Prison Phone Justice

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 1 of 41

ORAL ARGUMENT NOT YET SCHEDULED

UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 15-1461
(consolidated with Nos. 15-1498, 16-1012, 16-1029, 16-1038, 16-104 and 16-1057)

GLOBAL TEL*LINK, ET AL.,
PETITIONERS,
v.
FEDERAL COMMUNICATIONS COMMISSION
and UNITED STATES OF AMERICA,
RESPONDENTS.
On Petitions for Review from an Order of the
Federal Communications Commission

BRIEF	OF	INTERVENORS	ULANDIS	FORTE,	ETHEL	PEOPLES,	LAURIE	LAMANCUSA,	
DEDRA	EMMONS,	CHARLES	WADE,	EARL	PEOPLES,	DARRELL	NELSON,		
JACKIE		LUCAS, THE	D.C.	PRISIONERS’	LEGAL	SERVICES	PROJECT,	INC.,	CITIZENS	
UNITED	FOR	THE	REHABILITATION	OF	ERRANTS,	PRISON	POLICY		
INITIATIVE,	THE	HUMAN	RIGHTS	DEFENSE	CENTER,	THE	CAMPAIGN	FOR	PRISON	
PHONE	JUSTICE,	AND	OFFICE	OF	COMMUNICATION,	INC.		
OF	THE	UNITED	CHURCH	OF	CHRIST	(THE	“WRIGHT	PETITIONERS”)	
Andrew Jay Schwartzman
Drew T. Simshaw
Institute for Public Representation
Georgetown Law
600 New Jersey Avenue NW
Washington, DC 20001
(202) 662-9545
dts52@law.georgetown.edu
Counsel to The Wright Petitioners
September 29, 2016

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 2 of 41

CERTIFICATE AS TO PARTIES, RULINGS AND RELATED CASES
1. Parties and Amici Curiae.
All parties and Intervenors appearing in this Court are listed in the
Petitioners’ briefs. The States of Minnesota, Illinois, Massachusetts, New Mexico,
New York, Washington, and Washington, D.C. and, separately, the County of
Santa Clara and the City and County of San Francisco, have appeared as amici
curiae in support of Respondents.
2. Rulings under review.
The ruling at issue is Rates for Interstate Inmate Calling Services, 30
FCCRcd 12763 (2015).
3. Related cases.
The Order under review has not previously been the subject of a petition for
review in this Court or any other court.
In Securus Technologies, Inc. v. FCC, Nos. 13-1280, et al., various petitioners
challenged the predecessor order to the order under review. That challenge was
held in abeyance pending the rulemaking that led to the order under review. See
Securus Technologies, Inc. v. FCC, Nos. 13-1280, et al. (D.C. Cir. May 19, 2016).
In Securus Technologies, Inc. v. FCC, Nos. 16-1321, et al. several
petitioners have sought review of an FCC order granting partial reconsideration of
the order under review. Rates for Interstate Inmate Calling Services, Order on
Reconsideration, WC Docket No. 12-375, FCC 16-102 (rel. Aug. 9, 2016).

i	
	

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 3 of 41

CORPORATE DISCLOSURE STATEMENT
Pursuant to the United States Court of Appeals for the District of Columbia
Circuit R. 26.1 and Fed. R. App. P. 26.1, The D.C. Prisoners’ Legal Services
Project, Inc., Citizens United for Rehabilitation of Errants, the Prison Policy
Initiative, The Campaign for Prison Phone Justice, and Office of Communication,
Inc. of the United Church of Christ respectfully submit this Corporate Disclosure
Statement.
The D.C. Prisoners’Project is a project of the Washington Lawyers’
Committee for Civil Rights & Urban Affairs, Inc., a nonprofit corporation that
does not have any parent companies, subsidiaries, or affiliates that have issued
shares to the public.
Citizens United for Rehabilitation of Errants (“CURE”) is a nonprofit
corporation that has no parent companies, subsidiaries, or affiliates that have issued
shares to the public.
Prison Policy Initiative is a nonprofit corporation that has no parent
companies, subsidiaries, or affiliates that have issued shares to the public.
The Campaign for Prison Phone Justice is jointly led by the Media Action
Grassroots Network, Working Narratives, Prison Legal News, and diverse civil and
human rights organizations. The Media Action Grassroots Network is a project of
the Center for Media Justice, a nonprofit corporation that has no parent companies,
subsidiaries, or affiliates that have issued shares to the public. Working Narratives
is a nonprofit organization that has no parent companies, subsidiaries, or affiliates
that have issued shares to the public.
ii	
	

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 4 of 41

The Human Rights Defense Center is an organization that advocates on
behalf of the human rights of people held in U.S. detention facilities. Its
activities include the publication of Prison Legal News and operation of the
Prison Phone Justice website.
The Office of Communication, Inc. (“UCC OC, Inc.”) is a not-for-profit
corporation of the United Church of Christ (“UCC”). The United Church of
Christ is a not-for-profit, religious organization, with 5,100 local congregations
across the United States. Neither UCC nor UCC, OC Inc. has any parent
companies, subsidiaries, or affiliates that have issued shares to the public.
Respectfully submitted,
/s/Andrew Jay Schwartzman
Andrew Jay Schwartzman
Drew T. Simshaw
Counsel to The Wright Petitioners
September 29, 2016

iii	
	

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 5 of 41

TABLE OF CONTENTS
CERTIFICATE OF PARTIES, RULINGS AND RELATED CASES . . . . . . . . . . i
CORPORATE DISCLOSURE STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
STATUTES AND REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SUPPLEMENTAL STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . . . . . . 1
I.

THE DEVELOPMENT OF THE DYSFUNCTIONAL
ICS MARKET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II.
THE VALUE AND SOCIAL BENEFIT OF LOWER ICS
RATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
III. THE ROLE OF SITE COMMISSIONS . . . . . . . . . . . . . . . . . . . . . . . 6
IV. THE ROLE OF ANCILLARY SERVICE FEES . . . . . . . . . . . . . . . . 9
V.
THE WRIGHT PETITIONERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
VI. COMMISSION ACTION ON THE WRIGHT PETITIONERS’
RULEMAKING REQUEST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
VII. ICS REACTION TO THE INTERIM RATES AND
PARTIAL STAY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
VIII. THE ORDER UNDER REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SUMMARY OF ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
I.
II.

