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 romorming 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 eectively 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 difcult 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 costsor 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 requestor proposal (RFP) – a document that out-lines the number o phones, locations andtechnical perormance 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 letover ater 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 ofcials have denied thatkickbacks inuence their decision whencontracting or prison phone services.“There are complaints due to the rates,”
Prison Phone Contracts (cont.)
Michael Cohen, Kent Russell,Mumia Abu Jamal
Mike Brodheim, Matthew Clarke,John Dannenberg, Derek Gilna,Gary Hunter, David Reutter,Mike Rigby, Brandon Sample,Jimmy Franks, Mark Wilson
Lansing Scott/Catalytic Communications
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