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Federal Register / Vol. 86, No. 142 / Wednesday, July 28, 2021 / Rules and Regulations
40743

Table 6 - Upper Bound Estimates Contracts
Mean
Std. Dev.

Mean+2 Std. Dev.

Larger Jails
182

0.100

0.118

0.336

Prisons
129

0.092

0.041

0.174

62. The Commission finds these upper bounds likely overstate providers inmate calling services costs for several reasons.
First, providers have some incentive to overstate their costs because higher costs would lead to higher interstate rate caps and higher profits. Second, a lack of specificity in the Instructions for the Second Mandatory Data Collection, particularly those related to how providers should account for indirect costs, permitted providers to inflate reported costs further. These factors shift costs upward, resulting in higher upper bounds than would result with more accurate data.
These costs are further overstated because of the treatment of costs shared between contractors and subcontractors.
F. Assessing and Ensuring the Commercial Viability Under the New Interim Interstate Provider-Related Rate Caps 63. In the Report and Order, the Commission sets new interim interstate provider-related rate caps of $0.12 per minute for prisons and $0.14 per minute for larger jails, respectively. To help evaluate the reasonableness of those caps, the Commission considers the commercial viability of contracts under the selected interim rate caps compared to revenues reported by providers in the Second Mandatory Data Collection.
64. The Commission first compares revenues and costs by provider in 2018, and
contracts are projected to recover costs consistent with the revenues earned on each contract in 2018. Each of these estimates, except for the estimate that all contracts will be viable under the new interim rate caps, are conservative.
65. Comparing Reported Revenues and Costs. Table 7 shows the following for each provider and for the industry as a whole:
Inmate calling revenues, which include amounts collected to pay site commissions;
automated payment revenues; paper billing and account revenues; the sum of the preceding three types of revenues; inmate calling services costs, which for this purpose include site commissions; and profits defined as the difference between those summed revenues and inmate calling costs. Thus, profit nets out site commissions. Again, only REDACTED fails to recover its reported costs, incurring a surprisingly large REDACTED loss of REDACTED million on its inmate calling services operations, even when its revenues from ancillary service charges are included in its revenue total.
That REDACTED reports losses despite being the winning bidder on REDACTED
contracts, the industrys largest provider by most measures, and one of the industrys most sophisticated providers, suggests REDACTED revenues may be a more accurate estimate of its costs than are its reported costs.

then consider what would happen to revenues under interim provider-related rate caps of $0.12 per minute for prisons and $0.14 per minute for larger jails. In the first instance, the Commission takes a straightforward, but simplistic approach using minutes of use as the allocator. The Commission holds call minutes, automated payment revenues, and paper billing revenues constant and project that those new interim caps would allow providers to recover their allocated costs for 71% of their prison contracts and 99% of their contracts for larger jails. To test the robustness of this analysis, the Commission then determines the percentage of prison, and separately larger jail, contracts for which the new interim caps would allow providers to recover the revenues they earned in 2018.
The Commission finds the percentages to be 74% for prisons and 65% for larger jails. The Commissions examination of the remaining contracts shows that they, on average, have lower per-minute costs than the contracts under which providers would recover their 2018 revenues, and thus all of the contracts are also likely to be viable under the new interim rate caps. Lastly, recognizing that revenues in 2018 represent an upper bound on costs, and allowing call volumes to expand because the new interim caps will lower prices to incarcerated persons leading to more call minutes, the Commission finds that 77% of prison and 73% of larger jail
TABLE 7INMATE CALLING SERVICES REVENUES AND COSTS INCLUSIVE OF SITE COMMISSIONS BY PROVIDER IN 2018
in $ thousands Provider
ICS revenues
APF revenues
PBF revenues
Total revenues
Total costs
Profits
ATN
CenturyLink
Correct
CPC
Crown
GTL
ICSolutions
Legacy
NCIC
Pay Tel
Prodigy
Securus

REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED

REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED

REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED

REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED

REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED

REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED
REDACTED

Industry

1,093,192

115,757

410

1,209,359

1,181,611

27,748

66. Table 8 shows the following for each provider, and across all providers, split by prisons and larger jails: Number of contracts;
contract shares; the contract mean for total revenues per paid minute that is, the mean for the sum of inmate calling revenues, including amounts collected to pay site commissions, plus automated payment revenues and paper billing revenues, all
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divided by paid minutes for each of the 2,900
contracts; the contract mean of costs per paid minute, again including site commissions; the contract difference per paid minute between the preceding profit, which nets out site commissions; and the contract mean of direct costs per paid minute, excluding site commissions. In 2018, for prisons, both REDACTED and REDACTED

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on average incurred losses i.e., had perminute costs exceeding their per-minute revenues; and, for larger jails, only REDACTED on average incurred such losses. This may be due, in part, to these providers bidding overly aggressively for some contracts and to the cost allocation approach being unable to reliably allocate indirect costs for as many as 12.7% of
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Notes: APF means automated payment fee, and PBF means paper billing fee.