The Price to Call Home: State-Sanctioned Monopolization in the Prison Phone Industry
Exorbitant phone rates make the prison telephone industry one of the most lucrative businesses in the United States today. The industry is so profitable because prison phone companies have state-sanctioned monopolistic control over the state prison markets,1 and the sole federal agency with authority to rein in prison phone rates nationwide has thus far failed to provide meaningful relief.
Prison phone companies are awarded monopolies through bidding processes in which they submit contract proposals to the state prison systems; in all but eight states, these contracts include provisions to pay “commissions”—in effect, kickbacks—in either the form of a percentage of revenue, a fixed up-front payment or a combination of the two.2 Thus, state prison systems have no incentive to select the telephone company that offers the lowest rates; rather, they have an incentive to reap the most profit by selecting the company that provides the highest commission.3
This market oddity—that the government entity has an incentive to select the highest bidder and that the actual consumers have no input in the bidding process—makes the prison telephone industry susceptible to prices that are well above the phone rates for non-incarcerated persons. This fact, coupled with what economists would call the “relative inelastic demand”4 that incarcerated persons and their families have to speak with one another, leads to exorbitant rates. The prison telephone market is structured to be exploitative because it grants monopolies to the producers (prison phone companies), and because the consumers—the incarcerated persons and their families who are actually footing the bills—have no comparable alternative means of communicating.5
Exorbitant telephone rates are not only bad for incarcerated persons and their families, but also are bad for society at large. High phone rates reduce the ability of incarcerated persons to communicate with their family members, and family contact has been consistently shown to lower recidivism.6 Currently, there is public debate about reducing the costs of mass incarceration by focusing on ways to lower the likelihood that incarcerated persons will re-offend after their release.7 For example, the Republican Party Platform for 2012 endorses “the institution of family-friendly policies ... [to] reduce the rate of recidivism, thus reducing the enormous fiscal and social costs of incarceration.”8
And the Democratic Party Platform for 2012 notes that the party “support[s] ... initiatives to reduce recidivism.”9 Lowering prison telephone rates would serve the uncontroversial goal of reducing the likelihood that incarcerated persons will re-offend after their release, as family contact is linked to lower recidivism.
Fortunately, government regulation can help achieve this goal. The Federal Communications Commission is considering a modest regulation to impose price caps on long-distance prison telephone rates. Such regulation, when considered against the backdrop of the corporate monopolization of the prison telephone market, would both reduce the price-gouging that incarcerated persons and their families suffer, and simultaneously contribute to the social good by reducing recidivism.
The Prison Telephone Market is Broken
Markets for goods and services work best when consumers have the freedom to select the best option. In the prison phone market, though, consumers have no choice as to which telephone company they use. That choice is made for them by the state prison system. But state prison systems cannot be expected to advocate for lower phone rates because they don’t have consumer interests in mind. And prison telephone companies have little incentive to provide reasonable rates to their customers because they do not answer to those customers.
These state-sanctioned monopolies prey upon people who are least able to select alternative methods of communication and who are least able to sustain additional expenses. Incarcerated persons have below-average literacy rates that make it less practical for them to communicate in writing.10 Further, it is difficult for families of incarcerated persons to pay for phone calls because people in prison tend to come from low-income households.11 A study of recently-released people from Illinois prisons found that the high cost of prison phone calls was one of the two most significant barriers to family contact during incarceration.12 Therefore, prison phone companies not only have monopolies, but their customers have no comparable alternatives to telephone communication.
In addition to these structural problems within the prison telephone industry, corporate agglomeration has exacerbated already exorbitant prison phone rates. Over the past few years, three companies have emerged to dominate the market: 90% of incarcerated persons live in states with prison phone service that is controlled by Global Tel*Link, Securus Technologies or CenturyLink.13 The largest of these corporations, Global Tel*Link, currently has contracts for 27 state correctional departments following its acquisition of four smaller prison phone companies between 2009 and 2011.14 Global Tel*Link-controlled states contain approximately 57% of the total state prison population in the United States.15 Government regulation was designed to address this kind of corporate domination over a captive market.
