Drew Kukorowski, Prison Policy Initiative, September 11, 2012

Exorbitant calling rates make the prison telephone industry one of the most lucrative businesses in the United States today. This industry is so profitable because prison phone companies have state-sanctioned monopolistic control over the state prison markets, and the government agency with authority to rein in these rates across the nation has been reluctant to offer meaningful relief.

Prison phone companies are awarded these monopolies through bidding processes in which they submit contract proposals to the state prison systems; in all but eight states, these contracts include promises to pay “commissions” — in effect, kickbacks — to states, in either the form of a percentage of revenue, a fixed up-front payment, or a combination of the two. Thus, state prison systems have no incentive to select the telephone company that offers the lowest rates; rather, correctional departments have an incentive to reap the most profit by selecting the telephone company that provides the highest commission.

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