeven Point means, for purposes of an Alternate Pricing Plan, 
the usage amount:
    (1) Below which a Consumer would pay more under the Alternate 
Pricing Plan than the Consumer would have paid under the Provider's 
per-minute rates, and
    (2) At or above which the cost of the Alternate Pricing Plan would 
be less than or equal to what the Consumer would pay under the 
Provider's per-minute rates.
    Collect Calling means an arrangement whereby the called party takes 
affirmative action clearly indicating that it will pay the charges 
associated with a communication originating from an Incarcerated 
Person's Communications Device.
    Consumer means the party paying a Provider of Incarcerated People's 
Communications Services.
    Controlling Judicial or Administrative Mandate means:
    (1) A final court order requiring an Incarcerated Person to pay 
restitution;
    (2) A fine imposed as part of a criminal sentence;
    (3) A fee imposed in connection with a criminal conviction; or
    (4) A final court or administrative agency order adjudicating a 
valid contract between the Provider and the IPCS Account holder, 
entered into prior to July 22, 2024 that allows or requires that a 
Provider of Incarcerated People's Communications Services act in a 
manner that would otherwise violate Sec.  64.6130.
    Correctional Facility, Facility, or Correctional Institution means 
a Jail or a Prison.
    Debit Calling means a presubscription or comparable service which 
allows an Incarcerated Person, or someone acting on an Incarcerated 
Person's behalf, to fund an IPCS Account set up through a Provider that 
can be used to pay for Incarcerated People's Communications Services 
originated by the Incarcerated Person.
    Facility-Related Rate Component means either the Legally Mandated 
Facility Rate Component or the Contractually Prescribed Facility Rate 
Component identified in Sec.  64.6030(d).
    Incarcerated Person or Incarcerated People means a person or 
persons detained at a Jail or Prison, regardless of the duration of the 
detention.
    Incarcerated People's Communications Service or IPCS means the 
provision of telephone service; interconnected VoIP service; non-
interconnected VoIP service; interoperable video conferencing service; 
and any audio or video communications service used by Incarcerated 
People for the purpose of communicating with individuals outside the 
Facility where the Incarcerated Person is held, regardless of the 
technology used and regardless of interstate, intrastate or 
international jurisdiction.
    Incarcerated People's Communications Service Account or IPCS 
Account means any type of account administered, or directly or 
indirectly controlled by a Provider or an affiliate of a Provider that 
can be used to pay IPCS rates and charges, including accounts where the 
Incarcerated Person is the account holder.
    Incarcerated Person's Communications Device means a telephone 
instrument or other device capable of initiating communications, set 
aside by authorities of a Correctional Facility for use by one or more 
Incarcerated People.

[[Page 77363]]

    Interconnected Voice over Internet Protocol or Interconnected VoIP 
means a service that:
    (1) Enables real-time, two-way voice communications;
    (2) Requires a broadband connection from the user's location;
    (3) Requires internet protocol-compatible customer premises 
equipment; and
    (4) permits users generally to receive calls that originate on the 
public switched telephone network and to terminate calls to the public 
switched telephone network.
    Interoperable Video Conferencing Service means a service that 
provides real-time video communications, including audio, to enable 
users to share information of the user's choosing.
    International Communications means communications that originate in 
the United States and terminate outside the United States.
    International Destination means the rate zone in which an 
International Communication terminates. For countries that have a 
single rate zone, International Destination means the country in which 
an International Communication terminates.
    Inmate means a person detained at a Jail or Prison, regardless of 
the duration of the detention;
    Inmate Calling Service means a service that allows Inmates to make 
calls to individuals outside the Correctional Facility where the Inmate 
is being held, regardless of the technology used to deliver the 
service;
    Inmate Telephone means a telephone instrument, or other device 
capable of initiating calls, set aside by authorities of a Correctional 
Facility for use by Inmates;
    Jail means a Facility of a local, state, or federal law enforcement 
agency that is used to primarily hold individuals who are:
    (1) Awaiting adjudication of criminal charges;
    (2) Post-conviction and committed to confinement sentences of one 
year or less; or
    (3) Post-conviction and awaiting transfer to another Facility. The 
term also includes city, county, or regional facilities that have 
contracted with a private company to manage day-to-day operations; 
privately owned and operated Facilities primarily engaged in housing 
city, county or regional Incarcerated People; immigration detention 
facilities operated by, or pursuant to contracts with, federal, state, 
city, county, or regional agencies; juvenile detention centers; and 
secure mental health facilities.
    Jurisdiction means:
    (1) The state, city, county, or territory where a law enforcement 
authority is operating or contracting for the operation of a 
Correctional Facility; or
    (2) The United States for a Correctional Facility operated by or 
under the contracting authority of a Federal law enforcement agency.
    Jurisdictionally Mixed Charge means any charge Consumers may be 
assessed for use of Incarcerated People's Communications Services that 
is not included in the per-minute charges assessed for individual 
communications and that are assessed for, or in connection with, uses 
of Incarcerated People's Communications Service to make such 
communications that have interstate or international and intrastate 
components that are unable to be segregated at the time the charge is 
incurred.
    Mandatory Tax or Mandatory Fee means a fee that a Provider is 
required to collect directly from Consumers, and remit to federal, 
state, or local governments. A Mandatory Tax or Mandatory Fee that is 
passed through to a Consumer for, or in connection with, Incarcerated 
People's Communications Services may not include a markup, unless the 
markup is specifically authorized by a federal, state, or local 
statute, rule, or regulation.
    Non-interconnected VoIP means a service, other than an 
Interconnected VoIP service, that enables real-time voice 
communications that originate from, or terminate to, the end-user's 
location using Internet Protocol or any successor protocol and that 
requires Internet Protocol compatible customer premises equipment.
    Per-Call, Per-Connection, or Per-Communication Charge means a one-
time fee charged to a Consumer of IPCS at call or communication 
initiation.
    Prepaid Calling means a presubscription or comparable service in 
which a Consumer, other than an Incarcerated Person, funds an account 
set up through a Provider of Incarcerated People's Communications 
Services. Funds from the account can then be used to pay for 
Incarcerated People's Communications Services that originate with the 
same Incarcerated Person.
    Prepaid Collect Calling means a calling arrangement that allows an 
Incarcerated Person to initiate an Incarcerated People's Communications 
Services communication without having a pre-established billing 
arrangement and also provides a means, within that communication, for 
the called party to establish an arrangement to be billed directly by 
the Provider of Incarcerated People's Communications Services for 
future communications from the same Incarcerated Person.
    Prison means a Facility operated by a territorial, state, or 
Federal agency that is used primarily to confine individuals convicted 
of felonies and sentenced to terms in excess of one year. The term also 
includes public and private facilities that provide outsource housing 
to other agencies such as the State Departments of Correction and the 
Federal Bureau of Prisons; and facilities that would otherwise fall 
under the definition of a Jail but in which the majority of 
Incarcerated People are post-conviction and are committed to 
confinement for sentences of longer than one year.
    Provider of Incarcerated People's Communications Services or 
Provider means any communications service provider that provides 
Incarcerated People's Communications Services, regardless of the 
technology used.
    Provider-Related Rate Component means the interim per-minute rate 
specified in either Sec.  64.6030(b) or (c) that Providers at Jails 
with Average Daily Populations of 1,000 or more Incarcerated People and 
all Prisons may charge for interstate Collect Calling, Debit Calling, 
Prepaid Calling, or Prepaid Collect Calling.
    Site Commission means any form of monetary payment, in-kind 
payment, gift, exchange of services or goods, fee, technology 
allowance, or product that a Provider of Incarcerated People's 
Communications Services or affiliate of a Provider of Incarcerated 
People's Communications Services may pay, give, donate, or otherwise 
provide to an entity that operates a Correctional Institution, an 
entity with which the Provider of Incarcerated People's Communications 
Services enter into an agreement to provide Incarcerated People's 
Communications Services, a governmental agency that oversees a 
Correctional Facility, the city, county, or state where a Facility is 
located, or an agent of any such Facility.

0
10. Add Sec.  64.6010 to read as follows:


Sec.  64.6010  Incarcerated People's Communications Services rate caps.

    (a) A Provider must offer each Incarcerated People's Communications 
Service it provides at a per-minute rate. A Provider may also offer an 
Incarcerated People's Communications Service under one or more 
Alternate Pricing Plans, pursuant to Sec.  64.6140.
    (b) A Provider must not charge a per-minute rate for intrastate or 
interstate audio Incarcerated People's Communications Services in 
excess of the following rate caps on or after the dates specified 
below:

[[Page 77364]]

    (1) $0.06 per minute for each Prison;
    (2) $0.06 per minute for each Jail having an Average Daily 
Population of 1,000 or more Incarcerated People;
    (3) $0.07 per minute for each Jail having an Average Daily 
Population of between and including 350 and 999 Incarcerated People;
    (4) $0.09 per minute for each Jail having an Average Daily 
Population of between and including 100 and 349 Incarcerated People; 
and
    (5) $0.12 per minute for each Jail having an Average Daily 
Population of below 100 Incarcerated People.
    (c) A Provider must not charge a per-minute rate for video 
Incarcerated People's Communications Services in excess of the 
following interim rate caps except as set forth in paragraph (d) of 
this section:
    (1) $0.16 per minute for each Prison;
    (2) $0.11 per minute for each Jail having an Average Daily 
Population of 1,000 or more Incarcerated People;
    (3) $0.12 per minute for each Jail having an Average Daily 
Population of between and including 350 and 999 Incarcerated People;
    (4) $0.14 per minute for each Jail having an Average Daily 
Population of between and including 100 and 349 Incarcerated People; 
and
    (5) $0.25 per minute for each Jail having an Average Daily 
Population of below 100 Incarcerated People.
    (d) A Provider must charge the rate caps described in paragraphs 
(b) and (c) of this section beginning January 1, 2025 for all Prisons 
and for Jails with Average Daily Populations of 1,000 or more 
Incarcerated People, and April 1, 2025 for Jails with Average Daily 
Populations of less than 1,000 Incarcerated People, subject to the 
following special provisions.
    (1) Where a contract existing as of June 27, 2024 includes terms 
and conditions that would require material alteration through 
renegotiation due to a conflict with our new rules involving rates, 
contractually-negotiated Site Commission payments or passthrough 
charges included in the rates, and the contract expires on or after 
January 1, 2025 for Prisons and for Jails with Average Daily 
Populations of 1,000 or more Incarcerated People, or on or after April 
1, 2025 for Jails with Average Daily Populations of less than 1,000 
Incarcerated People, the compliance dates for the rate caps set forth 
in paragraphs (b) and (c) of this section and the Site Commission rules 
set forth in Sec.  64.6015 will be the earlier of the contract 
expiration date or January 1, 2026 for Prisons and for Jails with 
Average Daily Populations of 1,000 or more Incarcerated People, or the 
earlier of the contract expiration date or April 1, 2026 for Jails with 
Average Daily Populations of less than 1,000 Incarcerated People.
    (2) Where a contract existing as of June 27, 2024 includes terms 
and conditions that would require renegotiation due to a provision 
incorporating legally-mandated Site Commission payments and the 
contract expires on or after July 1, 2025 for any size Facility, the 
compliance date for paragraphs (b) and (c) of this section and the Site 
Commission rules set forth in Sec.  64.6015 will be the earlier of the 
contract expiration date or April 1, 2026.
    (e) A Provider must not charge a per-minute rate for international 
audio Incarcerated People's Communications Services in each Prison or 
Jail it serves in excess of the applicable interstate and intrastate 
cap set forth in paragraph (b) of this section plus the average amount 
that the Provider paid its underlying international service providers 
for audio communications to the International Destination of that 
communication, on a per-minute basis. A Provider shall determine the 
average amount paid for communications to each International 
Destination for each calendar quarter and shall adjust its maximum 
rates based on such determination within one month of the end of each 
calendar quarter.

0
11. Add Sec.  64.6015 to read as follows:


Sec.  64.6015  Prohibition against Site Commissions.

    A Provider must not pay any Site Commissions associated with its 
provision of Incarcerated People's Communications Services on or after 
the dates specified below:
    (a) Providers must comply with this section beginning January 1, 
2025 for all Prisons and for Jails with Average Daily Populations of 
1,000 or more Incarcerated People, and April 1, 2025 for Jails with 
Average Daily Populations of less than 1,000 Incarcerated People, 
subject to the special provisions in paragraphs (b) and (c) of this 
section.
    (b) Where a contract existing as of June 27, 2024 includes terms 
and conditions that would require material alteration through 
renegotiation due to a conflict with our new rules involving rates, 
contractually-negotiated Site Commission payments or pass-through 
charges included in the rates, and the contract expires on or after 
January 1, 2025 for Prisons and for Jails with Average Daily 
Populations of 1,000 or more Incarcerated People, or on or after April 
1, 2025 for Jails with Average Daily Populations of less than 1,000 
Incarcerated People, the compliance dates for this section will be the 
earlier of the contract expiration date or January 1, 2026 for Prisons 
and for Jails with Average Daily Populations of 1,000 or more 
Incarcerated People, or the earlier of the contract expiration date or 
April 1, 2026 for Jails with Average Daily Populations of less than 
1,000 Incarcerated People.
    (c) Where a contract existing as of June 27, 2024 includes terms 
and conditions that would require renegotiation due to a provision 
incorporating legally-mandated Site Commission payments and the 
contract expires on or after July 1, 2025 for any size Facility, the 
compliance date for this section will be the earlier of the contract 
expiration date or April 1, 2026.

0
12. Revise Sec.  64.6020 to read as follows:


Sec.  64.6020  Ancillary Service Charges.

    A Provider of Incarcerated People's Communications Services must 
not charge any Ancillary Service Charge, as defined in Sec.  64.6000 of 
this chapter.

0
13. Revise Sec.  64.6030 by adding paragraph (f) to read as follows:


Sec.  64.6030  Inmate Calling Services interim rate caps.

* * * * *
    (f) Paragraphs (a) through (e) of this section shall cease to be 
effective upon the individual compliance dates prescribed in the 
revisions to Sec.  64.6010 and the addition of Sec.  64.6015 for the 
Providers serving the Facilities subject to each such date.

0
14. Amend Sec.  64.6040 by revising paragraph (b)(1) and adding 
paragraph (e) to read as follows:


Sec.  64.6040  Communications access for Incarcerated People with 
disabilities.

* * * * *
    (b)(1) A Provider shall provide access for Incarcerated People with 
hearing or speech disabilities to Traditional (TTY-Based) TRS and STS. 
As an alternative to supporting transmissions from a TTY device, where 
broadband internet access service is available, an IPCS Provider may 
provide access to Traditional TRS via real-time text, in accordance 
with 47 CFR part 67, if real-time text is supported by the available 
devices and reliable access to a provider of traditional TRS service 
can be provided by this method.
* * * * *
    (e)(1) Paragraphs (a) through (c) of this section apply to services 
offered pursuant to an Alternate Pricing Plan, as defined in Sec.  
64.6000.
    (2) Except as provided in this paragraph (e) of this section, in 
the

[[Page 77365]]

context of a Provider offering an Alternate Pricing Plan, the Provider 
shall not levy or collect any charge or fee, or count any minute(s) of 
use, or call(s) or communication(s), toward the amount included in an 
Alternate Pricing Plan, on or from any party to a TRS call to or from 
an Incarcerated Person, or any charge for the use of a device or 
transmission service when used to access TRS from a Correctional 
Facility, or any charge for the internet or other connections needed 
for services covered by this section.
    (3) When providing access to IP CTS or CTS within the context of a 
Provider offering an Alternate Pricing Plan:
    (i) If the Alternate Pricing Plan consists of a fixed number of 
calls or communications, the IP CTS or CTS call shall count as one call 
or communication.
    (ii) If the Alternate Pricing Plan offers a fixed number of 
minutes, the IP CTS or CTS call shall count as the number of minutes 
used for the voice portion of the IP CTS or CTS call.
    (iii) If the Alternate Pricing Plan offers an unlimited number of 
minutes, calls or communications, the IP CTS or CTS call shall be 
counted as part of the unlimited number of minutes, calls or 
communications.
    (iv) There shall be no charge or fee for any internet or data 
portion of an IP CTS or CTS call.
    (4) When providing access to a point-to-point video service, as 
defined in Sec.  64.601(a), within the context of a Provider offering 
an Alternate Pricing Plan for Incarcerated People with hearing or 
speech disabilities who can use ASL:
    (i) If the Alternate Pricing Plan consists of a fixed number of 
calls or communications, the point-to-point call shall be counted as 
one video communication (if only video is included in the Alternate 
Pricing Plan), or one audio call (if audio is included in the Alternate 
Pricing Plan).
    (ii) If the Alternate Pricing Plan offers a fixed number of 
minutes, then the point-to-point call shall count as the number of 
minutes used and shall apply to the minutes provided for video, if only 
video is including in the Alternate Pricing Plan, or shall apply to the 
minutes provided for audio, if audio is included in the Alternate 
Pricing Plan.
    (iii) If the Alternate Pricing Plan offers an unlimited number of 
minutes, calls or communications, the point-to-point call shall count 
as a video communication (if only video is provided as part of the 
Alternate Pricing Plan) or as an audio call (if audio is provided as 
part of the Alternate Pricing Plan).
    (iv) Regardless of the format of the Alternate Pricing Plan, there 
shall be no charge or fee for the use of the equipment.
    (5) When providing access for TTY-to-TTY use within the context of 
a Provider offering an Alternate Pricing Plan that includes audio 
service:
    (i) If the Plan consists of a fixed number of calls, the TTY-to-TTY 
call shall count as one call;
    (ii) If the Plan offers a fixed number of minutes, then the TTY-to-
TTY call shall count as no more than one-fourth of the minutes used; 
and
    (iii) If the Plan offers an unlimited number of minutes, or calls, 
the TTY-to-TTY call shall count as an audio call.

0
15. Delayed indefinitely, amend Sec.  64.6040 by adding paragraph (f) 
to read as follows:


Sec.  64.6040  Communications access for Incarcerated People with 
disabilities.

* * * * *
    (f)(1) A Provider shall ensure that the information and 
documentation that it provides to current or potential Consumers of 
Incarcerated People's Communications Services is accessible. Such 
information and documentation includes, but is not limited to, 
disclosures of charges, user guides, bills, installation guides for end 
user devices, and product support communications.
    (2) The term ``accessible'' has the same meaning given such term 
under Sec.  14.10 of this chapter, as such section may be amended from 
time to time.
    (3) The requirement to ensure the information is accessible also 
includes ensuring access, at no extra cost, to call centers and 
customer support regarding the products and services for current or 
potential Consumers of Incarcerated People's Communications Services.

0
16. Revise Sec.  64.6050 to read as follows:


Sec.  64.6050  Billing-related call blocking.

    No Provider shall prohibit or prevent completion of a Collect 
Calling IPCS communication or decline to establish or otherwise degrade 
any Collect Calling IPCS communication solely for the reason that it 
lacks a billing relationship with the called party's communications 
service provider unless the Provider offers Debit Calling, Prepaid 
Calling, or Prepaid Collect Calling for IPCS communications.

0
17. Delayed indefinitely, revise Sec.  64.6060 to read as follows:


Sec.  64.6060  Annual reporting and certification requirement.

    (a) Each Provider must submit a report to the Commission, by April 
1 of each year, regarding intrastate, interstate and international 
audio and video IPCS for the prior calendar year. The report shall be 
categorized both by service type and Facility type and size and shall 
contain:
    (1) Current intrastate, interstate, and international rates for 
Incarcerated People's Communications Services.
    (2) For each Facility served, the kinds of TRS that may be accessed 
from the Facility.
    (3) For each Facility served, the number of calls completed during 
the reporting period in each of the following categories:
    (i) TTY-to-TTY calls;
    (ii) Point-to-point video calls placed or received by ASL users as 
those terms are defined in Sec.  64.601(a) of this chapter; and
    (iii) TRS calls, broken down by each form of TRS that can be 
accessed from the Facility.
    (4) For each Facility served, the number of complaints that the 
reporting Provider received in each of the categories set forth in 
paragraph (a)(3) of this section.
    (5) Such other information as the Consumer and Governmental Affairs 
Bureau or the Wireline Competition Bureau may require.
    (b) The Chief Executive Officer, Chief Financial Officer, or other 
senior executive of the reporting Provider, with first-hand knowledge 
of the truthfulness, accuracy, and completeness of the information 
provided pursuant to paragraph (a) of this section, must certify that 
the reported information and data are true, accurate and complete to 
the best of his or her knowledge, information, and belief.

0
18. Revise Sec.  64.6070 to read as follows:


Sec.  64.6070  Taxes and fees.

    (a) A Provider must not charge a Consumer any tax or fee associated 
with Incarcerated People's Communications Services other than a 
Mandatory Tax, a Mandatory Fee, or an Authorized Fee, as defined in 
Sec.  64.6000 of this chapter.

0
19. Revise Sec.  64.6080 to read as follows:


Sec.  64.6080  Per-Call, Per-Connection or Per-Communication Charges.

    A Provider must not impose a Per-Call, Per-Connection, or Per-
Communication Charge on a Consumer for any Incarcerated People's 
Communications Services communication.


Sec.  64.6090  [Removed and reserved].

0
20. Delayed indefinitely, remove and reserve Sec.  64.6090.

[[Page 77366]]


0
21. Revise Sec.  64.6100 to read as follows:


Sec.  64.6100  Minimum and maximum Prepaid Calling and Debit Calling 
account balances.

    (a) No Provider shall institute a minimum balance requirement for a 
Consumer to use Debit or Prepaid Calling for Incarcerated People's 
Communications Services.
    (b) No Provider shall prohibit a Consumer from depositing at least 
$50 per transaction to fund a Debit or Prepaid Calling account that can 
be used for Incarcerated People's Communications Services.

0
 22. Delayed indefinitely, revise and republish Sec.  64.6110 to read 
as follows:


Sec.  64.6110  Consumer Disclosure of Incarcerated People's 
Communications Services Rates.

    (a) Providers must clearly, accurately, and conspicuously disclose 
their intrastate, interstate, and international Incarcerated People's 
Communications Services rates, charges and associated practices on 
their publicly available websites. In connection with international 
rates, Providers shall also separately disclose the rate component for 
terminating calls to each International Destination where that Provider 
terminates International Communications.
    (1) In addition to the information required in paragraph (a) of 
this section, the Provider must disclose information on:
    (i) How to manage an IPCS Account;
    (ii) How to fund an IPCS Account;
    (iii) How to close an IPCS Account and how to obtain a refund of 
any unused balance in that account; and
    (iv) How to obtain a refund of any unused balance in inactive 
accounts pursuant to Sec.  64.6130 of this chapter.
    (b) Providers must clearly label the Facility-Related Rate 
Component (either the Legally Mandated Facility Rate Component or the 
Contractually Prescribed Facility Rate Component) identified in Sec.  
64.6030(d) as a separate line item on Consumer bills for the recovery 
of permissible facility-related costs contained in Site Commission 
payments. To be clearly labeled, the Facility-Related Rate Component 
shall:
    (1) Identify the Provider's obligation to pay a Site Commission as 
either imposed by state statutes or laws or regulations that are 
adopted pursuant to state administrative procedure statutes where there 
is notice and an opportunity for public comment that operates 
independently of the contracting process between Correctional 
Institutions and Providers or subject to a contract with the 
Correctional Facility;
    (2) Where the Site Commission is imposed by state statute, or law 
or regulation adopted pursuant to state administrative procedure 
statutes where there is notice and an opportunity for public comment 
and that operates independently of the contracting process between 
Correctional Institutions and Providers, specify the relevant statute, 
law, or regulation.
    (3) Identify the amount of the Site Commission payment, expressed 
as a per-minute or per-call charge, a percentage of revenue, or a flat 
fee; and
    (4) Identify the amount charged to the Consumer for the call or 
calls on the bill.
    (c) Providers must clearly label all charges for International 
Communications in Sec.  64.6010(d) of this chapter as a separate line 
item on Consumer Billing Statements and Statements of Account. To be 
clearly labeled, Providers must identify the amount charged to the 
Consumer for the International Communication, including the costs paid 
by the provider to its underlying international providers to terminate 
the International Communication to the International Destination of the 
call.
    (d) Providers shall make disclosures pursuant to this section 
available:
    (1) Via the Provider's website in a form generally accessible to 
the public without needing to have an IPCS Account with the Provider;
    (2) Via the Provider's online or mobile application, if Consumers 
use that application to create an IPCS Account with the Provider; and
    (3) On paper, upon request of the Consumer.
    (e) Billing Statements and Statements of Account:
    (1) Providers must make available Billing Statements and Statements 
of Account to all IPCS Account holders on a monthly basis via:
    (i) The Provider's website;
    (ii) The Provider's online or mobile application; or
    (iii) On paper, upon request of the Consumer.
    (2) Billing Statements and Statements of Account shall include:
    (i) The amount of any deposits to the account;
    (ii) The duration of any calls and communications for which a 
charge is assessed; and
    (iii) The balance remaining in the IPCS Account after the deduction 
of those charges.
    (f) All disclosures made pursuant to this section, and Sec. Sec.  
64.6130 and 64.6140 shall be clear, accurate, and conspicuous, and 
shall be available in accessible formats for people with disabilities.
    (g) Paragraph (b) of this section shall cease to be effective upon 
the individual compliance dates prescribed in the revisions to Sec.  
64.6010 and the addition of Sec.  64.6015.
    23. Delayed indefinitely, revise Sec.  64.6120 to read as follows:


Sec.  64.6120  Waiver process.

