FCC
Chairman Pai has launched a charm offensive showcasing his commitment to transparency
and regulatory restraint.
However, behind
the scenes, he ignores due process, the rule of law, FCC tradition,
bipartisanship and fair play to shut down previous FCC initiatives of which he
disapproves.
For
example, this bi-polar personality makes it possible for the Chairman to claim how
much he cares about curbing extraordinarily gouging long distance telephone
rates borne by the “captive” 2.2 million inmates in the U.S. even as he
instructs his General Counsel to abandon any participation in an ongoing
judicial review of prior FCC decision which resulted in rules.
See New Chairman Orders FCC To Abandon Court
Defense Of Rule Limiting Prison Phone Rates;
https://consumerist.com/2017/02/02/new-chairman-orders-fcc-to-abandon-court-defense-of-rule-limiting-prison-phone-rates/.
By ordering his counsel’s no show,—akin to the Democratic Senators’ boycotts of
Trump Cabinet nominee confirmation hearings—Chairman Pai facilitates
maintenance of the status quo.
Ironically,
the Chairman has acknowledged the inmate calling marketplace fails to support his
heartfelt belief that markets usually are infallible and efficient:
I believe that the
government should usually stay its hand in economic matters and allow the price
of goods and services to respond to consumer choice and
competition. But sometimes the market fails, and government intervention
carefully tailored to address that market failure is appropriate. Dissenting
Statement of Commissioner Ajit Pai as Delivered at the August 9, 2013 Open
Agenda Meeting, Re: Rates for Interstate Inmate Calling Services, WC Docket No.
12-375; available at:
https://apps.fcc.gov/edocs_public/attachmatch/DOC-322749A4.pdf.
On the other hand,
Chairman Pai willingly works to prevent the consequences of market failure and
the need for remedies, if the FCC errs in any way that he believes might
establish a precedent for jurisdiction and overreach where market
self-regulation suffices. Better to
eliminate in its entirety a ruling containing Pai-identified flaws than subject
it to a court test, and refinements under his administration.
The Pai-identified
flaws are based on alternative facts, economics, accounting and law.
The Chairman has determined that the FCC’s prescribed per minute caps
would prevent inmate calling companies from recouping costs.
He has interpreted Sec. 276 of the
Communications Act as foreclosing any FCC jurisdiction over intrastate calling
by inmates.
Additionally, the Chairman
reads Sec. 276 as authorizing the FCC to remedy the unlikely instances of below
cost rates, but prohibiting the Commission from remedying the far more likely
scenario of rate gouging.
To reach these
conclusions, Chairman Pai accepts an alternative reality.
For example, he appears to believe that interested
parties report the actual costs of doing business to the last dollar.
The Chairman takes as a fact the calculation
made by the National Sheriffs’ Association that annual administration costs for
jail-based calling amounted to $244,253,292 around 2012-13, but the FCC’s price
cap/safe harbor rate would yield only $136,704,062 in revenue. See Dissenting
Statement of Commissioner Ajit Pai, Re: Rates for Interstate Inmate Calling Services, WC Docket No. 12-375;
available at:
https://apps.fcc.gov/edocs_public/attachmatch/DOC-340632A5.pdf.
He can conclude that the FCC would impose “confiscatory”
rates on long suffering inmate calling companies should they have to reduce
rates.
Let’s take a look at
the U.S. inmate calling industry and its financial viability. Two privately owned companies, Global
Tel*Link and Securus Technologies control 70% of the market. These companies pay massive commissions—some
would say kickbacks—to jails and prisons. That surely contributed significantly
to the Sheriffs’ $244.2 million calculation.
Let’s call them franchise fees. No
stakeholder, no one at the FCC, no one period has provided credible evidence
that these inmate carrier costs plus franchise fees are compensatory vis a vis
the cost of providing telephone service. Inmate calling companies operate as telecommunications
service providers, subject to Title II common carrier regulation. Their rates have to be cost-compensatory,
plus a reasonable profit. Fees of any
sort have to relate to the cost of providing service and not doughnuts, boondoggle
trips to conferences and kickbacks.
Chairman Pai has
railed against voodoo economics and the absence of economics. Yet when it comes to inmate calling, he
accepts the accounting of a stakeholder having every incentive to pad the cost
calculation.
The Sheriffs’
calculation and Chairman Pai’s endorsement of it do not pass the smell
test.
Outside the penal environment, long
distance telephone calls cost retail subscribers about 2-5 cents for interstate
calls and about 10-15 cents for intrastate calls.
For example, see
http://www.phonedog.com/long-distance.
Outside jail, telecommunications costs are so
cheap that it makes financial sense to use cheap overseas labor to provide
operator assistance.
Operator assistance
is also computerized.
I don’t believe the Sheriffs
have made a credible calculation, nor do I believe their threat to yank out
phones if the FCC’s 13 cent rate cap were implemented. If a jail’s phones accrue $2 million in phone
commissions annually, which would management choose: $0, or $1.5 million? Similarly, I have seen no evidence that
jailors are spending millions policing, monitoring, and safeguarding the payphones.
I readily
accept that jails house a lot of “bad dudes,” foreign and domestic. They have to pay a debt to society, but it
does not have to include $15 for a 10 minute telephone call.
In this
time of alternative realities, apparently the Chairman can be all things to all
people. It simply depends on your
selective perception.
