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Petitioner's Appeal and Cover Letter

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10 Winthrop Square, 3rd Floor
Boston, MA 02110
617-482-2773; WATS 800-882-1413
FAX 617-451-6383
State Prisoner Speed Dial *9004#
County Col ect Cats 617-482-4124

October 16, 2013
Via electronic service and surface mail
Catrice C. Williams, Secretary
Department of Telecommunications and Cable
1000, Washington Street, Suite 820
Boston, MA 02118-6500
Re: D.T.C. 11-16
Dear Ms. Williams:
Enclosed for filing please find an original and three copies of the Petitioner's Appeal.
Please feel free to contact me with any questions or concerns at 617-482-2773 x 106.

Bonita Tenneriello
Staff Attorney
cc: Parties of Record

Formerly known as Massachusetts Correctional Legal Services

No. D.T.C. 11-16

The Petitioners respectfully request that the Commissioner reverse the portion of the
Hearing Officer Interlocutory Ruling that dismisses their request to open an investigation into the
usage rate component of the Inmate Calling Service (ICS) rate-setting mechanism. The Petition
was misconstrued as accepting a usage rate of $0.102 per minute as reasonable, when Petitioners
actually contend that a reasonable usage rate should be far lower than that. Substantial
evidence demonstrates that the actual costs of ICS (excluding commissions) is significantly
lower than Massachusetts' current usage rate of $1.50 per 15-minute call. The Federal
Communications Commission's recent landmark ruling on interstate ICS rates, arid the data cited
therein, further supports this conclusion; the agency is considering a flat, distance-insensitive
ICS rate of $0.07 per minute. The Petitioners' allegations are sufficient to demonstrate that an
investigation into the usage rate component of ICS charges is necessary in order to determine
just and reasonable ICS rates.

The Petitioners Did Not Propose $0.102 per minute as a Just and Reasonable
The Interlocutory Ruling states that the current usage rate cap is equivalent to the per-

minute cost accepted by Petitioners as just and reasonable." Interlocutory Ruling at 19.

However, the Petitioners have never accepted the current usage cap of $1.50 for 15 minutes as
just and reasonable. This conclusion is based on a misinterpretation of the portion of the 2009
Petition that discussed the unreasonableness of ICS rates in Massachusetts. The Petitioners
examined rates under the GTL contract with the Department of Correction (DOC), and
calculated that if site commissions of 35 percent were deducted from the rate, the remaining
charge would be $1.53 for a 15-minute call, or $0.102 per minute. See 2009 Petition at p. 29,
citing Appendix VI.
The Petitioners made this point to demonstrate that the costs of providing ICS were far
lower than the rates actually charged; they did not state that $0.102 was a reasonable rate. While
the Petitioners knew that 35 percent of the rate charged by GTL was dedicated to site
commissions, they had no way of knowing what the basis was for the remaining 65 percent of
the bill. There was no reason to assume that GTL's charges, after commissions, were based only
on ICS-related costs, and in fact there is reason to believe otherwise. Indeed, the Federal
Communications Commission in its recent ruling emphasized that even after eliminating site
commissions, current ICS rates are likely to contain impermissible, non-ICS-related costs. See
Exh. 1, In re the Matter of Rates for Interstate Inmate Calling Services, Federal Communications
Commission No. 12-375, Report and Order and. Further Notice of Proposed Rulemaking, August
9, 2013 ("FCC Order") ¶62 n. 229, ¶63 n. 235, ¶71 n. 266.
Therefore the Petitioners did not propose $0.102 per minute as a just and reasonable rate.
Rather, this calculation was simply presented to demonstrate the unreasonableness of current
rates. Furthermore, Petitioners cited evidence that rates lower than $0,102 were yielding a fair
profit to ICS providers. They calculated that if site commissions were eliminated from the
Hampden County telephone contract, the charge would have been less than $0.083 cents per


