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Copyright (c) 2002 Federal Communications Law Journal
Federal Communications Law Journal

ARTICLE: An Efficiency Analysis of Contracts for the Provision of Telephone Services to Prisons

May, 2002

54 Fed. Comm. L.J. 391


Justin Carver*


I. Introduction
The prison population in the United States has dramatically increased since the 1970s, and as recently as 1998, there were nearly two million inmates incarcerated in the United States. 1 As the numbers of prisons and prisoners continue to increase, so does the market for prison services. Indeed, the prison industry has already grown into a multibillion-dollar industry with its own trade shows and trade newspaper. 2

One of the more lucrative segments of this industry is the telephone market. In the prison context, the state contracts with a private entity, and the private entity provides services to the prisoners and also to the state. To the extent that the services are provided to the prisoners, the relationship resembles a third party beneficiary contract. Due to the perverse financial incentives and the political climate surrounding prisons and prisoners, however, neither the state nor the private entity acts in the best interests of the consumers in particular or of society in general.

With respect to the financial incentives, it is estimated that inmate calls generate a billion dollars or more in annual revenue. 3 One prison pay phone can generate $ 15,000 annually; a typical public pay phone generates only one-fifth of that amount. 4 Faced with the possibility of such revenues, MCI installed its inmate phone service in prisons throughout California at no charge to the state. 5 As part of the deal, in exchange for the right to be the sole provider of telephone ...
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