HEAVY TOLL ON CALLS FROM PRISON

Inmates' Families Accuse State, Phone Companies Of Price-Gouging

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.

Today, 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.''

CAPTIVE AUDIENCE

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.

The Department of Corrections would not comment on the prison pay-phone
contract, referring questions to the Department of General Services, which
bids all contracts for the state.

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.

PROFITS ALL AROUND

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.''

However, Ian Hicks, an executive manager with MCI, said these contracts are
profitable but also require a big investment.

``We have extensive call security technology in place in addition to an
advanced network,'' he said.

WHERE THE MONEY GOES

Many states award their prison-phone contracts to the highest bidder, but
use most of their commissions to benefit inmates. New York, Florida and
Ohio collected a total of $48 million last year, but sent that money to
inmate welfare funds to pay for books, prison education programs and other
inmate-related expenses.

In California, prison pay-phone revenues go into the state's general fund.
Only a handful of other states -- including Hawaii, Delaware and Virginia
- -- send prison-phone rebates to their general funds.

The state gets a commission from pay phones that MCI and GTE operate in all
state-owned facilities -- not just prisons but also state office buildings,
state-run hospitals and state colleges.

California gets the same commission percentage from all phones on state
property. But the per-minute rates and surcharges are much higher in prisons.

In fact, the state gets about 75 percent of its pay-phone revenues from
prisons, even though they represent only 25 percent of the total phones on
state property.

Critics say the state's commissions on the 7,500 phones on state property
are mainly profit, since it does not pay to install, maintain or operate
the phones. Instead, those costs are paid by MCI and GTE.

Prison officials say part of the commission pays for staff to escort
inmates to phones and monitor their calls to make sure they are not
planning a crime.

State officials would not say how much they spend on those activities, but
a report prepared by the Department of Corrections staff last year pointed
out that prisons do not monitor all inmate calls.

``Currently, the actual monitoring and investigation of inmate calls is
limited,'' the report said.

Those familiar with the prison industry say California's costs do not come
close to what the state collects in commission.

``Moving (prisoners) from one cell to another place may take resources too,
but I think they've been working that out for 100 years or more,''
Norlander said. ``When a guy has to go to the chaplain or to recreational
yard or to see a lawyer, they have to figure out how to keep track of them
in transit. They don't need $20 million to do it.''

CONTACT CRUCIAL

Prisoner advocates say it is crucial for prisoners to stay in contact with
the outside.

``They need a support system,'' said Gotsch of the ACLU. ``The way to
continue a family bond is through phone contact because many times it's
very difficult and expensive for the family to come and visit.''

Pat Nolan, the former California legislator who served time in a federal
prison in Dublin, said the high prison phone rates ``put a barrier to
keeping in touch that is just unconscionable. The prison system should be
doing all it can to encourage contact with prisoners' families.'' Nolan is
now president of The Justice Fellowship, a prisoner advocacy group.

OTHER FEES

Prisoners' families say that besides high rates and surcharges, they are
hit with other unfair fees. Among their complaints:

- -- Calls often are disconnected after a minute or two, forcing the inmate
to redial and pay an additional $3 surcharge.

A bill from one inmate's wife who lives in Gardena but did not want to be
identified shows two dropped calls in one weekend. By the time the couple
finally completed their 15-minute call, the cost was more than $16.

Hicks said MCI has heard similar complaints and said it may be caused by
technical glitches.

``We go out to the prisons and do hear that complaint every now and then,''
Hicks said. ``We try to isolate where that problem is coming from.'' He
also said some calls may be cut off by prison personnel, who are allowed to
monitor calls and end them if the conversation broaches a topic deemed
illegal.

- -- Some are charged for calls that last longer than the 15-minute time
limit imposed by the Department of Corrections.

Lara Johnson, whose husband is incarcerated at Sacramento state prison, was
billed last year by MCI for a 113-minute call she says she never received.
She was eventually given a $12 refund for the call.

- -- Charges for calls from prison sometimes exceed the published rates.

James Nunn, whose son is in Calipatria State Prison in Southern California,
was billed $7.42 by MCI for a seven-minute call to his home in Tucson,
Ariz. Minus the $3 surcharge, that comes out to 63 cents per minute

- --13 cents more per minute than what MCI says it charges.

Rick Jackson lives in Reno, and his wife is in Chowchilla State Prison. His
MCI bill shows a 15-minute call that cost $11.10. Without the $3 surcharge,
that breaks down to 54 cents per minute, 4 cents over MCI's published rate.

MCI and GTE say they do not charge more than their stated rates. ``There's
a capped rate to make sure no one goes off the chart, and we follow that,''
said Hicks of MCI.

He also said the company could charge as much as 55 cents a minute, but
stays below that.

CHEAPER TO MOVE

Allison Walters, whose husband was in Calipatria State Prison, has bills
that show the huge difference between a collect call from prison versus a
calling-card call.

A six-minute calling-card call placed from a pay phone outside Calipatria
prison to Walters' home in Hemet cost $1.08. A six-minute collect call made
from her husband to the same number cost $3.92.

When her husband was transferred to Folsom State Prison, Walters packed up
her things and moved 472 miles from Hemet to Sacramento so she could be
close enough to talk to him in person.

``This has caused so much hardship for me and my husband,'' said Walters.
He's the one who's in prison, but I'm the one being punished by having to
pay these bills and then move myself up here. That shouldn't be.''

CALIFORNIA NOT ALONE

In other states, prisoner families and government agencies have taken
action against high prison phone rates.

In April, the families of Illinois prison inmates sued MCI, AT&T and
Ameritech, contending that the phone companies unfairly charge higher rates
for collect calls from jails.

The Kentucky Public Service Commission is investigating complaints that MCI
overcharged customers for calls made from jail and prison pay phones.

In 1997, the Florida Public Service Commission ordered MCI to refund
customers for overcharging them by $2 per call for collect calls made from
Florida correctional facilities from February to July 1996.

To settle the claims, MCI paid a $10,000 fine and put $189,482.49 into a
prisoners fund.

Two years ago, an outcry from prisoners and their families in Virginia
prompted the state to negotiate a new contract with MCI. Its surcharges
dropped from $3 to $2.25.

UCAN's Carbone said California should follow Virginia's lead and consider
lowering the surcharges and getting rid of the bidding system.

``The families of prisoners shouldn't be going broke just trying to stay in
contact,'' Carbone said. ``If nothing else, the cost of the calls should be
tied to the cost of providing the service.''