April 29, 2021 FACT SHEET* Rates for Interstate Inmate Calling Services Third Report and Order, Order on Reconsideration, and Fifth Further Notice of Proposed Rulemaking  WC Docket No. 12-375 Background: Egregiously high rates and charges, and associated unreasonable practices, for telephone service impedes incarcerated individuals ability to stay connected with family and loved ones. Never have such connections been as vital as they are now, as many correctional facilities have eliminated in- person visitation in response to the COVID-19 pandemic. This item would respond to these exigent circumstances by substantially adopting the proposals from the 2020 ICS Notice. What the Third Report and Order Would Do: It would implement, in substantial part, the proposals in the 2020 ICS Notice to: " Lower the interstate interim rate caps to new interim caps of $0.12 per minute for prisons and $0.14 per minute for jails with populations of 1,000 or more, providing relief to the vast majority of incarcerated people. " Reform the current treatment of site commission payments, allowing an $0.02 additional allowance for negotiated site commission payments to prisons and jails. " Eliminate the separate interstate collect calling rate cap, lowering rates in all facilities. " Cap, for the first time, international calling rates. " Reform the ancillary service charge rules for third-party financial transaction fees. " Adopt a new mandatory data collection to gather data to set permanent rates. " Reaffirm providers obligations regarding access for incarcerated people with disabilities. What the Order on Reconsideration Would Do: " Reaffirm the Commission s finding in the 2020 ICS Order that the jurisdictional nature of a telephone call for purposes of charging consumers depends on the physical location of the originating and terminating endpoints of the call. What the Fifth Further Notice of Proposed Rulemaking Would Do: " Seek comment on issues including the provision of communications services to incarcerated individuals with disabilities; adoption of permanent interstate and international rate caps; reform of the treatment of site commission payments; and reforms to the ancillary service charges rules. * This document is being released as part of a  permit-but-disclose proceeding. Any presentations or views on the subject expressed to the Commission or to its staff, including by email, must be filed in WC Docket No. 12-375, which may be accessed via the Electronic Comment Filing System (https://www.fcc.gov/ecfs/). Before filing, participants should familiarize themselves with the Commission s ex parte rules, including the general prohibition on presentations (written and oral) on matters listed on the Sunshine Agenda, which is typically released a week prior to the Commission s meeting. See 47 CFR § 1.1200 et seq. Federal Communications Commission FCCCIRC2105-01 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Rates for Interstate Inmate Calling Services ) WC Docket No. 12-375 ) THIRD REPORT AND ORDER, ORDER ON RECONSIDERATION, AND FIFTH FURTHER NOTICE OF PROPOSED RULEMAKING*ð Adopted: [] Released: [] Comment Date: [[30]] days after date of publication in the Federal Register Reply Comment Date: [[60]] days after date of publication in the Federal Register TABLE OF CONTENTS I. INTRODUCTION .................................................................................................................................. 1 II. BACKGROUND .................................................................................................................................... 7 A. Statutory Background ...................................................................................................................... 8 B. History of Commission Proceedings Prior to 2020 ....................................................................... 11 C. Judicial Actions .............................................................................................................................. 16 D. 2020 Rates and Charges Reform Efforts........................................................................................ 22 III. THIRD REPORT AND ORDER ......................................................................................................... 28 A. Unique Marketplace for Telephone Services Provided to Incarcerated People ............................. 31 B. Impact on Consumers and Society ................................................................................................. 34 C. Interim Interstate Rate Cap Components ....................................................................................... 39 1. Eliminating Separate Rate Caps for Collect Calls ................................................................... 42 2. Setting a Threshold of 1,000 Average Daily Population for Larger Jails ............................... 46 3. Accounting for Providers Costs ............................................................................................. 49 4. Accounting for Correctional Facility Costs ........................................................................... 100 5. Waiver Process for Outliers .................................................................................................. 171 D. Interim International Rate Caps ................................................................................................... 178 E. Consistency with Section 276 of the Act ..................................................................................... 186 F. Cost-Benefit Analysis of Revised Interstate Rate Caps ............................................................... 195 G. Disability Access ......................................................................................................................... 