[Federal Register Volume 90, Number 232 (Friday, December 5, 2025)]
[Rules and Regulations]
[Pages 56013-56062]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-22125]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 64
[WC Docket Nos. 12-375, 23-62; FCC 25-75; FR ID 319372]
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) modifies the Commission's previous incarcerated people's
communications services (IPCS) rate caps in response to record evidence
of the significant unintended consequences of those rate caps. It
establishes new interim audio and video IPCS rate caps by basing the
calculation of the Commission's rate caps only on billed minutes,
incorporating all safety and security measure expenses that IPCS
providers reported incurring, and creating an additional rate cap tier
for extremely small jails. It also creates a separate interim rate
additive to ensure recovery of correctional facilities' costs of
administering IPCS. Additionally, it sets a new compliance date for
providers' compliance with the new rules and clarifies that the rate
cap, site commission, and per-minute pricing rules from the
Commission's 2021 Order will no longer apply following that date.
DATES:
Effective date: This rule is effective December 5, 2025.
Compliance date: compliance with this rule will be required on
April 6, 2026.
FOR FURTHER INFORMATION CONTACT: Shabbir Hamid, Pricing Policy Division
of the Wireline Competition Bureau, at (202) 418-2328 or via email at
[email protected].
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order and Order on Reconsideration, document FCC 25-75, adopted on
October 28, 2025 and released on November 6, 2025, 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 this document 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-25-75A1.pdf.
Synopsis
I. Introduction
1. The rates and other practices of the incarcerated people's
communications services (IPCS) industry have been the subject of the
Commission's and Congress' attempts to ensure just and reasonable rates
for consumers and fair compensation for providers for over a decade.
Indeed, the Commission has attempted on multiple occasions over the
last 12 years to address these issues, spawning multiple rounds of
litigation in several federal courts. With the passage of the Martha
Wright-Reed Act and its implementation by the Commission in the 2024
IPCS Order, the regulatory framework to achieve these dual goals was
largely established. But in taking those steps, the new regulatory
framework has led to significant unintended consequences that have been
brought to light by stakeholders, as well as other challenges that are
currently before the First Circuit. The ongoing implementation
challenges and the resulting risks to safety and security they cause
greatly exceed what the Commission considered or anticipated when it
adopted the 2024 IPCS Order, leading the Commission to today's action.
2. The goal of today's action is to establish a regulatory
framework that is
[[Page 56014]]
faithful to the Martha Wright-Reed Act and is also consistent with the
record that has developed over the last two years. The changes we make
in the IPCS regulatory framework today, in particular changes to the
methodology for calculating IPCS rate caps, supersede the corresponding
aspects of the 2024 IPCS Order and result in revised, interim audio and
video IPCS rate caps that respond to these unintended consequences. We
modify certain aspects of the rate cap calculations and rate structure
to more accurately reflect the costs providers and correctional
authorities incur in the provision of IPCS. The revised audio and video
rate caps we establish are interim, while we seek additional comment in
the Further Notice of Proposed Rulemaking (Further Notice) on, among
other issues, rate structure and rate cap setting methodologies, the
continued evolution of the IPCS market, and potential unintended
consequences of these proposals. The goal of our actions today is to
create a durable, predictable, and lawful framework that will properly
balance our implementation of the dual statutory mandates--just and
reasonable rates for consumers and providers and fair compensation for
providers--and thereby ensure the continued availability of IPCS to
incarcerated people and preserve correctional officials' ability to
provide safe and secure access to IPCS. The steps we take today will
provide a more stable framework to ensure continued higher levels of
communication between incarcerated people and their loved ones,
bringing all the benefits that has been demonstrated to provide,
including improved reentry into society, reduced recidivism, increased
public safety, and strengthened family ties between parents and
children, between spouses, and with family members generally.
II. Background
3. The Martha Wright-Reed Act was enacted by Congress in January
2023 to ensure that ``all [IPCS] rates and charges are just and
reasonable'' while continuing to ensure that ``all payphone service
providers are fairly compensated.'' The Act expanded the Commission's
jurisdiction to regulate IPCS to include intrastate IPCS and advanced
communications services, including video IPCS. It also permitted the
Commission to use industry-wide average costs to determine just and
reasonable rates and directed the Commission to ``consider costs
associated with any safety and security measures necessary to provide''
IPCS in determining those rates. In July 2024, the Commission adopted
the 2024 IPCS Order, implementing the Martha Wright-Reed Act and
establishing a new framework for the regulation of the IPCS industry.
The Commission also adopted the 2024 IPCS Notice, seeking further
comment on certain issues, including further disaggregation of the very
small jail rate cap tier and the adoption of a uniform rate additive to
account for costs incurred by correctional facilities providing IPCS.
4. In October 2024, petitions were filed seeking reconsideration of
various aspects of the 2024 IPCS Order, including for our purposes
here, a petition by NCIC (NCIC Reconsideration Petition). The NCIC
Reconsideration Petition seeks reconsideration of two issues the
Commission addresses herein. First, it challenges the Commission's
decision to exclude certain safety and security costs from the lower
bounds of its zones of reasonableness, asserting that the exclusion led
to rate caps that are ``below the cost of providing service for most
IPCS providers.'' It also seeks reconsideration of the Commission's
decision to include unbilled minutes of use in its cap calculations,
claiming that ``led to unsustainable rate cap reductions.''
5. During the transition period to the newly adopted rate caps, the
Commission was made aware of certain unintended consequences of the new
IPCS rules for the industry and for correctional facilities. In the
2025 IPCS Waiver Order, the Wireline Competition Bureau (WCB or the
Bureau) found the record, developed subsequent to the adoption of the
2024 IPCS Order, contained evidence indicating that the restructuring
of the IPCS industry required to implement the Commission's new rate
cap rules ``imposes implementation challenges and safety and security
risks greatly exceeding those the Commission envisioned in the 2024
IPCS Order.'' In light of these difficulties, the Bureau adopted the
2025 IPCS Waiver Order, which extended compliance deadlines for the
IPCS rate caps and other rules ``until April 1, 2027 or any alternative
date the Commission sets as part of further action in this
proceeding.'' On July 30, 2025, the Public Interest Parties filed an
Application for Review of the 2025 IPCS Waiver Order, asking the
Commission to rescind the order and allow the relevant IPCS rules to go
into effect as adopted. The Bureau sought and received comment on the
Application for Review.
III. Report and Order and Order on Reconsideration
6. We adopt a joint Report and Order and Order on Reconsideration
(Order) to address rate cap setting issues that arose in two distinct
procedural settings in this rulemaking--some in response to the 2024
IPCS Notice and others in response to the NCIC Reconsideration
Petition. We combine the discussions of our Report and Order and Order
on Reconsideration into a single holistic discussion to simplify and
clarify our analysis of the various rate cap setting modifications we
make, which are interrelated and interdependent, but which must be
factored together to result in a single set of revised rate caps. For
clarity's sake, we identify throughout this hybrid discussion the
procedural source of each issue we address and therefore the aspect of
the joint Order we issue today.
7. In this Order, we use a two-step process for revising the IPCS
rate caps. We first address four methodological issues raised in the
record and revise the approach to each in response to comments raised
in the record. We then incorporate the effects of those modifications
into the audio and video rate cap calculations by establishing a zone
of reasonableness for each rate tier, calculating upper and lower
bounds for each rate tier, and then select new rate caps from within
the resulting zones, rounding to whole cent amounts. The rate caps we
establish are interim, acknowledging the limitations of the data
submitted and allowing the Commission to seek further comment before
setting permanent rate caps.
8. We adopt the following revised, interim audio and video IPCS
rate caps:
[[Page 56015]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.300
A. Revisions to Rate Cap Setting Methodology and Rate Structure
9. We first revise four aspects of the rate cap setting approach
the Commission used in the 2024 IPCS Order, based on the record
developed in response to the 2024 IPCS Notice and NCIC's Petition for
Reconsideration of various aspects of the 2024 IPCS Order, as well as
updated information received in the record of this proceeding. As noted
above, these changes supersede the corresponding aspects of the 2024
IPCS Order. First, in response to the NCIC Reconsideration Petition, we
reconsider the use of unbilled minutes in calculating the IPCS rate
caps, excluding such minutes as they result in no compensation for IPCS
providers. Second, pursuant to comment sought in the 2024 IPCS Notice,
we adopt an additional size tier for extremely small jails (from 0 to
49 average daily population (ADP)) to better reflect the generally
higher per-minute and per-capita costs extremely small jails face.
Third, in response to the NCIC Reconsideration Petition, we revise the
treatment of safety and security costs to include all such reported
costs in the revised rate caps. Finally, pursuant to comment sought in
the 2024 IPCS Notice, we adopt a separate rate additive for all rate
tiers of up to $0.02 per minute that may be charged on top of the newly
revised per-minute rate caps. The net effect of these changes will be
to properly balance the way we implement the Martha Wright-Reed Act and
thereby ensure consumers, correctional facilities, and IPCS providers
realize the shared goal of increased communication with all the
benefits that has been shown to produce.
1. Exclusion of Unbilled Minutes in Calculating Rate Caps
10. NCIC seeks reconsideration of the Commission's inclusion of
unbilled minutes of use in calculating IPCS rate caps in the 2024 IPCS
Order. NCIC argues that the inclusion of unbilled minutes of use--
minutes that facilities may require and for which providers currently
collect no revenue--``would lead to IPCS providers being under-
compensated.'' The majority of commenters that responded to the
petition support NCIC's claim. We agree and therefore grant this
portion of the NCIC Reconsideration Petition.
11. In the 2024 IPCS Order, the Commission calculated the IPCS rate
caps by dividing used and useful costs incurred in the provision of
IPCS by the sum of billed and unbilled minutes as the unit of sale. It
reasoned that using both billed and unbilled minutes ``better
reflect[ed] the cost of actual minutes.''
[[Page 56016]]
The Commission considered that using both billed and unbilled minutes
would ``ensure all incarcerated persons are charged no more than the
cost of their calls, and treat[] all minutes equally, regardless of a
facility's or a provider's policy decisions on whether and how to
provide free minutes.''
12. NCIC contends that the Commission erred by including unbilled
minutes in its calculation of rate caps. It claims that the Commission
failed to ``adequately explain how including unbilled minutes, for
which IPCS providers incur costs to carry the traffic and monitor the
communications but receive no revenue, is a better reflection of an
IPCS providers' costs to provide service.'' We find that using total
reported minutes of use to calculate interim rate caps may not produce
rate caps that allow providers sufficient revenues to recover their
costs, even if doing so may be useful in assessing overall industry
cost characteristics. Using both billed and unbilled minutes, without
accounting for the fact that providers may not presently have contracts
in place enabling them to recover from facilities the costs of
providing any unbilled minutes that facilities require, may lead to
under-compensation, contrary to the ``fair compensation'' principle of
section 276(b)(1)(A) of the Communications Act of 1934, as amended
(Communications Act).
13. NCIC challenges the Commission's conclusion that using billed
and unbilled minutes to derive its rate caps was ``an improvement from
the 2021 ICS Order, which divided expenses by paid minutes.'' It
further claims the Commission ``failed to provide any meaningful
discussion on why its prior conclusion to rely on solely [paid] minutes
was in error.'' It cites the Commission's previous conclusion in the
2021 ICS Order to use paid minutes to derive rate caps ``because those
are the minutes that providers rely on to recover their costs.'' As
NCIC noted, using unbilled minutes for which no compensation is
received to calculate rate caps leads ``to IPCS providers' costs being
diluted by non-revenue generating IPCS calls,'' which may not ensure
providers are fairly compensated, as required by the Martha Wright-Reed
Act.
14. While NCIC seeks to exclude unbilled minutes from the
calculation of IPCS rate caps, it does not seek a return to the use of
paid minutes to calculate rate caps as was done in the 2021 ICS Order.
A return to using paid minutes was not necessary in the 2024 IPCS Order
as the Commission accounted for the difference between paid and billed
minutes by including bad debt expense in its rate cap calculations. In
this Order, we account for this difference by including a similar
allowance for bad debt expense in the costs used to calculate rate
caps.
15. The Public Interest Parties assert that ``excluding unbilled
minutes would lead to rate caps that are unreasonably high . . . in at
least some facilities.'' But they fail to acknowledge that basing rates
on unbilled minutes will undercompensate providers unless they recover
those costs directly from facilities. We therefore are not persuaded
that excluding unbilled minutes results in interim rate caps that are
not just and reasonable. Additionally, the Commission must take into
account the fact that unbilled minutes represent a non-trivial
percentage of all minutes as it balances the dual goals of ensuring
just and reasonable rates for consumers and fair compensation for
providers. Finally, consumers are direct beneficiaries of unbilled
minutes, an offsetting benefit which must be factored in assessing the
reasonableness of industry rate caps overall. This revision to our rate
caps, as well as the others adopted in this Order, are cost-based,
supported by the record, and meet the dual requirements that our rate
caps be just and reasonable and fairly compensatory. We find that
excluding unbilled minutes in calculating our interim rate caps
satisfies both statutory mandates.
16. In the 2024 IPCS Order, the Commission further explained its
decision to use unbilled minutes by citing the fact that the ``ratio of
billed minutes to unbilled minutes varies across facilities'' and that
basing rates on billed and unbilled minutes would minimize the problem
of under-recovery in facilities with a higher proportion of unbilled
minutes and over-recovery in facilities with a lower proportion of
unbilled minutes. However, as NCIC observes, that reasoning reflects
the inherent variability of rate caps based on average industry data
and therefore does not constitute a flaw in the Commission's rate cap
setting methodology, only an inherent attribute of average cost-based
ratemaking.
17. Finally, NCIC questions the Commission's reasoning that ``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 asserts that the Commission ``already has plans
to address any outdated rate caps in connection with ongoing oversight
of IPCS service.'' The Public Interest Parties assert in contrast that
including unbilled minutes ``eliminat[es] the need for the type of
ongoing monitoring NCIC describes,'' but do not explain how including
unbilled minutes in rate calculations would obviate the need for the
Commission to discharge its ongoing oversight responsibilities under
the Communications Act and the Martha Wright-Reed Act. We agree with
NCIC. We are currently monitoring and fully intend to continue to
monitor the IPCS industry as part of our ongoing oversight obligations
under the Communications Act and the Martha Wright-Reed Act.
18. We therefore use only billed minutes in calculating our interim
rate caps, superseding our decision in the 2024 IPCS Order, which we
find will help ensure IPCS providers are fairly compensated while still
ensuring just and reasonable rates. Removing unbilled minutes from the
calculation of those rate caps will, in combination with the other
modifications to IPCS rate caps adopted in this Order, ensure those
rate caps comply with the statutory requirement that providers are
fairly compensated. The impact of altering this aspect of the
Commission's rate cap calculation, as further explained in Appendix D,
is material. Unbilled minutes constitute 7.8% of the total number of
minutes reported by the industry in response to the 2023 Mandatory Data
Collection, although this proportion varies across different rate tiers
and between audio and video services. Unbilled minutes consist of a
greater proportion of video minutes than audio minutes, approximately
27.5% of reported video minutes, versus roughly 7% of audio minutes.
Removing unbilled minutes from our calculations increases the per
minute industry averages for audio and video IPCS and safety and
security expenses by as little as 6.2% to as much as 63.7%, depending
on the service and the tier in question (before lower-bound
adjustments). Replacing total minutes with billed minutes increases the
per-minute allowance for recovery of ancillary service expenses
reflected in the rate caps by about 8.5% (before lower-bound
adjustments and rounding to the nearest third decimal place). The
effect of this change is reflected in the interim rate caps adopted by
the Commission.
