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Rule2024-19037

Incarcerated People's Communication Services; Implementation of the Martha Wright-Reed Act; Rates for Interstate Inmate Calling Services

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Published

September 20, 2024

Effective

November 19, 2024

Issuing agencies

Federal Communications Commission

Abstract

In this document, the Federal Communications Commission (Commission) adopts rules addressing all intrastate, interstate, and international audio and video incarcerated people's communication services (IPCS), including video visitation services. The reforms include adopting permanent rate caps for audio IPCS and interim rate caps for video; prohibiting IPCS providers from making site commission payments associated with IPCS and preempting state and local laws and regulations requiring such commissions; prohibiting IPCS providers from imposing any separate ancillary service charges on IPCS consumers; strengthening the Commission's requirements for access to IPCS by incarcerated people with disabilities; permitting IPCS providers to offer optional alternate pricing plans that comply with the rate caps; strengthening existing consumer disclosure and inactive account requirements; revising the existing annual reporting and certification requirements; facilitating enforcement of the new IPCS rules; and delegating authority to the Commission's Wireline Competition Bureau (WCB), Consumer and Governmental Affairs Bureau (CGB), and Office of Economics and Analytics (OEA).

Full Text

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<title>Federal Register, Volume 89 Issue 183 (Friday, September 20, 2024)</title>
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[Federal Register Volume 89, Number 183 (Friday, September 20, 2024)]
[Rules and Regulations]
[Pages 77244-77443]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-19037]

[[Page 77243]]

Vol. 89

Friday,

No. 183

September 20, 2024

Part II

Federal Communications Commission

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47 CFR Parts 14 and 64

Incarcerated People's Communication Services; Implementation of the
Martha Wright-Reed Act; Rates for Interstate Inmate Calling Services;
Final Rule

Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 /
Rules and Regulations

[[Page 77244]]

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 14, 64

[WC Docket Nos. 12-375, 23-62; FCC 24-75; FR ID 237400]

Incarcerated People's Communication Services; Implementation of
the Martha Wright-Reed Act; Rates for Interstate Inmate Calling
Services

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission
(Commission) adopts rules addressing all intrastate, interstate, and
international audio and video incarcerated people's communication
services (IPCS), including video visitation services. The reforms
include adopting permanent rate caps for audio IPCS and interim rate
caps for video; prohibiting IPCS providers from making site commission
payments associated with IPCS and preempting state and local laws and
regulations requiring such commissions; prohibiting IPCS providers from
imposing any separate ancillary service charges on IPCS consumers;
strengthening the Commission's requirements for access to IPCS by
incarcerated people with disabilities; permitting IPCS providers to
offer optional alternate pricing plans that comply with the rate caps;
strengthening existing consumer disclosure and inactive account
requirements; revising the existing annual reporting and certification
requirements; facilitating enforcement of the new IPCS rules; and
delegating authority to the Commission's Wireline Competition Bureau
(WCB), Consumer and Governmental Affairs Bureau (CGB), and Office of
Economics and Analytics (OEA).

DATES:
Effective date: This rule is effective November 19, 2024, except
for amendatory instruction 7 (Sec. Sec. 64.611(l)(2), (3), (5), (6));
amendatory instruction 15 (Sec. 64.6040(f)); amendatory instruction 17
(Sec. 64.6060); amendatory instruction 20 (Sec. 64.6090); amendatory
instruction 22 (Sec. 64.6110); amendatory instruction 23 (Sec.
64.6120); amendatory instruction 25 (Sec. 64.6130(d) through (f), and
(h) through (k)); amendatory instruction 27 (Sec. 64.6140(c), (d),
(e)(2) through (4), (f)(2), and (f)(4)), which are delayed
indefinitely. The Federal Communications Commission will publish a
document in the Federal Register announcing the effective date of these
provisions.
Delegation of authority: The delegations of authority to WCB, CGB,
and OEA are effective on November 19, 2024.

ADDRESSES: Federal Communications Commission, 45 L Street NE,
Washington, DC 20554. People with Disabilities: To request materials in
accessible formats for people with disabilities (Braille, large print,
electronic files, audio format), send an email to <a href="/cdn-cgi/l/email-protection#81e7e2e2b4b1b5c1e7e2e2afe6eef7">[email&#160;protected]</a>, or
call the Consumer and Governmental Affairs Bureau at (202) 418-0530
(voice) or (202) 418-0432 (TTY).

FOR FURTHER INFORMATION CONTACT: Stephen Meil, Pricing Policy Division
of the Wireline Competition Bureau, at (202) 418-7233 or via email at
<a href="/cdn-cgi/l/email-protection#e89b9c8d98808d86c6858d8184a88e8b8bc68f879e">[email&#160;protected]</a>, regarding the portions of this document relating
to matters other than communications services for incarcerated people
with disabilities, and Michael Scott, Disability Rights Office of the
Consumer and Governmental Affairs Bureau, at (202) 418-1264 or via
email at <a href="/cdn-cgi/l/email-protection#98f5f1fbf0f9fdf4b6ebfbf7ececd8fefbfbb6fff7ee">[email&#160;protected]</a>, regarding the portions of this document
relating to communications services for incarcerated people with
disabilities.

SUPPLEMENTARY INFORMATION: This is a summary of the Federal
Communications Commission's (Commission's) Report and Order, document
FCC 24-75, adopted on July 18, 2024 and released on July 22, 2024, in
WC Docket Nos. 12-375 and 23-62. This summary is based on the public
redacted version of the document, the full text of which can be
obtained from the Commission's Electronic Document Management System
(EDOCS) website at <a href="http://www.fcc.gov/edocs">www.fcc.gov/edocs</a> or via the Commission's Electronic
Comment Filing System (ECFS) website at <a href="http://www.fcc.gov/ecfs">www.fcc.gov/ecfs</a>, or is
available at the following internet address: <a href="https://docs.fcc.gov/public/attachments/FCC-24-75A1.pdf">https://docs.fcc.gov/public/attachments/FCC-24-75A1.pdf</a>.

Synopsis

I. Introduction

1. Today we take the most significant steps thus far to fulfill the
dream of Martha Wright-Reed, who advocated tirelessly to ensure that
incarcerated people would be able to communicate with family and loved
ones at just and reasonable rates. While this document implements the
requirements of the Martha Wright-Reed Just and Reasonable
Communications Act of 2022 (Martha Wright-Reed Act or Act), this
proceeding began over twenty years ago when a determined grandmother
petitioned the Federal Communications Commission to take action against
the egregiously high telephone rates and charges that were impeding
incarcerated people's ability to stay connected with their families and
friends. Martha Wright-Reed championed the idea of easing the financial
burdens imposed on incarcerated people and their families simply to
make a phone call. As a blind elderly woman, who could neither write
letters nor travel such long distances for in-person visits, she often
spent hundreds of dollars a month in long distance phone calls to stay
in touch with her incarcerated grandson. In her honor, and in the face
of years of litigation frustrating the Commission's reform efforts in
this area, Congress passed the Martha Wright-Reed Act, significantly
expanding the Commission's jurisdiction over incarcerated people's
communications services (IPCS) and directing the Commission to
``establish a compensation plan to . . . ensure just and reasonable
charges for telephone and advanced communications services in
correctional and detention facilities.''
2. In this item, we exercise the authority granted the Commission
by Congress and adopt comprehensive reforms that will significantly
reduce the financial burdens incarcerated people face to communicate
with their loved ones. We first reduce existing rate caps for all
incarcerated people's audio communication services, by implementing a
methodology specifically permitted by Congress in the Act, and
establish, for the first time, interim rate caps for incarcerated
people's video communications services. We also materially reduce the
prices consumers pay for IPCS by limiting the costs that can be
recovered through IPCS rates to only costs that the Commission finds
are used and useful in the provision of IPCS. We also permit states to
maintain rates lower than the Commission's rate caps. We next end IPCS
providers' long-standing practice of making site commission payments to
carceral facilities, the costs of which were passed through to
consumers via higher IPCS rates. We further strengthen the requirements
for access to IPCS by incarcerated people with disabilities, and adopt
stronger consumer protection rules. We also permit providers, for the
first time, to offer optional alternate pricing plans, subject to
conditions to protect and benefit IPCS consumers.

A. Executive Summary

3. The Report and Order implements the expanded authority granted
to the Commission by the Martha Wright-Reed Act to establish a
compensation plan that ensures both just and reasonable rates and
charges for incarcerated

[[Page 77245]]

people's audio and video communications services and fair compensation
for incarcerated people's communications service providers. The Report
and Order fundamentally reforms the regulation of IPCS in all
correctional facilities, regardless of the technology used to deliver
these services, and significantly lowers the IPCS rates that
incarcerated people and their loved ones will pay. These comprehensive
reforms:
<bullet> Utilize the expanded authority Congress granted the
Commission, in conjunction with the FCC's preexisting statutory
authority, to adopt just and reasonable IPCS rates and charges for all
intrastate, interstate, and international audio and video IPCS,
including video visitation services;
<bullet> Lower existing per-minute rate caps for audio IPCS and
establish initial interim per-minute rate caps for video IPCS, based on
industry-wide cost data submitted by IPCS providers, while permitting
states to maintain IPCS rates lower than the Commission's rate caps;
<bullet> Lower the overall prices consumers pay for IPCS and
simplify the pricing structure by incorporating the costs of ancillary
services in the rate caps and prohibiting providers from imposing any
separate ancillary service charges on IPCS consumers;
<bullet> Prohibit IPCS providers from making site commission
payments for IPCS and preempt state and local laws and regulations
requiring such commissions;
<bullet> Limit the costs associated with safety and security
measures that can be recovered in the per-minute rates to only those
costs that the Commission finds are used and useful in the provision of
IPCS;
<bullet> Allow, subject to conditions, IPCS providers to offer
alternate pricing plans for IPCS that comply with the rate caps we
establish;
<bullet> Revise and strengthen accessibility requirements for IPCS
for incarcerated people with disabilities;
<bullet> Revise and strengthen existing consumer disclosure and
inactive account requirements; and
<bullet> Revise the existing annual reporting and certification
requirements.
4. We adopt the following rate caps:

Table One--New Rate Caps by Tier
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Audio (permanent) (per minute) Video (interim) (per minute)
Tier (ADP) ---------------------------------------------------------------
Current caps New caps Current caps New caps
----------------------------------------------------------------------------------------------------------------
Prisons (any ADP)............................... * $0.14 $0.06 N/A $0.16
Large Jails (1,000+)............................ * 0.16 0.06 N/A 0.11
Med. Jails (350 to 999)......................... 0.21 0.07 N/A 0.12
Small Jails (100 to 349)........................ 0.21 0.09 N/A 0.14
Very Small Jails (0 to 99)...................... 0.21 0.12 N/A 0.25
----------------------------------------------------------------------------------------------------------------
* Current cap figures that include a $0.02 additive for facility costs, which equates to the allowance made for
facility-incurred IPCS costs reflected in contractually-prescribed site commissions, the closest available
comparison.

II. Background

A. The Martha Wright-Reed Just and Reasonable Communications Act of
2022

5. The Martha Wright-Reed Just and Reasonable Communications Act of
2022 (Martha Wright-Reed Act or Act), was enacted on January 5, 2023.
It represents the culmination of a years-long effort to comprehensively
address unreasonably high rates and charges that incarcerated people
and their families pay for communications services. The Act expands and
clarifies the scope of the Commission's authority over IPCS under
section 276 of the Communications Act of 1934, as amended
(Communications Act) by modifying section 276 to require the Commission
to ensure that the rates and charges for incarcerated people's
intrastate and interstate communications services be just and
reasonable. It also modifies the requirement in section 276(b)(1)(A)
that providers be fairly compensated by eliminating the requirement
that compensation occur on a ``per call'' basis and for ``each and
every [call].'' Thus, with the new amendments, section 276(b)(1)(A)
directs the Commission to establish a compensation plan to ``ensure
that all payphone service providers are fairly compensated and all
rates and charges are just and reasonable for completed intrastate and
interstate communications using their payphone or other calling
device.'' The Act further augments the Commission's jurisdiction by
modifying the Communications Act to expand the definition of payphone
service in correctional institutions to encompass advanced
communications services, including ``any audio or video communications
service used by inmates . . . regardless of technology used.''
6. The Martha Wright-Reed Act also amends section 2(b) of the
Communications Act to reinforce that the Commission's jurisdiction
extends to intrastate, as well as interstate and international,
communications services used by incarcerated people. The Communications
Act generally allocates regulatory authority over intrastate,
interstate, and international communications services between the
Commission and the states. It grants authority to the Commission to
ensure that ``[a]ll charges, practices, classifications, and
regulations for and in connection with'' interstate or international
common carrier communications services are ``just and reasonable,'' and
directs the Commission to ``prescribe such rules and regulations as may
be necessary in the public interest to carry out'' this mandate.
7. Section 2(b) of the Communications Act generally preserves
states' jurisdiction over ``charges, classifications, practices,
services, facilities, or regulations for or in connection with
intrastate communication service.'' The Commission is thus ``generally
forbidden'' from regulating ``intrastate communication service, which
remains the province of the states.'' Stated differently, section 2(b)
``erects a presumption against the Commission's assertion of regulatory
authority over intrastate communications.'' But Congress can enact
statutory provisions that overcome this presumption, including by
expressly excluding provisions of the Communications Act from section
2(b). Section 276 of the Communications Act always has been

[[Page 77246]]

clear that the Commission has authority to establish compensation plans
for ``intrastate and interstate'' payphone calls, and the Martha
Wright-Reed Act also specifically modified section 2(b) to include
section 276, as amended, in an explicit exception. This amendment makes
abundantly clear that the Commission's authority under section 276
encompasses intrastate IPCS.
8. In direct response to the D.C. Circuit's decision in GTL v. FCC,
the Act expressly allows the Commission to ``use industry-wide average
costs,'' as well as the ``average costs of service of a communications
service provider'' in setting just and reasonable rates and charges. In
implementing the Act, the Commission is required to consider the
``costs associated with any safety and security measures necessary to
provide'' telephone service and advanced communications services.
Finally, the statute directs the Commission to promulgate regulations
necessary to implement the statutory provisions not earlier than 18
months and not later than 24 months after its January 5, 2023 enactment
date.

B. Early Reform Efforts

9. Prior to the enactment of the Martha Wright-Reed Act, the
Commission had previously taken a number of steps to reform
communications services for incarcerated people. In 2012, the
Commission initiated its inmate calling services (ICS) rulemaking
principally in response to petitions filed by Martha Wright and her
fellow petitioners seeking relief from ``excessive'' inmate calling
services rates. In the 2013 ICS Order, the Commission found that rates
for calling services for incarcerated people greatly exceeded the
reasonable costs of providing those services and adopted interim
interstate rate caps of $0.21 per minute for debit and prepaid calls,
and $0.25 per minute for collect calls. The Commission also launched
its First Mandatory Data Collection to obtain industry cost data to
help develop permanent rate caps. In 2014, the Commission sought
comment on establishing permanent rate caps for both interstate and
intrastate calls and on reforming charges for services ancillary to the
provision of inmate calling services.
10. In 2015, the Commission adopted a comprehensive regulatory
framework for interstate and intrastate inmate calling services that
included permanent rate caps for interstate and intrastate inmate
calling services calls, and imposed limits on ancillary service
charges. Specifically, the 2015 ICS Order set tiered rate caps for
interstate calls based on the type and size of correctional facilities
and calculated these caps using industry-wide average costs as reported
in the First Mandatory Data Collection. The Commission excluded all
site commission payments from industry costs, having found such
payments were not reasonably related to the provision of inmate calling
services. The Commission also extended the interim interstate rate caps
it had adopted in 2013 to intrastate calls, pending the effectiveness
of the new rate caps, and sought comment on rate regulation of
international inmate calling services calls. Finally, the 2015 ICS
Order established a Second Mandatory Data Collection to guide further
reforms, and began an annual filing obligation to collect information
on providers' interstate, intrastate, and international rates, as well
as their ancillary service charges, among other information.
11. While an appeal of the 2015 ICS Order was still pending, the
Commission reconsidered the full exclusion of site commission payments
from its permanent rate cap calculations. The Commission's 2016 ICS
Reconsideration Order increased the permanent rate caps adopted in the
2015 ICS Order to account for claims that certain correctional facility
costs reflected in site commission payments are directly and reasonably
related to the provision of inmate calling services.

C. The GTL v. FCC Decision

12. The permanent rate caps adopted in the 2015 ICS Order were
vacated by the D.C. Circuit in GTL v. FCC in 2017 on three principal
grounds. First, the panel majority held that the Commission lacked the
statutory authority to cap intrastate calling services rates because
the Commission's authority over intrastate calls under section 276 of
the Communications Act did not authorize it to impose intrastate rate
caps, and the Commission's authority under section 201(b) of the
Communications Act did not extend to intrastate rates. Second, the D.C.
Circuit concluded that the Commission had erred by categorically
excluding site commissions from inmate calling services providers'
costs used to set rate caps. Because some site commissions were
``mandated by state statute,'' while others were ``required by state
correctional institutions,'' the court concluded that some portion of
site commissions might be legitimately included in provider costs, and
remanded to the Commission to determine what portion of site
commissions were directly related to the provision of inmate calling
services. Third, the court found that the Commission's use of a
weighted average per-minute cost in setting rate caps, on the existing
record as analyzed in the 2015 ICS Order, was arbitrary and capricious,
in part because this approach, as the Commission had applied it,
rendered calls with above-average costs unprofitable and thus did ``not
fulfill the mandate of [section] 276 that `each and every' '' call be
fairly compensated.
13. The D.C. Circuit also remanded the Commission's ancillary
service charge caps, finding that--on the available record--the
Commission ``had no authority to impose ancillary fee caps with respect
to intrastate calls.'' Although the court found ancillary service
charge caps on interstate calls ``justified,'' it could not ``discern
from the record whether ancillary fees [could] be segregated between
interstate and intrastate calls,'' and remanded the issue for the
Commission to determine whether it could segregate ancillary service
fee caps between interstate calls and intrastate calls. The court also
vacated the video visitation annual reporting requirements adopted in
the 2015 ICS Order as ``beyond the statutory authority of the
Commission.''
14. In a related case decided later that year, the D.C. Circuit
``summarily vacated'' the 2016 ICS Reconsideration Order ``insofar as
it purports to set rate caps on inmate calling service'' because the
revised rate caps in that order were ``premised on the same legal
framework and mathematical methodology'' rejected by the court in GTL
v. FCC. As a result of the D.C. Circuit's decisions in GTL and Securus
Techs. v. FCC, the interim rate caps that the Commission adopted in
2013 ($0.21 per minute for debit/prepaid calls and $0.25 per minute for
collect calls) remained in effect for interstate inmate calling
services calls.

