Local Regulators Question FCC Authority on Inmate Calling Reforms

The Alabama commission, which earlier this year cracked down on the ancillary charges (CD May 5 p8), railed in comments filed in docket 12-375 (http://bit.ly/1yzn1NT) against a separate proposal by three inmate calling service providers to eliminate the commission payments to correctional facilities and to eliminate or cap ancillary charges. The PSC called the proposal by Global*Tel Link, Securus Technologies and Telmate a “ludicrous offer,” saying it would reduce some fees, but would impose so many others the providers would make a larger profit. The proposal seeks “to acquire the Hope Diamond from the Commission in exchange for a bag of wooden nickels,” the Alabama PSC said.

The FNPRM (CD Sept 25 p1), circulated by Chairman Tom Wheeler and pushed by Commissioner Mignon Clyburn, comes a year after the agency set interim interstate rates. The rates have dropped, but intrastate rates, commissions and ancillary charges like transaction fees have continued to rise, FCC officials have said. The FNPRM would bar the commissions, place caps on ancillary charges, make the interim rates permanent and impose intrastate caps.

Regardless of the merits of the proposal, the agency lacks authority to pre-empt intrastate toll rates based on Communications Act Section 276, said NARUC General Counsel Brad Ramsay, who has made the argument in the past. The provision was intended to “assure the Bell Operating Companies did not favor their own payphones over independently provided phones and to assure [that] payphone providers receive adequate compensation for calls,” Ramsay said. “Not even the FCC” would claim either issue was the impetus for the proposed inmate calling reforms, Ramsay said. NARUC said that none of the case law arising from earlier FCC actions based on Section 276 “support the proposed expansive FCC pre-emption of INTRASTATE toll service arrangements.” FCC action would also violate the constitutional authority of states to regulate intrastate commerce, the Alabama PSC argued.

Neither the FCC nor the ICS providers commented Wednesday, but the agency said in its FNPRM issued as part of last year’s order that Section 276 gives the commission authority to regulate intrastate ICS rates. The section directs the Commission to regulate the rates for intrastate and interstate payphone services and defines such services to include “the provision of inmate telephone service in correctional institutions, and any ancillary services,” the agency said. It tentatively concluded that Section 276 “affords the Commission broad discretion to regulate intrastate ICS rates and practices that deny fair compensation, and to preempt inconsistent state requirements.”

Industry Proposal Criticized

In return for no longer having to pay commissions to jails and prisons, the ICS providers said in the proposal sent to the FCC last week that it would drop 19 ancillary fees but said it would keep charging transaction or deposit fees; a cost recovery fee related to validation and security features; third-party money transfer fees; and fees for convenience or premium channels. The providers proposed a cap on each type of fee.

Transaction costs are already figured into the rate caps, so the proposal would allow the providers to recoup costs twice the PSC said, and the caps on fees the providers are proposing are higher than ones set in Alabama. The PSC said the fees that would be dropped are “inconsequential non-recurring fees” that are already not assessed in Alabama. The PSC called the list of fees to be eliminated “impressive only in the amount of space occupied” in the proposal.

The providers offered to accept a flat rate cap for interstate and intrastate calls of 20-cents-a-minute for debit and prepaid calls and 24 cents-a-minute for collect calls, each one cent lower than the FCC’s interim interstate cap. The providers’ proposal is a “'bait and switch;’ baiting the Commission with a $0.01/min reduction ... and switching it with an additive that results in higher effective calling rates,” the PSC said.

The issue is important to local agencies that rely on the payments. Barring commissions would “constitute an unjustified and unnecessary federal intrusion into the funding for state prisons and local jails,” the PSC said. The payments are used to pay for operating correctional facilities as well as for the health and welfare of prisoners, the PSC said, adding, “sheriffs, police chiefs, wardens, DOC personnel and jailers in Alabama are NOT public enemies, they are public servants.” The “blame” for excessive payments “rests squarely upon ICS providers” which offer large commissions because “they are willing to do whatever it takes to win a facility contract.” The interim rate caps do not allow for factoring in the payments in setting rates, so commission payments have to be funded through ancillary fees, the PSC said. Limiting the fees further than what the industry has proposed would do away with excessive commissions, the PSC said.