207 H. Other Issues .................................................................................................................................. 210 1. Ancillary Fee Cap for Single-Call Services and Third-Party Transaction Fees .................... 210 2. Effect on State Regulation ..................................................................................................... 218 *ð This document has been circulated for tentative consideration by the Commission at its May 20, 2021 open meeting. The issues referenced in this document and the Commission s ultimate resolution of those issues remain under consideration and subject to change. This document does not constitute any official action by the Commission. However, the Acting Chairwoman has determined that, in the interest of promoting the public s ability to understand the nature and scope of issues under consideration, the public interest would be served by making this document publicly available. The FCC s ex parte rules apply and presentations are subject to  permit-but-disclose ex parte rules. See, e.g., 47 C.F.R. §§ 1.1206, 1.1200(a). Participants in this proceeding should familiarize themselves with the Commission s ex parte rules, including the general prohibition on presentations (written and oral) on matters listed on the Sunshine Agenda, which is typically released a week prior to the Commission s meeting. See 47 CFR §§ 1.1200(a), 1.1203. Federal Communications Commission FCCCIRC2105-01 3. Additional Data Collection .................................................................................................... 219 4. Effective Dates ...................................................................................................................... 231 5. Rule Revisions ....................................................................................................................... 234 IV. ORDER ON RECONSIDERATION ................................................................................................. 236 A. Background .................................................................................................................................. 237 B. Discussion .................................................................................................................................... 241 1. GTL s Substantive Arguments Against the End-to-End Analysis Do Not Warrant Reconsideration ..................................................................................................................... 242 2. GTL s Procedural Arguments Do Not Warrant Reconsideration ......................................... 258 V. SEVERABILITY ............................................................................................................................... 262 VI. FIFTH FURTHER NOTICE OF PROPOSED RULEMAKING ....................................................... 263 A. Disability Access ......................................................................................................................... 264 1. Background ........................................................................................................................... 265 2. Making Modern Forms of TRS Available ............................................................................. 269 3. Application of Existing TRS Rules ....................................................................................... 285 4. Charges for TRS Calls ........................................................................................................... 289 5. Direct Video Communication by Incarcerated People with Communication Disabilities ............................................................................................................................. 295 6. Accessibility-Related Reporting ............................................................................................ 301 B. Permanently Capping Provider and Facility-Related Rate Components ..................................... 303 1. Overall Methodology ............................................................................................................ 303 2. Provision of Service to Jails with Average Daily Populations Below 1,000 ......................... 307 3. Correctional Facility Costs .................................................................................................... 311 C. Revising Ancillary Service Charges Rules .................................................................................. 325 D. Refining International Rate Methodology to Prevent Double Counting ..................................... 338 E. Recurring Mandatory Data Collection ......................................................................................... 342 F. Revisions to the Commission s Definition of  Jail .................................................................... 347 G. Characteristics of the Bidding Market ......................................................................................... 350 VII. PROCEDURAL MATTERS ............................................................................................................ 359 VIII. ORDERING CLAUSES ................................................................................................................. 