D. More Recent Reform Efforts

15. Following the D.C. Circuit's remand in GTL v. FCC, the
Commission took additional actions to address unreasonable rates and
charges for communications services for incarcerated people. In
February 2020, the Wireline Competition Bureau (Bureau or WCB) issued a
document seeking to refresh the record on issues related to ancillary
service charges to respond to the D.C. Circuit's remand. The Bureau
sought comment on whether ancillary service charges may be ``segregated
between interstate and intrastate calls and, if so, how.'' It also
sought comment on the definition of jurisdictionally mixed services and
how the Commission should proceed if any

[[Page 77247]]

permitted ancillary service is deemed jurisdictionally mixed.
16. In August 2020, the Commission adopted the 2020 ICS Order on
Remand (85 FR 67450 (Oct. 23, 2020)), in which it found that ancillary
service charges generally are jurisdictionally mixed and cannot be
practicably segregated between the interstate and intrastate
jurisdictions, except in a limited number of cases. The Commission
therefore concluded that inmate calling services providers are
generally prohibited from imposing ancillary service charges other than
those permitted by the Commission's rules, and from imposing charges in
excess of the Commission's ancillary service fee caps. In an
accompanying document, the Commission proposed reform of the inmate
calling services rates then within its jurisdiction based on its
analysis of industry data collected in the Second Mandatory Data
Collection, as well as information collected in the 2020 Annual
Reports.
17. In May 2021, the Commission adopted the 2021 ICS Order, which,
among other actions, set new interim interstate rate caps for prisons
and larger jails, reformed the treatment of site commissions, and
capped international calling rates. The Commission first eliminated
separate rate caps for all collect calls and retained the existing
$0.21 per minute interstate rate cap for debit and prepaid calls for
correctional facilities with average daily populations below 1,000. The
Commission then lowered the interstate interim rate caps from $0.21 per
minute for debit and prepaid calls to $0.12 per minute for prisons and
$0.14 per minute for jails with average daily populations of 1,000 or
more incarcerated people. It allowed site commission payments mandated
by federal, state, or local law, to be passed through to consumers,
without any markup, and capped other site commission payments that
result from contractual obligations or negotiations with providers to
no more than $0.02 per minute for prisons and jails with average daily
populations of 1,000 or more. The Commission adopted a modified waiver
process that permits providers to seek waivers of the rate and
ancillary services fee caps on a facility-by-facility or contract-by-
contract basis. The Commission also delegated authority to WCB and the
Office of Economics and Analytics (OEA) to conduct a Third Mandatory
Data Collection to collect uniform cost data to use in setting
permanent rate and ancillary services fee caps that more closely
reflect inmate service providers' costs of providing service.
18. In 2021, the Commission sought comment on, among other matters,
the provision of communications services to incarcerated people with
disabilities, and the methodology to be employed in setting permanent
interstate and international rate caps. It also sought comment on
general reform of the treatment of site commission payments in
connection with interstate and international calls, and additional
reforms to the Commission's ancillary service charges rules.
19. In September 2022, the Commission issued the 2022 ICS Order,
which adopted requirements to improve access to communications services
for incarcerated people with disabilities and to reduce certain charges
and curtail abusive practices related to ICS. The Commission required
inmate calling services providers to provide access to substantially
all relay services eligible for Telecommunications Relay Services (TRS)
Fund support in any correctional facility where broadband is available
and where the average daily population incarcerated in that
jurisdiction (i.e., in that city, county, state, or the United States)
totals 50 or more persons. It also required that where inmate calling
services providers are required to provide access to substantially all
forms of TRS, they also must provide access to American Sign Language
(ASL) direct, or point-to-point, video communication. Additionally, the
Commission lowered its caps on certain provider charges and barred
certain abusive practices to lessen the financial burden on
incarcerated people and their loved ones when using calling services.
20. The Commission also issued 2022 seeking stakeholder input and
evidence relating to additional reforms concerning incarcerated people
with disabilities. It sought further comment on reforms concerning
providers' rates, charges, and practices in connection with interstate
and international calling services, including further refining the
Commission's rules concerning the treatment of balances in inactive
accounts, expanding the breadth and scope of the Commission's consumer
disclosure requirements, using the Commission's data collections to
establish just and reasonable permanent caps on interstate and
international rates and associated ancillary service charges, and
allowing providers to offer pilot programs for alternative pricing
structures.

E. Implementation of Martha Wright-Reed Act

21. Following the enactment of the Martha Wright-Reed Act in
January 2023, the Commission issued 2023 and 2023 IPCS Order in March
2023 to begin the process of implementing that Act. In 2023, the
Commission sought comment on how it should interpret the Martha Wright-
Reed Act's provisions expanding the Commission's authority over
communications services for incarcerated people, including the Act's
requirement that rates and charges for incarcerated people's
communications services be just and reasonable, the Act's expansion of
the Commission's authority to include advanced communications services,
including video services, the expansion of the Commission's
jurisdiction to include intrastate communications services, and other
aspects of the Act. It also sought comment on how the Martha Wright-
Reed Act affects the Commission's ability to ensure that IPCS services
and associated equipment are accessible to and usable by people with
disabilities. Finally, 2023 incorporated unresolved issues previously
raised in WC Docket No. 12-375 into the current dual-captioned
proceeding.
22. In the 2023 IPCS Order, the Commission reaffirmed its prior
delegation of data collection authority to WCB and OEA, and directed
them to update and restructure their most recent data collection as
appropriate in light of the requirements of the new statute. In July
2023, WCB and OEA exercised this delegated authority and adopted the
2023 Mandatory Data Collection Order (88 FR 27850, May 3, 2023) to
collect information on the additional services and providers subject to
the Commission's newly expanded authority and address the Act's other
provisions where necessary.

III. Discussion

A. Unique Marketplace for Incarcerated People's Communications Services

23. The history of this proceeding makes crystal clear that the
IPCS marketplace ``is not a well functioning market with competitive
forces that would drive prices towards costs.'' Once a provider
successfully competes for a contract to serve a facility, it has a
monopoly over the provision of IPCS at that facility. Incarcerated
people play no role in the process of selecting IPCS providers or the
services they offer and have no choice but to pay the rates and charges
imposed if they wish to call their family or other loved ones.
Consumers have no means of switching to another provider and no means
of redress even if the IPCS provider ``raises rates, imposes additional
fees, adopts unreasonable terms and conditions for use of the service,
or offers inferior

[[Page 77248]]

service.'' As a result, there are no competitive forces to constrain
providers from imposing rates and charges that far exceed the costs
required to provide the services. This absence of competitive
alternatives to discipline IPCS rates justifies rate regulation
independent of the problematic role that site commissions historically
have played. We thus reject arguments that the elimination of site
commission payments calls into question the need for rate regulations.
In stating its preference for relying on competition and market forces
to discipline prices, the Commission has acknowledged ``there is little
dispute that the [IPCS] market is a prime example of market failure.''
This market failure persists today. Indeed, one provider aptly
summarizes the IPCS market dynamics today as follows:

Fundamentally, due to the inherent structure of the [IPCS]
marketplace, [IPCS] providers' rational economic incentive is to
entice confinement facilities to award the provider a service
contract as the facility, and confinement facilities' rational
economic incentive is to award contracts to [IPCS] providers who
provide the greatest payments (monetary or otherwise) to the
facility. Notably absent from the foregoing calculus are the [IPCS]
consumers themselves, despite the fact that they are the ones who
ultimately pay for [IPCS] service.

24. Despite Commission actions over the years to constrain rates
and charges in the audio IPCS marketplace, the monopolistic nature of
the marketplace has not changed, and remains ``characterized by
increasing rates, with no competitive pressures to reduce rates.'' The
``unusual market dynamics'' of the IPCS marketplace and the ``inability
of market forces to constrain IPCS rates'' are also evident in a still
nascent portion of the marketplace--video IPCS, making clear that
``some form of regulatory constraint . . . is needed to ensure that end
user rates are just and reasonable.'' The bipartisan Martha Wright-Reed
Act is a directive that the Commission provide such regulatory
constraint on the IPCS marketplace through ensuring ``just and
reasonable charges for telephone and advanced communications services
in correctional and detention facilities.''
25. Some commenters argue that the IPCS marketplace is competitive
because contracts are awarded based on a bidding process, an argument
that appears challenging to square with Congress's enactment of the
Martha Wright-Reed Act. Independently, the Commission has not been
persuaded by such arguments in the past, and we find no further
evidence in the record that might warrant a departure from this
conclusion. Instead, we continue to find that ``because correctional
officials typically allow only one provider to serve any given facility
. . . there are no competitive constraints on a provider's rates once
it has entered into a contract to serve a particular facility.''
Indeed, the Commission has found that providers' cost data reflect this
lack of competition in the industry. And the Commission has explained
how factors such as site commissions ` ``distort[ ] the [IPCS]
marketplace' by creating incentives for the facilities to select
providers that pay the highest site commissions, even if those
providers do not offer the best service or lowest rates.'' Thus, even
if there is ``competition'' in the bidding market as some providers
assert, it is not the type of competition the Commission recognizes as
having an ability to ``exert downward pressure on rates for
consumers.''

B. Impact on Consumers and Society

26. The Commission has long recognized--and worked to combat--the
negative consequences that unreasonable communications rates and
charges have on incarcerated people, their families and loved ones, and
society at large. The record in this proceeding provides overwhelming
evidence of the substantial burden excessive communications rates have
on the ability of incarcerated people to stay connected and maintain
the vital, human bonds that sustain families and friends when a loved
one is incarcerated. In fact, ``[t]he high costs of keeping in contact
drive more than 1 in 3 families, who are already financially burdened,
into debt for phone calls and visits with their loved ones.'' As the
Prison Policy Initiative explains, ``[t]he cost of everyday
communication is arguably the worst price-gouging that people behind
bars and their loved ones face.'' Color of Change highlights these
burdens through the story of Maria Marshall, who, ``after spending $120
in just two weeks to maintain contact with both her teenage son and her
ex-husband behind bars, was forced to make the difficult choice between
the two, as she struggled to pay exorbitant phone rates and could only
afford one of their accounts.'' Brian Howard, a formerly incarcerated
person, speaks for all too many in stating, ``though we have committed
a crime and became incarcerated, we incarcerate our family as well.''
27. The Commission held several public listening sessions to learn
firsthand from individuals directly impacted by unreasonable IPCS rates
and charges. In these sessions, witnesses testified to the high cost of
communications as being the primary barrier to keeping families
connected--despite the well documented benefits of ``maintaining
communication with loved ones during incarceration.'' Universally,
testimony from formerly incarcerated individuals stresses the burden
that unreasonable communications rates and charges have had on their
ability to communicate with their families. For example, Colette Payne,
both formerly incarcerated and having an incarcerated son, relates how,
because of the cost of phone calls, ``I wasn't always able to speak
with my own children during my incarceration.'' Kim Thomas, a formerly
incarcerated person, explains the anguish of mothers ``who gave birth
while incarcerated and did not get to see their child for 18 months,
physically or in any other way.'' Other formerly incarcerated people
emphasize how the high cost of communications prevents mothers from
regularly speaking to their children. One grandmother, whose daughter
is incarcerated, details how her four young grandchildren are only able
to speak to their mother every ``week and a half and two weeks if
that'' because communications are so expensive. Jada Cochran, who gave
birth in prison and whose mother raised her four young children while
she was incarcerated, cried as she lamented that her mother could not
afford many calls, despite the fact they were her ``lifeline to my
family, to my children.'' Brione Smith, a teenager whose father is
incarcerated, describes being devastated when she could not reach her
father after her best friend and grandfather died within a few weeks of
each other.
28. Participants at the Commission's listening sessions explain how
the unreasonably high communications rates at times force incarcerated
people and their families to choose between basic necessities, such as
between food, and communications. For example, Deon Nowell reports at
the Chicago listening session how some incarcerated people had to beg
for food to reserve enough money to call their families. Ana Navarro
describes how families must choose between communication or rent, food,
or school supplies. Kim Thomas, a formerly incarcerated person,
explains how incarcerated people earn ``about 15 cents an hour. . . .
So if you calculate that out, it's not very much money, and you choose
to make a phone call or buy soap.'' Incarcerated people with
disabilities that impact their ability to communicate continually
experience barriers to access because ``prison

[[Page 77249]]

administrators fail to understand their communication needs.''
29. The benefits of communications between incarcerated people and
their families are wide-ranging and well-documented. For decades,
studies have linked regular contact with family with lowering rates of
recidivism and increasing likelihood of successful reentry into society
after release. During the listening sessions, the formerly incarcerated
emphasized how communication with family decreases recidivism and
sustains hope. Children who have regular communications with an
incarcerated parent have ``better relationships with that parent.''
Without these connections, incarcerated people tend to lose contact
with the outside world and can lose hope of reengaging with society and
their loved ones. Others suggest that unlawful activities within
correctional facilities would likely decrease if communications
services were affordable and accessible. Rosalind Akins, whose grandson
was formerly incarcerated, describes how ``[p]eople become induced
mentally ill because they can't communicate.'' Deon Nowell explains
that lower communications rates will ``help [the incarcerated people]
make the right decision. That's why it's called rehabilitation. Help
[the incarcerated people] to make the right decision, especially when
it deals with the costs of communications.''
30. The Martha Wright-Reed Act charges us with evaluating and
breaking down the financial barriers to communications between
incarcerated people and their families, consequently lessening the
burden of having to choose between buying food and communicating with
their family members, and helping facilitate a successful transition to
a life outside of correctional facilities. The Act gives us the tools
we need to meet these objectives. We anticipate that by lessening the
financial burdens of staying connected, the reforms we adopt today will
promote increased communication--allowing the preservation of essential
family ties, keeping vital family connections alive by enabling
incarcerated people to parent their children and connect with their
spouses, and helping families stay intact.

C. Interpreting the Martha Wright-Reed Act and the Commission's
Authority Thereunder

1. Purpose and Scope of the Martha Wright-Reed Act
31. In the Martha Wright-Reed Act, Congress gave the Commission a
clear mandate to fix a ``broken system,'' one in which the rates and
charges that incarcerated people pay to communicate with those they
love far exceed the amounts other Americans pay. The 2023 IPCS Notice
of Proposed Rulemaking (NPRM) (88 FR 20804, April 7, 2023) sought
comment on the proper interpretation of the scope and purpose of the
Martha Wright-Reed Act's amendments. We conclude that the Martha
Wright-Reed Act, taken as whole, fundamentally validates the
Commission's broad exercise of authority over IPCS. The record reflects
widespread agreement that the Martha Wright-Reed Act ``confers plenary
authority on the Commission'' to regulate a wide range of
communications services, including telephone and certain advanced
communications services, provided to incarcerated people regardless of
the technology or device used or a communication's status as interstate
or intrastate. More specifically, as certain commenters observe, the
Martha Wright-Reed Act's amendments to section 276 of the
Communications Act provide the Commission with authority over all IPCS
rates and charges, complemented by the Commission's section 201(b) of
the Communications Act authority over interstate and international
IPCS. The Commission has previously interpreted ``interstate,'' as used
in section 276 of the Communications Act, to include international
calling services. Consistent with our historical understanding of our
statutory authority--including in the IPCS context in the near-term
lead-up to the enactment of the Martha Wright-Reed Act--we adopt that
interpretation today, a step that no commenter opposes. Independently,
insofar as our rules treat international IPCS calls the same as
domestic IPCS calls, the record does not persuade us that it would be
practicable to make the sort of real-time jurisdictional determinations
that would enable our rules to distinguish international calls from
domestic calls in those scenarios, in any event. Congress's directives
guide our implementation of the Commission's responsibilities as
described in further detail below.
32. IPCS providers, state and local officials, and public interest
advocates broadly agree that this expanded authority over
communications services provided to incarcerated people includes not
just audio services, but also certain advanced communications services
that were previously outside the Commission's ratemaking authority. No
commenter challenges this overall interpretation of the purpose and
scope of the Martha Wright-Reed Act or suggests a more limited view of
the Commission's authority. We find no basis for disagreeing with this
consensus view, and thus, we exercise the full degree of our authority
in this regard to adopt a compensation plan ensuring just and
reasonable rates and charges, as well as fair compensation for
providers of incarcerated people's audio and video communications
services. We analyze below the specific amendments to section 276 of
the Communications Act included in the Martha Wright-Reed Act that
collectively expand our jurisdiction over IPCS and interpret each
amendment, consistent with the overarching goal of the Act--just and
reasonable rates for IPCS consumers and fair compensation for IPCS
providers.
2. Addition of ``Other Calling Device[s]''
33. At the outset of our analysis, we address the fact that the
Martha Wright-Reed Act extends the Commission's authority over IPCS to
include not just communications using traditional payphones, but also
communications using ``other calling device[s].'' As amended, section
276(b)(1)(A) of the Communications Act directs the Commission to
establish a compensation plan so all payphone service providers are
fairly compensated for communications ``using their payphone or other
calling device.'' Based on the record and consistent with the
Commission's proposal in 2023, we interpret the term ``other calling
device[s]'' in the Martha Wright-Reed Act broadly to encompass all
devices that incarcerated people either use presently or may use in the
future to engage in covered communications with individuals not
confined within their correctional institutions. Our interpretation is
further confirmed by Congress's expansion of our authority over
advanced communications services in section 3(1)(E) of the
Communications Act, to include ``any audio or video communications
service used by inmates . . . regardless of technology used.''
34. There is support in the record for this expansive
interpretation. As the Public Interest Parties explain, ``Congress
chose to use expansive language covering `any technology used' to grant
the Commission authority as broadly as possible, intending to cover any
and all technologies that an incarcerated person may use to communicate
[by audio or video] today or in the future.'' The breadth of Congress's
language and the ``absence of additional qualifying language'' limiting
the scope of the term ``other calling

