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Prison Legal Newsletter

Prison Legal Newsletter

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Published by Ken Connor

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Published by: Ken Connor on May 27, 2011
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April 20111Prison Legal News
Inside
VOL. 22 No. 4April 2011
Legal News
ISSN 1075-7678
P R I S O N
Dedicated to Protecting Human Rights
Nationwide
PLN 
Survey Examines Prison Phone Contracts, Kickbacks
by John E. Dannenberg 
A
n exhaustive analysis o prison phonecontracts nationwide has revealedthat with only limited exceptions, tele-phone service providers oer lucrativekickbacks (politely termed “commis-sions”) to state contracting agencies – 
amounting on average to 42% o grossrevenues rom prisoners’ phone calls
inorder to obtain exclusive, monopolisticcontracts or prison phone services.These contracts are priced not onlyto unjustly enrich the telephone compa-nies by charging much higher rates thanthose paid by the general public, but areurther inated to cover the commissionpayments, which suck over $152 millionper year out o the pockets o prisoners’amilies – who are the overwhelming re-cipients o prison phone calls. Averaginga 42% kickback nationwide, this indicatesthat the phone market in state prison sys-tems is worth more than an estimated $362million annually in gross revenue.In a research task never beore ac-complished,
Prison Legal News
, usingpublic records laws, secured prison phonecontract inormation rom all 50 states(compiled in 2008-2009 and representingdata rom 2007-2008). The initial surveywas conducted by
PLN 
contributing writ-er Mike Rigby, with ollow-up research by
PLN 
associate editor Alex Friedmann.The phone contracts were reviewedto determine the service provider; thekickback percentage; the annual dollaramount o the kickbacks; and the ratescharged or local calls, intrastate calls(within a state based on calls rom one Lo-cal Access and Transport Area to another,known as interLATA), and interstate calls(long distance between states). To simpliythis survey, only collect call and daytimerates were analyzed.Around 30 states allow discounteddebit and/or prepaid collect calls, whichprovide lower prison phone rates (muchlower in some cases). However, since otherstates don’t oer such options and not allprisoners or their amilies have access todebit or prepaid accounts, only collectcalls – which are available in all prisonsystems except Iowa’s – were compared.Also, while telephone companies some-times provide reduced rates or eveningand nighttime calls, many prisoners don’thave the luxury o scheduling phone callsduring those time periods.Lastly, it should be noted that morerecent phone rates may now be in eect dueto new contract awards or renewals, andwhile data was obtained rom all 50 states,it was not complete or each category. Seethe chart accompanying this article or abreakdown o the data obtained.
PLN 
has previously reported on theegregious nature o exorbitant prisonphone rates, notably in our January 2007cover story, “Ex-Communication: Com-petition and Collusion in the U.S. PrisonTelephone Industry,” by University o Michigan proessor Steven Jackson.
How Are Phone Rates Regulated?
Domestic phone calls are generallydivided into three categories: local, intra-state and interstate. The rates charged orthese calls depend on several actors andare regulated by dierent authorities. Lo-cal calls are usually at-rate within a smallarea around the call’s originating location;e.g., within the same city.Local and intrastate calls are otenregulated by state public utility or ser-vice commissions, which set rate caps.These caps are negotiated to allow phonecompanies to recover capital costs in areasonable time rame while also satisyingrequirements levied by the state. The latterinclude subsidizing low-income phone us-ers, providing emergency communicationsor state agencies, and providing requiredphone coverage (such as emergency-reporting phone booths along majorhighways). Obviously, some o these state-mandated requirements are not in and o themselves proftable, so negotiation o rate structures includes recouping theseotherwise nonrecoverable costs.At the interstate level, phone com-
Phone Rate Chart 16Editorial 18Prisoners’ Human Rights 22Crime Reporting 26Guantanamo Drugging 28Washington Public Records Suit 32Texas Parole Audit 34Maine Private Prison Lobbying 37Los Angeles Jail Heat Ray 38Prison Facebook Problems 43Texas Legislator Sentenced 46New Jersey Bankrolls CEC 48News in Brie 50
 
