Federal Communications Commission DA 14-187
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of
Rates for Interstate Inmate Calling Services;
Pay Tel Communications, Inc.’s Petition for
Waiver of Interim Interstate ICS Rates
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WC Docket No. 12-375
ORDER
Adopted:  February 11, 2014 Released: February 11, 2014
By the Chief, Wireline Competition Bureau:
I. INTRODUCTION
1. In this Order, we find good cause to grant a limited, temporary waiver of the interim 
interstate inmate calling service (ICS) rate caps to Pay Tel Communications, Inc. (Pay Tel).
1
The rate cap 
rule at issue was adopted by the Federal Communications Commission (FCC or Commission) in the 
Inmate Calling Report and Order and FNPRM and will become effective on February 11, 2014.
2
  For the 
reasons discussed below and with the limitations and additional commitments identified herein, we grant 
Pay Tel a narrow waiver of the Commission’s ICS rate cap rule for nine months unless the Commission 
decides to take action on intrastate ICS rate caps sooner, then such Commission Order would supersede
this waiver.  This waiver will provide Pay Tel with sufficient time to pursue any necessary intrastate rate 
changes through the applicable state processes in light of the aggregate impact of Pay Tel’s ability to 
recover its costs with the application of the interim interstate ICS rate caps.
II. BACKGROUND
2.   In 2003, a group of inmates, their friends and families as well as advocacy groups 
(collectively Wright Petitioners) filed a rulemaking petition with the Commission to address ICS 
practices.
3
  The petition requested that the Commission prohibit exclusive ICS contracts and collect-call-
only restrictions in correctional facilities.
4
  In 2007, the same petitioners filed an alternative rulemaking 
petition, requesting that the Commission reform high ICS rates by requiring a debit-calling option in 
                                                     
1
Pay Tel Communications, Inc.’s Petition for Waiver of Interim Interstate ICS Rates, WC Docket 12-375 at 1 (filed 
Jan. 8, 2014) (Petition).
2
Rates for Interstate Inmate Calling Services, Report and Order and Further Notice of Proposed Rulemaking,WC 
Docket No. 12-375, 28 FCC Rcd 14107 (2013) (Inmate Calling Report and Order and FNPRM or Order); pets. for 
stay granted in part sub nom. Securus Techs. v. FCC, No. 13-1280 (D.C. Cir. Jan. 13, 2014) (Securus Techs. Partial 
Stay Order); pets. for review pending sub nom. Securus Techs. v. FCC, No. 13-1280 (D.C. Cir. Nov. 14, 2013) (and 
consolidated cases).
3
See generally Implementation of the Pay Telephone Reclassification and Compensation Provisions of the 
Telecommunications Act of 1996, Petition of Martha Wright et al. for Rulemaking or, in the Alternative, Petition to 
Address Referral Issues in Pending Rulemaking, CC Docket No. 96-128 at 3 (filed Nov. 3, 2003) (First Wright 
Petition).
4
Id.
Federal Communications Commission DA 14-187
2
correctional facilities, prohibiting per-call charges, and establishing rate caps for interstate ICS.
5
  The 
Commission sought and received comment on both petitions.
6
  In December 2012, the Commission 
granted the two petitions for rulemaking and adopted a notice of proposed rulemaking seeking comment 
on their proposals.
7
  The Commission released the Inmate Calling Report and Order and FNPRM on 
September 26, 2013.
8
  On January 13, 2014, the United States Court of Appeals for the District of 
Columbia Circuit issued a partial stay of the Inmate Calling Report and Order and FNPRM, pending the 
court’s resolution of petitions for review of the Order.
9
  The Partial Stay Order did not stay the interim 
rate cap rule at issue in this Order.
10
3. Section 201 of the Communications Act of 1934, as amended (Act) requires that all 
carriers’ interstate rates be just and reasonable.
11
  To be just and reasonable, rates must ordinarily be cost-
based absent an explanation for a departure
12
as well as include a reasonable return.
13
  Section 276 of the 
Act additionally requires that payphone rates be fair.
14
As part of its analysis in the Inmate Calling 
Report and Order and FNPRM, the Commission found that “the marketplace alone has not ensured that 
                                                     
