Local jails, state prisons and private phone providers
byPeter Wagner andAlexi JonesTweet thisFebruary 2019Press release
At a time when the cost of a typical phone call is approaching zero, people behind bars in the U.S. are often forced to pay astronomical rates to call their loved ones or lawyers. Why? Because phone companies bait prisons and jails into charging high phone rates in exchange for a share of the revenue.The good news is that, in the last decade, we’ve made this industry considerably fairer:The Federal Communications Commission (FCC) capped the cost of out-of-state phone calls from both prisons and jails at about 21 cents a minute;The FCC capped many of the abusive fees that providers used to extract extra profits from consumers; and
However, the vast majority of our progress has been in state-run prisons. In county- and city-run jails — where predatory contracts get little attention — instate phone calls can still cost $1 per minute, or more. Moreover, phone providers continue to extract additional profits by charging consumers hidden fees2 and are taking aggressive steps to limit competition in the industry.
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These high rates and fees can be disastrous for people incarcerated in local jails. Local jails are very different from state prisons: On a given day, 3 out of 4 people held in jails under local authority have not even been convicted, much less sentenced. The vast majority are being held pretrial, and many will remain behind bars unless they can make bail. Charging pretrial defendants high prices for phone calls punishes people who are legally innocent, drives up costs for their appointed counsel, and makes it harder for them to contact family members and others who might help them post bail or build their defense. It also puts them at risk of losing their jobs, housing, and custody of their children while they are in jail awaiting trial.
It is well within the power of both prisons and jails to negotiate for low phone rates for incarcerated people, by refusing to accept kickbacks (i.e. commissions) from the provider’s revenue and by striking harder bargains with the providers. And many state prisons have done so: Illinois prisons, notably, negotiated for phone calls costing less than a penny a minute.
But in Illinois jails — which are run not by the state but by individual cities and counties — phone calls cost 52 times more, with a typical 15-minute call home from a jail in Illinois costing $7. In other states, the families of people in jail have to pay even more: A call from a Michigan jail costs about $12 on average, and can go as high as $22 for 15 minutes (compared to $2.40 from the state’s prison system).
On average, phone calls from jail cost over three times more than phone calls from state prisons. Nationally, the average cost of a 15-minute call from jail is $5.74. This table and the map below show just how much more local jails are charging in each state than state prisons for the same 15 minute in-state phone call:
The evidence suggests that it is, at most, only slightly more expensive for the providers to serve jails than prisons, and certainly not 3 or 5 or more times more expensive. The difference in pricing is explained by three factors, listed below from least to most important:The small differences in the way that phones work in jails as compared to prisons;The profit-seeking strategies of individual facilities; andThe profit-seeking strategies of individual phone providers.
We’ll review these issues in order.
When the Federal Communications Commission reviewed confidential cost data from phone providers, it found that because jails are usually smaller than prisons and have higher turnover than prisons, providers pay more for certain overhead costs (such as the cost of opening new accounts), making each minute of use slightly more expensive.
But the difference was clearly small: When the FCC proposed maximum phone rates for prisons and jails, its proposed price caps for jails — even the smallest jails — were only moderately higher than its price caps for prisons. (The FCC’s intent was to propose reasonable phone rates for prisons and jails that would still be profitable for the providers. To be clear, these rate caps never went into effect.3):
|Local jails with a population over 1,000||14¢/minute||About 31% of people in jails are in facilities of this size, and this rate is 27% higher than in state prisons.|
|Local jails with a population of 350 to 999||16¢/minute||About 32% of people in jails are in facilities of this size, and this rate is 45% higher than in state prisons.|
|Local jails with a population under 350||22¢/minute||About 37% of people in jails are in facilities of this size, and this rate is twice that in state prisons.|
More data clearly demonstrate that small facilities do not have to charge such high rates. An analysis of Michigan rates shows that facility size does not actually correlate to rates. Many of the smallest facilities were able to set their rates at levels similar to those of the largest facilities:
It is clearly possible to have low rates in facilities of all sizes, as the vertical cluster of dots on the left of the graph illustrates.
So if phone rates are not correlated with facility size, who is responsible for sky-high phone rates in jails: jail administrators or phone providers?Let’s start with jail administrators and their demand for kickbacks. As the FCC’s investigation found, facilities’ demand for commissions drives up prices. In order to win contracts, the providers are willing to charge any rate necessary in order to deliver the desired income. So a provider might offer to charge consumers $1/minute and pay the facility a 90% commission, or $0.50/minute with an 80% commission, or $0.10/minute with no commission at all. These combinations all deliver the same income to the provider ($0.10 per minute), but the end cost to the consumer ultimately depends on how large of a commission the facility demands.