Exorbitant Rates Result from
the Monopolistic Market
The combination of corporate consolidation in the prison phone industry, state-granted monopolies and inelastic demand for prison telephone service has led to exorbitant pricing. In many states, people behind bars must pay about $15 for a fifteen-minute phone call.16 For families trying to stay in touch on a regular basis, such costs are often backbreaking.
Because phone rates vary widely between states—even between states that use the same prison phone company—nationwide regulation is appropriate. For example, a fifteen-minute long-distance call from Global Tel*Link costs $2.36 in Massachusetts, but the same call costs more than $17 in Georgia.17 This significant difference in rates originates in large part from the wide range—anywhere from 15% to 60%—in the size of kickbacks that prison phone companies pay to state governments.18
Prison phone companies and state prison officials use different arguments to defend the high rates. The companies argue that rates must be high in order to cover costs associated with providing secure telephone service, such as call monitoring.19 But this argument is refuted by the phone rates charged in New York’s prison system. New York law bans kickbacks and requires that “the lowest possible cost to the user shall be emphasized.”20
Currently, Global Tel*Link charges incarcerated persons and their families about $0.05 per minute for local and long-distance calls from New York prisons. Thus, low rates in the prison phone market are entirely consistent with call monitoring and other security measures.
Corrections officials argue that phone kickback revenue pays for prison amenities that otherwise would go unfunded by state legislatures.21 This argument fails to stand up to scrutiny when considering that the federal prison system charges comparatively low rates, $0.06/minute for local calls and $0.23/minute for long-distance, yet still generates enormous revenue. As a recent Government Accountability Office report points out, the federal prison phone rates were sufficient to cover costs plus generate $34 million in profit in 2010.22 Thus, substantial profits can still be realized when prices are set at relatively low levels, and both prison telephone companies and state prison systems would be able to cover their costs and generate revenue even with rate caps in place.
High Prison Phone Rates Harm Society
The link between family contact during incarceration and reduced recidivism is well-documented.23 Indeed, the federal Bureau of Prisons states that “telephone privileges are a supplemental means of maintaining community and family ties that will contribute to an inmate’s personal development.”24 Congress itself has found, in the context of enacting the Second Chance Act of 2007, that “there is evidence to suggest that inmates who are connected to their children and families are more likely to avoid negative incidents and have reduced sentences.”25 The American Correctional Association, the world’s largest professional corrections organization and an accreditation agency for correctional facilities, has repeatedly resolved that “sound correctional management” requires that “adult/juvenile offenders should have access to a range of reasonably priced telecommunications services,” and that rates for such services should be “commensurate with those charged to the general public for like services.”26 Thus, a variety of stakeholders and policy-making bodies agree that high prison telephone rates are harmful, yet such high rates persist.
In addition to reducing recidivism, lower phone rates that lead to increased contact between incarcerated people and their children increase incarcerated persons’ involvement with their children after release.27 As of 2007, 52% of people held in state prisons and 63% of people held in the federal prison system were parents of minor children.28 Lowering the cost of telephone communication for these incarcerated persons would improve parent-child relationships by permitting more frequent calls.
The economic consequences of high prison phone rates are harmful as well. The revenues generated by prison telephone rates are offset by the costs of larger prison populations caused by increased rates of re-offending. Forgoing revenue from exorbitant phone rates now will decrease correctional departments’ costs in the future, because fewer people will find themselves back in prison. If state governments are serious about cutting costs by reducing their prison populations, then lowering prison phone rates provides a simple, straightforward and evidence-based way to achieve that goal.
High prison phone rates also function as a regressive tax on communities that experience higher incarceration rates.29 This is the opposite of our generally progressive tax structure where tax burdens increase as income rises. In this context, low-income families pay exorbitant phone rates that fund state revenues. But taxpayers are already paying for prisons. It is unfair that taxpayers whose family members are incarcerated should be subject to an additional tax in the form of high prison phones rates, especially considering that this concurrently enriches prison phone companies and negatively impacts recidivism.