THE FCC HAS AUTHORITY TO REGULATE ANCILLARY
CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
THE COMMISSION’S LIMITATIONS ON ANCILLARY
CHARGES ARE NOT ARBITRARY AND CAPRICIOUS . . . . . . . . . . . 26

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

iv

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 6 of 41

TABLE OF AUTHORITIES
CASES
*Cable & Wireless P.L.C. v. FCC, 166 F.3d 1224 (D.C. Cir.1999 .........................25
*Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.,
467 U.S. 837 (1984) ................................................................................................. 24
Global Tel*Link v. FCC, Nos. 15-1461 et al. (D.C. Cir. Mar. 7, 2016).................. 21
Global Tel*Link v. FCC, Nos. 15-1461 et al. (D.C. Cir. Mar. 23, 2016) ............... 21
In re FCC, 753 F.3d 1015 (10th Cir. 2014) ............................................................. 25
Martha Wright et al. v. Corrections Corp. of America, No. 00-293
Mem. Op. (D.D.C. Aug. 22, 2001) .......................................................................... 13
National Cable & Telecommunications Association v. FCC, 567 F.3d 659
(D.C. Cir. 2009) ....................................................................................................... 26
Securus Technologies. v. FCC, No. 13-1280 (D.C. Cir. Jan. 13, 2014) .................. 17
U.S. v. Southwestern Cable Co., 392 U.S. 157 (1968) ............................................ 25
STATUTES AND REGULATIONS
47 U.S.C. §154(i) ..................................................................................................... 25
47 U.S.C. §201 .......................................................................................13, 21, 23, 27
47 U.S.C. §276 .......................................................................... 13, 21, 23, 24, 25, 27
ADMINISTRATIVE MATERIALS
Promotion of Competitive Networks in Local Telecommunications Markets,
23 FCCRcd 5385 (2008) ....................................................................................25, 26
*Rates for Interstate Inmate Calling Services,
27 FCCRcd 16629 (2012) ..................................................................................14, 15
v

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 7 of 41

*Rates for Interstate Inmate Calling Services, 28 FCCRcd 14107
(2013) .......................................... 3, 4, 5, 6, 7, 8, 9, 11, 12, 13, 15, 16, 17, 23, 24, 27
*Rates for Interstate Inmate Calling Services,
29 FCCRcd 13170 (2014) ................................... 7, 10, 18, 19, 20, 24, 25, 27, 28, 29
OTHER MATERIALS
Steven J. Jackson, Ex-Communication: Competition and
Collusion in the U.S. Prison Telephone Industry,
22 Critical Studies in Media Communication 263, 267 (2005) .........................1, 2, 3
History of Securus,
http://www.securustechnologies.com/securus-history .............................................. 3
Please Deposit All of Your Money: Kickbacks, Rates,
and Hidden Fees in the Jail Phone Industry (May 9, 2013) ...................9, 10, 11, 15
Xu, Castle Harlan Said in Talks to Sell Securus for $640 Million,
Bloomberg News (Apr. 5, 2013), http://www.bloomberg.com/news/2013-0405/castle-harlan-said-in-talks-to-sell-securus-for-640-million.html ......................... 3
Wagner, Meet the Prison Bankers Who Profit From the Inmates,
Time (Sept. 30, 2014),
http://time.com/3446372/criminal-justice-prisoners-profit/ .................................. 8, 9
Who Pays? The True Cost of Incarceration on Families,
Ella Baker Center for Human Rights, September, 2015 available at
http://whopaysreport.org/ ...................................................................................15, 16

* Cases and other authorities principally relied upon are marked with asterisks.

vi

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 8 of 41

GLOSSARY
Commission

Federal Communications Commission

Communications Act

Communications Act of 1934 (codified
as amended at 47 U.S.C. §151 et seq.)

FCC Br.

Brief for Respondents Federal
Communications Commission and the
United States

HRDC

Human Rights Defense Center

ICS

Inmate Calling Services

ICS Br.

Joint Brief for ICS Provider Petitioners
and Supporting Intervenors

Order

Rates for Interstate Inmate Calling Services,
30 FCCRcd 12763 (2015)

PPI

Prison Policy Initiative

Section 201

47 U.S.C. §201

Section 276

47 U.S.C. §276

vii

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 9 of 41

STATUTES AND REGULATIONS
All applicable statutes and regulations are set forth in the addendum to the
Brief of Respondents.
SUPPLEMENTAL STATEMENT OF THE CASE
Pursuant to Circuit Rule 28(d)(2), Intervenors, the Wright Petitioners,1 adopt
Respondents’ Statement of the Case. This supplemental statement provides
additional relevant information which can assist this Court in resolution of the
case.
I.

The Development of the Dysfunctional ICS Market.
Prior to the early 1970s, inmates in state and federal prisons were typically

limited to making one collect call every three months.2 In 1973, in response to
studies that demonstrated a strong correlation between weakened prisoner bonds
with their community and family, and the likelihood that they would re-offend,3
the Federal Bureau of Prisons sought to expand inmate telephone access. State
correctional departments also recognized the important role that phone access and
1

The individuals and organizations listed on the cover of this brief have appeared
throughout the proceedings below and before this Court in No. 13-1280 and this
case. Even though Ms. Wright died on January 18, 2015, the group continues to be
referred to as “the Wright Petitioners” or “Martha Wright, et al.”
2
Steven J. Jackson, Ex-Communication: Competition and Collusion in the U.S.
Prison Telephone Industry, 22 Critical Studies in Media Communication 263, 267
(2005).
3
Id.
1

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 10 of 41

maintaining community connections play in the rehabilitation process and, over the
next decade, commercial payphone services were installed in many state
correctional facilities across the country.4
Under the AT&T-dominated monopoly system that prevailed until the mid1980s, inmate calls were simply an ordinary line of business that provided
affordable, high-quality inmate calling services (“ICS”).5 AT&T and other
providers made operator-assisted collect calling available to inmates at rates
comparable to similar services offered to the general public.6 Essentially operating
as a stable utility system, this service model was effective for years, yielding the
rate of return-regulated providers a normal profit while also serving the needs of
correctional facilities, prisoners, and their families.
The ICS business model began to change following the anti-trust litigation
that led to the breakup of AT&T in 1984. As telephony began to be viewed as
several separate lines of business, competitive phone providers slowly began to
make inroads in local phone service and in the newly-created long distance market.
Some entrepreneurs saw the potential profitability of ICS and established

4

Id. at 267-68.
Human Rights Defense Center (“HRDC”) Comments 10 (Jul. 29, 2015)(JA ).
6
Letter from the American Bar Association to Julius Genachowski at 2-3 (Oct. 22,
2015)(JA____-____).
2
5

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 11 of 41

specialized carriers to compete for the right to provide ICS as a stand-alone
service.7
As ICS became increasingly lucrative throughout the 1990s, private equity
firms recognized the profitability in the 2000s, which led to a decade of
consolidation among ICS providers. Petitioner Global Tel*Link (GTL) acquired
ICS operations previously owned by Verizon and AT&T, among others,8 before
being purchased by American Securities in 2010 for $1 billion, resulting in a $655
million profit for its investors.9 Petitioner Securus was formed by the merger of
two companies which themselves had previously acquired at least eight other ICS
providers.10 In 2011, Castle Harlan purchased Securus from H.I.G. Capital for
$450 million and then sold the company two years later for $640 million.11 Today,
Securus, GTL, and CenturyLink dominate the industry, with GTL and Securus
alone controlling about 80% of the market.12

7

Jackson, supra n.2, at 268.
Wright, et al. Comments 18-19 (Mar. 25, 2013)(JA____-____).
9
Wright, et al. Comments 19 (Mar. 25, 2013)(JA____).
10
See History of Securus,
http://www.securustechnologies.com/securus-history (last visited Sept. 24, 2016).
11
Xu, Castle Harlan Said in Talks to Sell Securus for $640 Million, Bloomberg
News (Apr. 5, 2013), http://www.bloomberg.com/news/2013-04-05/castle-harlansaid-in-talks-to-sell-securus-for-640-million.html.
12
Rates for Interstate Inmate Calling Services, 28 FCCRcd 14107, 14122 ¶29,
n.106 (2013)(“2013 Order”)(JA____).
3
8

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 12 of 41

Throughout this period, ICS rates continued to increase despite a steady
decline in the cost of service resulting from the industry consolidation,
centralization of service, and changes in technology.13 The rise of automated
systems reduced the need for live operators, and, when needed, reduced the cost of
providing them.14 ICS providers also began to route calls through centralized
calling centers in low-wage locations that reduce overhead and allow use of
inexpensive cloud-based technologies.15 As a result, ICS providers can now
provide service at lower cost and without risking security.
II.