minute. See Petition at 28. The Petitioners also cited flat rates in other jurisdictions — including
two served by Securus and GTL respectively — which were fare lower than $0.102, assuming an
average call length of nine minutes or longer. See id, citing rates in Rhode Island, New Mexico
(Securus contract) and Montgomery County Maryland (GTL contract).
In addition, under the Department's 1998 order, the usage rate component of ICS covers
only "traditional cost recovery, not the unique additional costs associated with. ICS."
Interlocutory Ruling at 19. Even if the Petitioners had proposed $0.102 per minute as a
reasonable ICS rate, this clearly is not the same as accepting a usage rate of $0.10 plus additional
ICS-related costs. Instead, the Petitioners' evidence demonstrated that in 2009 ICS was being
provided for $0.102 or less (absent commissions), including the unique costs of providing
telephone service to prisoners.
Finally, even if the Petitioners had accepted $0.102 per minute as just and reasonable, a
rate-setting mechanism that allows providers to charge up $1.50 per 15-minute call, allocated as
the providers desire, is necessarily suspect.' The FCC has noted that rate structures which make
the cost of shorter calls disproportionately high may be unreasonable and unfair, particularly
given the problem of dropped calls, as raised by Petitioners in this case. See FCC Order ([ 85.2
The Petitioners presented evidence that industry costs have decreased since the usage rate
was set in 2004 and, indeed, even since the Petitioner's filing in 2009, due to new technology,
increased centralization and economies of scale. See Amended Affidavit of Douglas Dawson

For example, a consumer may be charged $1.00 for the first minute and then $0.035 for
subsequent minutes, making a three minute call $1.07, or $0.35 per minute, rather than $0.10 per
2 The FCC Order permits ICS providers to satisfy the safe harbor provisions through 15 minute
rate caps, but seeks comments as to whether rate structure requirements are necessary to ensure
the reasonableness of cost of shorter calls, and requires ICS providers to provide data on dropped
calls. FCC Order IN 87-88.

(Dawson I), filed on March 26, 2013, ¶ 21(noting that ICS costs have "dropped precipitously in
the last few years" due to technology and centralization); Exh. 2, Second Affidavit of Douglas A.
Dawson (Dawson

4 (noting, "the cost of long distance calling has plummeted in the last

decade" and that the ICS industry's move to automated pre-pay systems "have eliminated most
of the uncolleetables, which were the largest individual component of my cost estimates in 2003
and 2007"); and see generally Dawson I, ¶¶ 22-27.
Not only is the usage rate set in 2004 outdated, but it no longer makes sense to peg prison
telephone rates to ordinary pay telephones. As Mr. Dawson attests, the payphone industry is not
in any sense analogous to the ICS industry, see Dawson II, fi 17, 18 and, in fact, the payphone
industry is now moribund, due largely to the increased use of cell phones and related devices.

In sum, Petitioners presented sufficient evidence that ICS — including unique prison-

related costs — could be offered more cheaply than the current usage rate. Additional evidence
since their original filing only demonstrates that costs have continued to fall.

There is Substantial Evidence that ICS is Profitably Provided at Rates Lower
than the Current Massachusetts Usage Rate.
The Petitioners' expert, Douglas Dawson, and a telecommunications expert providing

evidence in the FCC rulemaking proceeding, Coleman Bazelon, have both determined that ICS
can profitably be provided for $0.07 per minute, with no additional surcharge. See Exh. 1,
Dawson Il, and Declaration of Coleman Bazelon (Bazelon), attached to Dawson II as Exh. A.
ICS is offered in some jurisdictions as cheaply as $0.04 and $0.05, absent commissions. See
Bazelon p. 16, Table I. The Federal Communications Commission has cited the wide variation
in interstate ICS rates as evidence of a market failure in the intrastate market as well. See FCC
Order ¶ 132. While setting interim "safe harbor" rates slightly higher than $$0.10, the FCC has