5
See Implementation of the Pay Telephone Reclassification and Compensation Provisions of the 
Telecommunications Act of 1996, Petitioners’ Alternative Rulemaking Proposal, CC Docket No. 96-128 (filed Mar. 
1, 2007) (Alternative Wright Petition).
6
See Petition For Rulemaking Filed Regarding Issues Related to Inmate Calling Services Pleading Cycle 
Established, CC Docket No. 96-128, Public Notice, DA 03-4027, 2003 WL 23095474 (Wireline Comp. Bur. 2003);
Comment Sought on Alternative Rulemaking Proposal Regarding Issues Related to Inmate Calling Services, CC 
Docket No. 96-128, Public Notice, 22 FCC Rcd 4229 (Wireline Comp. Bur. 2007).  
7
See generally Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Notice of Proposed 
Rulemaking, 27 FCC Rcd 16629 (2012) (2012 ICS NPRM).  The 2012 ICS NPRM incorporated relevant comments, 
reply comments and ex parte filings from the prior ICS docket, CC Docket No. 96-128, into WC Docket No. 12-
375.  See 2012 ICS NPRM, 27 FCC Rcd at 16636, para. 15.
8
See generally Inmate Calling Report and Order and FNPRM.  
9
See generally Securus Techs. Partial Stay Order.  The following rules are stayed pending resolution of the appeal:  
47 C.F.R. §§ 64.6010 (Cost-Based Rates for Inmate Calling Services); 64.6020 (Interim Safe Harbor); and 64.6060 
(Annual Reporting and Certification Requirement).  
10
Specifically, the following rules are not stayed by the Securus Techs. Partial Stay Order:  47 C.F.R. §§ 64.6000 
(Definitions); 64.6030 (Inmate Calling Services Interim Rate Cap); 64.6040 (Rates for Telecommunications Relay 
Service (TRS) Calling); and 64.6050 (Billing-Related Call Blocking).  See generally id. The court also did not issue 
a general stay of the Order, leaving in place, for example, the Commission’s provision for a one-time, mandatory 
data collection that will enable the Commission to establish permanent rules
11
See 47 U.S.C. § 201(b).  
12
See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14131, para. 45.
13
See id. at 14134, para. 53.
14
See 47 U.S.C. § 276(b).  “The Commission has previously found the term ‘fairly compensated’ permits a range of 
compensation rates that could be considered fair, but that the interests of both the payphone service providers and 
the parties paying the compensation must be taken into account.” Inmate Calling Report and Order and FNPRM, 
28 FCC Rcd at 14115, para. 14 (internal citation omitted).  The Commission has previously addressed section 276 
and its application to ICS, noting that “[u]nless an ICS provider can show that (i) revenue from its interstate or 
intrastate calls fails to recover, for each of these services, both its direct costs and some contribution to common 
costs, or (ii) the overall profitability of its payphone operations is deficient because the provider fails to recover its 
total costs from its aggregate revenues (including both revenues from interstate and intrastate calls), then we would 
see no reason to conclude that the provider has not been ‘fairly compensated.’”  Implementation of the Pay 
Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Order on Remand 
and Notice of Proposed Rulemaking, CC Docket No. 96-128, 17 FCC Rcd 3248, 3257-58, para. 23 (2002) (Inmate 
Calling Order on Remand and NPRM) (emphasis in original).
Federal Communications Commission DA 14-187
3
interstate ICS rates are just and reasonable and they are fair to consumers, as well as providers.”
15
  For 
example, the record in this docket showed that “inmates, or those whom they call, pay as much as $17.30, 
$10.70 or $7.35 for a 15-minute interstate collect call, depending upon the facility where the inmates are 
incarcerated.”
16
The Commission concluded “that the rate reforms we begin in this Order are necessary to 
ensure [interstate ICS rates] are just and reasonable”
17
and “necessary to implement section 276(b)(1)’s 
‘fair compensation’ directive.”
18
  
4. As part of interstate ICS rate reform, the Commission adopted interim interstate ICS rate 
caps of $0.21 per minute for interstate debit and prepaid calling and $0.25 per minute for collect calling 
“to place an upper limit on rates providers may charge for interstate ICS.”
19
  The Commission determined
that the interim rate caps established in the Order were “set at sufficiently conservative levels to account 
for all costs ICS providers will incur in providing ICS.”
20
  The interim rate caps were set based on cost 
studies submitted in the proceeding, including a cost study submitted by Pay Tel.
21
  The Commission also 
reaffirmed its earlier finding that site commission payments, “fees paid by ICS providers to correctional 
facilities or departments of corrections in order to win the exclusive right to provide inmate phone 
service,”
22
are an apportionment of profit, not a cost of providing ICS.
23
  Waiver of the interstate ICS rate 
caps is available for those “extraordinary circumstances” where a particular ICS provider “believes that it 
has cost-based rates for ICS that exceed [the] interim rate caps.”
24
  
5. Pay Tel’s Petition.  Pay Tel is an ICS provider based in North Carolina that currently 
serves correctional facilities in thirteen states.
25
  Pay Tel filed its Petition for waiver of the Commission’s 
interim interstate ICS rate caps on January 8, 2014.
26
  The Wireline Competition Bureau (Bureau)
released a Public Notice seeking comment on Pay Tel’s Petition on January 9, 2014.
27
  As described 
below, interested parties commented on the Petition and Pay Tel filed supplementary information and 
modified its request in response to questions raised by Bureau staff.
28
                                                     
15
Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14131, para. 45.
16
Id. at 14126, para. 35.
17
Id. at 14131, para. 45.
18
Id. at 14131-32, para. 46.
19
Id. at 14147, para. 73.
20
Id. at 14147, para. 74.
21
Id. at 14148, para. 76.
22
Id. at 14110, para. 3.
23
Id. at 14135, n.199. See also id. at 14135, para. 54.
24
Id. at 14153, paras. 82-83.
25
Pay Tel’s waiver request is based on second quarter 2013 data when it operated in only ten states, including
Florida, Georgia, Kansas, Missouri, North Carolina, Ohio, South Carolina, Tennessee, Virginia, and Washington.  
See Petition at 16-17.  Pay Tel did not include in its shortfall analysis or its request for relief new facilities added in 
three states (New Mexico, California and Maryland) after the second quarter of 2013. See Petition at nn.4 & 43.  
26
In support of its Petition, Pay Tel also filed: a “Pay Tel Cost Study” (includes confidential information); its 
“Wood Intrastate Shortfall Analysis”; a summary of its “Revenue Shortfall by State”; a “Summary of Intrastate 
Local Rate Restrictions”; the specific “Intrastate Local Rate Restrictions”; “Pay Tel’s Existing Rates by Facility” 
and signed declarations from its President and its economic and financial consultant.  See generally Petition.
27
Comment Sought on Pay Tel Communications, Inc. Waiver Petition,WC Docket No. 12-375, Public Notice, DA 
14-27 (Wireline Comp. Bur. rel. Jan. 9, 2014).  
28
See infra para. 9.
Federal Communications Commission DA 14-187
4
6. In its Petition, Pay Tel requests a waiver of the Commission’s rule establishing interim 
interstate ICS rate caps
29
and approval to continue to charge its current interstate ICS rates.
30
  Pay Tel 
acknowledges that the Commission relied on Pay Tel’s Cost Study in setting the interim rate caps
31
and
Pay Tel expressly bases its waiver request on the total company average per minute costs it produced.
32
  