The Value and Social Benefit of Lower ICS Rates.
Amici curiae State of Minnesota, et al. have demonstrated the important

value and social benefit of lower ICS rates, and Intervenors will not repeat those
arguments here.
Because at least 50% of prisoners are incarcerated more than 100 miles
away from home, with 10% more than 500 miles away, ICS is the main way
families can meaningfully communicate with imprisoned loved ones.16 Although
prisoners use ICS, it is family, friends, and clergy outside facility walls that

13

2013 Order, 28 FCCRcd at 14122 ¶29(JA ___).
Id., 28 FCCRcd at 14122(JA ___).
15
See Wright, et al. Comments 17-18 (Mar. 25, 2013)(JA____).
16
Wright, et al. Comments 34 (Mar. 25, 2013)(JA____).
4
14

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 13 of 41

typically end up footing the bill.17 Families with imprisoned loved ones struggle
financially, in large part because the prisoner was often the primary breadwinner
before incarceration.18 The lost income of the primary wage earner means that a
spouse on the outside must work more to pay for basic needs.19 In one study of
families reporting significant barriers to maintaining contact with loved ones, 76%
cited ICS costs as a primary impediment.20
High ICS costs have a profound effect on the 2.7 million children in the
United States who have at least one incarcerated parent,21 and the 52% of people
incarcerated in state facilities and 63% of people incarcerated in federal facilities
with children.22 Only 53% of parents in state prisons reported calling their children
while incarcerated.23 Incarcerated mothers are imprisoned an average of 160 miles
away from home, and less than half have had monthly contact with their children.24

17

NYU Ctr. Comments 4-5 (Mar. 25, 2013)(JA____-____).
Id. at 5(JA____).
19
Center for Media Justice, et al. Reply Comments 4 (Apr. 22, 2013)(JA____).
20
See Leadership Conference on Civil and Human Rights (LCCHR) Comments 3
(Mar. 25, 2013)(JA____).
21
2013 Order, 28 FCCRcd at 14109 ¶2(JA____).
22
Legal Services for Prisoners With Children Comments 2 (Dec. 8,
2014)(JA____).
23
Vera Inst. Comments 2 (Mar. 14, 2013)(JA____).
24
2013 Order, 28 FCCRcd at 14130 ¶42(JA____); Comments of Michael Stewart
2 (Feb. 23, 2013)(JA____).
5
18

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 14 of 41

Children who lack regular contact with incarcerated parents are more likely to face
developmental difficulties and fall into cycles of crime, truancy, and depression.25
The record has also demonstrated that lower ICS rates would have
cumulative societal benefits. Through increased communication with family and
friends, prisoners would feel more connected with the outside world, easing their
transition into communities upon release.26 When released prisoners feel
connected to their communities, they are less likely to commit additional crimes,
reducing recidivism rates and decreasing criminal justice costs.27
III.

The Role of Site Commissions.
It is essential to stress that for many decades, ICS services were delivered

without sharing revenues with correctional facilities. Nor, in calculating rates over
those many years, were payments to those authorities ever considered to be a part
of what was a compensable cost of providing service.28 However, over time, the
new entrants into the ICS market gained an increasing share of the market, not by
offering the lowest rates or best service, but through competing with offers to share
portions of rate-revenue through payments which became to be known as “site
25

2013 Order, 28 FCCRcd at 14109 ¶2, 14130 ¶42(JA____,____).
See Congressional Black Caucus Comments 3-4 (Apr. 22, 2013)(JA____);
Wright, et al. Comments 2-3 (Apr. 22, 2013)(JA____).
27
Wright, et al. Comments 3-4 (Apr. 22, 2013)(JA____).
28
See Rates for Interstate Inmate Calling Services, 30 FCCRcd 12763, 12824-26
¶127, 12834 ¶138 (“2015 Order”)(JA____-____,____).
6
26

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 15 of 41

commissions,” in exchange for exclusive contracts with those facilities.29 Given
that the customers–inmates, their families and their counsel–could not choose
competitive offerings, this dysfunctional market favored the awarding of contracts
to the ICS providers which were willing to charge the highest rates, so they could
offer ever-greater site commission payments.30
These contracts proved to be highly remunerative for both ICS providers and
correctional facilities. Site commissions became a substantial revenue stream for
correctional facilities, with ICS providers contracting to share anywhere from 20 to
88% of their profits.31 In 2013 alone, ICS providers paid at least $460 million to
correctional facilities;32 other estimates put the payments as high as $540 million.33
ICS providers and penal authorities emphasize that site commission revenue
is used for “inmate welfare programs like addiction, rehabilitation, inmate
29

See 2015 Order, 30 FCCRcd at 12819 ¶118 n.375(JA____); HRDC Letter 10
(Jul. 29, 2015)(JA____)(“Until the late 1980s when Evercom invented the
kickback model of giving money to corrections officials in exchange for monopoly
contracts, telephone services for prisoners and their families were cheap, high
quality and affordable.”).
30
Letter from American Bar Association to Julius Genachowski 3 (Oct. 22,
2015)(JA____); see also 2015 Order, 30 FCCRcd at 12821 ¶122(JA____); Rates
for Interstate Inmate Calling Services, WC Dkt. 12-375, 29 FCC Rcd 13170,
13180-81 ¶22 (2014)(“Second FNPRM”)(JA____-____).
31
2013 Order, 28 FCCRcd at 14125 ¶34(JA____); see HRDC Comments 7,
Exhibit G (93.9%)(Jan. 13, 2015)(JA____).
32
2015 Order, 30 FCCRcd at 12821 ¶122(JA____); Second FNPRM, 29 FCCRcd
at 13181 ¶23(JA____).
33
2015 Order, 30 FCCRcd at 12821 ¶122(JA____).
7

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 16 of 41

education and legal research....”34 Leaving aside the issue of whether inmates and
their families should be taxed to provide basic services that should be available as
of right,35 in fact, much, most or even all of these payments are generally used for
matters wholly unrelated to the provision of ICS services. Indeed, while Securus
told the Commission that “correctional facilities rely on site commission payments
to fund prison initiatives and administer inmate welfare programs,”36 its co-counsel
separately stated to the Commission that site commissions “have nothing to do
with the provision” of ICS.37 The record establishes that site commissions are in
practice used for prison operation expenses completely unrelated to inmate
welfare, such as employee salaries, benefits, and training, as well as facility
maintenance and equipment.38 Even when the funds are nominally directed to
“inmate welfare,” some jurisdictions have broadened the definition of the term to

34

State and Local Gov. Pet. Br. 13; see also Joint Brief for the ICS Carrier
Petitioners (“ICS Br.”) 6 (commissions are “a crucial funding source for sorely
needed rehabilitation programs”).
35
See, e.g, Prisoners Legal Services Comments 3 (Jan. 12, 2015)(describing such
a system as “unjust to consumers and harmful to society”)(JA____); HRDC
Comments 2-3 (Jan. 13, 2015)(describing harm of such funding “by prisoners and
their family members through contractual fiat by corrections officials and ICS
providers”)(JA____-____).
36
See 2015 Order, 30 FCCRcd at 12822 ¶123 n.400 (citing Securus Reply
Comments 12-13 (Jan. 12, 2015)(JA____-____).
37
Letter from Andrew Lipman to Marlene Dortch 9 (Apr. 8, 2015)(JA____); see
also 2015 Order, 30 FCCRcd at 12822 ¶123 n.400(JA____).
38
2013 Order, 28 FCCRcd at 14125 ¶34(JA____).
8