[[Page 56017]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.301
2. Establishing the Extremely Small Jail Tier
19. In the 2024 IPCS Notice, the Commission sought comment on the
costs of providing IPCS to very small jails, whether to disaggregate
the very small jail tier, and the types of data that would help capture
the variability of IPCS costs in this very small jail tier. After
analyzing the record received in response to the 2024 IPCS Notice, we
now further disaggregate the very small jail tier into two separate
tiers--very small jails and extremely small jails. Specifically, we
revise our definition of ``very small jails'' to include jails with an
ADP between and including 50 to 99 and create a new rate cap tier for
``extremely small jails'' for jails with an ADP of 0 to 49. These
revisions result in the following rate cap tiers, reflecting
differences in facility type and size, which we hereby adopt:
A separate tier for all prisons regardless of average
daily population;
Jails with an average daily population of 1,000 or more
(large jails);
Jails with an average daily population between and
including 350 to 999 (medium jails);
Jails with an average daily population between and
including 100 to 349 (small jails);
Jails with an average daily population between and
including 50 to 99 (very small jails); and
Jails with an average daily population of 0 to 49
(extremely small jails).
20. The Martha Wright-Reed Act directs the Commission to ensure
just and reasonable rates and consider costs associated with ``small,
medium, and large facilities'' or ``other characteristics.'' In the
2024 IPCS Order, the Commission interpreted this language as a mandate
to analyze the cost characteristics of different-sized facilities. The
Commission found no need to create separate rate cap tiers among
prisons because they are almost uniformly large, enjoy greater
economies of scale, and the data do not indicate significant
differences in the costs of serving different prison facilities.
Further, the Commission did not interpret the Martha Wright-Reed Act as
a directive that limits the Commission to adopting only three size
tiers. Given the record then before it, the Commission adopted a four-
tiered rate cap structure that includes the ``very small jail'' rate
cap tier that we reexamine here to better reflect the differences in
the costs of serving various sizes of jails.
[[Page 56018]]
21. Notably, the very small jail tier included jails with an ADP
between 0 and 99, which encompassed over half of all jails in the
United States. Generally speaking, these and other small jails are
located in rural areas--an ``other characteristic[ ]'' within the
meaning of the Martha Wright-Reed Act--where the record suggests that
providing IPCS involves increased costs due to ``higher
telecommunications expenses and customization requirements.'' The
Commission recognized that the rate cap tiers adopted in the 2024 IPCS
Order, while an improvement over its previous rate caps, may still not
effectively capture cost variations within this tier, and sought
comment in the 2024 IPCS Notice on further disaggregation of the very
small jail tier. Given the significant number of such jails and their
distinct cost structures, and given their generally more rural nature,
we find it necessary to further refine our rate cap tiers to better
capture the variability among small jails generally and within the very
small jail tier specifically to more accurately reflect providers'
costs and ensure they are fairly compensated.
22. As a general matter, we agree with commenters that as ADP
decreases, per-minute or per capita costs for the provision of IPCS
increase for the provider. Several factors cause per-minute IPCS costs
to rise as ADP shrinks. For one, the fixed costs of providing IPCS at
smaller or more rural facilities are distributed over fewer
incarcerated people and therefore fewer minutes of use, which results
in providers tending to have higher costs per minute at smaller
facilities as opposed to larger facilities. Importantly, extremely
small jails and very small jails are more typically located in rural
areas, where the per minute cost of service is higher because of the
reported difficulty of serving those areas. In addition to increased
costs for jail management and account set-up, greater reliance on
prepaid accounts, and fewer calling minutes, IPCS providers that serve
smaller jail facilities typically in rural locations often must also
provision longer haul, higher cost broadband connections to deliver
service. Accordingly, building upon the Commission's prior actions and
based on the record and analysis of IPCS data, we subdivide the very
small jail tier established in the 2024 IPCS Order and instead create
two separate tiers: a more focused very small jail tier for jails with
ADPs between 50 and 99, and a new extremely small jail tier for jails
with ADPs between 0 and 49.
23. The real world implications of adopting rate caps that do not
sufficiently take into account the higher costs of serving the smallest
and most rural facilities is evident in the record subsequent to the
adoption of the 2024 IPCS Order. One provider reported being ``forced
to cease the provision of IPCS services to four small jails in Arizona
and New Mexico that would no longer be financially viable under the
2024 Order.'' After attempting to find a replacement provider, ``the
facilities had no other choice but to revert to 1980s-style supervised
public pay telephones for use by the incarcerated population.'' Securus
and Pay Tel further emphasize that rate caps that do not take into
account the costs of serving very small facilities ``will undoubtedly
impact small jails in rural areas to the greatest extent, as those
facilities typically have the lowest calling levels and the highest
costs.''
24. We find that further disaggregating the very small jail tier
into two separate tiers better accounts for the operational challenges
of providing IPCS to very small and extremely small jails, more
accurately captures the heightened costs associated with providing IPCS
to jails in rural areas, and therefore more reliably ensures that IPCS
rates are just, reasonable, and fairly compensatory. Further, the
majority of incarcerated people that would have been covered by the
former very small jail tier rate cap will pay relatively lower rates
than they otherwise would have if the very small jail tier were not
subdivided, given that the majority of incarcerated people within the
two new tiers will be in the revised very small jail tier. Incarcerated
people housed in jails included in the new extremely small jail tier,
while paying marginally higher rates than they otherwise would have if
the very small jail tier were not subdivided, will be assured of the
long-term availability of IPCS at those institutions given that those
rates will more accurately compensate providers for their costs.
25. We subdivide the former very small jail tier at 50 ADP to
create two tiers, and find that using this additional threshold will
improve or better ensure the provision of IPCS within these tiers,
while balancing the differences in ADP, average length of time
incarcerated people are detained, and consumers' interests. This action
subdivides the rate tier that encompasses the largest number of
facilities. The most recent Bureau of Justice Statistics show that of
the 2,779 jails in operation, over half have an ADP below 100 (567 with
an ADP of between 50 to 99 and 956 with an ADP lower than 50). While
there are a higher number of jails in the lower half of the 0-100 ADP
range, those jails house significantly fewer people. Of the total ADP
of 59,600 in jails below 100 ADP during the 12-month period from July
1, 2021 to June 30, 2022, jails with ADPs from 50 to 99 account for
roughly 40,500 (68%), while jails with ADPs under 50 account for only
19,100 (32%).
26. We agree with commenters that assert that, because of this
uneven population distribution within the former very small jail tier,
the rate cap for this tier ``saddles many with rates that are far too
high as a result of the costs associated with providing service in the
smallest jails.'' Taking into account the differences in ADP at the
very small jail tier and the extremely small jail tier, we find that
dividing the existing very small jail tier at 50 ADP will ensure that,
at any given point in time, the majority of consumers in this group
will pay lower IPCS rates, reflecting the relatively lower per-minute
cost of service in jails from 50 to 99 ADP, while allowing providers at
extremely small jails to charge rates that will enable them to recover
their higher per-minute cost of service and therefore ensure they will
be able to continue providing service over the long term. Differences
in average length of stay between these two sets of facilities further
amplify the importance of disaggregating the former very small jail
tier to set appropriate rates for both new tiers. According to Worth
Rises, on average, ``people in jails with an ADP of 50 to 99 are
detained for 21.6 days, whereas people in jails with an ADP of 0 to 49
are detained for 13.4 days.'' Shorter detentions would tend to increase
the frequency of one-time administrative costs, all else being the
same. We therefore divide the former very small jail tier into two
separate tiers based on ADP.
27. We decline to further disaggregate the extremely small jail
tier by setting an additional threshold below 50 ADP. NCIC suggests
that there are a limited number of IPCS providers willing to serve very
small jails because they lack a consistent ADP that would enable
adequate revenue projections. After a certain point, however, we find
further disaggregating the smallest rate cap tiers beyond those we
adopt today would likely offer diminishing benefits. We recognize that
IPCS providers--both large and small--serving jails with, for example,
an ADP below 20 would likely face disproportionate compliance burdens
if an additional, even smaller tier were created. Therefore, after
carefully reviewing the data and record, we conclude 50 ADP represents
a reasonable break point between the very small and extremely small
jail tiers.
[[Page 56019]]
3. Inclusion of Safety and Security Costs
28. In the 2024 IPCS Order, to determine which provider-reported
expenses to include when calculating industry-average IPCS costs, the
Commission applied a used and useful framework and evaluated various
categories of safety and security expenses. After evaluating seven
categories ``based on the nature of the preponderance of tasks or
functions within each category,'' the Commission found that two
categories of safety and security expenses were used and useful in the
provision of IPCS. The Commission therefore included the reported costs
for the two categories--CALEA compliance measures and communications
security services--in the cost of service, but ultimately concluded
that ``the remaining five categories should not be treated as used and
useful'' for purposes of determining the lower bounds of the zones of
reasonableness. NCIC disputes this conclusion, arguing that the
Commission's ``inconsistent application of the `used and useful'
standard led to material errors'' when the Commission rejected the
costs in those five categories.
29. We now grant in part NCIC's Petition, by reconsidering the
Commission's previous decision to exclude various safety and security
costs from its IPCS rate cap calculations and instead treat all
reported safety and security costs as used and useful costs for
determining the costs to be included in the lower bounds of the zones
of reasonableness. In its Petition, NCIC alleges that the Commission's
application of the used and useful analysis ``did not fully account for
IPCS providers' safety and security costs.'' NCIC argues that ``the
lack of comprehensive data'' prevented ``a reasoned analysis of the
IPCS costs allocated across the seven categories of safety and security
measures.'' On reconsideration, we agree. While the available record
evidence concerning used and useful safety and security costs provided
a basis for the Commission to exclude certain categories of safety and
security costs, given the record which has developed since the
Commission adopted the 2024 IPCS Order, we find that this led to rate
caps that did not sufficiently recover providers' used and useful
safety and security costs. Accordingly, given our concerns about
jeopardizing access to IPCS if we underestimate used and useful safety
and security costs, we take a more conservative approach on the
existing record and treat all reported such costs as used and useful,
unless and until an improved record going forward shows otherwise,
thereby superseding our treatment of safety and security costs in the
2024 IPCS Order. Therefore, for the purposes of our interim rate caps
we now incorporate all safety and security cost categories in the
Commission's IPCS rate cap calculations and specifically add all such
categories of costs into our calculation of the lower bounds. The
zone's upper bounds already included and incorporated all reported
safety and security costs, and we need make no corresponding change to
the upper bounds as a result. In doing so, we not only reconsider the
Commission's earlier exclusion of five of the seven reported cost
categories, but also incorporate and reaffirm the Commission's earlier
reasons for including the other two reported cost categories.
30. In the 2023 Mandatory Data Collection, the Commission expanded
the scope of collected data, gathering more granular information
concerning safety and security services offered by providers,
particularly those safety and security services which were used and
useful in the provision of IPCS, and required providers to report on
these data in detail for the first time. The Commission structured
reporting of safety and security expenses by requiring providers to
allocate these expenses across seven different cost categories.
Industry-wide, providers reported the following expenses by category:
[GRAPHIC] [TIFF OMITTED] TR05DE25.302
[[Page 56020]]
As the chart demonstrates, providers reported a total of $569.9
million in safety and security costs across all categories, with
Category 3 (``Communications Security Services'') showing the highest
reported costs of any category. These costs represent 34.4% of all
reported costs.
31. While the Commission's categories were designed to group costs
according to the uses or functions for which they were incurred, the
Bureaus further disaggregated the category-based approach by directing
providers to report cost data for each category between regulated IPCS
(like audio IPCS, video IPCS, and ancillary services) and nonregulated
services using a catch-all column for reporting. Despite these changes
and attempts at clarification, providers still had difficulty in
reporting. Commenters have since disputed the categories as a viable
means of identifying used and useful costs, arguing that ``IPCS
providers do not categorize safety and security measures costs the same
way the [Commission] grouped them.'' For example, the record
demonstrates that responding providers interpreted communications
monitoring services (category 5) to include functions that might be
considered as typical of law enforcement, such as ``aid[ing]
investigations related to detention facilities,'' but that providers
also reported services more typically considered IPCS-related in
category 5, for example costs for ``keeping incarcerated people from
calling blocked numbers and from engaging in three-way calling.''
Similarly, as the National Sheriffs' Association argues, call recording
(category 4) and call monitoring (category 5) both may include
functions they consider used and useful in the provision of IPCS,
insofar as threats are made or crimes are committed during the use of
IPCS. On reconsideration, we find these arguments imply a benefit to
IPCS consumers and that overlapping uses between the categories of
safety and security measures include costs that the Commission did not
evaluate previously, which we find appropriate to contemplate for all
categories. Without more and better information, the Commission
undermined its category-based analysis by requiring providers to lump
reported costs into inexact categories, which, in some instances,
excluded certain reported costs from the categories the Commission
deemed used and useful.
32. At a more granular level, some of the individual services
within each category also suffered from ambiguity in function and use,
as they could be classified as a law enforcement function, as a service
which supported the provision of IPCS, or potentially both. Cost data
for safety and security measures can be allocated among different
security categories or functions in many ways, for example, by
allocating costs for research and development processes to one specific
category even if those costs apply more broadly to additional
categories. Further, reported safety and security costs--such as
platform development--could support both regulated IPCS and
nonregulated services like text messaging. For example, certain IPCS
providers develop their own proprietary software platforms for use by
customers and law enforcement; such platforms naturally serve multiple
functions, supporting not only the use of IPCS, but also education,
entertainment, or other nonregulated uses, in addition to providing
some safety and security features. Without a prescribed method of cost
allocation or attribution, the categorical distinctions lose
reliability, and can be treated differently by different respondents.
In sum, we find other costs, such as platform development costs, and
other functional overlaps heighten the degree to which regulated and
nonregulated service costs are intermingled, and further obfuscate the
Commission's ability to exclude reported safety and security cost
categories without better data.
33. Next, given the limitations of the available data in the 2024
IPCS Order, the Commission could not verify whether the costs of each
provider's reported safety and security measures were allocated
consistently to the seven cost categories. Despite the detailed
instructions and description of the safety and security cost categories
the Commission issued in the Mandatory Data Collection, providers did
not report their safety and security data in a uniform fashion; in
fact, the absence of costs reported in certain categories by certain
carriers underscores this point. For example, {[ REDACTED ]{time}
recorded costs for all seven categories of safety and security measures
costs. (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.) Similarly, {[ REDACTED ]{time}
providers reported costs in only two out of seven categories, while the
remaining {[ REDACTED ]{time} reported costs across six different
categories. Different sized providers made very different safety and
security cost allocations. The two largest providers allocated
approximately {[ REDACTED ]{time} percent of their expenses (besides
other ancillary services and other products and services expenses) to
safety and security, in contrast to all other providers which
collectively allocated only about 3.3 percent of these expenses to
safety and security. These percentages are derived from company-wide
data. The expenses reflected in the base used to calculate these
percentages are expenses reported as 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. Further, the Commission was
aware that providers had difficulty allocating safety and security
costs among categories as instructed or otherwise attributed safety and
security measures to many categories without supporting that
allocation. We find these types of reporting issues to be particularly
impactful on allocation decisions, particularly when some providers
elected not to allocate, despite instructions to do so. Similarly, the
National Sheriffs' Association argues that many providers do not
maintain ``more granular cost'' data that would allow accurate
categorization. Reporting disparities like these cannot be attributed
exclusively to the inexactitude of the Commission's reporting
categories; nonetheless, we agree that, upon reconsideration, these
flaws suggest on balance that the structure of the data collection
needs further refinement.
