New FCC regulations impact private equity prison telecom profiteers

For decades, incarcerated people and their loved ones have fought to make prison communications more affordable. In December 2022, Congress approved the The Martha Wright-Reed Just and Reasonable Communications Act, which gave the Federal Communications Commission (FCC) the authority to regulate costs of phone calls and other communications in prisons and jails; though the FCC already had the power to regulate prices for calls between states, the Commission did not have authority to do so within states. Furthermore, the bill extended the FCC’s authority to all forms of communication, as video calling has become increasingly popular in the last few years. 

In July, the FCC voted to implement the new rate caps and regulations. The new rates drastically reduce call costs. According to the FCC, “the cost of a 15-minute phone call will drop to $0.90 from as much as $11.35 in large jails and, in small jails, to $1.35 from $12.10.” Costs for video calling will still vary, but are capped at $0.25 per minute for the smallest jails.

The rate caps will impact revenues for prison telecommunications companies, the largest of which are owned by private equity firms. Securus, owned by Platinum Equity, and ViaPath (formerly Global Tel Link), owned by American Securities, dominated an estimated 74 to 83 percent of the market as of 2019. Prisons and jails contract with a single provider, which has historically allowed companies to charge “exorbitant” prices in what is literally a captive market. In 2018, Securus charged as much as $22.56 for a 15-minute phone call, while ViaPath charged $16.50. In addition to capping the rates for the phone calls themselves, the new FCC rules prohibit companies from charging fees for “ancillary services” like adding funds to an account or making a call without an account. 

While prison telecom companies and the private equity firms that own them profit from high rates, county sheriff offices and state corrections departments often receive “site commissions” (kickbacks) from calls. The Prison Policy Initiative recognizes kickbacks as fundamental to the current industry business model: “jails and prisons often choose their telecom providers on the basis of which company will pay the facility the most money in kickbacks.” 

Research indicates that prisons and jails across the country ended in-person visitation in order to make more from kickbacks. A review of public records by the New Yorkerfound that in St. Clair County, Michigan, “after the jail eliminated in-person visits, call commissions almost tripled, from $154,131 in 2017 to $404,752 the following year. In February of 2018, a jail administrator wrote a cheerful e-mail to colleagues: ‘Well that is a nice increase in revenues!’” In March 2024, advocates filed lawsuits against county officials, Securus, and ViaPath in Michigan for allegedly generating profit by denying families the right to visit their loved ones, as the Michigan Constitution “enshrines family integrity and intimate association.” The cases are ongoing as of August 2024.

Without the ability to charge higher fees and offer greater kickbacks, companies will need to adjust their business model in order to beat competition. Given private equity’s commitment to prioritizing return on investment, firms may seek to exit the sector. Platinum Equity has already been subject to scrutiny for its investment in Securus in recent years as pressure from incarcerated people, their loved ones, and advocates garnered media attention. Despite having clear proposals for exiting the investment, Platinum Equity continues to hold Securus in its portfolio through parent company Aventiv. In late 2023, S&P Global and Moody’s downgraded credit ratings for Aventiv, increasing speculation of a possible bankruptcy.

ViaPath also struggled financially even before the FCC approved the new rules. In February 2023,Bloomberg reportedthat SPAC Tristar Acquisition I Corp (TRIS) was considering acquiring ViaPath Technologies, and in March, Tristarreportedthat it had entered into a non-binding letter of intent that sets forth the preliminary terms and conditions of a potential business combination. However, in a June 2023 SEC filing, Tristar announcedthat it had terminated its letter of intent to acquire ViaPath. Unable to complete the sale, ViaPath needed to refinance $1.4 billion of debt. After a delay, ViaPath completed its refinancing deal in July 2024, but quietly removed its credit ratings from S&P Global after the agency downgraded the rating from B to B-. For more on American Securities investment risks across the firm’s portfolio, see our July report.

The FCC regulations are a major victory for communities across the country. Senator Tammy Duckworth, who introduced the legislation that paved the way for the rate caps, celebrated the FCC for “fulfilling the mission of the late Martha Wright-Reed to eliminate unjust and unreasonable prison phone rates and end the predatory status quo that enabled prison telecom providers to gouge the families of incarcerated Americans.” Though Securus and ViaPath may attempt to find new revenue streams in e-messaging or tablets, the time for private businesses to profit from incarceration may be coming to an end, especially as nonprofit correctional telecom provider Ameelio gains traction in the industry.

Tom Gores, CEO of Platinum Equity, agrees: “Ultimately, I think this industry really should be led probably not by private folks. I think it probably should be — I’ll get killed for saying this — but the nonprofit business, honestly.”