We agree that the Pay Tel Cost Study accurately represents Pay Tel’s costs of providing ICS.
33
  Pay Tel 
asserts that here, however, there is good cause for a waiver because the Order “fails to properly consider 
the impact that below-cost intrastate rate restrictions will have when working in tandem with the Order’s 
interstate rate caps.”
34
  Specifically, Pay Tel asserts that it “cannot recover its costs on a holding company 
level if it is required to charge the Order’s interim interstate rates.”
35
  Pay Tel bases this assertion on rate 
restrictions in five of the ten states where it provided service in 2012, that are mandated by either “the 
applicable state regulatory requirements or by the facility provider.”
36
  Pay Tel claims such restrictions 
require it to provide intrastate service at below-average-cost rates.
37
  Because of the interaction between 
these below-average-cost intrastate rates and the limits imposed by the interim interstate rate cap, Pay Tel 
asserts that it cannot meet its total company revenue requirement while complying both with our interstate 
rate caps and the relevant state rate requirements.
38
  Pay Tel estimates this disparity will result in a 
shortfall of approximately 11 percent of its total 2012 revenue.
39
  The shortfall, Pay Tel asserts, leaves it 
in an “economically unsustainable situation” that will force it either to go “out of business” or to 
“substantially curtail its operations,” likely by terminating service in the smallest facilities it serves.
40
  
7. In addition to its request for a waiver of the Commission’s rate caps, Pay Tel further 
requests that the Commission allow Pay Tel “to continue charging its existing interstate rates.”
41
  The 
Petition states that “this relief will permit Pay Tel to remain in business as the Commission continues to 
investigate the appropriate regulatory environment for the ICS industry.”
42
  Pay Tel also commits that it 
“will not charge interstate rates any greater than its existing rates” and “will remain bound by the 
Ancillary Charges provisions of the Order’s rate requirements and commit[ ] to charging no more than its 
                                                     
29
See 47 C.F.R § 64.6030; see also Petition at 1, 23-25.  Pay Tel further requests the Commission either determine 
that its rates comply with the Commission’s rule that ICS rates be cost-based or grant a waiver of such requirement.  
Id.  Given the Court of Appeals’ stay of this rule pending its resolution of appeals of the Order, the Bureau does not 
address this request.  We further note that Pay Tel neither seeks a waiver of the other rules adopted by the Order, 
nor of the provisions of the Order generally.  See Petition at 22-23.  
30
Based on Pay Tel’s reported total interstate revenues and total interstate minutes of use, staff calculates that Pay 
Tel’s interstate ICS rates average $0.81 per minute.  See Petition at Exh. B.  
31
See Petition at 4.
32
See, e.g., Petition at 6 (“In support of its waiver request . . . Pay Tel submits . . . a company-level cost study.”); 
Petition at 7 (“As shown in the study, Pay Tel’s cost of providing ICS are [$0.21 per minute for debit calls].”).
33
See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14151, n.293.  
34
Petition at 12.
35
Id. at 1.
36
Id. at 16.
37
See id.
38
See id. at 2.
39
See id.  
40
Id.  
41
Id. at 24.  
42
Id. at 22.  
Federal Communications Commission DA 14-187
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current fees” in the event its waiver request is granted.
43
  Pay Tel asserts such relief will be in the public 
interest in that it will ensure the viability of Pay Tel and avoid a reduction in competition among ICS 
providers,
44
it will mean that “ICS services will likely not be curtailed,”
45
and it will not “result in a 
financial windfall to Pay Tel.”
46
  Pay Tel requests that the Commission review and approve its Petition 
before the rate caps adopted in the Order take effect on February 11, 2014.
47
  
8. The Wright Petitioners filed comments on the Petition, stating that they “do not oppose 
FCC review of the Waiver Request to determine if relief is necessary.”
48
  The Wright Petitioners request 
that if the Commission determines that a waiver of the rate caps for Pay Tel is necessary, that the waiver 
be “narrowly tailored.”
49
  Pay Tel submitted reply comments, noting that no commenting parties opposed 
the relief Pay Tel requested.
50
The Human Rights Defense Center (HRDC) also submitted comments that 
address data, analyses, and claims made by Pay Tel in support of its waiver Petition.
51
  While HRDC does 
not dispute Pay Tel’s financial and operational data, it questions Pay Tel’s assertion that its operations
would be financially unsustainable under the provisions of the Order.
52
  HRDC asserts that Pay Tel “has 
not addressed other options which remain available to it.”
53
Specifically, HRDC asserts that Pay Tel 
                                                     
