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FCC Stay Opp. to Miss. DOC Stay Mot. - Securus Tech v. FCC (D.C. Cir.)

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Released: December 23, 2013
USCA Case #13-1280 Document #1471591 Filed: 12/20/2013 Page 1 of 15





) consolidated cases



Respondents. )





The Federal Communications Commission (FCC) opposes the motion of the
Mississippi Department of Corrections and South Dakota Department of
Corrections (Corrections Departments) for a stay pending judicial review of
interim rules that cap interstate rates for calling services to prisoners. See Rates for
Inmate Calling Services, FCC No. 13-113 (rel. Sept. 26, 2013) (ICS Order).1

The Corrections Departments contend that the FCC’s interim rules
unlawfully intrude into state and local authority over prison administration and do
not account for the costs of inmate calling services (ICS), including the costs of
security measures. Those contentions are unavailing. As we explain below, far

1 Motions for a stay of the same rules have been filed by inmate calling service
providers Securus Technologies, Inc. (Securus), Global Tel*Link (GTL), and
CenturyLink Public Communications, Inc. The FCC filed its opposition to those
motions on December 16, 2013.

USCA Case #13-1280 Document #1471591 Filed: 12/20/2013 Page 2 of 15
from intruding into state or local powers, the interim rules are a firmly grounded
exercise of the FCC’s statutory authority to ensure that rates for interstate
payphone calls are just, reasonable, and fair. See 47 U.S.C. §§ 201(b), 276(b). In
adopting them, the agency took care to account for the reasonable costs associated
with the provision of ICS. Among other things, the FCC set generous interim rate
caps using data that included security costs. The agency also made clear that
security costs – including for advanced security features – remain recoverable
through end-user rates.

Like the stay sought by their provider counterparts, the injunctive relief the
Corrections Departments seek would preserve a discredited system that has
constrained prisoners and their families to pay excessive inmate calling charges for
far too long. Because the Corrections Departments fail to meet the stringent test
for equitable relief, the Court should deny their motion.


Section 201(b) of the Communications Act requires that all charges “for and
in connection with” interstate telecommunications service “be just and
reasonable.” 47 U.S.C. § 201(b). Section 276(b) of the Act requires the FCC to
promulgate rules to ensure that all payphone service providers, including providers
of ICS, be “fairly” – not excessively – “compensated for each and every …
interstate call using their payphone[s].” 47 U.S.C. § 276(b)(1)(A). In adopting the
interim reforms of the ICS Order, the FCC took “critical, and long overdue, steps”
to address unjust, unreasonable, and unfair ICS rates. ICS Order ¶1.

USCA Case #13-1280 Document #1471591 Filed: 12/20/2013 Page 3 of 15
As our opposition to the provider stay motions explains, see 12/16 Opp. 8-
11, the FCC’s interim rules establish a three-part framework for interstate ICS.
First, any provider may initially set its rates at a “safe harbor” level that will be
presumed to reflect costs. Second, if a provider has costs above the safe harbor, it
can choose to set a cost-based rate above the safe harbor level, up to a “hard cap”
based on the highest costs reflected in the administrative record – including
security costs. Third, a provider with especially high costs may seek a waiver of
the hard cap based on those costs. ICS Order ¶¶60-84.
The interim rules permit rates up to the hard cap based only on “costs that
are reasonably and directly related to the provision of ICS, including a reasonable
share of common costs.” ICS Order ¶53. Such costs include “the cost of capital
(reasonable return on investment); expenses for originating, switching,
transporting, and terminating ICS calls; and costs associated with security features
relating to the provision of ICS.” Ibid. Recoverable security costs include the cost
of advanced features such as “biometric caller verification,” “sophisticated
tracking tools,” “link analysis software,” “audio word search,” “storage of inmate
call recordings,” and call “blocking mechanisms.” Id. n.196. And to ensure that
modern ICS security features will “continue to be provided and improved” under
the FCC’s interim rate structure, id. ¶2, the agency’s interim caps are “based on
cost studies that include the cost of advanced security features such as continuous
voice biometric identification.” Id. ¶58; see also id. ¶76 (setting the interim hard
cap for debit and prepaid calls based on data that “include[ed] continuous voice
biometric identification fees”).