But while facilities play a role in driving up the cost of phone calls, it’s clear that the profit-seeking behaviors of individual providers have a much greater impact. Providers, it should be noted, do not have to charge exorbitant rates to deliver substantial revenue to facilities. Some providers offer a combination of high commission income and low rates per minute. But other providers, like Securus, continue to dominate the market despite offering facilities a worse deal: low commissions and high rates, as shown in this analysis of Michigan commission revenue and in-state phone rates.
This analysis of annual revenue per incarcerated person5 shows that the most lucrative contracts are, from the perspective of the facilities, ICSolutions contracts that offer a lower rate. The facilities that contract with Securus and GTL often have both higher rates and a lower income.
These latter providers are uniquely skilled at convincing jails to sign contracts that are far less profitable than the facilities assume. What the cluster of high-commission, low-rate contracts in the graph above means is that it is possible for both jails and providers to make a substantial profit on $3.15 phone calls.6 On the other end of the graph, Securus’s cluster of high-rate low-commission-payment contracts means that the company is keeping the substantial income for itself and sharing very little with the facilities.7
Methodology: This analysis is based on an average of available commission payments made between 2014 and 2017 (link to appendix), and designed as a more realistic view of how commissions actually work in practice. The commission percentages in the contract are misleading because the providers make profits on fees which are outside of the commission system, and the providers have been known to steer call volume to lower-commission call types in order to suppress commission payments. (As we’ve documented in Genesee County, Michigan, this can make commissions 8 times smaller than counties expect.) For the data, see the full report methodology.
State prisons have, compared to jails, several advantages:State prisons, which are larger than jails, have the means to analyze the costs and benefits of proposed contracts (and often write their own contracts). Their analyses can reveal hidden fiscal and policy costs underlying too-good-to-be-true vendor proposals. State prisons tend to be run by appointees of the Governor, so they are often insulated from short-term financial and political pressures, and are often supported by career staff who have years of experience negotiating with billion-dollar communications companies.
Jails, meanwhile, are vulnerable to signing bad contracts because:Local governments (which run jails) tend to have smaller or less flexible budgets and are less eager to think long-term than state governments (which run prisons). And in particular, when jails are run by elected officials, they may not be looking beyond the next election.The typical person booked into a jail is released in hours or days and may make only a few calls, so it is difficult for their families to put sustained political pressure on jail administrators to negotiate better contracts. Many state legislatures — and by extension the Public Utility Commissions and other regulatory and civil society organizations — pay very little attention to individual jails or the state’s aggregated jail policy.
So to recap, the companies are savvy and very effective at cutting self-serving contracts with the jails. But in addition to their high rates in jails, companies also slip in hidden fees that exploit families and, as we will see, shortchange facilities.
How charging families hidden fees shortchanges both families and facilities
Phone providers are counting on facilities, regulators, legislators, journalists and the readers of this report to focus only on per-minute phone rates, ignoring their other major source of revenue: fees.
Because the typical reader unfamiliar with telecommunications regulations would assume that rates and fees are the same thing, it is helpful to step back and clarify our definitions:Rates:This is what you pay per minute, including any higher charge for the first minute of the call.Fees:This is everything else you might pay for “services” related to the call, such as fees to open an account, have an account, fund an account, close an account, get a refund, receive a paper bill, etc.
Charging high consumer fees allows phone providers to technically abide by rate caps while generating a new source of revenue — one on which, as a bonus, they do not have to pay commissions to facilities. As long as these fees are ignored or dismissed as an “ancillary” issue, companies will continue to use them as — in the FCC’s words — “the chief source of consumer abuse.” Historically, these fees are not trivial, but “can increase the cost of families staying in touch … by as much as 40%.”
To its credit, the FCC made tremendous progress on this issue in 2015, capping some fees and eliminating others.12 Just one of the reforms — capping the fee charged for a credit card purchase (to a still significant $3.00)13 — has saved consumers $48 million every year since.14
Sadly, the most unscrupulous providers have found ways to evade these new regulations, and continue to charge unconscionable fees.
For example, many people living in poverty (who are among the most likely to be incarcerated or have incarcerated loved ones) do not have bank accounts and often pay their bills by money transfer via WesternUnion or Moneygram.15 WesternUnion and MoneyGram charge a standard price of about $6.0016 to send a payment to most companies, including GTL,17 NCIC, Telmate, Paytel, or ICSolutions. (See table.)
However, other companies have arranged18 hidden profits in these third party payment systems. For the same $25 payment to Amtel, Lattice or Securus, Western Union and MoneyGram charge a shocking $10-12. The explanation is that Western Union and MoneyGram are collecting a portion of this fee on behalf of the phone providers, something that the FCC intended to prohibit. Amtel has even admitted to the FCC that it receives a portion of Western Union’s fees. Western Union calls these payments a “revenue share” in its correspondence and a “referral fee” in its contracts. Families and facilities would be right to call this hidden fee a form of exploitation.