April 20113Prison Legal News
panies are also regulated by the FederalCommunications Commission (FCC).The FCC oversees rate structures acrossstate lines, provides or an orderly inte-gration o smaller telephone companiesinto the national phone network, and isresponsible or implementing the Tele-communications Act o 1996.These regulatory agencies are neces-sary to prevent one large company romorming a monopoly and price gougingthe public with unreasonably high phonerates. However, such monopolies are onlyprohibited in the non-prison market.Prison phone service providers are reeto bid on contracts at the maximum ratesallowed by regulatory agencies, and uponwinning such bids are eectively granteda monopoly on phone services within agiven prison or jail system.
The Prison Phone Bidding Process
Prisons and jails present uniquecost actors to telephone service pro-viders. Such actors include physicallysecure phones (i.e., no readily removableparts); extensive monitoring and record-ing capabilities, including the ability toarchive phone calls or later review byinvestigators; and difcult access to theprison-based equipment or servicing.Some o these requirements, especial-ly the monitoring, recording and archivingaspects, are not unique to prisons and areroutinely provided to corporate America’scall and customer service centers. Natural-ly, telephone companies should be allowedto build into their charged rate structurethe recovery o capital and operating costsor such expenses.But that simple logic does not controlthe cost o prison phone rates. What doescontrol the rates? Pure, unabated greedby both the phone companies and thecontracting agencies (e.g., state prisonsystems, county jails and private prisoncompanies).The bidding process or prison phonecontracts typically begins with a requestor proposal (RFP) – a document that out-lines the number o phones, locations andtechnical perormance standards requiredby the contracting agency. The latterinclude minimum “down time” specifca-tions, requency o servicing, estimatedusage, and (in most but not all cases) auditprovisions. From the RFP, telephone com-panies can determine their cost exposurewhen making bids. But that is not whatguides their bid price or determines thewinning bidder in most cases.With very ew exceptions, prisonphone contracts contain kickback provi-sions whereby the service provider agreesto pay “commissions” to the contractingagency based on a percentage o the grossrevenue generated by prisoners’ phonecalls. These kickbacks are not insignif-cant. At more than $152 million per yearnationwide or state prison systems alone,the commissions dwar all other consider-ations and are a controlling actor whenawarding prison phone contracts.For example, when Louisiana issuedan RFP or prison phone services in 2001,it specifed that “[t]he maximum points,sixty (60) ... shall be awarded to the bid-der who bids the highest percentage o compensation ...,” and that “[t]he Statedesires that the bidder’s compensationpercentages ... be as high as possible.”When the Alaska Dept. o Correc-tions (DOC) issued an RFP in 2007,bidders were rated on a point system with60% o the evaluation points assignedto cost. The RFP explicitly stated that“[t]he cost proposal providing the largestpercentage o generated revenues ... to thestate will receive the maximum numbero points allocated to cost.” That is, themost important evaluation criterion wasthe commission rate.Prison phone service kickbacks average42% nationwide among states that acceptcommissions, and in some cases reach 60%or more. Put into simple terms, up to 60% o what prisoners’ amilies pay to receive phonecalls rom their incarcerated loved ones hasabsolutely nothing to do with the cost o thephone service provided. The kickbacks arenot controlled by state or ederal regulatoryagencies, and the only limit on the maximumrate or prison phone calls is the top ratepermitted by such agencies or by the phoneservice contract itsel.It should come as no surprise, then,that many prison phone contracts resultin very high rates, with enough proft letover ater recouping all o the phone com-pany’s costs to permit up to 60% o thegross revenue to be paid to the contract-ing agency. The kickback rates are listedin the chart accompanying this article, asare the dollar amounts o the commissionsreceived in 2007-2008.Some prison ofcials have denied thatkickbacks inuence their decision whencontracting or prison phone services.“There are complaints due to the rates,”
Prison Phone Contracts (cont.)
PUBLISHER
Rollin Wright
EDITOR
Paul Wright
ASSOCIATE EDITOR
Alex Friedmann
COLUMNISTS
Michael Cohen, Kent Russell,Mumia Abu Jamal
 CONTRIBUTING WRITERS
Mike Brodheim, Matthew Clarke,John Dannenberg, Derek Gilna,Gary Hunter, David Reutter,Mike Rigby, Brandon Sample,Jimmy Franks, Mark Wilson
RESEARCH ASSOCIATE
Sam Rutherford
ADVERTISING DIRECTOR
Susan Schwartzkopf 
LAYOUT
Lansing Scott/Catalytic Communications
HRDC GENERAL COUNSEL
Lance Weber
PLN 
is a Monthly Publication
A one year subscription is $24 or pris-oners, $30 or individuals, and $80 orlawyers and institutions. Prisoner dona-tions o less than $24 will be pro-ratedat $2.00/issue. Do not send less than$12.00 at a time. All oreign subscrip-tions are $100 sent via airmail.
PLN 
accepts Visa and Mastercard orders byphone. New subscribers please allowour to six weeks or the delivery o yourfrst issue. Confrmation o receipt o donations cannot be made without anSASE.
PLN 
is a section 501 (c)(3) non-proft organization. Donations are taxdeductible. Send contributions to:
Prison Legal NewsP.O. Box 2420West Brattleboro, VT 05303802-257-1342info@prisonlegalnews.orgwww.prisonlegalnews.org
Please do not mail
PLN 
paperwork or anongoing case or request legal advice.
PLN 
 is not a legal service provider and cannotgive legal advice.
PLN 
reports on legalcases and news stories related to prisonerrights and prison conditions o confne-ment.
PLN 
welcomes all news clippings,legal summaries and leads on people tocontact related to those issues.Article submissions should be sentto
- The Editor -
at the above address.We cannot return submissions withouta SASE. Check our website or send aSASE or writers guidelines.Advertising oers are void whereprohibited by law and constitutionaldetention acility rules.
PLN 
is indexed by the
Alternative PressIndex,
 
Criminal Justice Periodicals Index
and the
Department o Justice Index
.
 