USCA Case #13-1280 Document #1471591 Filed: 12/20/2013 Page 4 of 15


To obtain a stay, the Corrections Departments must show that (1) they will
likely prevail on the merits, (2) they will suffer irreparable harm unless the Court
grants a stay, (3) a stay will not harm other interested parties, and (4) a stay will
serve the public interest. WMATC v. Holiday Tours, Inc., 559 F.2d 841, 843 (D.C.
Cir. 1977); D.C. Cir. Rule 18(a)(1). A stay is an “intrusion into the ordinary
processes of administration and judicial review” and thus “is not a matter of right,
even if irreparable injury might otherwise result.” Nken v. Holder, 556 U.S. 418,
427 (2009) (quotation marks omitted). To merit such an “extraordinary remedy,”
the Corrections Departments must make “a clear showing” that they are “entitled
to such relief.” Winter v. NRDC, 555 U.S. 7, 22 (2008). They have failed to do so.
1. The Corrections Departments Have Not Demonstrated A Likelihood

Of Success On The Merits.

The Corrections Departments make two primary arguments in support of
their motion for a stay: first, that the ICS Order goes beyond the FCC’s authority
by intruding on the “prerogatives” of state and local authorities, Mot. 5-11; and
second, that the order is arbitrary and capricious because it does not account for
significant costs, including security costs, of providing ICS. Mot. 11-15. Neither
argument is persuasive.2

2 In a fleeting, one-sentence reference, Mot. 4-5, the Corrections Departments
adopt the arguments that the provider petitioners raised in their earlier-filed
motions. Our opposition to the providers’ stay motions explains why those
arguments fail. See 12/16 Opp. 12-23.


USCA Case #13-1280 Document #1471591 Filed: 12/20/2013 Page 5 of 15
a. The Order Is A Firmly Grounded Exercise Of The FCC’s Statutory
Duty To Ensure Just, Reasonable, and Fair Rates for Interstate Calls.
The ICS Order is not an impermissible intrusion into state or local authority;
it is an exercise of express authority under federal law. The order does not restrict
how state or local authorities can administer their correctional institutions. It
simply implements Congress’s decision, embodied in federal law, that ICS rates
should be just, reasonable, and fair. See 12/16 Opp. 22.
The Communications Act vests in the FCC the power to adopt rules to
ensure that “[a]ll charges … for and in connection with [interstate] communication
service … be just and reasonable,” 47 U.S.C. § 201(b), and that the owners of
payphones receive fair – not excessive – compensation for calls made from their
phones, id. § 276(b)(1)(A). That grant of authority is broad. See, e.g., Cable &
Wireless P.L.C. v. FCC, 166 F.3d 1224, 1232 (D.C. Cir. 1999) (citing “the
expansive powers delegated to the Commission under section[] 201(b)”); Global
Crossing Telecomms., Inc. v. FCC, 259 F.3d 740, 746 (D.C. Cir. 2001)
(recognizing that Congress has given the FCC “the authority to make the choice
between ... alternative[]” ways of implementing Section 276(b)(1)(A), and that the
Court will not second-guess the agency’s reasonable exercise of that authority); see
also Metrophones Telecomms., Inc. v. Global Crossing Telecomms., Inc., 423 F.3d
1056, 1072 (9th Cir. 2005) (discussing the FCC’s “broad authority” under Section
276), aff’d, 550 U.S. 45 (2007). A federal agency does not impermissibly intrude
into state authority when it properly exercises its powers under federal law. And
while state and local authorities are free under state law to administer their own