The providers also invent new services which they call “advanced,” “premium” or “convenience,” but which tend to be simply more expensive ways to make families pay for the same product.
For example, Securus goes out of its way to make it hard for family members to create and fund accounts in an efficient manner. Rather than encourage families to create pre-paid accounts — or to add funds to a depleted account — Securus instead steers people to pay for each call individually. By emotionally manipulating family members into paying for single calls rather than creating accounts (see comic below), the companies drive up fee revenue.19 Other services — such as charging families to listen to voicemails from their loved ones in jail — similarly manipulate consumers and increase revenue from fees. Neither public safety nor consumer “convenience” benefit from these unnecessary but highly profitable call products.
It’s easy to see how the phone providers benefit from imposing a variety of burdensome fees, but how this practice also hurts facilities does not get enough attention. Facilities’ commissions come from phone calls themselves, not the fees attached to them. Facilities should therefore want families to be making more phone calls, but when families are bled dry by high fees, the number of calls they can afford to make goes down. That outcome is fine with the providers, but leaves the facilities with less revenue than they expect. (For sheriffs who already feel uncomfortable charging families $1/minute, understanding that they, too, are being ripped off by providers should push them to negotiate for contracts that prioritize the interests of local families over large corporations.)
The providers are consolidating the market to limit facilities’ choices and lock them into unfair contracts
Phone providers, as we explain above, are skilled at writing self-serving contracts that burden consumers with unfair rates and fees. It is therefore in the interest of correctional facilities to be careful and conscientious in selecting a phone contract. But the odds of negotiating a fair contract — odds already tilted against facilities, as we’ve shown — are declining as phone companies buy up their direct competitors and the providers of related correctional services.
First, as the below timeline illustrates, providers are limiting facilities’ choice of vendor by directly purchasing their competitors:
The fact that only two companies now control most of the correctional phone market — and are poised to control even more if Securus acquires ICSolutions — is bad news for both facilities and consumers.
But the dominant companies have a second monopoly strategy, which is both more subtle and more harmful: buying non-telephone companies, in order to offer facilities packages of unrelated services in one huge bundled contract.
Bundled contracts combine phone calls with other services, such as video calling technology, electronic tablets, and money transfer for commissary accounts. This allows providers to shift profits from one service to another, thereby hiding the real costs of each service from the facility. Bundling also “locks in” contracts for the provider: It makes it more difficult for the facility to change vendors in the future, because the facility must now change their phone, email, commissary, and banking systems all at the same time.
So even the savviest of facilities are undercutting their future power by signing risky bundled contracts.
Taming the correctional phone market will require focusing on the areas where injustice is concentrated: Jails (rather than only prisons), fees (rather than only rates), and bundled contracts (rather than phone-only contracts). The bulk of the work lies with specific officials: contracting authorities, state legislatures, public utilities commissions, the FCC and Congress. For those groups, we recommend the following strategies:
Prisons and jails (and their oversight bodies):Negotiate better contracts based on delivering the best price to the consumer. (This goes beyond negotiating for “low” rates; and requires refusing unnecessary “extras” in the contract and looking at the total cost to the consumer, including fees.) Refuse to consider contracts that bundle telephone service with other goods and services. Facilities should always know what they are getting and what they — and the families — are paying for. Regularly conduct realistic tests of how your provider charges and treats consumers. Such tests should include test phone calls to staff phone numbers not already in the provider’s system and should include test deposits made via the mechanisms most likely to be used by the families of incarcerated people, including WesternUnion and MoneyGram. If you discover your provider is charging consumers beyond the fees and rates disclosed in your contract, demand that the provider make refunds.
Providers:Amtel, Lattice and Securus should stop making a profit on WesternUnion and MoneyGram payment fees. The consumers that use these services are among the lowest-income people in the country and should not be a target for exploitation.During the request for proposals process, be honest with the facilities that high-rate/high-commission contracts are not in the facility’s best interests. Explain that low-rate/low-commission contracts produce comparable revenue for the facilities while increasing family contact.
State Public Utility Commissions:If your state statutes do not grant you sufficient regulatory authority over the industry, immediately go to the legislature and request it so that consumers and facilities in your state will not remain defenseless.