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 17 of 41

include general expenses such as inmate medical care–a necessity–or purchases
like air conditioners and ice machines.39 In other instances, the payments are not
used on correctional facilities at all, but instead go to the states’ general funds.40
Virginia, for example, has deposited approximately $3.5 million annually from ICS
into the Commonwealth’s general fund, which finances things like roads,
transportation, education, and health care.41 Contrary to claims that these
payments are used to reimburse costs that correction facilities incur related to the
provision of ICS, as the FCC notes, “the record showed that site commissions are
an incentive mechanism that induces correctional facilities to award monopoly
contracts without regard to the affordability or quality of a provider’s services for
end users.”42
IV.

The Role of Ancillary Service Fees.
In addition to per minute rates, ICS providers have devised other

mechanisms to generate revenue. Since they generally do not have to pay site
39

See, e.g., Wagner, Meet the Prison Bankers Who Profit From the Inmates, Time
(Sept. 30, 2014), http://time.com/3446372/criminal-justice-prisoners-profit/ (“[W]e
started using that money if an inmate went out to medical on an emergency and
medical was end-of-year short….We bought air conditioners, ice machines, X-ray
machines.”).
40
See, e.g., Prisoners Legal Services of Massachusetts Comments 7 (Mar. 25,
2013)(describing funds transferred to the Commonwealth’s General
Fund)(JA____); see also 2015 Order, 30 FCCRcd at 12823 ¶125(JA____).
41
See 2013 Order, 28 FCCRcd at 14124 ¶33 n.125(JA____).
42
Brief for Respondents Federal Communications Commission and United States
of America (“FCC Br.”) 11-12.
9

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 18 of 41

commissions on revenue generated from these ancillary charges,43 these fees have
become increasingly attractive to them as site commission rates have been bid up
by competition for new contracts. The record indicates that ancillary fees now
provide almost 40%,44 and perhaps as much as 60% of ICS revenue.45
ICS providers have developed a dizzying array of these charges and
markups, most of which are unrelated to any actual additional service provided to
users. The Commission stated that
Ancillary service charges reported in response to the Mandatory Data
Collection included an account close-out fee, account transfer fee, automated
information services, automated operator recharge fee, bill processing
charge for direct billed calls, bill processing fee, bill statement fee, biometric
service charge, carrier cost recovery fee, collect call bill statement fee,
collect call regulatory fee, collect interstate USF cost recovery fee,
continuous voice verification, credit card charge-back fee, credit card
processing fee, federal regulatory recovery fee, federal USF, federal USF
administration fee for LEC billed calls, federal USF administration fee for
non-LEC billed calls, funding fee, funding fee from cashier's check deposit,
funding fee from credit/debit cards, funding fee from money order deposit,
funding fee from Western Union deposit, live operator recharge fee, live
prepaid account set-up fee, load fee, location validation, minimum payment
fee, monthly bill statement fee, payment fee—IVR/web, payment fee—live
operator, per call administrative fee for calls from county facilities, prepaid
accounts, prepaid deposit fees, processing fee, refund fee, regulatory
43

See Pay Tel Comments 14 (Mar. 25, 2013)(JA____); Prison Policy Initiative
Comments, Exhibit 3, Please Deposit All of Your Money: Kickbacks, Rates, and
Hidden Fees in the Jail Phone Industry 7 (May 9, 2013)(“PPI Report”)(JA____);
see also Second FNPRM, 29 FCCRcd at 13203 ¶82(JA____).
44
PPI Report 10 (38%)(JA____).
45
2015 Order, 30 FCCRcd at 12842 ¶154(JA____); See Pay Tel ex parte Attach.
(Jul. 10, 2014)(JA____).
10

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 19 of 41

assessment fee, sales tax, state cost recovery fee, state regulatory cost
recovery fee for LEC-billed calls, state regulatory cost recovery fee for nonLEC billed calls, state USF, state USF administration fee for LEC billed
calls, technology, USF administrative fee, USF federal, USF federal (LEC
billed), validation recovery fee, victim information and notification everyday
(VINE), voice biometrics, web interface account set-up and recharge fee,
and wireless administration fee.46
Customers cannot avoid many of these ancillary charges.47 Unless a
customer opts to incur prohibitive costs for calls made without establishing an
account,48 she must pay ancillary fees to open an account,49 use an account,50 not
use an account,51 or close an account.52 The Commission found that charges for

46

2015 Order, 30 FCCRcd at 12838 n.519(JA____).
“[F]or every $25 you put on the account, they take $5; then because I use a cell
phone for calls, there is a surcharge for cell calls.…Why a surcharge for cells?”
2015 Order, 30 FCCRcd at 12840 ¶149 n.531 (testimony of Cathrine
Nussbaum)(JA____).
48
ICS providers charge up to $14.99 for a call placed by parties lacking prepaid or
debit accounts with the provider. PPI Report, Ex. 22 (JA____).
49
See, e.g., 2013 Order, 28 FCCRcd at 14156 ¶90 n.333 (GTL’s charges $9.50 to
set up an account)(JA____).
50
See, e.g., id., 28 FCCRcd at 14156 n.335 (GTL charges $9.50 to add $50 to a
customer’s account)(JA____).
51
Providers charge up to $4.95 per month for account inactivity. See 2013 Order,
28 FCCRcd at 14156-57 ¶90(JA____-____).
52
For example, GTL charged $5 for customers to receive a refund, which must be
requested in writing. 2013 Order, 28 FCCRcd at 14156 ¶90 n.335; PPI Report,
Ex. 22(JA____). GTL claimed any money left in an inactive account for more
than 90 days. PPI Report, Ex. 22(JA____). Telmate will not issue a cash refund if
a customer has less than $50 in an account, charging a $10 fee to close the account
and applying any remaining funds to a prepaid calling card. Id., Ex. 45(JA____).
11
47

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 20 of 41

adding funds to accounts were especially exploitive.53 Because a very substantial
proportion of ICS customers are unbanked, they are reliant on money transfer
services. The Commission found that, in addition to the ordinary charges imposed
by the transfer services for any transaction, “the record indicates that ICS providers
are imposing significant additional charges, as high as $11.95, for end users to
make account payments via third parties such as Western Union and sharing the
resulting profit with those third-party financial institutions.”54
The record indicates that most ancillary fees are unrelated to the cost of
providing ICS.55 In fact, several jurisdictions have instituted, and ICS companies
have complied with, outright bans on ancillary service charges.56 The record
shows that the seven states which chose to prohibit site commissions still provided
effective service and security measures for prisoners, correctional staff, and call
recipients.57 This serves as a strong indication that ICS companies are able to
recover ancillary service costs while still providing reasonable ICS rates.58

53

See 2015 Order, 30 FCCRcd at 12850 ¶171(JA____).
2015 Order, 30 FCCRcd at 12850 ¶171 (fn omitted)(JA____).
55
2015 Order, 30 FCCRcd at 12845 ¶161 (ancillary fees are “unrelated to
costs”)(JA____).
56
See 2015 Order, 30 FCCRcd at 12847 ¶165(JA____)(citing Comments of Cook
County, IL, (Jan. 12, 2015)(JA____)).
57
2013 Order, 28 FCCRcd at 14127 ¶38(JA____).
58
2015 Order, 30 FCCRcd at 12847 ¶165(JA____).
12
54

USCA Case #15-1461

V.