    (a) A Provider may seek a waiver of the rate caps established in 
Sec.  64.6010 on a Correctional Facility or contract basis if the 
applicable rate caps prevent the Provider from recovering the costs of 
providing Incarcerated People's Communications Services at a 
Correctional Facility or at the Correctional Facilities covered by a 
contract.
    (b) At a minimum, a Provider seeking such a waiver must submit:
    (1) The Provider's total company costs, including the nonrecurring 
costs of the assets it uses to provide Incarcerated People's 
Communications Services, and its recurring operating expenses for these 
services at the Correctional Facility or under the contract;
    (2) The methods the Provider used to identify its direct costs of 
providing Incarcerated People's Communications Services, to allocate 
its indirect costs between its Incarcerated People's Communications 
Services and other operations, and to assign its direct costs to and 
allocate its indirect costs among its Incarcerated People's 
Communications Services contracts and Correctional Facilities;
    (3) The Provider's demand for Incarcerated People's Communications 
Services at the Correctional Facility or at each Correctional Facility 
covered by the contract;
    (4) The revenue or other compensation the Provider receives from 
the provision of Incarcerated People's Communications Services at the 
Correctional Facility or at each Correctional Facility covered by the 
contract;
    (5) A complete and unredacted copy of the contract for the 
Correctional Facility or Correctional Facilities, and any amendments to 
such contract;
    (6) Copies of the initial request for proposals and any amendments 
thereto, the Provider's bid in response to that request, and responses 
to any amendments (or a statement that the Provider no longer has 
access to those documents because they were executed prior to the 
effective date of this rule);
    (7) A written explanation of how and why the circumstances 
associated with that Correctional Facility or contract differ from the 
circumstances at similar Correctional Facilities the Provider

[[Page 77367]]

serves, and from other Correctional Facilities covered by the same 
contract, if applicable; and
    (8) An attestation from a company officer with knowledge of the 
underlying information that all of the information the Provider submits 
in support of its waiver request is complete and correct.
    (c) A Provider seeking a waiver pursuant to section 64.6120(a) must 
provide any additional information requested by the Commission during 
the course of its review.
    24. In Sec.  64.6130 revise paragraphs (a) through (c) to read as 
follows:


Sec.  64.6130  Interim protections of consumer funds in inactive 
accounts

    (a) All funds deposited into an IPCS Account shall remain the 
property of the account holder unless or until the funds are either:
    (1) Used to pay for products or services purchased by the account 
holder or the Incarcerated Person for whose benefit the account was 
established;
    (2) Disposed of in accordance with a Controlling Judicial or 
Administrative Mandate; or
    (3) Disposed of in accordance with applicable state law, including, 
but not limited to, laws governing unclaimed property.
    (b) No Provider may dispose of unused funds in an IPCS Account 
until at least 180 calendar days of continuous account inactivity have 
passed, or at the end of any longer, alternative period set by state 
law, except as provided in paragraphs (a) and (d) of this section or 
through a refund to the IPCS Account holder or such other individual as 
the account holder may have designated to receive a refund.
    (c) The 180-day period, or any longer alternative period set by 
state law, must be continuous. Any of the following actions by the IPCS 
Account holder or the Incarcerated Person for whose benefit the account 
was established ends the period of inactivity and restarts the 180-day 
period:
    (1) Depositing, crediting, or otherwise adding funds to an IPCS 
Account;
    (2) Withdrawing, spending, debiting, transferring, or otherwise 
removing funds from an IPCS Account; or
    (3) Expressing an interest in retaining, receiving, or transferring 
the funds in an IPCS Account, or otherwise attempting to exert or 
exerting ownership or control over the account or the funds held within 
the IPCS Account.
* * * * *

0
25. Delayed indefinitely, revise and republish Sec.  64.6130 to read as 
follows:


Sec.  64.6130  Protection of consumer funds in inactive accounts.

    (a) All funds deposited into an IPCS Account shall remain the 
property of the account holder unless or until the funds are either:
    (1) Used to pay for products or services purchased by the account 
holder or the Incarcerated Person for whose benefit the account was 
established;
    (2) Disposed of in accordance with a Controlling Judicial or 
Administrative Mandate; or
    (3) Disposed of in accordance with applicable state law, including, 
but not limited to, laws governing unclaimed property.
    (b) No Provider may dispose of unused funds in an IPCS Account 
until at least 180 calendar days of continuous account inactivity have 
passed, or at the end of any longer, alternative period set by state 
law, except as provided in paragraphs (a) and (d) of this section or 
through a refund to the IPCS Account holder or such other individual as 
the account holder may have designated to receive a refund.
    (c) The 180-day period, or any longer alternative period set by 
state law, must be continuous. Any of the following actions by the IPCS 
Account holder or the Incarcerated Person for whose benefit the account 
was established ends the period of inactivity and restarts the 180-day 
period:
    (1) Depositing, crediting, or otherwise adding funds to an IPCS 
Account;
    (2) Withdrawing, spending, debiting, transferring, or otherwise 
removing funds from an IPCS Account; or
    (3) Expressing an interest in retaining, receiving, or transferring 
the funds in an IPCS Account, or otherwise attempting to exert or 
exerting ownership or control over the account or the funds held within 
the IPCS Account.
    (d) After 180 days of continuous account inactivity have passed, or 
at the end of any longer alternative period set by state law, the 
Provider must:
    (1) Contact the account holder prior to closing the account and 
refunding the remaining balance to determine whether the account holder 
wishes to continue using the IPCS Account, or to close it and obtain a 
refund; and
    (2) Make reasonable efforts to refund the balance in the IPCS 
Account to the account holder or such other person as the account 
holder has specified. Reasonable efforts include, but are not limited 
to:
    (i) Notification to the account holder that the account has been 
deemed inactive;
    (ii) The collection of contact information needed to process the 
refund; and
    (iii) Timely responses to inquiries from an account holder.
    (e) If a Provider's reasonable efforts to refund the balance of the 
IPCS Account fail, the Provider must dispose of remaining funds in 
accordance with applicable state consumer protection law concerning 
unclaimed funds or the disposition of such accounts.
    (f) If a Provider becomes aware that an Incarcerated Person has 
been released or transferred, the 180-day inactivity period shall be 
deemed to have run and the Provider shall begin processing a refund in 
accordance with this section. The Provider shall contact the account 
holder prior to closing the IPCS Account and refunding the remaining 
balance in the IPCS Account, to determine whether the account holder 
wishes to continue using the IPCS Account, or to close it and obtain a 
refund from the Provider.
    (g) Any refund made pursuant to this section must include the 
entire balance of the IPCS Account, including any deductions the 
Provider may have made in anticipation of taxes or other charges that 
it assessed when funds were deposited and that were not actually 
incurred. The Provider shall not impose any fees or charges for 
processing the refund.
    (h) Any refund made pursuant to this section shall be issued within 
30 calendar days of the IPCS Account being deemed inactive or within 30 
calendar days of a request for a refund from an account holder or other 
such individual as the account holder may have specified to receive a 
refund.
    (i) In the absence of a Consumer's request for a refund, the 
requirement to provide a refund in accordance with this section shall 
not apply where the balance in an inactive IPCS Account is $1.50 or 
less. To the extent a Provider is unable to issue a refund requested by 
a Consumer, the Provider shall treat such balances consistent with 
applicable state consumer protection law concerning unclaimed funds or 
the disposition of such accounts.
    (j) Providers shall issue refunds required pursuant to this section 
through:
    (1) The IPCS Account holder's original form of payment;
    (2) An electronic transfer to a bank account;
    (3) A check; or
    (4) A debit card.
    (k) Providers shall clearly, accurately, and conspicuously disclose 
to IPCS Account holders, through their Billing Statements or Statements 
of Account,

[[Page 77368]]

notice of the status of IPCS Accounts prior to their being deemed 
inactive.
    (1) This notice shall initially be provided at least 60 calendar 
days prior to an IPCS Account being deemed inactive.
    (2) The notice shall be included in each Billing Statement or 
Statement of Account the Provider sends, or makes available to, the 
account holder until the IPCS Account holder takes one of the actions 
sufficient to restart the 180-day period in paragraph (c) of this 
section or the IPCS Account becomes inactive pursuant to this section.
    (3) All notices provided pursuant to this paragraph shall describe 
how the IPCS Account holder can keep the IPCS Account active and how 
the IPCS Account holder may update the refund information associated 
with the IPCS Account.

0
26. Add Sec.  64.6140 to read as follows:


Sec.  64.6140  Alternate Pricing Plans.

    (a) General Parameters. (1) A Provider offering IPCS via an 
Alternate Pricing Plan must comply with this section as well as Sec.  
64.710 and this subpart FF.
    (2) Enrollment in an Alternate Pricing Plan must be optional for 
the Consumer.
    (3) A service period for an Alternate Pricing Plan shall be no 
longer than one month.
    (4) When determining the format of an Alternate Pricing Plan, 
Providers must consider:
    (i) Any limits on the number of and length of calls or 
communications imposed by the Correctional Facility;
    (ii) The availability of correctional staff to manage the use of 
IPCS at the Correctional Facility; and
    (iii) Equipment availability for the calls or communications at the 
Correctional Facility.
    (b) Alternate Pricing Plan Rates. (1) An Alternate Pricing Plan 
must be offered at a rate such that the Breakeven Point is at or below 
the applicable rate cap(s).
    (i) A consumer complaint about an IPCS Provider's Alternate Pricing 
Plan rates will not be entertained under the rules in this section 
unless the consumer's usage meets or exceeds the Breakeven Point(s) for 
the Alternate Pricing Plan.
    (2) If a Consumer believes that the rates under an Alternate 
Pricing Plan exceed the applicable per-minute rates for that 
Correctional Facility, the Consumer must show that their usage meets or 
exceeds the Breakeven Point for the Alternate Pricing Plan. It is the 
Provider's burden to demonstrate that the rate charged to that Consumer 
under its Alternate Pricing Plan is less than or equal to the 
applicable rate cap.
    (3) After a Consumer uses all of the minutes, calls, or 
communications available during a service period of an Alternate 
Pricing Plan, the charge for subsequent minutes, calls, or 
communications during the remaining part of the service period shall 
not exceed the Provider's per-minute rate for the corresponding 
service.
    (c) [Reserved]
    (d) [Reserved]
    (e) Automatic Renewals and Related Consumer Disclosures. (1) If a 
Provider of an Alternate Pricing Plan offers automatic renewals, the 
automatic renewals must be optional to the Consumer.
    (2) [Reserved]
    (f) Cancellation by the Consumer and Related Consumer Disclosures. 
(1) A Provider must allow a Consumer using an Alternate Pricing Plan to 
cancel their participation in the Alternate Pricing Plan at any time 
during the relevant service period and revert to per-minute pricing. 
The Consumer may end their participation in the Alternate Pricing Plan 
on the date of their choosing. The process for cancelling an Alternate 
Pricing Plan must be readily accessible to the Consumer and must 
include the method that the Consumer used to enroll in the Alternate 
Pricing Plan.
    (2) [Reserved]
    (3) The refund amount provided to the Consumer upon the Consumer's 
cancellation of an Alternate Pricing Plan for the special circumstances 
provided in paragraph (f)(2) of this section must be at least the pro-
rated amount that corresponds to the unused portion of the service 
period.
    (g) Application to Telecommunications Relay Service (TRS) and 
Related Communications Services. A Provider that offers an Alternate 
Pricing Plan shall make TRS and related communications services 
available via the Alternate Pricing Plan, pursuant to Sec.  64.6040 of 
this chapter.

0
27. Delayed indefinitely, amend Sec.  64.6140 by adding paragraphs (c), 
(d), (e)(2) through (4), (f)(2) and (f)(4) to read as follows:


Sec.  64.6140  Alternate Pricing Plans.

* * * * *
    (c) Consumer Disclosures. (1) A Provider offering an Alternate 
Pricing Plan must comply with the consumer disclosure requirements in 
Sec.  64.6110 as well as the requirements in this section.
    (2) Before a Consumer enrolls in an Alternate Pricing Plan; upon 
request, at any time after Alternate Pricing Plan enrollment; with a 
Billing Statement or Statement of Account, and any related 
communications; and at the beginning of each call or communication, the 
Provider also must make disclosures that include the following 
information for each Alternate Pricing Plan offered by the Provider:
    (i) The rates and any added Mandatory Taxes or Mandatory Fees, a 
detailed explanation of the Mandatory Taxes and Mandatory Fees, total 
charge, quantity of minutes, calls or communications included in the 
Plan, the service period, and the beginning and end dates of the 
service period;
    (ii) Terms and conditions, including those concerning dropped calls 
and communications in paragraph (d) of this section, automatic renewals 
in paragraph (e) of this section and cancellations in paragraph (f) of 
this section;
    (iii) An explanation that per-minute rates are always available as 
an option to an Alternate Pricing Plan and that per-minute rates apply 
if the Consumer exceeds the calls/communications allotted in the Plan;
    (iv) The Breakeven Point indicating at the amount of Alternate 
Pricing Plan usage above which the Consumer will save money compared to 
the Provider's applicable per-minute rate for the same type and amount 
of service at the Correctional Facility; and
    (v) The ability to obtain prior usage and billing data, upon 
request, for each of the most recent three service periods (where 
feasible), including total usage and total charges including taxes and 
fees.
    (3) The Provider must make the disclosures for Alternate Pricing 
Plans pursuant to this paragraph (c) of this section available: to the 
public on the Provider's website; on the Provider's online or mobile 
application, if Consumers use the application to enroll in the Plan; 
via paper upon request; and via the methods for general IPCS 
disclosures pursuant to Sec.  64.6110 before, during, and after a 
Consumer's enrollment in a Plan.
    (4) In every communication between the Provider and a Consumer (or 
the Incarcerated Person, if they are not the Consumer) concerning the 
Alternate Pricing Plan, the Provider must either include the 
disclosures for Alternate Pricing Plans pursuant to paragraph (c) of 
this section, or provide clear, easy to follow, instructions for how 
the consumer (or Incarcerated Person, if not the Consumer) may 
immediately obtain access to those disclosures.
    (5) Before a Consumer enrolls in a Plan, and at any time upon 
Consumer request, the Provider must also provide to the Consumer:
    (i) The rates, Breakeven Point, and total cost including any 
Mandatory

[[Page 77369]]

Taxes or Mandatory Fees associated with the Plan; and
    (ii) An explanation that the Consumer's prior usage and billing 
data is available upon request through a readily accessible means and 
must include:
    (A) For the Provider's most recent three service periods (where 
feasible): the minutes of use for each of the calls or communications 
made by the Consumer and the applicable per-minute rate that was 
charged; the total number of minutes; and the totals charged for each 
service period including the details of any Mandatory Taxes and 
Mandatory Fees; and
    (B) This prior usage and billing data must be made available to the 
Consumer via the Provider's website or online or mobile application or 
via paper upon request of the Consumer.
    (6) After the Consumer enrolls in a Plan, the Provider must provide 
Billing Statements and Statements of Account for the Plan via the same 
method the Consumer used to sign up for the Plan, and via paper upon 
Consumer request. The Billing Statements and Statements of Account must 
include information specific to the Alternate Pricing Plan for the 
service period but the Consumer must be able to receive, upon request, 
information for the past three service periods (where feasible). The 
Billing Statement or Statement of Account must include for each service 
period:
    (i) Call details, including the duration of each call made, and the 
total minutes used for that service period, and the total charge 
including Mandatory Taxes and Mandatory Fees, with explanations of each 
Mandatory Tax or Mandatory Fee;
    (ii) The charges that would have been assessed for each call using 
the Provider's per-minute rate, and the total of those charges;
    (iii) The calculated per-minute rate for the service period under 
the Alternate Pricing Plan, calculated as the charge for the service 
period divided by the total minutes used by that Consumer, with an 
explanation of that rate;
    (iv) The Breakeven Point with an explanation of the Breakeven 
Point; and
    (v) Information about deposits made to the Consumer's IPCS Account 
and the IPCS Account balance.
    (7) The Provider must make available the number of minutes, calls, 
or communications remaining under a Consumer's Alternate Pricing Plan 
for the service period without the Consumer having to initiate a call 
or communication that would count toward a fixed allotment of minutes, 
calls, or communications in an Alternate Pricing Plan.
    (d) Dropped Calls or Communications and Related Consumer 
Disclosures. (1) A Provider offering an Alternate Pricing Plan must 
explain its policies regarding dropped calls or communications in plain 
language in its consumer disclosures.
    (2) The consumer disclosures must include:
    (i) The types of dropped calls and communications that a Consumer 
can seek a credit or refund for;
    (ii) How the Provider will calculate a credit or refund for a 
dropped call or communication; and
    (iii) The method the Consumer must use to request a credit or 
refund for a dropped call or communication, and that method must be 
easy for the Consumer to complete.
    (e) * * *
    (2) A Provider offering an Alternate Pricing Plan must explain the 
terms and conditions of the automatic renewal in plain language in its 
consumer disclosures when it initially offers the automatic renewal 
option and before any automatic renewal is about to occur by whatever 
method the Provider has established for consumer notifications to the 
Consumer.
    (3) The consumer disclosures must include an explanation that if a 
Consumer who requested automatic renewals does not later want the 
Alternate Pricing Plan to be renewed, the Consumer may cancel their 
participation in the Alternate Pricing Plan.
    (4) The Provider must give notice of an upcoming renewal for an 
Alternative Pricing Plan directly to the Consumer no later than three 
business days prior to the renewal date. Along with providing the 
notice, the Provider must explain, in plain language, the terms and 
conditions of the automatic renewal using, at a minimum, the method of 
communication the Consumer agreed to at the time they enrolled in the 
Alternate Pricing Plan.
    (f) * * *
    (2) A Provider must issue a refund for the remaining balance on an 
Alternate Pricing Plan if:
    (i) The Incarcerated Person is released;
    (ii) The Incarcerated Person is transferred to another Correctional 
Facility; or
    (iii) The Incarcerated Person is not permitted to make calls or 
communications for a substantial portion of the subscription period.
* * * * *
    (4) Consumer disclosures related to Consumer cancellation of an 
Alternate Pricing Plan must include:
    (i) An explanation that a Consumer enrolled in an Alternate Pricing 
Plan may cancel at any time and where applicable, the Provider will 
begin billing the Consumer at the Provider's per-minute rates by the 
first day after the termination date;
    (ii) An explanation of the process for requesting cancellation of 
the Alternate Pricing Plan;
    (iii) An explanation that the Consumer can end the Alternate 
Pricing Plan on a specific termination date of their choosing; and
    (iv) The special circumstances for which a Consumer who has 
cancelled their enrollment shall receive a refund and how that refund 
will be calculated.
* * * * *

    Note: The following appendices will not appear in the Code of 
Federal Regulations.

Appendix D: Data Collection

    1. This appendix and the other technical appendices that follow 
outline the data compilation and analysis that the Commission staff 
(staff) conducted using the 2023 Mandatory Data Collection as part 
of the Commission's efforts to determine just and reasonable and 
fairly compensatory rate caps for incarcerated people's 
communications services (IPCS). Collectively, the appendices 
provide: a description of the database compilation (Appendix A); a 
description of methods (Appendix B); summary statistics (Appendix 
C); a least absolute shrinkage and selection operator (Lasso) 
analysis to determine what characteristics of IPCS provision have a 
meaningful association with providers' reported per-minute expenses 
(Appendix D); our upper bound analysis (Appendix E); our lower bound 
analysis, including validation analyses (Appendix F); and a 
validation analysis of the rate caps adopted in the Order (Appendix 
G).
    2. Description of Data Collection. On July 26, 2023, the 
Wireline Competition Bureau and the Office of Economics and 
Analytics released an Order implementing the 2023 Mandatory Data 
Collection regarding IPCS. All providers of IPCS were required to 
respond to the data request by October 31, 2023. For the purposes of 
the 2023 Mandatory Data Collection, a provider is defined as any 
contractor or subcontractor that provides IPCS, regardless of 
whether that entity has a contract directly with the facility or 
with another provider. The aim of this collection was to acquire 
IPCS providers financial and operating data as part of the 
Commission's efforts to set just and reasonable and fairly 
compensatory rate caps. Generally, the data collection required IPCS 
providers to report, for 2022, billed and unbilled demand (minutes 
and communications) and billed revenues for audio and video IPCS and 
ancillary services; monetary and in-kind site commission payments, 
both legally mandated and contractually prescribed; and investments 
and expenses for audio and video IPCS, safety and security measure 
services,

