GTL Protest Exhibit 11

EXHIBIT 11

Federal Communications Commission FCC 13-113

Before the Federal Communications Commission

Washington, D.C. 20554

In the Matter of

Rates for Interstate Inmate Calling Services

WC Docket No. 12-375

REPORT AND ORDER AND FURTHER NOTICE OF PROPOSED RULEMAKING

Adopted: August 9, 2013 Released: September 26, 2013

Comment Date: 30 days after date of publication in the Federal Register Reply Comment Date: 45 days after date of publication in the Federal Register

By the Commission: Acting Chairwoman Clyburn and Commissioner Rosenworcel issuing separate statements. Commissioner Pai dissenting and issuing a statement.

TABLE OF CONTENTS

Heading Paragraph #

I. INTRODUCTION

II. PROCEDURAL BACKGROUND

III. ENSURING THAT RATES FOR INTERSTATE INMATE CALLING SERVICES ARE

JUST, REASONABLE, AND FAIR

A. Statutory Requirements for ICS

1. Statutory Standards for ICS Rates and Practices

2. Types of Facilities

B. Need for Reform

1. Current Structures for ICS Rates and Payment Options

2. The Record on ICS Costs

3. The Record on ICS Rates

4. Competition in the ICS Market

5. Societal Impacts of High ICS Rates

6. Reforms are Necessary to Ensure That Interstate ICS Rates Are Just, Reasonable, and

Fair C. Framework for Just, Reasonable, and Fair ICS Rates

1. Interstate ICS Rates and Charges Must Be Cost-Based

2. Costs of Providing Interstate ICS

a. General Standard

b. Site Commission Payments

3. Interim Interstate Rate Levels

a. Interim Safe Harbors for Interstate ICS Rates

b. Interim Rate Caps for Interstate ICS Rates

c. Interim Rate Structure

d. Ancillary Charges

D. Inmate Calling Services for the Deaf and Hard of Hearing E. Existing ICS Contracts

1. Background

2. Discussion

F. Commission Action Does Not Constitute a Taking G. Collect Calling Only and Billing-Related Call Blocking H. Enforcement

1. ICS Provider Certification Requirement

2. Compliance with Existing Rules

3. Investigations

4. Complaints

I. Mandatory Data Collection

IV. SEVERABILITY

V. FURTHER NOTICE OF PROPOSED RULEMAKING

A. Reforming Intrastate ICS

1. Need for Intrastate Rate Reform

2. Legal Authority

B. Inmate Calling Services for the Deaf and Hard of Hearing Community C. Further ICS Rate Reform

1. Rate Structure

2. Determining Costs for ICS Rates

3. International ICS

D. Ancillary Charges

1. Background

2. Discussion

E. Prohibiting Call Blocking

1. Background

2. Billing-Related Call Blocking

3. Non-Geographically Based Telephone Number Call Blocking

F. Exclusive ICS Contracts G. Quality of Service H. Cost/Benefit Analysis of Proposals

VI. PROCEDURAL MATTERS

A. Filing Instructions B. Ex Parte Requirements C. Paperwork Reduction Act Analysis D. Congressional Review Act E. Final Regulatory Flexibility Analysis F. Initial Regulatory Flexibility Analysis

VII. ORDERING CLAUSES

I. INTRODUCTION

1. Nearly 10 years ago Martha Wright, a grandmother from Washington, D.C., petitioned the Commission for relief from exorbitant long-distance calling rates from correctional facilities.1 Tens of thousands of others have since urged the Commission to act, explaining that the rates inmates and their

1 See generally Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Petition of Martha Wright et al. for Rulemaking or, in the Alternative, Petition to Address Referral Issues in Pending Rulemaking, CC Docket No. 96-128 at 3 (filed Nov. 3, 2003) (First Wright Petition) (“Accordingly, Petitioners request that the Commission prohibit exclusive inmate calling service agreements and collect call-only restrictions at privately-administered prisons and require such facilities to permit multiple long distance carriers to interconnect with prison telephone systems. . . .”). The Petitioners filed an alternative petition for rulemaking in 2007. See Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Petitioners’ Alternative Rulemaking Proposal, CC Docket No. 96-128 (filed Mar. 1, 2007) (Alternative Wright Petition).

friends and families pay for phone calls render it all but impossible for inmates to maintain contact with their loved ones and their broader support networks, to society’s detriment.2 Today, we answer those pleas by taking critical, and long overdue, steps to provide relief to the millions of Americans who have borne the financial burden of unjust and unreasonable interstate inmate phone rates.

2. This Order will promote the general welfare of our nation by making it easier for inmates to stay connected to their families and friends while taking full account of the security needs of correctional facilities. Studies have shown that family contact during incarceration is associated with lower recidivism rates.3 Lower recidivism means fewer crimes, decreases the need for additional correctional facilities, and reduces the overall costs to society.4 More directly, this helps families and the estimated 2.7 million children of incarcerated parents in our nation, an especially vulnerable part of our society.5 One commenter states that the “[l]ack of regular contact with incarcerated parents has been linked to truancy, homelessness, depression, aggression, and poor classroom performance in children.”6 In this Order we help these most vulnerable children by facilitating contact with their parents. By reducing interstate inmate phone rates, we will help to eliminate an unreasonable burden on some of the most economically disadvantaged people in our nation. We also recognize that inmate calling services (ICS) systems include important security features, such as call recording and monitoring, that advance the safety and security of the general public, inmates, their loved ones, and correctional facility employees.

Our Order ensures that security features that are part of modern ICS continue to be provided and improved.

