Prison telecom ViaPath, seeking refinancing, faces risk from new FCC rules

ViaPath Technologies, a prison telecom provider owned by private equity firm American Securities, is currently seeking a reported $1.45 billion refinancing led by Texas Capital Bank. Further reporting suggests ViaPath and TCB are seeking funding from private credit markets.

One of the most predatory providers of phone and communications services to U.S. jails, prisons, and detention centers, ViaPath (formerly Global Tel*Link) has received media attention for its practice of preying upon incarcerated people and their families to bolster its bottom line. However, ViaPath’s financial position, which has recently generated net losses, faces additional, looming risks.

To start, the Federal Communications Commission (FCC) is expected to approve game-changing industry regulations within the next month, using the authority granted by the Martha Wright-Reed Act to cap rates for phone calls as well as never-before-capped video calls in prisons and jails. At the very least, it would be prudent to avoid investing in new debt before the impact of this new regulation on ViaPath’s profitability and sustainability can be assessed.

Additionally, 11 states are currently considering legislation that would make phone calls free for incarcerated people, which would incentivize corrections departments to negotiate against telecom providers for lower rates. Five of these states are contracted by ViaPath, and more states are expected to introduce similar legislation next year.

More generally, any investment in ViaPath must also be considered in the context of the broader prison telecom industry’s poor financial outlook and abysmal reputation. ViaPath’s main competitor in the industry is struggling to pay back debt. ViaPath’s investors and private equity owners have also faced tremendous public scrutiny, similar to the rest of the industry.