[[Page 77370]]

ancillary services, and all other products and services. Throughout 
Appendices D through J, we use terms defined in the 2023 Mandatory 
Data Collection. Unless otherwise specified, we observe the 
following conventions: ``minutes'' refers to Billed and Unbilled 
Minutes sometimes also written ``billed and unbilled minutes''; 
``IPCS minutes'' refers to the sum of Audio IPCS Billed and Unbilled 
Minutes and Video IPCS Billed and Unbilled Minutes; ``audio IPCS 
services'' is typically shortened to ``audio services''; ``video 
IPCS services'' is typically shortened to ``video services''; 
``audio minutes'' refer to Audio IPCS Billed and Unbilled Minutes; 
``video minutes'' refer to Video IPCS Billed and Unbilled Minutes; 
the same conventions for minutes apply to communications, which 
generally can be thought of as calls; ``revenues'' refer to Billed 
Revenues; ``safety and security measure services'' are typically 
shortened to ``safety and security services''; and ancillary 
services refer to the five types of services defined in the data 
collection as ``Permissible Ancillary Services,'' for which the 
Commission's rules allowed providers to assess charges: (i) 
automated payment services, (ii) live agent services, (iii) paper 
bill/statement services, (iv) single-call and related services, and 
(v) third-party financial transaction services (all other ancillary 
services are defined as ``Other Ancillary Services''). To minimize 
the burden of the collection, we required providers to supply 
information based on their internal accounts, while remaining 
consistent with their financial reports and GAAP.
    3. The data collection requested information from providers at 
company-wide and facility levels, as well as by various categories 
of investments and expenses. We required reports at the company 
level for two reasons: such reports may be compared with company 
financial statements and doing so constrains the investments and 
expenses to be allocated among IPCS and IPCS-related services and 
non-IPCS. We required reports at the facility level to give us 
insight into how costs might vary with facility size and type. Staff 
also prepared a detailed set of instructions for providers, which 
required providers to allocate their reported investments and 
expenses among IPCS and IPCS-related services and other products and 
services and to further allocate the IPCS investments and expenses 
among facilities. Specifically, we required providers to allocate 
their investments and expenses, to the extent possible, in the 
following order: direct assignment; direct attribution based on 
factors that cause a particular business activity and thus 
investments or expenses to increase or decrease; indirect 
attribution in proportion to related categories of investments or 
expenses that are directly assigned or directly attributed; or 
allocation based on the share of the total of all investments or 
expenses already directly assigned or attributed.
    4. Structure of the Collection. To collect these financial and 
operating data, and to help the Commission understand the data at 
different levels and across different categories, staff developed an 
Excel template and a Word template, which we required providers to 
populate. Providers were required to report information at the 
company-wide level (worksheets C1-C2), including total company 
investments, capital expenses, operating expenses, and revenues. 
Investments (capital assets) categories include: tangible assets; 
capitalized research and development; purchased software; internally 
developed software; trademarks; capitalized site commissions; other 
identifiable intangible assets; and goodwill. Gross investment, 
accumulated depreciation or amortization, and net investment are 
reported separately for each of these categories of assets. The 
remaining investment categories are: accumulated deferred federal 
income taxes, accumulated deferred state income taxes, customer 
prepayments or deposits, cash working capital, and net capital 
stock. None of these categories is specific to any category of 
capital assets. The Excel template calculates net capital stock--
gross investment in assets, net of accumulated depreciation and 
amortization, accumulated deferred federal and state income taxes, 
and customer prepayments or deposits, plus an allowance for cash 
working capital. Capital expenses categories include: depreciation--
tangible assets; amortization--capitalized research and development; 
amortization--purchased software; amortization--internally developed 
software; amortization--trademarks; amortization--capitalized site 
commissions (includes amortization recognized as an offset against 
gross revenues); amortization--other identifiable intangible assets; 
amortization--goodwill; return; interest other than interest paid on 
customer prepayments or deposits; interest paid on customer 
prepayments or deposits; federal income tax; state income tax. The 
Excel template calculates return by multiplying net capital stock by 
the provider's claimed weighted average cost of capital or the 
default after-tax rate of return of 9.75%. Federal and state income 
taxes are not allocated. The Excel template uses the provider's 
reported federal and state income tax rates and tax-deductible 
interest expense to calculate the federal and state income tax 
income taxes that correspond to the taxable fraction of the return. 
Operating expenses categories are: maintenance, repair, and 
engineering of site plant, equipment, and facilities; payments to 
telecommunications carriers or other entities for interstate, 
international, or intrastate communications other than extra 
payments to telecommunications carriers or other entities for 
international communications; extra payments to telecommunications 
carriers or other entities for international communications; field 
services; network operations; call center; data center and storage; 
payment of site commissions recognized as an expense or an offset 
against gross revenues when paid or when the commissions-related 
transaction occurred; billing, collection, client management, and 
customer care; sales and marketing; general and administrative; 
other overhead; taxes other than income taxes; transactions related 
to mergers and acquisitions; and bad debt. Annual total expenses is 
the sum of annual operating expenses and annual capital expenses 
(including a return on net capital stock to cover the cost of 
capital). Providers were also required to allocate their data across 
ten (10) categories of services: audio IPCS, video IPCS, safety and 
security measures, permissible ancillary services (automated payment 
services, live agent services, paper bill/statement services, 
single-call and related services, and third-party financial 
transaction services), other ancillary services, and other products 
and services. Site commissions are reported only for the entire 
company; they are not allocated among services or facilities. 
Ancillary service reports are not split out as between audio and 
video. Providers also were required to report their revenues from 
each of the 10 service categories.
    5. Providers were further required to allocate their company-
wide investments and expenses to the facility level for audio and 
video IPCS costs, respectively (worksheet D1). These data are 
providers' allocations of the annual expenses they incurred to 
supply IPCS to each facility. Providers were also required to report 
revenues and demand for audio IPCS, video IPCS, and ancillary 
services at the facility level, by reporting billed revenues and 
total billed and unbilled minutes of use for each facility. For 
audio and video IPCS, providers reported billed, unbilled, and the 
total of billed and unbilled communications and minutes and billed 
revenues for each facility. In addition to the billed totals, billed 
communications, minutes, and revenues are reported separately for 
interstate, international, and intrastate communications for each 
facility. For ancillary services, providers reported billed demand 
separately for automated payment service (number of uses), live 
agent service (uses), paper bill/statement service (uses), single-
call and related services (number of transactions), and third-party 
financial transaction service (transactions), and billed revenues 
separately for each these services for each facility. Providers were 
required to report company-wide annual safety and security expenses 
among seven different safety and security categories: (i) the 
Communications Assistance for Law Enforcement Act (CALEA) compliance 
measures; (ii) law enforcement support services; (iii) communication 
security services; (iv) communication recording services; (v) 
communication monitoring services; (vi) voice biometrics services; 
and (vii) other safety and security measures (worksheet C3). Safety 
and security expenses were allocated across four different service 
categories: (a) audio IPCS; (b) video IPCS; (c) ancillary services; 
and (d) other products and services. The company-wide safety and 
security expenses for audio and video IPCS were then allocated among 
facilities as well (worksheet D2.c). Providers were directed simply 
to use estimates to allocate their safety and security expenses.
    6. Providers also were required to report site commissions 
attributable to all company products and services. They were further 
required to report company-wide ``IPCS and associated ancillary 
services,'' to report site commissions as either legally-mandated or 
contractually-prescribed, and were further required to sub-
categorize these commissions as monetary, in-kind, fixed, upfront, 
and

[[Page 77371]]

variable site commissions (worksheet C3). Throughout Appendices D-J, 
the term ``site commissions'' without further modification means all 
site commissions of all forms. These company-wide site commission 
figures were also required to be allocated among facilities 
(worksheet D2.b). There was no requirement to allocate site 
commissions between audio IPCS, and video IPCS and associated 
ancillary services separately.
    7. Providers were required to identify any affiliates or third 
parties they used to provide ancillary services, to report any 
payments to third parties for ancillary services, and to quantify 
any third-party fees they paid for ancillary services that they 
passed through to their customers (worksheet C3). Providers were 
also required to report any IPCS or ancillary services revenues 
passed through to their affiliates and any payments made to their 
affiliates to complete international communications. Similarly, 
providers were required to supply these responses at a facility 
level (worksheet D2.e).
    8. Breadth of the Collection. Twenty-one providers submitted 
responses to the 2023 Mandatory Data Collection. The list of filers 
with associated short names or acronyms used for these providers in 
appendices D through J: Ameelio, Inc. (Ameelio); ATN, Inc. (ATN); 
City Tele-Coin Co. (City Tele-Coin); Correct Solutions, LLC 
(Correct); Combined Public Communications (CPC); Crown Correctional 
Telephone, Inc. (Crown); Consolidated Telecom, Inc. (Consolidated); 
Custom Teleconnect (Custom); Encartele, Inc. (Encartele); Global 
Tel*Link Corporation d/b/a ViaPath (ViaPath); HomeWAV, LLC 
(HomeWAV); ICSolutions, LLC (ICSolutions); iWebVisit.com, LLC 
(iWeb); NCIC Inmate Communications (NCIC); Pay Tel Communications, 
Inc. (Pay Tel); Prodigy Solutions, Inc. (Prodigy); Reliance 
Telephone of Grand Forks, Incorporated (Reliance); Securus 
Technologies, LLC (Securus); Smart Communications (Smart); Talton 
Communications, Inc. (Talton); and TKC Telecom, LLC (TKC). Of this 
group, twelve provided data, or revisions to their data, before May 
1, 2024, which, as explained below, we were able to process and 
include in our provider database: ATN, City Tele-Coin, CPC, 
ICSolutions, HomeWAV, NCIC, Pay Tel, Prodigy, Securus, Smart, TKC, 
and ViaPath. Staff made the IPCS database available to Reviewing 
Parties in accordance with the relevant Protective Orders and Public 
Notice. The resulting IPCS database covers 2,750 contracts and 4,537 
facilities, accounting for an average daily population of 2,112,042 
incarcerated people and 11.3 billion billed and unbilled minutes of 
audio and 563 million billed and unbilled minutes of video. Unless 
otherwise indicated, our analyses and tables that follow are derived 
from this database.
    9. The IPCS database provides a helpful depiction of the IPCS 
industry. The database's twelve providers represent the vast 
majority of the IPCS industry, and their worksheets, though not 
audited, are broadly consistent with their submitted financial 
accounts. For seven providers beyond these twelve, staff were able 
to capture data such as minutes and/or revenues, though not the same 
data from each. The additional seven are from Ameelio, Correct, 
Crown, Consolidated, Custom, iWeb, and Talton. For the remaining two 
providers, {[REDACTED]{time} . Incorporating these data shows that 
the database of twelve providers covers approximately 84% of 
reported facilities, and approximately 87% of incarcerated persons. 
Table 1 reports shares of minutes, communications (the number of 
audio or video calls), and revenues covered by the twelve providers 
included in the database alongside the shares of the seven providers 
we excluded to the extent those seven providers provided processable 
data (the data from {[REDACTED]{time}  were either missing or 
unreliable). As described above, our database includes twelve 
providers: ATN, CPC, City Tele-Coin, HomeWAV, ICSolutions, NCIC, Pay 
Tel, Prodigy, Securus, Smart, TKC, and ViaPath. There are another 
seven providers reflected in this table's second row whose data we 
could process in part, but who were ultimately excluded from the 
database for the reasons discussed below: Ameelio, Correct, Crown, 
Consolidated, Custom, iWeb, and Talton. Finally, staff could not 
process the submissions of Encartele and Reliance. The table 
marginally overstates the relative marketplace significance of the 
providers included in the database, though the impact is de minimis. 
The overstatement arises for several reasons: some of 
{[REDACTED]{time} ; and some very small providers did not file. It 
is staff's view that if data were available for all these providers, 
the impact on our conclusions would amount to no more than a 
rounding error.
[GRAPHIC] [TIFF OMITTED] TR20SE24.000

A. Description of Initial Data Processing, Data Cleaning, and 
Database Compilation

    10. This subsection reviews the steps we took to process, clean, 
and combine the collected 2023 Mandatory Data Collection data into a 
database.
    11. Data Combination. Staff created variable names for each row 
of data in the Excel templates. Staff combined the processed twelve 
provider submissions into a database, segmented by tabs organized by 
worksheet from the submissions. Since the same facilities appear in 
multiple worksheets, staff took care to ensure the

[[Page 77372]]

database linked the same facilities across all worksheets.
    12. Data Review. Staff reviewed each submission, including the 
narratives supplied in the Word template, and checked for errors to 
evaluate whether the submitted data complied with the Excel template 
parameters. To minimize data submission errors, the Excel template 
included formulas to check for consistency between provider's 
company-wide and facility-specific entries. In all cases, staff 
communicated issues identified in our review, and allowed providers 
to resubmit corrected data. This resulted in some form of extended 
interaction between staff and providers in all cases except 
Consolidated, Custom, and Talton. In these communications, staff 
answered provider questions about the data collection requirements 
and/or explained the data collection process to aid submission. We 
received 14 refilings as a result of our error check process. The 
following providers refiled: Ameelio, CPC, Correct, City Tele-Coin, 
HomeWAV, ICSolutions, NCIC, Prodigy, Securus, Smart, TKC, ViaPath, 
and Pay Tel on two occasions. The conversations which staff had with 
these providers to prompt their refiling illustrates that the 
Commission ``made inquiries to providers during the data-collection 
process regarding ``questionable'' cost data.''
    13. Removing Invalid or Incomplete Data. Despite these efforts, 
staff concluded that we could not incorporate into the database 
worksheets submitted by nine providers: Ameelio, Correct, Crown, 
Consolidated, Custom, Encartele, iWeb, Reliance, and Talton. Staff 
would have removed {[REDACTED]{time} . Most commonly, filings could 
not be incorporated because providers' reports of expense, revenue, 
or demand data were wholly or partially omitted. For example, among 
other problems, {[REDACTED]{time}  did not provide costs at the 
facility level. Thus, their data could not be used to analyze how 
per-minute expenses vary by facility type, a matter which is central 
to the analysis. Similarly, among other problems, {[REDACTED]{time}  
did not provide IPCS minutes, making analysis of per-minute 
expenses, which is the basis for capping rates, impossible. In other 
cases, the provider failed to fully allocate investments or 
expenses, failed to identify the relevant subcontractor, or failed 
to report video expenses at a facility level, among other problems. 
For example, {[REDACTED]{time}  did not allocate investments or 
expenses to the other products and services category (though it 
supplies other services, e.g., electronic incarcerated person 
messaging services and management services) overstating 
{[REDACTED]{time}  IPCS expenses. {[REDACTED]{time}  also did not 
identify the name of the subcontractor, address, and facility 
geographic coordinates for all facilities making it impossible to 
match {[REDACTED]{time}  expense reports with those of its 
subcontractors, making analysis of {[REDACTED]{time}  facilities 
impossible. {[REDACTED]{time}  did not allocate IPCS costs between 
audio IPCS and video IPCS (though it provides both services). 
{[REDACTED]{time}  provided no financial statements, providing no 
means of cross-checking their expense reports. Without such cross 
checks staff and outside parties cannot even determine whether 
{[REDACTED]{time}  reports are internally consistent. 
{[REDACTED]{time}  also left the company-wide investment and 
expenses and facility video worksheets blank (though it sells 
video), making analysis of its expenses, and of video services 
impossible. In contrast to claims in the record, no provider was 
excluded from the database based on the provider's costs relative to 
industry costs.
    14. Excluding an Anomalous Provider. {[REDACTED]{time} 
    15. Excluding Federally Managed Facilities. Staff also excluded 
from the database facilities subject to the Immigration and Customs 
Enforcement (ICE) and the Bureau of Prisons (BOP) contracts because 
these facilities are not comparable to other correctional 
facilities. Significant portions of incarcerated people's 
communications services in these institutions are managed by a 
federal incarceration authority rather than the reporting provider. 
As was the case in the 2021 ICS Order, {[REDACTED]{time} . 
{[REDACTED]{time}  under those subcontracts from the database. Staff 
removed all BOP contracts they were able to identify. In 2021 ICS 
Order, staff allocated the shared costs to the BOP contract before 
dropping it, but that is not necessary for this data collection as 
it required providers to allocate all their costs down to the 
facility, {[REDACTED]{time} .
    16. Data Corrections. For the 12 filings reflected in the 
database, staff made corrections where necessary and feasible. In 
cases where unique facility identifiers were not identical across 
worksheets due to misspellings, abbreviations, or other mistakes 
(e.g., ``Couny'' versus ``County''), staff corrected these. In cases 
where the provider did not identify the facility as a jail or 
prison, and staff was able to do so, staff inserted the relevant 
facility type. Twenty-four entries could not be identified as a jail 
or prison, and were removed. Of these 24 facilities, 
{[REDACTED]{time}  entries given at the contract level that could 
not be matched to a facility. Two more entries do not correspond to 
a specific facility, and are instead attributed to `No Specific 
Contract' and `Other Non IPCS Facility Sites.' The last is an 
{[REDACTED]{time} . ViaPath submitted average daily population (ADP) 
and site commissions data at the contract level, so staff allocated 
ADP from contracts to facilities in proportion to ViaPath's total 
audio and video IPCS communications. Communications were chosen as 
the allocator variable as it correlates strongly with ADP in 
ViaPath's single-facility contracts. Communications was chosen over 
minutes as the allocator as the Pearson correlation coefficient was 
higher between ADP and communications than ADP and minutes. However, 
the impact of this choice is small. The difference in methodologies 
influences the industry per-minute IPCS expenses by no more than 
$0.0046 and by no more than 2.22% in any size-bracket, audio or 
video. This largest difference can be found in video IPCS per-minute 
expenses for very small jails, where the minutes-weighted 
methodology is $0.0046 lower than the calls-weighted methodology. 
Additionally, for some facilities reported total (billed + unbilled) 
minutes of use did not match the sum of billed and unbilled minutes 
of use. To fix these discrepancies, for both audio and video, total 
minutes of use were recalculated by summing billed and unbilled 
minutes of use.
    17. Treatment of Subcontractors. At certain facilities, IPCS is 
provided by a contractor and a subcontractor. In some cases, both 
the contractor and subcontractor submitted cost or demand data for a 
single facility, because each incurred some part of costs or bills 
for service. To account for this, staff matched or removed 
facilities across contractor/subcontractor pairs to avoid double 
counting the same facility. As facility IDs are not consistent among 
providers, staff performed many matches by examining information on 
address, counterparty, building, type, latitude, and longitude. 
Table 2 below depicts the attempted and successful matches:

[[Page 77373]]

[GRAPHIC] [TIFF OMITTED] TR20SE24.001

    18. In cases where the contractor and subcontractor both 
submitted data that could be incorporated into the dataset, multiple 
entries for a single facility were merged into one. For non-numeric 
descriptive data and numeric data that could not easily aggregate 
across entries, such as max call duration, average daily population, 
or tax rates, staff used the values given by the contractor for the 
merged entry if available. Staff summed numeric data that would not 
be duplicated across entries, such as revenue, cost, and minute 
information. In total, staff merged 82 subcontractor entries with 81 
contractor entries. In one case, a facility is reported by three 
providers, with {[REDACTED]{time}  both acting as subcontractors. In 
the three instances where a match was attempted but could not be 
made, staff removed the facilities, as identified. Additionally, 
{[REDACTED]{time}  remain in the dataset, but staff removed the 
video information. In other cases, where the subcontractor was not 
incorporated into the dataset, either because it never filed or was 
excluded, staff removed those facility entries. This accounts for 
the removal of 354 facility entries, which, in addition to the other 
steps, leaves 4,537 facility entries in the dataset.
    19. Geocoding. The providers were asked to provide address and 
coordinate information for each facility. However, many facilities 
lacked coordinate information. Staff used address information, where 
given, to geocode the dataset to generate coordinate information. As 
many providers' coordinates were incomplete, inaccurate, had low 
precision, or were different from staff-geocoded coordinates by a 
large distance, staff-geocoded coordinates were used where possible. 
To identify facilities as urban or rural, staff used Census-block 
data published by the US Census Bureau. The US Census identifies 
urban census tracts with five-digit UACE codes. Using UACE codes 
provided in the 2020 Census, staff identified 2,474 urban and 1,975 
rural facilities, for a total of 4,449 identified facilities. 98% of 
included facilities across all providers could be identified as 
urban or rural using provider coordinates or geocoded addresses. 
This is used in the Lasso Analysis in Appendix D.

Appendix E: Rate Cap Methodology

    1. This appendix describes the method staff used to analyze the 
2023 Mandatory Data Collection data and estimate the upper and lower 
bounds of our zones of reasonableness for incarcerated people's 
communications services (IPCS) per-minute expenses. The structure of 
the data collection allows staff to determine the fully distributed 
cost of providing IPCS for each provider and the entire industry. 
Providers were required to directly assign, attribute, or allocate 
all of their investments and expenses among audio IPCS, video IPCS, 
safety and security measures, ancillary services, and other products 
and services. Our measure of the fully distributed cost of providing 
a service, annual total expenses, sums the provider's operating 
expenses and capital expenses, including an allowance for recovery 
of its cost of capital. As described in Appendix A above, annual 
total expenses accounts for all of a provider's expenses, including 
maintenance, repair, and engineering and 14 other categories of 
operating expenses, depreciation and amortization expenses, federal 
and state income taxes, and the provider's cost of capital. Annual 
total expenses were reported for audio IPCS, video IPCS, safety and 
security measures, and ancillary services at the company level and 
separately for audio IPCS and video IPCS at each facility. Company-
wide annual total expenses of providing safety and security were 
allocated among seven different safety and security categories 
separately for audio IPCS, video IPCS, ancillary services, and other 
products and services. Audio IPCS and video IPCS safety and security 
expenses were further allocated by category among facilities. We 
determine our lower and upper bounds described in this Order by 
dividing allowable amounts of the reported expenses for various IPCS 
components by billed and unbilled minutes separately for prisons and 
different jail sizes. In this appendix, we outline the critical 
components of this analysis necessary to set just and reasonable 
rate caps for the provision of IPCS.
    2. Unit of Analysis. As discussed in the data collection 
description section, the 2023 Mandatory Data Collection required 
providers to report audio IPCS and video IPCS investments and 
expenses at two levels: that of the provider (company-wide) and that 
of individual facilities the provider serves. Our analysis of 
providers' costs is performed primarily at the level of the 
individual facility. This is in contrast to the 2021 ICS Order where 
staff analyzed provider data at the level of the contract, which was 
necessary because, in the ordinary course of business, many filers 
did not maintain requested cost data at the facility level. Relying 
on multi-facility contracts encompassing facilities of varying 
sizes, and in particular contracts that included facilities with 
less than 1,000 ADP, likely led to an overestimate of interim rate 
caps. The rate-setting methodology staff employ in this rulemaking 
relies on reported facility-level data, and thus avoids this 
problem. The structure of the 2023 Mandatory Data Collection, 
delineated by a detailed set of instructions requiring providers to 
assign, attribute, or allocate reported audio IPCS and video IPCS 
investments and expenses among facilities, allows for a more 
granular facility-level analysis. This ensures that the analysis is 
fully consistent with our rate-setting approach, which establishes 
rate caps for facilities rather than for contracts.
    3. Separation into Tiers. Staff separate facility observations 
into prisons versus jails and into jail size tiers based on average 
daily population (ADP), analyzing provider IPCS investments and 
expenses separately within each tier. Staff establish the following 
tiers for the purposes of rate setting: prisons; large jails (ADP >= 
1,000); medium jails (350 <= ADP < 1,000); small jails (100 <= ADP < 
350); and very small jails (ADP < 100). This approach is largely 
consistent with the approach taken in the 2021 ICS Order and is 
similarly consistent with record evidence of the cost differences 
among facilities of different sizes. However, whereas the 2021 ICS 
Order did not adopt rate caps for jails with ADP less than 1,000, 
the 2023 Mandatory Data Collection enables us to address IPCS 
facilities of all sizes. As such, staff must establish additional 
jail size tiers for the purposes of rate setting. Staff analysis of 
the variation in IPCS costs across jails of different sizes showed 
that significant cost differences exist among facilities served. 
These cost differences reflect progressively greater costs for jails 
with smaller ADPs, which warrants a more granular tiering