3. Our actions address the most egregious interstate long distances rates and practices.

While we generally prefer to promote competition to ensure that inmate phone rates are reasonable, it is clear that this market, as currently structured, is failing to protect the inmates and families who pay these charges.7 Evidence in our record demonstrates that inmate phone rates today vary widely, and in far too many cases greatly exceed the reasonable costs of providing the service.8 While an inmate in New

2 See, e.g., Petitioners 2013 Comments at 37-38; Letter from Drew Kukorowski, Research Associate, Prison Policy Initiative and Taren Stinebrickner-Kauffman, Founder and Executive Director, SumOfUs, to Julius Genachowski, Chairman, FCC, CC Docket No. 96-128 (filed Nov. 15, 2012) (including 36,690 public comments “supporting imposition of price caps on correctional facility telephone rates”).

3 The Center on the Admin. of Criminal Law 2013 Comments at 10 (citing Nancy G. La Vigne, Examining the Effect of Incarceration and In-Prison Family Contact on Prisoners’ Family Relationships, 21 J. OF CONTEMP. CRIM.

JUSTICE 314, 316 (2005)); accord Letter from Roy “Lynn” McCallum, Jail Commander, Elmore County Sheriff’s Office, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 at 1 (filed April 22, 2013) (“We recognize the value of retaining family contact during incarceration. The reduction in recidivism is well documented.”); see also AMY L. SOLOMON, JENNY OSBORNE, LAURA WINTERFIELD ET AL., Putting Public Safety First: 13 Parole Supervision Strategies to Enhance Reentry Outcomes at 29-31 (Washington, D.C.: The Urban Institute 2008), available at http://www.urban.org/UploadedPDF/411791_public_safety_first.pdf (last visited July 30, 2013).

4 See infra para. 43.

5 BRUCE WESTERN AND BECKY PETTIT, THE ECONOMIC MOBILITY PROJECT, Collateral Costs: Incarceration’s Effect on Economic Mobility at 18-19 (THE PEW CHARITABLE TRUSTS 2010), www.pewstates.org/uploadedfiles/PCS_Assets/2010/Collateral_costs(1).pdf.

6 The Phone Justice Commenters 2013 Reply at 4-5. Another commenter states that “[m]aintaining relationships with their incarcerated parents can reduce children’s risks of homelessness and of involvement in the child welfare system.” Letter from Margaret diZerega, Director, Family Justice Program, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 at 2 (filed Mar. 14, 2013) (Vera Mar. 14, 2013 Ex Parte Letter); see also Center on the Admin. of Criminal Law 2013 Comments at 11 (“A child that stays in touch with an incarcerated mother or father is less likely to drop out of school or be suspended.”).

7 See infra Section III.B.4.

8 See infra Section III.B.3.

Mexico may be able to place a 15 minute interstate collect call at an effective rate as low as $0.043 per minute with no call set up charges, the same call in Georgia can be as high as $0.89 per minute, with an additional per-call charge as high as $3.95 – as much as a 23-fold difference.9 Also, deaf prisoners and family members in some instances pay much higher rates than hearing prisoners for equivalent communications with their families.10 For example, the family of a deaf inmate in Maryland paid $20.40 for a nine minute call placed via Telecommunications Relay Service (TRS) – an average rate of $2.26 per minute.11 A significant factor driving these excessive rates is the widespread use of site commission payments – fees paid by ICS providers to correctional facilities or departments of corrections in order to win the exclusive right to provide inmate phone service.12 These site commission payments, which are often taken directly from provider revenues, have caused inmates and their friends and families to subsidize everything from inmate welfare to salaries and benefits, states’ general revenue funds, and personnel training.13

4. We applaud states such as New Mexico and New York that have already accomplished reforms, and thereby shown that rates can be reduced to reasonable, affordable levels without jeopardizing the security needs of correctional facilities and law enforcement or the quality of service.

Similarly, we acknowledge that some federal agencies, such as the Department of Homeland Security’s Immigration Customs and Enforcement (ICE), have taken similar measures to provide lower rates, resulting in nationwide calling rates of $0.12 a minute without additional fees or commissions at ICE facilities.14 Following such reforms, there is significant evidence that call volumes increased,15 which shows the direct correlation of how these reforms promote the ability of inmates to stay connected with

9 See Letter from Alex Friedmann, Assoc. Director, HRDC, to Marlene H. Dortch, Secretary, FCC, WC Docket No.

12-375, Rev. Exh. B (filed June 8, 2013) (HRDC June 8, 2013 Ex Parte Letter); see also Securus 2013 Comments, App. 2 (showing the wide range of rates in the various states).

10 Transcript of Reforming ICS Rates Workshop at 36-38, WC Docket 12-375 (filed July 16, 2013) (Transcript of Reforming ICS Rates Workshop) (Talila Lewis, Founder and President, HEARD, discussing ways in which deaf inmates are frequently charged higher ICS rates than hearing inmates). For purposes of this Order, the terms “the deaf” or “the deaf and hard of hearing” include people with speech as well as hearing disabilities. Our actions here will help both inmates with these disabilities as well as inmates who need to call people with such disabilities.

11 See HEARD 2013 Comments at 5 n.13. HEARD also asserts that some inmates are charged an additional fee of up to $8.00 to connect to TRS. Id.