Finally, lower prison telephone rates would also lessen the growing problem of contraband cell phones.30 The connection between prison phone rates and contraband cell phones spurred Congress to order a government study into the effect of high phone rates on the demand for contraband cell phones.31 And even TIME Magazine notes that the “notoriously expensive” cost of using prison telephones contributes to the demand for cell phones in prison.32 Thus, lowering high prison telephone rates would improve safety by providing less incentive for incarcerated people to acquire and use contraband cell phones.
Government Regulation in the Prison Phone Industry
Currently, prison phone companies are subject to minimal governmental regulation. Pressuring state utility agencies—which regulate in-state phone services—to lower prison phone rates has been successful in a few cases, but is unlikely to succeed everywhere. The kickback commissions that most states receive from prison phone companies give them little incentive to enact affordable rates. At the federal level, the Federal Communications Commission (FCC) currently limits its regulation of the prison phone industry to disclosure requirements mandating that prison phone companies inform collect call recipients of rate prices before they accept calls from incarcerated persons.33
In 2000, a group of plaintiffs brought a class-action lawsuit against Corrections Corporation of America and several prison phone companies, alleging that the prison phone agreements between the parties violated federal anti-trust law, among other claims. The federal district court referred the case to the FCC, stating that the FCC was better suited to address the concerns raised in the lawsuit. The plaintiffs then petitioned the FCC to enact regulations that would introduce competition to the prison telephone market, in the hopes of lowering prison phone rates by breaking up the monopolistic prison phone industry. After several years with little movement by the FCC, the plaintiffs shifted their request and petitioned the FCC to impose price caps or benchmark rates of $0.20 to $0.25 per minute for interstate (long distance) prison phone calls.34 This petition—known as the Wright Petition, after original plaintiff Martha Wright—is still pending before the FCC.
The rates requested by the Wright Petition would be more affordable and would still permit phone companies to generate profit. As demonstrated by the example of New York’s prison system discussed above, prison telephone rates as low as $0.05 per minute can still generate sufficient revenue. Despite widespread consensus that prison phone rates should be lower, the FCC has failed to impose price caps in this market due to obstructionism by prison phone companies. This is corporate greed and disregard for public welfare at its worst.
Why Federal Regulation Would Ameliorate the Problem
The Federal Communications Commission’s statutory purpose, stated in the law that created the agency in 1934, is to regulate telecommunications so that service is available nationwide at “reasonable charges.”35 Under no circumstances can the rates charged in the current prison phone market be deemed reasonable.
The FCC is ideally situated to regulate this broken industry. The FCC already has consumer protection capabilities such that it can field consumer complaints and resolve disputes with phone companies without the time and costs associated with litigation.
Federal regulation of interstate prison phone rates would bring much-needed relief to incarcerated persons and their families, and would increase public safety by reducing recidivism through increased family communications. While such regulation would not necessarily affect prison phone rates within a state (for local and intrastate calls),36 the highest prison phone rates currently apply to interstate calls.37 Setting price caps for interstate prison phone rates would bring them more in line with rates in the non-prison market while still allowing prison phone companies to generate profit.38 In sum, federal regulation of this industry is imperative.
Summary and Recommendations
State-sanctioned monopolies for prison telephone companies encourage exorbitant phone rates for incarcerated per-sons and their families. High prison phone rates—effectively regressive taxes—reduce communication between incarcerated persons and their family members. Research undeniably demonstrates that increased communication with family during incarceration reduces the risk that incarcerated persons will re-offend following their release. But neither prison phone companies nor state prison systems have an incentive to lower prison telephone rates. As a result, incarcerated persons, their families and the public suffer while prison phone companies, and the government agencies they contract with, profit.
Government regulation of this predatory industry is the best solution. The FCC should set price caps on interstate prison phone rates by approving the Wright Petition. State governments should refuse to engage in the collusive and pernicious practice of accepting kickbacks from prison phone companies. And the public should exercise its political power to ensure that justice is brought to the prison phone industry by participating in advocacy campaigns that address this issue, including those organized by Citizens United for the Rehabilitation of Errants (CURE), the Center for Media Justice and the Prison Phone Justice Campaign.39
Drew Kukorowski works as a consultant at the Prison Policy Initiative (www.prisonpolicy.org), a nonprofit organization dedicated to reforming criminal justice policy by demonstrating the effects of mass incarceration on people in prison and society at large.