Document #1638459

Filed: 09/29/2016

Page 21 of 41

The Wright Petitioners.
Following the AT&T breakup and the dramatic escalation of rates

throughout the 1990s, the resulting cost of ICS posed an increasingly onerous
burden on inmates, their families, and society. During this time, Martha Wright, a
retired nurse living in Washington, D.C., found herself paying more than $100 per
month to call her grandson, Ulandis Forte, who was incarcerated in Arizona.59
Joined by other D.C. residents and defense attorneys collectively referred to
as “the Wright Petitioners,” Ms. Wright filed a class action in the U.S. District
Court for the District of Columbia that sought to end ICS monopolies at private
prison facilities, alleging violations of the First and Fourteenth Amendments and
the Sherman Anti-Trust Act, as well as the Communications Act. Finding that the
FCC has jurisdiction over allegations invoking Sections 201 and 276 of the
Communications Act, Judge Kessler dismissed the complaint without prejudice
under the doctrine of primary jurisdiction.60 In deferring to the Commission, she
stated that the Court “expect[ed] the agency to move with dispatch.”61

59

2013 Order, 28 FCCRcd at 14213, Statement of Acting Chairwoman Mignon
Clyburn(JA____).
60
Martha Wright et al. v. Corrections Corp. of America, No. 00-293 Mem. Op.
(D.D.C. Aug. 22, 2001).
61
Id. at 15.
13

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 22 of 41

Seeking a response from the FCC, the class filed a petition for rulemaking in
2003.62 The FCC sought public comment on the petition,63 but took no further
action thereafter. Four years later, as consolidation among ICS providers
continued and as problems with ICS abuses worsened, the Wright Petitioners filed
a second petition asking the Commission to cap rates at $0.20 per minute for debit
calls and $0.25 per minute for collect calls.64 Again, the Commission sought and
received comments,65 but did not act.
VI.

Commission Action on the Wright Petitioners’ Rulemaking Request.
As ICS prices and charges continued to rise, the FCC took notice of the issue

and, in December 2012, the Commission acted on the Wright Petitioners’ request
for action by issuing a Notice of Proposed Rulemaking with respect to interstate
rates (“Notice”).66 Taking note of the “substantial renewed interest and comment
in this docket highlighting both the wide disparity among interstate interexchange
ICS rate levels and significant public interest concerns,” the Commission requested

62

Martha Wright et al. Petition for Rulemaking, Dkt. 96-128 (Nov. 3,
2003)(JA____).
63
Petition for Rulemaking Filed Regarding Issues Related to Inmate Calling
Services; Pleading Cycle Established, 69 FR 2697 (Jan. 20, 2004)(JA____).
64
Alternative Wright Petition, Dkt. 96-128 (Mar. 1, 2007)(JA____).
65
Comment Sought on Alternative Rulemaking Proposal Regarding Issues Related
to Inmate Calling Services, 22 FCCRcd 4229 (2007)(JA____).
66
Rates for Interstate Inmate Calling Services, Notice of Proposed Rulemaking, 27
FCCRcd 16629 (2012)(“Notice”)(JA____).
14

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 23 of 41

comments to “refresh the record and consider whether changes to our rules are
necessary to ensure just and reasonable ICS rates for interstate, long distance
calling at publicly- and privately-administered correctional facilities.”67 The
Notice also asked for “specific, detailed cost information and other relevant data”
to determine appropriate caps, and asked how it should treat other charges, such as
monthly account fees, that must be paid to use the service.68
Public response was overwhelming, demonstrating the depth of the problem,
the harms incurred by excessive rates and the need for remedial action. Tens of
thousands of members of the public urged the Commission to lower ICS rates, 69
and over 100 prison reform, social justice and professional legal organizations
developed a robust record demonstrating the need for action. For example, HRDC
provided comprehensive data on ICS rates,70 and Prison Policy Initiative (PPI)
submitted a report detailing how ICS providers use ancillary fees to increase
customers’ bills.71 The record also included stories of financial struggle caused by

67

Id., 27 FCCRcd at 16629-30 (footnote omitted)(JA____-____).
Id., 27 FCCRcd at 16637 ¶20, 16641 ¶33(JA____,____).
69
One organization submitted comments signed by more than 24,000 people,
including family members and friends of prisoners. Color of Change Comments
(Mar. 25, 2013)(JA____). See also 4,822 Comments filed by Credo Mobile (Mar.
23, 2013)(JA____).
70
See HRDC Comments (Mar. 25, 2013)(JA____).
71
PPI Report, supra n.43(JA____).
15
68

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 24 of 41

high ICS rates,72 emotional burdens imposed on children and families,73 and
conclusive proof that society itself benefits when prisoners can afford to
communicate with their loved ones.74
Nine months later, the FCC examined the record. Despite the fact that ICS
operators had not assisted the inquiry by providing adequate data upon which to
take final action,75 the Commission found that the record demonstrated the need for
immediate action. It found, inter alia, that there are important societal benefits
from reduced rates, such as reduction in recidivism,76 facilitation of parent-child
communications77 and reduced costs and improved quality of legal
representation.78 Accordingly, it adopted interim rate caps for interstate calls of

72

See, e.g., 2013 Order, 28 FCCRcd at 14130 ¶42(JA____);Wagner, Prison
Bankers Cash in on Captive Customers, Center for Public Integrity (Sept. 30,
2014)(cited in PPI Comments 3 (Jan. 12, 2015))(JA____). See also Who Pays?
The True Cost of Incarceration on Families, Ella Baker Center for Human Rights,
September, 2015 at 7-9, available at http://whopaysreport.org/.
73
See, e.g., Letter from Prison Policy Initiative (Jun. 20, 2014)(emphasis added)
(JA ___). See also The True Cost of Incarceration on Families, supra n.72.
74
See., e.g., Bazelon Declaration, Attached to Wright Petitioners’ Comments (Mar.
25, 2013)(JA____).
75
See Wright, et al. Comments 10 n.31 (Mar. 25, 2013)(JA____); Wright, et al.
Reply Comments i, 11, 13, 14 (Apr. 22, 2013)(JA____,____,____,____); Wright,
et al. ex parte 1 (Aug. 2, 2013)(JA____).
76
2013 Order, 28 FCCRcd at 14109 ¶2(JA____).
77
Id., 28 FCCRcd at 14109 (JA____).
78
Id., 28 FCCRcd at 14131 ¶44(JA____).
16

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 25 of 41

$0.21 for debit and prepaid calls and $0.25 for collect calls,79 and initiated a onetime mandatory reporting of certain data from ICS providers in order to obtain
more useful, reliable data from which it could adopt more precise permanent rate
caps.80 Finding that sometimes questionable and non-cost-based ancillary fees
were proliferating, the Commission determined that ancillary fees should be costbased.81 The 2013 Order also reaffirmed that site commission payments were not
part of the cost of providing ICS and therefore not compensable.82 Finding a wide
variation among the states with respect to intrastate rates and indications that rates
were excessive in many cases, it asked whether it has the authority to regulate
those practices and, if so, how it should do so.83
In November 2013, a number of ICS providers and state and municipal
bodies and officers sought review of the Commission’s 2013 Order in this Court.
On January 13, 2014, a motions panel of this Court issued a partial stay prior to the
effectiveness of the Order.84 As a result, the interim interstate rate caps went into