12 See infra para. 38.

13 For example, Petitioners point out that in Orange County, California, the Inmate Welfare Fund had a budget of $5,016,429 in 2010, and of that amount, 74% of the funds were used for staff salaries, 0.8% was used for the actual services, supplies, and training for inmate educational programs, and 0.06% was used for services, supplies, and training for inmate re-entry programs. See Petitioners 2013 Reply at 26-27; see also Petitioners 2013 Reply, Exh. H (providing a list of states and counties that, pursuant to statute, extract revenues shared with ICS providers for non-inmate educational needs, including employee salaries and equipment, building renewal funds, salaries and benefits, states’ general revenue funds, and personnel training); PLS 2013 Comments at 7 (noting that commissions paid to county facilities in Massachusetts are placed in a fund available for use by the Sheriff, while commissions paid to the Department of Correction are transferred to the General Fund of the Commonwealth).

14 See Letter from Glenn B. Manishin, Counsel to Telmate, to Marlene H. Dortch, Secretary, FCC, WC Docket No.

12-375 at 2 (filed July 26, 2013) (Telmate July 26, 2013 Ex Parte Letter).

15 See id. at Attach. (bar graphs showing call volume increases in Oregon DOC); see also Transcript of Reforming ICS Rates Workshop at 253 (Richard Torgersrud, CEO, Telmate, stating that “[W]e have done this in Oregon Department of Corrections, Montana Department of Corrections and we’ve done it for Homeland Security where we have implemented 16 cents per minute or less for calls. In doing so, we’ve seen up to 300 percent increase in call volume.”); see also id. at 287 (Lee Petro, Counsel to Petitioners, noting that “Telmate references a Great Plains state where they reduced the rate down to, I guess their 16 cent rate, and their call volume went up by 233 percent. In New York they reduced their fees and the call volume went up 36 percent.”).

friends and family. There is also support in the record that ICS rate reform has not compromised the security requirements of correctional facilities.16 Thus, these examples disprove critics who fear that reduced rates will undermine security or cannot be implemented given provider costs. Our actions build upon these examples by reducing rates, while balancing the unique security needs of facilities and ensuring that inmate phone providers receive fair compensation and a reasonable return on investment.

5. While some states have taken action to reduce ICS rates, the majority have not. We therefore take several actions to address interstate rates. We require inmate phone providers to charge cost-based rates to inmates and their families, and establish “safe-harbor” rates at or below which rates will be treated as lawful (i.e., just, reasonable, and fair) unless and until the Commission issues a finding to the contrary.17 Specifically, we adopt interim safe harbor rates of $0.12 per minute for debit and prepaid interstate calls and $0.14 per minute for collect interstate calls.18 Based on the evidence in this record, we also set an interim hard cap on ICS providers’ rates of $0.21 per minute for interstate debit and prepaid calls, and $0.25 per minute for collect interstate calls. This upper ceiling ensures that the highest rates are reduced immediately to the upper limit of what can reasonably be expected to be cost-based rates.19 Interstate ICS rates at or below the safe harbor are presumed just, reasonable, fair and cost-based.

Rates between the interim safe harbor and the interim rate cap will not benefit from this presumption.

6. We base the safe harbor rate levels and rate caps on data and cost studies presented by parties and/or taken directly from ICS provider service contracts in the record. The safe harbor rate levels are derived from ICS rates in seven states that have prohibited site commission payments from ICS providers to facilities.20 The interim rate caps adopted are based on (1) the highest total-company costs presented in a cost study provided by Pay Tel, an ICS provider that exclusively serves jails, and (2) the highest collect calling cost data presented in the 2008 ICS Provider Data Submission, compiling data from seven different ICS providers that serve various types and sizes of correctional facilities. We based the interim rate caps on these high levels, without attempting to exclude any unrecoverable costs or adjust any inputs, in order to ensure that the cap levels were a conservative estimate of the levels under which all ICS providers could provide service. Even so, we provide a waiver process to account for any unique circumstances.

7. In addition to immediate rate reform, we find that site commission payments and other provider expenditures that are not reasonably related to the provision of ICS are not recoverable through

16 See Transcript of Reforming ICS Rates Workshop at 186-87 (Jason Marks, former Commissioner, New Mexico Public Regulation Commission, stating that “there are no security problems in New Mexico”); see also Letter from Anthony Annucci, Acting Commissioner, State of New York Department of Corrections and Community Supervision, to Gregory Haledjian, Attorney-Advisor, FCC, WC Docket No. 12-375 at 1 (filed July 16, 2013) (NY DOCCS July 16, 2013 Ex Parte Letter) (discussing the New York statute that “requires the department to . . . ensure that any inmate phone call system . . . provides reasonable security measures to preserve the safety and security of each correctional facility”).

17 See infra Section III.C.3.

18 We find that the record provides ample justification for assuming a 15-minute call as the basis for our calculations. See infra note 232. Additionally, we address rates by adopting interim safe harbor rate levels and interim rate caps that work together. We adopt interim safe harbor interstate rate levels for prepaid and debit calls and separately for collect calls, and we will presume that interstate ICS rates at or below the safe harbors are cost-based and therefore just, reasonable, and fair.

19 We emphasize that ICS providers should not read this Order as providing a basis to increase rates up to either the interim safe harbor or interim rate caps. The goals of the reforms adopted herein are to reduce rates and ensure that rates are cost-based. This Order does not provide an independent basis for raising rates. Consistent with our requirement that rates be cost-based, providers may raise rates when necessary to ensure recovery of costs directly and reasonably related to the provision of ICS on a holding-company level.