375 I. INTRODUCTION 1. Unlike virtually everyone else in the United States, incarcerated people have no choice in their telephone service provider. Instead, their only option typically is to use a service provider chosen by the correctional facility, and once chosen, that service provider typically operates on a monopoly basis. Egregiously high rates and charges and associated unreasonable practices for the most basic and essential communications capability telephone service impedes incarcerated peoples ability to stay connected with family and loved ones, clergy, and counsel, and financially burdens incarcerated people and their loved ones. Never have such connections been as vital as they are now, as many correctional facilities have eliminated in-person visitation in response to the COVID-19 pandemic. 2. In August 2020, the Commission unanimously adopted a Notice proposing to reduce interstate rates and, for the first time, to cap international rates. Today, we move forward as proposed, lowering interstate rates and charges for the vast majority of incarcerated people, limiting international rates for the first time, and making other reforms to our rules. 3. Specifically, the Report and Order: " Lowers the interstate interim rate caps of $0.21 per minute for debit and prepaid calls from prisons and jails with 1,000 or more incarcerated people to new lower interim caps of $0.12 per minute for prisons and $0.14 per minute for larger jails. " Reforms the current treatment of site commission payments to permit recovery only of the portions of such payments related specifically to calling services and requires them to 2 Federal Communications Commission FCCCIRC2105-01 be separately listed on bills. o Where site commission payments are mandated by federal, state, or local law, providers may pass these payments through to consumers, without any markup, as an additional component of the new interim interstate per-minute rate caps. o Where site commission payments result from contractual obligations or negotiations with providers, providers may recover from consumers no more than the $0.02 per minute for prisons and $0.02 per minute for larger jails, as proposed in the 2020 ICS Notice. o Therefore, consistent with the proposal in the 2020 ICS Notice, the maximum total interstate rate caps are $0.14 per minute for prisons and $0.16 per minute for jails with 1,000 or more incarcerated people. " Eliminates the current interim interstate collect calling rate cap of $0.25 per minute resulting in a single uniform interim interstate maximum rate cap of $0.21 per minute for all calls for all facilities, consistent with the proposal in the 2020 ICS Notice. " Caps, for the first time, international calling rates at the applicable total interstate rate cap, plus the amount paid by the calling services provider to its underlying wholesale carriers for completing international calls, consistent with the 2020 ICS Notice. " Reforms the ancillary service third-party transaction fee caps for (1) calls that are billed on a single per-call basis, and (2) charges for transferring or processing third-party financial transactions, as proposed in the 2020 ICS Notice. " Adopts a new mandatory data collection to obtain more uniform cost data based on consistent prescribed allocation methodologies to determine reasonable permanent cost- based rate caps for facilities of all sizes, as suggested in the 2020 ICS Notice. " Reaffirms providers obligations regarding functionally equivalent access for incarcerated people with disabilities, consistent with the 2020 ICS Notice and federal law. 4. Next, we adopt an Order on Reconsideration denying GTL s petition for reconsideration of the 2020 ICS Order on Remand, and reiterate that the jurisdictional nature of a telephone call for purposes of charging consumers depends on the physical location of the originating and terminating endpoints of the call. To the extent the endpoints of any particular call could be either intrastate or interstate and such endpoints are not known or easily knowable, consistent with our precedent, rates or charges for such calls may not exceed any applicable federally prescribed rates or charges. 5. Finally, we adopt a Fifth Further Notice of Rulemaking to obtain evidence necessary to make further progress toward accomplishing the critical work that remains. To that end, the Further Notice seeks more detailed comments from stakeholders, including but not limited to, about the provision of communications services to incarcerated people with hearing and speech disabilities; the methodology to be employed in setting permanent interstate and international rate caps; general reform of the treatment of site commission payments in connection with interstate and international calls; the adoption of an on- going periodic cost data collection to ensure rates are just and reasonable; and additional reforms to our ancillary service charges rules. 6. We expect today s actions to have immediate meaningful and positive impacts on the ability of incarcerated people and their loved ones to satisfy our universal, basic need to communicate.1 1 Although we use various terminology throughout this item to refer to the intended beneficiaries of our actions herein, unless context specifically indicates otherwise, these beneficiaries are broadly the people placing and receiving inmate calling services (ICS) calls, whether they are incarcerated people, members of their family, or other loved ones and friends. We also may refer to them, generally, as consumers. 3 Federal Communications Commission FCCCIRC2105-01 II. BACKGROUND 7. Access to affordable communications services is critical for everyone in the United States, including incarcerated members of our society. Studies have long shown that incarcerated people who have regular contact with family members are more likely to succeed after release and have lower recidivism rates. Because correctional facilities generally grant exclusive rights to service providers, incarcerated people must purchase service from  locational monopolies and subsequently face rates far higher than those charged to other Americans. A. Statutory Background 8. The Communications Act of 1934, as amended (Communications Act or Act) divides regulatory authority over interstate, intrastate, and international communications services between the Commission and the states.2 Section 2(a) of the Act empowers the Commission to regulate  interstate and foreign communication by wire or radio. 