34. Despite the Commission's analysis, the safety and security data
on which the Commission relied in the 2024 IPCS Order were imperfect;
our reevaluation of that data in light of the record we have since
developed leaves us without assurance that the Commission's approach
was the best way to implement the relevant directives of the Martha
Wright-Reed Act. We now find that the method of data collection, and
providers' allocations in response to the collection, together impaired
the Commission's ability to assess the effect of excluding certain
safety and security costs. The data collection results fell short of
capturing the manner in which individual safety and security measures
were used in the provision of IPCS, particularly at smaller
institutions. We also agree that more specific, discrete, and granular
cost data and operational information would assist the Commission in
more reliably analyzing the costs and uses of reported safety and
security measures.
35. The record demonstrates that the unintended consequences of
these
[[Page 56021]]
shortcomings have had a significant impact on providers, correctional
facilities, and ultimately consumers. Correctional facilities have
raised basic safety and security concerns following the adoption of the
2024 IPCS Order suggesting that the adopted rates resulted in reduced
access to certain safety and security measures. For example, certain
IPCS providers state that ``many correctional facilities have made the
difficult--but [2024 IPCS] Order-required--decision to forgo these
services because they lack the funds to pay for them,'' ultimately
impacting the availability of IPCS generally. One provider reported
that it renegotiated contracts with a number of facilities that ``lack
sufficient financial resources to pay for the suite of safety and
security tools they previously relied upon to provide IPCS safely to
their populations and, accordingly, have elected to move forward with a
substantially reduced set of those tools, thus endangering facility and
public safety.'' The effects of the exclusion of certain safety and
security costs from IPCS rate calculations also appears to have
impacted access to IPCS generally. Another IPCS provider reported that
some facilities ``have decided to stop offering IPCS altogether because
they cannot guarantee the continued safety and security of their
facilities.''
36. While the Commission attempted to reconcile the intermingled
nature of these costs in the 2024 IPCS Order, particularly when setting
the relevant rate caps inside the zones of reasonableness, the results
of the 2023 Mandatory Data Collection did not enable the Commission to
be precise enough to avoid the unintended consequences described above.
As we have noted, the categories excluded by the 2024 IPCS Order
included services or functions that are used and useful. As a result of
excluding the costs of such services from the rate caps, and as the
record since the adoption of the 2024 IPCS Order shows, the fiscal
resources required to provide requisite safety and security services
were put at risk, implicating the availability of IPCS generally. We
therefore take the interim step of reincorporating the five excluded
cost categories of safety and security measures into the lower bounds
and calculating new interim rate caps for audio IPCS and video IPCS
accordingly, while continuing to include the two previously included
categories. The seven categories are as follows: Communications
Assistance for Law Enforcement Act (CALEA) compliance measures; law
enforcement support services; communication security services;
communication recording services; call monitoring services; voice
biometrics services; and other safety and security measures. This
approach applies the used and useful framework to an imperfect record
and therefore best ensures that all used and useful costs from safety
and security measures necessary to the provision of IPCS will be
accounted for in the governing interim rate caps pending the adoption
of permanent rate caps, alleviating the risk that consumers could lose
access to IPCS at some facilities altogether while the Commission works
to collect more precise data and operational information. While it may
at times be challenging to discern actual IPCS market conditions given
imperfect data and marketplace complexities, the evidence of a threat
to the availability of service is sufficient to justify our actions
today. We note that Pay Tel asserts that ``[b]ut for the 2025 waiver
order suspending several portions of the 2024 order, and the FCC's
ongoing consideration of revisions to the 2024 order, Pay Tel would
likely have been forced to forego service in other high-cost jails.''
Ultimately, we do not have the option to wait until market failure
becomes more widespread to intervene. The inclusion of these costs for
the purposes of our interim rate caps produces a reasonable outcome
given the fact that they are based on providers' reported costs. We
note that the upcoming data collection to establish permanent rates for
IPCS will provide the Commission and interested parties another
opportunity to revisit and reconsider these topics in the future.
4. Interim Facility Cost Rate Additive
37. On an interim basis and consistent with the record, we adopt a
uniform rate additive of up to $0.02 per minute separate from and in
addition to our rate caps to account for the costs correctional
facilities incur in allowing access to IPCS. This additive is
applicable equally to each rate tier we adopt today, and may be charged
on top of the new, interim per-minute audio and video IPCS rate caps
adopted in this Order. Our adoption of this uniform additive is an
interim measure designed to provide greater certainty to IPCS providers
and correctional facilities in determining compensation for
correctional facilities for the costs they incur in allowing access to
IPCS while the Commission seeks comment on how to structure a permanent
rate additive in today's Further Notice.
38. As an initial matter, we modify the IPCS rate structure to
create separate provider-related and facility-related cost recovery
components, as the Commission previously did in the 2021 ICS Order.
This rate structure more clearly delineates between provider-incurred
IPCS costs and IPCS costs incurred by correctional facilities.
Importantly, both rate elements are limited to the recovery of used and
useful expenses incurred in the provision of IPCS. Accordingly, we
modify the rate calculations used in the 2024 IPCS Order, which
included, based on the record before the Commission at that time, 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. In this Order, we supersede that decision and
remove from our rate cap calculations the costs incurred by
correctional facilities in making IPCS available and allow recovery of
those costs through a separate rate additive for facility-related cost
recovery. Establishing separate provider-related and facility-related
rate components helps ensure our rate structure accounts for both
providers' and correctional facilities' used and useful costs.
39. In the 2024 IPCS Order, the Commission established a framework
that aimed to account for, and to allow providers to reimburse
correctional facilities for the used and useful costs they incur in
allowing access to IPCS. To do so, the Commission incorporated its best
estimate of the costs correctional facilities incur into the zones of
reasonableness. Due to the lack of reliable correctional facility cost
data in the record, the Commission relied on the National Sheriffs'
Association's 2015 cost survey to incorporate $0.02 into the upper
bounds of the zones of reasonableness for all facilities. The
Commission explained that 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 Cost
survey reasonably supported'' in the 2021 ICS Order. In the 2021 ICS
Order, the Commission stated that it relied on ``two separate
independent bases'' in adopting the $0.02 per minute facility rate
additive. The 2021 ICS Order first based the rate additive on the
Commission's analysis of the portion of site commissions that were
legitimately related to inmate calling services. That analysis included
site commission data submitted by prisons and jails and compared the
per-minute site commission costs between all facilities that paid site
commissions to all those that did not. Second, the Commission also
based its decision on survey data submitted by the National Sheriffs'
[[Page 56022]]
Association. We likewise rely on both sources of data here in adopting
an interim rate additive and therefore reject the assertion by the UCC,
et al. that the ``2-cent facility fee does not apply to prisons'' and
that the data on which the $0.02 per minute rate additive is based is
``not related to costs in prisons.'' The Commission included no
estimate for correctional facility costs in the lower bounds of the
zones of reasonableness as the record contained ``no data that would
allow [it] to estimate those costs with any degree of precision.''
Because the Commission did not incorporate a measure of correctional
facility costs in the lower bounds, it explained that those bounds may
understate the used and useful costs of providing IPCS. The Commission
aimed to account for this fact by adopting rate caps that exceeded the
lower bounds of the zones of reasonableness at each tier.
40. To provide correctional facilities with the opportunity to
recover their used and useful costs, the Commission permitted IPCS
providers to reimburse correctional facilities for such costs under the
rate caps. The Commission explained that the rate caps ``reflect . . .
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'' and thus ``recognize[d], consistent with the
record, that correctional facilities may incur some used and useful
costs in allowing access to IPCS.'' Since the Commission also
eliminated site commissions, which likely were the primary means by
which correctional facilities recovered their used and useful costs,
they would have no means to recover those costs absent a reimbursement
mechanism.
41. In response to comments that the Commission's reimbursement
mechanism may be difficult for IPCS providers to implement and the
suggestion of some commenters that the Commission should instead use an
explicit additive to IPCS rate caps to account for correctional
facility costs, the Commission sought comment in the 2024 IPCS Notice
on whether the Commission should adopt a uniform additive to its IPCS
rate caps to account for correctional facility costs. The Commission
sought comment on the appropriate amount of a uniform rate additive,
noting that one commenter had suggested that $0.02 per-minute could be
established as a maximum facility cost recovery amount. Considering the
``perennial problem'' of receiving reliable correctional facility cost
data in these proceedings, the Commission also sought comment on which
data the Commission should rely on in determining any additive and how
the Commission can ensure that it receives reliable data.
42. The record now before us supports the adoption, on an interim
basis, of a uniform rate additive in lieu of the reimbursement
framework adopted in the 2024 IPCS Order. Commenters explain that the
reimbursement mechanism, which leaves correctional facilities and IPCS
providers to negotiate reimbursement between them ``will create
confusion and conflict for facilities and IPCS providers, and will be
less transparent for end users.'' Some commenters argue that the
reimbursement framework effectively resurrects the harms of site
commission payments insofar as IPCS providers will compete to offer the
highest reimbursement amounts instead of competing on price or quality
of service metrics, just as they did in connection with site commission
payments. In addition, ``the absence of a specific additive to rates as
a cost-recovery mechanism, and the separate prohibition on providers
using regulated revenue to fund safety and security services, is by
necessity requiring correctional facilities to divert already-limited
resources away from core elements of their public-safety mission.''
43. In contrast, a ``rate additive would provide much greater
certainty and remove providers from the role of gatekeeper for
correctional facility cost reimbursement.'' Pay Tel explains that a
fixed correctional facility cost rate additive would ``prevent the
harms associated with the flawed reimbursement provision and better
align market forces for all participants in the IPCS industry'' because
it would permit ``full facility cost recovery'' while also
incentivizing correctional facilities to increase the availability of
IPCS and create downward pressure on rates ``to stimulate more
calling.'' Commenters also point out that a rate additive structure is
a ``tested approach'' that is ``far simpler to implement and enforce,
and can better ensure that facilities can recover their reasonably
incurred costs.'' Indeed, ``a uniform additive has been in place'' for
prisons and large jails since the 2021 ICS Order became effective. The
$0.02 per-minute rate additive ``has proven to be an efficient,
consistent, predictable, and transparent solution for ensuring
correctional facilities can recover their costs associated with
providing access to IPCS.''
44. Although there is broad support for a rate additive, some
commenters oppose this approach. Worth Rises argues because ``the
Commission's rates already account for all investments necessary to
sustain IPCS, a uniform rate additive is duplicative at best and a way
around the ban on commissions at the worst.'' Given the prohibition on
paying site commissions, however, a rate additive does not result in
duplicative recovery. Nor does a uniform rate additive allow
circumvention of that prohibition because the rate additive is limited
to used and useful IPCS costs incurred by facilities. The Public
Interest Parties likewise oppose a rate additive, noting that it
``would include an additional amount on top of the rate caps,'' which
already incorporate an estimate of used and useful correctional
facility costs. But, unlike in the 2024 IPCS Order, our ratemaking
methodology is based exclusively on provider costs and thus excludes
facility costs from our interim rate cap calculations. Commenters also
note that even if there were a basis to adopt an additive, the record
is devoid of reliable correctional facility cost data on which to base
an additive.
45. Securus and Pay Tel acknowledge that the record lacks
definitive correctional facility cost data and that such data is
difficult to obtain, complicating the process of determining the
appropriate additive amount. Securus notes that ``the data used to
derive the previous $0.02 rate additive . . . is based on old data''
but that IPCS providers ``do not have information on the costs
correctional facilities incur.'' For its part, Pay Tel argues that
``implementing an interim fixed additive of $0.02 per minute consistent
with the 2021 ICS Order is achievable'' even if it would need
adjustment at a later date ``based on further evidence.'' In today's
Further Notice, we seek comment on how to obtain correctional facility
cost data that could be used to implement a permanent rate additive.
Additionally, prior to the adoption of the 2024 IPCS Order, the Prison
Policy Initiative proposed that if the Commission were to adopt a rate
additive, it should set a ``maximum facility cost recovery fee of 2
cents per minute of use'' while prohibiting site commission payments.
46. Considering the significant record support, we adopt an interim
uniform rate additive of up to $0.02 per minute. We agree with
commenters that an additive will provide greater certainty for IPCS
providers and correctional facilities. In particular, as Securus notes,
a rate additive ``would better enable facilities to estimate their
IPCS-related costs that would be compensable by providers'' as opposed
to the current reimbursement mechanism which requires correctional
facilities to negotiate contracts with providers
[[Page 56023]]
providing for reimbursement of their used and useful costs and to
persuade the provider that the costs for which they seek reimbursement
are used and useful. Additionally, as some commenters note, providers
and correctional facilities are already familiar with the rate additive
mechanism adopted in the 2021 ICS Order, which will facilitate
implementation by IPCS providers and correctional facilities alike.
While some commenters support non-uniform rate additives that would
reflect the varying costs faced by different facilities, the record at
this point is insufficient for us to adopt such additives. We seek
further comment on such rate additives in the Further Notice.
47. We therefore cap the interim additive at $0.02 per minute for
audio and video IPCS across all rate tiers for all correctional
facilities. The $0.02 additive derives from the additive adopted in the
2021 ICS Order and the estimate of used and useful correctional
facility costs in the upper bounds of the zones of reasonableness in
the 2024 IPCS Order, both of which were based in part on the National
Sheriffs' Association's 2015 cost survey. The lack of reliable
correctional facility cost data in the record constrains our ability to
justify adopting a different additive today, including one based on
facility size, as the National Sheriffs' Association suggests. We find
that the $0.02 per minute interim rate additive to be a reasonable
proxy for correctional facilities' used and useful costs pending the
receipt of additional information and data in response to today's
Further Notice. Although we concur with the National Sheriffs'
Association suggestion that rate additives more closely tailored to
facilities' costs would be preferable, the record before us does not
allow it and we therefore seek additional comment in the Further
Notice. Nevertheless, the National Sheriffs' Association cost survey
remains the best data available about the costs correctional facilities
incur in allowing access to IPCS that has been reported by correctional
facility representatives, despite outstanding questions about the
reliability of these data. We also continue to rely in part on the
analysis of prison and jail site commission data that the Commission
conducted when it originally adopted the $0.02 per minute rate additive
in the 2021 ICS Order. We therefore rely on these data to implement an
interim rate additive of up to $0.02 per minute at all correctional
facilities while the Commission considers the record that develops in
response to today's Further Notice. The survey provided by Pay Tel's
outside consultant, which quantified safety and security costs at 30
correctional facilities, is potentially helpful to inform future
consideration of a permanent additive. However, the survey is not
sufficient for the purposes of the industry-wide interim step we take
today.
48. The interim additive we adopt today is to be charged on top of
the per-minute audio and video rate caps as set forth in this Order. It
is thus ``in addition to, and not an offset or extraction from'' the
IPCS rate caps as they have been recalculated in this Order. The
interim rate caps adopted in this Order are higher than the rate caps
adopted in the 2024 IPCS Order due to the inclusion of an additional
$346 million of safety and security costs now included in the lower
bounds of the zones of reasonableness. To be clear, however, the
revised rate caps we adopt today reflect our removal from the upper
bounds of the zones of reasonableness the $0.02 estimate of used and
useful correctional facility costs that the Commission had added in the
2024 IPCS Order. Additionally, removing the $0.02 from the upper bounds
of the zones of reasonableness will mitigate the possibility that the
interim uniform additive we adopt today ``could double-count any
purported used and useful facility costs that have already been
factored into the Commission's IPCS rate caps.''