43
Id.  Ancillary charges are non-call-related charges imposed on ICS end users, for example, to set up or add money 
to prepaid or debit calling accounts, refund any outstanding money in a prepaid or debit calling account, or to deliver 
ICS calls to a wireless number.  See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14156, para. 90.  
The Commission expressed concern over the possibility of ICS providers “circumventing our reforms by 
augmenting ancillary services charges beyond the costs of providing such services.”  Inmate Calling Report and 
Order and FNPRM 28 FCC Rcd at 14158-59, para. 92.  Specifically, the Commission required that in keeping with 
its action on interstate ICS rates, ancillary service charges “must be cost-based, and to be compensable costs must be 
reasonably and directly related to provision of ICS.”  Inmate Calling Report and Order and FNPRM 28 FCC Rcd at 
14157-58, para. 91.  We note that the rule requiring “Cost-Based Rates for Inmate Calling Services” which states, 
“[a]ll rates charged for Inmate Calling Services and Ancillary Charges must be based only on costs that are 
reasonably and directly related to the provision of ICS,” was stayed in the Securus Techs. Partial Stay Order.  See 
generally Securus Techs. Partial Stay Order.
44
See Petition at 24.
45
Id. at 25.
46
Id. at 22.
47
See id. at 2.
48
Wright Petitioners Jan. 16, 2014 Waiver Comments at 2.  
49
Id. at 3.  Securus also filed comments on the Petition but such comments did not address the merits of the request.  
See Securus Jan. 16, 2014 Waiver Comments at 3.
50
Pay Tel Jan. 21, 2014 Waiver Reply Comments.  
51
HRDC’s comments were submitted as reply comments in response to the FNPRM in this docket.  See HRDC 
FNPRM Reply Comments.  HRDC’s comments addressed data and analyses previously submitted by Pay Tel in an 
ex parte filing.  The data and analyses submitted in Pay Tel’s ex parte submission were consistent with the 
supporting material submitted by Pay Tel as part of its Petition.  See generally Letter from Marcus W. Trathen, 
Counsel for Pay Tel, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 (filed Dec. 9, 2013).  
52
See HRDC FNPRM Reply Comments at 7.  
53
HRDC FNPRM Reply Comments at 2.  Specifically, HRDC asserts that Pay Tel could renegotiate its contracts, 
seek waivers from state regulatory agencies’ rules where necessary, or reconsider doing business in states that 
impose below-cost rate requirements.   See id. at 7-8.  Pay Tel notes that simply ceasing operations in certain states, 
as HRDC suggests, could result in inmates losing service which we note would be contrary to the purposes of 
section 276 and the Order.  See Pay Tel January 21, 2014 Waiver Reply Comments at 7. HRDC also notes that in 
three states that regulate intrastate ICS rates, a significant proportion of Pay Tel’s contracts generate net positive 
revenue.  HRDC FNPRM Reply Comments at 2.  Review of the intrastate rates charged by Pay Tel indicate that 
while not all of Pay Tel’s intrastate rates are set at the maximum allowed by state regulation, rates for the great 
majority of its intrastate call volume are at the caps set by the relevant states.  The net intrastate surplus HRDC 
(continued….)
Federal Communications Commission DA 14-187
6
could renegotiate its contracts, seek waivers from state regulatory agencies’ rules where necessary, or 
reconsider doing business in states that impose below-cost rate requirements.
54
  In its reply comments, 
Pay Tel notes that HRDC “has not identified any errors in the analysis present[ed] by Pay Tel.”
55
  
9. Pay Tel’s Supplemental Filings. In evaluating Pay Tel’s Petition, Bureau staff questioned 
whether allowing Pay Tel to continue to charge its existing rates following the effective date of the rules
56
would result in Pay Tel recovering interstate revenues that are currently used to pay site commissions that 
are based on interstate revenues.
57
The Commission confirmed in the Order that such site commission 
payments “are not part of the cost of providing ICS.”
58
  In response to staff inquiries, Pay Tel filed 
additional data and analyses in support of its waiver request and revised its request for relief.
59
  
