Should Inmates Pay for Universal Service?

August 22, 2019 | by Andrew Regitsky

Should Inmates Pay for Universal Service?

There is no question that inmates are among the most vulnerable segments of our society. They are disproportionately poor and if they have children, cannot effectively contribute to support their families. It is no different when it comes to telecommunications. Inmates cannot choose their provider and they and their families have been forced to pay extremely high rates for phone calls for years. Most inmate calls are either collect, debit account or pre-paid account.

Over the years the FCC has often addressed inmate calling service (ICS) with mixed results. The agency’s efforts have been hurt by courts finding it cannot control intrastate ICS and by its own failure to account for the legitimate costs of ICS providers. Most recently on August 4, 2016, the Commission set rate caps for local and long-distance inmate calls. They were scheduled to take effect for prisons on Dec. 12, 2016, and for jails on March 13, 2017. However, those rates were stayed by a court order, pending judicial review. As a result, interim rate caps implemented in 2013 remain in effect. The interim rate caps apply only to interstate long-distance calls, not in-state long distance or local calls. The rates are 21 cents a minute for debit/prepaid calls, and 25 cents a minute for collect calls.

In that 2016 Order, the Commission permitted certain authorized fees to be passed through to inmates when they make interstate calls. One of these fees is universal service fund (USF) charges. For the third quarter of 2019, the universal service contribution percentage is 24.4 percent. That means that every call made by an inmate can be marked up by 24.4 percent. Obviously, this is an additional hardship for many poor inmates and their families. Fortunately, this soon may change.

On August 9, 2019, a company that provides prepaid accounts for inmates, Network Communications International Corporation (NCIC), filed a Petition for Forbearance with the FCC seeking an end to the absurd requirement in which inmates with incomes so low they qualify for the Lifeline program, which would enable them to pay subsidized low rates for phone service, must pay universal service charges when they make interstate calls. Industry comments are due on September 16, 2019.

NCIC believes that its Petition meets the three forbearance conditions in the 1996 Telecommunications Act:

It Would Enable Just, Reasonable and Non-Discriminatory Inmate Calling Rates—Data indicates that families of inmates have approximately $75 per month to spend on inmate calling services. If the Petition is granted, they will be able to use more of these limited funds communicating with inmates rather than paying into the universal service fund. Moreover, providers of ICS would not incur administrative fees in passing through these fees. A win-win for the public.

Forbearance is Necessary for the Protection of Consumers—According to ICSC:

[T]he pass through of USF fees on interstate and international ICS calls on already suffering ICS consumers most certainly leads to the absurd result that inmates and families are actually funding the programs that were established to provide them with financial assistance. As such, the elimination of the USF fee on interstate and international ICS calls, would actually provide more protection to consumers and satisfy the second forbearance standard. (ICSC Petition, at p. 9).

Forbearance Will Best Serve the Public Interest—ICSC argues that elimination of USF charges for inmates would have a de minimis impact on universal service revenues. The budget for all four USF programs for 2018 is $11.42 billion.

Previously the FCC collected comprehensive, but confidential information from ICS carriers with regard to the revenue generated from interstate and international ICS calls. It has been estimated that ICS providers earn annual revenues of approximately $1.2 billion a year. Assuming that interstate and international ICS calls comprise roughly 20% of all ICS calls, then the total revenue earned on interstate and international ICS calls is approximately $240 million.

Therefore, based on the current contribution factor of 24.4% the amount collected from interstate and international ICS calls will be roughly $58 million in the 3rd quarter of 2019. This amount represents only 0.5% of the USF 2018 budget. Notably, the instant request, if granted, would be less than what the FCC previously found to be de minimis. (Id. at p. 10).

This Petition makes common sense and should be approved by the Commission. Unfortunately, it covers only about 20 percent of ICS calls and previous FCC attempts to regulate all ICS calls including intrastate and local calls have been rebuffed by the courts. Therefore, the Martha Wright-Reed Just and Reasonable Communications Act, which would authorize the FCC to regulate prison phones and cap the rate of all calls made from state and local prisons introduced by Sen. Tammy Duckworth earlier this year makes a lot of sense and is worthy of support.