49. The interim $0.02 per-minute rate additive ``does not
constitute a site commission'' as that term is defined in the
Commission's rules. In the 2024 IPCS Order, the Commission
distinguished between ``IPCS provider payments to correctional
facilities for costs used and useful in the provision of IPCS'' from
site commissions. With respect to the former, the Commission concluded
that its rate caps would ``allow for IPCS provider reimbursements to
correctional facilities for costs used and useful in the provision of
regulated IPCS.'' The Commission took a different approach with respect
to site commissions, concluding that these payments are not used and
useful in the provision of IPCS and therefore must be excluded from the
calculation of the Commission's rate caps. We maintain this distinction
today.
50. Some commenters argue that if ``IPCS providers are allowed to
freely compensate correctional facilities for costs without oversight,
they will effectively reintroduce site commissions by a different
name.'' We disagree. The interim rate additive we adopt is capped at
$0.02 per minute. In contrast, the current reimbursement mechanism is
``uncapped'' in that its only constraint is the IPCS rate caps. The
$0.02 per-minute rate additive we adopt here will provide a more
``consistent, predictable, and transparent solution for ensuring
correctional facilities can recover their costs associated with
providing access to IPCS.''
51. We also disagree with commenters arguing against a rate
additive based on the lack of data in the record regarding used and
useful correctional facility costs. While the Commission has noted the
lack of updated correctional facility cost data in the record, it has,
``out of an abundance of caution,'' incorporated a measure of
correctional facility costs into its rate structure based on the
National Sheriffs' Association's 2015 cost survey in both the 2021 ICS
Order and the 2024 IPCS Order. In both cases the Commission determined
that capping facility reimbursement at $0.02 per minute represents a
``reasonable estimate'' of used and useful correctional facility costs
and provides a reasonable outer bound for providers' negotiations with
facilities over the used and useful costs they incur in making IPCS
available. For purposes of the interim facility rate additive we adopt
today, we continue to rely on these data while we seek further
information regarding correctional facility costs in today's Further
Notice. While the Commission originally applied the $0.02 per-minute
additive only to prisons and jails with average daily populations of
1,000 or more in the 2021 ICS Order, those facilities' used and useful
IPCS costs may be less per minute than the used and useful IPCS costs
incurred by jails with lower average daily populations, a question we
seek further comment on in the attached Further Notice. Given this
capped and interim nature of the rate additive we adopt while we
consider alternatives, we find it is unlikely that the additive will
result in unreasonably high IPCS rates during the period the rate
additive remains in effect.
B. Adopting Revised Interim Audio and Video IPCS Rate Caps
52. After carefully considering the record developed since the
Commission adopted the 2024 IPCS Order and the 2024 IPCS Notice, and
incorporating the foregoing modifications to our rate cap setting
methodology and rate structure, we adopt the following interim, per-
minute, audio and video IPCS rate caps:
[[Page 56024]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.303
53. Our revised rate structure consists of two primary rate
components: provider-related rate caps designed to allow providers to
recover their used and useful costs in providing IPCS, and facility-
related rate additives, designed for the recovery of the used and
useful costs facilities incur in making IPCS available. In calculating
revised interim rate caps and rate additives for each tier, we
incorporate the four principal changes described in the foregoing
section based on the record developed in response to the 2024 IPCS
Notice and NCIC's Petition for Reconsideration. Those changes include:
(1) the removal of unbilled minutes from the rate cap calculations in
response to the NCIC Reconsideration Petition; (2) the adoption of an
additional size tier for extremely small jails (from 0 to 49 ADP)
pursuant to the 2024 IPCS FNPRM; (3) revisions to the treatment of
safety and security costs to include all such reported costs in the
rate caps in response to the NCIC Reconsideration Petition; and (4) the
adoption of a separate rate additive component consistent with the rate
additive adopted in the 2021 ICS Order of up to $0.02 per minute for
all rate tiers to address facilities' costs in making IPCS available,
pursuant to the 2024 IPCS Notice. Together, these modifications to our
rate caps and rate structure result in new, interim audio and video
IPCS rate caps that, while higher than the rate caps adopted in the
2024 IPCS Order, appropriately balance the need to ensure that IPCS
rates and charges are just and reasonable and that IPCS providers are
fairly compensated in accordance with section 276. These interim rate
caps and rate additives supersede the rate caps from the 2024
[[Page 56025]]
IPCS Order and will remain in place pending resolution of the issues
set forth in today's Further Notice.
54. Each of these modifications functions within the ratesetting
methodology that the Commission used in both the 2021 ICS Order and the
2024 IPCS Order. That framework remains unchanged. We use average
industry costs to develop rate caps pursuant to section 3(b)(1) of the
Martha Wright-Reed Act as the Commission did in the 2024 IPCS Order. We
continue to rely on the 2023 Mandatory Data Collection and record
evidence to calculate rate caps as the Commission did in the 2024 IPCS
Order since it remains the best data available to the Commission on
which to base IPCS rate caps. In calculating the revised rate caps, we
use the zone of reasonableness approach that was previously used in
both the 2021 ICS Order and the 2024 IPCS Order as the best means for
minimizing the impact of any imperfections in the dataset on our final
rate caps. As the Commission noted in the 2024 IPCS Order, the zone of
reasonableness approach is ``well-suited to reconcile competing
concerns,'' in particular, the ``competing interests of providers and
consumers.'' It also gives us ``flexibility to effectively address
imperfections in the data and ultimately select rate caps that
satisfy'' the dual mandates of the Martha Wright-Reed Act--just and
reasonable rates for consumers and fair compensation for providers. As
the Commission did in the 2024 IPCS Order, we include an allowance for
the additional costs IPCS providers incur in making TRS and other,
related disability access communications technologies available to
disabled incarcerated people in both our upper and lower bounds
calculations. Finally, we continue to include IPCS providers' reported
costs of providing ancillary services in both our upper and lower
bounds calculations to ensure providers are fairly compensated.
Together, these modifications will ensure a stable regulatory framework
that continues to foster increased communication for incarcerated
people while the Commission adopts permanent rate caps and rate
additives based on additional data and stakeholder input.
1. Preliminary Rate Cap Setting Observations
55. Our revisions to IPCS rates are based on the 2023 Mandatory
Data Collection, which remains the best data available to us,
notwithstanding the limitations previously acknowledged. From the
results of that data collection, the Commission developed and refined a
database that enabled it to analyze industry cost and operational
characteristics and ultimately to select IPCS rate caps. The database
represents approximately 99% of all industry minutes of use and
approximately 97% of all industry revenues. We revisit the IPCS rate
caps and rate cap setting methodology given the fact that the record
developed since the adoption of the 2024 IPCS Order makes clear the
unforeseen consequences of some aspects of the methodology used. The
modifications we make in our rate cap setting methodology and rate
structure ensure that the revised rate caps we set today will result in
just and reasonable rates for consumers and fair compensation to
providers.
56. We set audio and video IPCS rate caps on an interim basis. As
the aforementioned discussion on safety and security costs illustrates,
more accurate data is needed with regard to how safety and security
measures are used in the provision of IPCS, including data on the costs
of individual safety and security measures and data on how and where
such measures are used, before the Commission can set permanent audio
rate caps. Additionally, as the Commission previously noted in the 2024
IPCS Order, the data collected regarding the video IPCS market
demonstrates the nascent character of that market, which will continue
to mature over time as video IPCS deployment and usage becomes more
widespread. Therefore, we adopt interim rate caps, which will give us
flexibility to adjust our rate caps to reflect the evolution of the
marketplace, and time for us to refine our rate analysis based on a
future data collection before adopting permanent IPCS rates.
57. We clarify that our revisions to the rate cap setting
methodologies and rate structure continue to be based on the used and
useful framework for analyzing industry costs the Commission used in
the 2024 IPCS Order. For example, based on the limited data available
for our analysis and in light of the recognized inconsistencies with
the categorical approach the Commission took in the 2024 IPCS Order, we
cannot conclude that the categories of safety and security costs
formerly excluded from the lower bounds are not in fact used and useful
in the provision of IPCS, and we thus treat these categories, pending
our further data collection, as used and useful as a whole. As
previously discussed, we are unable to reconcile the disparities in
reporting among providers and the inconsistencies of providers'
allocation of safety and security measure costs among reporting
categories, which effectively precluded further analysis of the data.
Upon reconsideration, we find it unworkable to apply the used and
useful analysis at a categorical level given the available data. By the
same token, neither can we apply the used and useful analysis to the
reported costs of individual safety and security measures, as the
reported data is insufficiently granular and inconsistently allocated
between the categories by providers. Without the ability to reliably
attribute cost data to the categories employed by the data collection,
and in order to avoid the unintended consequences--for providers and
consumers alike--of incorrectly classifying costs and thereby excluding
from the lower bounds the cost of safety and security measures that are
necessary to the provision of IPCS and to consumers' continuing access
to IPCS, we find it appropriate, on an interim basis, to include
reported safety and security costs as a whole in the revised interim
rate caps. We therefore revisit the Commission's conclusion that
``[a]llowing 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 [to ensure just and reasonable rates].''
Where, as here, the decision to exclude certain of those expenses would
frustrate the industry's ability to provide the service at all, the
inclusion of those same expenses in order to enable service is
inherently just and reasonable, unless and until additional data allows
the Commission the ability to review and analyze such expenses on a
more granular basis to determine whether such expenses are used and
useful in the provision of IPCS. At present, we find the developed
record insufficient to determine the requisite ``nexus'' of reported
safety and security expenses, particularly under a categorical
analysis. Therefore, in the interim and out of an abundance of caution
to preserve the general availability of IPCS, we treat all reported
safety and security costs as used and useful in the provision of IPCS.
Given the state of the record, we likewise consider this approach the
best way to ensure that the Commission has satisfied its duty under the
Martha Wright-Reed Act to ``consider costs associated with any safety
and security measures necessary to provide'' IPCS. While some parties
might seek to portray this approach as a departure from the ordinary
application of the used and useful framework, we find that this
approach benefits ratepayers by ensuring that they continue to receive
service, and thus is directionally aligned
[[Page 56026]]
with the ordinary operation of the framework.
2. Establishing Zones of Reasonableness
58. We employ a zone of reasonableness approach to rate cap setting
that follows a three-step analysis consistent with the process used by
the Commission in the 2021 ICS Order and the 2024 IPCS Order, and base
our analysis on the data submitted by providers in response to the 2023
Mandatory Data Collection. We first establish upper bounds for each
rate tier, which set a ceiling on the upper range of reasonable rates.
We then establish lower bounds for each rate tier, by beginning with
the upper bound figures and then making certain reasonable and
conservative data adjustments which reduce the reported costs to set a
reasonable rate floor. Finally, we rely on record evidence and on
extensive agency expertise to determine a rate cap for each tier from
within those upper and lower bounds for both audio and video IPCS.
59. Determining the Upper Bounds. Our approach to establishing the
upper bounds of the zones of reasonableness remains largely identical
to the approach taken by the Commission in the 2024 IPCS Order. In
short, we take a series of familiar steps to reach the upper bounds,
each identical to the approach adopted in the 2024 IPCS Order. For
continuity, we continue to use the dataset developed for the 2024 IPCS
Order, which incorporates the vast majority of reported data but which
excludes certain data submissions that were either incomplete or
unusable. We again accept providers' costs and weighted average cost of
capital as reported. Importantly, we continue to incorporate all of
providers' safety and security costs into the upper bounds without any
adjustment. As we note above, our estimate of the upper bounds likewise
includes the provider-reported costs of ancillary service charges, as
well as an estimate of providers' TRS-related costs. We repeat these
steps in setting upper bounds for rates today based on the same
analysis and reasoning used in setting upper bounds in the 2024 IPCS
Order, and we readopt them for our use here.
60. Our approach to establishing the upper bounds of the zones of
reasonableness diverges from that in the 2024 IPCS Order in one key
respect: we no longer incorporate into the upper bounds any estimate of
the separate IPCS-related costs which correctional facilities may incur
in allowing access to IPCS. As we previously explained, the record that
has developed since the adoption of the 2024 IPCS Order demonstrates a
need to account for such costs in the form of a separate rate additive.
Because we adopt and implement that rate additive in today's Order,
those costs are now recovered outside of the rate caps, which in turn
removes any need to account for them when developing our estimate of
industry average IPCS costs. We therefore exclude such costs from the
upper bounds we establish today.
61. In light of the foregoing, and after adding the new size tier
for ``extremely small jails,'' we calculate the upper bounds for
interim audio and video IPCS rate caps for each tier as follows:
Prisons: $0.094 per minute for audio communications and
$0.470 per minute for video communications;
Large Jails: $0.086 per minute for audio communications
and $0.327 per minute for video communications;
Medium Jails: $0.097 per minute for audio communications
and $0.259 per minute for video communications;
Small Jails: $0.108 per minute for audio communications
and $0.230 per minute for video communications;
Very Small Jails: $0.128 per minute for audio
communications and $0.263 per minute for video communications; and
Extremely Small Jails: $0.168 per minute for audio
communications and $0.436 per minute for video communications.
62. Determining the Lower Bounds. The second step of our rate cap
setting process is to establish lower bounds of our zones of
reasonableness. To reach the lower bounds, we incorporate the results
of the upper bound analysis and make reasonable adjustments beyond
those applied to reach our upper bounds. Our approach to these
adjustments largely follows that taken by the Commission in the 2024
IPCS Order, with the exception that we incorporate all reported safety
and security costs in the industry costs we use to calculate the lower
bounds.
63. As explained above, and upon reconsideration, we now
incorporate the five previously excluded categories of safety and
security costs in the lower bounds, which includes costs for: Category
2 (Law Enforcement Support Services); Category 4 (Communication
Recording Services); Category 5 (Communication Monitoring Services);
Category 6 (Voice Biometric Services); and Category 7 (Other Safety &
Security Services). Including these costs increases industry-wide total
costs in the lower bounds by approximately $346 million. Because we
find that the data collected by the categorical approach the Commission
took in 2024 did not offer sufficient precision to allow the Commission
to exclude entire categories without risking providers' and facilities'
ability to provide and/or fund IPCS and the necessary safety and
security services, we take the conservative approach to include all
such reported costs in our lower bounds.
64. Apart from the inclusion of safety and security costs in the
lower bounds, the remaining steps and adjustments we take today
replicate those taken in 2024. To be clear, the components of the lower
bounds continue to incorporate reported ancillary service charge costs
and an estimate of providers' TRS-related costs, both of which were
also included in the upper bounds. As we describe in Appendix D, the
adjustment we make to the reported weighted average cost of capital
lowers the net sum of ancillary service expenses, although the total
per minute allowance for recovery of these expenses is otherwise
developed identically. This is the same approach the Commission took in
2024, to which no commenter objected. And, because we excluded an
estimate of facility costs from the upper bound, we need no longer
adjust the lower bound to remove them. In other words, because we adopt
an external rate additive to ensure recovery of facilities' costs of
making IPCS available, we no longer include any separate estimate of
facility costs in our rate cap setting analysis.
65. We make two adjustments to the industry cost data. First, we
adjust the weighted average cost of capital reported by certain
providers to match the industry default of 9.75%. As explained in
greater length in Appendix D, the net effect of this adjustment is to
reduce reported costs by about $72.5 million industry-wide.
