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Captive Markets

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Why we won’t get prison reform

Published in the February 2015 issue of Harper’s Magazine, “Captive Markets” explores the political and economic incentives that drive mass incarceration in the United States. The article is free to read in full through October 5. Subscribe to Harper’s Magazine for instant access to our entire 165-year archive.

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From a New York Times report, published September 30, 2015, on the Federal Communications Commission’s proposed rules to limit the fees that jails and prisons can charge inmates to make phone calls.

The commission is seeking to regulate the $1.2 billion phone industry serving prisons and jails, which has been criticized for overcharging inmates’ families.
     Rates for phone calls from jails and prisons are typically far more expensive than normal commercial charges and can cost as much as $14 a minute. Service fees often add another 40 percent, resulting in phone bills as high as $500 a month, inmates’ families and prison advocacy groups say.

Consider the prison-phone industry. For inmates, especially urban felons shipped to far-off rural sites, calls to the outside are a social lifeline and a proven method for reducing recidivism. But here, too, Wall Street has identified a high-demand, low-supply commodity. Other government contractors, be they food suppliers or dentists, collect fees paid out by the state. Prison-phone companies, and the prison-wire-transfer companies that are following their model, extract revenues directly from inmates and their families. (Fifteen dollars for a fifteen-minute phone call is not uncommon.)

As with partnership corrections, profits are largely determined by contracts, but phone and money-transfer companies sweeten the deals for their public partners with profit-sharing perks. These commissions kick back anywhere from 40 to 60 percent of revenue to the contracting government agency. According to a study by Prison Legal News, a publication of the Human Rights Defense Center, about 85 percent of non-federal jails sign up for commission-added contracts, and because commissions increase in proportion to the total contract value, cash-strapped public officials are motivated to choose the most expensive contract available. Prison Legal News found that when Louisiana put out a public request for proposals for phone services in 2001, the agency stated the wish explicitly: “The state desires that the bidder’s compensation percentages . . . be as high as possible.”

In 2000, prison-phone commissions totaled more than $20 million in both New York and California. The states, along with at least seven others, have since phased out the kickbacks, and after a decade of petitions, the FCC has instituted limits on interstate call rates. But the FCC rules have not affected intrastate rates, and inmates and their families still deal with exorbitant fees. The prison-phone industry, which generated more than a billion dollars in annual revenue in 2014, is one of the brightest stars in the corrections economy.

Read the full article here.

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