[[Page 77250]]

device[s]'' persuades us that a broad reading of this term is intended.
Under this reading, the Commission's authority extends to ``all types
of calling devices'' that incarcerated people may now or in the future
use to communicate by audio or video with those not confined in the
incarcerated person's correctional institution. Furthermore, the
Commission has long understood section 276(b)(1)(A) of the
Communications Act to set requirements governing TRS communications
using TRS devices in correctional facilities. Given that backdrop,
coupled with the fact that TRS is designed to ensure service
functionally equivalent to telephone service, we conclude that
``payphone[s]'' and ``other calling devices'' under section
276(b)(1)(A) include devices that people with disabilities use for
purposes of ``communications'' regardless of whether the devices convey
those communications using audio and/or video, or also (or instead)
text, braille, or another communications medium.
35. To be clear, as proposed in 2023, the interpretation of ``other
calling device[s]'' we adopt today encompasses all wireline and
wireless phones, computers, tablets, and other communications equipment
capable of sending or receiving audio or video communications described
in section 276(d) of the Communications Act, regardless of transmission
format. And, ``[c]onsistent with the Commission's mandate to provide
Telecommunications Relay Service (`TRS') for incarcerated people with
disabilities,'' this statutory phrase also includes all wireline and
wireless equipment, whether audio, video, text, other communications
medium, or some combination thereof that incarcerated people with
disabilities presently use to communicate, through any payphone
service, with the non-incarcerated, including but not limited to
videophones, captioned telephones, and peripheral devices for
accessibility, such as braille display readers, screen readers, and
TTYs.
36. Finally, as proposed in 2023, our interpretation of ``other
calling device[s]'' includes other potential devices, not yet in use,
to the extent incarcerated people, including those with disabilities,
use them for covered communications in the future. Such a future-
oriented interpretation is necessary to ensure that IPCS rates and
charges remain just and reasonable, and that providers continue to be
fairly compensated, as IPCS technology evolves. It also will, to the
extent possible, keep IPCS providers from shifting ``exploitative
practices to spaces left unregulated'' by our actions today.
3. The Requirement To Establish a Compensation Plan
37. The Martha Wright-Reed Act preserved the requirement in section
276(b) of the Communications Act that the Commission ``establish a
compensation plan'' as a principal means of achieving the statutory
goals with regard to IPCS. As amended, section 276(b)(1)(A) requires
that this compensation plan ensure that ``all payphone service
providers are fairly compensated'' for completed communications and
that ``all rates and charges [for those communications] are just and
reasonable.'' The statute further requires the Commission to implement
this statutory directive by rule. We now turn to the legal framework
envisioned by the statute for establishing a compensation plan that
will realize these statutory goals.
a. Addition of the ``Just and Reasonable'' Requirement to Section
276(b)(1)(A)
38. We adopt the Commission's proposal that the term ``just and
reasonable,'' added to section 276(b)(1)(A) of the Communications Act
by the Martha Wright-Reed Act, be interpreted as having the same
meaning as the term ``just and reasonable'' in section 201(b) of the
Communications Act. Prior to the Martha Wright-Reed Act, section
276(b)(1)(A) contained no ``just and reasonable'' requirement. Instead,
that section required the Commission to evaluate payphone rates on a
per-call basis and to ensure that providers were fairly compensated for
each and every completed call. Congress, however, modified this
approach in the Act by removing the ``per call'' and ``each and every''
completed call language from section 276(b)(1)(A), which instead now
requires that all payphone service providers be fairly compensated, and
that all rates and charges imposed by those providers be ``just and
reasonable.'' Not only is there strong support in the record for the
conclusion that ``just and reasonable'' for the purposes of revised
section 276(b)(1)(A) has the same meaning as ``just and reasonable'' in
section 201(b), but the rules of statutory construction and judicial
precedent buttress this finding.
39. By way of example, the Public Interest Parties explain, and we
agree, that ``[t]racking the Section 201(b) meaning is the most sound
reading of the statute and of congressional intent,'' consistent with
the understanding ``that Congress was aware of the Section 201(b)
standard--and the Commission's decades of relevant precedent
interpreting it--when it chose to add the identical term to Section
276.'' The Supreme Court likewise explained in FCC v. AT&T that
``identical words and phrases within the same statute should normally
be given the same meaning.'' Both of these tenets have particular force
here. The identical terms ``just and reasonable'' appear in section
201(b) and have now been added to section 276(b)(1)(A), both sections
of Title II of the Communications Act, to describe the required end
result of our ratemaking. The Martha Wright-Reed Act also was enacted
against the regulatory backdrop of--and in response to--the GTL v. FCC
decision, where the D.C. Circuit found that the Commission unreasonably
relied on the ``just and reasonable'' standard of section 201(b) when
implementing the differently-worded language of section 276. Further,
in the wake of GTL v. FCC, the Commission continued to regulate rates
and practices for interstate and international IPCS services under its
section 201(b) ``just and reasonable'' authority, informed by the
obligation to ensure ``fair'' compensation under section 276(b)(1)(B).
40. Nothing in the text of the Martha Wright-Reed Act leads us to
believe that Congress intended to alter that general regulatory
approach in our implementation of section 276(b)(1)(A) in the case of
services we previously have regulated under section 201(b). Instead,
that regulatory backdrop reinforces our conclusion that ``just and
reasonable'' is best interpreted in a manner that harmonizes the
application of that standard in sections 201(b) and 276(b)(1)(A). The
record also provides no reason to interpret ``just and reasonable''
differently in the two sections of the Communications Act. We thus find
that ``just and reasonable'' has the same meaning in both statutory
provisions and regardless of the services to which the phrase is
applied.
41. The Used and Useful Framework. As Congress has imported section
201(b)'s ``just and reasonable'' standard into section 276(b)(1)(A), we
next find that the standard the Commission has used to determine just
and reasonable rates under 201(b) should also apply to our ratemaking
under section 276(b)(1)(A). Historically, the ``used and useful''
framework has ``both informed the Commission's regulatory cost
accounting and ratemaking rules and operated to protect the interests
of ratepayers and carriers.'' The record supports our conclusion that
this framework provides the most appropriate mechanism for ensuring
just and reasonable rates and charges for

[[Page 77251]]

IPCS, and therefore applies to all IPCS over which we now have
authority.
42. Accordingly, we rely on ``the `used and useful' doctrine and
its associated prudent expenditure standard'' to assess the costs that
should either be included or excluded from our rate cap calculations to
ensure just and reasonable rates and charges for IPCS. Under this
framework, the determination of just and reasonable rates focuses on
affording regulated entities an opportunity to recover their
``prudently incurred investments and expenses that are `used and
useful' in the provision of the regulated service for which rates are
being set.'' The used and useful framework permits regulated entities
to earn a reasonable return on their resources dedicated to public use
but it does not allow them to include a markup for profit beyond that.
This ``used and useful'' framework, which ``is rooted in American legal
theory and particularly in the constitutional limitations on the taking
of private property for public use,'' balances the ``equitable
principle that public utilities must be compensated for the use of
their property in providing service to the public'' with the
``[e]qually central . . . equitable principle that the ratepayers may
not fairly be forced to pay a return except on investment which can be
shown directly to benefit them.'' In this Order, we use the term ``used
and useful framework'' to refer collectively to the ``used and useful''
standard and the ``prudent expenditure'' standard. In applying these
principles, ``the Commission considers whether the investment or
expense `promotes customer benefits, or is primarily for the benefit of
the carrier.' '' There are several elements of the Commission's used
and useful analysis. First, the Commission considers the need to
compensate providers ``for the use of their property and expenses
incurred in providing the regulated service.'' Second, the Commission
looks to the ``equitable principle that ratepayers should not be forced
to pay a return except on investments that can be shown to benefit
them.'' In this regard, the Commission considers ``whether the expense
was necessary to the provision of'' the services subject to the ``just
and reasonable''. And third, the Commission considers ``whether a
carrier's investments and expenses were prudent (rather than
excessive).'' As the Commission has explained, ``[t]he used and useful
and prudent investment standards allow into the rate base portions of
plant that directly benefit the ratepayer, and exclude any imprudent,
fraudulent, or extravagant outlays.''
43. As one commenter suggests, the used and useful framework allows
us to recognize all IPCS costs that benefit IPCS users, including any
such costs incurred by correctional facilities, as costs that should be
recovered though IPCS rates and charges. Conversely, that framework
allows us to exclude from that recovery any costs that do not benefit
IPCS users, either because they were imprudent or because they were for
non-IPCS products or services, regardless of whether the provider or
the facility incurred them. In short, the used and useful framework
functions as an ``equitable principle'' that prevents ratepayers from
having to pay for costs that are ``primarily for the benefit of the
carrier,'' while allowing regulated entities to be compensated for
providing service.
44. Some commenters express concerns over our reliance on the used
and useful framework in the IPCS context, describing the framework as
being ``a vestige of rate-of-return regulation.'' To the contrary, we
find that the framework remains the most practical and effective method
for determining the costs providers and facilities reasonably incur in
providing IPCS. As historically applied by the Commission, the used and
useful framework limits the costs recoverable through regulated rates
and charges to ``prudently incurred investments and expenses that are
`used and useful' in the provision of the regulated service.'' Contrary
to Pay Tel's and Securus's representations, our application of the used
and useful standard is not ``novel'' or otherwise inappropriate as
applied in the Report and Order. The used and useful standard is ``a
standard regulatory agencies have been using for decades'' to
``determine whether a regulated company's expenses are justified.
Nothing about the Commission's approach here is novel. Instead, it
reflects the familiar ratemaking exercise the Commission routinely
undertakes to determine those capital costs and expenses that may be
recovered through regulated rates. To the extent Pay Tel's argument is
premised on the notion that the used and useful standard ``is nowhere
specified in the Martha Wright-Reed Act or in Section 276,'' we explain
above that as Congress has imported section 201(b)'s ``just and
reasonable'' standard into section 276(b)(1)(A), the used and useful
framework that the Commission's has used to determine just and
reasonable rates under section 201(b) provides the most appropriate
mechanism for determining just and reasonable rates under section
276(b)(1)(A). And, in any event, section 201(b) is similarly silent on
the applicability of the used and useful standard. Further, we do not,
as Pay Tel suggests, rely on the used and useful framework ``to the
exclusion of `fair compensation.' '' As we explain below, the text of
section 276(b)(1)(A), as amended by the Martha Wright-Reed Act,
requires the Commission to implement both provisions in tandem, which
we do in setting rate caps using a zone of reasonableness approach. We
disagree with those commenters who argue that competition in the IPCS
market makes application of the used and useful standard unnecessary.
That argument conflates the bidding market (i.e., the market in which
IPCS providers compete against each other to win contracts with
correctional facilities) with the retail market (i.e., the market in
which IPCS consumers pay rates and charges for the communications
services that we must ensure are just and reasonable). Indeed, the
Commission has previously determined that ``even if there is
competition in the bidding market . . . it is not the type of
competition the Commission recognizes as having an ability to exert
downward pressure on rates for consumers.'' Pay Tel and ViaPath contend
that ``IPCS providers [should be] free to best determine how to manage
their investments and expenses.'' Allowing providers such complete
flexibility would run contrary to the plain text in the Martha Wright-
Reed Act and congressional directive to the Commission. Moreover, this
type of behavior has thus far resulted in unreasonable IPCS rates and
charges for consumers, underscoring the need for us to apply the used
and useful (or a similar) framework to prevent the inclusion of
imprudent and non-IPCS costs in IPCS rates and charges.
45. We also find unpersuasive arguments that we should allow all
prudently incurred ``operating expenses'' to be recovered through IPCS
rates and charges even if those expenses are not used and useful in the
provision of IPCS and related ancillary services. The National
Sheriffs' Association, in particular, expresses concern that the costs
of some expenditures that correctional officials find prudent,
including expenditures for certain safety and security measures, will
be excluded from our ratemaking calculus. It claims that relying on the
used and useful standard is inconsistent with section 4 of Martha
Wright-Reed Act, which specifies that ``[n]othing in the Act shall be
construed to . . . prohibit the

[[Page 77252]]

implementation of any safety and security measures'' related to IPCS
``at a State or local prison, jail, or detention facility.''
46. The National Sheriffs' Association's reasoning, however, does
not fully comport with the language of the Martha Wright-Reed Act
addressing safety and security measures. Section 3(b)(2) of that Act
requires that we ``consider costs associated with any safety and
security measures necessary to provide'' IPCS in promulgating
implementing rules and in ``determining just and reasonable rates'' for
IPCS. But neither section 3(b)(2) nor any other provision of the Martha
Wright-Reed Act concludes or requires that every safety and security
measure that a correctional institution chooses to implement in
connection with IPCS is ``necessary to provide'' IPCS, or mandate that
we require consumers to pay for all those measures through IPCS rates.
47. Rather, when read in conjunction with section 3(b)(2) and the
other provisions of the Martha Wright-Reed Act, section 4 simply makes
clear that, in directing the Commission to develop a compensation plan
to ensure just and reasonable IPCS rates and charges, Congress did not
intend to intrude on the ability of correctional institutions to
``adopt policies that, in their judgment, are needed to preserve safety
and security.'' Our actions in this Order make no such intrusion. We do
not prohibit any correctional institution from implementing any safety
and security measure that it deems appropriate or desirable. We do,
however, ensure that IPCS consumers do not bear the costs of those
safety and security measures that are not necessary to provide IPCS
regardless of how desirable these measures may be to correctional
institutions. Section 4 does not preclude such an outcome.
48. The Commission has relied on the used and useful framework to
ensure just and reasonable rates for decades. Our decision to apply
that framework in determining which costs should be recoverable from
consumers through IPCS rates and charges is fully consistent with the
Communications Act, as amended by the Martha Wright-Reed Act, as well
as with Commission precedent, including Commission regulation of IPCS
rates that formed the regulatory backdrop to the enactment of the
Martha Wright-Reed Act. The used and useful framework, including its
prudent expenditure component, embodies core ratemaking principles that
the Commission has long used to separate the costs that captive
ratepayers should pay for regulated services from those that are either
properly attributable to other products or services or excessive. In
applying that framework, along with the ``necessary'' standard that
section 3(b)(2) of the Martha Wright-Reed Act specifies for the costs
of safety and security measures and the other standards set forth in
that Act, we discharge our statutory duties, consistent with record
support, without intruding into matters outside our authority.
b. Effect on Other Laws
49. Section 4 of the Martha Wright-Reed Act provides additional
direction regarding the effect of the Act on existing laws. Section 4
consists of two clauses that are meant to guide the interpretation of
the remainder of the Act. The first clause of section 4 of the Act
specifies that ``[n]othing in this Act shall be construed to modify or
affect any Federal, State or local law to require telephone service or
advanced communications services at a State or local prison, jail, or
detention facility.'' We interpret ``this Act,'' as used in section 4
of the Martha Wright-Reed Act, as referring the Martha Wright-Reed Act,
rather than the Communications Act. All parties commenting on the
meaning of section 4 accept this interpretation. In 2023, the
Commission sought comment on the meaning of this statutory language.
The Commission asked whether ``the language of this clause simply
mean[s] that the Martha Wright-Reed Act does not create any new
obligation for state or local facilities to provide any form of
incarcerated people's calling services.'' The National Sheriffs'
Association supports this interpretation, adding that the language of
the Martha Wright-Reed Act would not support ``any new requirement to
make IPCS available.'' The United Church of Christ and Public Knowledge
likewise agree that ``this provision demonstrates that the Act does not
affirmatively require any additional service offerings'' at
correctional institutions. No commenter disputes this interpretation of
the first clause of section 4. We conclude that this clause means that
the Martha Wright-Reed Act neither expressly nor by implication
modifies any federal, state or local law in a manner that would require
the provision of any new or additional incarcerated people's
communications services at any state or local correctional institution.
50. The second clause of section 4 specifies that nothing in the
Martha Wright-Reed Act ``shall be construed to . . . prohibit the
implementation of any safety and security measures related to''
telephone service or advanced communications services at a State or
local prison, jail, or detention facility. In 2023, the Commission
sought comment on how to interpret this clause and asked, in
particular, whether the clause means that the Martha Wright-Reed Act,
with its focus on ``just and reasonable ratemaking'' was ``not intended
to interfere with any correctional official's decision on whether to
implement any type of safety or security measure that the official
desires in conjunction with audio or video communications services.''
Two commenters support this interpretation of the second clause of
section 4. In contrast, the United Church of Christ and Public
Knowledge contend more narrowly that ``this provision demonstrates that
the Act does not . . . prohibit safety and security measures.''
51. While the Commission's initial request for comment seems to
suggest the more expansive reading of the second clause of section 4
that the National Sheriffs' Association supports, we now conclude that
a narrower reading of that clause will more closely reflect the limited
scope of the statutory language. We find that the National Sheriffs'
Association's interpretation is overbroad and would expand the reach of
the second clause beyond its intended scope. When read in conjunction
with the other provisions of the Martha Wright-Reed Act, the second
clause of section 4 of that Act simply makes clear that, in directing
the Commission to develop a compensation plan to ensure just and
reasonable IPCS rates and charges, Congress did not intend to prohibit
correctional institutions from implementing policies that, in their
judgment, are needed to preserve safety and security. Consistent with
that interpretation and the specific language of section 4, we
interpret the second clause of section 4 as precluding us from
construing any provision of that Act as making such a prohibition
regarding the implementation of any safety and security measures at any
federal, state, or local correctional institution.
51. The National Sheriffs' Association expresses concern that the
costs of some expenditures for certain safety and security measures
will be excluded from our ratemaking calculus. The National Sheriffs'
Association relies on its broader interpretation of section 4 to assert
that the Commission must not ``interfere with the operation of jails by
eliminating their ability to recover [safety and security] costs''
through IPCS rates. Although the National Sheriffs' Association admits
that excluding certain safety and security costs from IPCS rates ``is
not a prohibition per se,'' it claims that, in

[[Page 77253]]

practice, disallowing any costs associated with safety and security
measures that law enforcement officials have approved effectively
prohibits the measures from being implemented.
53. The National Sheriffs' Association's reasoning, however, does
not comport with the broader statutory context of the Martha Wright-
Reed Act addressing safety and security measures. In particular,
section 3(b)(2) of that Act requires that we ``consider costs
associated with any safety and security measures necessary to provide''
IPCS in promulgating implementing rules and in ``determining just and
reasonable rates'' for IPCS. The best interpretation of the Martha
Wright-Reed Act will ensure a meaningful role for both section 3(b)(2)
and section 4.
54. If section 3(b)(2), of its own force, required the Commission
to allow recovery of all costs identified by providers or correctional
facilities as safety and security costs in regulated rates, as some
commenters suggest, then there would seem to be little to no possible
risk that such safety and security measures could be ``prohibited''
because they would, instead, be affirmatively funded by IPCS
ratepayers. That would leave section 4 with little or no risk to
address in that regard, and thus the relevant language of section 4
would be of substantially diminished significance. We reject Securus'
suggestion that failure to find all safety and security measures
``necessary'' and recoverable would violate the Administrative
Procedure Act (APA). As revealed by our consideration of the relevant
issues and the record before us on safety and security issues below, we
fully ensure that we have ``acted within a zone of reasonableness and,
in particular, ha[ve] reasonably considered the relevant issues and
reasonably explained the decision.'' We recognize that section 3(b)(2)
is focused on ``costs associated with any safety and security measures
necessary to provide'' IPCS, Martha Wright-Reed Act Sec. 3(b)(2)
(emphasis added), while section 4 is focused on ``safety and security
measures related to'' IPCS. Martha Wright-Reed Act Sec. 4 (emphasis
added). Despite the potential that ``necessary'' in section 3(b)(2) is
a narrower standard than ``related to'' in section 4, it is not clear
how much practical significance that would have if, as some commenters
contend, the Commission is required to simply defer to providers' and/
or correctional facilities' on what safety and security costs must be
recoverable in IPCS rates. But even under a stricter standard, we are
persuaded that mandatory recovery through IPCS rates of all ``costs
associated with any safety and security measures necessary to provide''
IPCS would leave the relevant proviso of section 4 of substantially
diminished significance.
55. Conversely, if section 4 were read to require recovery of the
full array of safety and security costs--deferring to the correctional
facilities' decision to approve the use of particular measures when
doing so--there would seem to be little meaningful left for the
Commission to ``consider'' in that regard under section 3(b)(2).
Matters such as identifying the magnitude of such costs and how they
should be allocated already would be necessitated by the ``just and
reasonable'' requirement in section 276(b)(1)(A) of the Communications
Act, as amended by the Martha Wright-Reed Act, if section 4 were
interpreted to require such recovery. That, in turn, would leave
section 3(b)(2) of substantially diminished significance.
56. Our interpretation of those provisions, by contrast, preserves
a meaningful role for each, particularly when understood in light of
the relevant regulatory backdrop. In the years leading up to the
enactment of the Martha Wright-Reed Act, one of the most-debated issues
was the recovery through IPCS rates of payments providers made to
correctional facilities, ostensibly--at least in some instances--
associated with safety and security measures. Some parties argued for a
categorical prohibition on any such recovery, while other parties
advocated for full recovery through IPCS rates of virtually any such
asserted costs or payments. For its part, the Commission sought to
navigate these competing claims by seeking to use the best available
evidence to assess whether there were costs--such as safety and
security costs--with a sufficient nexus to IPCS to potentially warrant
recovery of those costs in IPCS rates; using the best available data to
seek to quantify those costs; and continuing to evaluate additional
tools it might use to address the continued concerns about such cost
recovery, including possible preemption. Our reading of section 3(b)(2)
reflects an approach to safety and security costs analogous to the
middle path the Commission historically has sought to take. By
requiring that such costs be ``considered''--but only that they be
``considered''--the Martha Wright-Reed Act makes clear that it is not
putting a thumb on the scale of either extreme position by
categorically precluding or categorically allowing recovery of claimed
safety and security costs through regulated IPCS rates. At the same
time, section 4 of the Martha Wright-Reed Act makes clear that the
Commission cannot use that Act as a basis to go so far as outright
``prohibit[ing] the implementation of any safety and security measures
related to'' IPCS--such as by preempting even the implementation of
such measures--while not foreclosing the possibility that correctional
facilities ultimately must look elsewhere besides IPCS provider
payments passed through in IPCS rates to fund some (or many) of those
measures.
57. Our actions in this Order do not prohibit any correctional
institution from implementing any safety and security measure that it
deems appropriate or desirable. We do, however, ensure that IPCS
consumers do not bear the costs of those safety and security measures
that are not used and useful or necessary to provide IPCS regardless of
how desirable these measures may be to correctional institutions.
Section 4 does not preclude such an outcome.
58. In addition, without conceding the factual merits of the
National Sheriffs' Association's claim regarding our ability to exclude
costs of safety and security measures that are neither used and useful
nor necessary from our ratemaking analysis, as a statutory matter we
observe that in other contexts where Congress wanted to prevent not
only the prohibition of certain conduct, but even things that
effectively prohibit such conduct, it has done so explicitly.
Particularly because our interpretation best reconciles sections
3(b)(2) and 4 of the Martha Wright-Reed Act, we are not persuaded to
infer a de facto prohibition--a prohibition in fact--from the language
of section 4 as the National Sheriffs' Association suggests. With
respect to the factual merits of the National Sheriffs' Association
claims, we have provided for the recovery generally of used and useful
costs, including costs for necessary safety and security measures,
through the rate caps we adopt today. We find our actions adequately
address concerns about a de facto prohibition of safety and security
measures in this context.
c. Implementation of the ``Fairly Compensated'' Standard in Section
276(b)(1)(A)
59. We now turn to the requirement that we establish a compensation
plan to ensure IPCS providers are fairly compensated. We conclude that,
in addition to ensuring ``just and reasonable'' rates and charges, our
compensation plan for IPCS must accord meaning to the ``fairly
compensated'' clause in section 276(b)(1)(A) and its relationship to
the