79

Id., 28 FCCRcd at 14138-14153 ¶¶59-81(JA____-____).
Id., 28 FCCRcd at 14172 ¶124(JA____).
81
Id., 28 FCCRcd at 14111 ¶5, 14132 ¶47(JA____,____).
82
Id., 28 FCCRcd at 14135 ¶54(JA____).
83
Id., 28 FCCRcd at 14173 ¶128(JA____).
84
Pets. for stay granted in part sub nom. Securus Technologies. v. FCC, No. 131280 (D.C. Cir. Jan. 13, 2014).
17
80

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 26 of 41

effect, but the requirement that ancillary service charges be based on costs, did
not.85
VII. ICS Reaction to the Interim Interstate Rates and Partial Stay.
ICS companies’ response to the 2013 Order and this Court’s partial stay is
notable in two respects.
First, interstate debit and prepaid rates decreased by an average of 32%, and
collect rates decreased by an average of 44%.86 This generated an increase in call
volume by as much as 70%,87 to the benefit of both ICS providers and customers.
Amici Santa Clara and San Francisco report that interstate call volume increased
almost 15-fold after the interstate interim rate cap was introduced, so that the ICS
providers’ total revenue doubled when per minute rates were reduced from $1.36
to $0.21.88
Second, in numerous instances, ICS companies circumvented the interim
rate caps by jacking up ancillary fees.89 With the partial stay in effect, increases to

85

See 2015 Order, 30 FCCRcd at 12773 ¶16(JA____)(“Due to the partial stay, the
requirement that ancillary service charges be based on costs did not go into
effect.”).
86
See 2015 Order, 30 FCCRcd at 12772 ¶14(JA____).
87
Id., 30 FCCRcd at 12772(JA____).
88
Brief of County of Santa Clara, et al. at 3.
89
2015 Order, 30 FCCRcd at 12842 ¶154(JA____); see Second FNPRM, 29
FCCRcd at 13174 ¶5(JA____)(citing 2014 ICS Workshop Transcript at
169)(JA____)); Martha Wright, et al. ex parte 1(July 14, 2014)(JA____)(“Several
18

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 27 of 41

ancillary fees went largely unrestrained.90 And, since some 80% of calls are
intrastate, ICS companies also maneuvered around the 2013 interim interstate rate
caps by raising intrastate rates, when possible under state laws.91 The record
demonstrates that these increases, like the increases in ancillary service charges,
were not tied to any increased cost of service, but rather were additional attempts
to increase revenue following the 2013 interim interstate rate caps.92 Accordingly,
in October 2014, the Commission issued a further NPRM seeking more
comprehensive ICS reform to address inter- and intrastate rate caps, site
commissions, and ancillary fees.93 In doing so, the Commission cited evidence

of the ICS providers have increased their ancillary fees in light of the imposition of
the February 2014 rate cap on Interstate ICS rates…”)(“[T]he increase in these fees
are solely being used to recover a portion of the revenue previously earned by
charging exorbitant Interstate ICS rates.”); HRDC Comments 1 (Aug. 8,
2015)(JA____)(“[A]ncillary fees related to inmate calling services…increased
after the Order implementing interstate ICS rate regulation became effective in
February 2014….”); HRDC Reply Comments 6 (Feb. 8, 2016)(JA____)(“[A]fter
the FCC took the first steps to reign in what had become an out-of-control market
by setting modest rate caps on interstate calls, the ICS providers responded–as we
would expect–by increasing unregulated intrastate rates and ancillary fees to
replace lost revenue.”).
90
See 2015 Order, 30 FCCRcd at 12773 ¶16 (“Due to the partial stay, the
requirement that ancillary service charges be based on costs did not go into effect.
As a result, there have been no reforms to ancillary service charges and fees and
they have continued to increase since the 2013 Order.”)(JA____).
91
See 2015 Order, 30 FCCRcd at 12766 ¶2, 12768 ¶7(JA____,____).
92
See 2015 Order, 30 FCCRcd at 12774 ¶19(JA____)(citing Second FNPRM, 29
FCCRcd at 13173-74 ¶5(JA____-____)).
93
Second FNPRM, supra n.30, 29 FCCRcd at 13170(JA____).
19

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 28 of 41

that intrastate rates had increased since the 2013 Order,94 and that ancillary fees
had “increased in number, price, or both, leading to further expense for ICS
consumers in a manner that is often unrelated to the cost of providing ICS.”95 It
also cited further evidence that communication between inmates and loved ones
lowers recidivism rates and benefits society.96
VIII. The Order Under Review.
Based on data collected on ICS costs and commentary from the public, the
FCC issued the order now under review.97 In the 2015 Order, the Commission
capped all inter- and intrastate rates,98 reaffirmed that site commissions are not
costs “reasonably related to the provision of [ICS],”99 addressed ancillary services
by limiting how much providers may charge for a small list of enumerated
permitted fee categories,100 and implemented various reporting requirements.
94

See, e.g., Second FNPRM, 29 FCCRcd at 13174 ¶6(JA____) (citing 2014 ICS
Workshop Transcript at 169 (Lee Petro, Counsel to Petitioners) (“We’ve seen now
with the reduction in the interstate rates an increase in the intrastate rates and an
increase in the ancillary fees.”)(JA____)).
95
See Second FNPRM, 29 FCCRcd at 13174 ¶6(JA____)(citing 2014 ICS
Workshop Transcript at 137, 140 (Vincent Townsend, President, Pay
Tel)(JA____); see also Letter from Marcus W. Trathen, Counsel to Pay Tel, to
Marlene Dortch at Attach. “FCC Workshop on Inmate Calling Services –Panel 2,
Ancillary Charges” (Jul. 10, 2014)(JA____).
96
See Second FNPRM, 29 FCCRcd at 13171 ¶2(JA____).
97
2015 Order, supra n.28(JA____).
98
2015 Order, 30 FCCRcd at 12775 ¶22 (JA____); see also FCC Br. 8-10.
99
2015 Order, 30 FCCRcd at 12821 ¶123 (JA____); see also FCC Br. 10-12.
100
2015 Order, 30 FCCRcd at 12839 ¶147 (JA____); see also FCC Br. 12-13.
20

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 29 of 41

As explained more fully in the Respondents’ brief, several ICS parties
unsuccessfully requested administrative stays of the newly-adopted rule.101 They
also sought review in this Court and, joined by some state and local governmental
interests, sought a stay from this Court. A motions panel of this Court issued a
partial stay on March 7, 2016.102 A second motions panel, with Judge Millet
dissenting, extended the stay by Order dated March 23, 2016.103
SUMMARY OF ARGUMENT
Some, but not all, of the ICS Petitioners challenge the Commission’s
restriction on all but five categories of ancillary service fees, characterizing them
as being “financial transactions-not calling services” which are not within the
scope of Sections 201 or 276. Many of the fees at issue have nothing to do with
financial transactions, but the Commission clearly has authority to regulate those
fees as well, and is entitled to deference in its construction of Sections 201 and
276. The fact that some of the charges involve the way that customers pay for calls
does not alter the Commission’s authority, especially where, as here, these fees