[[Page 77374]]

structure for jails than that adopted in previous orders, comprising 
four tiers based on jail size. Staff examined per-minute costs both 
graphically and using simple regressions. While there were no 
sharply obvious break points, per-minute costs increased at an 
increasingly steep rate as facility ADP fell. This suggested use of 
the tiers adopted in the Rates for Inmate Calling Services, WC 
Docket No. 12-375, Second Report and Order and Third Further Notice 
of Proposed Rulemaking, 30 FCC Rcd 12763 (2015) with the small jails 
tier split into two tiers, now called small jails and very small 
jails. Grouping facilities into the tiers outlined above is 
necessary to ensure that our rate caps reflect underlying 
differences in the cost of IPCS provision across different types and 
sizes of facilities. Prisons and jails are distinguished under our 
rules largely by their respective confinement periods, with prisons 
used to confine individuals ``sentenced to terms in excess of one 
year'' and jails used to confine those with shorter sentences. This 
definitional difference entails a meaningful difference in average 
confinement periods and turnover rates, which drives part of the 
difference in costs between the two types of facilities. Thus, by 
accounting for facility type, our rate caps account for the impact 
of turnover on costs. We examine the impact of other factors in the 
Lasso analysis below.
    4. Unit of Sale. Our rate setting methodology relies on the sum 
of billed and unbilled minutes of audio or video IPCS as the unit of 
sale. That is, we divide annual total expenses by billed and 
unbilled minutes to determine separate per-minute rate caps for 
audio and video IPCS for each facility tier. Use of a per-minute 
rate structure is consistent with past Commission action, reflects 
the predominant industry pricing strategy for IPCS, and is 
consistent with existing Commission rules covering interstate and 
international audio IPCS, which require providers to charge for 
service on a per-minute basis. While this rulemaking allows 
alternate pricing plans, such as monthly plans for a set number of 
calls or minutes, subject to certain specified conditions, all 
providers still must offer per-minute pricing for audio and video 
IPCS. The use of both billed and unbilled minutes is an improvement 
from the 2021 ICS Order, which divided expenses by paid minutes, and 
better reflects the cost of actual minutes. This approach helps 
ensure all incarcerated persons are charged no more than the cost of 
their calls, and treats all minutes equally, regardless of a 
facility's or a provider's policy decisions on whether and how to 
provide free minutes. We disagree with commenters who argue that, 
similar to the 2021 ICS Order, we should have calculated per-minute 
costs on the basis of billed minutes rather than the sum of billed 
and unbilled minutes. The ratio of billed minutes to unbilled 
minutes varies across facilities, and rate caps based on the average 
cost of a billed minute would allow over recovery of costs, and 
therefore unreasonably high rates, in facilities that had a lower 
ratio than the average facility in 2022, while allowing under-
recovery in other facilities. As a result, such an approach would 
also mean the Commission was effectively requiring incarcerated 
people who receive relatively few free minutes to subsidize other 
users. Further, if the relative proportions of billed to unbilled 
minutes were to shift in the future, a rate cap based on the amount 
of billed minutes would become outdated. It is true that many ``IPCS 
providers--particularly those serving jails--are required to provide 
certain calls (e.g., calls for booking and calls to public 
defenders) free of charge.'' The Report and Order does not prevent 
or in any way discourage this. Just as correctional authorities may 
pay providers to offer calling plans that (from the incarcerated 
person's perspective) are free, correctional authorities may enter 
into arrangements with providers that allow incarcerated people to 
make certain types, or a certain number, of free calls. Correctional 
authorities remain free to decide whether and how providers should 
offer unbilled minutes. We further note that there is no strict 
parallel between ``Paid Minutes,'' as used in the 2021 ICS Order, 
and ``Billed Minutes'' as used in the 2023 Mandatory Data 
Collection. Billed minutes do not equal paid minutes to the extent 
minutes are billed for, but not paid. The instructions for the 2023 
Mandatory Data Collection define billed minutes as the number of 
audio or video IPCS minutes supplied for which payment is demanded, 
and define unbilled minutes as the number of audio or video IPCS 
minutes supplied for which payment is not demanded. Thus, billed 
minutes reported in response to the 2023 Mandatory Data Collection 
are intended to include minutes billed to the caller, called party, 
incarcerated authority, or any other third party whether or not 
these bills were actually paid. By contrast, paid minutes reported 
in response to the Second Mandatory Data Collection were intended to 
exclude minutes which were billed, but for which the bills were not 
actually paid. (Our measure of expenses reflected in the rate caps 
includes an allowance for bad debt expense to recognize unpaid bills 
that are no longer expected to be collected due to customer 
default.)
    5. Industry Average Costs. The Martha Wright-Reed Act expressly 
granted the Commission authority to use industry-wide average costs 
to set IPCS rate caps. Our rate-setting approach relies on this new 
statutory authority. As such, our analysis of provider investments 
and expenses calculates the minute-weighted average expense of IPCS 
provision, separately for audio and video IPCS and within each rate 
tier. If staff were confident of three things: That the providers' 
cost allocations reasonably reflect cost-causation; there was no 
underlying cost variation within each of our five facility 
categories when looking at audio and video separately; and there was 
no overstatement of costs--then rate caps based on the industry 
average would be far too high from an efficiency perspective. For 
example, our analysis showed no material variation from facility to 
facility in local market conditions. However, it is unlikely that 
any of these three things are true, so instead staff use the minute-
weighted industry average to account for potential variation in 
costs within our categories, and discount certain costs using a zone 
of reasonableness analysis, to account for potentially misallocated 
or cost variation otherwise not controlled for. Specifically, our 
analysis calculates the minute-weighted average expense of providing 
IPCS, separately for audio and video IPCS for each facility tier 
(prisons, and jails of differing sizes). Staff calculate minute-
weighted average costs as annual total expense divided by total 
billed and unbilled minutes, separately for audio and video IPCS and 
within each rate tier. Staff reliance on industry average costs is 
further supported by the Brattle Group's analysis of the 2023 
Mandatory Data Collection data. Brattle finds considerable variation 
in costs among IPCS providers and the facilities they serve, 
particularly in the provision of video IPCS, and ultimately drop all 
facility observations with costs above $0.25 per minute in their 
analysis of per-minute expenses. We have concerns with such an 
approach, as dropping observations creates a delta between company-
wide expenses and those reported across providers' facilities. In 
addition, any threshold relied upon for pruning outliers must either 
be untenably high or would potentially drop valid data points. 
However, given that Brattle relies on simple, rather than weighted, 
averages of facility-level per-minute expenses, pruning of outliers 
needs to take place to obtain meaningful results. Staff's use of 
weighted industry average expenses per minute avoids this concern, 
allowing even significant outlier observations to be included in the 
calculation of rate caps while ensuring that such observations do 
not have a disproportionate impact on the results. We disagree with 
commenters who argue that the use of the industry average to develop 
our caps is ``confiscatory.''
    6. Staff consider that the industry minute-weighted averages, 
controlling for audio or video service, and whether the facility is 
a prison or a jail of a particular size, are good, if high, 
estimates of efficient costs for the following reasons. First, 
providers differ in their cost accounting practices, and use 
different and necessarily imperfect cost allocators. These cost 
allocation variations create cost differences across facilities that 
are not related to the efficient cost of service delivery. However, 
by definition, these cost allocation problems cancel out across each 
provider--that is, if costs are overallocated to one facility, they 
must be under allocated to another. This conclusion does not apply, 
of course, to costs that are improperly allocated to IPCS rather 
than to nonregulated services. If these inappropriate cost 
allocations are relatively random across all facilities, and there 
is no evidence to the contrary, then the use of the per-minute 
weighted mean would, as a good approximation, net these differences 
out. The Commission could only take a different action if there was 
a known correctable cost allocation bias. Second, given providers' 
incentives, costs are likely overstated, biasing the industry mean 
toward overstating efficient costs. That {[REDACTED]{time}  reported 
company-wide IPCS revenues that were respectively about 15%, 15%, 
and 25% below their reported IPCS costs plus site commissions is 
evidence of cost overstatement. There are many ways that costs could 
be overstated which we cannot audit on the record before us and, to 
the

[[Page 77375]]

extent additional information would help us resolve the matter, 
within the timeframe the Martha Wright-Reed Act sets for Commission 
action. Securus argues that ``the assumption that costs must be 
inflated is contrary to the draft's conclusion that the cost 
information is reliable.'' We disagree. Third, to the extent that 
providers' cost reports are not overstated in the sense that they 
reflect actual costs, many providers appear to be inefficient, 
implying that the industry mean is further biased toward overstating 
efficient costs. For example, there is substantial variation in 
provider costs that quality or scale differences do not readily 
explain. While the largest providers, {[REDACTED]{time} . These 
disparities are not likely explained by quality differences, since, 
for example, the large providers tend to offer more features than 
smaller ones, suggesting they should have higher per-minute costs. 
Fourth, while there may be some variation in efficient costs, after 
controlling for audio or video service, and whether the facility is 
a prison or a jail of a particular size, the cost variation that can 
be attributed to any given factor is relatively small compared with 
the preceding two sources of difference. The record suggests the key 
drivers of audio cost are facility-type and size, which are already 
controlled for in our rate-setting approach. The Lasso analysis 
shows the relationship between costs and other variables, apart from 
provider identity and state, to be largely statistically 
insignificant. Although our Lasso analysis points to provider 
identity and state as the dominant predictors of costs, we find that 
these variables are not appropriate for incorporation into our rate 
caps. In summary, when taking the industry mean, the variation due 
to the first of these points likely cancels out; the variation due 
to the second and third points likely results in substantial 
overstatement of efficient per-minute expenses; and the true cost 
variation of the fourth point is small. Thus, the industry minute-
weighted mean likely lies above efficient costs. This is further 
supported by analysis of facility per-minute revenues.
    7. Overview of Our Zones of Reasonableness. Staff establish 
zones of reasonableness, separately for audio and video IPCS and for 
each facility tier, and determine final audio and interim video IPCS 
rate caps from within these zones. A zone of reasonableness approach 
helps avoid giving undue weight to imprecise and likely overstated 
provider cost data, as well as to data assumptions and adjustments 
that could lead to unduly high or low per-minute rate caps.
    8. Staff begin by using data that providers submitted in 
response to the 2023 Mandatory Data Collection to establish upper 
bounds. Staff make no adjustments to provider reported expenses 
beyond the data cleaning, processing, and corrections discussed in 
the data collection appendix, and supplement these data with 
estimates of the costs incurred by facilities to provide access to 
IPCS and by providers to provide TRS. As discussed above, we find 
that, in light of the Martha Wright-Reed Act's elimination of the 
requirement that ``each and every'' completed communication be 
fairly compensated, it is appropriate to set our upper and lower 
bounds based on industry-wide average costs at each tier of 
facilities, without the need to consider one standard deviation or 
any other measure of deviance from the average. Staff then make 
reasonable, conservative adjustments to the reported data and use 
those data to establish the lower bounds of our zones of 
reasonableness. Finally, we select rates from within each zone of 
reasonableness to establish final audio and interim video IPCS rate 
caps for each facility rate tier.
    9. Components of Our Upper Bounds. Our upper bounds incorporate 
five distinct components of expenses for audio and video IPCS: (i) 
audio/video IPCS expenses; (ii) audio/video IPCS safety and security 
expenses; (iii) ancillary service expenses; (iv) correctional 
facility expense component; and (v) TRS allowance. Staff discuss and 
explain each of these components in the upper bounds appendix.
    10. Components of Our Lower Bounds. As indicated, staff 
establish our lower bounds by making reasoned disallowances and 
adjustments to reported provider cost data. The lower bounds 
appendix explains the need for these steps. After the disallowances 
and adjustments, the lower bounds incorporates the following 
components of industry average costs: (i) audio/video IPCS expenses 
after adjustments to certain expense categories; (ii) audio/video 
IPCS safety and security expenses after certain disallowances and 
adjustments to expense categories; (iii) ancillary service expenses 
after adjustments to certain expense categories; and (iv) unadjusted 
TRS allowance. The impact of the expense adjustments on ancillary 
service expenses is trivial, shaving $0.001 off the lower bounds.

Appendix F: Summary Statistics

    1. The database, developed as described in Appendix A, is the 
primary data source for our analysis. This appendix provides summary 
statistics and associated analysis for that database. The database 
used in our analyses contains data for 4,537 facilities supplied by 
12 providers, referred to throughout as the industry. The following 
discussion summarizes key aspects of audio and video incarcerated 
people's communications services (IPCS) provision, including 
industry demand, revenue, and expenses as reported in the database.
    2. As mentioned in previous sections, the data used for this 
analysis comes from two levels of data: company-wide and facility-
specific. It is important to note that the estimates from company-
wide and facility-specific do not always perfectly match one 
another. Therefore, estimates using company-wide data may vary 
slightly from facility-specific data.

A. Industry Fundamentals

    3. Table 1 provides an overview of the size and composition of 
audio and video supply and of the nature of audio and video 
expenses. In 2022, IPCS audio was the predominate form of 
communication, and IPCS audio usage outweighed IPCS video. There 
were 11,266 million audio IPCS minutes, and 558 million video IPCS 
minutes. Thus, audio minutes comprised approximately 95% of industry 
minutes--see Table 1. Similarly, audio communications comprised 
approximately 97% (1.82 billion/1.878 billion) of industry 
communications. This difference was less marked in terms of 
facilities: 2,092 facilities had video calls, or about half as many 
2,092, was about half as many as had audio, 4,151. This suggests 
that in 2022 video had barely taken off as a service, and it is 
highly likely that video share today is much higher than in 2022, 
and likely will continue to grow. It is best to first focus on audio 
given the lopsided share of audio data and, as evidenced below, the 
odd results for video, which are likely attributable to the nascent 
nature of video supply in 2022. Either in terms of minutes or 
average daily population (ADP) the two largest IPCS providers by far 
were {[REDACTED]{time} .
    4. [REDACTED]. Video is also different from audio in other ways. 
{[REDACTED]{time} .
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    5. Table 1 also illustrates that per-minute audio expenses vary 
significantly across carriers. Focusing first on audio, while 
{[REDACTED]{time} .
    6. Per-minute video expenses vary much more than audio. The 
industry standard deviation across providers is 210.7 for audio and 
1,187.5 for video. And again there are surprises. For example, 
despite being a relatively low-cost audio provider, 
{[REDACTED]{time} . This wide variation could arise from accounting 
differences, including choices on how to depreciate assets over 
time, quality differences, and providers being at different points 
in their video deployment. For example, some providers may be 
further down the ``learning by doing'' cost curve, and/or have 
incurred costs without yet achieving the sales volumes they are 
capable of.
    7. Finally, Table 2 shows providers' shares of audio minutes can 
be quite different from their share of audio communications, 
implying that the average length of an audio communication varies 
across providers. This is directly shown in Table 2, and is also 
true for video. Table 2 also shows that the average video 
communication lasts about 18.3 minutes, more than double the average 
audio communication length of 7.3 minutes. Yet, {[REDACTED]{time} . 
Video communication lengths are also considerably more varied than 
those of audio. Audio communications lengths vary by about nine 
minutes, from 4.3 to 12.9, while video communications lengths vary 
by about twenty-one minutes, from 3.6 to 25.1 minutes. The industry 
standard deviation across providers is 2.3 for audio and 6.8 for 
video.

[[Page 77379]]

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[[Page 77380]]

B. Expenses, Revenues, and Margins

    8. Expenses. Table 3 shows provider-reported expenses, as 
allocated between five categories: audio, video, safety and security 
services, site commissions, and ancillary services. Throughout 
Appendices D through J, the term ``site commissions'' refers to the 
sum of all forms of monetary payment, in-kind payment, gift, 
exchange of services or goods, fee, technology allowance, or product 
that a provider or affiliate of a provider may pay, give, donate, or 
otherwise provide to an entity that operates a facility, an entity 
with which the provider enters into an agreement to provide IPCS, a 
governmental agency that oversees a facility, the city, the county, 
or state where a facility is located, or an agent of any such 
facility. In-kind site commissions amount to less than one percent 
of all site commissions. Site commissions are not IPCS costs. 
Ancillary services refer to the five types of services defined in 
the data collection as ``Permissible Ancillary Services,'' which our 
rules allowed providers to charge: (i) automated payment services, 
(ii) live agent services, (iii) paper bill/statement services, (iv) 
single-call and related services, and (v) third-party financial 
transaction services (all other ancillary services are defined as 
``Other Ancillary Services''). As expected, {[REDACTED]{time} . 
Safety and security expenses are the largest source of industry 
expenses, accounting for more than a third of the sum of reports for 
the five listed expenses. Yet, there is a sharp difference between 
{[REDACTED]{time} , a matter we will turn to when discussing Table 
4.
    9. After safety and security, site commissions account for the 
second largest fraction of industry expenses--over one fourth. 
(Percent of Site Commissions of All Related Expenses = (Legally 
Mandated Site Commissions + Contractually Prescribed Site 
Commissions)/Total Expenses = ($29,017,010 + $403,577,600)/
$1,555,228,234 = 27.8%.) By comparison, audio expenses account for 
about one fifth of industry expenses, and ancillary services for 
about one tenth. A distant last place, video expenses only account 
for less than five percent of this total, again likely reflecting 
that video was a new service in 2022.
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[[Page 77381]]

[GRAPHIC] [TIFF OMITTED] TR20SE24.011

    10. Using facility-specific data from providers, we also analyze 
expenses and revenues separately for prisons and jails, and for 
different jail sizes. We categorize jails based on average daily 
population (ADP). A large jail is defined as a jail with an ADP

[[Page 77382]]

equal to or greater than 1,000. A medium jail is a jail with an ADP 
of or greater than 350 and less than 1,000. A small jail has an ADP 
of or greater than 100 and less than 350. Lastly, a very small jail 
has an ADP of less than 100. As demonstrated in the tables below, a 
large majority of facilities are jails as opposed to prisons and, of 
all jails, about half classify as very small, with ADPs of less than 
100.
    11. Table 4 reports first audio expenses, excluding safety and 
security expenses, per billed and unbilled audio minute by facility 
type for each provider and the industry average, and then the same 
thing for video. Focusing first on audio, it shows that audio 
expenses per billed and unbilled minute tend to be lower for prisons 
compared to jails for the entire industry, with an industry average 
of about $0.02 for prisons and between $0.02 and $0.09 across the 
different jail sizes. However, for the three providers that serve 
prisons, the difference between prisons and jails is minimal. 
Similarly, smaller jails tend to have higher per-minute expenses for 
audio compared to larger jails. Industry audio expenses per billed 
and unbilled minute are about $0.02, $0.04, $0.06, and $0.09 for 
large, medium, small, and very small jails, respectively. Again, the 
data for video contain anomalies. Video per-minute expenses for 
prisons were $0.156, greater than that for jails of all sizes except 
very small jails, reversing the same comparison for audio. And the 
per-minute expenses of the three providers of prisons are very 
different, with an order of magnitude range of {[REDACTED]{time} . 
With only ten providers reporting video expenses, industry video 
expenses per billed and unbilled minute are about $0.09, $0.09, 
$0.12, and $0.21 for large, medium, small, and very small jails, 
respectively. Table 4 also shows the outsized impact of 
{[REDACTED]{time} .

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[[Page 77384]]


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    12. Safety and Security Expenses. Table 5 presents per-minute 
audio and per-minute video IPCS safety and security expenses for 
facility types. It shows that {[REDACTED]{time} .

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BILLING CODE 6712-01-C
    13. International Audio Termination Expenses. Staff examine the 
providers' reported international termination expenses to determine 
the feasibility of establishing a

[[Page 77387]]

separate rate cap to recover those expenses. Under the Commission's 
current rules, a provider can charge a per-minute rate for 
international audio communications that does not exceed the 
applicable interstate rate cap plus the average per-minute amount 
the provider paid its international service providers for 
communications to a particular international destination. Under 
these rules, a provider is also required to determine the average 
amount paid for communications to each international destination for 
each calendar quarter and to adjust its maximum rates based on this 
determination within one month of the end of each calendar quarter. 
Providers were required to report extra payments to 
telecommunications carriers or other entities for international 
communications as an operating expense on row 75 on the C1-C2. 
Company-Wide Information worksheet. {[REDACTED]{time}  
{[REDACTED]{time} . As these extra payments are for termination of 
audio communications to international destinations, and providers 
can impose a separate charge on international minutes to recover 
these expenses under our rules, staff divide {[REDACTED]{time} . 
Logically, if none of the extra payments to telecommunications 
carriers or other entities for international communications were 
allocated to video IPCS, then the portion of the extra payments 
allocated to safety and security measures would be attributed to 
audio IPCS provision. Table 6 below details this calculation.
[GRAPHIC] [TIFF OMITTED] TR20SE24.016

    14. {[REDACTED]{time} . In addition, nothing in the record 
suggests a need to create a separate charge for video analogous to 
the separate charge for termination of international audio 
communications.
    15. Staff note that annual total expenses, as developed on the 
Excel template, excludes extra payments to telecommunications 
carriers or other entities for international communications. 
{[REDACTED]{time}  other providers make payments for termination of 
international communications. They likely report these as expenses 
on a different row than the row designated for reporting these extra 
payments in the Excel template. For example, providers may have 
reported the extra payments for international communications not as 
extra payments but instead as part of payments to telecommunications 
carriers or other entities for interstate, international, or 
intrastate communications other than extra payments to 
telecommunications carriers or other entities for international 
communications. In other words, they may have reported the extra 
payments on row 74 on the C1-C2. Company-Wide Information worksheet 
and row 85 on the D1. Facility Audio IPCS Costs and D1. Facility 
Video IPCS Costs worksheets. To the extent that these other 
providers report these extra payments as expenses on any other row, 
these expenses are reflected in annual total expenses and thus in 
the upper and lower bounds of our audio rate caps. Consequently, the 
upper and lower bounds for our audio rate caps are likely overstated 
because providers can still impose a separate charge for termination 
of international audio communications, consistent with the 
Commission's existing rules.
    16. Revenues. Turning to the other side of the ledger, Table 7 
depicts IPCS billed revenues, inclusive of the portion of those 
revenues used to pay monetary site commissions (revenues hereafter), 
by category for each provider and the overall industry. Table 7 
shows that the overwhelming majority of IPCS revenue is audio 
revenue, roughly 77%. {[REDACTED]{time}  We conclude that generally 
safety and security measures are not priced separately. Our 
instructions specified that only revenues derived from safety and 
security measures that are priced separately were to be reported 
separately.
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[[Page 77388]]

[GRAPHIC] [TIFF OMITTED] TR20SE24.017

    17. The top of Table 8 shows the audio revenues per billed and 
unbilled audio minutes among the different facility types for each 
provider and for the industry average. Looking at the industry; 
revenues, per billed and unbilled minutes, are lowest for prisons, 
increasing by about 50% for large jails, by 50% again for medium 
jails, and finally by about 20% for small jails, with no change for 
very small jails. However, this pattern is largely driven by 
{[REDACTED]{time} . Many of the smaller providers' per-minute 
revenues fall for some jail size declines, and often their per-
minute revenues are quite close across the jail types they serve. 
The latter half of Table 8 reveals less variation across facility 
types for video than for audio revenues per billed and unbilled 
minutes, but directionally the effects are similar.

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[[Page 77390]]


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    18. Margins. Provider's reported margins, the difference between 
their reported revenues and expenses, including site commission 
payments, are remarkable--see Table 9. Half of the 12 companies in 
the database, including the largest three,

[[Page 77391]]

{[REDACTED]{time} . And five of these companies {[REDACTED]{time} . 
The reported losses are so large that they result in an industry 
loss of about $219 million, more than 16% of industry revenue. 
{[REDACTED]{time} 
[GRAPHIC] [TIFF OMITTED] TR20SE24.020

BILLING CODE 6712-01-C
    19. A firm's revenues from the sale of services over the long 
run must cover the expenses it incurs to provide these services, 
including its cost of capital. Otherwise, a firm will cease to 
operate as it will be unable to pay its employees, suppliers, or 
creditors, or compensate its owners with a normal rate of return for 
use of their money. A normal rate of return is a rate of return 
equal to what the firm's owners could expect to earn if they 
invested in their next best alternative, holding other things, most 
notably risk, constant. There is no evidence that a current IPCS 
provider is failing to recover enough to justify long-run ongoing 
service. While recent press reports suggest Securus may be 
considering filing for bankruptcy, {[REDACTED]{time} . As such, a 
useful benchmark to gauge the suitability of the providers' reported 
expenses for setting rate caps is whether their revenues cover their 
expenses. Some providers produce services other than and in addition 
to IPCS. IPCS is a key business segment for all providers and this 
segment would be expected to operate as a profit center. Thus, a 
narrower comparison between IPCS revenues and expenses is a useful 
benchmark for the business segment.
    20. Thus, the reported losses of at least the six companies, 
{[REDACTED]{time}  are difficult to reconcile with a reasonable 
expectation of these providers' economic profits--their capacity to 
recover the least cost of their operations, including a return on 
capital commensurate with efficient risk bearing--rather than 
accounting losses relevant for tax purposes, or to investors who may 
have overpaid for the company or debtors who may have 
underappreciated the risks associated with their loans. 
{[REDACTED]{time}  are large and sophisticated, with many years of 
experience in the provision of IPCS. Indeed, the smaller companies 
reporting losses also have many years of experience in this 
industry. All these companies routinely and voluntarily bid on 
contracts in an environment they understand. They know what services 
correctional authorities are interested in and what is necessary to 
offer them. They have a deep knowledge of the characteristics of 
their customers and the regulatory and political environment, and 
thus of what protections are needed in their contracts. There is 
nothing in the record that suggests 2022 was a year in which any of 
these providers faced unusual economic difficulties, or to suggest 
that these providers' operations are not going concerns. 2022 was 
unusual due to the ongoing impacts of

[[Page 77392]]

COVID, which led correctional facilities to request changes in 
contract terms, for example, so as to provide more free calling. 
However, these were voluntary, and subject to the original terms of 
the existing contracts. There is no evidence that these changes 
created financial hardship for any providers.
    21. It is therefore implausible that {[REDACTED]{time} . Such 
deficits call into question the suitability of these four providers' 
reported expenses for setting rate caps. In sum, these figures 
suggest that, at a high level, reported costs are overstated. In 
either case, use of the providers' reported expenses without 
adjustment to set rate caps or without considering other record 
evidence or recognizing that this deficit is simply a snapshot in 
time that does not reflect long run expectations may produce rate 
caps that are too high, thereby enabling even an inefficient 
provider to earn more than a normal rate of return.