[[Page 77254]]

``just and reasonable'' rates and charges mandate.
60. Meaning of the Fair Compensation Standard. We conclude that our
compensation plan for IPCS must give full effect to both the ``just and
reasonable'' and the ``fairly compensated'' clauses in section
276(b)(1)(A). In 2023, the Commission sought comment on how it should
balance the interests of both consumers and industry in giving effect
to both clauses. As proposed in 2023, we determine that giving effect
to both standards requires a balanced approach that ``emphas[izes]
consumers' (particularly incarcerated people's) and providers' right to
just and reasonable rates and charges for each audio and video
communications service now encompassed within the statutory definition
of `payphone service,' '' as well as ensuring that such rates ensure
that ``all payphone providers are fairly compensated.'' We thus reject
Securus's claim that the Order ``simply collapses the fair compensation
standard into the just and reasonable standard.'' As we explain, our
rate-making methodology and statutory interpretation of the Martha
Wright-Reed Act ensure that both standards are given full effect.
61. We view these clauses as imposing two interdependent statutory
mandates, each of which we must seek to fully implement. As discussed
below, as a general matter a range of possible outcomes potentially can
be found ``just and reasonable'' and a range of possible outcomes
potentially can be found to ``fairly compensate'' IPCS providers.
Because of that, we anticipate being able to find areas of overlap in
those two ranges that will satisfy both statutory mandates. We find
this expectation particularly reasonable given that the ``just and
reasonable'' precedent under section 201(b)--which we carry into our
application of section 276(b)(1)(A)--already involves a balancing that
accounts for the service provider's interests.
62. With respect to the ``just and reasonable'' mandate, as
discussed above, that directive leads us to balance the ``equitable
principle that public utilities must be compensated for the use of
their property in providing service to the public'' with the
``[e]qually central . . . equitable principle that the ratepayers may
not fairly be forced to pay a return except on investment which can be
shown directly to benefit them,'' drawing on Commission precedent under
section 201(b). In determining rates that are ``just and reasonable''
we look to whether costs to be recovered were prudently incurred and
used and useful in the provision of the services at issue. That
framework does not inevitably lead to a single ``just and reasonable''
rate, however, but allows for a range of rates with the agency
potentially able to find any rate with that zone to be ``just and
reasonable.''
63. There also is a body of precedent regarding the interpretation
of the ``fairly compensated'' mandate historically present in section
276(b)(1)(A)--but our approach here must account for certain ways in
which the Martha Wright-Reed Act altered the operative statutory
approach, necessitating related departures from that historical
precedent. Under that precedent, regulated rate levels historically
were viewed as in accordance with the ``fairly compensated'' standard
if they ``allow providers to generate sufficient revenue from each
interstate and international call--including any ancillary service fees
attributable to that call--(1) to recover the direct costs of that
call; and (2) to make a reasonable contribution to the provider's
indirect costs related to inmate calling services.'' As the Commission
recognized in the 2002 Pay Telephone Order--and recognized again in the
2021 ICS Order--the ``lion's share of payphone costs are those that are
`shared' or `common' to all services,'' and there are ``no logical or
economic rules that assign these common costs to `each and every call.'
'' As a result, ``a wide range of compensation amounts may be
considered `fair.' '' Securus argues that we have departed from the
2002 Pay Telephone Order's fair compensation determination based on
overall profitability to determine fair compensation evaluating
``profitability on a call-by-call basis.'' We disagree. Further,
Securus has not explained the difference between these two views of
profitability, and has not articulated why a provider would not be
profitable overall if it were profitable on a call-by-call basis.
64. The Continued Role of the Fair Compensation Standard. Prior to
the enactment of the Martha Wright-Reed Act, section 276(b)(1)(A) of
the Communications Act required that the Commission ``establish a per
call compensation plan'' ensuring that service providers be ``fairly
compensated for each and every completed'' call. The Martha Wright-Reed
Act eliminated the ``per call'' and ``each and every'' call
requirements and added a new dimension to section 276 by requiring that
our compensation plan for IPCS ``ensure that . . . all rates and
charges'' for incarcerated people's communications services ``are just
and reasonable.'' We disagree with UCC's argument that it would be
``arbitrary and capricious'' to require fair compensation for
providers. This is contrary to the explicit statutory text of section
276(b)(1)(A) that requires fair compensation. In 2023, the Commission
sought comment on how the Martha Wright-Reed Act's amendments to
section 276(b)(1)(A) affect the ``fairly compensated'' requirement in
that section. In particular, the Commission sought comment on
Congress's intent in striking the ``per call'' and ``each and every
[call]'' language from section 276(b)(1)(A) and the effect of its
removal on the ``fairly compensated'' requirement, particularly in
light of the Martha Wright-Reed Act's new requirement that all IPCS
rates and charges be just and reasonable.
65. The record persuades us that in striking the ``per call'' and
``each and every [call]'' language, Congress modified but did not
eliminate the requirement that providers be fairly compensated for
completed intrastate and interstate communications. Instead, as Pay Tel
explains, the fair compensation requirement ``was left as an
independent requirement by the Martha Wright-Reed Act, reflecting a
purposeful decision by Congress to retain the requirement as an
essential component of [IPCS] reform.'' We agree that we should not
``effectively read the requirement out of the statute or diminish its
importance.'' Instead, we address the fair compensation and just and
reasonable standards as interdependent standards as we implement the
requirements of section 276(b)(1)(A).
66. At the same time, we reject suggestions that the ``just and
reasonable'' mandate could be treated as subsidiary to the ``fairly
compensated'' mandate. We therefore reject any argument that IPCS rates
or ancillary services charges ``must be higher than they otherwise
would be under a `just and reasonable' '' analysis in order ``to
achieve `fairness.' '' The text of section 276(b)(1)(A) as amended by
the Martha Wright-Reed Act requires the Commission to implement both
provisions in tandem. And because the two mandates potentially can be
satisfied through a range of outcomes, the record here does not
persuade us that we will be forced into a situation where one mandate
must yield for the other mandate to be met.
67. Interpreting the Fair Compensation Standard in Light of the
Martha Wright-Reed Act. While we conclude that our compensation plan
for IPCS must accord meaning to the ``fairly compensated'' clause in
section 276(b)(1)(A), we also conclude that the

[[Page 77255]]

Martha Wright-Reed Act alters our interpretation and application of
that clause in certain key ways. For one, deletion of the ``per call''
and ``each and every [call]'' language from section 276(b)(1)(A)
fundamentally changes the requirements of that clause. Consistent with
the Commission's preliminary interpretation in 2023, we find that these
statutory amendments signal ``Congress's intent to restrict the
application of the `fairly compensated' requirement with respect to
[IPCS] by no longer requiring the Commission to ensure that its
compensation plan allows for `fair' compensation for `each and every'
completed call.'' Thus, while we must ensure that providers receive
fair compensation for completed intrastate and interstate
communications, we are not obliged to establish a per-call based
compensation plan, as section 276(b)(1)(A) previously required.
68. The Martha Wright-Reed Act also affects how we implement
section 276(b)(1)(A)'s directive that our compensation plan for IPCS
``ensure that all payphone service providers are fairly compensated''
for completed communications, consistent with the Act's amendments to
section 276(b)(1)(A). Section 3(b)(1) of the Martha Wright-Reed Act
grants us explicit authority to use ``industry-wide average costs.''
Use of industry-wide average costs, of necessity, evaluates provider
compensation on a more aggregated--rather than provider-by-provider--
basis. Section 3(b)(1) expressly permits the use of such data in
``determining just and reasonable rates'' as one permissible example,
alongside more general authority to use industry-wide average costs
``[i]n implementing this Act and the amendments made by this Act,'' and
``promulgating regulations under'' the Martha Wright-Reed Act's
amendments to the Communications Act. Nothing in the Martha Wright-Reed
Act compels the Commission to use ``the average costs of service of a
communications service provider'' in determining just and reasonable
rates. Martha Wright-Reed Act Sec. 3(b)(1). We thus reject Securus's
argument that the Commission somehow ``ignored'' the possibility of
using such costs in setting its rate caps. Based on that language we
interpret Congress as authorizing us to rely on industry-wide average
costs in implementing the ``fairly compensated'' mandate--and its
interplay with the ``just and reasonable'' mandate--as amended and
codified in section 276(b)(1)(A) by the Martha Wright-Reed Act. We
consequently interpret Congress' permission to use industry-wide
average costs to mean that rate caps based on costs evaluated on an
aggregated basis generally will satisfy the requirement that all
payphone service providers be fairly compensated. The record supports
this interpretation. Consistent with the Martha Wright-Reed Act, and
its amendments to section 276(b)(1)(A), we therefore adopt rate caps
based on industry-wide average cost data submitted by IPCS providers in
response to the Commission's 2023 Mandatory Data Collection, as
described below.
69. We also observe that these provisions of the Martha Wright-Reed
Act respond directly to the D.C. Circuit's holding in GTL v. FCC that
setting rate caps based on industry-wide average costs was ``patently
unreasonable'' because ``calls with above-average costs'' would not be
fairly compensated on a per call basis. The elimination by Congress of
the ``per call'' and ``each and every [call]'' language from section
276(b)(1)(A) leads to the interpretation that compensation need not be
evaluated on a per-call basis. In addition, our reading of section
3(b)(1) of the Martha Wright-Reed Act persuades us that fair
compensation need not be evaluated on a provider-by-provider basis--
still subject, of course, to Constitutional limits on rate regulation
as applied to individual providers.
70. At the same time, the flexibility in evaluating costs described
in section 3(b)(1) of the Martha Wright-Reed Act is tempered by certain
requirements to consider particular costs or cost characteristics under
section 3(b)(2) of that Act. Section 3(b)(2) provides that the
Commission ``shall consider costs associated with any safety and
security measures necessary to provide a service.'' Under that
provision, the Commission also must consider cost differences
associated with ``small, medium, or large facilities or other
characteristics.'' Consistent with that provision, we therefore also
evaluate such costs considerations in the rate caps we adopt, as
described below.
71. Consistent with the Commission's analysis in the 2021 ICS
Order, we find that a provider will be fairly compensated within the
meaning of section 276(b)(1)(A), as amended by the Martha Wright-Reed
Act, if the rates and charges we find just and reasonable afford it an
opportunity to be fairly compensated at the level of the contract,
regardless of the contributions that any particular communication or
service makes toward the provider's shared and common costs, ensuring
efficient providers have an opportunity to obtain fair compensation
when bidding on contracts. We decline to set rate caps that ensure cost
recovery for providers with unusually high costs because to let unusual
cases determine rates generally would result in unjust and unreasonable
rates. Instead, if such providers exist, they can seek a waiver. In
that Order, the Commission found that compensation could be fair, when
measured on a per-call basis, even if ``each and every completed call''
did not ``make the same contribution to a provider's indirect costs''
(i.e., costs shared among, or common to, groups of calls) and even if
the provider did not ``recover the total `cost' it claims in connection
with each and every separate inmate calling services call.'' Instead,
the Commission recognized that ``the lion's share'' of inmate calling
services costs were shared or common costs and that there were a range
of economically sound methods of assigning these costs to individual
calls. Under this approach, a provider will be fairly compensated if
the rates and fees it is permitted to charge will afford it an
opportunity to recover industry-average costs associated with prudent
investments used and useful in providing IPCS and associated ancillary
services at the facilities the provider serves.
d. Rates and Charges
72. We interpret the statutory language ``rates and charges'' to
encompass the amounts imposed on consumers by IPCS providers as the
Commission proposed in 2023. Section 276(b)(1)(A), as amended by the
Act, requires that ``all rates and charges'' imposed by providers for
the eligible communications are just and reasonable. The 2023 IPCS NPRM
proposed to interpret ``rates'' to include ``the amounts paid by
consumers of incarcerated people's communications services for calls or
other audio or video communications covered by the statute or [the
Commission's] rules.'' And 2023 proposed to interpret ``charges'' to
include ``all other amounts assessed on consumers of incarcerated
people's communications services'' including ``ancillary service
charges, authorized fees, mandatory taxes and fees, and any other
charges a provider may seek to impose on consumers.'' The record
supports these interpretations. We are persuaded that the statutory
language ``rates and charges'' encompasses the amounts imposed on IPCS
consumers, as we proposed in 2023, whether ``rates'' and ``charges''
are interpreted individually or if ``rates and charges'' is understood
as an all-encompassing category.

[[Page 77256]]

73. The regulation of ``rates and charges'' lies at the core of the
Martha Wright-Reed Act, and the amendments to section 276. Prior to the
enactment of the Martha Wright-Reed Act, the Commission's rules
commonly used the term ``rates'' when referring to the amounts
consumers paid for inmate calling services calls, while at other times
referring to such amounts as ``charges.'' The Commission's rules also
at times use the term ``rates'' in connection with ancillary service
charges. Nonetheless, on balance we conclude that under our rules in
place at the time of the enactment of the Martha Wright-Reed Act, the
term ``rates'' should be understood as referring to the amounts paid by
consumers of incarcerated people's communications services for calls,
supporting our adoption of the interpretation of that term proposed in
2023. Our interpretation also comports with the broad ordinary meaning
of the term ``rate.''
74. We also conclude that ``charge[s]'' properly are interpreted as
including ancillary services charges, mandatory taxes, mandatory fees,
and authorized fees. The Commission's rules at the time of the Martha
Wright-Reed Act's enactment defined ``Ancillary Service Charge'' as
``any charge Consumers may be assessed for, or in connection with, the
interstate or international use of Inmate Calling Services that are not
included in the per-minute charges assessed for such individual
calls.'' Although the ancillary service charges that were permitted to
be assessed under the Commission's rules were limited to five discrete
categories, Congress notably did not use the term ``ancillary service
charges'' in the Martha Wright-Reed Act, instead using the more generic
term ``charges.'' Consequently, we do not find it appropriate to focus
narrowly on the scope of ancillary service charges specifically
permitted to be assessed under the Commission's rules. Rather,
consistent with Congress's use of the broader term ``charges,'' we look
to the distinction drawn between per-minute rates and any other
``charge[s] Consumers may be assessed for, or in connection with, the
interstate or international use of Inmate Calling Services.'' That
encompasses not only ancillary service charges permitted under the
Commission's rules, but the other amounts identified in 2023 such as
mandatory taxes, mandatory fees, and authorized fees. This
interpretation likewise comports with the broad ordinary meaning of the
term ``charge.''
75. As an alternative basis for our decision, we conclude that
``rates and charges'' can be interpreted collectively as reflecting a
``belt and suspenders'' approach to the Commission's regulatory
authority under section 276(b)(1)(A) that encompasses the full array of
amounts assessed on IPCS customers discussed above. The statutory
context and regulatory history are consistent with that understanding.
For example, leading up to the enactment of the Martha Wright-Reed Act,
the Commission relied on authority under section 201(b)--which refers
to ``charges'' but includes no express reference to ``rates''--to adopt
rules governing ``rates and charges'' for IPCS. Treating ``rates and
charges'' as a doublet that emphasizes that meaning of these
overlapping terms also harmonizes section 3(b) of the Martha Wright-
Reed Act--which addresses the Commission's consideration of certain
cost information when, among other things, ``determining just and
reasonable rates''--with the fact that the Act amended section
276(b)(1)(A) to include a mandate that the Commission ensure that
``rates and charges are just and reasonable'' for IPCS. This
understanding of ``rates and charges'' also is understandable given the
Commission's own sometimes inconsistent usage of ``rates'' and
``charges'' in its IPCS rules in effect at the time of enactment of the
Martha Wright-Reed Act. Given that statutory context and regulatory
history, ``rates and charges'' need not necessarily be understood as
embodying two distinct concepts, but rather as ensuring that Congress
collectively encompassed the full range of amounts assessed on IPCS
customers over which it wanted the Commission to have authority.
Further, this interpretation of ``rates and charges'' reflects the
substantial overlap in the ordinary meaning of those terms.
76. Notably, section 276(b)(1)(A) also specifies that ``all rates
and charges'' be just and reasonable. By specifying that ``all,'' as
opposed to some smaller subset of ``rates and charges,'' are to be just
and reasonable, Congress obviously intended to grant us broad
regulatory oversight of ``rates and charges.'' We find that the
requirement that ``all'' rates and charges be just and reasonable
applies both to the rates providers impose and the rates consumers
ultimately pay. Thus, the totality of the rates and charges a provider
assesses on or collects from consumers must be just and reasonable. We
find support for this in the record and judicial precedent.
77. Thus, we disagree with ViaPath that we should interpret ``rates
and charges'' as excluding mandatory taxes, mandatory fees, and
authorized fees. ViaPath contends that our ``current IPCS rules
acknowledge'' that ``authorized fees and mandatory taxes and fees are
separate and apart from ancillary service charges.'' As we explain
above, the Martha Wright-Reed Act uses a broader term than ``ancillary
service charges,'' and we conclude it best effectuates Congress' choice
for our interpretation to sweep more broadly than the specific
categories of ancillary service charges permitted under our existing
rules. Nor are we persuaded by ViaPath's efforts to rely on rules and
precedent from the operator services context. We find the statutory and
regulatory considerations that we have described here to be much more
pertinent to understanding Congress's actions against that precise
legal backdrop than precedent and rules cited by ViaPath that were
adopted in a context that we find at most tangentially related to our
regulation of IPCS as relevant here.
78. To exclude any tax or fee that a provider might impose on IPCS
consumers from the term ``all rates and charges'' would risk opening
the door to assessments that could undercut the requirement of section
26(b)(1)(A) that amounts IPCS providers impose--and that IPCS customers
pay--be just and reasonable. Indeed, the Commission recognized as much
in the 2015 ICS Order (80 FR 79135, December 18, 2015) when it
repeatedly referred to mandatory taxes, mandatory fees, and authorized
fees as charges and banned all inmate calling services ``fees or
charges beyond mandatory taxes and fees, and authorized fees that the
carrier has the discretion to pass through to consumers without any
mark up.'' The Commission concluded that this ban would help ensure
just and reasonable rates for inmate calling services. The record at
that time demonstrated that providers had been marking up taxes and
regulatory fees before passing them on to consumers and that those
inflated fees had contributed to unreasonable inmate calling services
rates and charges. Given the history of inflated ICS charges, there can
be no assurance of a just and reasonable end result for IPCS if the
definition of rates and charges were limited in the manner ViaPath
proposes, which would allow providers to impose additional charges on
consumers or to mark up their authorized fees, mandatory taxes, or
mandatory fees before recovering them from consumers. Indeed, a recent
class action lawsuit alleges that an IPCS provider charges consumers
inflated fees under the guise of taxes. The rules we adopt today do not
alter the circumstances in which providers may pass authorized fees,
mandatory taxes,