101

See FCC Br. 14; Rates for Interstate Inmate Calling Services, 31 FCCRcd
261(WCB 2016)(JA____).
102
Global Tel*Link v. FCC, Nos. 15-1461 et al. (D.C. Cir. Mar. 7, 2016)(per
curium).
103
Global Tel*Link v. FCC, Nos. 15-1461 et al. (D.C. Cir. Mar. 23, 2016)(per
curium, Millet J. dissenting).
21

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 30 of 41

cannot be avoided. They are indubitably “directly related to provision of ICS,” as
the Commission has construed the statute.
Longstanding precedent bolsters the Commission’s interpretation. This
Court has held that the Commission’s power is not circumscribed because it may
have incidental implications for entities beyond its jurisdiction.
The Commission’s decisions as to which ancillary fees are permissible as
cost-based and its restriction of others was based on its meticulous examination of
the record. That review showed that ancillary charges, including newly-created
categories, have been used to circumvent rate caps. As to credit-card and debitcard fees, the Commission did not ignore claims that rates should be higher, but
rejected them based on stated reasons. Nor did it disregard evidence as to singlecall services. While the challenging Petitioners characterize these services as
“valuable,” to the extent that they impose a markup over what would ordinarily be
charged for a money transfer which is split with the transfer service, it is certainly
not of value to inmates and their families. Insofar as the challenging Petitioners
seek to charge more than the regular charges for such calls, the Commission found
no cost justification for the upcharge.

22

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 31 of 41

ARGUMENT
I.

The FCC Has Authority to Regulate Ancillary Charges.
Some, but not all,104 of the ICS Petitioners make a desultory challenge to the

Commission’s general authority to regulate intrastate ancillary charges based upon
their theory that Section 276 is designed only to provide a floor, and not a ceiling,
for providers. The Respondents’ brief thoroughly rebuts this argument at pp. 2839.
The same Petitioners make a much more pointed challenge to the particular
rules the Commission adopted, claiming “[t]he fees that the FCC purports to
regulate (or bar) are for financial transactions-not calling services-and are therefore
outside the scope of §276(b)(1)(A) altogether.”105 That blunderbuss
characterization would effectively nullify any Commission authority to oversee
ancillary fees, notwithstanding the plain directive in §276(d) defining “payphone
service” as including “any ancillary services.”106 Their argument is not only
illogical, but fails to mention, much less address, the Commission’s interpretation

104

See ICS Br. 47 n.32.
ICS Br. 48.
106
They make a similar, equally unpersuasive, argument as to the Commission’s
interstate authority under Section 201. See 2013 Order, 28 FCCRcd at 14158 ¶91
n.341 (citing precedent)(JA____).
23
105

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 32 of 41

of Section 276, which, under Chevron,107 is the proper starting place for any
statutory challenge. The Commission definitively defined the statutory term and
construed its jurisdiction in its 2013 Order, finding that

[I]nterstate ICS rates must be cost-based, and to be
compensable costs must be reasonably and directly related to
provision of ICS. Ancillary service charges are no exception;
they also fall within this standard and the Commission has the
jurisdiction and authority to regulate them****Section 276 of
the Act defines “payphone service” to encompass “the
provision of inmate telephone service in correctional
institutions, and any ancillary services,” and requires that
providers be “fairly compensated.” The services associated
with these ancillary charges are…“ancillary” for purposes of
section 276****Therefore, even if a provider’s interstate ICS
rates are otherwise in compliance with the requirements of
this Order, the provider may still be found in violation of the
Act and our rules if its ancillary service charges are not costbased.108
The fact that some of the charges that the FCC addressed involve the
way in which customers pay for calls does not alter the Commission’s
authority, especially where, as in many cases, these fees cannot be avoided.109
These charges cannot be incurred except in connection with, and for the
purpose of, placing calls and, as such, are indubitably “directly related to
provision of ICS” as defined by the Commission. This is underscored by the
107

Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837
(1984).
108
2013 Order 28 FCCRcd at 14157-58 ¶91 (emphasis in the original)(JA____).
109
See supra pp. 11-12.
24

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 33 of 41

fact that, as the Commission has stressed, and recent history has
demonstrated,110 ancillary fees can be used “circumvent” the Commission’s
rate caps.111
Longstanding precedent bolsters the Commission’s interpretation.112
Even if there were doubt as to whether Section 276 reaches “financial
transactions,” this Court has held that the Commission’s power is not
circumscribed because it may have incidental implications for entities beyond
its jurisdiction, and that capping a charge does not amount to regulation of
those bodies.113 It is well established that the FCC has the power to “regulate
the contractual or other arrangements between common carriers and other
entities, even those entities that are generally not subject to Commission

110

See supra n.89.
See, e.g., 2015 Order, 30 FCCRcd at 12860 ¶194(JA____); see also, Second
FNPRM, 29 FCCRcd at 13173-74 ¶5 (JA____-____)(“[R]egulating ancillary
charges was a necessary aspect of our cost-based reforms, as otherwise providers
could simply increase their ancillary charges to offset lower rates subject to our
caps.”).
112
It also bears mention that 47 U.S.C. §154(i) gives the Commission broad
ancillary authority over activities related to matters subject to its jurisdiction. 2015
Order, 30 FCCRcd at ¶335(JA____); see U.S. v. Southwestern Cable Co., 392 U.S.
157 (1968).
113
Cable & Wireless P.L.C. v. FCC, 166 F.3d 1224, 1230 (D.C. Cir.1999). See
also In re FCC, 753 F.3d 1015, 1068 (10th Cir. 2014).
25
111

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 34 of 41

regulation.”114 Indeed, “most every agency action has relatively immediate
effects for parties beyond those directly subject to regulation.”115
II.

The Commission’s Limitations on Ancillary Charges Are Not Arbitrary
and Capricious.
The ICS providers challenging the Commission’s ancillary fee orders also

alleged that the Commission’s action was arbitrary and capricious because it denies
cost recovery and discourages development of innovation.116 This argument
overlooks the meticulous examination the FCC undertook as well as steps it took to
afford flexibility where justified.
While the challenge is framed in general terms as against all fees which the
Commission prohibited or capped, the brief is largely directed at credit-card and
debit-card fees and its single-call services, which are euphemistically described as
“premium billing options.”117 In addition, the brief also makes a half-hearted
argument that prohibiting recovery of “all fees not specifically listed” is arbitrary
and capricious because the fees are “necessary to recoup the costs ICS providers

114

Promotion of Competitive Networks in Local Telecommunications Markets, 23
FCCRcd 5385, 5391 (2008)(citation omitted).
115
National Cable & Telecommunications Association v. FCC, 567 F.3d 659, 666
(D.C. Cir. 2009).
116
ICS Br. 51-53.
117
The notion that a party without an account seeking to communicate with family
or counsel in an emergency is “opting” to an upgraded first-class service as if this
were not a coerced transaction is laughable.
26

