The Prison Phone Industry Has Quietly Become Even More of a Duopoly
by Steve Horn
In little-noticed regulatory filings in New York, Maryland, West Virginia, Ohio and Arizona in May 2018, telecom company Securus Technologies solidified its grip over the prison and jail phone service industry by announcing its acquisition of one of its competitors, ICSolutions, also known as ICS. First reported by Law360.com, the purchase further consolidates the duopoly of the prison telecom market, which is largely split between Securus and Global Tel*Link (GTL).
GTL and Securus currently own over 70 percent of the prison and jail phone industry, according to data crunched by the Prison Policy Initiative (PPI), a criminal justice research and advocacy organization. The regulatory filings – joint petitions by Securus and ICSolutions regarding the acquisition – also included the private equity firm TKC Holdings, the company that owned ICSolutions. TKC Holdings also owns Trinity Services Group and Keefe Group, which provide food and commissary services to prisons and jails.
“Securus will acquire all the issued and outstanding membership interests of ICS,” the filings stated. “As a result, ICS will become a wholly owned, direct subsidiary of Securus. Petitioners intend to consummate the Transaction as promptly as possible after the necessary federal and state regulatory approvals have been received.”
Just a week before the announcement of the acquisition, The New York Times revealed that former Missouri sheriff Cory Hutchenson had been indicted for using Securus’ telephone system at his jail to obtain location data on cell phone customers without a court order. Put another way, Securus’ platform can be abused by law enforcement officials to spy on people who receive calls from their incarcerated loved ones.
Officially, as the regulatory filings in New York and West Virginia point out, there are other competitors in the prison and jail telecom market besides Securus and GTL, including Legacy Long Distance, Network Communications International Corp., Pay Tel and Legacy Inmate Communications. But by and large, Securus and GTL dominate the industry and ICSolutions was already in a distant fourth place behind GTL, Securus and CenturyLink, according to PPI.
The regulatory filings noted that Securus would now have an even greater opportunity to market its telecommunications services to prisoners, including tablet devices. [See: PLN, April 2018, p.44; Sept. 2015, p.16; July 2015, p.42]. “Inmate calling can also be permitted from such tablets, further facilitating the ability of inmates to connect with their friends and family,” the filings stated.
An investor note written by the analyst and credit ratings firm Moody’s observed that Securus was acquiring ICSolutions by taking on the company’s $350 million in debt. It also noted that the purchase will rid Securus of one of its competitors.
“The transaction is strategically positive for Securus as it removes a marginal competitor and improves the company’s market share position,” the note said. “ICS has grown significantly over the past three years by winning new contracts, occasionally from Securus as well as other competitors. While a costly purchase, the acquisition eliminates an aggressive competitor in the smaller facility space comprised of local and county jails. Moody’s believes this is a prudent defensive tactic which fortifies Securus’ recent market share gains and helps preserve the company’s solid growth trajectory.”
Securus also owns JPay, a company it acquired in 2015 that provides fee-based email services, video calling, money transfers and tablets to prisoners. Securus, in turn, is owned by the private equity firm Platinum Equity. The company, managed by Detroit Pistons owner Tom Gores, acquired Securus for $1.5 billion in November 2017. [See: PLN, Oct. 2017, p.48]. GTL, meanwhile, purchased Telmate, another corrections phone service provider, in August 2017 – further consolidating the industry into a duopoly.
In a research note about GTL’s acquisition of Telmate, the Prison Policy Initiative explained why the ever-consolidating prison and jail phone industry matters for prisoners and their families.
“Now that there are just two major national companies left to compete for contracts, it will be harder for facilities that want to lower prices to do so,” PPI stated. “Because the primary differentiation between vendors is cost, having fewer companies compete for contracts will mean less choice for the facility that awards the contracts and less of an incentive for the companies to offer good deals.”
Lee Petro, an attorney with the law firm of Drinker Biddle & Reath, LLP who represents petitioners in the Wright Petition – a regulatory proceeding before the Federal Communications Commission related to the cost of prison and jail phone services – told Prison Legal News that he largely shares those concerns.
“The acquisition of ICSolutions by Securus is just another step in the consolidation of an industry that already operates as a monopoly at the facility level. By acquiring ICSolutions, Securus has eliminated a potential competitor that had actively bid for large jails and state prison systems,” said Petro. “If this transaction is approved, it is likely that we will see just two or three bidders for large facilities, and further elimination of controls over ICS rates and fees.”