[[Page 77257]]

and mandatory fees through to consumers. We therefore conclude that the
statute requires us to consider the totality of the rates and charges a
provider assesses or collects from consumers to ensure that all IPCS
rates and charges are just and reasonable.
e. Authority To Regulate IPCS Providers' Practices
79. In 2023, the Commission sought comment on whether section
276(b)(1)(A)'s mandate that we ``establish a compensation plan to
ensure that . . . all rates and charges'' for incarcerated people's
communications services be ``just and reasonable'' extends to ensuring
that the providers' practices, classifications, and regulations for or
in connection with those services are just and reasonable. The
Commission also asked for comment on the extent of its section
276(b)(1)(A) authority, if any, to address providers' practices,
classifications, and regulations, as well as any limitations on that
authority. Based on the record, we conclude that the Martha Wright-Reed
Act provides us with limited authority to regulate IPCS providers'
practices, classifications, and regulations (collectively,
``practices'') as a necessary part of our obligation to establish a
compensation plan to ensure fair IPCS compensation to providers and
just and reasonable rates and charges for IPCS consumers and providers
under section 276(b)(1)(A). In addition, section 201(b)'s grant of
authority over practices for or in connection with interstate and
international common carrier incarcerated people's communications
services enables us to act in certain circumstances, as well. We
address these two sources of authority below.
80. Section 276(b)(1)(A) Compensation Plan Requirement. We conclude
that the section 276 requirement that the Commission ``establish a
compensation plan'' to achieve the goals of fair compensation for
providers and just and reasonable rates and charges for consumers and
providers, requires more of the Commission than the simple act of
setting rates and charges. When implementing section 276(b)(1)(A)
historically, the Commission has not limited itself just to the
regulation of rate levels when seeking to effectuate the ``fairly
compensated'' requirement that preceded the Martha Wright-Reed Act. By
adding the ``just and reasonable'' mandate, while leaving the directive
to establish a ``compensation plan'' unaltered, we understand Congress
to intend that the Commission undertake an integrated set of actions
designed to work in concert to achieve the statute's central goals of
fair compensation and just and reasonable rates and charges.
81. Long prior to the enactment of the Martha Wright-Reed Act, the
Commission implemented section 276(b)(1)(A)'s mandate to establish a
compensation plan to ensure payphone providers are fairly compensated
by addressing the practical details associated with charging for, and
receiving payment for, payphone services. In its implementation of
section 276(b)(1)(A) over time, the Commission adopted various
requirements in particular payphone contexts apart from simply rate
setting. Such requirements have included, among other things: (1)
requiring the transmission of information to enable tracking of calls
from payphones; (2) allocating responsibility for paying compensation
for payphone calls; and (3) defining the permissible arrangements
between payphone providers and the carriers paying them compensation
for payphone calls. A unifying premise of these requirements is that
their inclusion in a compensation plan enabled the Commission to
advance the fair compensation mandate in section 276(b)(1)(A).
82. In light of the Martha Wright-Reed Act's addition of the ``just
and reasonable'' mandate in section 276(b)(1)(A), we find that the
statute's direction to establish a compensation plan likewise
necessarily carries with it the authority to prescribe regulations to
govern providers' practices to the extent that those practices
implicate the Commission's ability to ensure that rates and charges are
just and reasonable. In this way, the ``compensation plan''
requirement--which the Martha Wright-Reed Act left unaltered--gives the
Commission authority in the case of the ``just and reasonable'' mandate
that is comparable to what it historically has possessed when crafting
compensation plans to account for the ``fairly compensated'' mandate.
As the Public Interest Parties indicate, the responsibility to
establish a comprehensive plan ensuring just and reasonable rates and
charges ``necessarily encompasses a corresponding responsibility to
ensure that IPCS providers do not evade [the Commission's rate and fee]
caps through their other practices, classifications, and regulations.''
Given the mandate of the Martha Wright-Reed Act and its revisions to
section 276(b)(1)(A), we find that the Commission's authority over
rates and charges necessarily extends to practices that affect our
ability to ensure that rates and charges are just and reasonable, as
well as that providers are fairly compensated.
83. If section 276(b)(1)(A) instead were read only to allow us to
regulate IPCS rate levels, providers' practices could thwart Congress'
direction to ensure just and reasonable rates and charges for consumers
and fair compensation for IPCS providers. The risk that providers'
practices could subvert the goals of the statute is not speculative.
For example, in light of evidence that inmate calling services
providers were ``engaging in unjust and unreasonable practices and
imposing unfair rates by instituting minimum or maximum amounts that
may be deposited for prepaid calling accounts,'' the Commission
prohibited providers from instituting prepaid account minimums and
required that any provider that limits deposits set the maximum
purchase amount at no less than $50 per transaction. Securus asks that
we ``set minimum funding amounts to allow [IPCS providers] to better
manage costs. We decline on the record before us to adopt its proposal,
but will continue to monitor its concerns. And, more recently, the
Commission concluded that all funds deposited into a debit-calling or
prepaid calling account and not spent on products or services are
generally the property of the account holder and that any action
inconsistent with this finding is an unjust and unreasonable practice.
The Commission also has found affirmative requirements, such as
consumer disclosure rules, necessary to ensure that rates and charges
as implemented are just and reasonable as applied to consumers. In sum,
we find that section 276, as amended by the Martha Wright-Reed Act,
gives us authority over providers' practices to the extent they may
affect the Commission's ability to ensure just and reasonable IPCS
rates and charges and fair compensation for all incarcerated people's
communications services. Those services include the full range of
services now subject to Commission authority as a result of the Martha
Wright-Reed Act, including intrastate IPCS and the advanced
communications services now included in the statutory definition of
``payphone service.''
84. We agree with commenters insofar as they note that Congress did
not incorporate the entirety of the section 201(b) legal framework to
ensure just and reasonable practices, classification, and regulations
into section 276(b)(1)(A). At the same time, we reject claims that we
lack any authority at all over IPCS provider practices under section
276(b)(1)(A). In particular, we reject arguments that our
interpretation

[[Page 77258]]

fails to properly credit Congress' decision to use different language
in section 201(b) and section 276(b)(1)(A). To the contrary, we honor
Congress's choice because we do not interpret our section 276(b)(1)(A)
authority over IPCS practices to be as extensive as the Commission's
authority over common carrier practices under section 201(b). At the
same time, we also must honor Congress's choice to leave intact the
requirement that the Commission ``establish a compensation plan'' in
the regulation mandated by section 276(b)(1)(A). As indicated by our
analysis above, the compensation plan provision goes beyond the
establishment of individual rates and necessarily entails a harmonized
set of requirements that act as a coordinated whole to achieve the new
statutory mandate of just and reasonable rates and charges.
85. Section 201(b) Authority Over Interstate and International
Practices. Apart from the statutory directives in section 276 taken as
a whole that support our finding of jurisdiction over certain IPCS
practices to the extent they bear on just and reasonable rates and
charges, we conclude that section 201(b) provides an independent
statutory basis for regulating providers' practices with regard to
IPCS. This authority explicitly extends to IPCS-related practices for
or in connection to the interstate and international telecommunications
services that are within our section 201(b) authority, as well as to
practices for or in connection with other IPCS services within our
section 276 authority to the extent those practices cannot practicably
be separated from practices applicable to services within our section
201(b) authority.
86. Section 201(b) grants the Commission jurisdiction over
``practices, classifications, and regulations'' of carriers ``for or in
connection with'' interstate and international communications services,
including those services used to provide IPCS. That authority has been
interpreted by the Commission to extend ``to the intrastate portion of
jurisdictionally mixed services `where it is impossible or impractical
to separate the service's intrastate from interstate components' and
state regulation of the intrastate component would interfere with valid
federal rules applicable to the interstate component.'' In 2023, the
Commission sought comment on whether it could use this ``impossibility
exception'' to regulate practices for or in connection with
incarcerated people's intrastate communications services and to audio
and video services that were unregulated prior to the enactment of the
Martha Wright-Reed Act. The record is mixed on this issue.
87. The Commission has previously applied section 201(b) and the
impossibility exception to regulate providers' practices that affect
both interstate and intrastate inmate calling services. In the 2020 ICS
Remand Order, the Commission relied on section 201(b) in adopting rules
applicable to both interstate and intrastate ancillary service charges,
finding that ``ancillary service charges generally cannot be
practically segregated between the interstate and intrastate
jurisdiction except in the limited number of cases where, at the time a
charge is imposed and the consumer accepts the charge, the call to
which the service is ancillary is a clearly intrastate-only call.'' In
the 2022 ICS Order, the Commission exercised its 201(b) authority to
prohibit provider seizure of outstanding balances in inactive accounts
that could be used to pay for interstate, intrastate, and nonregulated
services, and to set limitations on ancillary service fees in order to
curtail the incentives for providers to engage in revenue-sharing
schemes that drive up prices charged to inmate calling services
consumers.
88. Consistent with this precedent, we conclude that our section
201(b) authority over providers' practices extends to the full range of
``payphone service[s],'' as defined in section 276(d), to the extent
the practices for or in connection with the payphone services outside
of our separate section 201(b) authority cannot practicably be
separated from the practices for or in connection with the payphone
services within that authority. Consistent with the Commission's
finding in the 2020 ICS Remand Order, we find that this inseverability
generally extends to providers' rate and ancillary services charge
practices in connection with interstate and intrastate IPCS to the
extent that IPCS-related practices cannot practicably be separated into
interstate, intrastate or non-section 201(b) regulated services
components.
4. Amendment to Section 2(b) of the Communications Act
89. In the next step of our analysis, we address the Martha Wright-
Reed Act's confirmation of our jurisdiction to regulate the rates of
all forms of intrastate IPCS to ensure they are not unreasonably high.
Section 276(b)(1)(A) always has been clear that the Commission has
authority to establish compensation plans for ``intrastate and
interstate'' payphone calls, and as explained above, the Martha Wright-
Reed Act amended that provision to clearly establish the Commission's
authority to ensure just and reasonable rates for both intrastate and
interstate communications, as newly encompassed by section 276(d).
Above and beyond that, the Martha Wright-Reed Act added section 276 to
the express exceptions to the general preservation of state authority
in section 2(b) of the Act. Consistent with the Commission's proposal
in 2023, we conclude that the collective effect of the amendments to
section 276 as to intrastate communications, when coupled with the
Martha Wright-Reed Act's amendment to section 2(b) of the
Communications Act, is to remove any doubt that our authority over IPCS
includes both interstate and intrastate jurisdiction.
5. Inclusion of Advanced Communications Services Within the Definition
of Payphone Service
90. In 2023, the Commission recognized that the Martha Wright-Reed
Act had expanded its section 276 authority over ``payphone service'' in
correctional institutions to include ``advanced communications
services,'' as defined in sections 3(1)(A), 3(1)(B), 3(1)(D), and new
(3)(1)(E) of the Communications Act. The Commission asked how this
expansion of statutory authority applies to each type of enumerated
advanced communications service for incarcerated people. We conclude
that the Martha Wright-Reed Act not only retains the Commission's
preexisting authority over audio communications in the carceral
setting, but extends that authority to include four categories of
advanced communications services--``interconnected VoIP service,''
``non-interconnected VoIP service,'' ``interoperable video conferencing
service,'' and ``any audio or video communications service used by
inmates for the purpose of communicating with individuals outside the
correctional institution where the inmate is held, regardless of
technology used''--within the definition of ``payphone service. We also
conclude, as proposed in 2023, that the language in the new statute
confers on the Commission broad jurisdiction to develop a compensation
plan for the categories of audio and video communications included in
the definition of ``payphone service'' in order to ensure that IPCS
providers are fairly compensated and all IPCS rates and charges are
just and reasonable. We likewise find that the expansion of the types
of services and devices over which we have authority correspondingly
includes entities that may not have previously been subject to

[[Page 77259]]

our rules and that now fall under our regulatory oversight. Below, we
discuss, in turn, the four types of advanced communications services
now included in the definition of ``payphone service.''
a. Interconnected and Non-Interconnected VoIP Services (47 U.S.C.
153(1)(A) to (B))
91. The Martha Wright-Reed Act expressly confirms the Commission's
authority over interconnected and non-interconnected VoIP services,
adding interconnected and non-interconnected VoIP services, as
referenced in sections 3(1)(A) and 3(1)(B) of the Communications Act,
to section 276(d)'s definition of ``payphone service.'' Based on
universal support in the record, we find that this authority includes
audio services using interconnected or non-interconnected VoIP, and
extends to each entity that provides IPCS via interconnected or non-
interconnected VoIP, including entities that provide those services via
non-traditional equipment such as tablets or kiosks. As the Commission
has observed, ``[s]ection 276 makes no mention of the technology used
to provide payphone service. . . . Thus, the use of VoIP or any other
technology for any or all of an ICS provider's service does not affect
our authority under section 276.'' Our authority over inmate calling
services is therefore unaffected by the application of VoIP technology;
rather, the expansion of our inmate calling services authority to
include VoIP technology reflects the Commission's long-held
understanding of inmate calling services as inherently technology
neutral. If a particular service meets the relevant definition in the
Commission's rules, it is a form of inmate calling services and subject
to the Commission's inmate calling services rules. To the extent an
entity provides any of these services in ``correctional institutions,''
it will be subject to the rules we adopt in the Report and Order.
b. Interoperable Video Conferencing Service (47 U.S.C. 153(1)(D))
92. The Martha Wright-Reed Act extends our section 276 authority to
``interoperable video conferencing service'' by adding a reference to
sub-paragraph 3(1)(D) of the Communications Act to the definition of
``payphone service'' in section 276(d). The Communications Act defines
``interoperable video conferencing service'' as ``a service that
provides real-time video communications, including audio, to enable
users to share information of the user's choosing.'' This definition
encompasses video conferencing applications commonly in use outside the
incarceration context, including applications that rely on transmission
over the internet; and the rules we adopt in the Report and Order
extend to such applications and similar applications should they be
used in the incarceration context.
93. One commenter suggests that ``[i]n the absence of a Commission
adopted definition of `interoperable,' it is difficult to identify
which video services made available to incarcerated persons qualify for
potential rate regulation.'' That argument is outdated. In the Access
to Video Conferencing Order, the Commission revisited its previous
views regarding the interpretation of the statutory term
``interoperable video conferencing service'' and concluded that there
was ``no persuasive reason to modify or limit the scope of the
statutory definition of this term.'' There, the Commission explained
that the statutory definition of ``interoperable video conferencing
service'' encompasses a variety of video communication services that
are commonly used today, or that may be used in the future, to enable
two or more users to share information with one another. In 2011, the
Commission interpreted a qualifying phrase in the definition--``to
enable users to share information of the user's choosing''--to mean
that services ``provid[ing] real-time video communications, including
audio, between two or more users'' would be included, ``even if they
can also be used for video broadcasting purposes (only from one
user).'' It rejected arguments that the term ``interoperable'' had
meaning independent of the statutory definition or in some way limited
the scope of the statutory definition of the service. It concluded that
the term interoperable ``may simply reflect the fact that any video
service satisfying [the statutory] definition . . . necessarily
involves some level of interoperability among the particular devices
and software employed by users of that service.'' We find arguments to
the contrary to have been fully addressed by the Commission's actions
in the Access to Video Conferencing proceeding.
94. As the Commission has explained, the definition of
interoperable video conferencing services does not reflect an intention
to exclude any service based on whether it is used primarily for point-
to-point or multi-point conversations, or based on the type of device
used to access the service. Likewise, the definition does not depend on
the options offered to users for connecting to a video conference
(e.g., through a dial-up telephone connection or by broadband, through
a downloadable app or a web browser), what operating systems or
browsers users' devices may employ, whether the service works with more
than one operating system, or whether the service may be classified as
offered to the public or to a private group of users (such as a
telehealth platform). The Commission concluded that the important
characteristic is that two or more people can use the service to share
information with one another in real-time, via video.
95. Our section 276 authority over interoperable video conferencing
services in the IPCS context therefore includes all options offered to
users for connecting to a video conference, regardless of what
operating systems or browsers their devices may use, whether the
service works with more than one operating system, or whether the
service may be classified as offered to the public or to a private
group of users. Where two or more people can use a video conferencing
service to share information with one another in real-time, that
service is subject to our section 276 authority in the incarceration
context. This authority also extends to educational, vocational, or
other video programming in which incarcerated people participate in
real-time in the incarceration context. To be clear, entertainment and
other forms of content that are not real-time communications services
are not included in our authority over interoperable video
conferencing. They may, however, be subject to our authority under
section 3(1)(E), which is not limited to real-time communications
services.
96. We disagree that this interpretation somehow constitutes an
assertion of authority over internet content. Notwithstanding certain
parties' comments suggesting otherwise, we have not proposed to
regulate internet content, nor do we do so in the Report and Order. The
rules we adopt today are content-neutral, and our authority over
interoperable video conferencing services, like our authority over
traditional payphone services, is independent of the information
communicated though those services. Neither the Communications Act nor
the Martha Wright-Reed Act includes any language limiting the content
or information that may be offered through interoperable video
conferencing, and we do not impose any such limitations in our rules.
97. Interoperable Video Conferencing Service for People with
Disabilities. Under section 716 of the Communications Act, as amended
by the Twenty-First Century

[[Page 77260]]

