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HRDC quoted on FCC's revision of prison phone rate caps, Aug. 2, 2016.

New Prison Rate Caps Could Help FCC Dump Court Challenge

Law360, Washington (August 2, 2016, 9:06 PM ET) -- The Federal Communications Commission is hoping a vote Thursday to raise rate limits on inmate calling services will weaken a legal challenge filed by providers shortly after their 2015 approval, but success remains uncertain given lingering questions surrounding the agency's authority and unwillingness to limit pay-to-play payments to facilities. 
FCC Chairman Tom Wheeler and Democratic Commissioner Mignon Clyburn have floated the change to rates set in October for a vote this week, proposing to increase an 11 cent-per-minute rate cap for prisons to 13 cents, and a range of 14 to 22 cents per minute in jails to 19 to 31 cents. The proposal comes after the D.C. Circuit halted the rates pending the outcome of the providers’ suit.

Inmate calling service, or ICS, providers have taken issue with the FCC’s authority in setting caps, but also with the agency's decision to discourage — not ban or limit — the controversial payments from phone providers to correctional facilities that the companies say are necessary to win contracts. The so-called site commissions have been singled out as the largest factor in skyrocketing rates.

The refusal by Wheeler and Clyburn to take up the issue once again in their latest proposal shows a continued hesitation that leaves many on all sides unsatisfied. Still, experts said the FCC's change may be a way forward that stands up in court even if it isn't ideal.

Alex Friedmann, who serves as associate director of the Human Rights Defense Center, said he "understand[s] the realities behind what the FCC’s trying to accomplish."

"We think that the rate cap should be much lower, but we understand that the FCC is trying to effect as much reform as possible," said Friedmann, who advocates for inmates and the caps.

The FCC has asked the court to delay the case pending its update, saying that continuing the briefing with such a large change looming would only waste participants' time. Several states and providers have asked the court to reject that request, with Global Tel*Link and CenturyLink Public Communications Inc. arguing Monday that the change as proposed "would have little effect on petitioners' challenges."

"The proposed increase in rates — supposedly to account for costs incurred by correctional facilities — would not address any of the challenged infirmities in the order," the groups said, including issues of statutory authority or site commission payments.

But Lee G. Petro of Drinker Biddle & Reath LLP, who represents the petitioners who asked the FCC to regulate the call rates several years ago, said he believes the FCC's move would address the central argument of the suit by increasing rates.

Petro wrote in a recent letter to the FCC on behalf of his clients that providers would get a large increase in revenue with the raised caps and the increase would eliminate arguments that "any aspect" of their costs won’t be covered.

Companies are already finding ways to preserve revenue lost under other fee rules in the commission's order that weren't stayed by the court, Petro added.

"I would love to see lower rates go into effect," he said. "The ones that the FCC adopted in October of 2015 however, given the fact that the ICS providers have substantially increased intrastate rates to make up for their lost ancillary fee revenue, we'd rather get a uniform rate on the books as soon as possible. The FCC's order does that and we’ll deal with reducing rates certainly in the future."

In a fact sheet on their proposal, Clyburn and Wheeler said they were addressing a petition from criminal defense attorney Michael S. Hamden that asked the FCC to reconsider prohibiting site commissions or install a modest cost recovery fee. The increased caps would "account for jails' and prisons' legitimate ICS costs," they said.

"The record developed in response to the Hamden petition and in the litigation before the D.C. Circuit support an approach to inmate calling rate reform that expressly accounts, in the rate cap calculations, for the possibility that jails and prisons bear legitimate costs in providing access to ICS," the fact sheet said.

But providers and other stakeholders have told the FCC that the change doesn't address the critical commissions. Attorneys and other experts split this week on the FCC's role and authority on the issue.

Hamden told Law360 that he sees the vote as an opportunity to "correct course," but that it seems as though the FCC won’t address the deeper issue. Nearly everyone agrees that the commissions are the root of the problem, he said, adding that he believes the FCC has the authority to limit them.

"It's better than no caps, but there's nothing that I am aware of in the record that would justify the increase,” he said. “I think it would be justifiable in the context of a compromise that eliminated commissions, but there's nothing in the record that would show those rates would reflect anything approaching actual costs to facilities. And moreover, the idea that facilities should be compensated for providing correctional services is novel."

But Petro said although he is opposed to the commissions, it's too difficult for the FCC to wade into the issue at facilities nationwide.

"It's a classic whack-a-mole situation, it really is, and the commission has a set focus that it should have on making sure that rates are just, reasonable and fair to consumers and they really shouldn't get into the business of regulating the criminal justice system," he said.

Friedmann said that from his perspective, the FCC does have the authority to address site commissions. But the agency seems interested in taking a "cautious approach" that puts it on solid footing in court.

"The FCC wants to make sure its order is on as firm a legal ground as possible," he said.

The commissions are a driving factor behind rates, but Friedmann said he believes simply setting rates low without necessarily eliminating "kickbacks" would still solve the problem for inmate families.

Mitchell F. Brecher of Greenberg Traurig LLP, who has followed the issue but has no clients involved, said he is skeptical of the FCC's chances with the change and more broadly in the case. Regulating rates within states is a heavy lift, even if the agency's "collective heart is in the right place" with the issue.

"Bumping up the rates a little bit, I don't think it'll satisfy the parties, particularly the ones that are getting the money, whether it be the providers or the institutions themselves," he said. "And No. 2, it doesn't really resolve the underlying legal issues."

Still, inmates don't have the same options as general consumers and cannot simply take their business elsewhere, he said. Providers likely won't be viewed too sympathetically by the court, and the FCC has been given latitude in its decision-making, such as in the recent net neutrality case.

"I don't think the site commissions per se are the problem," Brecher said. "The problem is to what extent the providers are allowed to recover the site commissions in government-approved rates."

The consolidated case is Global Tel*Link et al. v. Federal Communications Commission et al., case number 15-1461, in the U.S. Court of Appeals for the District of Columbia Circuit.

--Additional reporting by Michael Macagnone. Editing by Mark Lebetkin and Katherine Rautenberg.