Specifically, Pay Tel filed a revised shortfall analysis, information on change of law provisions in its 
contracts, and interstate site commission data.
60
  Pay Tel also provided Bureau staff with its audited 
financial statements.
61
  Pay Tel further supplemented its Petition to add a “commitment that Pay Tel will 
not assess a rate for interstate long distance calls in excess of $0.46/minute for existing or new clients.”
62
Additionally, Pay Tel commits not to charge interstate rates at any correctional institution any greater than 
its existing rates,
63
and to implement the “rate of $0.46/minute as a ‘postalized’ rate without any 
additional per-call surcharges” (except in facilities with interstate rates currently below the proposed 
$0.46/minute rate).
64
  Pay Tel states that “[t]his revised commitment reflects . . . the elimination of 
interstate commissions from Pay Tel’s interstate rates.”
65
  Pay Tel asserts that grant of the requested relief 
will be in the public interest since it “will, in no way, result in a financial windfall to Pay Tel,”
66
“will 
(Continued from previous page)                                                            
identifies for a number of Pay Tel’s facilities in rate-capped states is relatively minor in amount and would be 
insufficient for Pay Tel to recover its costs.  
54
See HRDC FNPRM Reply Comments at 7-8.
55
See Pay Tel Jan. 21, 2014 Waiver Reply Comments at 5.  
56
See Petition at 24.  
57
The Commission made clear in the Order that site commission payments are not a direct cost of providing ICS.  
See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14135-38, paras. 54-58.  
58
Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14135, para. 54.  
59
Letter from Marcus W. Trathen, Counsel for Pay Tel, to Marlene H. Dortch, Secretary, FCC, WC Docket 12-375 
(filed Jan. 23, 2014) (revised waiver request) (Pay Tel Third Supplemental Filing).
60
See Letter from Marcus W. Trathen, Counsel for Pay Tel, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 
12-375 (filed Jan. 16, 2014) (revised shortfall analysis, change in law provision information, and interstate site 
commission data) (Pay Tel First Supplemental Filing) (includes confidential information).
61
Letter from Marcus W. Trathen, Counsel for Pay Tel, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-
375 (filed Jan. 16, 2014) (financial statements) (Pay Tel Second Supplemental Filing) (includes confidential 
information).
62
Pay Tel Third Supplemental Filing at 1-2.  
63
“This commitment would not apply in those facilities with rates currently below the proposed $0.46/minute rate 
(as to those rates, Pay Tel does not have the contractual flexibility to unilaterally increase rates).  As a result, this 
proposal would not result in interstate rate increases in any existing Pay Tel facility.”  Id. at n.3.
64
Id. at 2, n.3.  
65
Id. at 2.
66
Id.   
Federal Communications Commission DA 14-187
7
permit Pay Tel to remain in business,”
67
and will “ensur[e] that consumers of interstate services receive 
meaningful decreases in interstate rates.”
68
10. Applicable Waiver Standard.  Pay Tel seeks a waiver under the Commission’s general 
waiver rule as informed by additional guidance included in the Order.
69
  Section 1.3 of the Commission’s 
rules states that the Commission’s rules may be waived for good cause shown.
70
  Waiver of the 
Commission’s rules “is appropriate only if special circumstances warrant a deviation from the general 
rule and such deviation will serve the public interest.”
71
  In the Order, the Commission stated that “the 
petitioner bears the burden of proof to show good cause exists to support the request” and identified 
factors to be considered in reviewing a waiver request.
72
It further stated that ICS providers “will have 
opportunities to seek waivers to the extent the framework adopted in this Order does not adequately 
address their legitimate costs of providing ICS.”
73
  The Commission noted that “petitions for waiver of 
the interim rate caps would account for extraordinary circumstances.”
74
  The Commission concluded that, 
for both substantive and administrative reasons, it would evaluate waivers at the holding company level.
75
  
It delegated authority to the Bureau to “request additional information necessary for its evaluation of 
waiver requests and to approve or deny all or part of requests for waiver of the interim rate caps adopted 
herein.”
76
III. DISCUSSION
11. We conclude that Pay Tel has met its burden of proof to establish good cause to grant a 
limited, temporary waiver of the Commission’s interim ICS rate cap rule.  Based on a thorough review of 
the information provided by Pay Tel, we conclude that Pay Tel has shown that the combination of its 
existing below-average-cost state ICS rates and the Commission’s interim rate caps, which accurately 
reflect its average total company costs constitute “extraordinary circumstances”
77
that justify temporary 
waiver of the Commission’s rate caps, and that the waiver will be in the public interest.
78
  We note that 
Pay Tel’s data submissions adequately address the factors relevant to the review of its Petition as 
                                                     
67
Id.   
68
Id. 
69
See Petition at 1, 6.  
70
“Any provision of the rules may be waived by the Commission on its own motion or on petition if good cause 
therefor is shown.”  47 C.F.R. § 1.3.
71
Cellular Telephone Co. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 1990) (Northeast Cellular).  The Commission 
may exercise its discretion to waive a rule where the particular facts make strict compliance inconsistent with the 
public interest.  Northeast Cellular 897 F.2d at 1166.  In addition, the Commission may take into account 
considerations of hardship, equity, or more effective implementation of overall policy on an individual basis.  WAIT 
Radio v. FCC, 418 F.2d 1153, 1159 (D.C. Cir. 1969); Northeast Cellular, 897 F.2d at 1166.  Waiver of the 
Commission’s rules is appropriate only if both (i) special circumstances warrant a deviation from the general rule, 
and (ii) such deviation will serve the public interest. Northeast Cellular, 897 F.2d at 1166. 
72
Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14153, para. 82.  
73
Id. at 14164, para. 105.  The factors are “costs directly related to the provision of interstate ICS and ancillary 
services; demand levels and trends; a reasonable allocation of common costs shared with the providers’ non-inmate 
calling services; and general and administrative cost data.”  Id. at 14153, para. 82.  
74
Id. at 14153, para. 83.  
75
Id. 
76
Id. at 14154, para. 84.
77
Id. at 14153, para. 83.
78
Petition at 2.  
Federal Communications Commission DA 14-187
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identified in the waiver provisions of the Order.
79
  Pay Tel does not dispute that the cost study relied upon 
by the Commission continues to accurately represent its average costs of providing ICS service. Instead, 
it maintains that it cannot recover its costs plus a reasonable return while complying both with our interim 
interstate rate caps and its existing intrastate rate requirements because some of these intrastate rates are 
below its actual costs.  We therefore grant this temporary waiver to afford Pay Tel additional time to 
pursue appropriate changes to its intrastate requirements, which when brought to appropriate levels 
should permit Pay Tel to charge rates in compliance with our requirements. We therefore limit the 
duration of this waiver to nine months unless the Commission decides to take action on intrastate ICS rate 
caps sooner, then such Commission Order would supersede this waiver.    
12. We review Pay Tel’s request under the Commission’s standard waiver analysis as 
informed by the additional guidance included in waiver provisions of the Order.  This requires Pay Tel to 
establish good cause for a waiver by demonstrating that it faces special circumstances that warrant a 
waiver and by showing that a waiver would be in the public interest.  Pay Tel cites as special 
circumstances the Commission’s average-cost-based interstate rate caps and below-average-cost state 
rates, the combination of which precludes it from recovering its total company costs of providing ICS.  
We therefore must review and verify: 1) the data and analyses that establish Pay Tel’s average cost and;
2) the data and analyses that support Pay Tel’s quantification of its intrastate shortfall.
13. Corporate Structure.  As an initial matter and consistent with the Order’s waiver 
provisions, we review Pay Tel’s request and supporting data at the holding company level.
80
  Pay Tel’s 
Petition states that “Pay Tel has a one-tier corporate organizational structure” and that “[a]ll of its ICS 
operations are conducted as Pay Tel Communications, Inc.”
81
  There is no evidence in the record of any 
parent company or other corporate entity having an ownership interest in Pay Tel, nor is there evidence 
that Pay Tel has an ownership interest in other corporate entities.  Additionally, given that Pay Tel’s 
corporate structure includes no subsidiaries or affiliates, there are no inter- or intra-company allocations, 
transactions or interests that might otherwise impact our analysis of Pay Tel’s Petition and require the 
submission of additional data.  
14. Cost Showing.  To establish that it faces special circumstances warranting a waiver, Pay 
Tel must first demonstrate its total company average cost of providing ICS in order to provide a baseline 
for assessing its intrastate shortfall claims.  We find that the supporting data and analyses submitted by 
Pay Tel, including a cost study
82
which we find accurately reflects the company’s cost of providing ICS,
audited financial statements,
83
and data on its average interstate site commission payments,
84
are sufficient 
to establish that its average total company per-minute cost is at the interim interstate rate cap.
85
  The cost 
data in Pay Tel’s Cost Study were corroborated by cost data from its audited financial statements
86
and we 
find it remains valid but note, as the Commission discussed in the Order, that our actions here are not a 
                                                     