20 See infra para. 62.

ICS rates, and therefore may not be passed on to inmates and their friends and families.21 We require that charges for services ancillary to the provision of ICS must be cost-based. We prohibit special charges levied on calls made using teletypewriter (TTY) equipment or other technologies used to access TRS.22 While we find that the record fully supports the safe harbor and rate caps adopted here, we seek additional information that could allow us to refine these rates in the future. Accordingly, we require all ICS providers to submit data on their underlying costs so that the Commission can develop a permanent rate structure, which could include more targeted tiered rates in the future.23

8. The Communications Act (Act) requires that interstate rates be just and reasonable for all Americans—there is no exception in the statute for those who are incarcerated or their families.24 The Act further requires that our payphone regulations “benefit . . . the general public,” not just some segment of it.25 Our actions in this Order, while long overdue, fulfill these statutory mandates while taking into account the legitimate and unique requirements for security and public safety in the provision of inmate phone services and the benefits to society of increased communications between inmates and their families. Our work, however, is not done, and we continue in the Further Notice (or FNPRM) our efforts to ensure that these rates are just, reasonable, and fair to the benefit of both providers and the general public.

II. PROCEDURAL BACKGROUND

9. In 2003, Mrs. Wright and her fellow petitioners (Petitioners), which included current and former inmates at Corrections Corporations of America-run confinement facilities, filed a petition with the Commission seeking to initiate a rulemaking to address high ICS rates.26 The petition sought to prohibit exclusive ICS contracts and collect-call-only restrictions.27 In 2007, the same petitioners filed a second rulemaking petition, seeking to address ICS rates by requiring a debit-calling option in correctional facilities, prohibiting per-call charges, and establishing rate caps for interstate, interexchange ICS.28 The Commission sought and received comment on both petitions.29 In 2008, certain ICS providers placed in the record a cost study that quantified their interstate ICS costs.30

21 See infra Section III.C.2.b.

22 See infra Section III.D.

23 See infra Section III.I.

24 See 47 U.S.C. §§ 151, 201(b).

25 See 47 U.S.C. § 276(b)(1) (emphasis added).

26 See generally First Wright Petition.

27 Id.

28 See generally Alternative Wright Petition.

29 See Petition For Rulemaking Filed Regarding Issues Related to Inmate Calling Services Pleading Cycle Established, CC Docket No. 96-128, Public Notice, DA 03-4027, 2003 WL 23095474 (Wireline Comp. Bur. 2003);

Comment Sought on Alternative Rulemaking Proposal Regarding Issues Related to Inmate Calling Services, CC Docket No. 96-128, Public Notice, 22 FCC Rcd 4229 (Wireline Comp. Bur. 2007) (2007 Public Notice).

30 See generally Don J. Wood, Inmate Calling Services Interstate Call Cost Study (WOOD & WOOD 2008) CC Docket No. 96-128 (filed Aug. 15, 2008); Letter from Stephanie A. Joyce, Counsel to Securus Technologies, Inc., to Marlene H. Dortch, Secretary, FCC, CC Docket No. 96-128 (filed Aug. 22, 2008) (Joyce Aug. 22, 2008 Ex Parte Letter) (attaching supplemental cost and usage data); Record submission by “several providers of inmate telephone service,” CC Docket No. 96-128 (filed Oct. 15, 2008) (amending supplemental cost and usage data) (collectively ICS Provider Data Submission).

10. In December 2012, the Commission adopted a notice of proposed rulemaking seeking comment on, among other things, the proposals in the Wright petitions.31 The 2012 ICS NPRM sought comment on the two petitions and proposed ways to “balance the goal of ensuring reasonable ICS rates for end users with the security concerns and expense inherent to ICS within the statutory guidelines of sections 201(b) and 276 of the Act.”32 The 2012 ICS NPRM sought comment on other issues affecting the ICS market, including possible rate caps for interstate ICS; the ICS Provider Data Submission; collect, debit, and prepaid ICS calling options; site commissions; issues regarding disabilities access; and the Commission’s statutory authority to regulate ICS.33

11. The FCC’s Consumer Advisory Committee (CAC) adopted a recommendation in 2012 finding that ICS rates may be “unreasonably high and unaffordable” and that such high ICS rates challenge the “national goal of the reduction of recidivism among inmates.”34 The CAC recommended that the Commission: ensure that the rates for ICS calls are reasonable; restrict “commissions” paid to correctional institutions; encourage the use of “prepaid debit accounts” or use of other “low-cost minutes;” and continue to allow collect calls “with charges that are a reasonable amount above the actual cost of providing the call.”35 On August 2, 2013, the CAC reiterated its request for the Commission to take action on “this long overdue issue” of high ICS rates.36

III. ENSURING THAT RATES FOR INTERSTATE INMATE CALLING SERVICES ARE

JUST, REASONABLE, AND FAIR

12. In this Order, we take several actions to ensure that interstate ICS rates are just, reasonable, and fair as required by the Communications Act. First, we examine the statute and the current state of the ICS market and conclude that the current market structure is not operating to ensure that rates are consistent with the statutory requirements of sections 201(b) and 276 to be just, reasonable, and fair.

Thus, we require that interstate ICS rates be cost-based. We address what appropriate costs are and conclude, among other things, that site commission payments, in and of themselves, are not a cost of providing the communications service—ICS. We then address several interrelated rate issues, including rate levels and options for provider compliance with our rules including “safe harbor” rate levels. We require that ancillary service charges also be cost-based. We address rates for the use of TTY equipment.37 We conclude that our actions herein do not require us to abrogate existing contracts

31 See generally Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Notice of Proposed Rulemaking, 27 FCC Rcd 16629 (2012) (2012 ICS NPRM). The 2012 ICS NPRM incorporated relevant comments, reply comments and ex parte filings from the prior ICS docket, CC Docket No. 96-128, into WC Docket No. 12-

375. See 2012 ICS NPRM, 27 FCC Rcd at 16636, para. 15.

32 2012 ICS NPRM, 27 FCC Rcd at 16636, para. 16.