C. Video Versus Audio IPCS Investment and Expense Data

    22. We compare key net investment and expense categories 
reported industry-wide for video IPCS, a relatively new service, 
with the same categories reported for audio IPCS, a service that has 
been provided for many years. Staff observe large differences 
between the video IPCS and audio IPCS net investment and expense 
data across the various categories. This analysis excludes 
consideration of safety and security investments and expenses as 
providers were not required to further allocate the various 
investment and expense categories for safety and security measures 
between audio and video. Rather, providers more simply allocated 
annual total expenses, our measure of the fully distributed costs of 
providing IPCS, between audio and video. Table 10 below shows each 
of these categories of net investment and expense and billed 
revenues, depicted in absolute dollar amounts, and billed and 
unbilled minutes. Investment and expense data are from the C1-C2. 
Company-Wide Information worksheet. Revenue and minutes data are 
from the D1. Facility Demand and Revenue worksheet.
BILLING CODE 6712-01-P
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[[Page 77393]]


BILLING CODE 6712-01-C
    23. Table 10 shows that the dollar amount for each of these 
categories is much smaller for video relative to audio. For example, 
the ratios of video to audio dollars for net investment in tangible 
assets, total net investment, depreciation and amortization 
expenses, total operating expenses, billed revenues, and billed and 
unbilled minutes are respectively about 0.49, 0.18, 0.37, 0.17, 
0.11, and 0.05. In short, video has yet to achieve anywhere near the 
scale of operations as audio. This is not surprising, given that 
audio is an established industry, while video is still emerging. 
These facts demonstrate relative size but not relative efficiency 
between video and audio operations.
    24. One current difficulty in establishing permanent video rate 
caps stems from relative cost inefficiencies reflected in the video 
net investment and expense data. To enable a comparison between the 
provision of audio and video, staff must provide a measure of 
efficiency and adjust for scale. Staff first divide the absolute 
dollar amount reported for each of the net investment and expense 
categories by billed and unbilled minutes separately for video and 
audio. A service is provided more efficiently if it requires fewer 
dollars of investments or expenses to produce a unit of output 
(e.g., a minute of audio or video). We then divide the resulting 
per-minute video net investment and expense numbers by the analogous 
audio numbers to compare the efficiency of providing video and 
audio. The last column of Table 10 shows that the resulting video to 
audio ratios for all of the net investment and expense categories 
are well above one, and as high as ten. As video and audio are 
different services, we would expect the video to audio per-minute 
ratios for the various net investment and expense categories to 
differ somewhat from one, even after video matures, though not 
nearly to this same extent. Overall, these results demonstrate that 
provision of video is far less efficient than that of audio. We note 
that the ratio of video to audio billed revenue per billed and 
unbilled minute is also set out in the last column of Tbl. 10. This 
ratio is greater than two, meaning that average revenue per minute 
for video is more than twice that average for audio.
    25. Most notably, the highest ratios of video to audio per-
minute net investments and expenses are for tangible assets net 
investment (about 10) and depreciation and amortization expenses 
(about 7). While video may have greater capital requirements than 
audio, we would not expect the ratios of video to audio per minute 
for tangible assets net investment and depreciation and amortization 
expenses to be nearly as high as video usage grows significantly 
over time. These high ratios may reflect providers' large capital 
outlays for purchasing and installing long-term assets necessary for 
the roll out and delivery of video, as would be expected for a new 
service that requires significant investment in fixed assets during 
its early phases. At the same time, limited customer awareness of 
and experience with a new service such as video may limit initial 
customer demand over which the capital outlays for these assets may 
be spread. Depreciation and amortization allocate the initial 
capital outlay for a long-term asset over its useful life as a 
periodic expense for accounting or tax purposes. (While depreciation 
and amortization are conceptually the same, tangible assets are said 
to be depreciated over time whereas definite-life intangible assets 
are said to be amortized over time.) We can reasonably expect video 
to experience considerable growth in the future. As this growth 
occurs, we can expect video to be provided far more efficiently and 
therefore at a much lower cost per-minute than the current video 
investment and expense data suggest. Consequently, we hesitate to 
establish permanent cost-based rate caps for video at this time 
given the likelihood that these caps will soon be considerably above 
cost.

D. Ancillary Services

    26. Table 13 shows expenses, by provider and for the industry, 
per billed and unbilled audio and video minutes for each of the 
ancillary services for which providers may assess separate 
interstate charges under the Commission's rules. Per-minute expenses 
for these ancillary services collectively range from less than 
{[REDACTED]{time} , with an industry average of $0.011. Eight 
providers reported automated payment services expenses, and these 
expenses account for most of the ancillary services expenses. 
Automated payment services per-minute expenses range from 
{[REDACTED]{time} , with an industry average of about $0.01. 
Industry expenses per minute for the other ancillary services are no 
higher than one tenth of a cent. Seven providers reported live agent 
expenses; of these providers, these per-minute expenses are as large 
as {[REDACTED]{time} . Only four, three, and two providers reported 
expenses for third-party financial services, paper bill/statement 
services, and single-call and related services, respectively. As 
Table 11 demonstrates, providers failed to reliably or consistently 
allocate their costs among the various ancillary services.
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[[Page 77395]]


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BILLING CODE 6712-01-C

E. Site Commissions

    27. Table 12 shows site commissions, by provider and industry. 
Site commissions are equal to the sum of legally mandated and 
contractually prescribed site commissions, and are only attributable 
to audio, video, safety and security measures, and ancillary 
services, not other products and services. Over 93% ($403.6 million/
$432.6 million) of site commissions are contractually prescribed as 
opposed to legally mandated. Only two providers, {[REDACTED]{time} , 
reported legally mandated site commissions. The total site 
commissions figure understates the overall industry cost for site 
commissions, as it omits the excluded providers, whose collective 
submissions comprise less than 1% of reported billed and unbilled 
minutes in the 2023 Mandatory Data Collection, and total an 
additional $13,433,691 in reported site commissions, or 3% of the 
industry total of $446,038,302.
BILLING CODE 6712-01-p
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[[Page 77396]]


    28. Table 13 shows that legally mandated and contractually 
prescribed site commissions, expressed per billed and unbilled 
minute, range from{[REDACTED]{time}  {[REDACTED]{time}  with an 
industry average of $0.036. {[REDACTED]{time} 
[GRAPHIC] [TIFF OMITTED] TR20SE24.025

    29. Table 14 presents site commissions per billed and unbilled 
minute, by facility type for each provider and the overall industry. 
Similar to other expenses and revenues, site commissions per minute 
are typically lower among prisons and higher among medium and 
smaller-sized jails.

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[[Page 77398]]


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F. Supplemental Data Tables

    30. Detailed Tables Showing Industry Shares for Minutes, 
Communications, and Facilities. Tables 15 and 16 provide detailed 
breakdowns of provider shares, first by minutes and communications, 
and then by facilities and ADP.

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[[Page 77400]]


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[[Page 77401]]


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    31. Safety and Security Expenses--Detailed Tables. Tables 17- 
through 19 provide detailed breakdowns of safety and security 
expenses.

[[Page 77402]]

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[[Page 77403]]


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BILLING CODE 6712-01-C

Appendix G: Lasso Analysis

    1. In this appendix, staff analyze incarcerated people's 
communications services (IPCS) providers' responses to the 2023 
Mandatory Data Collection to determine what characteristics of IPCS 
provision have a meaningful association with providers' reported 
per-minute expenses. The Commission performed a similar analysis in 
Appendix F of the 2021 ICS Order, Appendix F of the 2020 ICS Order 
on Remand, and in the 2020 ICS Notice of Proposed Rulemaking (NPRM) 
(85 FR 67480, October 23, 2020). Those analyses found that provider 
identity and the state a facility is in to be the most important 
predictors of a contract's per-minute audio costs. Staff update that 
analysis here, using the 2023 Mandatory Data Collection data and 
looking at both audio and video facility-level costs. Staff consider 
characteristics such as the average daily population (ADP) of the 
facility, the type of facility served (prison or jail), and the 
rurality of the facility. If these variables are associated with 
statistically significant variation in provider costs, then our 
analysis would support a rate-setting approach that has audio and 
video rate caps that vary along these dimensions.
    2. As before, staff use the statistical method called Lasso 
(least absolute shrinkage and selection operator). This method 
identifies predictors of an outcome variable--in our case, the 
logarithm of either audio or video costs per minute--by trading off 
goodness of fit against the complexity of the model, as measured by 
the number of predictors. Lasso is especially useful in situations 
where many variables, and interactions among those variables, can 
predict an outcome of interest. Given that we are interested in 
determining the potential cost effects of many categorical variables 
as well as their interactions with one another, the overall number 
of potential variables is extremely large: our baseline Lasso 
specifications consider 490 variables for audio, and 381 for video. 
Estimating the effects all these variables have on costs via more 
traditional methods (such as linear regression) is infeasible. The 
results of our Lasso analysis indicate that the main predictors of 
provider costs per minute at the facilities they serve, for both 
audio and video, are provider identity and the state where the 
facility is located. We also find that whether the facility is a 
prison or jail is a predictor of costs per minute, although the 
effect is weaker than provider identity and state. A wide range of 
other variables have less or essentially no predictive power for 
either audio or video expenses.
    3. We use the upper bound processed dataset with the facility 
operated by a provider as the unit of observation for our analysis. 
For both audio and video communications, we use the logarithm of 
per-minute costs as the dependent variable. Log transformation of 
the dependent variable has two benefits: (i) it can reduce the 
impact of outliers; and (ii) it can reduce skewness of the 
underlying per-minute cost data and make the distribution of the 
dependent variable more normal, which can improve model fit and help 
to ensure that residuals are normally distributed. Among the 
variables that we are interested in are monetary and in-kind site 
commission payments by providers at facilities they serve. 
Providers, however, did not allocate site commissions between audio 
and video. Therefore, for some of our models we will rely on the 
logarithm of the sum of audio and video per-minute costs as the 
dependent variable. To avoid having the Lasso biased by misreported 
and outlier data, we conservatively drop facilities with per-minute 
audio costs above $1, per-minute video costs above $5, or for which 
per-minute audio or video costs are reported as negative. Standard 
regression analysis is vulnerable to distortion from outliers. The 
simplest regression of the dependent variable on an independent 
variable fits a line by minimizing the sum of the squared 
differences between each observation and that line. Points on the 
line are the model's ``prediction,'' and can be thought of as the 
expected values of the dependent variable for the values of the 
independent variable. Outlier observations are farther from the 
prediction line and squaring those differences has a 
disproportionate effect on the sum of squared differences, pulling 
the prediction line towards those outliers. The same logic applies 
for a multivariate regression except that the prediction line is a 
``hyperplane'' across the multidimensional space of all the 
independent variables. The Lasso model, like standard linear 
regression, minimizes the sum of squared differences and is 
therefore also sensitive to outliers. In the case of the 2023 
Mandatory Data Collection, there are some extreme outliers, e.g., 
per-minute expense reports in excess of $1,000 for audio and 
$100,000 for video. We also drop facilities for which negative 
commission payments were reported. The predictor variables that we 
considered in our analysis are as follows:
     The identity of the incarcerated people's 
communications service provider;
     The state(s) in which the correctional facilities are 
located;
     The type of facility (prison or jail);
     An indicator for joint contracts (i.e., contracts for 
which an IPCS service provider subcontracts with another 
incarcerated people's communications service provider);
     An indicator for whether the facility receives a site 
commission;
     Contract average daily population (ADP);
     Five indicators for whether a facility meets one of the 
five following criteria: it is a jail with average daily population 
<=100; it is a jail with average daily population between 100 and 
350; it is a jail with average daily population between 350 and 
1,000; it is a jail with average daily population >1,000; or it is a 
prison;
     Log of safety and security expenses;
     Rurality of the facilities covered by the contract 
(urban if the facility is located in an area designated by the Urban 
Area Census (UACE20) as urban);
     Various combinations (i.e., multiplicative 
interactions) among the above variables.
    4. Lasso and Costs per Minute. The Lasso results indicate 
significant differences in costs per minute across different 
providers and states. The baseline Lasso models, when all variables, 
including multiplicative interactions, are included, explain 
approximately 62% of the variation in audio costs across facilities, 
and 67% of the variation in video costs across facilities. In 
addition to provider and state variables, these baseline models also 
select variables for facility type (i.e., prison versus jail), and 
whether or not a site commission was collected. For both our audio 
and video baseline models, facility type is selected by the Lasso 
almost exclusively for its interaction effect with state dummy 
variables. However, the explanatory power of variables other than 
provider and state is small.
    5. To establish the incremental explanatory power of state and 
provider, staff consider

[[Page 77408]]

audio and video Lasso models where only provider and state variables 
are included and compare them with models that included all 
variables except for provider and state. Staff find the provider and 
state variables explain far more than what all the other variables 
are able to explain. When only provider and state variables are 
included, the Lasso models explain approximately 52% of the 
variation in audio costs across contracts, and 56% of the variation 
in video costs. This is a difference of about 10% as compared with 
the full model. By contrast, for models that include all variables 
except for provider and state, Lasso explains just 23% of variation 
in audio costs across contracts, and 20% of the variation in video 
costs, a difference of about 40% as compared with the full model.
    6. The differences in costs across providers identified by the 
Lasso may reflect systematic differences in underlying costs of IPCS 
provision but may also point to differences in the way providers 
allocated their company-wide investment and expenses to the 
facility-level. The cost variation attributed to the state variable 
may reflect state-level differences in costs arising from different 
regulatory frameworks, including state-specific price caps that may 
be correlated with provider decisions to bid on contracts (allowing 
only the most efficient providers to operate in certain states), or 
to underlying cost differences due to other state-specific factors. 
Given concerns that the Lasso model may be placing undue weight on 
the provider and state variables due to cost allocation approaches 
that are unrelated to the underlying cost of IPCS provision, and 
given that we have substantial record evidence indicating that 
facility type and size are important dimensions along which costs of 
IPCS vary, it would not be appropriate to consider the Lasso model 
results as suggesting that rate caps be established by directly 
taking into account the IPCS provider or location of a facility. 
Rather, the Lasso results confirm that there are certain data 
deficiencies at the facility-level, likely due to differences in 
cost allocation approaches across providers as well as instances of 
cost misallocation, and provide additional support for the industry 
average cost approach to rate-setting, as such an approach is less 
impacted by individual provider decisions on cost allocation and 
cost-allocation anomalies that create outlier facility cost 
observations.
    7. While the provider and state variables were most significant 
in explaining the variation in audio and video costs in our Lasso 
models, facility type was also selected by the Lasso as an important 
predictor of per-minute costs. Given the results from the Lasso 
models, and the strong record support for jails being more costly to 
service than prisons and smaller jails being more costly to serve 
than larger ones, we explored whether a cost difference between 
jails and prisons, and between jails of different sizes, existed 
using a double-selection Lasso model. Unlike regular Lasso, which 
selects predictors but does not allow for standard statistical 
inference (e.g., confidence intervals, t-statistics), double-
selection Lasso allows for statistical inference to be performed on 
a subset of variables of interest. In double-selection Lasso, the 
researcher selects a subset of predictor variables as the variables 
of interest. Two Lasso models are then run. In the first, a Lasso is 
run regressing the variables of interest on all other predictor 
variables. In the second, a Lasso is run regressing the dependent 
variable (in our case, the per-minute cost of service) on all the 
predictor variables except for the variables of interest. The 
researcher then takes all of the predictor variables that were 
selected by the two Lasso models and runs a regression of the 
dependent variable on that subset of predictor variables and the 
variables of interest. This process allows for statistical inference 
on the variables of interest.
    8. For audio communications, the results of the double selection 
Lasso model indicated that--all other things equal--the costs of 
providing audio services are approximately 113% greater in jails 
than in prisons, and the costs of providing video services were 
approximately nine percent greater in jails than in prisons. The 
audio result was statistically significant at the 99% confidence 
level, whereas the video result was not significant (z-score of 
0.31). The lack of statistical significance in the difference 
between video costs in jails and prisons may be further evidence 
that the 2022 video data is unreliable; for example, it could be the 
result of certain providers in the data making significant upfront 
capital expenditures in video provision, without yet realizing high 
video usage. When audio and video costs were combined, the per-
minute costs of providing audio and video service were approximately 
33% higher in jails than in prisons, with the cost difference 
between jails and prisons statistically significant at the 90% 
level, but not 95% confidence level (z-score of 1.90).
    9. Lastly, we test whether providers that pay legally mandated 
or contractually prescribed site commissions at their facilities 
have significantly lower per-minute expenses than providers who do 
not pay site commissions. If our results showed this, it would be 
consistent with there being cost shifting between the provider and 
the correctional facility (i.e., the facility is receiving a 
commission in exchange for covering some costs of IPCS provision). 
With respect to audio communications, however, we find that 
facilities for which providers pay site commissions--all else 
equal--have higher per-minute costs, with the result being 
significant at the 99% confidence level. This is not consistent with 
cost-shifting between the provider and the incarceration authority 
receiving the site commission. Instead, it may reflect how different 
providers allocated their costs and site commissions, or something 
else. For video communications, we find no statistically significant 
difference in costs between facilities that do and do not collect a 
site commission. Recognizing the aforementioned issues with our per-
minute video cost data, we also consider the sum of per-minute video 
and audio costs. We find no statistically significant difference 
between costs in facilities that do and do not pay site commissions. 
Altogether, our double-selection Lasso results do not support the 
premise that site commissions represent cost-shifting between the 
provider and the correctional facility.

Appendix H: Upper Bound Analysis

    1. The following appendix explains how staff determined the 
upper bounds of our zones of reasonableness for incarcerated 
people's communications services (IPCS) per-minute expenses 
(hereafter ``upper bound(s)''), using the providers' reported 
expenses and billed and unbilled minutes without adjustment. The 
data used consist of the database as described in Appendix A. Staff 
reviewed providers' data for compliance with the basic parameters of 
the Incarcerated People's Communications Services 2023 Mandatory 
Data Collection Instructions, WC Docket Nos. 23-62 and 12-375, at 
29, https://www.fcc.gov/files/2023-ipcs-mandatory-data-collection-instructions, including a comparison with their financial 
statements, and shared that review with providers. In response, 
providers revised and resubmitted their data, also providing a 
narrative to address these compliance issues. The expenses of the 
unadjusted dataset are likely too high. These upper bounds reflect 
the allocation methods that providers chose following our 
instructions. Providers allocated their reported company-wide 
investment and expenses among audio IPCS, video IPCS, safety and 
security measures, automated payment services, live agent services, 
paper bill/statement services, single-call and related services, 
third-party financial transaction services, other ancillary 
services, and other products and services. Providers further 
allocated audio IPCS, video IPCS, and safety and security 
investments and expenses among individual facilities. The providers 
chose the basis for allocation, or allocators, as necessary to 
allocate their investments and expenses among the above services and 
facilities. Staff calculated ten upper bounds--five for audio IPCS 
and five for video IPCS, for prisons, large jails, medium-size 
jails, small jails, and very small jails. Staff did this to control, 
albeit imperfectly, for the effect of facility type and size on 
expense per minute. The average per-minute expense for each category 
measures the central tendency of the data for similar facilities.
    2. The respective upper bounds for audio and video services for 
the five facility types are the sum of five per-minute expense 
components: (i) audio IPCS or video IPCS; (ii) audio or video IPCS 
safety and security measures (hereafter ``safety and security 
measures''); (iii) ancillary services; (iv) Telecommunications Relay 
Services (TRS) compliance; and (v) correctional facilities' 
expenses. We discuss these in turn.
    3. Audio and Video Expenses. Audio and video IPCS, safety and 
security, and ancillary services expenses per minute are calculated 
in the same way as per-minute expenses in the summary statistics 
section above. Audio IPCS and video IPCS expenses per minute, 
respectively, are calculated by taking the sum of, respectively, the 
reported audio IPCS and video IPCS expenses and audio IPCS and video 
IPCS billed and unbilled minutes across all providers, and dividing 
the expenses by the minutes. Safety and security expenses per 
minute, respectively, sum the

[[Page 77409]]

reported safety and security expenses and audio IPCS and video IPCS 
billed and unbilled minutes across all providers and divides the 
expenses by the minutes. Ancillary services expenses per minute sums 
the reported ancillary services expenses and billed and unbilled 
audio and video minutes across all providers that reported ancillary 
services expenses and divides the expenses by the minutes. The 
ancillary services are automated payment services, live agent 
services, paper bill/statement services, single-call and related 
services, and third-party financial transaction services. Staff 
calculated safety and security expenses per minute for all seven 
safety and security measure categories combined. The seven safety 
and security measures are: (i) the Communications Assistance for Law 
Enforcement Act (CALEA), 47 U.S.C. 1001 et seq., 47 CFR 1.20000 et 
seq., Compliance Measures; (ii) law enforcement support services; 
(iii) communication security services; (iv) communication recording 
services; (v) communication monitoring services; (vi) voice 
biometrics services; and (vii) other safety and security measures. 
This ensures our upper bounds reflect all safety and security 
expenses reported by providers without consideration as to whether 
they are used and useful in the provision of audio or video IPCS.
    4. Ancillary Services. Prior to this Order, ancillary services 
were billed separately, but going forward will be recovered under 
our caps. To incorporate ancillary service expenses into the upper 
bounds, staff divide the sum of ancillary expenses by the sum of 
audio and video minutes for providers reporting said expenses and 
add this quotient, $0.011, to each of our ten caps. Staff do this 
because ancillary service expenses are not reported separately for 
audio and video. This also is a reasonable way to allocate these 
costs for three reasons: billing and collection services cover both 
audio and video IPCS; both sets of charges would generally appear on 
the same bill; and it is not obvious billing and collection services 
for audio would be more expensive than for video or vice versa. 
Indeed, commenters asserted that the costs of ancillary services 
were not distinguishable for audio versus video IPCS.
    5. TRS Expenses. The 2023 Mandatory Data Collection invited 
providers to estimate the incremental expense of complying with the 
TRS requirements adopted in the 2022 ICS Order, to the extent those 
expenses are not reflected in their data for 2022. Those rules 
require that IPCS providers must provide access for incarcerated 
people with communications disabilities to all relay services 
eligible for TRS Fund support in any correctional facility where 
broadband is available and where the average daily population 
incarcerated in that jurisdiction totals 50 or more persons. They 
also require that where incarcerated people's communication services 
providers are required to provide access to all forms of TRS, they 
also must allow American Sign Language direct, or point-to-point, 
video communication. The Commission clarified and expanded the scope 
of the restrictions on incarcerated people's communications service 
providers assessing charges for TRS calls, expanded the scope of the 
required Annual Reports to reflect the above changes, and modified 
TRS user registration requirements to facilitate the use of TRS by 
eligible incarcerated persons. One provider, {[REDACTED]{time}  
submitted an incremental expense estimate, providing the only data 
from which we extrapolated these costs for the industry. The upper-
bound TRS compliance expense per minute component divides 
{[REDACTED]{time} . The resulting figure, rounded to $0.002, is used 
as an estimate for the industry, as no other provider submitted an 
incremental TRS expense estimate. It is added to each of the ten 
upper bound calculations.
    6. Correctional Facilities' Expenses. The 2023 Mandatory Data 
Collection recognized that, in some cases, the authorities that 
operate prisons or jails may incur costs attributable to providing 
IPCS. Specifically, the 2023 Mandatory Data Collection directed 
providers to report any verifiable, reliable, and accurate 
information about the costs incurred by facilities that the 
providers served in 2022 to offer safety and security measures or 
other functions regarding the provision of IPCS. None of the 
providers submitted these cost data. Hence, staff develop the 
facilities component of the upper bounds by again relying on the 
$0.02 expense additive adopted as part of the interim rate caps in 
the 2021 ICS Order (86 FR 40682, July 28, 2021). Staff add this 
amount to each upper bound rate cap tier for both audio and video 
IPCS. Including this amount likely overstates facilities' IPCS 
costs.
    7. Table 22 shows the upper bound industry average components 
for prisons and the four jail sizes, depicting audio and video IPCS 
and IPCS safety and security, excepting the ancillary services, TRS, 
and facility components, and the sum of these components plus $0.011 
for ancillary services, $0.002 for TRS, and $0.02 for facility 
expenses. Columns (1A) and (2A) summarize the industry average 
components of the upper bounds of our zones of reasonableness for 
audio IPCS and safety and security expenses, separately for each 
rate tier. Staff adds a flat per-minute allowance for ancillary 
services ($0.011), TRS ($0.002), and facility expenses ($0.02) to 
calculate the upper bounds for audio IPCS rate caps in the third 
column.

