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Monopoly Findings Supported

Court Affirms Calif. 7-Cent Cap on Intrastate Call Rates in Jails

Securus failed to show that California’s interim cap on incarcerated person calling services (IPCS) intrastate rates must be set aside, the 2nd District California Court of Appeals ruled Wednesday. The court affirmed the California Public Utilities Commission’s 2021 decision to provide interim relief by capping the rate at 7 cents per minute and banning ancillary fees.

Securus claimed the CPUC’s temporary cap wasn’t based on data and departed from FCC decisions (see 2205120037). The CPUC answered that its record showed rates were too high and there was enough support to set the 7-cent rate. At oral argument last month, Associate Justice Audrey Collins asked Securus why it didn’t press to submit evidence or for the agency to hold an evidentiary hearing (see 2301120054).

Securus failed to show the CPUC erred in saying IPCS providers operate locational monopolies and exercise market power, wrote Justice Brian Currey. The CPUC appropriately relied on the FCC’s May 2021 findings “to conclude that although providers compete among themselves to obtain IPCS contracts with individual facilities, the nature of that competition does not drive rates downward,” said Currey.

The PUC reasonably inferred declining IPCS rates were not attributable to competition in the provider bidding market,” the judge wrote. Even if providers can’t “unilaterally raise rates once their bids have been accepted, they control the rates they offer to charge in those bids at the outset,” he said. Collins and Judge Lynn Scaduto, on assignment from the Los Angeles Superior Court, concurred with the unpublished opinion (case B320207).

Securus is evaluating its options after the decision, said a spokesperson for parent company Aventiv. “We continue to believe that data-driven regulation is essential for consumers, agencies, and public-private partnerships." The CPUC didn’t comment Thursday.

"This is an excellent win for families," said Brenda Villanueva, lead counsel-telecom for The Utility Reform Network (TURN). She said the CPUC decision gave "interim relief to hundreds of thousands of families paying too much to be in touch with loved ones detained or incarcerated." Securus "had ample opportunities" to give evidence, said Villanueva.

Securus failed to show the CPUC acted arbitrarily or abused its discretion in adopting the interim relief, said the 2nd District. The court disagreed the commission failed to consider data or other evidence about costs incurred by IPCS providers. "Securus does not cite -- and we could not locate -- any” CPUC procedural rules “or any other legal authority demonstrating the PUC was required to solicit certain evidence from the parties” in advance, wrote Currey. “Nor does Securus cite -- and, again, we could not locate -- any portion of the record showing the PUC imposed such a requirement upon itself.”

The CPUC’s scoping memo said evidentiary hearings would happen in the proceeding's second phase, but "it did not state or otherwise suggest the PUC would not consider any evidence until then," or ban parties from filing evidence in phase one, said Currey, noting other parties did: "Securus has not tendered a reasonable excuse for its failure to submit cost data for the PUC’s consideration.”

Securus never requested a hearing or argued the CPUC must hold one, Currey said. Securus failed to show the state public utilities code’s Section 728 required a hearing before interim relief, said the judge: The California Supreme Court said the CPUC must hold one in true ratemaking proceedings but not for temporary rate restrictions. The court rebuffed Securus’ other procedural argument that the CPUC failed to warn it might adopt a temporary rate cap as interim relief. The CPUC said in a scoping memo it would consider rate caps in phase two, but that didn't prohibit the PUC from adopting a temporary cap in phase one, the 2nd District said.

The CPUC didn't err by considering a California state contract setting a 2.5 cent per-minute rate for intrastate calls, even if that contract was later set aside, the court said. The CPUC didn’t abuse its discretion by using the state prison rate to estimate costs for local jails because the agency’s order noted the differences between prisons and jails, it said.

The court disagreed that the CPUC arbitrarily applied the FCC's finding on the cost differential between prisons and large jails to estimate costs for small and large jails. "We are not persuaded by this argument because the PUC did not … simply apply the 22 to 25% cost differential to the [state contract] rate to account for the differences in IPCS costs between prisons and jails of all sizes,” said Currey. “The PUC used the FCC’s cost differential as a reference point.”

The state court disagreed with Securus that the CPUC relied on flawed evidence, misstated evidence and drew unsupported inferences to develop a base 5 cent per-minute rate. "Resolving all reasonable doubts in the PUC’s favor, we conclude that, taken together, this evidence could lead a reasonable person to find that, without accounting for site commission costs, California IPCS providers could feasibly charge $0.05 per minute for intrastate calls in prisons and jails,” wrote Currey: The court's role isn't to reevaluate how much weight the CPUC should have given to specific pieces of evidence.

Citing similar reasons, the court said the CPUC didn't abuse its discretion by adding 2 cents to the base rate for site commissions. The PUC didn’t unlawfully restrict county sheriffs' discretion to collect and use site commissions under California Penal Code Section 4025, said Currey: While capping how much IPCS providers may charge to account for commissions, the CPUC “imposes no limits on how sheriffs may use those funds once received” and “sheriffs retain the authority to collect site commissions.”

The court also disagreed that the CPUC prohibited ancillary fees without evidence showing providers can recover costs without the charges. It's untrue the decision gave no meaningful justification for eliminating the fees or that the decision never specified which jurisdictionally mixed calls are subject to the prohibition, Currey said.

The state court spent less paper rejecting the IPCS provider’s constitutional challenges, including that the 7-cent cap is confiscatory under the Fifth Amendment. Securus failed to prove prejudicial error on constitutional grounds, the court said.