79
Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14153, para. 83.  
80
Id.  
81
Petition at 1 n.2.  
82
See Petition at Exh. A.  
83
See Pay Tel Second Supplemental Filing at Attach.  
84
See Pay Tel Third Supplemental Filing at Attach.  
85
The D.C. Circuit stayed rule 64.6010 (“Cost-Based Rates for Inmate Calling Services”).  See generally Securus 
Techs. Partial Stay Order.  However, Pay Tel voluntarily submitted cost information in support of its Petition and 
we see no conflict in reviewing Pay Tel’s cost information for the express purpose of evaluating and addressing its 
request.  Also, costs are central to the analysis under the just and reasonable mandate found in section 201(b).  See 
supra para. 3.
86
See Pay Tel Second Supplemental Filing at Attach. (includes confidential information).   
Federal Communications Commission DA 14-187
9
blanket endorsement of the study.
87
  Pay Tel’s interstate site commission payment data supplemented the 
site commission data from its cost study and identified the site commissions assessed on Pay Tel’s 
interstate ICS.
88
15. Impact of Below-Cost Intrastate Rates.  To support its request, Pay Tel also establishes
that it faces below-average-cost state rate mandates and quantifies the magnitude of the resulting revenue 
shortfall it incurs.  Pay Tel’s Petition includes a detailed analysis that concludes that it incurs a total 
intrastate shortfall of approximately $2.8 million, approximately $1.2 million of which is offset by 
interstate revenues.
89
  We find the data and analyses Pay Tel submitted sufficient to verify these claims.  
Pay Tel’s Petition included detailed rate, call volume and revenue data by facility and by type of inmate 
calling service, which enabled an independent assessment of its intrastate revenue shortfall assertions.
90
  
These data were corroborated by comparable data in its financial statements.
91
  Pay Tel also provided
summary descriptions of the below-cost intrastate rate mandates it claims cause its intrastate shortfall 
along with excerpts from the relevant mandates by state.
92
  Given Pay Tel’s average cost and its intrastate 
revenue shortfall, we conclude that it has demonstrated that it faces special circumstances that warrant a 
waiver.  
16. Public Interest Showing. Finally, Pay Tel must also demonstrate that a waiver of the 
Commission’s interim interstate ICS rate caps is in the public interest.  We find that Pay Tel has 
demonstrated that a limited, temporary waiver will serve the public interest.  It will ensure that Pay Tel 
continues to provide highly-secure ICS to inmates and their families at the facilities which it serves.
93
  We 
further note that a waiver will be consistent with our statutory obligation under section 201(b) of the Act 
and, pursuant to section 276, will “promote competition” and “promote the widespread deployment of 
payphone services to the benefit of the general public.”
94
  Finally, and importantly, Pay Tel has asserted 
that setting a rate cap at $0.46 per minute will ensure that the great majority of people most affected by 
Pay Tel’s interstate ICS rates – the inmates in the facilities Pay Tel serves and their families – will see 
immediate and substantial rate decreases when this Order becomes effective because it will result in a 
reduction of over 40 percent from average existing interstate ICS rates of $0.81 per minute.
95
   
17. We limit the waiver we grant to the revised $0.46 per-minute rate cap Pay Tel proposed 
in its Third Supplemental Filing.
96
  This revised rate cap reflects, on a per-minute basis, the “elimination 
of interstate commissions from Pay Tel’s interstate rates”
97
consistent with the Order’s determination that 
                                                     