[[Page 77410]]

[GRAPHIC] [TIFF OMITTED] TR20SE24.037

    8. Columns (1B) and (2B) show the industry average components of 
the upper bounds of our zones of reasonableness for video IPCS and 
safety and security expenses. Staff adds a flat per-minute allowance 
for ancillary services ($0.011), TRS ($0.002), and facility expenses 
($0.02) to calculate the upper bounds for video IPCS rate caps in 
the final column of Table 1.
    9. The upper bound results for audio IPCS and video IPCS are 
driven by the two largest providers, {[REDACTED]{time}  which supply 
a majority of IPCS minutes. As a result, {[REDACTED]{time} , 
discussed in the summary statistics above, likely distort our video 
upper bounds. Tables 2 and 3 present the upper bound results, for 
audio and video respectively, for each individual provider to permit 
comparisons across and between providers' per-minute expenses and 
the industry average per-minute expense. The fixed add-ons for 
ancillary services, TRS, and facility expenses are excluded.
    10. Table 23 suggests that the upper bounds for audio IPCS rate 
caps do not disadvantage smaller providers that appear to operate 
efficiently in their provision of audio IPCS compared to the 
industry average. Setting an audio IPCS zone of reasonableness upper 
bounds at the industry average implies four carriers, 
{[REDACTED]{time} , have average per-minute expenses that are either 
less than the upper bounds or within five percent of them for all 
facility types. This is also true for {[REDACTED]{time} . That 
leaves five providers with average per-minute expenses that are more 
than five percent above the cap for a majority, but not always for 
all of the facility types: {[REDACTED]{time} . While, to some 
degree, these results support the view that larger providers have 
lower unit costs, {[REDACTED]{time}  are small providers who report 
costs largely or entirely under, or close to, the upper bounds. In 
fact, for small and very small jails, {[REDACTED]{time} . Thus, 
though {[REDACTED]{time}  appear to benefit from scale economies, 
there is no clear indication that the rest of the industry is 
systematically disadvantaged in its ability to provide audio IPCS at 
rates below our upper bounds. That being said, efficient costs are 
the least costs of provision, and there is no onus on the Commission 
to set rate caps that support inefficient business models, even if a 
provider is inefficient due to its scale.
BILLING CODE 6712-01-P

[[Page 77411]]

[GRAPHIC] [TIFF OMITTED] TR20SE24.038

    11. Table 24 shows that using the industry average to determine 
the five upper bounds for video IPCS expenses leaves only 
{[REDACTED]{time}  with per-minute expenses that exceed the industry 
average by more than five percent for a majority of facility types. 
However, this result is largely driven by one provider. 
{[REDACTED]{time}  per-minute expenses substantially raise the 
average, ranging from nearly twice to more than seven times as high 
as the next highest provider. It is also not clear that reported 
per-minute video expenses represent long run expenses, because video 
calling is a nascent market. Thus, providers may still be making 
large expenditures to improve their platforms, while supply may be 
constrained and demand is still growing. These effects would 
overstate per-minute video expenses relative to a future steady 
state, as current expenses are higher than those in a future steady 
state, while demand is lower.

[[Page 77412]]

[GRAPHIC] [TIFF OMITTED] TR20SE24.039

    {[REDACTED]{time} 
BILLING CODE 6712-01-C

Appendix I: Lower Bound Analysis

    1. The following appendix explains how staff estimated the lower 
bounds of our zones of reasonableness for incarcerated people's 
communications services (IPCS) per-minute expenses (hereafter 
``lower bounds''). The first section explains a range of adjustments 
made to the upper bounds, to produce our lower bounds, while the 
second section brings these together, producing ten lower bounds, 
being the five for each facility type for both audio and video. The 
final section uses three independent sources to validate our lower 
bounds.

A. Lower Bound Analysis and Adjustments

    2. This section develops the lower bounds for audio and video 
IPCS per-minute rate caps for each rate cap tier by making the 
following adjustments to the upper bounds: bringing the WACCs 
reported by {[REDACTED]{time}  down to 9.75%; removing the 
allowances for expenses incurred by correctional facilities; 
removing categories of safety and security expenses that are not 
generally used and useful in the provision of IPCS; adjusting the 
ancillary service expenses to reflect the WACC changes; and 
adjusting for anomalies in {[REDACTED]{time}  The section also 
explains our concerns with providers' reports of goodwill, but that 
we decline to make goodwill adjustments due to a lack of data. While 
at least one commenter has argued that the lower bounds are 
``unreasonably low,'' we disagree. As set out herein, we reach those 
bounds based on a reasonable, logical analysis of the collected 
data. In making these adjustments, staff rely on the providers' data 
reports, financials, and Word templates.

1. WACC Analysis and Adjustments

    3. The weighted average cost of capital, or WACC, is the sum of 
a company's cost of equity, cost of preferred stock, and cost of 
debt, each expressed as an annual percentage rate and weighted by 
its proportion in the capital structure. It represents the average 
rate-of-return that debt, preferred stock, and equity investors 
require to provide a company with the capital it uses to finance its 
assets and operations. Mathematically, WACC = [(Equity/(Debt + 
Equity + Preferred Stock)) * Cost of Equity] + [(Debt/(Debt + Equity 
+ Preferred Stock)) * Cost of Debt] + [(Preferred Stock/(Debt + 
Equity + Preferred Stock)) * Cost of Preferred Stock]. Staff 
programmed the Excel template to multiply the WACC by net capital 
stock to determine the return component of the provider's annual 
total expenses. Net capital stock means gross investment in assets, 
net of accumulated depreciation and amortization, accumulated 
deferred federal and state income taxes, and customer prepayments or 
deposits, plus an allowance for cash working capital. Annual total 
expenses is the sum of annual operating expenses and annual capital 
expenses. Return is the allowance for

[[Page 77413]]

recovery of the cost of capital and is therefore a component of 
capital expenses.
    4. The instructions directed providers to use either a default 
WACC of 9.75% or an alternative WACC. {[REDACTED]{time} . All other 
providers used the default WACC. If the provider claimed a WACC 
greater than 9.75%, the instructions for the 2023 Mandatory Data 
Collection required the provider to fully document, explain, and 
justify how it developed that alternative WACC. Specifically, the 
instructions required that the provider ``fully document . . . by 
submitting data, formulas, cost of equity analyses[,] . . . 
calculations, and worksheets, and explain and justify the 
development of'' its claimed cost of capital, as well as its claimed 
cost of debt, its claimed cost of equity, and the other components 
of its claimed capital structure. The instructions warned providers 
that a failure to do so may result in reversion to the default WACC. 
We note that, despite an opportunity for comment, neither Securus 
nor ViaPath (nor any other party) objected to the use of 9.75% as 
the default WACC during the pleading cycle leading to its adoption.
    5. The default 9.75% WACC is equal to the Commission's currently 
authorized rate of return for local exchange carrier services 
subject to rate of return on rate base regulation. The Commission 
adopted this rate of return as part of a formal rulemaking 
proceeding and it reflects rigorous analyses of the costs of debt 
and equity, capital structure, and the WACC, as the authorized rate 
of return is designed to compensate these carriers for their cost of 
capital. The Commission's determination was informed by comments, 
data and other information entered into the record by interested 
parties and the analyses reflected in this prescription underwent 
peer review.
    6. While we accept the claimed WACC of both Securus and ViaPath 
to establish the upper bounds, we decline to do so for the purpose 
of establishing the lower bounds. As explained below, neither 
Securus nor ViaPath sufficiently justifies its claimed WACC. Given 
this lack of justification and the limited information otherwise 
available to the Commission to develop its own estimate, we also 
decline to develop an alternative WACC for either of these two 
providers. Estimates of the true WACC can vary over a wide range 
under different sets of reasonable assumptions. A firm's cost of 
equity, in particular, must be estimated because it reflects both 
current and future investors' constantly changing expectations of 
that firm's future profits. Cost of equity estimates are necessarily 
developed from imperfect models such as the Capital Asset Pricing 
Model or Discounted Cash Flow Model. Where a firm does not issue 
publicly traded stock, as is the case for Securus and ViaPath, one 
must apply these (or other) models to a sufficiently comparable 
proxy group of firms that issue publicly traded stock. Identifying a 
proxy group of comparable and publicly traded firms can be a 
difficult and imprecise exercise and using different proxies can 
produce significantly different estimates. Consequently, cost of 
equity estimates developed from models and using proxy groups are 
often susceptible to large errors and the cost of equity is often 
impossible to measure precisely. Given this, if the Commission were 
to attempt to estimate Securus's or ViaPath's costs of capital, the 
estimates would come with wide error ranges that would encompass the 
9.75% default. We therefore find that adopting our default WACC 
provides a reasonable lower bound assumption.
    7. Cost of Debt. Of the three estimates needed to estimate the 
WACC (i.e., cost of debt, cost of equity, and capital structure 
estimates), the cost of debt estimate typically is the least 
complicated. Yet, both Securus and ViaPath make mistakes in how they 
estimate their costs of debt.
    8. {[REDACTED]{time} .
    9. {[REDACTED]{time} .
    10. Capital Structure. Capital structure refers to the shares of 
equity, preferred stock, and debt capital that a firm uses to 
finance its operations and assets. Each capital structure component 
is equal to: value of a capital component/(value of debt + value of 
preferred stock + value of equity). Each share is used to weight its 
respective capital cost to estimate the weighted average cost of 
capital. Financial theory requires use of market value weights to 
estimate the WACC. Financial theory also specifies that a firm's 
target capital structure should be used to estimate the WACC. 
Regulators, including the Commission, typically use book value 
weights to estimate the WACC, though under the Commission's 
represcription rules, market value weights can be used if use of 
book value weights would produce unreasonable results. Under the 
Commission's rules for represcribing the authorized rate of return 
for local exchange carriers regulated on a rate-of-return basis, the 
results of book value capital structure calculations are to be used 
unless their use would be unreasonable. In fact, the Commission's 
current authorized rate of return for local exchange carriers 
regulated on a rate-of-return basis, 9.75%, reflects the use of 
market value weights.
    11. {[REDACTED]{time} .
    12. {[REDACTED]{time} .
    13. {[REDACTED]{time} .
    Table 1: {[REDACTED]{time} 
    14. {[REDACTED]{time} .
    15. {[REDACTED]{time} .
    16. {[REDACTED]{time} .
    17. {[REDACTED]{time} .
    18. {[REDACTED]{time} .
    19. {[REDACTED]{time} .
    20. {[REDACTED]{time} .
    21. {[REDACTED]{time} .
    22. {[REDACTED]{time} .
    23. {[REDACTED]{time} .
    24. {[REDACTED]{time} . Total beta is equal to the standard 
deviation of a security's expected returns divided by the market's 
expected return. Alternatively, total beta equals the CAPM beta 
estimate divided by the square root of the coefficient of 
determination for the regression equation used to estimate beta. 
{[REDACTED]{time} 
    25. The use of total beta to develop cost of equity estimates 
for a private business is not broadly accepted. For example, Pratt 
and Grabowski argue: ``This interpretation of beta as the risk 
measure in estimating total returns is based on the premise that 
most owners of private businesses are completely undiversified and, 
therefore, the cost of equity capital of the private business should 
include that extra amount due to the owner being undiversified. This 
leads to the unreasonable position that there are at least two costs 
of capital for a business--the cost of capital for investors who are 
the pool of likely buyers who are likely to be diversified (for whom 
in theory only market or beta risk matters) and the cost of equity 
capital to the current owner who is completely undiversified (for 
whom both market risk and unsystematic risk matter).''
    26. Moreover, Securus is not an undiversified investor. Securus 
is a subsidiary of Aventiv Technologies, which in turn is owned by 
the private equity firm Platinum Equity. On its website, Platinum 
Equity explains that it has been in business for more than 28 years, 
made more than 450 acquisitions, and manages over $48 billion in 
assets. It further explains that it ``generate[s] returns by 
investing in companies across a wide range of industries that need 
financial and operational support.'' Securus cannot credibly argue 
that its owner, Platinum Equity (or Platinum Equity's investors 
collectively), is an undiversified owner, and it therefore fails to 
justify its company specific risk premium adjustment.
    27. {[REDACTED]{time} .
    28. {[REDACTED]{time} .
    29. {[REDACTED]{time} .
    30. {[REDACTED]{time} .
    31. {[REDACTED]{time} .
    32. {[REDACTED]{time} .
    33. {[REDACTED]{time} . While CAPM is widely used among 
practitioners and is featured prominently in most finance textbooks, 
CAPM is not perfect, as no model can be. For this reason, in 
addition to reasons we set out above, we are reluctant to rely on 
the results of a single model, adjusted or not. When the Commission 
last prescribed the rate of return for local exchange carriers, for 
example, it relied on CAPM and the Discounted Cash Flow Model, 
recognizing that neither model is perfect. That would have been our 
preferred approach here as well. However, we do not have access to 
data that would allow us to develop a Discounted Cash Flow Model for 
either provider.
    34. In summary, a substantial range of Securus's and ViaPath's 
assumptions in developing their WACCs are not fully documented and/
or appear inappropriate. Consequently, we cannot rely on their 
estimates. Given there is insufficient evidence in the record to 
allow the Commission to develop robust estimates of our own, we 
revert to our default WACC of 9.75%.
    35. WACC Adjustment Mechanics. Staff replace Securus's and 
ViaPath's claimed WACC figures with the default WACC of 9.75% on 
their Excel templates to adjust their reported annual total 
expenses. Staff also replace the tax-deductible interest expense 
{[REDACTED]{time}  Section 163(j) limits the interest expense 
deduction to the sum of (i) the taxpayer's business interest income; 
(ii) 30% of the taxpayer's adjusted taxable income; and (iii) the 
taxpayer's floor plan financing interest expense for the taxable 
year. Business interest income is not a cost

[[Page 77414]]

of providing IPCS and is not reported on the Excel template or 
relevant to the development of rate caps. Under section 163(j), 
floor plan financing interest expense is interest on debt used to 
finance the acquisition of motor vehicles held for sale or lease 
where the debt is secured by the acquired inventory. Floor plan 
financing interest expense is not reported separately on the Excel 
template and neither {[REDACTED]{time}  nor any other IPCS provider 
is likely to incur this type of expense. Staff add this formula even 
though {[REDACTED]{time}  approach likely understates tax-deductible 
interest expense, leading to a larger income tax allowance and 
larger annual total expenses than otherwise. Under section 163(j), 
adjusted taxable income aligns with earnings before (subtracting) 
interest expense and taxes. Return on the Excel template is 
generally a smaller number than adjusted taxable income under 
section 163(j) because return is equivalent to earnings after 
interest expense and taxes with the interest expense added back to 
this calculation of earnings. The portion of return subject to taxes 
must be ``grossed up'' by dividing it by one minus the tax rate, and 
then added to the portion of the return that is not subject to taxes 
to calculate the pre-tax return (including interest expense). 
{[REDACTED]{time} . Lastly, staff reduce the safety and security 
expenses these providers report at the facility level by the same 
percentage as these expenses are reduced by at the company-wide 
level as a result of the WACC and tax-deductible interest expense 
adjustments. Securus argues against this adjustment by noting that 
by reducing Securus's and ViaPath's costs of capital, ``the draft 
cut {[REDACTED]{time}  for [sic] the industries' total safety and 
security expenses.'' We find this effect is a natural consequence of 
the adjustment, given the fact that capital expenses constitute a 
significant portion of safety and security measure costs, and do not 
find this a compelling reason to avoid making said adjustment.
    36. We reject the argument that the Commission's default 9.75% 
WACC ``bears no resemblance to rate of return for companies like 
Securus that are primarily technology and IT service providers.'' We 
recognize that IPCS is a communication service, yet not necessarily 
the same as local exchange carrier service. This distinction is why 
the 2023 Mandatory Data Collection instructions directed providers 
to use either the default WACC of 9.75% or an alternative WACC, with 
providers bearing the burden to fully document, explain, and justify 
how they developed any alternative WACC. While the Commission's 
9.75% rate-of-return prescription dates back to 2016, that 
prescription was conservative. The Commission found that an overall 
range for reasonable WACC estimates for rate-of-return-regulated 
local exchange carriers is 7.12% to 9.01%, based on WACC estimates 
derived from CAPM and a discounted cash flow model. It expanded the 
upper end of the rate of return zone of reasonableness beyond these 
WACC estimates based on policy considerations and adopted the rate 
of return from the upper end of this zone. Specifically, the 
Commission expanded the zone of reasonableness to provide an 
additional cushion for rate-of-return incumbent LECs that may have 
relatively high costs of capital. It also added a cushion to account 
for regulatory lag between recognition of the need to prescribe a 
different rate of return, as capital markets change significantly 
over time, and actually prescribing a new rate of return. It 
therefore added about three-quarters of a percentage point to the 
top of the WACC range developed from the cost of equity models, 
expanding the overall zone of reasonableness for rate of return 
estimates to 7.12% to 9.75%, and then prescribed a 9.75% rate of 
return. Neither Securus nor any other party objected to the use of 
9.75% as the default WACC during the pleading cycle leading to its 
adoption.
    37. As discussed elsewhere, Securus relies on a number of 
aggressive and insufficiently justified assumptions to develop its 
WACC estimate. For example, CAPM assumes that investors are able to 
diversify away exposure to non-systematic risk such as company-
specific risk. Securus, however, adds a company-specific risk 
premium {[REDACTED]{time}  to its CAPM cost of equity estimate, even 
though its owner, Platinum Equity (or Platinum Equity's investors 
collectively), is able to diversify away exposure to non-systematic 
risk such as company-specific risk. For these and the other reasons 
discussed, we therefore find it reasonable to use the default WACC 
for Securus to develop lower bounds for our rate caps.

2. Aggressive Assumptions on Facilities Additive

    38. Expenses Incurred by Correctional Facilities. To the extent 
correctional facilities bear some IPCS expenses and recover these 
through site commissions, our rate caps should allow for the 
reimbursement of the legitimately recoverable expenses facilities 
incur. In our upper bound analysis, relying on record claims, we add 
$0.02 for such expenses. We do not make this addition in our lower 
bound analysis because our dataset provides no evidence that site 
commissions lower providers' expenses.
    39. If site commissions were in some instances associated with 
facilities bearing some of the expenses of IPCS provision, then we 
would expect to see that providers' expenses in facilities where 
site commissions are paid would, on average, be lower than in 
facilities where they are not. In fact, the presence of site 
commissions tends to raise, rather than lower, providers' audio and 
video IPCS and safety and security expenses--see Table 2. For four 
of the five facility types, the average expenses per minute rise by 
between $0.021 and $0.012 per minute, only declining by $0.006 for 
small jails. We therefore disagree with those commenters that urge 
the Commission to include a $0.02 additive to account for facility 
costs in the lower bounds. Commenters have not provided sufficient 
data on either the costs or type of facility costs to contradict the 
analysis we perform here. Nor have they provided any data or other 
information that might independently justify a $0.02 additive, or 
indeed any other additive, to the lower bounds.

[[Page 77415]]

[GRAPHIC] [TIFF OMITTED] TR20SE24.040

    40. To the extent that a correctional facility incurs IPCS 
expenses (e.g., a broadband connection or safety and security 
measure), its corresponding provider would face fewer expenses than 
otherwise. Further, one would expect this to be reflected in higher 
site commission payments, holding other things constant. However, 
the payment of site commissions is not associated with a reduction 
of providers' audio and video IPCS and safety and security expenses. 
Providers' mean per billed and unbilled minute IPCS expenses at 
facilities with no site commissions is $0.070, which is less than 
the $0.085 IPCS per-minute expenses where site commissions are paid. 
This difference is not statistically significant: there is an 
approximately 50% chance of the observed difference randomly 
occurring if the means were in fact identical. Based on a linear 
regression of expenses per minute on an indicator variable for when 
site commissions are zero versus when site commissions are greater 
than zero, the p-value for the coefficient of the indicator variable 
is 0.488. (The regression model is of the form: Expense Per Minute = 
A + B * Site Commission Dummy (0,1)). In contrast, the conventional 
default for statistical significance requires a p-value of less than 
0.05, that is, less than a one in twenty chance that the observed 
difference occurred by chance. Finally, the results of our Lasso 
analysis are also consistent with the conclusion that provider 
expenses are not offset by the payment of site commissions to the 
correctional facilities they serve. In fact, the Lasso model finds 
that facilities at which site commissions are paid have higher per-
minute expenses than facilities at which site commissions are not 
paid.

3. Lower Bound TRS Additive

    41. We add to the lower bounds of our zones of reasonableness 
the same per-minute estimate of TRS expenses, $0.002, that we added 
to the upper bound zones. This estimate, as explained above in the 
upper bound analysis, is derived from {[REDACTED]{time}  study of 
the incremental expense of TRS compliance. {[REDACTED]{time}  study 
reasonably adheres to our instructions for developing the 
incremental expense of TRS compliance. At the same time, no other 
provider submitted an estimate of these expenses. As there is 
nothing in the record to support a lower estimate, we use the same 
estimate for both the upper and the lower bounds of our zones of 
reasonableness.

4. Goodwill Analysis

    42. Four providers report goodwill as an investment, and this 
section discusses these investments and their implication for the 
development of rate caps. In particular, we find that we lack the 
necessary information to determine the appropriate amount of 
goodwill assigned to regulated services and whether the resulting 
amount should be reflected in the development of our rate caps. We 
conclude that the best way forward is to accept goodwill as reported 
in the development of our upper and lower bounds, but to take 
account of this uncertainty in choosing how we set our rate caps 
within those bounds.
    43. The section begins by defining goodwill. Next, it provides 
information on each of the four providers' reported goodwill, 
including a description of the relative importance of goodwill as 
reflected in their overall investment and expenses. It then 
discusses regulatory approaches to goodwill and describes our 
concerns with these providers' reported goodwill. Finally, it 
explains our approach to goodwill in this proceeding.
    44. Goodwill is a balance sheet item that is recorded when one 
company acquires another company, being the difference between the 
purchase price and the sum of the fair value of the assets acquired, 
net of the sum of the fair value of the liabilities assumed. 
Goodwill recognizes that the present value of the expected future 
return of the going concern is greater than what would be necessary 
to compensate the original owners for the value of their assets net 
of their debts. Like other long-lived assets measured at carrying 
value on a company's financial statements, goodwill is impaired if 
the carrying value is not recoverable. The goodwill impairment test 
is a test of whether the aggregate carrying value of the assets of a 
business including the value of the goodwill is recoverable. 
Goodwill impairment testing assesses whether a business acquisition 
is successful and holds management accountable for the acquisition. 
For example, if after an acquisition the hoped for synergies fail to 
materialize, then this should be recognized through impairment 
testing. If the impairment testing so indicates, the carrying value 
of the goodwill is written down or reduced on the balance sheet, and 
the amount of the reduction is recorded as a loss on the income 
statement.
    45. Four IPCS providers, {[REDACTED]{time} , report goodwill on 
the Excel template. Providers were required to report goodwill gross 
investment, accumulated amortization, net investment, and 
amortization expense on rows 36, 37, 38, and 55 on the C1-C2. 
Company-Wide Information worksheet and on rows 47, 48, 49, and 66 on 
the D1. Facility Audio IPCS Costs and D1. Facility Video IPCS Costs 
worksheets, respectively. The goodwill data reported on the Company-
Wide Information worksheet are used for the analysis in this 
section. Table 3 below shows the dollar amount of each provider's 
reported goodwill net investment (or more simply goodwill) and the 
percentage of the accounting entity total each provider reported for 
regulated services and nonregulated services. For purposes of our 
discussion of goodwill, regulated services are audio IPCS, video 
IPCS, safety and security measures, automated payment services, live 
agent services, paper bill/statement services, single-call and 
related services, and third-party financial transaction services. 
Nonregulated services are other ancillary services and other 
products and services. These four providers attribute 100% of their 
safety and security investments and expenses to audio IPCS and video 
IPCS and thus none to ancillary services or other products and 
services on the C3. Safety & Security Measures worksheet.

