Brittany J. Finder (firstname.lastname@example.org) is a J.D. Candidate at The George Washington University Law School and the Senior Managing Editor of the Public Contract Law Journal. She wishes to thank Henry D. Anreder, Kelsey M. O’Brien, Judge Jeri K. Somers, and Bryan Byrd for their feedback and support throughout the Note-writing process.
On August 9, 2013, Bethany Fraser, the mother of two young children whose father is incarcerated, testified before the Federal Communications Commission (FCC or Commission).1 With tears in her eyes, Ms. Fraser described how her telephone bill “regularly exceeded her grocery and electricity bills combined,” but she “would do anything, and pay any amount to keep [her] children connected to their father.”2
That same day, answering the call of those who had pleaded with the FCC for over a decade to regulate the high costs of inmate calling services (ICS),3 the Commission voted to limit the rates of intrastate telephone calls placed from jails and prisons.4 On October 25, 2015, after considering the potential cost savings to inmates’ families and the societal benefits derived from strengthening inmates’ connections to their support networks,5 the Commission approved regulation capping the rates for both interstate and intrastate telephone calls placed from jails and prisons.6 Before the provisions of the 2015 ICS Order went into effect, however, five major ICS providers and several states challenged the FCC’s rate caps in the U.S. District Court for the District of Columbia.7
In response to a petition for partial reconsideration of the 2015 ICS Order,8 the FCC approved modified rate caps on August 4, 2016.9 The FCC’s rate caps sought to limit the rates charged to consumers.10 In some states, ICS rates had ballooned to more than eighteen dollars for a fifteen- minute telephone call11 — forcing inmates and their families, like Ms. Fraser, to “[c]hoos[e] between essential needs and keeping kids connected to their parent.”12
While the FCC attempted to remove barriers to contact between inmates and their families during incarceration,13 the FCC’s rate caps failed to restrict or prohibit what the Commission has called “the main cause of the dysfunction of the ICS marketplace”14 — the widespread use of payments, commonly referred to as “site commissions.” ICS providers pay site commissions to state and local corrections agencies in exchange for exclusive ICS contracts.15 Site commissions often take the form of “monetary payments, in-kind payments, exchanges, or allowances,”16 and have been described as “kickbacks,”17 or “legal bribes to induce correctional agencies to provide ICS providers with lucrative monopoly contracts.”18 Illegal in eleven states,19 site commissions function as a cost-recovery mechanism for corrections agencies across the United States.
This Note examines both the practical and normative implications of the FCC’s failure to restrict or prohibit site commissions. Part II of this Note traces the legal and federal regulatory developments in the ICS market. Part III analyzes the disproportionate influence of site commissions on bidding and bid selection procedures — a significant factor that continues to drive the costs of ICS telephone calls for inmates and their families. Part IV maintains that prevailing incentives in ICS procurement persist as wholly inconsistent with a principled approach to public contracting, undermining the public contracting goals of accountability, transparency, and competition.
Finally, Part V urges the FCC to build upon its cost-based regulation of the ICS market to ameliorate the pernicious effects of site commissions. This Note recommends that the Commission enact a federal ban on site commission clauses in ICS contracts, which would render such clauses unenforceable as against public policy.
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