87
See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14151, n. 293.
88
Pay Tel Third Supplemental Filing at Attach.  
89
Following the filing of its Petition, Pay Tel supplemented its shortfall analysis with additional documentation.  See
Pay Tel First Supplemental Filing at 1-2, Attach.  
90
Petition at 13-19, Exh. B.  It also included a summary of the financial impacts by state of intrastate ICS rates.  See
Petition at Exh. C.  
91
See Petition at Exh. B; Pay Tel Third Supplemental Filing at Attach.  
92
Petition at Exhs. D & E.  
93
Pay Tel Third Supplemental Filing at 2 (The limited, temporary nature of the waiver will ensure that it will not 
result in a financial windfall for Pay Tel, an outcome Pay Tel expressly disavowed and distanced itself from by 
revising downward its requested initial request for relief.). 
94
47 U.S.C. § 276(b)(1).  
95
See Pay Tel Third Supplemental Filing at 2; supra n.30.  
96
Using the data that Pay Tel provided on its interstate site commissions, staff calculated that those commissions 
represent approximately $0.35 per-minute of its average $0.81 per-minute revenue.  See Petition at Exh. B; see also 
Pay Tel Third Supplemental Filing at Attach.  
97
Pay Tel Third Supplemental Filing at 2. 
Federal Communications Commission DA 14-187
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site commissions are not a recoverable component of interstate ICS rates.
98
  Granting Pay Tel’s revised 
waiver request will, according to Pay Tel, “permit Pay Tel to remain in business.”
99
  We note that the 
$0.46 per minute rate cap will enable Pay Tel to continue to recover that portion of interstate revenues 
that is currently available to Pay Tel to offset its intrastate shortfall.  Specifically, the Bureau estimated
the amount of revenue the revised $0.46 per minute rate cap would yield Pay Tel by using the Wood 
Intrastate Shortfall Analysis to calculate its total interstate ICS revenue less its total interstate site 
commission payments and its total cost of providing interstate service.
100
  
18. A grant is also consistent with the Inmate Calling Order on Remand and NPRM, which 
notes that:
[u]nless an ICS provider can show that (i) revenue from its interstate or 
intrastate calls fails to recover, for each of these services, both its direct costs 
and some contribution to common costs, or (ii) the overall profitability of its 
payphone operations is deficient because the provider fails to recover its total 
costs from its aggregate revenues (including both revenues from interstate and 
intrastate calls), then we would see no reason to conclude that the provider has 
not been ‘fairly compensated.’
101
  
The data submitted by Pay Tel demonstrate that it falls within the second category enumerated above, 
further supporting the decision to grant the waiver.  Moreover, we agree with Pay Tel that reducing its 
interstate ICS rates to no more than $0.46 per minute will “ensur[e] that consumers of interstate services 
receive meaningful decreases in interstate rates.”
102
  
19. Duration of Waiver.  We grant Pay Tel a temporary waiver in order to provide it with an 
opportunity to address below-average-cost rate mandates at their source – at the state level and with the 
individual facilities it serves.  Pay Tel explains that the intrastate revenue shortfalls it experiences result 
either from state regulatory mandates or contractual provisions predicated on state mandated rates.  We 
agree with HRDC that Pay Tel nevertheless is not constrained from pursuing relief in either instance.
103
  
Specifically, Pay Tel can follow existing processes within the relevant states to seek necessary intrastate 
rate changes, or waivers, in light of the impact of the interim interstate ICS rate caps.
104
  Further, as the 
Commission asserted in the Order, ICS providers, like most commercial entities, generally can 
renegotiate contract terms with the facilities they serve, particularly where such contracts contain change 
of law provisions.
105
  The fact that certain of Pay Tel’s ICS contractual rates are predicated on rates that 
state commissions established for local exchange service does not change our analysis of the ability of 
providers to seek necessary intrastate rate changes. Additionally, we recognize that the Commission has 
an open proceeding that is considering final interstate ICS rates and potential action on intrastate ICS 
                                                     
98
See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14135, para. 54.
99
Pay Tel Third Supplemental Filing at 2.
100
See Petition at Exhs. A & B; see also Pay Tel Third Supplemental Filing.  The Wood intrastate Shortfall Analysis 
includes rate and call volume data for the second quarter of 2013 for all locations in operation for the entire quarter; 
data is provided for post-paid collect, prepaid-collect, pre-paid calling cards, and debit calls by jurisdiction.
101
Inmate Calling Order on Remand and NPRM, 17 FCC Rcd 3248 at 3257-58, para. 23 (emphasis in original).
102
Pay Tel Third Supplemental Filing at 2.
103
See supra n. 53.
104
See HRDC FNPRM Reply Comments at 7. 
105
Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14162-63, para. 102.  See also HRDC FNPRM 
Reply Comments at 7.  But cf. Petition, Exh. G at 1 (statement of Vincent Townsend); Pay Tel First Supplemental 
Filing at 2; Pay Tel Jan. 21, 2014 Reply Comment at 5-6 (noting that only a small proportion of its contracts contain 
such a provision).  
Federal Communications Commission DA 14-187
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rates.
106
  In light of these circumstances, we find it is in the public interest to grant Pay Tel temporary 
relief while it pursues relief in the states, and we therefore limit the duration of the waiver to nine months
unless the Commission decides to take action on intrastate ICS rate caps sooner, then such Commission 
Order would supersede this waiver.
107
  