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 35 of 41

incur...,”118 although the challenging Petitioners do not say anything at all to
explain why the Commission was wrong in finding that these fees are not actually
cost-based.
Having determined in the 2013 Order that ancillary fees must be costbased,119 the Commission sought comment on “on how the Commission can
ensure, going forward, that ancillary charges are just, reasonable, and costbased,”120 including specific requests for data regarding the “use [of] third parties
to process debit and prepaid transactions,”121 “the cost drivers underlying ICS
providers’ ancillary service charges,”122 and “whether some ancillary services
charges constitute unjust and unreasonable practices, in violation of section 201(b),
or a practice that would lead to unfair rates in violation of section 276.” 123 Then,
after finding that the record had adduced “evidence indicat[ing] that ancillary
charges have increased” since the 2013 Order,124 and “suggesting that any reforms

118

ICS Br. at 54.
2013 Order, 28 FCCRcd at 14187 ¶168(JA____).
120
Id., 28 FCCRcd at 14187 (JA____).
121
Id., 28 FCCRcd at 14187-88 (JA____-____).
122
Id., 28 FCCRcd at 14188 ¶170(JA____).
123
Id., 28 FCCRcd at 14188 ¶171(JA___).
124
Second FNPRM, 29 FCCRcd at 13203 ¶82(JA____)(citing Pay Tel July 10,
2014 Ex Parte Letter, Attach. (“FCC Workshop on Inmate Calling Services–Panel
2, Ancillary Charges”))(JA____); Alabama PSC FNPRM Comments at 6 (the
Alabama PSC “observed a tendency for the ICS industry to increase both the
number and magnitude of fees”)(JA____)).
27
119

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 36 of 41

limited to ICS rates could be circumvented through increased and new ancillary
charges,”125 the Commission sought “comment on prohibiting separate charges for
certain ancillary services that are basic requirements for consumers to gain access
to ICS, and that are typically recovered through rates as part of normal utility
overhead costs.”126
The 2015 Order was based on this record, which “confirms that ancillary
service charges have not only increased, but new charges have appeared,”127 and
evidence “that different providers may describe the same charge by different
names.”128 The Commission therefore reasonably found that “our statutory
directive requires us to adopt reforms to limit ancillary service charges,”129 and
established a “limited list of ancillary fees that the Commission will permit ICS
providers to charge.”130
This thorough, transparent process cannot reasonably be characterized by the
challenging providers as “lack[ing] any supporting cost evidence” for setting

125

Second FNPRM, 29 FCCRcd at 13203 ¶82 (citing, e.g., 2014 ICS Workshop
Transcript at 140 (Vincent Townsend, President, Pay Tel) (“They’ve increased–
payment fees have gone up with most providers since then”))(JA____).
126
Second FNPRM, 29 FCCRcd at 13205 ¶87(JA____).
127
2015 Order, 30 FCCRcd at 12839 ¶145(JA____).
128
Id., 30 FCCRcd at 12839 ¶146(JA____).
129
Id., 30 FCCRcd at 12839 ¶145(JA____).
130
Id., 30 FCCRcd at 12839 ¶147(JA____).
28

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 37 of 41

maxima for credit-card and debit-card fees.131 The Commission explains that it
“specifically sought comment on automated payment fees in the Second FNPRM,”
and that its approach is supported not only by the Alabama PSC, which also
concluded that a $3.00 cap for credit card processing and bill processing is
appropriate, and Pay Tel, which charges $3.00 for automated payments, but also
CenturyLink, which explained that ICS providers incur little or no cost in
employing third party payment agents.132 The Commission did not ignore claims
that costs are higher; it rejected them and gave a reason for doing so: “The creditcard processing costs that Securus cites indicate to us that it is an outlier, especially
since…companies that are much smaller than Securus acknowledge that they can
process credit card payments at a $3.00 rate.”133
Nor can the Commission be said to have “improperly disregarded” evidence
pertaining to the cost of single-call services.134 The Challengers tout this offering
as “extremely valuable,”135 but if this is a reference to the practice of adding a

131

ICS Br. at 51.
2015 Order, 30 FCCRcd at 12847-48 ¶167(JA____-____). See also,
CenturyLink Reply Comments 28 (Jan. 27, 2015)(“The key costs of third party
funding are borne by the third party provider, not by the ICS provider. Allowing
providers to assess add-on fees for third party funding could encourage transaction
fee ‘churning.’”)(JA____).
133
2015 Order, 30 FCCRcd at 12848 ¶167(JA____).
134
ICS Br. at 53.
135
Id.
29
132

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 38 of 41

markup over what would ordinarily be charged for a money transfer and splitting
that sum with the transfer service, it is certainly not of value to the customers being
ripped off. If this is simply referring to charging more than the regular charge for
such calls, the Commission explained (and the selective quotation in the
challenging providers’ brief conveniently ignores) that “the record is replete with
evidence that some of these services are being used in a manner to inflate charges,
and may be offered at unjust, unreasonable, or unfair rates, and/or at rates above
our interim rate caps or rate caps adopted in this Order,” and that the record
“highlights substantial end-user confusion regarding single-call services.”136 The
fact that there may be “some efficiencies”137 from these arrangements suggests, if
anything, that this should reduce costs, and thus allow lower, not higher, rates.
Moreover, the claim that the Commission’s action to forestall evasion of the
rate caps “will prevent development of new and better services,”138 is entirely
unfounded. The Commission’s rule leaves substantial flexibility because the
permissible categories of ancillary service charges are broadly defined, without
regard to the technology used.139 And, importantly, providers seeking to adopt

136

2015 Order, 30 FCCRcd at 12855 ¶182 (citations omitted)(JA____).
ICS Br. 53.
138
ICS Br. 54.
139
See FCC Br. 54.
30
137

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 39 of 41

new categories of charges may seek approval of such categories through a waiver
process or by filing a petition for rulemaking.140
CONCLUSION
For the foregoing reasons, this Court should affirm the decision of the
Commission and grant all such other relief as may be just and proper.
Respectfully submitted,
/s/ Andrew Jay Schwartzman
Andrew Jay Schwartzman
Drew T. Simshaw
Institute for Public Representation
Georgetown University Law Center
600 New Jersey Avenue NW
Washington, DC 20001
(202) 662-9545
dts52@law.georgetown.edu
Counsel to The Wright Petitioners
September 29, 2016

140

See id.; 2015 Order, 30 FCCRcd at 12870-72 ¶¶217-220(JA____-____), 12864
¶204 n.729 (“ICS providers are free to file a waiver [of rate caps or ancillary fee
caps] if circumstances warrant.”)(JA____).
31

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 40 of 41

CERTIFICATE OF COMPLIANCE
This brief complies with the applicable type-volume limitations. Exclusive of
the portions exempted by Federal Rules of Appellate Procedure Rule
32(a)(7)(B)(iii) and Circuit Rule 32(a)(1), this brief contains 7123 words. This
brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the
type style requirements of Fed. R. App. P. 32(a)(6) because this brief has been
prepared in 14-point Times Roman, a proportionally spaced typeface.
Respectfully submitted,
/s/ Andrew Jay Schwartzman
Andrew Jay Schwartzman

September 29, 2016

USCA Case #15-1461

Document #1638459

Filed: 09/29/2016

Page 41 of 41

CERTIFICATE OF SERVICE
I certify that I electronically filed the foregoing with the Clerk of the Court
for the United States Court of Appeals for the D.C. Circuit by using the appellate
CM/ECF system on September 29, 2016.
I certify that all parties in the case are registered CM/ECF users and that
service will be accomplished by the appellate CM/ECF system.
Respectfully submitted,
/s/ Andrew Jay Schwartzman
Andrew Jay Schwartzman
September 29, 2016