USCA Case #13-1280 Document #1471591 Filed: 12/20/2013 Page 6 of 15
correctional facilities, see Mot. 5, they are not entitled to profit from excessive
charges for interstate communications services that violate federal law, see, e.g., 47
U.S.C. § 276(c) (“To the extent that any State requirements are inconsistent with
the Commission’s regulations [implementing Section 276 of the Act], the
Commission’s regulations on such matters shall preempt such State
Contrary to the Corrections Departments’ contentions, nothing in the ICS
Order “improperly displaces the judgment of state and local authorities” as to “the
worthiness of correctional facilities’ programs and services and who should pay for
them.” Mot. 7. While the order imposes new requirements on providers of ICS, it
does not regulate correctional institutions. In particular, the order “say[s] nothing
… about how correctional facilities spend their funds or from where they derive.”
ICS Order ¶56. Correctional facilities may continue to “have arrangements [with
ICS providers] that include site commissions,” ibid.; the order merely bars
providers generally from passing through commission payments to end-users
through “interstate ICS rates,” ibid. Using commission payments or any other
source of revenue, correctional facilities remain free to sponsor any program they
The FCC reasonably determined that commissions to correctional facilities
are not recoverable because they bear no direct relationship to costs, id. ¶7; see id.
¶57, but are instead an allocation of profit from ICS providers to the facilities, id.
¶54. That judgment falls well within the FCC’s power to regulate interstate ICS
rates, and the agency “does not exceed its authority simply because a regulatory

USCA Case #13-1280 Document #1471591 Filed: 12/20/2013 Page 7 of 15
action” may affect parties beyond the agency’s jurisdiction. Cable & Wireless,
166 F.3d at 1230.
b. The Order Takes Legitimate ICS Costs, Including Security Costs,
Into Account.
The interim, interstate ICS rates that the FCC adopted also account for
evidence in the record of the costs of providing ICS – including security costs.
Contrary to the Corrections Departments’ contentions, the FCC did not
“fail[] to consider the significant [cost] differences across correctional facilities.”
Mot. 11; see ICS Order ¶¶69, 81. As explained at page 3 above, the rules permit a
provider whose costs exceed the safe harbor rates to charge cost-justified rates up
to the hard rate cap, and even to seek a waiver of the hard cap in the event it can
show its costs exceed that limit. The rules thus provide mechanisms to account for
a provider’s particular cost structure in setting its rates. The Corrections
Departments complain that the FCC used “averaging to establish the safe harbor
rates.” Mot. 12. But as we explained in our opposition to the provider petitioners’
stay motions, see 12/16 Opp. 21-22, there is nothing novel or improper in the
agency’s use of industry-wide and averaged data to craft an interim rate structure.
See Sw. Bell Tel. Co. v. FCC, 168 F.3d 1344, 1352-53 (D.C. Cir. 1999).
The Corrections Departments also argue that the FCC “failed to consider
adequately the significant costs of necessary security measures,” Mot. 13, and that
the ICS Order undermines the decision of state and local officials to use “advanced
security measures,” Mot. 10. On the contrary, however, the FCC took great care to
account for security concerns in its rate determinations, and the order makes

USCA Case #13-1280 Document #1471591 Filed: 12/20/2013 Page 8 of 15
abundantly clear that “compensable costs” include, among other things, “costs
associated with security features relating to the provision of ICS,” ICS Order ¶53,
including the costs of advanced security features, id. n.196 (acknowledging the
propriety of provider investment in “sophisticated security features” relating to
ICS); id. ¶58 (basing the interim rate caps on studies “that include the cost of
advanced security features such as continuous voice biometric identification”).
Indeed, while the ICS Order generally prohibits the recovery of site
commission payments through interstate end-user rates above the safe harbor, ICS
Order ¶¶53-58 (because in “most or all” cases such payments “have no reasonable
and direct relation to the provision of ICS,” id. ¶55), the order allows some leeway
to reflect a “possibility,” which the record did not “foreclose,” “that some portion
of payments from ICS providers to some correctional facilities” might on occasion
repay the “facilities for their costs of providing ICS,” ICS Order n.203. The
agency therefore stated that “any ICS provider … seeking to justify costs between
the safe harbor and the interim rate cap” in the context of a formal complaint or
enforcement proceeding, or seeking a waiver, “may provide specific details about
payments to correctional facilities that it contends are compensable for costs
meeting [the FCC’s] cost standards.” Ibid.
The Corrections Departments also argue that lower rates will deter
deployment of advanced ICS security features and deter further technological
innovation. Mot. 13-14. The FCC found, on the basis of record evidence, that the
costs of providing secure ICS were decreasing, due in part to advances in
technology. ICS Order ¶29. The agency accordingly found that its rate reforms

