Prison Phone Companies Would Face Hit in Stimulus Bill

(Bloomberg) -- The U.S. House’s $3 trillion economic stimulus bill features provisions that would slash earnings for providers of phone services to prisoners, an industry that many Democratic lawmakers view as extracting excessive profits from its captive customers and their families.

The bill, set for vote on Friday, has slim chances of getting signed into law. But House Speaker Nancy Pelosi is counting on parts of the legislation, such as aid to states and extended unemployment insurance, to get enough public support to sway the White House and the Republicans who control the Senate to begin negotiations for another round of stimulus for the hobbled U.S. economy.

The proposed measures would require the Federal Communications Commission to set maximum rates for all calls originating from correctional facilities within 18 months. Until then, it would set a maximum rate of four or five cents per minute depending on the type of call.

That could cut into profits for private-equity backed companies like Securus Technologies Inc. and Global Tel*Link Corp. that provide the phone services. The changes could also hurt revenues for cities and states that get commissions from the service providers. Under the bill, they could charge a maximum of 75 cents for a 15-minute call. In jails, where rates tend to be higher, that figure is over $20 now in some states, though it averages closer to $5.75 across the U.S., according to data from the Prison Policy Initiative, a non-profit research group.

If these provisions make it into any final stimulus law, they could drastically reshape a portion of the prison industry that private equity firms have come to dominate over the past several years, attracting increased scrutiny from lawmakers and activists.

“There has never been a more significant federal legislative vote on the regulation of prison phone calls,” said Bianca Tylek, executive director of Worth Rises, a non-profit that advocates for the dismantling of the for-profit prison industry.

A representative for Securus and Platinum Equity, the buyout firm that owns the company, declined to comment. Representatives for GTL and its private equity owner American Securities also declined to comment.

Rate Cut

Demands to make prison phone calls free have intensified since the Covid-19 outbreak, as correctional facilities around the country banned in-person visits to contain the spread of the virus, leaving phones as the only way for incarcerated people to communicate with their families. Both Securus and GTL have provided some free services during the pandemic.

The bill would also put an end to the long-established practice of phone service providers rebating a portion of their call revenue back to correctional facilities through so-called site commissions, which states and local governments have come to rely on to supplement their budgets.

A prior attempt by the FCC to set caps for prison phone calls during the Obama administration partly failed after an appeals court found the agency did not have the authority to regulate in-state calls.

©2020 Bloomberg L.P.

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