33 See generally 2012 ICS NPRM. While some commenters use the terms “debit” and “prepaid” interchangeably, in the 2012 ICS NPRM, the Commission differentiated between the two, noting that for debit calling, “money is deducted from an account but the minutes are not purchased in advance,” id. at 16641, para. 33, whereas prepaid calls are always funded in advance. Id. We continue that distinction in this Order.

34 See FCC Consumer Advisory Committee, Recommendation Regarding Affordable Phone Access for Incarcerated Individuals and Families, CC Docket No. 96-123 at 1 (filed Oct. 18, 2012).

35 Id.

36 See FCC Consumer Advisory Committee, Further Recommendation Regarding Inmate Calling Rates, WC Docket No. 12-375 (filed Aug. 5, 2013). The CAC reiterated its former recommendations about ICS-related issues, and additionally proposed that the Commission require ICS providers to: “proportionally discount rates for TTY and relay calls;” allow more time for such calls; and “report all ICS-related complaints” to the Commission, including disability access complaints.

37 We distinguish our decision to regulate interstate ICS rates here from the Commission’s previous decision to rely on negotiated compensation for ICS. Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, CC Docket No. 96-128, Order on Reconsideration, 11 FCC Rcd

(continued….)

between correctional facilities and ICS providers; to the extent that any agreement may need to be revisited, it is only because those agreements cannot supersede our authority over rates charged to end users. Finally, we address collect-calling only requirements at correctional facilities, require an annual certification filing, and initiate a mandatory data collection, directing all ICS providers to file data regarding their ICS costs. These actions take into account the needs of ICS providers for adequate cost recovery and the need for just, reasonable, and fair rates for ICS consumers while meeting the unique security needs inherent in the provision of ICS.

A. Statutory Requirements for ICS

1. Statutory Standards for ICS Rates and Practices

13. The Communications Act requires ICS rates, charges, and practices to be just, reasonable, and fair.38 Section 201(b) provides that “charges, practices, classifications, and regulations for and in connection with [interstate common carrier] service, shall be just and reasonable,” and grants the Commission authority to “prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of this chapter.”39 The Commission has previously found that interstate ICS, typically a common carrier service, falls within the mandates of section 201.40

(Continued from previous page) 21233, 21269, para. 72 (1996) (Payphone Order on Reconsideration) (“[W]henever a PSP is able to negotiate for itself the terms of compensation for the calls its payphones originate, then our statutory obligation to provide fair compensation is satisfied.”). In that proceeding, the question presented was whether ICS providers were entitled to compensation additional to that which they had already negotiated with correctional facilities. The Commission denied the request for additional compensation. Here, the question before us is whether negotiated rates result in unfairly high compensation for ICS providers and unjust and unreasonable rates for end users. We conclude that they do and that we are obligated to ensure that rates comply with our statutory mandates.

38 See 47 U.S.C. § 201(b); see also Petitioners 2013 Comments at 5 (asserting that “there is no legitimate question that the Act provides the FCC with sufficient authority to regulate all ICS rates and practices”); GTL 2013 Comments at 33 (stating that, “taken together, Sections 201 and 276 appear to provide broad authority for the FCC to address interstate interexchange ICS rates”); Raher 2013 Comments at 2 (contending that “there is no impediment to the Commission’s jurisdiction in these matters”); Securus 2013 Comments at 10 (asserting that “the Commission’s purview . . . remains interstate telephone rates”); CBC 2013 Reply at 2 (“A plain reading of §§ 276 and 201 of the Act indicates that the FCC has broad authority to regulate both interstate and intrastate inmate calling services to ensure that the rates of inmate calling services are reasonable.”) (emphasis in original omitted); Hamden Ancillary Charges PN Reply at 12 (stating that “the widely diverging regulations, items of call billing that are not tariffed, and broad discrepancies in calling rates that can only be characterized as arbitrary, all demonstrate that regulation at the state level has been ineffectual” and that “in the absence of federal regulation, meaningful reform of the nationwide ICS industry simply cannot be achieved”).

39 See Petitioners 2013 Comments at 8 (“An ICS telephone call fits squarely within the definition of interstate or foreign communication by wire or radio.”); NASUCA 2013 Comments at 7 (stating that “this broadly conferred authority plainly reaches interstate ICS calling”); The Phone Justice Commenters 2013 Reply at 5 (“Section 201(b) of the Communications Act grants the Commission broad authority to regulate interstate ICS rates.”); Alternative Wright Petition at 11-12.