USCA Case #13-1280 Document #1471591 Filed: 12/20/2013 Page 9 of 15
would “not impact security or innovation in the ICS market.” Id. ¶71. Instead, it
explained, “innovation will continue to drive down costs through automation and
centralization of the security features correctional facilities require.” Ibid.
Finally, the Corrections Departments contend that “the Order conflicts with”
evidence “that the Commission’s rate cap is arbitrarily low when compared to non-
inmate, interstate collect calling offered to the public.” Mot. 14. That claim
overstates the nature of the record, which as far as we can tell contained neither of
the rate schedules that the Corrections Departments cite in their motion. Mot.
nn.16-17. The FCC reasonably, and conservatively, based its interim collect call
rate cap on “the highest costs of any data submitted in the record” for ICS calls,
ICS Order ¶78, which came from a cost study by “seven different ICS providers
that serve various types and sizes of correctional facilities,” id. ¶6; see id. ¶25.
And even had the record established higher rates for “ordinary” collect calls, the
FCC might reasonably still have opted to use the ICS providers’ data; a heavier
volume of collect calls in correctional settings may allow ICS providers to offer
collect calling services at a lower cost per call than is possible for providers of
ordinary residential telephone or payphone service.
2. The Corrections Departments Have Not Demonstrated Irreparable


The Corrections Departments claim that the FCC’s supposed failure to
account for the costs of ICS security will deter deployment of security features and
thereby “risk serious harm to the public and to prison officials.” Mot. 16. But as
we have explained, see pp. 8-9, supra, the FCC reasonably found that its rate

USCA Case #13-1280 Document #1471591 Filed: 12/20/2013 Page 10 of 15
reforms would not deter deployment of current or advanced security features,
because the cost of such features has been accounted for, and is recoverable in, ICS
rates. Indeed, as the FCC observed, the successful history of ICS rate reform in
states “such as New Mexico and New York” shows “that rates can be reduced to
reasonable, affordable levels without jeopardizing … security.” ICS Order ¶4; see
id. ¶70 (“[M]any state departments of correction make ICS available to inmates at
rates lower than those we implement here and nonetheless operate in a safe, secure,
and profitable manner.”).
The Corrections Departments also contend that the FCC “creat[ed]
uncertainty” as to what costs are recoverable in end-user rates, Mot. 16, which they
fear “will make ICS providers reluctant to continue providing needed security
measures,” Mot. 17. It is impossible to see how that can be; the agency made clear
that the “costs associated with security features relating to the provision of ICS” –
as opposed to “general security features of the correctional facilit[ies] unrelated to
ICS” – are costs “compensable” through interstate ICS rates. ICS Order ¶53; see
12/16 Opp. 17-18.
3. A Stay Would Harm Third Parties And Disserve The Public Interest.
The interim rate reforms that the FCC has adopted are intended to make it
easier for prisoners to stay connected to their families and friends, to lessen the
negative impact on the millions of children with an incarcerated parent, to reduce
recidivism (and thus lower the cost of repeated incarceration), and to improve
communications between inmates and their legal representatives. See ICS Order

USCA Case #13-1280 Document #1471591 Filed: 12/20/2013 Page 11 of 15
¶¶2, 42-44. The order thus advances inmate welfare, as well as the public interest.
A stay of the order would undermine both.
The Corrections Defendants contend that the FCC’s interim rate reforms
“may … deprive[]” prisoners at high-cost facilities of access to ICS. Mot. 20. But
as we have explained, there is no basis in the record for presuming that the
reformed rates, which are based on highly conservative assumptions, will be
insufficient to support service in high-cost facilities.3 See 12/16 Opp. 29. The
FCC therefore was reasonable in “not find[ing] persuasive the assertion that
regulation of interstate ICS” would “curtail[] ICS access.” ICS Order ¶70.
The Corrections Departments additionally argue that the FCC’s interim
reforms will harm third parties and the public interest by threatening to eliminate
programs and services to prisoners, Mot. 18-19, as well as “services provided
outside of prisons,” Mot. 19, that are currently funded by commissions from ICS
providers. But there is no reason why users of ICS – particularly family and
friends of the incarcerated, who have committed no crime, but who typically pay
for ICS calls – should bear the costs of unrelated services through overcharges

