The profits generated by the corrections economy have not been definitively calculated, and a comprehensive audit would be a staggering accounting task. The figure would have to include the cost of private-prison real estate, mandatory drug testing, electronic monitoring anklets, prison-factory labor, prison-farm labor, prison-phone contracts, and the service fees charged to prisoners’ families when they wire money for supplies from the prison commissary. Contracted commercial activity flows in and out of every city jail, rural prison, suburban probation office, and immigration detention center. For stakeholders in the largest peacetime carceral apparatus in the history of the world, the opportunities for profit add up. For analysts like Sommer, the system also offers a safe, government-secured investment...
Consider the prison-phone industry. For inmates, especially urban felons shipped to far-off rural sites, calls to the outside are a social lifeline and a proven method for reducing recidivism. But here, too, Wall Street has identified a high-demand, low-supply commodity. Other government contractors, be they food suppliers or dentists, collect fees paid out by the state. Prison-phone companies, and the prison-wire-transfer companies that are following their model, extract revenues directly from inmates and their families. (Fifteen dollars for a fifteen-minute phone call is not uncommon.)
As with partnership corrections, profits are largely determined by contracts, but phone and money-transfer companies sweeten the deals for their public partners with profit-sharing perks. These commissions kick back anywhere from 40 to 60 percent of revenue to the contracting government agency. According to a study by Prison Legal News, a publication of the Human Rights Defense Center, about 85 percent of non-federal jails sign up for commission-added contracts, and because commissions increase in proportion to the total contract value, cash-strapped public officials are motivated to choose the most expensive contract available. Prison Legal News found that when Louisiana put out a public request for proposals for phone services in 2001, the agency stated the wish explicitly: “The state desires that the bidder’s compensation percentages . . . be as high as possible.”
Addendum/update: I posted the above in March of 2015. Now in October comes a report that the FCC is going to mandate a cap of 11 cents per minute:
The FCC said its vote yesterday "lower[s] the cap to 11 cents per minute for all local and long distance calls from state and federal prisons, while providing tiered rates for jails to account for the higher costs of serving jails and smaller institutions."
Part of the problem is that jails and prisons have been charging phone companies big commissions in exchange for exclusive contracts. These commission payments are passed on to prisoners.
The FCC did not outlaw commissions but said that it "strongly encourages parties to move away from site commissions and urges states to take action on this issue." Clyburn said that "states must do their part and take a hard look at their site commission practices and how such payments impact prices, service, and the reverberating impact on the community."