required providers to provide cost data and is considering a flat, distance-insensitive rate of $0.07
per-minute. FCC Order 11155.
These facts, construed in the Petitioners favor as they must be3, are sufficient to
demonstrate that the current usage rate of $0.10 is unjust and unreasonable, particularly
considering that the existing usage rate does not even purport to account for additional, unique
ICS-related costs. To dismiss this claim now, before any discovery, would hamstring the
Department's inquiry and would violate the Petitioner's right to seek just and reasonable rates.
A. ICS Can Profitably Be Offered for less than 50.10 Per Minute.
In 2003, the Petitioner's expert Douglas Dawson undertook an analysis of the ICS
industry for the petitioners in the FCC rulemaking proceeding, Martha Wright et 01. 4 Earlier this
year, an additional telecommunications expert, Coleman Bazelon, on behalf of the Wright
petitioners, reviewed Mr. Dawson's earlier work and updated it to account for changes in the
industry over the past decade. See Bazelon, attached as Exh. A to Dawson II. Mr. Dawson has
in turn reviewed Mr. Bazelon's recent analysis and adopts his conclusions. The two experts
concur that ICS can profitably be offered for $0.07 per minute. See Bazelon ¶ 26; Dawson II ¶ 4.

In considering dismissal, the Department must take the Petitioners' assertions of fact as true
and construe them in favor of the Petitioners. See Petition of the Attorney General of the
Commonwealth of Massachusetts, pursuant to G.L. c. 164, § 93, for an Investigation of the
Electric Distribution Rates of Fitchburg Gas and Electric Light Co., DTE 99-18, Order of Oct.
18, 2001 at 4 (2001) (citing Riverside Steam & Electric Co., DPU 88-123, at 26-27 (1988)).
Dismissal may not be granted unless it appears that the Plaintiffs would be entitled to no relief
under any statement of facts that could be proven in support of their claim. See id.
4 See Exh. 3, Declaration of Douglas A. Dawson in Support of Petitioners' Alternative Proposal
("Dawson Declaration 2007-I") at 5-6, Appendix B to Petitioners' Alternative Proposal,
Implementation of the Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of 1996, CC Docket No. 96-128 (March 1, 2007). To avoid waste,
Petitioners do not include hundreds of pages of Exhibits to Mr. Dawson's 2007 affidavit, but will.
provide these on request; after the current federal government shut-down ends, they will be
available at:
http ://fj al lfoss. fcc. gov/prod/ecfs/retri eve. cgi?nati ve or ndf=pdf&id document=651890901 2.


Dawson and Bazelon base their suggested rate on an analysis of the underlying costs of
service and the additional costs of providing debit and collect payment options. Bazelon ¶¶ 1425. The two experts also cite ICS rates in several states lower than $0.10 (absent commissions)
as evidence of the reasonableness of their suggested rate. See Bazelon 411- 30-34; Dawson II ¶ 6.
Interstate rates in other jurisdictions are a relevant comparison to Mssachusetts' intrastate rates
because of the " lack of significant discrepancy in the cost of providing these services across
states." Dawson ¶ 20. Dawson notes that with centralized technology and industry
consolidation, "[most of a prison provider's costs are now fixed at big hub locations and a much
smaller percentage of their costs are driven incrementally at each prison." Id. ¶ 26.
Bazelon cites rates of $0.05 per minute in Oklahoma and New York, and $0.04 in New
Mexico as a proving "that it is commercially viable to provide prison phone service for only
$0.05 per minute." He also notes that South Carolina charges an average of $0.07 per minute,
and that five other states have rates of $0.10 or less, and concludes that these rates "demonstrate
that it is possible, absent commissions, to provide prison phone service for far less than the rates
currently charged in most states today." Bazelon ¶ 33. Dawson reviewed this data, supports
Bazelon's conclusion that ICS can be provided for $0.10 per minute, and states that this gives
ground to question the reasonableness of Massachusetts' current usage rate. Dawson II ¶¶ 5-6.
These facts are certainly enough to create a triable dispute over the reasonableness of
Massachusetts' per-minute rate.
B. The Federal Communications Commission Is Considering a Permanent
Interstate Rate of 50.07 per minute.
In its recent landmark decision, the Federal Communications Commission set interim
limits on interstate ICS rates, ruling that charges below a "safe harbor" of $0.12 per minute for
debit and prepaid calls and $0.14 for collect calls will be presumed just and reasonable, setting a

