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Private Equity Take From Prison Phone Market Cut by FCC

Aug. 9 (Bloomberg) -- U.S. regulators reduced interstate telephone fees charged to inmates by a prison-calling industry that sends profits to private equity firms and CenturyLink Inc.

The Federal Communications Commission, in a 2-to-1 Democratic-led vote at its monthly meeting today, capped rates and said charges need to be based on the cost of providing service.

“Today’s order provides immediate relief” from rates as high as $17 for a 15-minute call, Acting Chairwoman Mignon Clyburn said.

Prisoners pay as much as $16.55 for a 15-minute interstate call, according to the FCC. Charges are set by contracts that state and local agencies strike with companies, and costs can include commissions the companies pay to the agencies.

The $1.2 billion market is dominated by Global Tel*Link Corp. and Securus Technologies Inc., closely-held companies.

Civil rights and religious groups supported by some members of Congress have pressed the FCC to act on a petition filed in 2003 by prisoners and family members to cut rates they termed “exorbitant.” High rates isolate prisoners from family members, the advocates said.

CenturyLink in a July 26 filing said it was against rate caps. Abrupt changes could render existing contracts uneconomic, the Monroe, Louisiana-based company said, citing its expenditure of “tens of millions of dollars” building a system for Texas.

Prison Market

About 20 percent of CenturyLink’s revenue comes from a unit that offers wholesale connections to other phone providers and includes “a small payphone and inmate services business,” R. Stewart Ewing Jr., the company’s chief financial officer, said at a conference in November 2011 without offering details. A spokeswoman, Debra Peterson, via telephone declined to comment.

Global Tel*Link, based in Mobile, Alabama, has about 50 percent of the correctional phone services market, followed by Dallas-based Securus with almost 30 percent, according to Standard & Poor’s.

Global Tel*Link is owned by American Securities LLC, a Park Avenue private equity firm. Mark Kollar, a spokesman, via telephone declined to comment.

A New York-based private equity firm, Castle Harlan Inc., is said to have proposed selling Securus to ABRY Partners LLC, a Boston-based firm. Mike Millican, a spokesman for Castle Harlan, in an e-mail declined to comment. A telephone call to Securus wasn’t immediately returned.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net;

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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