[[Page 77416]]

[GRAPHIC] [TIFF OMITTED] TR20SE24.041

    46. These four providers collectively report goodwill of 
approximately $1.2 billion for regulated services, about 94% of the 
accounting entity total, as compared to approximately $79 million 
for nonregulated services, about six percent of that total.
    47. A provider's reported annual total expenses increase as the 
amount of reported goodwill increases. Goodwill reported on the 
Excel template is a component of net capital stock. The Excel 
template multiplies each provider's net capital stock by its claimed 
WACC or the default WACC of 9.75% to calculate return. The Excel 
template also calculates the federal and state income taxes on this 
return, net of tax-deductible interest expense, using the provider's 
reported federal and state tax income tax rates. The return and 
income taxes are components of annual total expenses, and these 
expenses are reflected in our rate cap calculations. A private firm 
under GAAP may elect to amortize goodwill on a straight-line basis 
over a period of 10 years or less. {[REDACTED]{time} .
    48. Net investment is the building block for net capital stock. 
Net capital stock equals net investment in assets minus accumulated 
deferred federal income taxes, minus accumulated deferred state 
income taxes, minus customer prepayments or deposits, plus cash 
working capital. Net capital stock is not developed on the Excel 
template for nonregulated services. To get a sense of the relative 
magnitude of each of these providers' reported goodwill, Table 4 
below shows their reported goodwill net investment, total net 
investment including goodwill, and goodwill's share of total net 
investment separately for regulated and nonregulated services. Total 
net investment includes net investment in tangible assets, 
capitalized research and development, purchased software, internally 
developed software, trademarks, other identifiable intangible 
assets, and goodwill. It excludes capitalized site commissions.
    49. The four providers collectively report total net investment 
of {[REDACTED]{time}  for regulated services, and of this total 
goodwill accounts for about {[REDACTED]{time} . Thus, for these four 
providers, goodwill accounts for over half the return and related 
income tax allowances that are reflected in our rate caps for the 
industry. In contrast, the four providers collectively report total 
net investment of approximately {[REDACTED]{time}  for nonregulated 
services, and of this total, goodwill accounts for only about 
{[REDACTED]{time} . There is no ``net capital stock'' for these 
nonregulated services upon which a return is ``allowed'' to be 
earned or reflected in rate caps.

[[Page 77417]]

[GRAPHIC] [TIFF OMITTED] TR20SE24.042

    50. Table 29 shows the impact of removing goodwill on each 
provider's annual total expenses. Annual total expenses are the sum 
of reported capital expenses, including a return on net capital 
stock, and operating expenses and is the key component to the upper 
and lower bounds of our zones of reasonableness. Removing goodwill 
from each provider's reported annual total expenses reduces the four 
providers' expenses collectively by approximately $141 million, or 
about 15%. Staff assume a 9.75% return on net capital stock to 
determine this impact. For {[REDACTED]{time} , the reduction to 
annual total expenses reflects removal of the remaining unamortized 
value of capitalized goodwill from net capital stock and removal of 
amortization expense.
[GRAPHIC] [TIFF OMITTED] TR20SE24.043

    51. Regulators often exclude goodwill from the base on which a 
return is allowed, absent a showing by the regulated firm that its 
rate payers stand to benefit from the sale that gives rise to the 
goodwill. Otherwise, a firm that is sold for more than the original 
cost, fair value, or other regulator-specified valuation of its 
assets would be able to earn a return that exceeds what that same 
firm was entitled to earn immediately prior to the sale for no 
reason other than the exchange of ownership for money. Methods of 
asset valuation imposed on regulated firms vary among regulators. 
The 2023 Mandatory Data Collection simply requires that IPCS 
providers report values for the components of net capital stock 
consistent with GAAP. The burden typically is on the acquiring firm 
to

[[Page 77418]]

demonstrate to the satisfaction of the regulator that the 
acquisition will, for example, create efficiencies that lower the 
firm's operating expenses or lead to superior service quality or 
more innovative services, and thus benefit rate payers. Otherwise, 
the regulator may exclude the goodwill arising from the acquisition 
from the base upon which the regulator allows a return to be earned.
    52. For the reasons stated above, regulators are skeptical of 
allowing goodwill to be included in net capital stock. While these 
four firms assign large dollar amounts of goodwill to regulated 
services relative to nonregulated services, they do not explain the 
basis for these assignments. We looked for justification of these 
providers' goodwill claims in their financial statements and in 
their Word templates. What we found only further increased our 
skepticism. For example, {[REDACTED]{time} .
    53. We are also skeptical of {[REDACTED]{time}  reported 
goodwill. {[REDACTED]{time} . Finally, we have no information that 
would allow us to determine whether the four providers' reported 
goodwill reflects value to the incarcerated persons that the prior 
owner was unable to deliver. Absent a demonstration of that value, 
goodwill typically would not be allowed to earn a return or 
recovered as an expense.
    54. In summary, the four providers that report goodwill have not 
justified the amount of their claimed goodwill, nor the assignments 
they make to regulated and nonregulated services. A proper 
assignment of goodwill to regulated services and nonregulated 
services would reflect a comparison between the fair values of these 
services to the fair value of their assets, net of liabilities. 
Among other complexities, determining the fair value of these 
services would require an estimate of the present worth of their 
future cash flows. Staff lack the type of detailed and comprehensive 
financial information and the insight into the operations of these 
services that would be needed to develop our own present worth 
estimates and thus have no accurate and feasible way to re-assign or 
make targeted disallowances to the goodwill these providers' report 
on their Excel templates. Further, we lack sufficient information to 
estimate the goodwill recorded on the balance sheet at time of the 
acquisition, to conduct impairment tests, or to determine the source 
of the goodwill, and hence to determine whether it should be allowed 
to earn a return or recovered as an expense. We therefore make no 
reassignment of or disallowance to the providers' claimed goodwill. 
Instead, we consider the possibility of misassignment or 
overstatement of goodwill when choosing rate caps from within our 
zones of reasonableness.

5. Safety and Security Expenses

    55. Safety and security expenses as reported in the data 
collection are divided into seven categories: the Communications 
Assistance for Law Enforcement Act (CALEA) compliance measures and 
communication security services, law enforcement support, 
communication recording services, communication monitoring services, 
voice biometric services, and other safety and security measures. Of 
the providers included in our dataset, 11 providers reported expense 
data and additional information regarding their delivery of safety 
and security measures. Of those 11 providers, all reported offering 
some mix of safety and security measures and allocated their 
expenses by category. Table 6 shows these expenses by category and 
facility type, after the WACC and tax-deductible interest expense 
adjustments.
BILLING CODE 6712-01-P

[[Page 77419]]

[GRAPHIC] [TIFF OMITTED] TR20SE24.044


[[Page 77420]]


[GRAPHIC] [TIFF OMITTED] TR20SE24.045

BILLING CODE 6712-01-C
    56. Because these expenses were exclusively reported at the 
level of these seven categories and each category contains more than 
one safety and security measure, it is not possible to isolate the 
expenses incurred to provide each individual safety and security 
measure within each category, much less the portion of the expenses 
within each category that are used and useful in the provision of 
IPCS. The instructions for the 2023 Mandatory Data Collection 
required providers to allocate safety and security expenses among 
the seven categories at the facility level, and gave providers the 
option to further allocate these expenses among individual services 
within each category, notwithstanding NCIC's claim to the contrary. 
Providers, including NCIC, declined to allocate costs among 
individual services, precluding the Commission from identifying 
those expenses on a more granular basis. While our upper bounds 
include all expenses reported for each of the seven categories, the 
lower bounds include only the expenses reported for the two of these 
categories that consist of safety and security measures that we find 
are generally used and useful in the provision of IPCS: CALEA 
compliance measures and communication security services. Providers' 
narrative responses also indicate that the suite of safety and 
security measures they provide are often offered as a default 
package at the time of contract, however some providers also offer 
optional add-on services. The fact that these services are optional 
belies the claim that they are necessary for the provision of IPCS. 
For example, {[REDACTED]{time} . Together, CALEA compliance measures 
and communication security services capture 34.1% of reported audio 
and 36.9% of reported video safety and security measure expenses 
after the WACC and tax-deductible interest expense adjustments.
    57. Table 7 compares per-minute audio and video IPCS safety and 
security expenses after the WACC and tax-deductible interest expense 
adjustments, with and without the category adjustment. Across the 
industry, the adjustment for the lower bounds decreases audio safety 
and security expenses by $0.028 per billed audio minute and video 
safety and security expenses by $0.054 per billed video minute. The 
percent decrease from the unadjusted to adjusted total is similar 
across all facility types within audio and video.

[[Page 77421]]

[GRAPHIC] [TIFF OMITTED] TR20SE24.046

6. Ancillary Services Cost Analysis

    58. Ancillary services are billing and collection services for 
both audio and video IPCS, and consequently are not reported 
separately. The reported expenses for these services are included in 
the upper bounds of our zones of reasonableness for audio and video 
IPCS by dividing them by the sum of audio and video minutes and 
adding this quotient to the separate audio and video caps. This 
upper bound adjustment adds a flat per-minute allowance, $0.011, for 
ancillary services, for all five size-type facilities. This is 
computed as industry ancillary services expenses, $125.2 million, 
divided by the sum of the audio and video IPCS minutes of the 
providers that reported ancillary services expenses, 11,585.9 
million (a smaller number than the industry total number of 
minutes).
    59. The lower bounds reflect reductions in ancillary services 
expenses for {[REDACTED]{time}  due to restatements (lowering) of 
their WACCs, with an accompanying adjustment to {[REDACTED]{time}  
reported tax-deductible interest expense. The result is an industry 
ancillary service expense of $0.010 per minute. Industry ancillary 
services expense for the five services, $125.2 million, is reduced 
by WACC and interest expense adjustments for {[REDACTED]{time} . The 
minutes for providers who report these expenses are 11,585.9 
million. Like the $0.011 ancillary expense added to the upper 
bounds, this lower figure is added to the lower bounds as a flat 
per-minute allowance for all five size-type facilities.

7. Video Expense Adjustment(s)

    60. {[REDACTED]{time}  Video IPCS Adjustment. {[REDACTED]{time}  
reports extremely high costs for the provision of video IPCS. Their 
video IPCS per-minute expenses are a substantial outlier vis-a-vis 
their closest competitors and the industry as a whole, and their 
resulting reported per-minute video IPCS expenses significantly skew 
the industry average. They are three times higher than the industry 
average and about {[REDACTED]{time} . Staff did not adjust 
{[REDACTED]{time}  per-minute expenses in establishing the upper 
bounds of our zones of reasonableness but find it appropriate to 
adjust these expenses in establishing the lower bounds. While staff 
cannot fully determine why {[REDACTED]{time}  reported expenses are 
so different to everyone else's, they are not indicative of 
efficient operations. For example, it is likely {[REDACTED]{time}  
future demand will rise to at least proportionately match that of 
{[REDACTED]{time} , and that may result in spreading 
{[REDACTED]{time}  capital expenditures over significantly more 
video minutes.
    61. Staff make a conservative adjustment to {[REDACTED]{time}  
video IPCS expenses to align them more closely with the rest of the 
industry by recalculating their expenses based on the industry 
average costs per minute. More specifically, we calculate the 
weighted average video IPCS cost per minute of all providers, 
excluding {[REDACTED]{time} . This estimate is multiplied by 
{[REDACTED]{time}  total billed and unbilled video IPCS minutes to 
estimate {[REDACTED]{time}  video expenses as if they were 
equivalent to the rest of the industry. {[REDACTED]{time}  adjusted 
expenses are then divided by their original expenses and subtracted 
from one to calculate the percent reduction to {[REDACTED]{time}  
video expenses. With an industry cost per minute for video IPCS of 
0.076 when {[REDACTED]{time}  is excluded, the reduction to 
{[REDACTED]{time}  expenses is 78.5%. We apply this reduction to 
video IPCS expenses separately to each of {[REDACTED]{time}  
facility tiers and divide by total minutes for each tier to arrive 
at per-minute estimates. This approach is conservative as a more 
appropriate adjustment of {[REDACTED]{time}  video expenses would 
weigh more heavily towards {[REDACTED]{time}  video expenses, given 
their comparable sizes and market positions. Such a reduction would 
bring {[REDACTED]{time}  video per-minute costs even lower, as 
{[REDACTED]{time}  is a relatively low-cost provider of video IPCS.
    62. Table 8 shows the unadjusted and adjusted video IPCS 
expenses for {[REDACTED]{time}  as well as the industry average, 
which includes {[REDACTED]{time} , for each facility type. The 
adjusted video IPCS expense per minute for {[REDACTED]{time}  across 
all facilities does not equal that of the industry average because 
the reduction applied to the video expenses for {[REDACTED]{time}  
is calculated using all observations while the industry average 
expense per minute estimates presented in Tbl. 8 must exclude 
facilities that do not report ADP so that facilities can be grouped 
by tier. All other adjustments made to the

[[Page 77422]]

lower bounds are applied to both scenarios presented in the table. 
When compared to the industry average, which includes 
{[REDACTED]{time} , {[REDACTED]{time}  cost per minute across each 
facility type is roughly three or more times higher, with the 
exception of small jails, which are still twice that of the industry 
average. Once the adjustment is made to {[REDACTED]{time}  video 
IPCS expenses, {[REDACTED]{time}  video cost per minute for each 
facility type is much more comparable to the industry average for 
each corresponding facility type. However, when including safety and 
security we find that {[REDACTED]{time}  total IPCS video expenses 
are still substantially above the industry average, both overall and 
for each corresponding facility type. Despite what is likely a 
similar overinvestment in video safety and security relative to 
competitors, we do not adjust {[REDACTED]{time}  safety and security 
expenses for video IPCS provision.
BILLING CODE 6712-01-P
[GRAPHIC] [TIFF OMITTED] TR20SE24.047

    63. {[REDACTED]{time}  Tablet Deployment. We examine 
{[REDACTED]{time}  deployment of tablets relative to its competitors 
to determine whether {[REDACTED]{time}  has over-invested in 
tablets, and whether tablet deployment costs have an outsized impact 
on {[REDACTED]{time}  video IPCS expenses. Table 9 shows tablet 
deployment per ADP across providers and facility tiers. 
{[REDACTED]{time}  deployed the most tablets per ADP for each jail 
tier, and has the same per-ADP deployment as {[REDACTED]{time}  in 
prisons.

[[Page 77423]]

For medium jails, {[REDACTED]{time}  tablets exceed the incarcerated 
person population by 21%. In total, as seen further down in Table 10 
below, {[REDACTED]{time}  has deployed nearly twice as many tablets 
as {[REDACTED]{time} .
[GRAPHIC] [TIFF OMITTED] TR20SE24.048


[[Page 77424]]


    64. {[REDACTED]{time}  reports a $400 million gross investment 
in tablets. {[REDACTED]{time}  tablet deployment should be reflected 
in higher investment in tangible assets in the 2023 Mandatory Data 
Collection data. Table 10 shows industry net tangible asset 
attribution between regulated and nonregulated business segments. 
While {[REDACTED]{time}  has a significant investment in net 
tangible assets, possibly due to its investment in tablets, it 
attributes the lowest percentage of net tangible assets to regulated 
services among all providers {[REDACTED]{time} . As such, despite 
{[REDACTED]{time}  tablet deployment being out of line with 
{[REDACTED]{time}  and the rest of the industry, the large majority 
of {[REDACTED]{time}  tangible asset net investment is not reflected 
in its net capital stock for regulated IPCS services. As such, we 
refrain from making any adjustments with respect to 
{[REDACTED]{time}  video investments or expenses on the basis of 
tablet deployment.

[[Page 77425]]

[GRAPHIC] [TIFF OMITTED] TR20SE24.049


[[Page 77426]]



B. Audio and Video IPCS Lower Bounds

    65. Incorporating the adjustments discussed above, staff have 
calculated ten lower bounds--five for audio IPCS and five for video 
IPCS, in each case for prisons, large jails, medium-size jails, 
small jails, and very small jails. As with the upper bounds, our 
rate-setting approach controls for the effect of facility type and 
size on expense per minute.
    66. The respective lower bounds for audio and video services for 
the five facility types are the sum of four per-minute expense 
components: (i) audio IPCS or video IPCS; (ii) audio or video IPCS 
safety and security measures; (iii) ancillary services; and (iv) the 
TRS additive.
    67. Table 11 summarizes the industry average components of the 
lower bounds of our zones of reasonableness for audio and video IPCS 
expenses, separately for audio and video, and for each rate tier. 
Column (1) shows the industry average for per-minute audio IPCS 
expenses by facility type, column (2) shows the industry average for 
per-minute safety and security expenses by facility type, and column 
(3) shows the final lower bound estimates for audio IPCS, including 
the ancillary service and TRS additives. Columns (4), (5), and (6) 
report the corresponding estimates for video IPCS expenses per 
minute.
[GRAPHIC] [TIFF OMITTED] TR20SE24.050

BILLING CODE 6712-01-C

C. Validation of Lower Bounds

    68. This section uses three different sources to validate our 
lower bounds. The first examines evidence submitted by the Brattle 
Group as to reasonable per-minute audio and video expenses and find 
that to be consistent with, if somewhat lower, than our lower bounds 
for audio. The second shows that large fractions of facilities in 
all likelihood would be viable at rates that are less than our lower 
bounds, validating that our lower bounds are not set too low. Staff 
demonstrate this for many facilities--presumably those with the most 
efficient operations after controlling for facility type. The third 
compares counties in the region of Dallas and Denton in Texas and 
finds that per-minute audio rates of {[REDACTED]{time} . Because we 
set each of our rate caps somewhat above the respective lower 
bounds, but in each case closer to the lower bounds than the upper 
bounds, these sources also offer support for the rate caps that we 
adopt.

1. Brattle Analysis

    69. In reviewing the record, we find the Brattle Group's model 
carrier analysis provides external validation for our lower bounds. 
The Brattle Group's analysis estimates per-minute costs for audio 
and video calls in small, medium, and large facilities, drawing on 
market data and data from the 2023 Mandatory Data Collection. The 
initial model was filed on July 12, 2023, and a revised model was 
filed on February 9, 2024. Comments were filed on the Brattle model 
carrier analysis.
    70. The Commission finds the model carrier approach useful to 
evaluate the analysis of reported industry investments and expenses 
undertaken by staff to establish the lower bounds of our zones of 
reasonableness. Brattle's model carrier analysis aggregates 
estimates of the costs of the various components that comprise IPCS, 
including a markup on expenses to cover overhead. Its aim is to 
estimate IPCS costs based on publicly available prices that are 
constrained by market forces capturing industry standards for 
efficiency, cost, and performance. As explained below, we find that, 
by and large, Brattle has produced a credible and transparent model 
of industry costs.
    71. The advantages of Brattle's model carrier approach include 
its transparency and

[[Page 77427]]

that market forces ``audit'' the relied-upon price data, in contrast 
to the inability of the Commission and other stakeholders to audit 
providers' expense reports. The disadvantages are that there are 
aspects of IPCS for which there are limited market data, notably 
many safety and security measures (which the Brattle Group does not 
model), that it is not clear how to add up piece parts from 
different wholesale markets to ensure the sum of the parts is a good 
estimate of the whole, and that it may be difficult for a model 
carrier approach to capture cost variation along relevant cost-
causative dimensions, notably the distinction between prisons and 
jails, and across jail sizes. The Brattle Group address this 
difficulty by using wholesale prices, which already include markups 
for overheads, and then apply further markups for overheads to the 
sum of these component estimates. Arguably, economies of scope and 
scale in IPCS supply may be missed by such an approach, resulting in 
cost overestimation. The Brattle Group seek to capture these 
differences by choosing component cost models that, in their 
analysis, likely overstate costs.
    72. Brattle filed an initial model carrier approach, and then in 
the light of comments, a revised approach. We focus on the latter. 
Brattle created its model carrier by identifying five modules of 
costs, populating the modules with data taken from, where available, 
publicly available prices, the sources for which they document in 
their report; the Commission's data collection from IPCS providers; 
and other market estimates. The five cost modules are described in 
Table 12.
[GRAPHIC] [TIFF OMITTED] TR20SE24.051

    73. Brattle's revised model carrier analysis makes several 
adjustments to the Telecom and Facilities cost modules in response 
to critiques in the record. These adjustments include the following 
four responsive adjustments. First, Brattle made an upward revision 
in VoIP call cost by eliminating zero-cost providers from the set 
used to calculate an average price. This revision responded to Mr. 
Wood's critique that the model picked the lowest prices. FTI argues 
even this high rate is too low, but offers no alternative. Second, 
Brattle made an upward adjustment to the price of a video call with 
a rate from Microsoft Azure at $0.0004 per minute. This revision 
responded to Mr. Wood's critique that the model picked the lowest 
prices. FTI argues even this higher rate is too low but offers no 
alternative. Third, Brattle made an upward adjustment to the number 
of necessary T-1 lines based on high-definition video call quality 
for 60 minutes. Fourth, Brattle shortened the useful life of 
equipment and relied on a wider array of equipment pricing to 
respond to Mr. Wood's critique that providers make tradeoffs between 
maintenance and replacement of assets.
    74. The model carrier analysis assumes all video calls are made 
over kiosks, which Brattle explains are more expensive than tablets. 
Brattle does not use tablets because tablets can be used for 
nonregulated services like books and movies, which creates a cost 
allocation issue. FTI's comments argue that in fact tablets are 
widely used, sometimes in conjunction with kiosks. This may be so, 
but may reflect a transition from kiosks to tablets, with such 
duplication being inherently inefficient. Without record evidence, 
staff do not consider it appropriate to add both kiosk and tablet 
costs together for the purposes of the model carrier model. Further, 
even a partial transition from kiosks to tablets would imply that 
Brattle's revised model may overestimate the number of kiosks but 
underestimate the cost of tablets, with the net impact on 
recoverable expenses arguably being an over, rather than an 
underestimate.
    75. In its revised model carrier analysis, Brattle also lowers 
the video to audio minutes ratio from 1:2 to 1:4, which raises video 
per-minute costs. The more video minutes in the model, the lower the 
per-minute cost would be, because a large fraction of costs are 
fixed. Video IPCS is still developing, and the Commission's data 
collection does not provide a robust basis for

[[Page 77428]]

establishing a ratio based on long-run relative demand for audio vs. 
video IPCS. In developing our lower bounds, the Commission 
implicitly assumes an audio to video ratio as given by the industry 
average, excluding Securus. {[REDACTED]{time}  If, as is likely, the 
ratio of video to audio calls were to increase substantially, then 
our per video minute lower bounds would be much too high. Outside of 
the IPCS context, video calls are increasingly popular, and it is 
likely we will see a similar trajectory for the provision of video 
IPCS going forward. For example, Juniper Research predicts a 
continued decline in revenues from voice service for mobile network 
operators, despite investments in 5G and growing subscriber numbers, 
because the quality of over-the-top services like video conferencing 
applications are improving. To the degree that happens, the Brattle 
model and our own projections would overstate long-run video 
expenses. It is uncertainty about long run video expenses that leads 
us to set interim, rather than permanent, rate caps for video IPCS.
    76. Site commissions are not included the model carrier, 
something Wood criticizes. However, the exclusion of site 
commissions as an expense is consistent with the used and useful 
analysis in our Order. Consequently, excluding those costs from the 
data analysis accords with the legal determinations we make.
    77. Table 13 shows costs for audio and video calls when applying 
the model carrier for small, medium, and large facilities in 
Brattle's revised model. {[REDACTED]{time} 
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    78. The Model Carrier Analysis Is Largely Consistent with Our 
Lower Bounds for Audio IPCS. Brattle Group's revised model carrier 
analysis makes several reasoned adjustments in response to record 
criticism of its original submission, resulting in the per-minute 
estimates in Table 13 above. For audio, these estimates generally 
align with the lower bound audio IPCS component of expenses that 
staff derived through an examination of industry average costs based 
on provider 2023 Mandatory Data Collection data ($0.021 per minute 
for prisons and $0.022 for large jails). While the model's estimated 
video IPCS expenses, excluding safety and security, are about 
{[REDACTED]{time}  than those established in our lower bounds, this 
disparity can be, at least in part, attributed to the market for 
video being less established than audio, as reflected by 
{[REDACTED]{time} .
    79. Staff acknowledge that the model carrier is not a substitute 
for a fully distributed cost analysis of provider investments and 
expenses because it is unable to capture all sources of cost 
variation in the provision of IPCS, most notably cost differences 
between facilities of different types and sizes, and because a model 
that aggregates piece-parts of service provision to create an 
efficient provider by definition does not reflect the real world 
investment, operating, and other decisions of IPCS providers. 
However, staff are encouraged that the benchmark audio IPCS rates 
estimated by the revised model align closely with the lower bounds 
we have established, which helps to validate both our lower bound 
estimates and the rate caps that we ultimately adopt.