40 See Billed Party Preference For Interlata 0+ Calls, CC Docket No. 92-77, Second Report and Order and Order on Reconsideration, 13 FCC Rcd 6122, 6156, para. 59 (1998) (finding that inmate phone rates “must conform to the just and reasonable requirements of Section 201”) (Second Report and Order and Order on Reconsideration). We disagree with GTL’s assertion that, because it is a provider of “competitive, non-dominant services,” it is “not subject to rate regulation or cost justification requirements.” See GTL Ancillary Charges PN Comments at 2. GTL asserts that it must detariff its rates, make them available in a public location and on its website, and “make certain oral disclosures prior to the completion” of an ICS call, but beyond such requirements, it is “subject to less stringent regulatory burdens” than dominant providers. Id. at 3-4. GTL compares itself to “carriers that are not rate-regulated by [the] Commission, namely interexchange carriers, CMRS providers, and competitive local exchange carriers” who “are exercising ‘the freedom’ granted by the Commission to non-dominant carries to make their own pricing decisions.” Id. at 5. We reaffirm our finding in the Second Report and Order and Order on Reconsideration that

14. In addition, section 27641 directs the Commission to “establish a per call compensation plan to ensure that all payphone service providers”—which the statute defines to include providers of ICS42—“are fairly compensated for each and every completed intrastate and interstate call.”43 The Commission has previously found the term “fairly compensated” permits a range of compensation rates that could be considered fair,44 but that the interests of both the payphone service providers and the parties paying the compensation must be taken into account.45 Section 276 makes no mention of the technology used to provide payphone service and makes no reference to “common carrier” or “telecommunications service” definitions. Thus, the use of VoIP or any other technology for any or all of an ICS provider’s service does not affect our authority under section 276.46 Indeed, several commenters state that the Commission can regulate ICS regardless of the underlying technology used to provide the service.47 Finally, section 276 provides that “[t]o the extent that any State requirements are inconsistent with the Commission’s regulations, the Commission’s regulations on such matters shall preempt such State requirements.”48

15. Our exercise of authority under sections 201 and 276 is further informed by the principles of Title I of the Act. Among other things, that provision states that it is the Commission’s purpose “to

(Continued from previous page) ICS rates must be just and reasonable under section 201(b) of the Act. ICS providers are not exempt from “rate regulation or cost justification requirements” simply because they claim non-dominant status. See Second Report and Order and Order on Reconsideration, 13 FCC Rcd at 6165, para. 59.

41 Section 276(b)(1) states that “within 9 months after February 8, 1996, the Commission shall take all actions necessary . . . to prescribe regulations” implementing subsections (b)(1)(A)—(E). 47 U.S.C. § 276(b)(1).

Consistent with our prior interpretation of analogous statutory language, we believe this provision is best interpreted as permitting the Commission subsequently to change or adopt new regulations implementing section 276. As the Commission explained with respect to the similar six-month deadline imposed in section 251(d)(1), “the actions that were ‘necessary’ to implement section 251 at the time of the 1996 Act do not constitute the entire universe of regulations that may be necessary or appropriate to implement those provisions in the future.” Connect America Fund et al., WC Docket No. 10-90 et al., Report and Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd 17663, 17918, para. 767 n.1381 (2011) (USF/ICC Transformation Order), pets. for review pending sub nom. In re: FCC 11-161, No. 11-9900 (10th Cir. filed Dec. 8, 2011).

42 47 U.S.C. § 276(d) (“As used in this section, the term ‘payphone service’ means the provision of public or semi-public pay telephones, the provision of inmate telephone service in correctional institutions, and any ancillary services.”).

43 Id. § 276(b)(1)(A); see also Petitioners 2013 Comments, Exh. A at 8-9 (citing Wright v. Corrections Corp. of America, C.A. No. 00-293 (GK), Memorandum Opinion, slip op. at 8-9 (D.D.C. Aug. 22, 2001)).

44 See Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, CC Docket No. 96-128, Order on Remand and Notice of Proposed Rulemaking, 17 FCC Rcd 3248, 3254-58, paras. 14-24 (2002) (Inmate Calling Services Order on Remand and NPRM).

45 Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, CC Docket No. 96-128, Third Report and Order, and Order on Reconsideration of the Second Report and Order, 14 FCC Rcd 2545 at 2570, para. 55 (1999) (Payphone Third Report and Order); see also Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, CC Docket No. 96-128, Fifth Order on Reconsideration and Order on Remand, 17 FCC Rcd 21274, 21302-03, para. 82 (2002) (Fifth Order on Reconsideration and Remand) (holding that “fair” compensation under section 276 “implies fairness to both sides”).

46 See 47 U.S.C. § 276.

47 See Transcript of Reforming ICS Rates Workshop at 186, 221-22 (Statement of Jason Marks, former Commissioner, New Mexico Public Regulation Commission); NASUCA 2013 Reply at 2-3 (noting that “none of the commenters seriously challenge the Commission’s jurisdiction to regulate rates for ICS services.”); Petitioners 2013 Comments at 12-16.

48 47 U.S.C. § 276(c).

make available, so far as possible, to all the people of the United States” communications services “at reasonable charges.”49 The regulation of interstate ICS adopted in this Order advances those objectives.

2. Types of Facilities

16. The rules we adopt herein apply to interstate ICS provided in “correctional institutions” as that term is used in section 276.50 Accordingly, the scope of facilities covered by this Order is coextensive with the scope of the term “correctional institutions” in the statute and includes, for example, prisons, jails and immigration detention facilities.51

17. Prisons and Jails. Prisons and jails are both core examples of facilities that constitute “correctional institutions” under section 276 and this Order.52 The Commission has long made clear that its ICS rules apply at a minimum to inmate telephone service in prisons and jails. For instance, the 2002 Inmate Calling Services Order on Remand and NPRM repeatedly referred to “prisons” and “jails,”53 often in contexts that explicitly make clear that both entities fall within the definition of “correctional institution.”54 Similarly, in the 2012 ICS NPRM, the Commission repeatedly used the more generic term “prison,”55 noting, however, that jails are a particular subset of prisons (i.e., that jails are “local prisons” to be distinguished from “state prisons”).56 Finally, a number of commenters in this proceeding – including ICS providers – submitted data for both prisons and jails,57 and/or otherwise stated or assumed within their written advocacy58 that both entities would be subject to any new rules.59 We do not

49 Id. § 151 (emphasis added).

50 Id. § 276(d) (defining “payphone service” to include “the provision of inmate telephone service in correctional institutions”). Throughout this Order and Further Notice we use “correctional facility” and “correctional institution” interchangeably. We also note that the requirements adopted in this Order apply to federal, state, and local correctional facilities.