April 2011Prison Legal News4
Prison Phone Contracts (cont.)
said Nevada DOC spokesman Greg Smithin 2008, ater the DOC entered into a newphone contract with Embarq. “A lot o amilies do complain that it’s expensive,but it’s an intricate system, it’s not cheap....We didn’t negotiate this [contract] to cre-ate more revenue or us.”However, when responding to theRFP or Nevada’s prison phone contract,Embarq had presented three options:base rates, lower rates and higher rates.The lower rate option included a smallerkickback (41.5%) and lower guaranteedminimum commission ($1.36 millionper year). Instead, the Nevada DOCselected the company’s higher rate op-tion, which provided a 54.2% kickbackand guaranteed minimum annual com-mission payment o $2.4 million, eventhough this resulted in higher local andinterstate phone rates or prisoners andtheir amilies.So despite protestations by prisonofcials, sometimes they do in act nego-tiate contracts specifcally to create morerevenue. This was explicitly acknowledgedin an RFP or prison phone services inAlabama. According to a March 13, 2007memo rom the state’s Department o Fi-nance, the RFP “proposed to award whatamounts to an ‘exclusive ranchise’ to thesuccessul bidder based on the highestcommission rate paid to the State on rev-enues received rom users o the [prison]pay phones.” It is likely no coincidencethat Alabama has one o the highest com-mission rates – 61.5%.
The History Behind KickbackCommissions
The prison phone service market re-mained an exclusive monopoly o AT&Tuntil 1984, when it was thrown wide openwith AT&T’s breakup under a settlementin an antitrust action brought by the U.S.Department o Justice. In 1989, MCI in-troduced its “Maximum Security” service,part o a larger concerted push into thegovernment and institutional markets. By1995 MCI held monopoly or near-monop-oly contracts or prison phone services inCaliornia, Ohio, Connecticut, Virginia,Wisconsin, Missouri and Kentucky (MCImerged with WorldCom in 1998).Other companies had their own“locked-in” contracts. The reorganizedAT&T Prisoner Services Division man-aged to hold on to prison phone contractsin New Jersey, Pennsylvania, Michigan,New Mexico, Mississippi and Washing-ton, ollowed by phone companies GTE(in Washington DC, Hawaii, Indianaand parts o Michigan); Sprint (sharingMichigan and also in Nevada); and USWest (in New Mexico, Idaho, Oregon,South Dakota and Nebraska).By the mid-1990s, this new com-petition had driven prison phone rates – spurred by higher kickback commis-sions to win contracts – to new heights.According to an American CorrectionalAssociation (ACA) survey publishedin 1995, nearly 90% o prison and jailsystems nationwide received a portion o the profts derived rom calls placed byprisoners, ranging rom 10-55% o grossrevenues.For states struggling to keep up with thecosts o exploding prison populations, thesekickback payments represented a welcomeand multi-million dollar source o income.According to the 1995 ACA survey, basedon sel-reports, Ohio was making $21 mil-lion a year in prison phone commissions(more recently it took in only $14.5 millionbased on
PLN 
’s research), while New Yorkbrought in $15 million, Caliornia $9 million(more recently $19.5 million in 2007-2008),Florida $8.2 million (more recently $3 mil-lion), and Michigan $7.5 million (morerecently $10.2 million beore phasing outkickbacks in August 2008).According to the ACA, 32 stateprison systems plus 24 city and county jails – a raction o the national total – reported phone commission payments in1994 totaling over $100 million. The morerecent total was $152.44 million rom 43o the 44 states that received prison phonerevenue at the time o 
PLN 
’s survey (Ari-zona claimed it did not track commissionpayments).Since the survey, one additional stateno longer accepts prison phone kickbacks:Caliornia. Thus, the nationwide total orcommission revenue has since decreasedby $19.5 million per year based on Cali-ornia’s 2007-2008 commission income(the state’s kickback was phased out roma at $26 million prior to August 2007 to$19.5 million in 2007-2008, $13 million in2008-2009, $6.5 million in 2009-2010 andzero in FY 2010-2011).Notably, however, the kickback com-mission data reported by state prisonsystems still vastly undervalues theprison phone service market, as it doesnot include jails, the ederal prison system,private prisons or immigration detentionacilities.By 2000, the commission rates orprison phone contracts had soared to newheights, with Caliornia at 44%, Georgia46%, South Carolina 48%, Illinois, Ohioand Pennsylvania at 50%, Indiana 53%,Florida 57%, and a national high in NewYork at 60% (reduced in 2001 to 57.5%).Ten states were raking in $10 million ormore per year rom prisoner calls, withCaliornia, New York and the ederalBureau o Prisons leading the way withover $20 million each in annual kickbacks.Such patterns were broadly i unevenlyreplicated at the local level, with city andcounty jails entering into similar commis-sion-based phone contracts.According to
PLN 
’s research, as o 2008 more than hal o the states thatreported their kickback percentage werereceiving commissions o at least 40%,including thirteen that reaped 50% ormore. The Idaho DOC uses a commissionstructure that includes a per-call kickbackranging rom $1.75 per collect call to $2.25per debit call, which is “not aected by... the length o call or whether the callis local or long distance.” This at per-call commission translates to an eectivekickback rate o 10.5% to 66.1% basedon a 15-minute call. Several states have
SASE Required. Reasonable rates

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