2. Reported Facilities Earning Per-Minute Revenues Below Our Lower 
Bounds

    80. Comparing Per-Minute Audio Revenues with Our Lower Bounds. 
This section examines the facilities in which the per-minute audio 
revenue, less site commissions, that is, the per-minute revenues 
providers keep at a given facility, is less than our lower bounds 
for that facility type. We do not perform a similar analysis for 
video because the video data is unreliable and likely reflects a 
nascent market with significant up-front expenses and low demand. 
This means that both per-minute video revenues and per-minute video 
expenses (relied upon to establish the lower bounds) are distorted, 
and a comparison of the two would not yield meaningful results in 
terms of validating our interim video lower bounds. 
{[REDACTED]{time}  These facilities demonstrate that our lower 
bounds may be too high (and so provide further validation for 
setting our rate caps closer to the lower bounds). Such facilities 
are prima facie profitable at prices that approximate their per-
minute audio revenue rates, otherwise providers would be seeking to 
exit these contracts, thus showing their per-minute audio costs, net 
of site commissions, to be below our lower bounds. This result 
applies most strongly for prisons and large jails, where nearly two 
thirds and nearly one half of facilities, respectively, have per-
minute audio revenues net of site commissions that lie below their 
respective lower bounds. For medium, small and very small jails this 
share is between more than a fifth and more than a third of 
facilities. We also find that the share of providers with per-minute 
audio revenues less site commissions that are less than our lower 
bounds is not significantly impacted by whether the provider is in a 
rural or urban area.
    81. In undertaking the analysis, staff's first step is to 
calculate, for each facility, the sum of IPCS audio, safety and 
security and ancillary service revenues net of site commissions and 
divide this amount by the sum of the facility's billed and unbilled 
minutes. Safety and security revenues are allocated to facilities 
using safety and security expenses, as the two are likely 
correlated. {[REDACTED]{time} . Site commissions at the facility 
level are allocated between audio video using revenue weights, since 
site commissions are in many cases proportional to revenues. To make 
an apples-to-apples comparison between the resulting revenue per 
minute for a facility and its corresponding lower bound, staff 
subtract from the lower bound the $0.002 allowance for TRS costs and 
add back in the safety and security expenses removed from the lower 
bounds. The safety and security expenses added back in are: law 
enforcement support, communication recording services, communication 
monitoring services, voice biometric services, and other safety and 
security measures. CALEA compliance measures and communication 
security services are included in the lower bounds. The TRS 
allowance is subtracted because in 2022 TRS was largely not 
provided, and so TRS costs did not need to be recovered. Staff add 
back in the safety and security expenses that were removed to create 
the lower bounds, because revenue reported in 2022 was for services 
that included these safety and security expenses. The last row of 
Table 14 shows the net impact of these two adjustments on the lower 
bound. Thus, staff compare the revenue per-minute calculation for 
each facility with the lower bound appropriate to that facility, 
thereby identifying facilities for which the per-minute revenue is 
less than the lower bound.
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    82. Table 15 shows the facilities depicted in Table 14 
categorized by whether they are located in an urban area, as 
classified by the Census (locations that we could not geocode were 
unassigned). It suggests that geography does not have a material 
impact on whether facilities have per-minute revenues less than 
their lower bounds as calculated. The last row shows that non-urban 
facilities are 75% less common than urban facilities. This ratio is 
also true for facilities that could be identified as urban or rural 
with the per-

[[Page 77431]]

minute revenues as described being less than the adjusted lower 
bounds, suggesting geography has no impact on the likelihood that a 
facility's per-minute rates being lower than the lower bounds as 
calculated here.

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    83. In summary, our lower bounds do not appear too low. Nearly 
42% of facilities operate at imputed per-minute rates, after netting 
of site commissions, that lie below our caps, yet there are no signs 
that these contracts are not viable. Thus, it is likely per-minute 
costs for at least the vast bulk of these contracts are less than 
our lower bounds.

3. Low-Priced Contracts Analysis

    84. A Comparison Across 13 Contiguous Texas Counties. This 
section shows two things. First, that our lower bounds may be 
excessive for the region of Dallas-Fort Worth and surrounding 
counties, which provide a broad range of conditions, from urban to 
rural. And staff have no reason to think there is something special 
about this region. Second, that despite there being no obvious 
reasons why costs would vary significantly across comparable 
counties within this region, the per-minute revenues kept by 
providers, that is, per-minute revenues net of site commissions, 
vary widely. This suggests in most instances where one sees high 
per-minute revenues, net of site commissions, these do not reflect 
costs.
    85. {[REDACTED]{time}  We then reviewed the publicly available 
contracts we were able to find to better determine if these low 
prices were driven by unusual factors (aside from having limited 
site commissions). {[REDACTED]{time}  Consequently, staff examined 
the cluster of 13 counties contiguous to Dallas, Tarrant (Fort 
Worth), and Denton in Texas--Figure 1, {[REDACTED]{time} . The twin 
cities of Dallas and Fort Worth (Tarrant) are natural comparators. 
Collin and Denton are also natural comparators. They are neighbors 
of similar geographic size, each lies above a major urban 
agglomeration, and has a population of about one million people. 
Collin had a population of 1,064,465, and Denton of 906,422. Ellis, 
Hunt, Grayson, Johnson, Parker are all of geographically similar 
sizes with populations ranging from about 100,000 to about 200,000. 
Their respective 2020 Census population estimates were: Ellis: 
192,455; Grayson: 135,543; Hunt: 99,956; Johnson: 179,927; Kaufman: 
145,310; and Parker: 148,222. Rockwall's population is 107,819, very 
similar to Hunt's, but Rockwall is geographically much smaller than 
all the counties considered here. That leaves Cooke and Wise, which 
are of similar geographic size to all the other counties, except 
Rockwall. Cooke and Wise have the two smallest populations, 
respectively of 41,668 and 8,632.

Figure 1: The Counties of, and Surrounding, Dallas-Fort Worth and 
Denton, Texas, Sorted According to Their Reported IPCS Audio Rates

    {[ REDACTED ]{time} 
    Source: Rates are as found in the providers' 2022 Annual Reports 
(covering 2021).
    86. Of the 13 counties just outlined, staff were able to 
identify all but {[REDACTED]{time}  in the 2023 Mandatory Data 
Collection--see Table 16. {[REDACTED]{time} 
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    87. {[REDACTED]{time} 
    88. Given the disparity in reported per-minute revenues, net of 
site commissions, staff sought further information on each of these 
counties. Staff could identify no factors that would justify cost 
differences substantially above the implied costs for the counties 
with low prices.
    89. Staff first checked providers' 2023 Annual Reports for 2022 
for consistency with their 2023 Mandatory Data Collection reports. 
Each county's IPCS audio rates are listed in Table 17, along with 
whether the county receives any site commissions. This data was 
largely consistent with the reports in the 2023 Mandatory Data 
Collection.

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BILLING CODE 6712-01-C
    90. Summary of Contract Analysis. Commission staff then analyzed 
the five contracts they were able to find for these 13 counties, 
those of Dallas, Denton, Grayson, Tarrant and Wise. Comparing the 
twin cities of Dallas and Fort Worth (Tarrant) shows that Securus's 
per minute revenues, net of site commissions, were about $0.015 per 
audio minute in Dallas, much less than in Tarrant, which were $0.133 
per audio minute, for no reasons staff could identify. Thus, staff 
concludes the costs of supplying populated suburban counties like 
Dallas and Tarrant are around or less than $0.016 per minute. This 
is well below our lower bound.
    91. {[REDACTED]{time} 
    92. Staff examination of the Grayson contract showed it only 
provides fairly basic features. {[REDACTED]{time}  In turn, this 
suggests that our rate caps should be set closer to our lower 
bounds.
    93. Dallas and Tarrant Contracts. The Dallas contract shows 
nothing that would suggest it is for facilities with unusually low 
costs. {[REDACTED]{time}  the Dallas contract was with Securus, 
involved no site commissions, and included free community tablets 
and included hosted video visitation services. Per-minute domestic 
audio and video visitation rates were respectively $0.0119 and 
$0.13, with the only other charges being $0.24 to send an email, and 
$5 per month for a personal tablet and charges for games, video and 
audio content.
    94. Given their proximity, and extent of interaction, Dallas and 
Tarrant likely face similar cost conditions. {[REDACTED]{time}  They 
showed audio rates were set on to $0.16 per minute on November 16, 
2021, with two sources of site commissions: Tarrant received $0.02 
per minute, and $59,420 per month, which previously came from per-
minute site commissions. Staff could not calculate Tarrant's 
effective per-minute site commission from the contract. In 
comparison, Securus received $0.0119 per IPCS minute in the Dallas 
contract. There is nothing in the contracts to suggest that IPCS 
provision in Tarrant is more expensive than IPCS provision in 
Dallas.
    95. Denton contract. Staff next compared the ``sister'' counties 
Denton and Collin. {[REDACTED]{time}  Staff only had the Denton 
contract to examine. It specifies call prices of $0.02 per minute 
with a 95% site commission payment. {[REDACTED]{time} 
    96. Grayson and Wise Contracts. The only other contracts staff 
were able to find were for the relatively small and rural Grayson 
and Wise Counties. Both contracts are with Correct. In Grayson, 
Correct sets the following per-minute rates: interstate prepaid and 
debit, $0.21, interstate collect, $0.25, international, $1.00, 
intrastate, $0.30, and video visitation $0.50. The contract's 
domestic rates are consistent with the 2022 annual report Correct 
made to the Commission for calendar year 2001. There is a $3.00 
credit card transaction fee, a $1 for debit calling moving fee, a 
$5.95 live operator fee, a $0.50 message or email fee, and $0.99 per 
hour for tablet use, though prisoners are allowed 15 minutes of free 
tablet use every four hours. Correct installs and maintains 
equipment, including kiosks and tablets, and undertakes certain 
services, such as contraband and remote mail scanning. Under the 
contract, Correct pays an 82% site commission on all but interstate 
calls and 10% on video visitation, suggesting Correct collects $0.21 
per minute on interstate calls, and $0.06 (= (1-0.82) * $0.30) on 
intrastate calls. {[REDACTED]{time} 
    97. Wise County contracted with Correct effective October 1, 
2018, to provide audio IPCS setting the following rates: interstate 
prepaid, $0.21, interstate collect, $0.25, international, $0.50, 
intrastate, $0.50, kiosk transactions, $3.00, and live operator 
transactions, $5.95. {[REDACTED]{time}  Under

[[Page 77436]]

the contract, Correct was to provide what appear to be relatively 
basic services: the equipment and platform required for IPCS and 
voicemail services. Wise County was also to receive 75% of calling 
revenue ``with the exception of interstate calls with regard to the 
FCC rule,'' and 100% of voicemail revenues. Staff understand the 
exception to be the same as for Grayson, that no commission is paid 
on interstate calls. The contract was amended three times, numbered 
one through three, and still appears to be in place. One of those 
amendments is relevant here. In that, Correct agrees to increase the 
services it requires, in particular to provide 100 tablets, two 
correctional grade kiosks, chargers and similar and certain services 
such as electronic messaging, law library, and medical scheduling. 
There was also a memorandum of understanding which states that due 
to an ``excessive increase in cost of business'' Correct will now 
``impose a five percent reduction in the number of minutes on which 
the commission is calculated.''
    98. {[REDACTED]{time} 

Appendix J: Rate Cap Validation

    1. Selection of Rate Caps from Within Zones of Reasonableness. 
We establish our final audio IPCS and our interim video IPCS rate 
caps from within our zones of reasonableness. Table 1 presents the 
rate caps for audio and video IPCS.
[GRAPHIC] [TIFF OMITTED] TR20SE24.059

    2. Validity Check on the Audio Rate Caps. This appendix counts 
the facilities where the per-minute audio revenue, less site 
commissions, is less than our rate cap for that facility type. On 
the revenue side, for each facility, we calculate the sum of IPCS 
audio, safety and security, and ancillary service revenues, net of 
site commissions, and divide this amount by the sum of the 
facility's billed and unbilled minutes. Safety and security revenues 
are allocated to facilities using safety and security expenses, as 
the two are likely correlated. {[REDACTED]{time}  Site commissions 
at the facility are allocated between audio and video using revenue 
weights, since site commissions are in many cases proportional to 
revenues. To ensure apples-to-apples comparisons, staff subtracts 
the TRS addon of $0.002 from our rate cap and adds back those safety 
and security expenses which were removed from the lower bounds. We 
do not perform a similar analysis for video because the video data 
is comparatively unreliable and likely reflects a nascent market 
with significant up-front expenses and low demand. We agree that 
``[v]ideo calling is a relatively new service compared to audio 
calling'' and that providers ``will gradually enhance their 
efficiency in providing this service over time.'' In sum, a 
comparison of per-minute video revenues and per-minute video 
expenses using data from the 2023 Mandatory Data Collection, which 
are for calendar year 2022, would not meaningfully validate our 
interim video rate caps. About half of facilities meet this 
condition, as shown in Table 2. It is likely that our audio caps 
will have little impact on these facilities, for those facilities 
which collect revenues per minute which lie below our caps will not 
need to adjust their pricing, things otherwise constant. This result 
applies most strongly for prisons and large jails, where about three 
quarters and more than half of facilities, respectively, collected 
per-minute audio revenues below their respective rate caps. Shares 
of medium, small, and very small jails facilities with per-minute 
revenues below the rate caps are about 42%, 29%, and 39% 
respectively.
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BILLING CODE 6712-01-C
    3. A large fraction of facilities of all types demonstrate 
profitability at rates consistent with our rate caps. While certain 
providers claim otherwise and argue that our rate caps will prevent 
many providers from recovering costs, we reject these claims as 
explained herein. Many facilities appear to have per-minute revenues 
net of site commissions that exceed plausible estimates of costs. 
For example, 1,294, or over 30% of facilities, report per-minute 
audio revenue, less site commissions, that exceed our highest upper 
bound, $0.152, which is for very small jails. Of these, 627, or 15% 
of, facilities have reported per-minute audio revenues, net of site 
commissions, that exceed $0.21, our highest interim cap, but there 
are no credible claims that per-minute costs come close to this 
level. In fact, the highest per-minute average cost for audio, 
including safety and security costs, any provider reported in the 
current collection, was {[REDACTED]{time} . Our upper bound analysis 
suggests it is unlikely that these per-minute revenues are cost-
reflective. Per-minute expenses, net of site commissions, also vary 
widely within the same facility tier. Given there were facilities 
where providers' per-minute revenues less site commissions exceeded 
our rate caps, this suggests that their revenues per-minute either 
exceed costs per-minute, or some providers' costs are inefficiently 
high.

[[Page 77439]]

    4. In an efficient market for the same service, all providers' 
per-minute revenues (net of site commissions) would be similar, as 
would providers' per-minute expenses net of site commissions. After 
controlling for facility type, we do not see this similarity. There 
is no suggestion in the record that we are missing key sources of 
cost variation that could explain the substantial differences we 
observe. In fact, our Lasso analysis shows providers' identities are 
more correlated with costs than any other variable, reinforcing the 
conclusion that reported per-minute revenues do not reflect 
efficient costs. The Lasso analysis shows that provider identity and 
state are primarily correlated with per-minute expenses. Facility 
type and whether or not a site commission is collected also matter, 
but far less than provider identity and state. Consequently, our 
caps will put market pressure on providers with inefficient per-
minute costs. Because so many facilities, after controlling for 
facility type, have per-minute revenues below our rate caps, we find 
it likely that efficient per-minute costs are below our caps as 
well. Thus, our caps incentivize firms with particularly inefficient 
costs to reduce their costs through increased efficiencies.
    5. Comparing revenues under our rate caps to reported expenses 
shows that a range of providers, both big and small, are expected to 
recover their costs, again supporting our finding that our rate caps 
will allow efficient providers to meet demand for IPCS. Inefficient 
firms may well face market pressure as a result, but we are not 
persuaded by such claims. Table 3 shows the revenues a provider 
would receive if their reported respective audio minutes and video 
minutes for each facility were multiplied by the respective audio 
and video rate caps. It also shows the sum of audio IPCS, video 
IPCS, and CALEA and Communication Security expenses. The difference 
between these understates the expected margin since call volumes 
would rise with lower prices, but, due to economies of scale, costs 
would rise less quickly. We likewise reiterate that we believe 
reported costs are inflated, particularly given that total industry 
reported costs exceed total industry reported revenues by such a 
wide margin. Of the 4,441 facilities, 3,202 have revenues at the 
rate caps that match or exceed their costs, accounting for 72% of 
facilities. Eight of the twelve providers in our database have 
implied revenues under the caps that exceed their reported costs. 
The eight providers are {[REDACTED]{time}  This is also true for 
revenues calculated as the product of reported minutes and the lower 
of our rate caps and existing prices. We do not find that the other 
four providers would not recover their costs, only that they would 
not recover revenues as calculated here. We therefore disagree that 
many providers would not be ``fairly compensated.'' These providers, 
{[REDACTED]{time} , cover about 85% of all facilities. 
{[REDACTED]{time} 
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    Contrary to some claims, which argue that our rate caps impact 
smaller providers and thus smaller facilities, provider size is no 
predictor of the choice to serve very small jails. We disagree with 
such claims. As we explain, the eight providers which already have 
revenues less site commissions beneath our caps serve an 
overwhelming number of small and very small facilities, as well as 
medium and large facilities. As illustrated in Table 4, all eight of 
the providers discussed above serve very small jails. 
{[REDACTED]{time}  Thus, it is implausible that our caps will 
prevent supply in small jails. Even if we take all providers' 
reported costs at face value, which we do not, we would not be 
setting just and reasonable rates if we allowed any provider to 
recover its reported costs-of-service where these exceed those of an 
efficient provider. As articulated therein, we find the reasons that 
reported costs are overstated to be compelling, and disagree that 
such a finding is ``erroneous[ ].'' Equally, we must ensure 
providers are fairly compensated. To that end, we have chosen to set 
rate caps that likely exceed efficient costs, even if they are lower 
than some providers' reported costs.

[[Page 77441]]

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BILLING CODE 6712-01-C
    7. We reject claims that our actions could harm competition. 
Competition should not be mistaken for the number of competitors. 
Competition delivers lower prices, adjusted for quality, and 
competition may sometimes drive out inefficient competitors. 
Competition also leads inefficient competitors to become more 
efficient. Setting rate caps to enable inefficient competitors to 
survive would not be pro-competitive, and would not result in just 
and reasonable prices. It would also allow providers to be 
overcompensated, rather than to receive fair compensation. Nor would 
an inefficient provider's exit from the market indicate a reduction 
of competition as some commenters allege. This commenter would do 
well to mind the age-old antitrust maxim: the law protects 
competition, not competitors. We agree with those commenters that 
observe that ``the Commission is not obligated to set rates to cover 
an inefficient business model.''
    8. We also disagree with claims that inflation and concomitant 
regulatory obligations are ``plausible explanations'' for why 
industry reported costs are exceeding IPCS revenues. Commercial 
contracts commonly include clauses addressing inflation and changes 
of law, and here, contract renegotiation seems common; in any year, 
a material fraction of contracts are won, renewed and renegotiated. 
Without any evidence in the record, we decline to assume that half 
of providers, including Securus, would broadly renew unviable 
contracts, place bids at non-viable prices, or would not seek to 
renegotiate contracts in the face of unanticipated inflation. 
Neither Securus nor any other party has shown that IPCS expenses 
have grown sufficiently fast since 2022, after accounting for 
industry productivity, to render 2022 expenses too low for the 
purpose of setting our rate caps. In fact, over the past decade, 
telecommunications industry inflation has been significantly lower 
than broader measures of inflation. The Telecommunications PPI over 
the last ten years averaged 0.7% annually, as opposed to 2.6% 
average annual increases in the GDP deflator over the same period. 
Likewise, we are unconvinced that regulation compliance costs made 
IPCS unviable in 2022. In 2022, roughly half of all audio call 
minutes were for intrastate calls, which were not subject to 
Commission pricing regulation at that time. Further, our 2022 rate 
caps were set substantially above our current upper bounds, which 
take providers' 2022 reported costs at face value, so they too 
cannot have held rates below costs. Nor are we convinced that 
regulation at the state level adequately explains the disparity 
between industry-wide costs and revenues. For example, Securus 
points to Pay Tel's exit from California, but IPCS continued to be 
supplied at the correctional facility in question, just by a 
different, and presumably more efficient provider. In sum, we do not 
find it credible that inflation could have caused the apparent 
losses providers reported in 2022, nor is it the Commission's 
responsibility to cure contracts that fail to anticipate common 
exigencies.
    9. We are likewise unpersuaded that the difference between 
industry contract revenues and IPCS expenses is explained by 
providers use of profits from other non-IPCS services to cross-
subsidize the price of IPCS. The record presents no substantive 
evidence of cross-subsidization, or of its extent, let alone 
establish that the practice was

[[Page 77442]]

widespread and led to material reductions of IPCS revenues below 
costs. Cross-subsidization, while potentially making an otherwise 
unprofitable business segment profitable for the overall contract, 
can also obscure inefficiencies within the regulated business and 
misalign incentives. For example, providers may be disincentivized 
to reduce costs and efficiently provide IPCS if they only use it to 
generate other business within the same contract. In Securus' own 
words, ``regulated rates must enable companies to earn a positive 
return specifically from the service being regulated.'' Given the 
distortionary effects of cross-subsidization, we find the most 
direct way to assess viability of IPCS provision at a facility is to 
compare IPCS revenues with IPCS costs.
    10. In validating our caps, we do not place significant weight 
on analysis of facility-level per-minute audio expenses as that 
would be misleading for at least the following reasons: different 
providers allocate costs differently, no provider's cost allocations 
are likely to be particularly accurate at the level of the facility, 
and the likelihood of reporting errors at the facility. There are 
also corner cases, for example, where costs are incurred at the 
start of a contract, but few or no minutes are supplied. Tables 5 
and 6 illustrate the difficulties with facility-level data. These 
tables show provider-reported per-minute expenses vary widely within 
a single provider's data, often over implausible ranges. However, 
because providers allocate all their costs down to their facilities, 
a focus at the level of the provider avoids cost allocation 
problems. Similarly, viewing an aggregation of facilities, including 
at the level of the provider, or across providers, tends to smooth 
out reporting errors and corner cases. This is not the case when 
considering a provider's higher cost facilities, since, by 
definition, one is choosing the facilities to which more costs were 
allocated and ignoring those to which fewer costs were allocated. 
Thus, Pay Tel's argument that one third of its facilities will be 
loss-making under our rate caps requires belief that its cost 
allocations accurately reflect underlying costs. That seems 
improbable for at least some of its facilities given its per-minute 
cost estimates for very small jails range from {[REDACTED]{time} . 
If it is true that Pay Tel overall could not operate profitably 
under our rate caps, we find that to be because Pay Tel's costs 
exceed efficient costs. We reject, for the same reasons, a similar 
claim made by Securus. Securus argues that a substantial number of 
facilities will be ``underwater at the lower bound cost level given 
the proposed rate caps,'' and that certain ``providers' lower bound 
per minute costs exceed the rate cap[s].'' We find this analysis 
implausible, unsupported, and, given the fact that Securus did not 
submit the calculations in the record, we are unable to analyze or 
otherwise replicate their results. As an initial matter, Securus 
fails to separately identify audio and video profitability, leaving 
the differences between these services obscure. Further, we find 
Securus's analysis misleading. By ``excluding {[REDACTED]{time} '' 
from the analysis, Securus removes the substantial majority of 
facilities and cost data from its analysis, and uses a sample size 
of less than 20% of the industry to support its conclusions. Such a 
limited picture is particularly inappropriate for developing rate 
caps based on industry average costs, an approach which is expressly 
permitted by the statute. For example, given that our upper bounds 
reflect all costs as submitted, we find it unlikely that certain 
providers have ``lower bound costs [that] exceed rate caps by 
{[REDACTED]{time} '' as Securus claims, because costs which lie 
{[REDACTED]{time}  above the rate caps would also lie above the 
upper bounds for all jail size tiers.
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[FR Doc. 2024-19037 Filed 9-18-24; 8:45 am]
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