Both Sides Worry, Read Tea Leaves, Ahead of Prison Reform Order

"I am reading tea leaves based on press releases,” said Richard Smith, CEO of Securus Technologies. He’s hearing that the agency is trying to fix a number of problems that have been raised with the order. Commissioner Ajit Pai’s criticism about the potential administrative burden, made in his dissent, is particularly salient, said the CEO. Smith suspects FCC attorneys are talking to acting Chairwoman Mignon Clyburn about the “great legal grounds” companies such as Securus have to get the order thrown out in court, he said.

"I really don’t like to file lawsuits, especially in federal court,” Smith told us, saying it’s his only recourse. “It isn’t just like I could write the FCC a letter and say ‘Please reconsider this.'” Litigation isn’t certain, he said. “I could be pleasantly surprised. My guess is I won’t be.” Until the order is released, Smith can only speculate based on news releases what commissioners said at the FCC Aug. 9 meeting, and on what he could divine from the agency’s July workshop (CD July 11 p1). “I don’t have the order. You don’t have the order. No one in the industry has the order,” said Smith. He has a “feeling” for where the FCC is going, “but all of these things are just guesses until we see the order."

In their speculation, prison phone providers and prisoners’ rights groups fear the worst. Smith worries that, after a 90-day waiting period, the order could apply to the industry’s existing 15,000 contracts with jails and prisons nationwide. “You can’t have the government coming in and saying, ‘Well, we're changing the rules on all those contracts,'” he said. “That clearly is illegal and grounds for a federal judge to get it thrown out.” When pressed, he acknowledged he doesn’t know whether the order will change past contracts, “but that’s kind of the feeling that I got,” he said.

Prison Policy Initiative Executive Director Peter Wagner cautioned that prison phone providers could be taking advantage of the delay to raise their fees and grab as much money as they can before the new rules take effect. “Is Securus raising its fees because it wants to raise every dollar it can now, before the FCC rules take effect?” Wagner asked in a recent blog entry (http://bit.ly/1aTKMVF). “Is the FCC aware of what the industry is doing while we wait for the publication of the order to regulate the industry?”

Wagner expected the order to be released the day it was passed. “I spent a couple hours hitting refresh on their Web site,” he told us. In the days and weeks that followed, he was unable to get any real answers from the FCC what was taking so long, he said. “They were pretty evasive. They stopped returning our phone calls."

"I don’t know if this is about getting every dime they can before the FCC changes the rules of their business,” Wagner said. “But it does look like they're trying to increase their profits now.” Smith said that’s “absolutely” false. “We've increased and decreased fees and rates for the last 25 years in both directions,” he said. Advocates for cutting prison calling rates “make up this story that we're doing it to grab every last dollar,” he said. “That is not true."

Meanwhile, prisoners are continuing to pay rates as high as $17 for a 15-minute call, said an FCC news release when it passed the order (http://bit.ly/1aTVOtL). “The FCC has acted, but thus far no relief has been provided to the actual consumers,” said Lee Petro of Drinker Biddle, pro bono counsel to Martha Wright, the grandmother who asked the commission to do something about high prison calling rates. The negative impact, he said, is obvious. “It’s not as though the new rates went into place on August the ninth. They go into place when the rules become effective,” Biddle said. “And if you don’t actually release the order, then the rates actually don’t come into effect yet."

Petro’s efforts to get any information about the delay have been “largely forestalled,” he said. “No one can give me an accurate estimation on when this thing’s going to come out.” Petro and others say they think the holdup is due to the commission’s attempt to develop language to respond to Pai’s dissent. An FCC official said that is indeed the main reason for the delay. Delay is not that unusual, the official said, particularly with controversial orders. An FCC spokesman declined to comment on the reasons for the delay. Wireline Bureau Chief Julie Veach told us last week the order would be out soon.

Pai’s dissent, deriding the order as a “serious mistake,” warned that the commission lacks the resources to review the rates of prison phone call providers and sort out legitimate costs from illegitimate costs in each of the thousands of correctional institutions in America. “I do not believe that it is within the commission’s competence to micromanage the prices of inmate calling services,” he said (http://bit.ly/16fIqYn). Smith agreed the “administrative burden” is far too high. “The FCC isn’t geared up to deal with anything like that,” he said.

It took the commission 10 years to craft rules in response to the original Wright petition, Smith said. For the FCC to get involved in prison contracts, it would have to act a lot faster than that. “Competition marches on,” he said. “We bid on multiple contracts every single day.” In a competitive environment where a single request for proposal might need to put rates filed by 10 different competitors in one contract, when would FCC approval be required? he asked. How would that work with the 30- or 60-day implementation requirements in some facilities? he asked. The FCC would have to act far more quickly than it has proven capable of, he said. “You clearly can’t justify having the FCC dealing with thousands of petitions on rates."

Delay doesn’t just cause uncertainty within industry. Delay on the federal level could be causing delay on the state level as well, said Bonita Tenneriello, an attorney with Prisoners’ Legal Services of Massachusetts. The organization asked the Massachusetts Department of Telecommunications and Cable in 2009 to set just and reasonable rates on intrastate calls. The petition was docketed in late 2011, all the briefs are in, and there was a public hearing in 2012. Tenneriello said she suspects the state is “waiting for leadership from the FCC.” Tenneriello was planning to submit the FCC’s order to the state commission for it to draw upon, she said. “We felt the FCC’s ruling would really support our regulator, looking very seriously at this as a standard for intrastate rates.”

But it’s been too long, said Tenneriello. “We see no reason for our state regulator to wait for the FCC. ... They don’t need to see the fine print to know that consumers shouldn’t be paying site commissions, shouldn’t be paying to cover the costs of running prisons.” Look at ancillary fees, like the $9 needed to add money to a prepaid calling card to place a call from jail, she said. “They don’t need the FCC to tell them this is wrong.”