51 Beyond the guidance provided in this section, to the extent there are questions about whether a particular facility is a “correctional institution” under this Order, such questions will be resolved on a case-by-case basis.

52 For these purposes, the term “jail” includes adult detention facilities (excluding secure mental health facilities) where individuals are held pending charges or pending trial. Moreover, we note that whether a particular facility is a correctional institution is a question of fact that focuses on the function of the facility. In this regard, we note that the name of a particular facility may not be dispositive. For instance, if a facility functions as a prison or jail, then it will be covered by our rules even if the facility does not include the term “prison” or “jail” in its name. See e.g., http://www.fairfaxcounty.gov/sheriff/adc.htm (FAQs acknowledging that the Fairfax County Adult Detention Center is a “jail”).

53 See Inmate Calling Services Order on Remand and NPRM, 17 FCC Rcd 3248, paras. 6, 9, 10, 11, 19, 39, 40, 42, 72, 75, 77.

54 See, e.g., id. at 3276, para. 72 (“Correctional facilities must balance the laudable goal of making calling services available to inmates at reasonable rates, so that they may contact their families and attorneys, with necessary security measures and costs related to those measures. For this reason, most prisons and jails contract with a single carrier to provide payphone service and perform associated security functions.”).

55 See 2012 ICS NPRM, 27 FCC Rcd 16629, paras. 1, 4, 7, 12, 14, 26, 27, 31, 41, 43.

56 Id. at para. 44 n.148; see also id. at para. 2 n.12. Similarly, the First Wright Petition and the Alternative Wright Petition repeatedly referred to “prisons,” noting that most “low-capacity prisons” are “locally-administered jails.”

First Wright Petition at n.51.

57 See ICS Provider Data Submission (data from seven ICS providers covering both prisons and jails); Securus 2013 Comments, Expert Report of Stephen E. Siwek (data covering both prisons and jails).

58 See generally First Wright Petition (seeking relief from anticompetitive practices in prisons); Alternative Wright Petition (seeking the establishment of benchmark rates for prisons); Pay Tel Cost Study (cost study from a provider that serves primarily jails); Letter from Lee G. Petro, Counsel to Petitioners, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 96-128 at 1 (filed Oct. 24, 2012) (“It was noted that not only would action on the Wright Petition distinguish in this Order between prisons and jails, in part because our record does not permit us to draw any clear distinctions. Because both are included within the scope of this Order, however, there is no need at this time to draw any distinction.60

18. Immigration Detention Facilities. Immigration detention facilities also are a type of “correctional institutions.” The term is widely understood to include “facility[ies] of confinement.”61

This common understanding of the term has long been reflected in advocacy regarding the lawfulness of ICS rates under section 276. As early as 2004, for example, commenters made arguments predicated on the assumption that immigration detention facilities are a type of “correctional institution” under section

276.62 Petitioners in this proceeding likewise made arguments based on the same assumption, as did a number of commenters in response to the 2012 ICS NPRM63 as well as participants in the Reforming ICS Rates Workshop.64 This common understanding of that statutory term was not disputed or called into

(Continued from previous page) affect inmate prison phone rates, but also those phone rates charged at immigration detention centers.”); Letter from Holly S. Cooper, Assoc. Director, UC Davis Immigration Law Clinic, to Marlene H. Dortch, Secretary, FCC, CC Docket No. 96-128 at 1 (filed Nov. 8, 2012) (“Immigrants in detention have a critical need for telephone access, and high phone rates leave them particularly vulnerable.”).

59 ”[T]he Commission must consider all aspects of ICS—interstate and intrastate, at all kinds and sizes of correctional facilities—as it engages in reform.” Pay Tel 2013 Comments at 2. ICS providers that have participated in this docket serve both prisons and jails. See e.g., GTL 2013 Comments at 3-4 (GTL serves over 1,900 facilities);

NCIC 2013 Comments at 2 (NCIC serves nearly 300 jails nationwide); Telmate July 26, 2013 Ex Parte Letter at 1-2 (Telmate serves state departments of corrections, ICE, and county and municipal jails.).

60 Contrary to Commissioner Pai’s dissenting statement that “the record evidence simply does not support the Commission’s one-size-fits-all approach,” Dissenting Statement of Commissioner Ajit Pai at 116 (Dissent), the interim rates we adopt are based on the data most likely to approximate the actual costs of providing inmate calling services. See infra para. 69. Moreover, as explained below, higher cost providers have the flexibility to charge cost-based rates up to the interim rate cap, and we have a waiver process for any unique circumstances. See id. We seek comment in the Further Notice on whether we should draw such a distinction for purposes of regulating ICS. See infra para. 159.

61 See, e.g., Black’s Law Dictionary 396, 1314 (9th ed. 2009) (definitions of “correctional institutions” and “prison”).

62 MCI 2004 Comments at 18 (“Correctional facilities, ranging from county jails, state prisons, federal prisons, to Immigration and Naturalization Service detention facilities, uniformly rely on a single ICS provider because doing so gives them the greatest ability to maintain prison security and protect the public.”); Coalition 2004 Comments at 6 (“There is a vast array of types of private correctional facilities. The Federal Bureau of Prisons, the Federal Bureau of Immigration and Customs Enforcement (‘BICE’), and many state and county governments send people to private facilities.”).