20. For these reasons, we conclude that Pay Tel has demonstrated good cause for the Bureau 
to grant a limited, temporary waiver of the Commission’s rule establishing interim interstate ICS rate 
caps.  Furthermore, we find the following conditions to be consistent with Pay Tel’s proposed 
commitments and in the public interest:  Pay Tel (1) may not assess a rate for interstate long distance ICS 
calls in excess of $0.46 per minute for existing and new clients and may not charge interstate rates any 
greater than its rates as of February 10, 2014 if those rates were under $0.46 per-minute;
108
and Pay Tel 
(2) may charge no more than its current fees.
109
  Pay Tel notes, however, that changes in circumstances 
may justify a change in its fee structure.
110
  Given the spirit of the Inmate Calling Report and Order and 
FNPRM, increasing ancillary fees to offset the rate caps could thwart reforms and relief for inmates and 
their families.  We therefore adopt Pay Tel’s additional commitment that it “will assess the minimum in 
fees which are necessary to recover its costs.”
111
  Further, to the extent Pay Tel assesses any new or 
increased fees, in addition to notifying its customers,
112
we require it to also notify the Commission and to 
include an updated analysis of its cost and revenue data.  Any such new or increased fees may impact the 
need and justification for the instant waiver.
113
  As a result, we adopt the waiver with these conditions.
21. We authorize such rates for a period of nine months unless the Commission decides to 
take action on intrastate ICS rate caps sooner, then such Commission Order would supersede this waiver.  
This period of time will provide Pay Tel an opportunity to seek modification of the intrastate rates it cites 
in its Petition.  States should recognize the Commission’s and the Bureau’s actions in this proceeding as 
part of a broader effort to establish a consistent framework of cost-based rate caps for ICS generally and 
work with the relevant parties to that end.  We allow Pay Tel up to seven days from the release of this 
                                                     
106
While Pay Tel’s Petition does not expressly limit the duration of its requested waiver, it nonetheless suggests 
such a limitation by requesting relief “as the Commission continues to investigate the appropriate regulatory 
environment for the ICS industry.”  Petition at 22; see also Pay Tel Third Supplemental Filing at 2.  The 
Commission’s investigation into ICS rates is on-going.  In the FNPRM in this proceeding, the Commission sought 
and received comment on extending its interim interstate ICS rules to intrastate ICS and making its ICS rules 
permanent.  See Inmate Calling Report and Order and FNPRM at Sections V.A. and V.C.  The Inmate Calling 
Report and Order and FNPRM also prescribed a mandatory data request for ICS providers that will allow the 
Commission to assess more accurately the costs of providing ICS and therefore adopt rate caps that will more 
precisely reflect providers’ costs.  See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14172-73, 
paras. 124-26.
107
Any subsequent requests from Pay Tel will require, at a minimum, a showing of its efforts to obtain relief from 
state-imposed regulatory mandates.
108
“As a result, this proposal would not result in interstate rate increases in any existing Pay Tel facility.” Pay Tel 
Third Supplemental Filing at 2, n.3. Rates should be calculated on a per-minute basis assuming a call duration of 15 
minutes.  See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14155-56, para. 88.
109
See Petition at 22. 
110
See Petition at 22, n.68.  
111
Pay Tel Third Supplemental Filing at 2, n.5.  
112
See Pay Tel Third Supplemental Filing at 2, n.5.  
113
To the extent that Pay Tel assesses a fee or fees that would recover more than its reasonable costs and would 
result in Pay Tel obtaining a financial windfall, we reserve the right to revise the $0.46 per minute rate cap granted 
in this Order.  
Federal Communications Commission DA 14-187
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Order to make the rate changes adopted herein.
114
  We implement this limited, temporary waiver to ensure 
that Pay Tel recovers its total costs, on a holding company basis, for providing ICS.  
IV. ORDERING CLAUSES
22. Accordingly, IT IS ORDERED, pursuant to the authority contained in sections 1, 4(i), 
5(c), 201, and 276 and of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 154(i), 
155(c), 201, and 276, and sections 0.91, 0.291, and 1.3 of the Commission’s rules, 47 C.F.R. §§ 0.91, 
0.291, and 1.3, that the Petition for Waiver of Interim Interstate ICS Rates filed by Pay Tel 
Communications, Inc. on January 8, 2014 IS GRANTED to the extent and subject to the conditions set 
forth above, for a duration of nine months, beginning on February 11, 2014 and ending on November 11, 
2014 unless the Commission decides to take action on intrastate ICS rate caps sooner, then such 
Commission Order would supersede this waiver.
23. IT IS FURTHER ORDERED that the Petition for Waiver of Interim Interstate ICS Rates 
filed by Pay Tel Communications, Inc. on January 8, 2014, and subsequently revised on January 23, 
2014, is DENIED to the extent not granted herein.
24. IT IS FURTHER ORDERED that the Petition for Partial Stay of Rates for Interstate 
Inmate Calling Services Order filed by Pay Tel Communications, Inc. on November 26, 2013 in WC 
Docket 12-375 is DISMISSED AS MOOT.
25. IT IS FURTHER ORDERED that this Order SHALL BE EFFECTIVE upon release.
FEDERAL COMMUNICATIONS COMMISSION
Julie A. Veach
Chief
Wireline Competition Bureau
                                                     
114
Pay Tel may charge its existing interstate ICS rates in the intervening seven days until it begins charging 
$0.46/minute for all interstate ICS calls.