3 The Corrections Departments assert that “the per-minute cost for a call at all
facilities served by Securus exceeds the safe harbor rates set by the Order, and the
per-minute cost for a call from the median facility is more than double the rate cap
established by the Order.” Mot. 17-18 (emphasis omitted). In fact, the record
showed that costs for the majority of Securus’s calls were about 4 cents per minute
– well under the safe harbor. See ICS Order ¶26 & n.91; Rates for Inmate Calling
, No. DA13-2236, n.148 (Nov. 21, 2013) (Ex. B to GTL’s Motion). To
support the assertion that Securus’s costs are higher, the Corrections Departments
incorrectly rely on data that includes noncompensable site commission payments,
Mot. n.13 (citing Expert Report of Stephen E. Siwek ¶3.1 (Ex. B to 12/16 Opp.)).

USCA Case #13-1280 Document #1471591 Filed: 12/20/2013 Page 12 of 15
imposing a serious hardship on their ability to communicate. See 12/16 Opp. 28-
29. And nothing in the ICS Order prevents a state or locality from replacing any
diminution in ICS commissions through taxpayer revenues or other funding
Prisoners and their families have for far too long “borne the … burden of
unjust and unreasonable interstate inmate phone rates.” ICS Order ¶1. The ICS
Order offers relief from “the most egregious” of the existing abuses. Id. ¶3. The
“parties and the public … are … entitled to [its] prompt execution.” Nken, 556
U.S. at 427.


For the foregoing reasons, the Court should deny the Corrections
Departments’ motion for a stay.


USCA Case #13-1280 Document #1471591 Filed: 12/20/2013 Page 13 of 15
Respectfully submitted,

Jonathan B. Sallet

Acting General Counsel

Jacob M. Lewis


Sarah E. Citrin


December 20, 2013


USCA Case #13-1280 Document #1471591 Filed: 12/20/2013 Page 14 of 15




., )







) consolidated cases








I, Sarah E. Citrin, hereby certify that on December 20, 2013, I electronically filed
the foregoing Opposition Of Federal Communications Commission To Motion For
Stay Of Mississippi And South Dakota Departments Of Corrections with the Clerk
of the Court for the United States Court of Appeals for the D.C. Circuit by using
the CM/ECF system. Participants in the case who are registered CM/ECF users
will be served by the CM/ECF system.

Stephanie A. Joyce
Michael K. Kellogg
G. David Carter
Courtney S. Elwood
Arent, Fox LLP
Aaron M. Panner
1717 K Street, N.W.
John B. Ward
Washington, D.C. 20036
Kellogg Humber Hansen Todd
Counsel for:Securus Technologies,
Evans & Figel, PLLC
1615 M Street, N.W., Suite 400

Washington, D.C. 20036
Counsel for: Global Tel*Link

USCA Case #13-1280 Document #1471591 Filed: 12/20/2013 Page 15 of 15

Helgi C. Walker
Angela J. Campbell
Scott G. Stewart
Georgetown University Law Center
Philip S. Alito
Institute for Public Representation
Gibson, Dunn,& Crutcher
600 New Jersey Avenue, NW
1050 Connecticut Ave., N.W.
Suite 312
Washington, D.C. 20036
Washington, DC 20001
Counsel for: Mississippi Dept.
Counsel for: Intervenors
of Corrections & South Dakota
Dept. of Corrections

Robert B. Nicholson
Robert A. Long, Jr.
U.S. Department of Justice
Matthew J. Berns
Antitrust Division
Kristen E. Eichensehr
950 Pennsylvania Ave., N.W.
Covington & Burling
Room 3224
1201 Pennsylvania Ave., N.W.
Washington, D.C. 20530
Washington, D.C. 20004
Counsel for: USA
Counsel for: CenturyLink Public

Communications, Inc.

Dennis R. Hansen
Deputy Attorney General
Office of Attorney General
323 Center Street, Suite 200
Little Rock, AR 72201
Counsel for: Arkansas Dept.
Of Correction

/s/ Sarah E. Citrin

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