cap of $0.21 for debit and prepaid calls and $0.25 for collect calls, and permitting providers to
seek to justify rates between the safe harbor and the cap. See FCC Order ¶ 5. The FCC held
that ICS rates, including ancillary fees, must be cost-based, and that site commissions are not a
cost of providing ICS and may not be passed on to consumers. See id., if 7. Providers are
required to submit data on their underlying costs so that the FCC can develop a permanent rate
structure. See id.
The interim rates set by the FCC were calculated by averaging interstate ICS rates
charged in seven states that have eliminated site commissions, and also by considering the rates
charged in ten other states after commissions are deducted. Id., ¶j 63-65. The agency noted
that rates in five of the states that have eliminated site commissions were between $0.04 and
$0.08 per minute, and only two of the states charged higher. "Given that evidence in the record
does not suggest a dramatic difference in costs among states...the states with higher rates are
likely to include non-ICS costs" other than commissions. Id., ¶ 63 n. 235. However, it used
existing rates as the basis for its calculation "in the interest of being conservative in setting our
interim safe harbor." Id. See also id., ¶71 n. 266 ("In the calculation of conservative safe harbor
rates we have not sought to back out these additional charges" other than commissions).
The FCC repeatedly cautions that the interim rates are generous to the industry, and do
not represent a calculation of the actual costs of ICS. "Our use of these states' data does not
indicate that we conclude these interstate rates are necessarily at cost....There may well be other
factors driving these rates above what we would consider to be reasonable cost but we
nevertheless include these states to make a conservative safe harbor rate level calculation." Id.
1162 n. 229. "...Fin this order we are not simply 'calling' our measures conservative but rather
are relying on record evidence in a conservative fashion. Indeed, as we emphasize herein, the


rates we set for the safe harbor and the cap reflect costs that exceed the cost data that any party
submitted in the record."1162 n. 230 (emphasis in original).
To develop permanent interstate rates, the FCC has required ICS providers to turn over
data detailing their costs. Id. !II 124-26. It is also requesting comment on its authority to
regulate intrastate rates, while at the same time urging state regulators to reform ICS rates.
129-34. The variation in rates that demonstrates market failure in the interstate market leads the
FCC "to conclude that the same failure has occurred for intrastate ICS rates as well." Id. ¶ 132.
The FCC seeks comment on its "tentative conclusion" that site commissions should not be
recovered through intrastate rates for the same reason it has banned their recovery through
interstate rates. Id. ¶ 133. Most saliently, the agency is considering the Wright Petitioner's
proposed rate of $0.07 per minute as a flat, distance-insensitive rate for all calls.

Id. ¶ 155.

For the Department to now ratify a per-minute rate of $0.10, and to consider adding on to
this rate additional charges to cover unique ICS-related costs, flies in the face not only of the
analysis of petitioners' expert, but also of the FCC's own analysis. The FCC states that its own
interim safe harbor and rate caps are likely to include non-ICS costs and are generous to ICS
providers, and it is considering a permanent rate as low as $0.07 per minute. The DTC should
not foreclose such a rate for Massachusetts before discovery has even begun.
For the above-stated reasons, the portion of the Hearing Officer's ruling that dismisses
the Petitioner's challenge to the per-minute usage rate should be reversed.


Date akk- /') '2° (-3

Respectfully submitted:

Bonita Tenneriello, Esq.
Elizabeth Matos, Esq.
James Pingeon, Esq.
10 Winthrop Square, 3rd Floor
Boston, Massachusetts 02110
(617) 482-2773 (telephone)
(617) 451-6383 (facsimile)

hereby certify that a true copy of the above
document was served upon the attorney of
record for each other party by mail (by hand)


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