State legislatures:Require these correctional communications contracts be negotiated on the basis of the lowest price to the consumer. (This goes beyond setting a cap or banning “commissions.”) Ensure that these rules apply to both prisons and jails.Encourage the State Public Utility Commission to investigate and regulate the prison and jail telephone industry. Be on the lookout for arguments from providers that they are exempt from regulation because they claim to be providing Voice Over Internet Protocol (VOIP) or Internet Protocol-enabled (IP-enabled) services. (Some states deregulated these services when cable telephone markets became competitive, but such reregulation should not apply in a quintessential monopoly such as prison and jail phone service.) Depending on your state, you may want to encourage your Public Utility Commission to reject such arguments as contrary to legislative intent, or you may need to pass clarifying legislation.
FCC:Reject Securus’ application to merge with ICSolutions.Investigate Amtel, Lattice and Securus for arranging a kickback with WesternUnion and MoneyGram in violation of the FCC’s order prohibiting marking up those money transfer fees.
Appendices and Exhibits:
Appendix Table 1
This report, its visuals and its appendices pull together several different surveys of rates:2018 jails (in-state calls only): With the exception of Reliance Telephone (see below), we manually looked up prepaid rates on providers’ websites November 1st 2018 to November 8th 2018 from an in-state number (generally the governor’s number) for each facility listed in the state. (This methodology may have understated the cost of in-state phone calls in a small number of counties if the facility was within the same “LATA” as the Governor’s office. In those cases, our rates may report a lower “local” call rate and not a typical in-state call; but we did not have a way to control for this directly except in Michigan where we manually chose a number located in another “LATA”). In April 2019, we updated the report with the rates of 163 counties that contract with Reliance Telephone. As in 2016, counties that had multiple facilities were aggregated together, state prisons were kept separate from our data on jails, and we removed police departments. Some facilities are included twice because providers sometimes do not remove the rates/counties from contracts they have lost from their website. If we were unable to determine which provider currently contracts with a facility, we kept both.
The results of this survey are in Appendix Table 2, except for the NCIC facilities. (Unlike most providers, NCIC does not post their facility list or rates online. However, NCIC gave us their facility and price list so that we could calculate the average jail phone cost in each state on the condition that we not include their facility-level data in the Appendix.)
There are some slight differences in these surveys that are relevant to discuss. First, although more comprehensive than our 2016 data, this new survey is still missing data from several smaller prison phone companies that do not post their rates online, including Correct Solutions, City TeleCoin, Turnkey, Consolidated Telecom, Inc. (CTEL), etc. Second, some counties are in one survey but not the other, likely because they changed to or from a provider who does not post rates. Third, our newer survey includes two-lower cost providers that were not in the earlier survey. (Telmate’s decision to finally post their rates online and NCIC’s sharing of their rate data with us slightly reduces the average rates reported. Based on our analysis of counties for whom rates are available for both years, we believe that about half of the $1 decline in the cost of in-state 15 minute phone calls from 2016 to 2018 is the result of actual declines in the rates; and about half is the result of these two lower-cost providers making their data available.
For our survey of WesternUnion and Moneygram fees, we collected Western Union fee data for a $25 payment to different phone providers through in-person payments at Big E’s Supermarket, Easthampton, and Walgreens (225R King St., Northampton, MA) and through online chats with Western Union Representatives.
We collected data on MoneyGram’s fees for a $25 payment through Moneygram’s online BillPay feature and in person at Walmart (337 Russell St, Hadley, MA 01035).
Our interactive feature showing how much a phone call from various local jails would cost is based on our late 2018 survey of jail rates. The feature includes only some of the highest rates from jails in each state, so for the specific rates of all facilities, see appendix 2. The feature always shows the cost of the first minute of a call for the first minute of reading the webpage, and then apportions the cost of subsequent minutes to each subsequent second. For providers who bill only on the basis of individual minutes, our feature therefore underestimates the cost of each call.
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Our timeline of consolidation in the industry is built upon reviewing every document we could find and a select number of interviews. The raw data and our notes on sourcing for transaction or change in status is in Appendix 8. Where ever possible, all dates in the visual are accurate to the nearest quarter year. Because it was not always clear when these privately held companies were founded or when they entered the prison or jail phone market, we choose to represent start dates that we were not sure about with a faded line. We used a break in the line to represent companies’ name changes. We did not include some very small companies, such as Michigan Paytel and American Phone Systems, some of which appeared to have substantial business relationships with large phone companies.
For the sidebar about unjustifiably high phone rates from jails, we used commission data for 2014-2017 for select counties in Michigan, which was collected via FOIA requests. With a goal of representing a range of counties, we requested records from at least 54 counties (out of 83 total) and received records from 44. This raw data is available in Appendix 5. To reduce the impact of artifacts in the data and to make it possible to compare counties of different sizes, we averaged the payments from multiple years and used the Average Daily Population reported in the Census of Jails, 2013 to calculate annual revenue per incarcerated person.