66. Second, we adjust Securus's reported video costs to bring
Securus's costs in line with its competitors in the IPCS market and set
Securus's video IPCS cost per minute equal to the weighted average for
all other providers offering video IPCS. We complete the adjustment by
reducing Securus's cost per-minute data reported for each facility by
the appropriate relative percentage. Without adjustment, the per-minute
video IPCS costs reported by Securus in the 2023 Mandatory Data
Collection are between {[ REDACTED ]{time} times the average of the
rest of the industry. Given its size, Securus should be able to
``achieve economies of scale'' by ``spread[ing] its fixed costs over a
relatively large portfolio of contracts relative to other providers.''
Notably, these economies of scale are present in Securus's reported
cost data for audio IPCS but not for video IPCS. While
[[Page 56027]]
Securus argues that the Commission should set interim rates that
reflect their costs as reported in the data collection and not future
expectations of costs, we find it inappropriate to set rates based on
cost data that is heavily ``skewed by one provider's outsized
investment in upfront costs for a nascent service offering.''
Therefore, we find it reasonable to adjust Securus's video IPCS costs
to align with IPCS industry costs for the purposes of calculating
interim video rate caps.
67. Separate from its video IPCS cost data, Securus's reported
video safety and security cost data are also significantly higher than
the rest of the industry. Given the inclusion of all safety and
security costs in the lower bounds we establish here, including those
for video IPCS, we extend our adjustment of Securus's video IPCS costs
to include its video safety and security costs. Failure to do so would
perpetuate the distortions caused by Securus's extremely high video
costs, which would ``significantly skew the industry average'' on which
we base our interim video IPCS rate caps. Further, not extending our
adjustment to Securus's video safety and security costs would also be
inconsistent with our adjustment to other costs, including our
adjustment to weighted average cost of capital costs, which applies to
both IPCS and safety and security costs.
68. Following the aforementioned steps, including adding all
reported safety and security costs upon reconsideration, and adding the
new ``extremely small jail'' tier, we calculate the lower bounds for
interim audio and video IPCS rate caps as follows:
Prisons: $0.086 per minute for audio communications and
$0.214 per minute for video communications;
Large Jails: $0.079 per minute for audio communications
and $0.156 per minute for video communications;
Medium Jails: $0.091 per minute for audio communications
and $0.161 per minute for video communications;
Small Jails: $0.103 per minute for audio communications
and $0.174 per minute for video communications;
Very Small Jails: $0.124 per minute for audio
communications and $0.216 per minute for video communications; and
Extremely Small Jails: $0.163 per minute for audio
communications and $0.390 per minute for video communications.
3. Determining Interim Rate Caps for Audio IPCS and Video IPCS
69. Based on the available information and on the changes outlined
above regarding billed and unbilled minutes, the adoption of a new
``extremely small jail'' tier, and the incorporation into the lower
bounds of all safety and security costs as reported, we find that the
following rate caps based on the zone of reasonableness for each tier
of facilities will provide just and reasonable rates while ensuring
fair compensation. We establish these rate caps based on our
examination of the developing record, the available data, and the
Commission's experience regulating the IPCS marketplace. These rate
caps are interim in nature given the need to conduct an additional
industry data collection that will capture, particularly for the
evolving video IPCS market, more mature market characteristics that
will provide a sufficient basis for the establishment of permanent IPCS
rate caps. These interim rate caps and rate additives will serve to
ensure that the demonstrated benefits of increased communication in the
carceral setting--reduced recidivism, increased public safety and
strengthened family ties--will not be jeopardized by unintended
implementation challenges.
70. Setting Interim Audio Rate Caps. We begin by setting our audio
rate caps at the lower bounds of the zones of reasonableness, and
rounding to the nearest whole cent for each tier. At the outset, we
note that the upper and lower bounds for audio rates differ by
relatively small margins; at no tier do they differ by more than $0.01.
The audio caps we set at each tier are as follows:
[[Page 56028]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.304
71. The lower bounds are the appropriate starting points when
setting the audio IPCS rate caps, for many of the reasons that drove
the Commission's rate cap setting decisions in the 2024 IPCS Order.
First, the collected data reflect ``total industry reported costs which
exceeded total industry revenues by $219 million;'' a mismatch which
continues to strongly suggest that reported costs are overstated. The
difference between total industry revenues and costs does not, by
itself, undermine the reasonableness of the interim rate caps we set
here given that we are unable to ascertain and quantify the factors
driving this difference in the dataset. We will seek additional clarity
on this question in the forthcoming mandatory data collection that will
be the basis for the Commission's adoption of permanent rate caps.
While we nonetheless find these cost data provide a valid basis on
which to set rates, they suggest that setting rate caps based initially
on our lower bounds will ensure just and reasonable rates and fair
compensation for providers. Second, our analysis of the cost data still
suggests that several providers have reported ``substantial amounts of
goodwill,'' which resulted in large allocations of reported costs to
IPCS activities. As the Commission did in 2024, we again decline to
introduce an adjustment to reported costs on this basis. Continued
inclusion of these goodwill amounts argues in favor of calculating our
rate caps based initially on the lower bounds we have set. As the
Commission noted in 2024, these goodwill allocations ``tend to inflate
reported costs'' and therefore support our reliance on the lower bounds
as the initial step of our rate setting process.
72. Choosing to set interim audio rate caps based on the lower
bounds also is justified by the fact that the largest adjustment we
make--the inclusion of all reported safety and security costs in our
calculation of the lower bounds--may include some costs that are only
marginally related to the provision of IPCS. Although we describe above
why the categorical exclusion of safety and security costs failed to
adequately provide fair compensation for facilities and providers, it
is just as important to note that the wholesale inclusion of all
reported safety and security costs may be overbroad. Consequently,
taking all such costs as reported should also tend to result in a
conservative estimate of IPCS costs, further supporting the use of the
lower bounds as a basis for setting interim rate caps.
73. Record evidence received since the 2024 IPCS Order was adopted
also
[[Page 56029]]
supports our interim audio rate caps. As the record illustrates,
providers have contracted to provide audio IPCS at lower rates in some
circumstances. For example, both New York and California contracted to
provide audio IPCS to their respective state prison systems at a lower
rate. While the rates charged in these instances support our use of the
lower bounds in setting our rate caps, they are rates paid by
facilities directly to providers and are therefore not directly
comparable to the interim consumer rate caps we adopt here. Although we
cannot evaluate these prices in the abstract without a complete
understanding of the contractual relationships between the parties,
they nonetheless provide additional evidence in favor of adopting audio
rate caps at the lower bounds.
74. After deciding to set audio IPCS rate caps based on the lower
bounds, we use the standard rounding rule, in order to set caps at the
whole cent. We find that setting rate caps at the whole cent will
reduce confusion and complexity, and result in rate caps which can be
more easily understood and used by consumers. While rounding a lower
bound downward (or upward) can result in a rate cap that technically
falls below a lower bound (or above an upper bound), our use of
standard rounding principles is a statistically defensible process that
yields interim rate caps that remain consonant with our zone of
reasonableness approach. (Our use of a factor to estimate the effects
of inflation on the 2022 cost data is intended to reflect a separate
dynamic in our ratesetting process and does not impact the validity of
our standard rounding rule.) Additionally, rounding to the nearest
whole cent avoids conveying a false sense of precision, given the
limitations of the data, and facilitates the administration of and
provision of IPCS. Further, by the very nature of the rounding process,
the differences between the audio rate caps we now adopt and the lower
bounds which we have calculated are de minimis and therefore will not
result either in unjust rates or unfair compensation for providers. The
audio rate caps we adopt today are above the caps adopted in the 2024
IPCS Order, reflecting a more comprehensive accounting of IPCS costs,
thereby ensuring that, even for marginal cases, providers should be
more than able to recover their costs. To the extent that a provider
with exceptionally high costs can demonstrate that its costs exceed the
interim audio and video rate caps we adopt today, it may use the
Commission's waiver process.
75. Finally, the rate caps we set today are interim in nature given
remaining outstanding questions we have with the dataset we use
(goodwill costs, excess of costs over revenues industry-wide,
inconsistent allocation practices, etc.) and given the continued
evolution of the IPCS market. Likewise, interim caps are particularly
appropriate until we can better isolate and analyze the costs of safety
and security measures. Rather than the permanent caps adopted in the
2024 IPCS Order, today's audio rate caps are designed to be temporary
in nature thus helping reduce concerns about their levels which the
Commission has already committed to revisit in the relatively near
future on the basis of additional data.
76. Setting Interim Video IPCS Rate Caps. We find that the lower
bounds are also the appropriate starting points when setting interim
video IPCS rate caps, for many of the same reasons we have used the
lower bounds as the starting point for setting interim rate caps for
audio IPCS. We find that setting the interim video rate caps based on
the lower bounds of the video zones of reasonableness gives appropriate
weight to a range of factors, as described below. The video rate caps
we set at each tier are as follows:
[[Page 56030]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.305
77. We identify certain factors that support setting video IPCS
rate caps based on the lower bounds, including several that dovetail
with those referenced above in the discussion of our audio IPCS rate
caps, as well as with those the Commission relied on in 2024. In
particular, we reiterate that including all safety and security costs
is generally conservative, and that providers have a natural incentive
to overreport their IPCS cost data. Additionally, given the nascent
nature of the video IPCS market, substantial initial investments in
fixed assets are typical and are evident in our record, which gives us
further confidence that relying on our lower bounds to set video IPCS
rate caps will result in rate caps that are just and reasonable and
fairly compensatory. Finally, given the inclusion of all safety and
security costs in the lower bounds and the removal of facility costs
from our rate cap analysis, the video rate caps we adopt today are
above the corresponding rate caps adopted in the 2024 IPCS Order,
ensuring that providers should be able to recover their costs. We
acknowledge that the adjustment we apply to Securus's video expenses
reduces the lower bounds for video IPCS. For the aforementioned
reasons, however, we find that relying on that adjustment does not
undermine our reliance on our lower bounds as the basis for setting
rate caps.
78. We continue to adopt video rate caps on an interim basis, as
the Commission did in the 2024 IPCS Order. The same considerations
which led us to adopt interim audio IPCS rate caps today support the
adoption of interim video IPCS rate caps. Further, the interim nature
of the video rate caps will allow the Commission to monitor the
evolving nature of the video IPCS industry. As an emerging segment of
the IPCS industry, we expect that the per minute costs reflected in the
2023 Mandatory Data Collection would normally fall over time as the
industry matures. As with the interim audio rate caps we set today, our
interim video caps will be revisited going forward on the basis of
additional data and input from stakeholders generally.
79. Inflation factor. Securus contends that the interim IPCS rate
caps we adopt in this Order should be adjusted for inflation as these
rate caps are based on provider cost data from calendar year 2022. It
proposes an inflation adjustment factor of 11.6% using the
Telecommunications Producer Price Index (Telecom PPI). We agree that
the interim rate caps should be adjusted to account for inflation since
2022 but do not choose to rely on Securus's method of calculating the
adjustment. Securus relies on the Telecom PPI but IPCS providers'
investments and expenses reflect a mix of assets and business
activities that is not purely a telecommunications service. For
example, the provision of IPCS safety and security measures, which
accounts for roughly one-third of all industry costs, aligns as much
with the information technology and systems software sectors as it does
with telecommunications. Similarly, the costs reported by providers
like Securus also include significant hardware investments,
particularly in tablets used for video IPCS and other non-IPCS
services. Using a broader index like the Gross Domestic Product Price
Index (GDP-PI) to estimate an inflation adjustment factor would
arguably be more applicable to the relatively diverse mix of costs IPCS
providers typically incur. The Commission has a long history of relying
on broad measures of inflation including, for example, use of the GDP-
PI to adjust the Price Cap Index used as part of the ex ante rate-
setting methodology that limits certain interstate access rates that
incumbent local exchange carriers subject to the
[[Page 56031]]
Commission's price cap and incentive regulation rules may charge.
Moreover, Securus does not explain or justify the starting point for
its calculation. Nor could we confirm the initial figure Securus cites
(104.25) in its calculation in the Telecom PPI series published by the
Bureau of Labor Statistics (BLS).
80. We therefore find it more appropriate to use the GDP-PI figure
for the 4th quarter 2022, 120.175, as the starting point (i.e., time
zero or baseline figure) and the GDP-PI figure for the 2nd quarter
2025, the most recent figure published by the Bureau of Economic
Analysis (BEA), 128.266, as the ending point to calculate an inflation
adjustment factor. Our use of these two factors produces an inflation
adjustment factor of 6.73%. We apply this factor to the lower bounds
before rounding from three to two decimal places, and then we round the
products of these calculations to two decimal places to produce the
final rate caps. We also note that when the Commission incorporates an
estimate of inflation in a ratesetting process, it also typically
includes an offsetting estimate of productivity, which we do not
attempt here given the relative lack of productivity data specific to
the IPCS industry.
C. Other Matters
1. Data Collection
81. We reaffirm the Commission's prior delegation of authority to
WCB and OEA to conduct an additional data collection to enable the
Commission to set permanent rate caps for both audio and video IPCS.
That delegation included a direction to WCB and OEA to determine the
timing and scope of the data collection, ``provided that such
collection shall be conducted as soon as practicable.'' Parties have
underscored the importance of conducting a data collection without
further delay. Given the time that has elapsed since the most recent
mandatory data collection, the evolution of the market in the interim,
and the importance of establishing permanent IPCS rate caps without
undue delay, we now direct WCB and OEA to conduct a data collection
following the conclusion of the Further Notice comment period with the
goal of establishing permanent rate caps before the end of the first
quarter of 2027. We reiterate our delegation of authority to WCB and
OEA to make any appropriate modifications to the structure of the
collection and the template and instructions for the collection
necessary to provide the Commission an objective basis to establish
permanent IPCS rate caps.
2. Cost Benefit Analysis
82. We perform an analysis of the relative costs and benefits of
establishing new, interim audio and video IPCS rate caps. We expect
that the benefits of adopting new, interim audio rate caps that are
lower than the rate caps currently in effect, and establishing new
interim video rate caps, will far exceed the implementation costs over
a five-year time horizon. The net welfare gain to IPCS consumers alone
is sufficient to ensure that the benefits of our actions exceed the
costs. The other salutary effects of higher IPCS call volume--greater
family stability, improved mental health, and lower recidivism and
crime--will further expand these benefits.
83. Upward Revision of IPCS Demand Price Elasticity. Commission
staff previously estimated a price elasticity of demand for inmate
calling services of -0.3 based on empirical evidence of the
responsiveness of inmate calling volumes to price declines. The record
at the time included five estimates of demand elasticity which ranged
from -0.38 to -0.29. The Commission selected a demand elasticity
estimate effectively at the lower end of this range as a conservative
estimate. A more recent empirical study estimates a higher IPCS price
elasticity of demand of between -0.55 and -0.69, a range with a
midpoint of -0.62. The authors computed the demand elasticity as the
implied rate of a 15-minute call fell from $2.30 to $0.72 in New York
and from $4.95 to $0.66 in New Jersey. We find that the increase
identified by this study more accurately reflects the surge in call
volume from unleashing the pent-up demand of inmates who had previously
either called less than desired or not at all. Indeed, Miller et al.
found that the average number of calls per inmate/per month increased
from 8.82 to 15.86 in New York and from 8.32 to 27.00 in New Jersey, a
near-doubling and tripling, respectively, of incarcerated people call
volume. Miller et al. also developed a model using pooled New York and
New Jersey data that showed rate elasticities of demand are higher at
higher rates. Massachusetts sheriffs also witnessed a significant surge
in demand when the price of inmate calling was lowered. The literature
corroborates the higher elasticity: typical basic telephone demand
price elasticities in developed countries range between -0.1 to -0.5
for local calls, -0.2 to -0.5 for long distance calls, and -0.2 to -1.5
for international calls. The price elasticity estimated by Miller, et
al. is only slightly higher in absolute terms. This difference might be
attributable to the higher incidence of youth or poverty among inmates.