Communications and Video Accessibility Act of 2010 (CVAA),
interoperable video conferencing service and equipment used for
interoperable video conferencing service must be accessible to and
usable by people with disabilities, unless those requirements are not
achievable. Consistent with the Commission's analysis in the Access to
Video Conferencing Order, we find no persuasive reason to modify or
limit the scope of these accessibility requirements as they apply in
the IPCS context. Instead, we conclude that the accessibility
requirements in section 716 of the Communications Act and part 14 of
our rules apply, without limitation, to all interoperable video
conferencing services provided in correctional institutions and to all
equipment that people with disabilities use to access those services.
As explained in more detail below, in the 2011 ACS Order the Commission
assumed that the word ``interoperable'' needed to be defined
independently of the term ``interoperable video conferencing service.''
In the Access to Video Conferencing Order, the Commission revisited
this issue and rejected arguments that the term ``interoperable'' had
meaning independent of the statutory definition or in some way limited
the scope of the statutory definition of the service. The Commission
explained that the statutory definition of ``interoperable video
conferencing service'' encompasses a variety of video communication
services that are commonly used today, or that may be used in the
future, to enable two or more users to share information with one
another.
c. Any Audio or Video Communications Service (47 U.S.C. 153(1)(E))
98. The Martha Wright-Reed Act added new subsection (E) to section
3(1) of the Communications Act to expand the definition of ``advanced
communications services'' to include ``any audio or video
communications service used by inmates for the purpose of communicating
with individuals outside the correctional institution where the inmate
is held, regardless of technology used.'' It also included these same
services in the definition of payphone service in section 276(d),
expanding the scope of the Commission's authority over incarcerated
people's communications services. As proposed in 2023, we interpret the
phrase ``any audio or video communications service'' in subsection
3(1)(E) as encompassing every method that incarcerated people may
presently, or in the future, use to communicate, by wire or radio, by
voice, sign language,'' or other audio or video media, without
qualification. The record strongly supports this interpretation. In
doing so, we fulfill Congress's intent that a broad range of
communications services and technologies be available to incarcerated
persons and their loved ones at just and reasonable rates. Congress
included all aspects of the section 3(1) definition of advanced
communications services in the section 276(d) definition of payphone
services with the exception of electronic messaging services defined in
section 3(1)(C). Certain commenters address the exclusion of electronic
messaging services from the Commission's regulatory jurisdiction in the
record, particularly to the extent audio or video communications may be
sent via electronic messaging service. On the limited record before us,
we decline at this time to determine what is or is not an electronic
messaging service for purposes of excluding such services from the
scope of the Act's implementation mandate. While we decline to make a
determination, we reiterate that under section 716 of the
Communications Act, electronic messaging service is required to be
accessible to and usable by people with disabilities, including those
in carceral facilities. Separately, some commenters argue that the
Commission should assert authority over voicemail. Other commenters
argue that the Commission may not regulate voicemail because the
Commission treats voicemail as an information service. The record in
this regard is underdeveloped. Thus, at this time, we decline to
address the Commission's regulatory jurisdiction over voicemail in the
IPCS context.
99. Our interpretation encompasses technology used by people with
disabilities. We find that, consistent with our mandate to provide TRS
to incarcerated persons with disabilities, ``any audio or video
communications services,'' as used in section 3(1)(E) includes all
services currently provided in correctional institutions that an
incarcerated person who is deaf, hard of hearing, deafblind, or has
speech or other disabilities may use to communicate with individuals
outside the correctional institution where the incarcerated person is
held, and incorporates all future services and technologies that will
assist incarcerated people with disabilities to communicate with the
non-incarcerated--or incarcerated people to communicate with non-
incarcerated people with disabilities--so long as it involves audio or
video communications services.
100. We interpret ``audio or video communications services'' to
encompass not only services that are audio and/or video at both ends of
the communication, but also services that are audio and/or video at
only one end of the communication or otherwise involve audio and/or
video for only a segment or portion of the communication. The focus of
section 3(1)(E) is not on whether a particular party to a communication
is communicating in audio and/or video form, but rather on whether the
service is an ``audio or video communications service.'' So long as the
communications service involves audio and/or video in at least some
respect, we conclude the ``audio or video communications service''
criterion is satisfied. The breadth of this interpretation, which may
be of particular relevance where communications involving people with
disabilities are concerned, is further supported by the fact that
Congress chose to include that service within the category of
``advanced communications services'' that are subject to various
disability access requirements, along with the recognition in section
276(b)(1)(A) that the communications services covered by that provision
would include TRS.
101. Unlike some other services included within the section 3(1)
definition of advanced communications services, the services included
in section 3(1)(E) are not expressly restricted to real-time or near
real-time communications services. We interpret Congress' omission of
such limiting language for the comprehensive set of IPCS services
covered by section 3(1)(E) as bringing non-real-time communications
services generally within the ambit of our IPCS jurisdiction, to the
extent an incarcerated person may use them to communicate with the non-
incarcerated.
102. While Congress included no limitations to the range of audio
and video communications services encompassed in section 3(1)(E), it
addressed the parties involved by limiting the definition to audio or
video services used for communications between two classes of users,
i.e., ``inmates'' and ``individuals outside the correctional
institution where the inmate is held.'' While there is no dispute in
the record regarding the meaning of the statute's reference to inmates,
parties do dispute the meaning of the latter phrase.
103. Consistent with one of the alternatives raised in the
Commission's discussion in 2023, we interpret the phrase ``individuals
outside the correctional institution where the inmate is held'' to
mean, not the precise physical location of the individual with whom the
incarcerated person is

[[Page 77261]]

communicating, but instead the status of that individual as someone who
is ``neither confined in nor employed by the institution, even if [they
are] temporarily located on the premises of the institution for
purposes of communicating with incarcerated individuals through some
form of audio or video communications service.'' The record supports
this interpretation. As the Public Interest Parties recognize,
``although the term `outside the correctional institution' can mean
`not physically within the structure,' it can equally mean `not held
within the institution.' '' The relevant statutory language appears
very similar to part of the Commission's longstanding definition of
``inmate calling service,'' which likewise refers to ``individuals
outside the Correctional Facility where the Inmate is being held.''
Although the Commission did not definitively interpret the meaning of
the ``outside'' language in its IPCS rules prior to the enactment of
the Martha Wright-Reed Act, in the inmate calling context it regularly
used the term ``outside'' of a correctional facility when referring to
the status--rather than the physical location--of the party with whom
the inmate was communicating. We recognize that the FCC Form
established for purposes of a proposed collection of data on video
visitation services described ``Off-Site Video Visitation'' as ``a call
that allows an Inmate to communicate via video with another party (or
parties) located outside the Facility where the Inmate is being
detained.'' That limited example does not overcome our understanding of
the broader usage of ``outside'' in Commission decisions in this
context, particularly where it referred to communications to another
party ``located'' outside the relevant correctional facility--a
qualifier signaling physical location that is not present in either the
Commission's definition of ICS or the text of section 3(1)(E) of the
Communications Act. Because our interpretation is both consistent with
the ordinary meaning of ``outside'' and accords with the trend we
discern in the regulatory backdrop relevant here, we find that the best
reading of ``outside the correctional institution'' in section 3(1)(E)
refers to a party's status rather than its physical location.
Consistent with the arguments of a number of commenters, we thus
conclude that communications with ``individuals outside the
correctional institution where the inmate is held'' is best understood
to mean communications with individuals who are neither incarcerated
in, nor employed by, the incarcerated person's correctional
institution, i.e., ``outside'' of the institution's framework,
regardless of the physical location where they can use the
communication service. By the same token, our analysis leads us to
reject claims that we must interpret ``outside the correctional
institution'' to refer to the physical location of the party with whom
the inmate is communicating. These commenters do not persuade us that
anything in the statutory text itself counsels against our
interpretation, and insofar as they otherwise have a narrow view of
congressional intent underlying the language it adopted, we are not
persuaded by that either, as discussed more below.
104. Our interpretation also is supported by our view of
congressional intent and associated policy considerations. We agree
with Worth Rises that ``[t]here is no evidence that Congress intended
for a miniscule regulatory cut-out that leaves IPCS ratepayers
unprotected from rate regulation when they are physically located
within a building that is property of the correctional authority.
Whether the outside called party is on their mobile phone in the lobby
of a correctional facility or sitting at a video kiosk booth in the on-
site video calling room, they should be protected by the Commission's
ratemaking authority.'' This reinforces our conclusion that the best
reading of the statutory language is that it refers to the non-
incarcerated status of the individual with whom the incarcerated person
is communicating, rather than the physical location of individuals with
whom an inmate can communicate using a given service.
105. The ordinary tools of statutory interpretation strongly
support the view that the qualifier, ``individuals outside the
correctional institution where the inmate is held,'' in section 3(1)(E)
should be limited to services that only meet the definition of advanced
communications services under that specific provision. Section 3(1)
consistently has been understood as a disjunctive list of services such
that meeting any one of those categories is sufficient to render a
service an advanced communications service. While several commenters
agree with this interpretation, one commenter contends that ``the
limiting phrase of new subsection 3(1)(E)'' applies to all of the
services included in section 3(1) ``in the context of IPCS.'' While the
scope of section 3(1)(E) outside of the phrase in question is
sufficiently expansive to encompass virtually all communications
services, the National Sheriffs' Association points to nothing in the
Martha Wright-Reed Act or the amended text of section 3(1) that would
suggest that Congress intended to override the preexisting operative
structure of that provision or subsume the definitions of
interconnected VoIP service, non-interconnected VoIP service, and
interoperable video conferencing service within section 3(1)(E).
Indeed, if the relevant qualifier in section 3(1)(E) either were
interpreted to apply to sections 3(1)(A), (B), and (D) or if section
3(1)(E) were read as subsuming sections 3(1)(A), (B), and (D), it is
not clear what remaining practical significances sections 3(1)(A), (B),
and (D) would have given the existence of section 3(1)(E). Under
ordinary canons of statutory interpretation, such an outcome cuts
against that reading. Had Congress intended the ``outside the
correctional institution'' language in section 3(1)(E) to apply to
other advanced communications services, it could have included that
language in section 3(1) as a whole, appended it to other subsections
of section 3(1) as it deemed appropriate, or incorporated that language
into section 276(d). It did none of these things.
106. Nor can the National Sheriffs' Association's interpretation be
reconciled with the broader statutory context. The definition of
``advanced communications service'' in section 3(1) does not owe its
existence solely to IPCS regulation under section 276 of the
Communications Act. Indeed, section 3(1) includes ``electronic
messaging service,'' 47 U.S.C. 153(1)(C), which was not included as a
specified category of service covered by amended section 276(d) of the
Communications Act. Rather, a range of statutory provisions rely on
that definition. Interpreting section 3(1) to mean that each of the
individual audio and video services listed in sections 3(1)(A), (B),
and (D) are subject to the limitation in (E) would result in a
substantial narrowing of preexisting statutory requirements dealing
with matters such as disability access.
107. Likewise, the National Sheriffs' Association's interpretation
cannot readily be squared with section 276(d) as amended by the Martha
Wright-Reed Act. In pertinent part, that provision as originally
enacted defined ``payphone service'' subject to Commission authority
under section 276 as encompassing ``the provision of inmate telephone
service in correctional institutions.'' When Congress amended that
definition in the Martha Wright-Reed Act to include certain advanced
communications services, it made those services subject to the ``in
correctional institutions'' limitation, as well. Yet if

[[Page 77262]]

the relevant terms in section 3(1) all already were subject to the
limitation in 3(1)(E), it is not clear how much work would be left for
the section 276(d) qualifier ``in correctional institutions'' to
perform. At a minimum, Congress's deliberate choice to subject the
advanced communications services covered by section 276(d) to the ``in
correctional institutions'' qualifier provides good reason to pause
before inferring arguably similar limitations in section 3(1) in a
manner that appears contrary to that statutory text.
108. Consequently, we adopt the proposal in 2023 that the language
requiring that communications involve ``individuals outside the
correctional institution where the inmate is held'' applies only with
regard to subparagraph 3(1)(E). We therefore agree with other
commenters that the phrase ``outside the correctional institution where
the inmate is held'' does not apply outside the context of section
3(1)(E).
6. Onsite Video Visitation
109. In 2023, the Commission sought comment on whether its expanded
authority over IPCS extends to onsite video visitation services. The
widespread use of onsite video visitation is a relatively recent
phenomenon, initially driven by significant health risks posed by the
COVID-19 pandemic. During the pandemic, ``nearly every jail and
prison'' shifted from in-person visitation to onsite video services to
prevent exposure to and the spread of coronavirus. In many instances,
correctional institutions continue to restrict onsite visits to video
communications in lieu of in-person visits.
110. Consistent with the description in 2023, we define onsite
video visitation services as services that enable video communications
between a person incarcerated in a correctional institution and a non-
incarcerated person visiting that institution. We find that our
authority over incarcerated peoples' advanced communications services
extends to onsite video visitation on two independent grounds: (a)
onsite video visitation's status as an ``interoperable video
conferencing service'' within the meaning of section 3(1)(D); and (b)
its status as an ``audio or video communications service used by
inmates for the purpose of communicating with individuals outside the
correctional institution where the inmate is held, regardless of
technology used'' within the meaning of section 3(1)(E).
111. Onsite Video Visitation as an Interoperable Video Conferencing
Service under Section Sec. 3(1)(D). We conclude that onsite video
visitation includes each of the elements of the definition of
interoperable video conferencing service in section 3(27) of the
Communications Act and that it is therefore a ``payphone service''
within the meaning of section 276(d) when provided in correctional
institutions. Section 3(27) defines ``interoperable video conferencing
service'' as ``a service that provides real-time video communications,
including audio, to enable users to share information of the user's
choosing.'' Onsite video visitation meets those criteria: it is a real-
time service that involves video communications, including audio, and
that enables the incarcerated and the non-incarcerated to share
information of their choosing. Notwithstanding the National Sheriffs'
Association's advocacy to the contrary, we find above that the
limitation to ``individuals outside the correctional institution''
included in section 3(1)(E) is specific to the grant of authority in
that section and is not generally applicable to section 3(1) as a
whole. Thus, to the extent it were relevant in a given scenario, we
observe that the definition of interoperable video conferencing service
does not include any limitation or requirement that the communications
be with individuals outside the correctional institution. Instead, we
find the statute best interpreted to mean that any interoperable video
conferencing service, a service that includes onsite video visitation,
is a payphone service, and therefore subject to our authority under
section 276(b)(1)(A), to the extent it is provided in correctional
institutions. Onsite video visitation uses the same or functionally
similar technology and equipment as is used generally for video IPCS.
112. We also find that Congress intended our authority under
section 276 to extend to the full range of interoperable video
conferencing services, including onsite video visitation services,
given the inclusion of section 3(1)(D) in section 276(d). By this
inclusion, Congress eliminated doubt that video visitation was subject
to the Commission's authority in response to the D.C. Circuit's GTL v.
FCC decision casting doubt on whether video visitation reporting
requirements were within the Commission's authority. As amended by the
Martha Wright-Reed Act, the definition of ``payphone service'' in
section 276(d) of the Communications Act now includes all interoperable
video conferencing services, without qualification, to the extent they
are provided in correctional institutions. Given this statutory
language, we conclude that our authority under section 276(b)(1)(A)
extends to all onsite video visitation services.
113. Our conclusion does not change regardless of whether onsite
video visitation is offered free of charge. Though one commenter argues
that we should limit our oversight because ``the industry has no
history of charging for such services, we find that because such
services meet the definition of ``payphone service'' in section 276(d),
they fall within the Commission's jurisdiction. We affirm that onsite
video visitation services are interoperable video conferencing
services, and as such, are subject to our section 276 jurisdiction and
the rules we adopt herein.
114. Onsite Video Visitation as a Video Communications Service
under Section 3(1)(E). In 2023, the Commission sought comment on
whether onsite video visitation services constitute ``video
communications service[s]'' within the meaning of section 3(1)(E). As
an initial matter, we find that, based on the record in response to
2023, onsite video visitation is a video communications service under
section 3(1)(E), giving us an alternative basis for exercising section
276 authority over those services independent of section 3(1)(D). We
are persuaded by commenters' explanations that ``[o]n-site video
visitation service used by an incarcerated person for the purpose of
communicating with those neither confined nor employed by the
correctional facility fits plainly within the statutory language in
section 3(1)(E), as the service is used by incarcerated persons to
communicate with . . . persons not held within the institution.''
115. Nor do we find any ``reasonable justification to interpret the
Act to allow the Commission to regulate [remote video services] but
[not onsite video services].'' We are not persuaded by suggestions that
Congress intended to include a limitation based on the physical
location of the non-incarcerated person involved in the communication
such that we have no authority over onsite video visitation under
section 3(1)(E). As discussed above, the language of the statute is
best read as focused on the status of the individuals involved in an
audio or video communication--not on the physical location of the
called party at the time of the communication. Indeed, even assuming
arguendo that the qualifier in section 3(1)(E) were interpreted to
apply to the physical

[[Page 77263]]

location rather than status of the individuals with whom an inmate is
communicating, the relevant statutory question would be where the
service can be used, and not where a given communication occurs. If an
audio or video communications service can be used by inmates for the
purpose of communicating with individuals outside the correctional
institution where the inmate is held, the details associated with a
given individual communication using that service would be irrelevant.
116. Policy considerations likewise support our interpretation. We
find it compelling that ``[b]oth remote and on-premises video calls are
typically operated by the same IPCS providers, involve the same
technological systems, and have the same functions and equipment for
the incarcerated user, regardless of the location of the person with
whom they are communicating.'' While some providers offer such service
for free today, it does not follow that consumers never would or could
need the protection of the ``just and reasonable'' standard provided by
the Martha Wright-Reed Act for these video communications. Absent
Commission oversight of onsite video visitation, both facilities and
IPCS providers could, for example, have ``a perverse incentive . . . to
reduce the availability of other forms of IPCS as well as in-person
visitation.'' We are persuaded that, because these services share
providers, equipment, and other technology systems, the only difference
between onsite and remote video communications is the location of the
non-incarcerated party with whom the incarcerated individual is
communicating. We therefore agree that ``[t]here is no reasonable
justification to interpret the Act to allow the Commission to regulate
one but not the other.''