63 NJAID/NYU IRC 2013 Comments at 5 (urging the Commission to “[p]revent future exploitation by prison telephone companies of vulnerable immigrant detainees, other persons held in correctional facilities, and their families”); AILA 2013 Comments at 1 (arguing that “[t]he exorbitant telephone rates paid by individuals in immigration detention are a well-documented concern,” and urging the FCC to regulate ICS rates for calls “made from correctional facilities to ensure just and reasonable rates for inmates, including individuals in immigration detention”); CIVIC 2013 Comments at 1, 4 (noting that “there are more than 400,000 men and women held in U.S.

civil immigration detention each year,” and urging the Commission “to take action and cap the cost of interstate calls from prisons and detention centers” in order to help these detainees); Immigration Equality 2013 Comments at 1 (urging the Commission to “regulate the high cost of calls at immigration detention facilities”). See also 2012 ICS NPRM, 27 FCC Rcd at 16629, para. 1 n.6 (observing that “[r]ecently, there has been substantial renewed interest and comment in this docket highlighting . . . significant public interest concerns,” and citing, inter alia, Letter from Katherine Grincewich, Assoc. General Counsel, United States Conference of Catholic Bishops, to Chairman Julius Genachowski, FCC, CC Docket No. 96-128 (filed Oct. 12, 2012) (“urging the Commission to cap ICS rates and highlighting the problem of high ICS rates in immigrant detention centers”)).

64 See Transcript of Reforming ICS Rates Workshop at 217-18 (amalia deloney, Assoc. Dir., Center for Media Justice, describing the monetary effects of immigrant detainees telephone calls); id. at 22-23 (Alex Friedman, Assoc.

Dir., HRDC, discussing site Commission payments from jails, prisons, immigration detention facilities).

question by any evidence in the record. As such, “correctional institution” as used within section 276 includes immigration detention facilities.

19. Additional support for this finding derives from the largely fungible nature of jails and facilities where immigrants are detained when viewed from the standpoint of detained immigrants. As commenters have pointed out, of the nearly 400,000 immigrants detained in this country each year, many are “held in local jails and prisons that have contracted with Immigration Customs and Enforcement.”65 This fact suggests a rough functional equivalence between jails and prisons on the one hand, and immigration detention facilities on the other – particularly from the perspective of the would-be users of ICS (i.e., apprehended immigrants who may be detained either in a jail or some other facility, depending on happenstance). Moreover, treating the two categories of institutions differently would result in disparate treatment among immigrant detainees. For instance, if immigration detention facilities were excluded from the scope of “correctional institution,” immigrant detainees in jails would receive a “fair” rate for phone calls while immigrant detainees in ICE facilities would not. This kind of disparate treatment would not be just or consistent with the public interest, and for this reason as well we find it reasonable that “correctional institutions” includes immigration detention facilities.

B. Need for Reform

20. In this section, we first describe the different categories of rates and charges for ICS and the different options that end users have to pay for them. We then explore the record on the costs of providing ICS, and the record on rates, and find that in most facilities the rates for interstate ICS far exceed the cost of providing ICS. To assess why this occurs, we look at competition in the market for ICS, which, in this case, does not adequately exert downward pressure on end-user rates. We examine the societal impacts of high ICS rates, and we conclude that we must take action to meet our statutory mandate that all rates be just, reasonable, and fair.66

1. Current Structures for ICS Rates and Payment Options

21. ICS providers generally offer their services pursuant to contracts with correctional facilities.67 These contracts vary by the correctional facilities and ICS providers involved, and the states and local jurisdictions in which the services are provided.68 ICS rates can differ for local, intrastate long distance, and interstate long distance calls69 and can include per-minute or per-call charges or both.70 This

65 Comments of NJAID/NYU IRC 2013 Comments at 1; see also http://www.ice.gov/news/library/factsheets/reform-2009reform.htm (stating that “most” of the roughly 350 facilities that detain immigrants are currently jails “designed for penal, not civil, detention” and are not operated by ICE).

66 See 47 U.S.C. §§ 201, 276.

67 See, e.g., GTL 2013 Comments at 4; Securus 2013 Comments at 2; CenturyLink 2013 Comments at 7-8.

68 See, e.g., Securus 2013 Comments at 2; GTL 2013 Comments at 14.

69 See, e.g., HRDC 2013 Comments, Exh. A (comparing local collect intrastate to local collect interstate rates, per state); see also Letter from Peter Wagner, Exec. Dir., Prison Policy Initiative, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, Attach. at 10-11 and Tbls. 8-9 (filed May 9, 2013) (Please Deposit All of Your Money Study) (noting different fees and “taxes” that Telmate charges for prepaid accounts, with resulting variety of fees, rates, and percentages, per state).

70 See, e.g., State of Maine Dept. of Corrections, Agreement to Purchase Services, available at http://prisonphonejustice.org/includes/_public/contracts/Maine/ME_contract_with_PCSGTL_20072012.pdf (ICS contract between GTL and Maine Department of Corrections dated July 24, 2007) (noting that in Maine, GTL charges a $3.00 set up fee for collect and prepaid calls and a $0.69 per-minute charge); see also HRDC June 8, 2013 Ex Parte Letter Rev. Exh. B; Letter from Jamie Susskind, Acting Legal Advisor to the Bureau Chief, Wireline Competition Bureau, FCC, to Marlene H. Dortch, Secretary, FCC, WC Docket No.