Sunday, December 28, 2014

FCC: Phone firms must quit gouging inmates on calls

Prisoners are literally a captive market, and abusive phone rates were widespread as a result.

FCC: Phone firms must quit gouging inmates on calls

Prisoners - literally a captive market - are perhaps the biggest victims of phone deregulation's unintended consequences. On Friday, after a decade of complaints from families and advocacy groups, the Federal Communications Commission finally moved to end the price-gouging that has enriched a handful of carriers, private-equity firms, and jurisdictions that controlled the prisons' phone contracts.

Here's how it works, according to the LA Times:

The prison phone market, which brings in $1.2 billion annually, is dominated by two little-known phone companies. Global Tel-Link, based in Atlanta, and Securus Technologies of Dallas, both backed by private equity firms, make up more than 80% of the market, according to Standard & Poor's.

The result is a patchwork of contracts across states and counties, meaning a 15-minute phone call with Securus can cost $17.30 from an Alaska prison or $1.75 from Missouri, one of eight states [not including Pennsylvania or New Jersey] that have banned commissions.

The companies operate by competing for exclusive rights to serve each jurisdiction, rights often won by promising the highest percentage in commissions. Hungry for revenue, state prisons and county jails have increasingly awarded contracts to companies that can promise more cash. In some cases, commissions account for as much as 60% of the cost of a phone call.

The FCC voted to cap the rates temporarily at 21 cents per minute for debit and prepaid calls and 25 cents per minute for collect calls, a dramatic reduction from rates it said typically topped $1 a minute for a 15-minute call. Public Knowledge, an advocacy group that applauded the FCC's decision, said some calls were billed at more than $2 per minute.

This was nothing but shameless gouging of some of society's most powerless people and their families. Good riddance.

Jeff Gelles Inquirer Business Columnist
About this blog

Jeff Gelles, who writes the Inquirer's weekly Consumer 14.0 and Tech Life columns, takes a broad look at the marketplace of goods, services, and ideas.

Reach Jeff at jgelles@phillynews.com.

Jeff Gelles Inquirer Business Columnist
Business Videos:
Also on Philly.com:
Stay Connected