D. Rate Caps

117. After carefully considering our expanded statutory authority,
the data received in response to the 2023 Mandatory Data Collection,
and the record developed from the 2023 and the precursor requests for
comment, we take a series of actions to establish just and reasonable
rates for IPCS while also ensuring fair compensation for providers.
Specifically, we adopt the Commission's proposals to set separate rate
caps for audio IPCS and video IPCS, and to treat interstate and
intrastate communications uniformly, as supported by both the record
and provider responses to the 2023 Mandatory Data Collection. We also
revise our rate cap tiers, and adopt separate per-minute rate caps
within each of those tiers for audio IPCS and video IPCS. Collectively,
these steps will achieve the dual directives of the statute to ensure
just and reasonable rates for consumers and providers and fair
compensation for providers.
118. These actions reflect our application of the ``used and
useful'' framework in evaluating the costs of providing IPCS,
consistent with the Commission's proposal in 2023. Under this
framework, the determination of just and reasonable rates focuses on
affording regulated entities an opportunity to recover their
``prudently incurred investments and expenses that are `used and
useful' in the provision'' of the regulated service. In applying this
framework, we use provider-submitted data and other information from
the record to estimate the costs incurred in providing IPCS, including
any safety and security measures used and useful in the provision of
these services. Our rate cap calculations incorporate the costs
providers reported as their costs of providing ancillary services,
consistent with our decision to eliminate separate charges for
ancillary services. Finally, our rate caps reflect our best estimate of
the costs incurred in implementing the TRS reforms adopted in the 2022
ICS Order and our best estimate of the costs facilities incur in the
provision of IPCS.
119. Accordingly, we adopt the following permanent rate caps for
audio IPCS, and interim rate caps for video IPCS:
<bullet> For all prisons, $0.06 per minute for audio
communications, and $0.16 per minute for video communications;
<bullet> For jails with an average daily population (ADP) greater
than or equal to 1,000 incarcerated people, $0.06 per minute for audio
communications and $0.11 per minute for video communications;
<bullet> For jails with an ADP between and including 350 and 999
incarcerated people, $0.07 per minute for audio communications and
$0.12 per minute for video communications; and
<bullet> For jails with an ADP between and including 100 and 349
incarcerated people, $0.09 per minute for audio communications and
$0.14 per minute for video communications.
<bullet> For jails with an ADP with 99 or fewer incarcerated
people, $0.12 per minute for audio communications and $0.25 per minute
for video communications.
We establish these rate caps using a zone of reasonableness
approach. This approach allows us to respond to the limitations of the
cost-of-service data before us in a manner that appropriately balances
fair compensation for IPCS providers with just and reasonable rates and
charges for consumers and providers. Through this approach, we afford
providers an opportunity to recover the used and useful costs incurred
to provide IPCS and also keep IPCS rates affordable for incarcerated
people and their loved ones.
1. Rate Cap Structure
120. Adopting Rate Caps as the Regulatory Mechanism. We conclude
that rate caps are the appropriate mechanism for ensuring that all
rates for IPCS are just and reasonable. Consistent with the
Commission's prior ratemaking with regard to inmate calling services,
we find that rate caps provide the best overall rate structure for IPCS
because of the flexibility that rate caps afford providers while still
ensuring that the incarcerated individual and their loved ones are
protected from unreasonably high rates and charges. We also find that
rate caps are preferable to prescriptive rate setting for IPCS because
a rate cap approach does not preclude or prevent providers and parties
representing facilities from negotiating and entering into agreements
to provide IPCS at lower or no cost to incarcerated people and their
friends and family, as is shown in the record. The record strongly
supports the use of rate caps rather than prescriptive rate setting.
Rate caps also allow providers to be responsive to the differing needs
of each facility, and ``protect ratepayers as a group from high prices
and provide carriers with an incentive to increase productivity.'' As
the IPCS industry continues to develop and offer advanced
communications services including video communications, we find that
flexibility in pricing and in service offerings will be important to
ensure that providers and incarcerated people and their friends,
families, and loved ones benefit from the rate caps we adopt today.
121. Separate Rate Caps for Audio IPCS and Video IPCS. With the
Martha Wright-Reed Act's expansion of the Commission's authority to
regulate advanced communications services, and in keeping with the
Commission's obligation to ensure just and reasonable rates, we adopt
separate rate caps for audio IPCS and video IPCS. In adopting these
rate caps, we do not intend any modification of the requirements of
Sec. 64.6040(d) of our rules, which addresses TRS and certain related
services (TTY-to-TTY communications and point-to-point video
communication in American Sign Language). For IP CTS, CTS, and point-
to-point video communication in ASL, an IPCS provider may assess
charges

[[Page 77264]]

that do not exceed its charges for an equivalent voice telephone call.
Thus, charges for these services will be effectively capped at the
applicable rate cap for audio communications. For TTY-to-TTY
communication, an IPCS provider may assess a charge that does not
exceed 25 percent of the applicable per-minute rate for a voice call.
Thus, such charges are effectively capped at 25 percent of the
applicable per-minute rate for a voice call. We find the record,
including the 2023 Mandatory Data Collection data, overwhelmingly
support this approach. Record comments support separate rate caps
because of the materially different cost structures of offering audio
and video IPCS, and we agree. The data show that video communications
typically require more expensive equipment, and even when comparing
audio and video communications made using the same equipment, the data
suggest that video communications are more expensive to provide. This
difference in costs justifies the need to adopt separate rate caps for
these services to satisfy our obligations for both providers and
consumers of IPCS. Accordingly, we separately analyze audio and video
IPCS costs and develop separate rate caps at each tier for both
services.
122. As proposed in 2021 and 2023, we adopt permanent rate caps for
audio IPCS. The Commission has previously been constrained to adopt
only interim rates for these services given persistent limitations of
the industry data available to it. We now find that the audio cost data
received in response to our most recent data collection provide a
sufficient basis for setting permanent audio IPCS rate caps.
123. By contrast, video IPCS involves relatively new services in an
emerging market for the correctional industry, and one which the
Commission has not previously had the authority to regulate. The
reported costs show a marked differential between audio and video costs
per minute, which may be attributable, in part, to the respective
difference in maturity of the two types of service offerings. As a
result of the relative nascency of the video IPCS market generally, the
wide variations among facilities in the per-minute costs of providing
IPCS, and the likely need to revise any video rate caps in the future
to account for growth and evolution of the video IPCS marketplace, we
find that the reported costs and demand for video IPCS are best suited
for interim rate caps. We find that the video data present similarities
to the data that the Commission reviewed in 2021, when the Commission
was faced with data that it determined was unreliable, resulting in the
adoption of interim rate caps. NCIC argues that the Commission should
``delay the adoption of interim rates until it receives comprehensive
data from all video visitation providers, and deliver immediate relief
by simply prohibiting flat-rate billing, which is currently being
offered at up to $12.99 per session''). While we recognize that the
video marketplace is in its nascent stages, we find that the available
data sufficiently support the interim rate caps we adopt today. In
addition, as we note below, interim rate caps for video are necessary
to curb abuses identified in the record concerning other existing rate
structures in the video market.
124. Per-Minute Rate Caps for Audio IPCS and Video IPCS. We adopt
the Commission's proposal to set rate caps for audio and video IPCS on
a per-minute basis as the foundation of our efforts to ensure just and
reasonable IPCS rates and charges. The record provides no basis to
abandon the long-standing per-minute rate caps for audio IPCS, and we
find no reason to deviate from this approach. The Commission has
historically set per-minute rate caps for audio IPCS. This decision is
further supported by our adoption today of rules to permit alternate
pricing plans subject to specified conditions. Similarly, given the
per-minute rate structure we adopt for audio calls, we find that taking
a consistent approach for video communications would offer several
benefits for IPCS consumers. First, per-minute rates are simple to
understand and reflect the actual duration of the call or
communication. As a matter of policy, the Commission has stated that
transparency regarding the charges for IPCS ``is critical because it
ensures that incarcerated persons and their families understand the
prices they are, or will be, charged for the services they use,
enabling them to make informed decisions when purchasing those
services.'' We find that consistent use of per-minute rates for audio
and video IPCS will result in an easier to understand and more
transparent regulatory framework. We therefore reject proposals to use
other rate metrics, such as per-session charges, in the rate caps that
serve as the foundation for ensuring just and reasonable IPCS rates.
Per-minute rates also provide greater transparency and offer greater
familiarity and flexibility for both industry and consumers.
125. Establishing interim per-minute rate caps for video IPCS is
also responsive to concerns voiced in the record about the need to curb
abusive practices associated with other existing rate structures for
video IPCS. At the same time, however, our new rules permitting
providers to deploy alternate pricing plans for both audio and video
IPCS, subject to certain conditions, including, in particular,
compliance with the overall rate caps adopted here, will permit
providers to experiment with optional rate structures that may be
beneficial and desirable for IPCS consumers. Taken together, we find
these actions satisfy two goals: our default per-minute rates will
ensure just and reasonable rates for IPCS consumers and providers and
fair compensation for providers; and our optional alternate pricing
plan rules will provide some measure of flexibility for the industry,
allowing providers and customers to voluntarily opt-in to other pricing
arrangements that may be mutually beneficial. The Commission has
previously found that when providers used flat-rate charges for audio
calls, if the duration of the audio call was less than the maximum time
allowable, ``the price for that call is disproportionately high.''
Receiving no record evidence to the contrary, we find that a similar
result is likely in the case of per-call or per-session charges for
video IPCS.
126. We decline to adopt a model carrier approach to establish the
rates for either audio or video IPCS. As proposed in the record, a
model carrier approach would set rates by reference to general
telecommunications industry-average costs for non-IPCS calls, including
a predetermined return, ``and then potentially adjust for costs that
may be particular to the provision of service in incarceration
facilities.'' Although the Commission has employed a similar approach
in other circumstances, we find that our tiered approach based on the
currently available IPCS-provider data provides a more accurate
estimate of just and reasonable IPCS rates and will better reflect the
size variance and the economies of scale in the IPCS market rather than
relying on a uniform general telecommunications industry rate setting
approach. We find further that the marketplace is still adapting to the
requirements of IPCS video communications, which counsels in favor of
allowing more time before adopting a model carrier approach. Because we
do not base our analysis on the model carrier approach, we find it
unnecessary to address arguments concerning the Commission's authority
in this respect. At the same time, a model carrier based approach is
useful for comparative analysis, and as explained further in a
technical appendix, can be used to confirm our

[[Page 77265]]

understanding of certain aspects of providers' cost data.
127. Adopting Rate Caps Derived from Industry Average Costs. As
permitted by the Martha Wright-Reed Act, we use industry average costs
reported by IPCS providers at the company-wide and facility levels in
response to the 2023 Mandatory Data Collection as the basis for
developing the IPCS rate caps we adopt today. In 2021, the Commission
sought comment on whether to ``calculate industry-wide mean contract
costs per paid minute of use,'' or to ``analyze costs at the facility
level.'' We resolve this question by confirming that we analyze costs
at the facility level, in the interest of evaluating providers' costs
as accurately as possible, consistent with the facility-level cost data
staff sought and obtained through the 2023 Mandatory Data Collection.
The Commission previously used industry average costs to set inmate
calling services rate caps, but the D.C. Circuit rejected that approach
as not providing fair compensation for providers on a ``per call''
basis for ``each and every call,'' as was then required by the language
of section 276(b)(1)(a) of the Communications Act. The Martha Wright-
Reed Act removed the ``each and every call'' language from section
276(b)(1)(a) and authorized the Commission to use ``industry-wide
average costs'' in determining just and reasonable rates. We can only
conclude, and commenters concur, that the Act thereby removed the
limitations set forth in the D.C. Circuit's decision. We also believe
that using industry average costs to set rates will best ensure rates
that are just and reasonable for consumers and providers and provide
fair compensation for providers.
128. We further find that the Act's elimination of the requirement
that ``each and every'' completed communication be fairly compensated
means that we are no longer required to establish a per-call based
compensation plan. Commenters agree. Rate caps based on costs evaluated
on an aggregated basis generally will satisfy the requirement that all
payphone service providers be fairly compensated. Based on our
interpretation of the Act in light of the D.C. Circuit's holding in GTL
v. FCC, as well as the Act's explicit terms, we further find that
setting the upper and lower bounds of our zone of reasonableness based
on industry-wide average costs at each tier of facilities--without the
need to consider one standard deviation or any other measure of
deviance from the average--will satisfy this requirement. We find that
Congress's express permission to use industry average costs in setting
rate caps encompasses the specific approach to using industry average
costs that the Commission adopted in the 2015 ICS Order: setting rate
caps at the level of the weighted average of providers' reported costs
at each tier. The regulatory history--particularly our understanding of
the ways that the Martha Wright-Reed Act sought to respond to the D.C.
Circuit's decision in GTL, including with specific respect to the use
of industry average costs--reinforces the reasonableness of our
interpretation.
a. Rate Caps Based on Total Costs
129. Consistent with the changes to our authority, we adopt the
proposal to set rate caps that incorporate total IPCS costs by
including all relevant costs incurred in the provision of IPCS in our
calculations of average provider costs. In implementing that approach,
we depart from the Commission's previous approach to allowing and
capping separate charges for certain ancillary services and instead
include the costs related to the provision of those ancillary services
in our IPCS rate caps. We also depart from the Commission's use of
separate rate additives for facility-incurred costs in the 2021 ICS
Order, in favor of including those costs, to the extent recoverable, in
our per-minute rate caps. This will substantially simplify our cap
structure. Pay Tel proposes that we account for facility costs
``through an explicit additive to IPCS rate caps,'' as this will
``incentivize facilities to compare service-based, competitive market
factors when awarding contracts.'' We find that the approach we adopt
here will obtain a fundamentally similar result. After analyzing
providers' cost data, we find that the data for calendar year 2022
collected in response to the 2023 Mandatory Data Collection, together
with other record evidence, provide a sufficient and reasoned basis on
which to take these steps in establishing our rate caps. One commenter
notes that we should consider ``free video calls through off-the-shelf
video platforms,'' such as Microsoft Teams, Zoom, and Ameelio, as part
of the industry-wide definition of IPCS providers. We find that these
video platform business models are substantially different from those
of most IPCS providers, and we decline at this time to do so. Taken
together, reforming our ancillary services charge rules, and including
costs incurred by facilities to provide IPCS and TRS-related costs into
our rate caps, result in a total cost approach to setting IPCS rate
caps which is more straightforward, results in rates which are easier
to understand, and will empower incarcerated persons and their loved
ones to make better informed choices. We address each of these steps
below. Lastly, we disagree with commenters that suggest that we
incorporate an inflation factor into our methodology for setting rate
caps. Secretariat Economists' data show that, historically, growth in
the Telecommunications PPI has been lower, on average, than general
measures of inflation. Over the last decade, the average annual change
of the Telecommunications PPI was 0.7%, as compared to the average
annual change of the broader GDP Deflator over the same time period of
2.6%. Those commenters generally fail to acknowledge the role that
productivity increases play in offsetting inflation. Neither study
includes data on the rates of increase in productivity in the
telecommunications industry. We also note that the data in the
Secretariat Economists May 8, 2023 Report shows that inflation in the
telecommunications industry has generally been lower than the broader
measure of inflation. We find that they fail to establish that
productivity increases did not offset the inflation that has incurred
since 2022, much less that inflation will outpace productivity gains in
the future.
130. Incorporating Costs Associated with Ancillary Services. We
find that the five types of ancillary services addressed by our rules
are intrinsic to the provision of IPCS, and we incorporate the costs of
providing these services into our per-minute rate caps for a number of
reasons. For one, incorporating the costs of these services into a
single rate cap--rather than allowing providers to assess a separate
ancillary service charge for each ancillary service--will result in
rates and charges that are easier for consumers to understand and
easier for providers to administer, while still allowing providers to
recover the average costs associated with these ancillary services
through our per-minute rates.
131. In addition, in the 2021 ICS Order, the Commission found that,
based on record data, there was ``no reliable way to exclude ancillary
service costs'' from the calculations for the provider-related rate cap
component, resulting in interim rate caps that included the costs that
consumers already paid for through separate ancillary services fees. To
address this issue, in 2022 the Commission asked whether ``some or all
of [the ancillary] services'' for which separate charges were permitted
are ``an inherent part of providing inmate calling services,'' such
that the Commission should continue to

[[Page 77266]]

``include these costs in [the] per-minute rate cap calculations and
eliminate some or all charges for ancillary services.'' As the record
shows, all of these fees ``relate to payment and billing,'' and other
than the paper bill fee, all of these fees address consumers' means of
paying for the service they rely upon. Put otherwise, consumers may pay
for IPCS via a payment card or a third-party money transmitter, with
the assistance of a live agent, and/or may pay to complete a
communication without setting up an account. Although these ancillary
services may have qualified as a ``convenience'' in 2015 when the
Commission first identified them in its rules, the record indicates
that they are now the predominant means by which consumers gain access
to IPCS. While alternative methods of funding an account remain
available (e.g., by check or money order), we find that automated
payment or money transmitter services are ``an intrinsic part'' of
accessing the service, like most other services in the 21st-century
economy. Indeed, one provider has pointed to the decline in one
alternative payment mechanism--collect calls--in support of its
proposal that the Commission eliminate the fee for paper statements. In
short, ``incarcerated people and their families must either incur
[these charges] when making a call or forego contact with their loved
ones.''
132. Our decision to incorporate the costs of ancillary service
functions in our rate caps also reflects the limitations in the cost
data providers submitted for their ancillary services. Like the
Commission found in the 2021 ICS Order, we still cannot reliably
isolate the costs of providing each type of ancillary service from
other IPCS costs. In contrast to the Second Mandatory Data Collection,
the instructions for the 2023 Mandatory Data Collection required
providers to report their costs of each ancillary service separately.
Nevertheless, we find that providers failed to reliably or consistently
allocate their costs among the various ancillary services, or even
between ancillary services and other IPCS costs. Incorporating all of
these reported costs into the rate cap avoids the risk of setting
individual fee caps for each ancillary service that misestimate
providers' actual costs. We therefore find that incorporating ancillary
service costs into our rate caps is the best means of recovering the
aggregated ancillary services costs reported by providers and ensuring
just and reasonable IPCS rates. We find that this approach is
preferable to allowing double recovery of the same costs by adopting
separate rates and charges.
133. Incorporating the costs of providing ancillary services into
our rate caps will provide several benefits to IPCS consumers and
respond to concerns raised in the record. First, this rate cap
structure will eliminate the incentive and ability for providers to
charge multiple fees for the same transaction, as a way of exacting
revenue from consumers that far exceeds their actual costs of
completing the transaction, a problem that is well-documented in the
record. The comment record reflects substantial debate (even confusion)
as to whether--and if so, under what circumstances--multiple fees can
be charged for a single transaction, and more generally, what activity
the payment-related fees were intended to encompass. By folding the
costs of all ancillary services into our rate caps and eliminating
providers' ability to charge for them separately, we also remove the
incentive for providers to ``double dip'' in this manner, effectively
mooting related concerns under our new rules, and mitigate consumer
confusion arising from these practices. Certain providers contend that
any circumstances in which they have charged multiple fees are
legitimate. Because the rate cap structure we adopt enables providers
to recover their average costs of providing ancillary services, as
permitted by the Martha Wright-Reed Act, we find it unnecessary to
resolve this dispute in this rulemaking. The record also shows that
such practices have engendered consumer confusion. We similarly
eliminate the ability of providers to engage in other rent-seeking
activity described in the record, including concerns that providers may
``steer'' consumers to a more expensive single-call option for an
incarcerated person's initial call after incarceration in an effort to
artificially inflate revenues through single-call fees. These practices
undermine the intent of our rules, and inflate providers' revenues well
beyond costs, at the expense of consumers, all while providing no
additional consumer value. Indeed, by removing such incentives, we find
that the rate cap structure we adopt in this Order may, for example,
motivate providers to make it easier to set up an account when
consumers receive an IPCS communication for the first time.
134. We likewise find that incorporating ancillary service costs
into our rate caps will align rates and charges more fairly with actual
user activity. Several commenters point out the seeming
unreasonableness and disproportionality of charging a $3.00 fee for a
call that may only last one minute, or passing through similar fees for
small deposits, causing consumers to ``lose a significant amount'' of
their account deposits paying such fees. By incorporating ancillary
service costs into our rate caps, we ensure that the cost of any
particular communication for any IPCS consumer is more proportionate to
its duration. We also eliminate certain distortions that our current
fee structure may perpetuate, such as avoiding a live agent, or
transferring funds to relatives less frequently in an effort to avoid
such charges. Our actions today reduce these barriers to communication.
135. Incorporating ancillary service costs into our rate caps will
also simplify the billing process, easing the administrative burden on
providers and clarifying the bills and general operational process for
consumers. We agree that these changes will ``simplify matters for
consumers.'' Similarly, with respect to paper billing fees, by
incorporating the costs of these bills into our rate caps we align IPCS
billing practices more closely with consumers' experiences for other
forms of telecommunications service outside of the carceral context,
where separate charges are not assessed for paper bills.
136. Finally, we find that incorporating ancillary service costs
into our rate caps aligns our rate and fee structure more effectively
with broader patterns in the industry and the diminishing utility of
certain ancillary services. As the Commission has previously observed,
several jurisdictions have already banned ancillary service charges,
either piecemeal or outright. The record affirms that several of these
services are declining in use. For example, several providers assert
they rarely charge a paper bill fee as few consumers require paper
bills, even proposing outright that this fee be eliminated. At least
one provider no longer charges a live agent fee, having switched to an
automated system during the pandemic. Meanwhile, providers have shifted
from offering single-call services through third parties (as defined in
our rules) to instead provide these services themselves. The record
further suggests that the single-call service, which ostensibly offers
the convenience of completing initial contact without setting up an
account, may in practice--like paper billing--offer little benefit to
consumers, as they still have to enter their payment card information
to accept the call. The record does not establish the marginal
difference between single-call payment and account creation, and we are
not