Studies have shown price elasticities are highest among the youngest
and poorest customers. Another possible explanation is that Miller, et
al. are estimating a blended elasticity for all calls, which would be
higher because of the inclusion of the relatively more elastic
international call volume (i.e., their price elasticity is tantamount
to a weighted average). We therefore revise our previous demand
elasticity estimate and rely on a price elasticity of demand of -0.6 to
estimate consumer welfare effects.
84. Gain in IPCS Consumer Welfare. Using our revised IPCS price
elasticity of demand, we estimate a net increase in IPCS caller welfare
of nearly $14 million annually, for a net present value of $64 million
over a five-year period. $64 million is the present value of a five-
year stream of $14 million payments discounted at an OMB recommended
rate of 3%. Worth Rises also estimates higher elasticity for IPCS,
although it does so by comparing the rates adopted here to those
adopted in the 2024 IPCS Order instead of those currently in force.
85. Other Salutary Effects of Increased IPCS Call Volume. The
anticipated expansion in IPCS call volume due to the new, interim rate
caps that are lower than the rate caps currently in effect should
generate salutary effects similar in nature to those discussed in prior
Commission orders, namely facilitating inmate re-entry, reducing
recidivism and crime, diminishing costly foster-child care placements,
and improving the mental health outcomes of inmates and their families.
86. Costs of Implementing New IPCS Rates. We previously estimated
that implementing new IPCS rates would cost IPCS providers a one-time
expense of $14 million in order to revise audio and video contracts to
reflect the new rate caps. To account for unanticipated challenges
faced by IPCS providers to implement the changes, including substantial
admin costs, we revise our estimate upward by 50%, for a total of $21
million. For the sake of direct comparison with estimated annual
benefits, this one-time cost averages to $2.8 million per year over
five years. The revised IPCS rates stipulated in this Order will not
alter estimated contract revision costs.
3. Effective Date and Compliance Date
87. We find good cause to make our rules effective on publication
in the Federal Register. The Administrative Procedure Act ordinarily
requires notice of a rule ``not less than 30 days before
[[Page 56032]]
its effective date,'' subject to exceptions, including ``as . . .
provided by the agency for good cause.'' Here, there is good cause to
make the rules we adopt effective immediately upon publication. The
Martha Wright-Reed Act required the Commission to promulgate
implementing rules not more than 24 months after the Act's enactment,
or by January 5, 2025. The Commission adopted implementing rules in the
2024 IPCS Order, but as previously discussed, those rules had
unintended consequences that prompted us to revisit them soon after
(and before widespread compliance). Because we are making fundamental
changes to those rules--including superseding the rate caps
themselves--we conclude that there is still a reason for urgency.
Therefore, consistent with Congress's direction to move quickly and
avoid unnecessary delay, we make this Order effective on publication of
notice in the Federal Register.
88. At the same time--and to avoid any risk of prejudice from our
determination to make the new rules effective immediately upon
publication of notice in the Federal Register--we do not require
compliance with the new interim audio and video IPCS rate caps and rate
additive adopted in this Order until 120 days after the date of Federal
Register notice. This will allow providers, correctional institutions,
and state and local governments sufficient time to conduct any
negotiations and administrative steps that may be necessary to
implement the new rate caps and rate additive. The Commission's release
of proposed orders three weeks in advance of their consideration at the
Commission's monthly open meetings and the additional time inherent in
the Federal Register publication process provide additional reasons why
we believe this deferred effective date gives providers and facilities
reasonable time to implement the revised interim rate caps and rate
additive. We find that deferring the compliance date until after the
effective date, as the Commission previously did in the 2024 IPCS
Order, will best balance the interests in fulfilling Congress's intent
to ensure implementation of the Martha Wright-Reed Act without undue
delay, while at the same time allowing parties sufficient time to
implement these changes.
89. The compliance date, 120 days after publication in the Federal
Register, represents the ``alternative date the Commission sets as part
of further action in the IPCS proceeding,'' as anticipated in the 2025
IPCS Waiver Order and therefore supersedes the April 1, 2027 compliance
deadline previously established in that order. While not directly
responding to the Application for Review filed by the Public Interest
Parties, by superseding the April 1, 2027 compliance date of the 2025
IPCS Waiver Order, the Commission effectively provides the substance of
the relief sought in that filing. The compliance date of this Order
therefore becomes the date on which compliance will be required for the
three rules temporarily suspended in the 2025 IPCS Waiver Order--the
IPCS interim rate caps (as modified herein), the prohibition on the
payment of site commissions, and the per-minute rate requirement for
IPCS offerings. The compliance date of this Order, which supersedes the
extended deadline for compliance with the Commission's per minute rate
rules set by the 2025 IPCS Waiver Order, works in conjunction with
deadlines previously set for compliance by two other recent Bureau
orders. The effective date of this Order will provide Securus the
additional time it requested to implement the per-minute rate
requirement for its video IPCS in the ex parte it filed in this
proceeding on June 27, 2025. The compliance date for this Order
supersedes and effectively extends the waiver relief previously granted
Securus by the Bureau. We do not modify waiver relief previously
granted TKC Telecom, which extended its compliance with the per-minute
pricing rule for its video IPCS until April 1, 2026. This compliance
date will approximate the latest of the staggered compliance dates
established by the 2024 IPCS Order and the deferred compliance dates
set by WCB in granting waivers of the per-minute pricing rule for video
IPCS. Securus seeks additional time to implement the per-minute pricing
rule, which we do not grant. While the Commission does not grant
additional time for providers to meet the per-minute pricing rule, it
reminds providers that they may seek a waiver of the Commission's rules
on an as-needed basis.
IV. Procedural Matters
90. Regulatory Flexibility Act. The Regulatory Flexibility Act of
1980, as amended (RFA), requires that an agency prepare a regulatory
flexibility analysis for notice and comment rulemakings, unless the
agency certifies that ``the rule will not, if promulgated, have a
significant economic impact on a substantial number of small
entities.'' Accordingly, the Commission has prepared a Final Regulatory
Flexibility Analysis (FRFA) concerning the possible impact of the rule
changes contained in this Report and Order and this Order on
Reconsideration on small entities. The FRFA is set forth in section V
below.
91. Paperwork Reduction Act. This document does not contain
proposed information collections subject to the Paperwork Reduction Act
of 1995 (PRA), 44 U.S.C. 3501-3521. In addition, therefore, it does not
contain any new or modified information collection burden for small
business concerns with fewer than 25 employees, pursuant to the Small
Business Paperwork Relief Act of 2002, 44 U.S.C. 3506(c)(4).
92. 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 Report & Order,
Order on Reconsideration, and Further Notice of Proposed Rulemaking is
non-major under the Congressional Review Act, 5 U.S.C. 804(2). The
Commission will send a copy of this Report & Order, Order on
Reconsideration, and Further Notice of Proposed Rulemaking to Congress
and the Government Accountability Office pursuant to 5 U.S.C.
801(a)(1)(A).
93. Providing Accountability Through Transparency Act. Consistent
with the Providing Accountability Through Transparency Act, Public Law
118-9, a summary of the 2025 IPCS NPRM will be available on https://www.fcc.gov/proposed-rulemakings.
94. 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. This requirement is to be implemented ``in
accordance with guidance by the Director'' of OMB. 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
[[Page 56033]]
data assets maintained or created by the Commission pursuant to the
rules adopted in the 2025 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)-(7) (exemptions concerning confidential commercial information,
personal privacy, and information compiled for law enforcement
purposes, respectively). We also seek comment in the 2025 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.''
95. 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.
96. Availability of Documents. Comments, reply comments, and ex
parte submissions will be publicly available online via ECFS.
97. Further Information. For further information, contact Shabbir
Hamid, at (202) 418-2328 or [email protected] or [email protected].
V. Final Regulatory Flexibility Analysis
98. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), the Federal Communications Commission (Commission)
incorporated Initial Regulatory Flexibility Analyses (IRFAs) in the
Incarcerated People's Communications Services; Implementation of the
Martha Wright-Reed Act; Rates for Interstate Inmate Calling Services,
Further Notice of Proposed Rulemaking (2024 IPCS Notice), released in
July 2024), in the 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 Report and Order
and Order on Reconsideration continue ongoing efforts to reform
providers' rates, charges, and practices in connection with
incarcerated people's communication services. The Report and Order and
Order on Reconsideration also address issues raised in the Petition for
Reconsideration of Network Communications International Corp. The
Commission sought written public comment on the proposals in those
notices, including comment on the IFRA. No comments were filed
addressing the IRFA. This Final Regulatory Flexibility Analysis (FRFA)
conforms to the RFA and it (or a summary thereof) will be published in
the Federal Register.
A. Need for, and Objectives of, the Rules
99. The Report and Order and Order on Reconsideration modify the
incarcerated people's communications services (IPCS) regulatory
framework, changing the methodology for calculating IPCS rate caps and
adopting revised, interim audio and video IPCS rate caps that address
unintended consequences of the Commission's 2024 IPCS Order. These
actions ensure rates and charges for incarcerated people's audio and
video communications services are just and reasonable and IPCS
providers are fairly compensated.
100. The Report and Order and Order on Reconsideration alters the
ratesetting methodology used in the 2024 IPCS Order by: (1) excluding
the use of unbilled minutes of use in calculating per-minute rate caps;
(2) establishing a new rate cap tier for extremely small jails; (3)
including previously excluded safety and security costs from rate cap
calculations; and (4) removing an estimate of correctional facilities'
costs from the rate caps and creating a separate rate additive to
account for those costs. In the Report and Order and Order on
Reconsideration, the Commission adopts interim rate caps for all
intrastate and interstate audio IPCS and video IPCS and revises the
existing dates for providers' compliance with the Commission's rules.
The goal of the Report and Order and Order on Reconsideration is to
properly balance the Commission's implementation of the dual statutory
mandates--just and reasonable rates for consumers and fair compensation
for providers--and thereby ensure the continued availability of IPCS to
incarcerated people and preserve correctional officials' ability to
provide safe and secure access to IPCS.
B. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA
101. No comments were filed addressing the impact of the proposed
rules on small entities.
C. Response to Comments by the Chief Counsel for the Small Business
Administration Office of Advocacy
102. 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 the Small Business Administration Office of
Advocacy (SBA), and also 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
the Rules Will Apply
103. 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 (SBA). A ``small business concern'' is one which: (1) is
independently owned and operated; (2) is not dominant in its field of
operation; and (3) satisfies any additional criteria established by the
SBA. The SBA establishes small business size standards that agencies
are required to use when promulgating regulations relating to small
businesses; agencies may establish alternative size standards for use
in such programs, but must consult and obtain approval from SBA before
doing so.
104. Our actions, over time, may affect small entities that are not
easily categorized at present. We therefore describe three broad groups
of small entities that could be directly affected by our actions. 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 34.75 million
businesses. Next, ``small organizations'' are not-for-profit
enterprises that are independently owned and operated and are not
dominant in their field. While we do not have data regarding the number
of non-profits that meet that criteria, over 99 percent of nonprofits
have fewer than 500 employees. Finally, ``small governmental
jurisdictions'' are defined as cities, counties, towns, townships,
villages, school districts, or special districts with populations of
less
[[Page 56034]]
than fifty thousand. Based on the 2022 U.S. Census of Governments data,
we estimate that at least 48,724 out of 90,835 local government
jurisdictions have a population of less than 50,000.
105. The rules adopted in the Report and Order and Order on
Reconsideration will apply to small entities in the industries
identified in the chart below by their six-digit North American
Industry Classification System (NAICS) codes and corresponding SBA size
standard. Based on currently available U.S. Census data regarding the
estimated number of small firms in each identified industry, we
conclude that the new rules will impact several small entities. Where
available, we also provide additional information regarding the number
of potentially affected entities in the identified industries below.
BILLING CODE 6712-01-P
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[[Page 56035]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.307
BILLING CODE 6712-01-C
E. Description of Economic Impact and Projected Reporting,
Recordkeeping and Other Compliance Requirements for Small Entities
106. The RFA directs agencies to describe the economic impact of
the adopted rules on small entities, as well as projected reporting,
recordkeeping and other compliance requirements, including an estimate
of the classes of small entities which will be subject to the
requirement and the type of professional skills necessary for
preparation of the report or record.
107. IPCS providers that qualify as small entities should be
positively impacted by the modifications made in the calculation of
IPCS rate caps. Those changes include the incorporation of five
additional safety and security costs in the rate caps, helping to
ensure that IPCS providers, and particularly smaller IPCS providers,
recover their costs and therefore receive fair compensation. The
Commission also determined that only billed minutes will be used to
calculate
[[Page 56036]]
interim rate caps, which will help ensure that small and other
providers will be fairly compensated. The creation of a new rate cap
tier for extremely small jails (0-49 average daily population or ADP)
is specifically designed to ensure that the predominantly smaller
providers that serve the smallest jails, which the Commission's data
collection show tend to have higher per-minute costs, will be able to
recover their costs of service.
108. Additionally, the creation of a $0.02 per-minute interim rate
additive to account for costs that facilities incur in making IPCS
available will ensure the adopted IPCS rates allow smaller correctional
institutions to be better able to recover those costs. Setting the
effective date of the joint Report and Order and Order on
Reconsideration at the date of its publication in the Federal Register
but adding a separate compliance date at 120 days post-publication of
the item in the Federal Register, instead of the April 1, 2027 date
established in the 2025 Waiver Order, will give small and other
providers a reasonable time frame to adapt to the new rates and ensure
compliance burdens for small entities are reasonable. Additional
resources or personnel should not be required to effectuate these
changes because IPCS providers should already be familiar with how to
adjust their systems to effectuate new rate caps and should be able to
make the necessary operational changes.
F. Discussion of Steps Taken To Minimize the Significant Economic
Impact on Small Entities, and Significant Alternatives Considered
109. 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.''
110. In the Report and Order and Order on Reconsideration, the
Commission took several steps to minimize the economic impact of its
IPCS regulations on small entities. First, the item modifies existing
rate caps by including additional safety and security costs in the rate
cap calculations which will minimize the chance that providers,
particularly smaller providers with generally higher per-minute costs,
will not be able to recover their costs. The Commission also adopts a
new rate cap tier that provides additional differentiation between five
different sizes of jails--large, medium, small, very small, and
extremely small--based on ADP. The use of five different size tiers for
jails is supported in the record and accounts for differences in costs
incurred by providers serving these different facility sizes. Adding
this extremely small jail tier minimizes the risk that providers, and
smaller providers that typically serve smaller facilities, will not be
able to recover their cost of service. However, we decline to adopt a
proposed alternative to set an additional tier below extremely small
because it would likely create a disproportionate compliance burden for
jails with a lower ADP. Finally, instead of the approach adopted in the
2024 IPCS Order, the Commission adopts a $0.02 per-minute rate additive
to account for correctional facilities' IPCS costs, which will aid with
cost recovery and minimize economic uncertainties faced by smaller
correctional facilities when they make service available to their
incarcerated populations.
