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Do phone rates gouge prisoners?
State's contract with pay-phone firms called unfair

Jennine Grigsby was evicted from her Oakland apartment, her car was repossessed and she was forced to move in with her mother after she could no longer make her rent or car payments.

Grigsby had not lost a job or fallen ill. Instead, the single mother had amassed $400 monthly phone bills by accepting collect calls from the father of her two children -- an inmate at San Quentin State Prison.Like many people who have loved ones behind bars, Grigsby was forced to pay just about the highest phone rates in the market.

That is because prisoners can make collect calls only from pay phones run by the company that has won the exclusive contract to offer phone service at their prison. California, which awards the contracts, collects a big commission -- as much as 44 cents per dollar -- on prison pay-phone charges. Like many other states, California picks the phone company that gives it the biggest commission, not the lowest rates for prisoners.

Grigsby pays about $5 for a 15-minute collect call from San Quentin to Oakland. The same call made from a pay phone right outside the prison costs about $2.55.

Consumer and prisoner advocates say this system gouges the friends and families of prisoners. And they say the state encourages price-gouging because it gets a share of the phone companies' profits.

The Utility Consumers Action Network, based in San Diego, plans to file a complaint with state regulators alleging that MCI WorldCom overcharges the families of prisoners and should be forced to stop.

"Right now, the phone companies are taking advantage of a vulnerable community," said UCAN's Charles Carbone. "They're saying it's OK to bilk families of prisoners and overcharge them because they're a vulnerable community and they probably won't do anything about it. That's not right."

In Illinois, Kentucky and Florida, relatives of prisoners or government agencies have sued, investigated or fined companies for alleged prison price-gouging.

To pay off her debts, Grigsby has limited her calls from San Quentin to once a week. Some families have had to cut off contact with prisoners altogether -- something prisoner advocates warn will harm society, because prisoners who lose contact with the outside world are more likely to commit a crime when they get out.

In fact, a 1998 report by the Florida House of Representatives found that the 70 percent of prisoners who maintained contact with a family member were less likely to get rearrested during their first year out of prison. Those who had no contact were six times more likely to return to prison in their first year.

"Most inmates come from disadvantaged backgrounds, so when the companies charge these incredible rates, it puts a severe financial strain on the families," said Kara Gotsch, with the American Civil Liberties Union's national prison project. "It's unfortunate that correctional systems find it necessary to allow this burden to continue on families so they can make a profit."

In California state prisons, inmates can make collect calls using only MCI or GTE -- whichever has the exclusive contract in their prison.

MCI provides long-distance service at 33 California state prisons, and GTE provides pay-phone service at four.

The phone companies say some of the money they collect from prison calls pays for mandatory operator assistance, added security features and commissions to the state.

For each dollar it collects on prison calls, MCI pays the state 44 cents. GTE pays 33 cents.

Last year, those commissions amounted to about $16 million. This year, that figure is expected to exceed $20 million because of rate increases and a growing prison population, according to state officials.

Bill Case, manager of the state Department of General Services' pay-phone division, said, "The state tries to get the best commission it can from a vendor, whether it's Burger King going on a University of California campus" or MCI offering phone service in state prisons.

Right now, long-distance collect calls from pay phones in state-run prisons cost about 50 cents per minute, on top of an automatic $3 surcharge for each call.

By comparison, people outside prisons typically pay 8 to 55 cents per minute for a long-distance collect call, plus a $2.25 to $3.25 surcharge for operator assistance.

The high end of that range represents collect, operator-assisted peak-hour calls from places like airports and hotel rooms. Most people can avoid those extremes by being careful about how they place their calls. Prisoners do not have that option.

"They have a truly captive customer base," said Carbone.

Rates probably will go even higher.

MCI recently filed an application with the state Public Utilities Commission to raise rates on local toll calls from California state prisons to a flat rate of 30 cents per minute. Right now, those calls cost from 6 to 20 cents per minute.

Additionally, California plans to rebid its pay-phone contract in August. Sources said the state probably will seek larger commissions, which could lead to even higher rates for prisoners.

The phone companies will not disclose how much they earn from prison revenue. But consumer watchdogs say the phone companies bid high for these contracts because they are so lucrative.

"The state has gone into the phone business and is sharing the profits with these providers," said Gerald Norlander, deputy director of the Public Utility Project in Albany, N.Y. "The companies are definitely making a profit off this. The cost for the hardware they need to install has been tumbling, and the actual cost of providing the call is very cheap. It can be very lucrative for these companies; that's why they are willing to give these states $20 million."