[[Page 77267]]

convinced that the margin would be great enough to significantly deter
interested consumers.
137. Some commenters object to the approach of incorporating
ancillary service costs into the rate caps. Those commenters argue that
this methodology ``does not reflect the manner in which costs are
caused by users of the service,'' and ``would impose costs for payment
processing on all consumers, rather than just those consumers directly
responsible for the cost.'' We are unpersuaded. We find that most of
these functions have become ``an intrinsic part of providing'' IPCS
because they provide IPCS consumers the means to obtain IPCS, such that
consumers typically ``must either incur [these charges] when making a
call or forego contact with their loved ones.'' For the same reason, we
are not persuaded by Securus's implicit argument that the current
ancillary fees are offered ``as a convenience to incarcerated persons
or their friends and family and are not intrinsic to the provision of
ICS.'' The sole fee unrelated to paying for IPCS, the paper bill fee,
is sufficiently rarely used that it has a negligible impact on the per-
minute rate caps. It is not necessary that these services be used by
``all consumers''; the fact that these services operate as a threshold
to most IPCS communications, coupled with the many factors identified
above in support of ancillary service cost recovery through our per-
minute IPCS rate caps, establishes that our regulatory approach
provides for just and reasonable rates for consumers and providers,
while also providing appropriate cost recovery for providers. In the
2015 ICS Order, the Commission found that single-call services were not
``reasonably and directly related to the provision of ICS'' because
they ``inflate the effective price end users pay for ICS and result in
excessive compensation to providers.'' We find that this pattern has
been ameliorated, in part, by the changes to single-call fees adopted
in the 2021 ICS Order and 2022 ICS Order; we also recognize that
providers incur some amount of legitimate costs for providing this
service, which for at least some consumers may offer a crucial means of
completing an IPCS communication. At the same time, we find that the
continuing abuse of this fee described in the record supports
elimination of the single-call fee as an independent charge--and
suggests that our analysis of ancillary service costs may actually
overestimate providers' actual costs. We also find unpersuasive the
argument that we should abstain from ``[f]urther changes to, or
eliminating, ancillary fees'' because this ``likely will cause new
efforts to subvert the FCC's ancillary fee caps.'' NCIC also argues
that changes to, or elimination of, ancillary fees would ``require ICS
providers to spend thousands of hours renegotiating contracts to comply
with a new fee structure.'' The rate caps we adopt today will require
contract amendments or renegotiations regardless, and NCIC does not
provide evidence or elaboration to support its conclusory assertions
regarding the implications of the particular change associated with
ancillary fees, so we find this argument unpersuasive. The history of
this proceeding demonstrates that ``efforts to subvert [our] ancillary
fee caps'' or otherwise abuse ancillary fees is merely an endemic
feature of the market. The record contains no evidence that eliminating
separate ancillary service fees would amplify this pattern; indeed, the
record suggests, and logic supports the fact, that eliminating separate
fees would eliminate entirely the incentive and ability to subvert
them. For example, the 2015 ICS Order banned several types of ancillary
service charges, e.g., ``account set-up, maintenance, closure, and
refund fees.'' The record is bereft of any evidence that the
elimination of these fees has encouraged providers to attempt to
subvert the Commission's rules.
138. Incorporating Facility Costs in IPCS Rate Caps. We also
include in our rate caps an estimate of the costs that correctional
facilities incur that are used and useful in the provision of IPCS.
Previously, the Commission found that correctional facilities incur
certain costs that are ``reasonably and directly related'' to the
provision of IPCS. However, despite repeated efforts to collect data
from which to reliably measure such costs, we find that neither the
collected data nor the record before us allow us to identify those
costs with reasonable certainty. At best, the record discussion
concerning IPCS costs which facilities may bear falls short of the sort
of quantitative evidence which would ordinarily support the
Commission's ratemaking efforts. Further, requiring accurate cost
accounting of facilities' costs would unreasonably burden facilities,
and facilities have declined to provide such data voluntarily.
Consequently, as proposed in 2023, we make generalized findings based
on the available record information before us. Our rate caps,
therefore, include our best estimate of the used and useful facility
costs incurred in the provision of IPCS.
139. Incorporating TRS Costs in IPCS Rate Caps. We also include in
our IPCS rate caps an estimate of the costs associated with providing
TRS in correctional facilities as required by the 2022 ICS Order to the
extent that they are not recoverable through TRS support mechanisms.
Industry and stakeholders overwhelmingly support the provision of
communications services to incarcerated people with hearing or speech
disabilities, but the record indicates that, in the carceral
environment, enabling these services imposes certain costs upon IPCS
providers. We find that our inclusion of a TRS cost estimate into our
zones of reasonableness accounts for providers' concerns about the
imposition of costs at smaller facilities; and further, we disagree
that ensuring the availability of functionally equivalent communication
services provides ``little'' benefit to those who rely on such services
to communicate with their friends, families, and loved ones. We find,
as the record demonstrates, that these costs to provide TRS are
particularly challenging to recover at the smallest facilities. In
light of that record and informed by responses to the 2023 Mandatory
Data Collection, we now include cost recovery for the additional
infrastructure and hardware costs to deliver TRS in the carceral
environment in our rate caps, estimated based on the best available
data.
b. Additional Components of Rate Cap Structure
140. Single Rate Cap for Audio IPCS. Consistent with the proposal
in 2023 and the record, we find that the costs to provide interstate
and intrastate audio IPCS are not materially different from each other
and therefore adopt a single rate cap that applies to both interstate
and intrastate audio IPCS communications at each tier. The Martha
Wright-Reed Act's directive to set rates and charges that are ``just
and reasonable'' for interstate and intrastate IPCS establishes the
framework for our analysis. Examining the record through this lens, we
find support for treating the costs of providing interstate and
intrastate audio IPCS as functionally identical. The record indicates
that providers do not distinguish between the costs of providing
interstate and intrastate audio IPCS communications, and we find no
reason to do otherwise. We thus set a single rate cap for these
communications, and find that this simplified approach will benefit
consumers and providers alike. The record supports our conclusion that
the adoption of identical rate caps for interstate and intrastate audio
IPCS communications will benefit the public interest. For example, one
commenter

[[Page 77268]]

suggests that adopting a single rate cap for interstate and intrastate
audio IPCS communications will benefit providers by ``ensur[ing] a
consistent regulatory approach,'' and benefit consumers ``by
simplifying and unifying rate structures in a manner more consistent
with today's consumer expectations and experiences with other
telecommunications services.'' Indeed, at least one provider has
already independently set a unitary rate for interstate and intrastate
IPCS communications, reflecting that providers are likely to benefit
from the implementation of a single rate cap. We agree that a simple
unified rate cap will benefit both providers and consumers, and this
finding further supports our action today.
141. Our action today is consistent with the Commission's previous
findings that provider cost data failed to identify meaningful
differences between interstate and intrastate audio IPCS costs. In the
Third Mandatory Data Collection, the Bureau offered providers the
option to allocate their expenses so as to reflect any cost differences
between providing interstate and intrastate ICS, and no providers
exercised this option. This fact suggests either that no providers had
differences to report, or that any such differences were de minimis.
Commenters have subsequently recognized the same, and emphasized that
providers declined to distinguish between costs for interstate and
intrastate audio IPCS in responding to prior mandatory data
collections.
142. More recently, 2023 sought comment on whether to ``treat costs
for interstate voice services and intrastate voice services as having
identical per-unit costs.'' All commenters to address the subject
support this approach. Several commenters state that there is no
material cost difference between providing interstate and intrastate
audio IPCS. Subsequently, in the 2023 Mandatory Data Collection, the
Bureau again offered providers the option to allocate their costs
between intrastate and interstate audio IPCS. Once more, providers
declined to exercise this option. In short, nothing in the record
suggests any material differences between interstate and intrastate
audio IPCS costs, and we therefore adopt a single unified rate cap for
each facility tier. Independently, our adoption of identical rates
based on an analysis of the collective (i.e., aggregate of both
interstate and intrastate) average costs of providing IPCS is further
underpinned by the Martha Wright-Reed Act's authorization to ``use
industry-wide average costs'' in setting rates.
143. Single Rate Cap for Video IPCS. We also find that interstate
and intrastate video IPCS communications have costs that are not
materially different, and adopt a single rate cap for interstate and
intrastate video IPCS communications at each tier. As with audio IPCS,
the adoption of a unified rate cap for interstate and intrastate video
IPCS communications is uniformly supported by the record and fully
consistent with the treatment of interstate and intrastate video
services by providers.
144. In 2023, the Commission sought comment on whether to assume
that the average costs for intrastate and interstate video
communications services are identical. All commenters to address the
subject support taking this approach. Several commenters observe that
there are no material cost differences between interstate and
intrastate video IPCS, while others note that providers do not separate
costs between interstate and intrastate video IPCS internally and will
likely face challenges in separating such costs.
145. In the 2023 Mandatory Data Collection, the Bureau offered
providers the option to allocate their video IPCS expenses to reflect
any cost differences between providing interstate and intrastate video
IPCS. No providers exercised this option, supporting our view that such
costs are materially indistinguishable between the two jurisdictions.
In the absence of any demonstrated material differences between
interstate and intrastate video IPCS costs or record data supporting
such a distinction, we adopt a single unified rate cap for video IPCS
communications for each tier as well. Similar to audio IPCS, setting a
single rate cap for video IPCS will benefit both providers and
consumers by establishing an efficient and simplified mechanism for
video IPCS rate regulation.
c. Rate Cap Tiers
146. In light of the directives established by the Martha Wright-
Reed Act and record support, we adopt a rate cap structure that first
distinguishes between two types of facilities (jails and prisons) and
then four tiers of jails based on size. We agree with commenters that
continuing to ``distinguish[ ] between the type of facility (jails vs.
prisons), as well as, for jails, between different size facilities'' is
a reasonable approach. While one commenter supports differentiation
between prisons and jails, it also suggests that myriad factors may be
``glossed over'' by our reliance upon industry averages. As set out in
a technical appendix and explained below, we believe this tiering
structure best captures the costs across the various types and sizes of
facilities, and the record does not establish that such other factors
are more cost-causative. The record and the data also support rate cap
distinctions based on the ``differences in the costs'' of providing
IPCS that relate to facility size and ``other characteristics.'' We
adopt the following rate cap tiers to reflect the cost characteristics
attributable to differences in facility type and size:
(1) Jails with an average daily population of 0 to 99;
(2) Jails with an average daily population between and including
100 to 349;
(3) Jails with an average daily population between and including
350 to 999;
(4) Jails with an average daily population of 1,000 or more; and
(5) A separate tier for all prisons regardless of average daily
population.
We also revise the definition for average daily population in our
rules by establishing a date certain each year by which the jail
population during the preceding calendar year must be determined.
Specifically, we set April 30 as the date on which the annual
recalculation of average daily population becomes effective, in order
to promote greater uniformity in its application. We find that the
combination of size and type rate tiers that we adopt reflect the most
critical factors driving providers' costs, and will result in both just
and reasonable rates for consumers and providers and fair compensation
for providers.
147. Facility Size. The Martha Wright-Reed Act directs the
Commission to ``consider . . . differences in the costs'' incurred to
provide IPCS ``by small, medium, or large facilities'' in setting rates
for IPCS. We note that, by requiring only that we ``consider'' cost
differences ``by small, medium, or large facilities or other
characteristics,'' the statute does not require the Commission to set
rate tiers based on facility size or other applicable factors where,
after appropriate consideration, we determine that there are not
meaningful cost differences attributable to these factors. For example,
as discussed below, we do not find support in the record or the data
for establishing different size tiers for prisons, and so decline to
adopt such tiers. In 2023, the Commission sought comment on how to
interpret the requirement imposed by the Martha Wright-Reed Act to
``consider . . . differences in the costs . . . by small, medium, or
large facilities or other characteristics'' in

[[Page 77269]]

determining rates. The Commission asked for comment on what size
categories to adopt and where to set the size thresholds for each
category. The Commission proposed that the rate structure adopted in
the 2021 ICS Order, which ``establish[ed] separate caps for prisons and
jails, as well as separate rate tiers for different-sized jails,''
seemed consistent with this provision of the Act. However, the
Commission sought comment on whether the Act required any change to the
approach of analyzing providers' costs ``based on the type and size of
correctional institution being served,'' such as by implementing more
or fewer rate tiers based on facility type or size.
148. The record nearly uniformly supports maintaining a rate cap
structure that distinguishes among jails based on facility size. For
administrative simplicity, we decline to apply size tiering to prisons
for several reasons. First, as the Commission has previously observed,
``prisons are almost uniformly large,'' allowing them to enjoy greater
economies of scale than jails. Second, the data filed in response to
the 2023 Mandatory Data Collection do not indicate significant
differences in the costs of serving different prison facilities.
Finally, only one commenter raised the prospect of tiered rates for
prisons. All commenters addressing the issue agree that the Act permits
us to maintain this general tiering structure. Several commenters
contend that the available data do, in fact, indicate significant
variations in costs due to facility size, and that we should therefore
set rate tiers accounting for these variations. Indeed, the record in
this proceeding ``contains extensive documentation of [the] cost
differences, and the reasons for those differences,'' in providing
audio and video IPCS among different sizes of jails. Several factors
contribute to these cost disparities, particularly the economies of
scale associated with serving larger facilities and the fact that
smaller facilities are often located in more rural areas. As set forth
in Appendices D and G, our data analysis indicates that there remain
statistically significant differences in the costs of providing audio
and video IPCS among jails of different sizes. The data submitted in
response to the Third Mandatory Data Collection further support this
conclusion. The record supports adopting four size tiers of jails,
expanding the categories contemplated by the Martha Wright-Reed Act.
Although we find that the present record and data support establishing
rate caps that vary with size tiers for jails, we reiterate that the
statute does not require us to set rate tiers as described. After
appropriate consideration, however, we determine that the record and
data do support a tiering structure for prisons. Specifically, we find
evidence that providers incur progressively greater costs in serving
jails at the lower tiers of ADP than at the highest tier that we adopt.
We found in the 2021 ICS Order that the available data suggested that
``providers incur higher costs per minute for jails with [ADPs] below
1,000 than for larger jails.'' The data submitted for the 2023
Mandatory Data Collection continues to reflect this pattern. However,
at that time we deferred on further rate cap setting with respect to
jails with ADPs below 1,000 ``because the available data [did] not
allow us to quantify the extent to which providers' costs of serving
[such] jails . . . exceed the industry average.'' With the data
submitted for the 2023 Mandatory Data Collection, we are now able to
determine with greater accuracy the cost differential of providing
service to jails with ADPs below 1,000. Consequently, we adopt average
daily population cutoffs of 100, 350, and 1,000 incarcerated persons in
order to distinguish among different sizes of jails. Although certain
commenters suggest other size thresholds, we find that the size tiers
we adopt here best fit the data submitted for the 2023 Mandatory Data
Collection.
149. While the Martha Wright-Reed Act specifies that we consider
cost differences among three sizes of facilities (``small, medium, and
large''), we do not interpret that specification as a directive that
limits our actions to only three size tiers that correspond to the
terms referenced in the statute. Instead, we interpret Congress' intent
as mandating that the Commission analyze the relevant data to assess
the cost characteristics of different-sized facilities, including those
referenced in the statute, and then to reflect that analysis in the
rate cap structure the Commission ultimately adopts. Pursuant to their
delegated authority, WCB and OEA structured the 2023 Mandatory Data
Collection to ensure it included the requisite facility-level data
needed to support this analysis. After ``consider[ing] . . .
differences in the costs'' incurred to provide IPCS ``by small, medium,
or large facilities'' as directed by the Act, we find that the data do
reflect size differences among jails--and that the data further support
distinguishing a further, fourth size tier of jails to best ensure just
and reasonable rates for consumers and providers and fair compensation
for providers.
150. We find that the record supports adopting a more granular
tiering structure than that referenced in the Act or established by our
current rules to better capture cost differences among ``small, medium,
and large facilities,'' in addition to creating a separate tier for
very small jails. The record supports adopting this tiering arrangement
to better reflect the ``differences in the costs'' of serving various
sizes of jails, particularly where the record distinguishes jails of
the smallest sizes as subject to special per-unit cost differences. Our
adoption of an additional tier for very small jails is consistent with
the statutory directive to consider cost differences for ``small,
medium, and large'' facilities as well as an ``other characteristic''
for which to account. This rate cap structure finds further support in
the rate cap tiers previously adopted by the Commission, which also
distinguished among facilities based on facility type and size based on
average daily population. In the 2015 ICS Order, the Commission found
that there was ``substantial record support'' from commenters for
``rate tiering based on differences between jails and prisons as well
as population size'' given the differences in provider costs arising
from these factors, a conclusion supported by the Commission's analysis
of the First Mandatory Data Collection. The Commission therefore
adopted rate cap tiers based on facility type and size, to ``account[ ]
for the differences in costs to ICS providers'' and to avoid ``over-
compensating ICS providers serving larger, lower-cost facilities.'' In
the 2021 ICS Order, following similar reasoning, the Commission again
adopted a rate cap structure distinguishing between prisons and jails
and among jails based on size. We also seek comment in the Further
Notice on whether obtaining more granular data from providers serving
very small jails would allow us to further disaggregate this size tier
to better reflect the variability of provider costs and other
characteristics in our rate tiers.
151. Other Characteristics. In addition to the three specified
sizes of facilities, the Martha Wright-Reed Act also directs the
Commission to ``consider . . . differences in the costs'' incurred to
provide IPCS due to ``other characteristics.'' The Commission sought
comment on whether it should continue to use the type of facility as
another characteristic in determining its IPCS rate cap structure.
Several commenters propose that

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