Rate Cap Methodology
111. This appendix sets forth the Commission's revised methodology
for setting just and reasonable and fairly compensatory rate caps for
incarcerated people's communications services (IPCS). The appendix
reflects our reassessment of the data and other information IPCS
providers submitted to the 2023 Mandatory Data Collection in light of
the expanded record developed in response to the 2024 IPCS Notice and
the NCIC Petition for Reconsideration of aspects of the 2024 IPCS
Order. Our reassessment relies on the same dataset that the Commission
staff developed for the 2024 IPCS Order (as described in Appendix D of
that order) and, subject to the exceptions discussed below, adheres to
the rate cap methodology set forth in Appendices E, F, H, and I of that
order.
112. Unit of Sale. Our revised rate cap methodology relies on
billed minutes of audio or video IPCS as the unit of sale to determine
industry average costs per minute. Billed minutes refer to the number
of audio and/or video IPCS minutes supplied during a year for which
payment is demanded. Table 1 summarizes the billed and total audio and
video IPCS minutes for each reporting provider, along with the
percentage of total minutes that are billed and share of industry
billed and total minutes for each provider.
113. The percentage of total IPCS minutes that are billed
significantly differs between audio and video IPCS. Table 1 shows that
93.1% of all audio IPCS minutes are billed. Providers with the lowest
percentages of billed audio minutes include {[ REDACTED ]{time} , {[
REDACTED]{time} , {[ REDACTED ]{time} , and {[ REDACTED ]{time} . Three
providers ({[ REDACTED ]{time} ) report {[ REDACTED ]{time} of their
audio minutes as billed. In contrast, only 72.5% of all video IPCS
minutes are billed, with significant variation among providers ranging
from {[ REDACTED ]{time} . {[ REDACTED ]{time} reports the lowest
percent of billed video minutes at {[ REDACTED ]{time} , followed in
increasing order by {[ REDACTED ]{time} , {[ REDACTED ]{time} , and {[
REDACTED ]{time} . Only two providers ({[ REDACTED ]{time} ) report {[
REDACTED ]{time} of billed video minutes.
114. The industry share of billed versus total minutes across
providers also varies between audio and video IPCS. Securus and ViaPath
supply almost {[ REDACTED ]{time} of the industry's billed and total
audio minutes, with Securus supplying more than a third and ViaPath
supplying nearly half of industry audio minutes. ICSolutions has the
third largest share of audio minutes at {[ REDACTED ]{time} , while the
remaining nine providers account for less than {[ REDACTED ]{time} of
the industry. As for video IPCS, ViaPath similarly supplies a large
share of the billed and total minutes ({[ REDACTED ]{time} ), but
Securus, the second largest provider of video IPCS, supplies a much
smaller share of respective industry billed and total video minutes ({[
REDACTED ]{time} ) compared to audio IPCS minutes ({[ REDACTED
]{time} ). HomeWAV, ICSolutions, and Pay Tel account for {[ REDACTED
]{time} of billed video minutes and {[ REDACTED ]{time} of total
video minutes, respectively. The remaining five providers account for
{[ REDACTED ]{time} of industry billed and total video minutes,
respectively.
BILLING CODE 6712-01-P
[[Page 56037]]
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[[Page 56038]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.309
BILLING CODE 6712-01-C
115. Separation into Tiers. In setting rate caps in the 2024 IPCS
Order, the Commission adopted tiers for prisons and different sized
jails (large, medium,
[[Page 56039]]
small, and very small) based on average daily population (ADP) data
reported by providers. Our revised rate cap methodology adds a new rate
cap tier for extremely small jails (0-49 ADP). The largest three jail
tiers remain the same as those adopted in the 2024 IPCS Order: large
jails (ADP >= 1,000); medium jails (350 <= ADP < 1,000); and small
jails (100 <= ADP < 350). We divide the very small jail category,
originally including all jails with an ADP of less than 100, into two
jail tiers: very small jails (50 <= ADP < 100) and extremely small
jails (ADP < 50). Jails with an ADP below 100 include a
disproportionally large number of facilities with disparate demand and
cost characteristics. Table 2 sets out summary statistics for audio and
video IPCS for each rate tier as well as the industry as a whole. There
are 534 very small jails and 881 extremely small jails, or 1,415
facilities, out of the 4,149 total facilities that provide access to
audio IPCS. As for video IPCS, there are 325 very small and 259
extremely small jails, or 684 facilities out of 2,234 total facilities
that provide access to video IPCS. The very small and extremely small
jail tiers not only comprise a significant proportion of these
facilities, but also of total industry video IPCS expenses. These
tiers, however, account for a small share of total ADP (2.1% and 1.1%
for audio and 2.2% and 0.7% for video, respectively) and billed minutes
(1.7% and 0.9% for audio and 6% and 1.7% for video, respectively). Rate
tiers for larger facilities account for all other ADP and billed
minutes. For example, prisons account for a majority of ADP and billed
minutes and nearly half of total audio IPCS expenses. For video IPCS,
ADP and billed minutes are more dispersed among the largest four
facility tiers, with prisons still retaining the majority of total ADP.
Despite the small share of billed minutes and ADP of the extremely
small jail tier, jails in that tier account for an outsized share of
total IPCS expenses for both audio and video IPCS (8% for audio and
10.1% for video). This observation supports the disaggregation of the
previous very small jail tier into the two new tiers we use in our
revised rate cap methodology.
116. Additionally, Table 2 shows that the average costs of
providing audio and video IPCS differed between very small and
extremely small jails, further supporting our disaggregation of the
former very small tier (ADP < 100) into two separate tiers. For
example, the average per minute cost of providing audio IPCS in very
small jails was $0.083 as compared to $0.115 for extremely small jails.
For video IPCS, the average per minute cost of providing service in
very small jails was $0.192 as compared to $0.282 for extremely small
jails. The cost differences between these two sets of facilities
support disaggregation of the former very small jail tier into two
tiers to ensure our rate caps are just and reasonable and fairly
compensate the providers serving these two sets of facilities.
BILLING CODE 6712-01-P
[[Page 56040]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.310
[[Page 56041]]
117. Upper Bound Analysis. We again establish zones of
reasonableness, separately for audio and video IPCS and for each
facility tier, and determine interim audio and video IPCS rate caps
using these zones. The upper bounds of our zones of reasonableness
incorporate four distinct per-minute expense components: (1) audio/
video IPCS expenses; (2) audio/video safety and security expenses; (3)
ancillary service expenses; and (4) a telecommunications relay services
(TRS) allowance. These bounds are calculated in the same manner as in
the 2024 IPCS Order, with two exceptions. First, as previously
indicated, the unit of sale is now billed audio or video IPCS minutes
of use rather than total billed and unbilled minutes as in the 2024
IPCS Order. Second, we remove the correctional facilities' expense
component previously included in the upper bounds in the 2024 IPCS
Order and do not consider it in the determination of our zones of
reasonableness or our rate caps. Instead, we adopt a separate per-
minute rate cap additive to allow for recovery of these expenses. We
make this separation because, if a provider does not incur expenses by
collecting monies from its customers and remitting those monies to the
facility, the additive should not be included in its rate cap.
118. The per billed minute ancillary services expenses included in
our rate cap calculations equal the sum of all ancillary service
expenses divided by the sum of all billed audio and video minutes for
providers that reported ancillary expenses. Those expenses total $0.013
per billed minute--an increase from the estimate of $0.011 per minute
in the 2024 IPCS Order that results from using billed, instead of
total, minutes to calculate per billed minute expenses. The TRS per
billed minute allowance ($0.002 per minute) remains unchanged from the
2024 IPCS Order. Use of billed minutes instead of total minutes to
calculate the TRS additive produces the same per minute figure when
rounded to the third decimal place.
BILLING CODE 6712-01-C
[[Page 56042]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.311
119. Lower Bound Analysis. We establish lower bounds for our zones
of reasonableness by making reasoned adjustments to reported provider
cost data, which we explain below. After the adjustments to certain
expense categories, the lower bounds incorporate the following
components of industry average expenses: (1) audio/video IPCS expenses;
(2) audio/video IPCS safety and security expenses; (3) ancillary
service expenses; and (4) a TRS allowance. The impact of the expense
adjustments on the allowance for recovery of ancillary service expenses
is again trivial, decreasing the lower bounds by $0.002 per minute
(after rounding the upper- and lower-bound figures to the nearest third
decimal place). Accordingly, the lower-bound allowance for recovery of
ancillary services is $0.011 per billed minute.
120. Weighted Average Cost of Capital and Tax-Deductible Interest
Expense Adjustments. In their 2023 Mandatory Data Collection
submissions, Securus reported an {[ REDACTED ]{time} weighted average
cost of capital (WACC), and ViaPath reported a {[ REDACTED ]{time}
WACC for audio and video IPCS, safety and security measures, and
ancillary services. In determining the lower bounds of our zones of
reasonableness, we again adjust Securus's and ViaPath's claimed WACCs
and Securus's claimed tax-deductible interest expense for the
[[Page 56043]]
same reasons and in the same manner as in the 2024 IPCS Order. There
are three steps to these adjustments. First, we 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. 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. Net capital stock is 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. The Excel template uses
formulas and investment, expense, and other inputs to calculate annual
total expenses 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. The WACC and tax-
deductible interest expense are two of these inputs. The Excel template
calculates return by multiplying net capital stock by the provider's
claimed WACC or the default after-tax rate of return of 9.75%.
Decreasing the WACC decreases the (dollar) return on net capital stock
reflected in annual total expenses; at the same time, the lower return
reduces taxable income, and thus the allowance for state and federal
income taxes reflected in annual total expenses. Second, we replace the
tax-deductible interest expense Securus reported for IPCS and IPCS-
related services with a formula that multiplies Securus's return by
30%. This adjustment is consistent with the explanation provided by
Securus in its Word supplement as to how it determined its tax-
deductible interest expense. Use of this formula reduces the WACC
adjustment's impact on Securus's annual total expenses because it
reduces tax-deductible interest expense as return decreases, thereby
increasing taxable income, and thus the allowance for state and federal
income taxes. Third, we reduce the safety and security measure expenses
these providers reported at the facility level by the same percentage
by which these expenses are reduced at the company-wide level as a
result of the WACC and tax-deductible interest expense adjustments.
121. The adjustments we make in this Order to Securus's and
ViaPath's claimed WACCs and Securus's tax-deductible interest expense
also have the effect of reducing these providers' claimed expenses for
all seven categories of safety and security measures, as here we make
no adjustment to remove any of these categories. Moreover, the
adjustments we make here to Securus's WACC and tax-deductible interest
expense are made prior to the adjustments we make below to bring
Securus's video expenses in line with industry expenses (by disallowing
a portion of Securus's claimed expenses for both video IPCS costs and
video safety and security measure costs). In the 2024 IPCS Order, the
Commission disallowed five of the seven categories of safety and
security measure expenses, but did so after making the corresponding
WACC and tax-deductible interest expense adjustments to all seven
categories of these providers' safety and security measure expenses.
The Commission did not make an adjustment in the 2024 IPCS Order to
disallow any of Securus's claimed expenses within the two categories of
safety and security measure for which it allowed recovery of expenses
as a general matter. Accordingly, the adjustments we make here to
Securus's and ViaPath's WACCs and Securus's tax-deductible interest
expense on these providers' claimed safety and security measure
expenses produce the same effect as the adjustments the Commission made
in the 2024 IPCS Order, prior to excluding five categories of safety
and security measure expenses in the 2024 IPCS Order and disallowing a
portion of Securus's claimed expenses for safety and security measures
in this Order.
122. Table 4 summarizes IPCS and safety and security expenses for
audio and video IPCS before and after adjusting Securus's and ViaPath's
WACC and Securus's tax-deductible interest expenses. Adjusting both
providers' WACCs to 9.75% and Securus's tax-deductible interest expense
results in total audio and video IPCS and safety and security expenses
decreasing by about $60 million. The WACC and tax-deductible interest
expense adjustments for Securus and the WACC adjustment for ViaPath
also reduce Securus's and ViaPath's reported ancillary service expenses
by approximately {[ REDACTED ]{time} , respectively. These adjustments
are developed using the investment and expense data reported by these
providers for ancillary services in their Company-Wide Information
worksheets, as company-wide data are used to develop the allowance for
recovery of ancillary services expenses. This reduction corresponds to
a 6.2% decrease in total expenses for the industry. The total of the
expenses reported separately by ICSolutions and ViaPath for the 22
facilities at which ICSolutions is the contractor and ViaPath is the
subcontractor is reduced because of the adjustment to ViaPath's WACC,
but the impact is limited. As shown in Table 4 below, of the $60
million total reduction in expenses associated with the WACC and tax-
deductible interest expense adjustments, $54 million comes from a
reduction in audio IPCS and safety and security expenses while the
remaining $6 million comes from a reduction in video IPCS and safety
and security expenses. Adding the total of the two ancillary services
expense reductions referenced above, about {[ REDACTED ]{time} , to the
reduction to audio and video IPCS and safety and security expenses,
about $60 million, brings the total of the WACC and tax-deductible
interest expense reductions to about {[ REDACTED ]{time} .
BILLING CODE 6712-01-P
[[Page 56044]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.312
BILLING CODE 6712-01-C
123. Safety and Security. We include all categories of safety and
security expenses in establishing the lower bounds of our zones of
reasonableness.
[[Page 56045]]
This is in contrast to the approach taken in the 2024 IPCS Order, where
the costs of Communications Assistance for Law Enforcement Act (CALEA)
compliance measures and communication security services were the only
safety and security measure costs included in the lower bounds. Tables
5 through 7 examine safety and security expenses for audio and video
IPCS after adjusting for Securus's and ViaPath's WACC and Securus's
tax-deductible interest expenses.
124. Table 5 summarizes the safety and security expenses
attributable to audio and video IPCS by category and by provider. Audio
safety and security expenses total approximately $475 million. Video
safety and security expenses total approximately $48 million. For audio
IPCS, Securus and ViaPath report total safety and security expenses of
{[ REDACTED ]{time} , respectively, accounting for nearly {[ REDACTED
]{time} percent of the industry total. All other providers have
expenses between {[ REDACTED ]{time} . For video IPCS, Securus's and
ViaPath's respective safety and security expenses ({[ REDACTED ]{time}
account for {[ REDACTED ]{time} of the industry total). All other
providers' expenses range from as little as {[ REDACTED ]{time} .
BILLING CODE 6712-01-P
[[Page 56046]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.313
[[Page 56047]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.314
[[Page 56048]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.315
125. Table 6 summarizes safety and security expenses attributable
to audio and video by provider and across facility tiers. For audio,
prisons account for 66.6% of industry-wide safety and security expenses
and Securus and ViaPath jointly account for {[ REDACTED ]{time} of
those prison expenses. Extremely small jails account for the lowest
share of audio safety and security expenses, and Securus and ViaPath
account for {[ REDACTED ]{time} such expenses. Video safety and
security expenses are more evenly distributed across the four larger
facility tiers. Securus and ViaPath account for {[ REDACTED ]{time} of
the industry's video safety and security expenses among prisons ({[
REDACTED ]{time} ), large jails ({[ REDACTED ]{time} ), and medium
jails ({[ REDACTED ]{time} ), but their combined
[[Page 56049]]
share decreases within the smaller jail tiers ({[ REDACTED ]{time} for
small, very small, and extremely small jails, respectively).
