Telecom Firms Shift Revenue Streams in Response to Prison Phone Reforms
As the Federal Trade Commission (FTC) held an information-gathering hearing on April 24, 2024, about a proposed rule regarding so-called “junk fees,” prisoners are set to get left behind. The problem mushroomed once more governments moved to make prison and jail phone calls free, and sometimes other communication services, too. Connecticut’s Department of Corrections (DOC) was the first to do so in 2022; three other state prison systems soon followed, most recently in Minnesota. Several jails have implemented free phone-call policies, too, with more considering the idea.
Historically, prison telecom companies reaped enormous profits by charging prisoners and their families exorbitant phone rates, up to $1.00 per minute. The industry generates annual revenue estimated at $1 billion. The two leading prison telecom firms, which together control around 90% of the captive carceral market, are ViaPath (formerly Global Tel*Link), owned by private equity firm American Securities, and Securus, a subsidiary of Aventiv Technologies, which is owned by Platinum Equity, another private equity company.
As PLN reported, the Federal Communication Commission (FCC) imposed rate caps on prison and jail calls in May 2021, after more than a decade of advocacy by organizations such as the Human Rights Defense Center (HRDC), publisher of PLN. [See: PLN, Sep. 2021, p.12.] Since then, prison telecom companies are increasingly shifting their revenue streams to areas that are unregulated.
Minnesota implemented free calls in state prisons in July 2023, also prohibiting its DOC from accepting “commission” kickbacks on phone calls, video calling and e-messaging services. Prior to those reforms the state’s prison system received a 40% commission on phone revenue, amounting to $1.3 million a year. ViaPath, DOC’s telecom vendor, has since shifted to other ways to generate revenue that still provide commission payments to the prison system. Annual revenues from these non-call services already approach $3 million.
In Minnesota, the company’s expanded revenue stream includes money transfer services used to fund prisoners’ trust accounts and fee-based music downloads, games, movies, e-books and photo sharing, all provided on electronic tablets—and all carrying fees not regulated by the FCC or state. Prisoners currently pay between $1.06 and $1.99 for a single song under DOC’s contract with JPay, another Aventiv subsidiary; the contract includes a 5% kickback on most noncommunication services. DOC received $274,365 in commissions in 2023, including $160,000 for money transfer fees, $48,500 from music purchases and $31,000 from photo-sharing services. Agency spokesperson Aaron Swanum said, “We have not had any discussions about commissions related to non-communication services.”
Revenue that DOC receives is expected to soar under a new contract with ViaPath to supply prisoner tablets, providing a 20% kickback, according to the Minnesota Office of the Ombuds for Corrections. Costs will rise for prisoners, too; the fee for downloading a single song, for example, will increase up to $2.36. This revenue-shifting by prison telecoms will likely expand as more states provide no-cost phone calls and other communication services to prisoners, and as fee-based digital tablet services expand in lockups nationwide.
“It really appears that in a lot of places, the majority of revenue that companies are bringing in is from nonphone products,” said Wanda Bertram, with the nonprofit Prison Policy Initiative (PPI). The companies are “starting to boost their money streams in places that aren’t regulated,” agreed HRDC Executive Director Paul Wright.
In 2023, the administration of Pres. Joseph R. Biden, Jr. announced a federal initiative to address so-called ‘‘junk fees,” those that simply increase the cost of a service while providing no benefit to consumers. In prisons and jails, these fees include charges related to money transfers, debit release cards and tablet-based services. The FTC’s new rule, proposed on October 11, 2023, would “provide more transparency about junk fees but little actual relief,” according to PPI. That’s because it does not ban junk fees but only makes consumers more aware of them. For prisoners, who have zero options when fee-based services are provided under monopoly contracts, such transparency is of extremely limited value. Yet the proposed rule, which is still gathering public comments, has already drawn heavyweight opposition from the U.S. Chamber of Commerce for its “hidden costs.” See: 16 CFR Part 464, FTC (Oct. 2023)
“Unlike on the outside, people in prison and jail can’t use a different business if they think a company is [charging] excessive fees,” PPI noted. In a comment filed with the FTC, the organization recommended that fees providing little or no value to consumers, or which exceed the cost of providing a good or service, should be prohibited.
Additional source: Jacobin