Acknowledgements: Many thanks to the following people for kindly giving their time to speak with me about prison telephone justice: Barbara Fair, Alex Friedmann, Steven Healy, Aleks Kajstura, Kelsey Kauffman, Taren Kauffman, Leah Sakala, Nick Szuberla, Peter Wagner and Paul Wright.
1 Paul R. Zimmerman & Susan M.V. Flaherty, “Location Monopolies and Prison Phone Rates,” 47 Quarterly Review of Economics and Finance 261, 262 (2007). Specifically, Zimmerman & Flaherty identify prison telephone companies as having “location monopolies,” i.e., the telephone service provider is the exclusive provider for all of the prisons within a state
2 See John E. Dannenberg, “Nationwide PLN Survey Examines Prison Phone Contracts, Kickbacks,” 22 Prison Legal News 1, 4-5 (April 2011); see also Steven J. Jackson, “Ex-Communication: Competition and Collusion in the U.S. Prison Telephone Industry,” 22 Critical Studies in Media Communication 263, 269 (2005). Dannenberg’s article is a tour de force that is required reading for this issue
3 See Jackson, supra note 2, at 269
4 Roughly, demand for a specific product is inelastic when changes in the product’s price do not have a corresponding effect on the demand for that good or service
5 See Zimmerman & Flaherty, supra note 1, at 262 (arguing that mail and email are not close substitutes of telephone communication because of the high rate of illiteracy among incarcerated persons)
6 See Nancy G. La Vigne, Rebecca L. Naser, Lisa E. Brooks & Jennifer L. Castro, “Examining the Effect of Incarceration and In-Prison Family Contact on Prisoners’ Family Relationships,” 21 Journal of Contemporary Criminal Justice 314, 316 (2005)
7 There is also significant action by states to consider new ways to reduce recidivism. See Christian Henrichson & Ruth Delaney, Vera Institute of Justice, The Price of Prisons: What Incarceration Costs Taxpayers 12 (2012) (noting that several states have increased efforts to reduce recidivism through improved reentry programs), available at www.vera.org/download?file=3542
/Price%2520of%2520Prisons_updated%2520version_072512.pdf (last visited Sept. 5, 2012)
8 Republican Party Platform 38 (2012), available at www.gop.com/wp-content/uploads/2012/08/2012GOPPlatform.pdf (last visited Sept. 4, 2012)
9 Democratic National Platform (2012), available at http://assets.dstatic.org/dnc-platform/2012-National-Platform.pdf (last visited Sept. 7, 2012)
10 See Elizabeth Greenberg, Eric Dunleavy, Mark Kutner & Sheida White, U.S. Dept. of Education, National Center for Education Statistics, Literacy Behind Bars: Results from the 2003 National Assessment of Adult Literacy Prison Survey 29 (2007), available at http://nces.ed.gov/pubs2007/2007473.pdf (last visited Sept. 5, 2012)
11 See generally Bruce Western, Punishment and Inequality in America 85-107 (2006) (Ch.4)
12 See La Vigne, et al., supra note 6, at 323 (2005)
13 Note that this data only reflects state prison contracts, not local jail contracts or contracts with private prisons. Thus, it is likely that these companies control phone service for even more incarcerated persons. Percentage was calculated by consulting Dannenberg (2011) and U.S. Dept. of Justice, Bureau of Justice Statistics, Prisoners in 2010 14 (2012), available at http://bjs.ojp.usdoj.gov/index.cfm?ty=pbdetail&iid=2230 (last visited Sept. 5, 2012)
14 See Dannenberg, supra note 2, at 16, and Global Tel*Link website, available at www.gtl.net (noting that Global Tel*Link owns the contracts for Conversant Technologies, Value-Added Communications, Public Communications Services and Inmate Telephone Inc.) (last visited Sept. 10, 2012)
15 See note 13, supra