[GRAPHIC] [TIFF OMITTED] TR05DE25.316
[[Page 56050]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.317
BILLING CODE 6712-01-C
126. Table 7 presents per billed minute audio and video safety and
security expenses by provider and across facility tiers. For audio, the
[[Page 56051]]
industry-wide per-minute safety and security expense across all
facility tiers is $0.045. Paradoxically, per-minute audio safety and
security expenses are highest among prisons ($0.05), followed by large
jails ($0.042), medium jails ($0.04), and extremely small jails
($0.036). Small and very small jails have the lowest per-minute average
safety and security expenses at $0.028 (each), due in part to
providers' differing expense allocation practices. Industry-wide video
per-minute safety and security expenses are over 2.5 times higher than
audio, averaging $0.118. As with audio, prisons have the highest per-
minute video safety and security expenses at $0.198, followed by large
jails ($0.148), medium jails ($0.109), and extremely small jails
($0.068).
127. We would expect larger facilities to have lower per billed
minute expenses due to economies of scale. However, these
counterintuitive observations result, in large part, from the different
ways providers allocated expenses between IPCS and safety and security
measures. Only Securus and ViaPath allocated a non-trivial share of
their expenses to categories of safety and security measures. Securus
reports {[ REDACTED ]{time} of its total expenses as safety and
security expenses. ViaPath reports {[ REDACTED ]{time} of its total
expenses as safety and security expenses. The rest of the industry, on
average, reports only 3.9% of total expenses as safety and security
expenses. Because Securus and ViaPath supply a lower share of billed
minutes in the smallest facility tiers relative to their share in
prisons and large jails, per billed minute safety and security expenses
in the smallest tiers are driven less by these two market leaders and
more by the smaller providers. These smaller providers allocated nearly
all of their expenses to audio and video IPCS, and nearly none to
safety and security measures. Securus and ViaPath have per billed
minute audio safety and security expenses of {[ REDACTED ]{time} ,
respectively, which dwarfs all other providers' expenses. The provider
with the next highest per billed minute safety and security expense is
CPC at {[ REDACTED ]{time} . For video safety and security, Securus and
ViaPath have per billed minute expenses of {[ REDACTED ]{time} ,
respectively. ICSolutions is third at {[ REDACTED ]{time} per billed
minute. As a consequence, industry average safety and security measure
expenses across facility size tiers appear to exhibit diseconomies of
scale. However, this is almost entirely the result of the different
cost allocation approaches taken by Securus and ViaPath as compared to
those taken by smaller providers.
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[[Page 56052]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.318
[[Page 56053]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.319
BILLING CODE 6712-01-C
128. Adjustment to Securus's Video IPCS Expenses. We adjust
Securus's extraordinarily high per-minute video IPCS expenses to bring
them in line
[[Page 56054]]
with the rest of the industry. The Commission previously made a similar
adjustment to the same expenses, with the exception that here we use
billed instead of total billed and unbilled minutes. The adjustment
involves several steps. First, we calculate the weighted average video
IPCS expense per billed minute for all providers, excluding Securus. We
then multiply this estimate by Securus's total billed video IPCS
minutes to simulate the video IPCS expenses Securus would incur if they
were equivalent to the average of the rest of the industry's expenses
on a per-minute basis. This estimate is then divided by Securus's
reported expenses and subtracted from one to calculate the percent
reduction to Securus's video IPCS expenses. Excluding Securus, the
industry expense per billed minute for video IPCS is {[ REDACTED
]{time} . After multiplying this estimate by Securus's total billed
video minutes, dividing by Securus's original expenses and subtracting
by one, we calculate {[ REDACTED ]{time} reduction in Securus's video
IPCS expenses.
129. Table 8 presents the unadjusted and adjusted video IPCS
expenses per billed minute for Securus and the industry (including
Securus) for each facility type. Securus's unadjusted per-minute
expenses range from just under {[ REDACTED ]{time} , depending on
facility type. Securus's per-minute average of {[ REDACTED ]{time}
across all facilities is more than {[ REDACTED ]{time} times higher
than the industry average, and more than {[ REDACTED ]{time} times
higher than the industry average when excluding Securus. Securus's
unusually high per-minute expenses increase the industry average from
{[ REDACTED ]{time} , a {[ REDACTED ]{time} increase. However, once
the adjustment to Securus's video IPCS expenses is made, its per-minute
expenses are significantly more comparable to those of the rest of the
industry.
BILLING CODE 6712-01-P
[[Page 56055]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.320
130. Table 9 shows the total video IPCS expenses for Securus and
the industry before and after the adjustment. The overall reduction in
video IPCS expenses is roughly {[ REDACTED ]{time} million, or a
reduction in
[[Page 56056]]
industry video IPCS expenses of {[ REDACTED ]{time} %.
[GRAPHIC] [TIFF OMITTED] TR05DE25.321
BILLING CODE 6712-01-C
131. Adjustment to Securus's Video IPCS Safety and Security Measure
Expenses. Table 10 demonstrates the proportionality of Securus's
reported expenses, and shows Securus's audio and video IPCS billed
minutes and safety and security measure expenses in dollars and per
billed minutes along with the analogous figures for ViaPath, the
industry, and the industry without Securus. Securus's video IPCS safety
and security measure per billed minute expenses {[ REDACTED ]{time}
are substantially higher than ViaPath's, its most comparable provider
in terms of scale and scope, {[ REDACTED ]{time} , and the industry
average is significantly skewed by including Securus {[ REDACTED
]{time} as compared to the industry average of all providers excluding
Securus ({[ REDACTED ]{time} without Securus). Securus's video IPCS
safety and security expenses per billed minute are over {[ REDACTED
]{time} times higher than the industry average with and without
Securus, respectively, and over {[ REDACTED ]{time} times higher than
those of ViaPath. Notably, Securus's share of the industry's IPCS video
safety and security measure expenses also markedly exceeds Securus's
share of the industry's video IPCS minutes. While Securus accounts for
about {[ REDACTED ]{time} of the industry's IPCS video safety and
security measure expenses, it only reports about {[ REDACTED ]{time}
of the video minutes. By comparison, ViaPath's share of the industry's
video IPCS billed minutes and safety and security measure expenses
mirror one another, at {[ REDACTED ]{time} , respectively. Securus's
video IPCS safety and security measure data are also inconsistent with
its audio IPCS safety and security measure data. Securus's audio IPCS
safety and security measure per billed minute expenses {[ REDACTED
]{time} , are lower than ViaPath's {[ REDACTED ]{time} and only
slightly above the industry average {[ REDACTED ]{time} , with and
without Securus, respectively. Moreover, Securus's shares of the
industry's audio IPCS billed minutes and safety and security measure
expenses, {[ REDACTED ]{time} , respectively, are similar. These data
and their relative proportions demonstrate the anomalous character of
Securus's video IPCS and video safety and security expense data and the
need for adjustments.
BILLING CODE 6712-01-P
[[Page 56057]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.322
BILLING CODE 6712-01-C
132. The record does not allow us to fully determine why Securus's
per billed minute video IPCS safety and security measure expenses
deviate so
[[Page 56058]]
significantly from those of the other providers. However, Securus's
video IPCS safety and security measure expenses are not indicative of a
mature, ongoing operation. Taking Securus's expense data at face value,
however, it is reasonable to anticipate future demand for Securus's
video IPCS to increase to a level more commensurate with its future
video IPCS and video IPCS safety and security expenses as the rate of
investment in new infrastructure slows and customer awareness and use
of video IPCS increase. This would enable Securus to spread its
significant early stage and subsequent incremental investments in long-
term video IPCS and video safety and security measure assets over
significantly more video IPCS billed minutes, and thus reduce both its
per billed minute video IPCS and video IPCS safety and security measure
expenses.
133. We therefore adjust Securus's high video IPCS safety and
security measure expenses per billed minute down to the industry
average (without Securus). The adjustment is made in the same manner as
the adjustment to Securus's video IPCS expenses. We thus use the
industry average (without Securus) to reduce both Securus's video IPCS
expenses and its video IPCS safety and security measure expenses.
Specifically, we reduce Securus's video IPCS safety and security
measure expenses equally across all facilities by the percentage that
equates the sum of these expenses to the overall industry average
(excluding Securus) on a per billed minute basis. Securus's video IPCS
safety and security measure expenses are {[ REDACTED ]{time} per
billed minute. The industry average video IPCS safety and security
measure expenses per billed minute without Securus are $0.07. A
reduction of {[ REDACTED ]{time} to Securus's video IPCS safety and
security measure expenses across all of its facilities reduces the sum
of these expenses to the level of the industry average on a per billed
minute basis.
134. Table 11 shows the unadjusted and adjusted video IPCS safety
and security measure expenses per billed minute for Securus and the
industry (including Securus) for each facility type. Securus's
unadjusted billed per minute expenses range from {[ REDACTED ]{time} ,
depending on facility type. After the adjustment to Securus's video
IPCS safety and security measure expenses, its per billed minute
expenses range from {[ REDACTED ]{time} , and as shown in the final
column, these adjusted per billed minute expenses are significantly
more comparable to the industry average for each facility type.
[[Page 56059]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.323
135. Table 12 shows Securus and industry total (including Securus)
video IPCS safety and security measure expenses before and after the {[
REDACTED ]{time} downward adjustment to Securus's expenses. Adjusting
Securus's video IPCS safety and security measure expenses to reflect
the industry average per billed minute expense reduces Securus's video
expenses by approximately {[ REDACTED ]{time} million. This reduction
decreases total industry video IPCS safety and security measure
expenses by {[ REDACTED ]{time} .
[[Page 56060]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.324
136. Lower Bounds. We now determine lower bounds, which in
conjunction with the upper bounds addressed above, will establish the
zones of reasonableness that we use to set audio and video IPCS rate
caps. The four distinct per billed minute expense components of the
lower bounds are: (1) audio/video IPCS expenses; (2) audio/video safety
and security expenses; (3) ancillary service expenses; and (4) TRS
allowance. These per billed minute components are calculated using the
upper bound data net of the adjustments to Securus's and ViaPath's
WACCs and to Securus's tax-deductible interest, video IPCS, and video
IPCS safety and security measure expenses. As with our upper bound
analysis, the correctional facilities' expenses are not included in the
lower bound analysis but are addressed separately through the
establishment of a rate additive for facility costs. The ancillary
service expenses per billed minute additive is calculated in the same
manner as in the upper bound analysis except for using ancillary
expense data after the WACC and tax-deductible interest expense
adjustments. This per billed minute additive totals $0.011. The TRS
additive of $0.002 included in the upper bound remains unchanged. Table
13 shows the lower bounds for audio and video IPCS for each facility
type and size.
[[Page 56061]]
[GRAPHIC] [TIFF OMITTED] TR05DE25.325
Report to Congress
137. The Commission will send a copy of the Report and Order and
Order on Reconsideration, including this Final Regulatory Flexibility
Analysis, in a report to Congress pursuant to the Congressional Review
Act. In addition, the Commission will send a copy of the Report and
Order and Order on Reconsideration, including this Final Regulatory
Flexibility Analysis, to the Chief Counsel for the SBA Office of
Advocacy and will publish a copy of the Report and Order and Order on
Reconsideration, and this Final Regulatory Flexibility Analysis (or a
summary thereof) in the Federal Register.
VI. Ordering Clauses
138. Accordingly, it is ordered, pursuant to the authority
contained in sections 1, 2, 4(i)-(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)-(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), that this joint Report
and Order, Order on Reconsideration, and Further Notice of Proposed
Rulemaking in WC Docket Nos. 23-62 and 12-375 are adopted. Pursuant to
Executive Order 14215, 90 FR 10447 (Feb. 20, 2025), this regulatory
action has been determined to be not significant under Executive Order
12866.
139. Accordingly, it is further ordered, pursuant to the authority
contained in sections 1, 2, 4(i)-(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)-(j), 201(b), 218, 220, 276, 403, and 617, and the
Martha Wright-Reed Just and Reasonable Communications Act of 2022,
Public Law 117-338, 136 Stat. 6156 (2022), that this joint Report and
[[Page 56062]]
Order and Order on Reconsideration shall be effective upon publication
of a summary of it in the Federal Register, compliance with which shall
be required one hundred and twenty (120) days after such publication.
The effective date and compliance date of this joint Report and Order
and Order on Reconsideration supersede the extended deadline
established by the 2025 Waiver Order previously adopted by the Wireline
Competition Bureau. The Commission directs the Wireline Competition
Bureau to announce the effective date and compliance date by subsequent
Public Notice.
140. It is further ordered that, pursuant to the authority
contained in sections 1, 2, 4(i)-(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)-(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 Petition for
Reconsideration, filed October 21, 2024, by NCIC Inmate Communications
is granted in part as described herein.
141. It is further ordered that the Commission's Office of the
Secretary, shall send a copy of this Report and Order, Order on
Reconsideration, and Further Notice of Proposed Rulemaking, including
the Initial Regulatory Flexibility Analysis and the Final Regulatory
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
Business Administration.
142. It is further ordered that the Office of the Managing
Director, Performance and Program Management, shall include a copy of
this Report and Order, Order on Reconsideration, 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 Part 64
Communications, Communications common carriers, Incarcerated
people, Inmates, Security measures, Telecommunications, Telephone,
Video.
Federal Communications Commission.
Marlene Dortch,
Secretary.
Final Rules
For the reasons discussed in the preamble, the Federal
Communications Commission amends 47 CFR part 64 as follows:
PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS
0
1. The authority citation for part 64 continues to read as follows:
Authority: 47 U.S.C. 151, 152, 154, 201, 202, 217, 218, 220,
222, 225, 226, 227, 227b, 228, 251(a), 251(e), 254(k), 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.
Subpart FF--Incarcerated People's Communications Services
0
2. Amend Sec. 64.6010 by:
0
a. Removing and reserving paragraphs (a) through (d); and
0
b. Revising paragraph (e).
The revision reads as follows:
Sec. 64.6010 Incarcerated People's Communications Services rate caps.
* * * * *
(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 interim interstate and
intrastate cap set forth in Sec. 64.6030 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
3. Revise 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.
0
4. Revise Sec. 64.6030 to read as follows:
Sec. 64.6030 Incarcerated People's Communications Services interim
rate caps.
(a) A Provider must offer each Incarcerated People's Communications
Service 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 interim rate caps:
(1) $0.09 per minute for each Prison;
(2) $0.08 per minute for each Jail having an Average Daily
Population of 1,000 or more Incarcerated People;
(3) $0.10 per minute for each Jail having an Average Daily
Population of between and including 350 and 999 Incarcerated People;
(4) $0.11 per minute for each Jail having an Average Daily
Population of between and including 100 and 349 Incarcerated People;
(5) $0.13 per minute for each Jail having an Average Daily
Population of between and including 50 and 99 Incarcerated People; and
(6) $0.17 per minute for each Jail having an Average Daily
Population below and including 49 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:
(1) $0.23 per minute for each Prison;
(2) $0.17 per minute for each Jail having an Average Daily
Population of 1,000 or more Incarcerated People;
(3) $0.17 per minute for each Jail having an Average Daily
Population of between and including 350 and 999 Incarcerated People;
(4) $0.19 per minute for each Jail having an Average Daily
Population of between and including 100 and 349 Incarcerated People;
(5) $0.23 per minute for each Jail having an Average Daily
Population of between and including 50 and 99 Incarcerated People; and
(6) $0.42 per minute for each Jail having an Average Daily
Population of below and including 49 Incarcerated People.
(d) Providers may charge up to an additional $0.02 per minute above
the audio and video Incarcerated People's Communications Services rate
caps in paragraphs (b) and (c) of this section to recover the costs
that a Correctional Facility may incur in making Incarcerated People's
Communications Services available.
[FR Doc. 2025-22125 Filed 12-4-25; 8:45 am]
BILLING CODE 6712-01-P