Inmate Calling Providers, States, Sheriffs Make Case Against FCC Rate/Fee Caps

The commission lacked jurisdiction over intrastate rates, said the ICS providers along with state and sheriff interests, which filed a brief (in Pacer) that also said the agency failed to include the costs of their jails and prisons in its decisions. The D.C. Circuit stayed the rate caps and fees on "single calls" and related services (see 1603070055) plus the agency's attempt to apply interim 2013 interstate rate caps to intrastate rates (see 1603230058).

A commission spokesman said the ICS actions help inmate families. “The FCC’s inmate calling reform efforts have already brought significant relief to families struggling to pay the high cost of staying in touch with loved ones. Our limits on exorbitant fees are saving money for families of inmates in prisons, and will provide similar relief to families of inmates in jails starting June 20. We look forward to defending the FCC’s comprehensive reform of inmate calling services in court, and are confident our new rules will be upheld,” he emailed. The FCC's response brief is due Aug. 5.

The FCC can't set rate caps below industry's "proven costs of service," despite its belief they reflect "desirable social policy," the ICS providers' brief said. The rates are to be phased down to levels between 11 and 22 cents per minute by July 2018, with rates lower for large institutions than small ones. The commission attempted to justify the reductions by excluding from its calculations -- but not restricting -- provider "site commission" payments to correctional institutions, and by excluding evidence that providers often have costs that are higher than the rate caps, even without the site commissions, they said, calling both determinations unlawful. "Section 276 of the Communications Act authorizes the FCC to ensure that ICS providers are not deprived of fair compensation for the use of their payphones; Section 201 authorizes it to ensure that rates for and in connection with interstate telecommunications services are just and reasonable," their brief said. "The FCC may not ignore these statutory limits to advance its preferred correctional policy.”

Site commissions are required by state and local governments and correctional authorities "and are accordingly a cost of providing service like other state taxes and fees that the FCC recognizes as recoverable costs," the ICS providers said. "Even if site commissions are disregarded, the rate caps were set too low to ensure compensation 'for each and every completed ... call'" (citing statutory text). The caps are below average costs documented by many providers, and the FCC's assertion that such providers operate inefficiently is contrary to the record, they said. The commission instead "relied on two outlier ICS providers that -- combined -- represent 0.1 percent of the ICS market," their brief said.

The ICS providers disputed the FCC's authority to restrict rates, particularly intrastate rates. The intrastate action was based on a "20-year-old statute that has never been read to confer such authority and despite express statutory provisions limiting" its intrastate authority, they said. "The ICS Providers other than Pay Tel argue that Section 276 does not authorize the FCC to cap inmate calling rates -- and that the FCC thus cannot cap intrastate rates, or rates for non-telecommunications carriers, at all," their brief said. Global Tel*Link, Securus and Telmate said the FCC's ancillary service fee restrictions exceeded its authority and were arbitrary and capricious, among other challenges.

FCC fee caps for automated credit/debit card payments and live-agent transactions were way below Securus' demonstrated costs, the provider said in its brief. The commission's disregard for Securus' costs as an "outlier" was irrational, "because Securus was the only party that provided any documentation at all of its itemized costs to provide these specific services," it said. Securus also said the FCC's ban on providers adding any markup to third-party financial transaction fees on single-call services "arbitrarily and irrationally" prevents the company from recovering its demonstrated costs, the company said.

The states and sheriffs disputed FCC reliance on Section 276(b)(1)(A) and its requirement that payphone providers be "fairly compensated," which the agency said gave it authority to ensure "just, reasonable, and fair" rates. Their brief said the provision gave the agency "only the limited authority to regulate intrastate calls to ensure payphone providers are not undercompensated" so that they can compete with the payphone services of the regional Bells and others. It did not give the commission "the authority to limit the compensation given to payphone providers or plenary authority to regulate intrastate rates," they said. The provider view "is compelled by the statute's text, context, history, purpose, and contemporaneous interpretation by the Commission and courts," including congressional intent to ensure independent payphone providers could compete on a level field with the Bells, they said.

The FCC rate caps ignored "copious record evidence that jails and prisons incur substantial security and support costs" in allowing ICS offerings in their facilities, the states and sheriffs said. NARUC and the state of Oklahoma led the brief, joined by Indiana and Oklahoma sheriffs and by the states of Arizona, Arkansas, Indiana, Kansas, Louisiana, Missouri, Nevada and Wisconsin.