16 In Mississippi, for example, someone behind bars in the state Department of Corrections pays $14.55 for a 15-minute phone call. See U.S. Government Accountability Office, Improved Evaluations and Increased Coordination Could Improve Cell Phone Detection 14 (2011), available at www.gao.gov/assets/330/322805.pdf (last visited Sept. 5, 2012). In Georgia, that price rises to more than $17. See Georgia Department of Corrections, Inmate Telephone System: Global Tel Link Customer User Guide 4, available at www.dcor.state.ga.us/pdf/GDC_GTL_user_manual.pdf (last visited on Sept. 3, 2012)
17 See Dannenberg, supra note 2, at 16
18 See id. at 2
19 See Zimmerman & Flaherty, supra note 1, at 263
20 N.Y. CORR. LAW § 623
21 See Zimmerman & Flaherty, supra note 1, at 263; see also Justin Carver, An Efficiency Analysis of Contracts for the Provision of Telephone Services to Prisons, 54 Fed. Comm. L.J. 391, 400 (2002)
22 See U.S. GAO, supra note 16, at 15
23 See La Vigne, et al., supra note 6, at 316; see also Rebecca L. Naser & Christy A. Visher, “Family Members’ Experiences with Incarceration and Reentry,” 7 Western Criminology Review 20, 21 (2006) (noting that “a remarkably consistent association has been found between family contact during incarceration and lower recidivism rates”)
24 28 C.F.R. § 540.100(a)
25 42 U.S.C. § 17501(b)(6)
26 American Correctional Association, Public Correctional Policies, Public Correctional Policy on Adult/Juvenile Offender Access to Telephones 2001-1 (amended 2011), available at www.aca.org/government/policyresolution/PDFs/Public_Correctional_Policies.pdf (last visited Sept. 8, 2012). This Policy Statement was unanimously adopted in 2001, and amended and endorsed in 2006 and 2011
27 See La Vigne, et al., supra note 6, at 328
28 Lauren E. Glaze & Laura M. Maruschak, Bureau of Justice Statistics, Parents in Prison and Their Minor Children 1 (2008; revised 2010), available at http://bjs.ojp.usdoj.gov/index.cfm?ty=pbdetail&iid=823 (last visited Sept. 6, 2012)
29 See Carver, supra note 21, at 400 (2002)
30 See, e.g., Todd W. Burke & Stephen S. Owen, FBI Law Enforcement Bulletin, Cell Phones as Prison Contraband (2010), available at www.fbi.gov/stats-services/publications/law-enforcement-bulletin/july-2010/cell-phones-as-prison-contraband (last visited Sept. 6, 2012). This FBI bulletin also acknowledges that part of correctional administrators’ objection to cell phones lies in the fact that cell phone use reduces revenue from prison-approved phones. See also David R. Shaw, California Office of the Inspector General, Special Report: Inmate Cell Phone Use Endangers Prison Security and Public Safety 6 (2009) (noting that a correctional officer in the California prison system earned $150,000 in a single year smuggling cell phones)
31 Cell Phone Contraband Act of 2010, Pub. L. No. 111-225, 124 Stat. 2387 (2010)
32 Tom McNichol, “Prison Cell Phone Use a Growing Problem,” TIME Magazine (May 26, 2009), available at www.time.com/time/nation/article/0,8599,1900859,00.html (last visited Sept. 3, 2012)
33 47 C.F.R. § 64.710
34 Federal Communications Commission, Implementation of Pay Telephone Reclassification and Compensation Provisions of Telecommunications Act of 1996. Petitioners’ Alternative Rulemaking Proposal, CC Docket No. 96-128 (Feb. 28, 2007). Given that this request was submitted in 2007, and considering the low long-distance rates that prevail today outside the prison context, the requested rates would already seem too high
35 47 U.S.C. § 151
36 FCC jurisdiction only extends to interstate telecommunications
37 See Dannenberg, supra note 2, at 16
38 See Zimmerman & Flaherty, supra note 1, at 277
39 See www.etccampaign.com; www.centerformediajustice.org/tag/prison-phone-justice; www.prisonphonejustice.org; www.kitescampaigns.org/campaign/prison-phone-justice