3 This regulatory authority includes ensuring that  [a]ll charges, practices, classifications, and regulations for and in connection with interstate or international communications services are  just and reasonable in accordance with section 201(b) of the Act.4 Section 201(b) also provides that  [t]he Commission may prescribe such rules and regulations as may be necessary in the public interest to carry out these provisions.5 9. Section 2(b) of the Act preserves states jurisdiction over  charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communication service. 6 The Commission is thus  generally forbidden from entering the field of intrastate communication service, which remains the province of the states. 7 Stated differently, section 2(b)  erects a presumption against the Commission s assertion of regulatory authority over intrastate communications. 8 10. Section 276 of the Act directs the Commission to prescribe regulations that ensure that payphone service providers, including inmate calling services providers,  are fairly compensated for each and every completed intrastate and interstate call using their payphone. 9 Although the Telecommunications Act of 1996 (1996 Act) amended the Act and  chang[ed] the FCC s authority with respect to some intrastate activities, 10 with respect to section 276, the U.S. Court of Appeals for the District of Columbia Circuit has held that  the strictures of [section 2(b)] remain in force. 11 Accordingly, that court concluded that section 276 does not authorize the Commission to determine  just and reasonable rates for intrastate calls, and that the Commission s authority under that provision to 2 E.g., Global Tel*Link v. FCC, 866 F.3d 397, 402 (D.C. Cir. 2017) (GTL v. FCC or GTL). 3 47 U.S.C. § 152(a). 4 47 U.S.C. § 201(b). 5 Id. 6 47 U.S.C. § 152(b). 7 GTL v. FCC, 866 F.3d at 403 (quoting New England Pub. Commc ns Council, Inc. v. FCC, 334 F.3d 69, 75 (D.C. Cir. 2003) (citing 47 U.S.C. § 152(b)). 8 Id. at 403, 409; see also id. at 403 ( This is  not only a substantive jurisdictional limitation on the FCC s power, but also a rule of statutory construction in interpreting the Act s provisions. (quoting La. Pub. Serv. Comm n v. FCC, 476 U.S. 355, 373 (1986) (Louisiana Public Service Commission))). 9 47 U.S.C. § 276(b)(1)(A); see also 47 U.S.C. § 276(d) (defining  payphone service to include  the provision of inmate telephone service in correctional institutions, and any ancillary services ). The statute explicitly exempts telecommunications relay service calls for hearing disabled individuals from the requirement that providers must be compensated for  each and every completed call. Id. § 276(b)(1)(A). 10 GTL v. FCC, 866 F.3d at 403. 11 Id. 4 Federal Communications Commission FCCCIRC2105-01 ensure that providers  are fairly compensated both for intrastate and interstate calls does not extend to establishing rate caps on intrastate services.12 B. History of Commission Proceedings Prior to 2020 11. In 2003, Martha Wright and her fellow petitioners, current and former incarcerated people and their relatives and legal counsel (Wright Petitioners), filed a petition seeking a rulemaking to address  excessive inmate calling services rates.13 The petition sought to prohibit exclusive inmate calling services contracts and collect-call-only restrictions in correctional facilities.14 In 2007, the Wright Petitioners filed an alternative petition for rulemaking in which they emphasized the urgency of the need for Commission action due to  exorbitant inmate calling services rates.15 The Wright Petitioners proposed benchmark rates for interstate long distance inmate calling services calls and reiterated their request that providers offer debit calling as an alternative option to collect calling.16 The Commission sought and received comment on both petitions.17 12. In 2012, the Commission commenced an inmate calling services rulemaking proceeding by releasing the 2012 ICS Notice seeking comment on, among other matters, the proposals in the Wright Petitioners petitions and whether to establish rate caps for interstate inmate calling services calls.18 13. In the 2013 ICS Order, in light of record evidence that rates for calling services used by incarcerated people greatly exceeded the reasonable costs of providing those services, the Commission adopted interim interstate rate caps of $0.21 per minute for debit and prepaid calls and $0.25 per minute for collect calls.19 In the First Mandatory Data Collection, the Commission required all inmate calling services providers to submit data on their underlying costs so that the agency could develop permanent 12 Id. at 409-12. Judge Pillard dissented from this view, finding permissible the Commission s contrary interpretation of the meaning of  fairly compensated in section 276. Id. at 419-23 (Pillard, J., dissenting). 13 Petition for Rulemaking or, in the Alternative, Petition to Address Referral Issues in Pending Rulemaking, CC Docket No. 96-128, at 1 (filed Nov. 3, 2003), https://ecfsapi.fcc.gov/file/6515782164.pdf. 14 Id. at 3. 15 Petitioners Alternative Rulemaking Proposal, CC Docket No. 96-128, at 2 (filed Mar. 1, 2007), https://ecfsapi.fcc.gov/file/6518908681.pdf. 16 Id. at 5, 10. 17 Comment Sought on Alternative Rulemaking Proposal Regarding Issues Related to Inmate Calling Services, CC Docket No. 96-128, Public Notice, 22 FCC Rcd 4229 (WCB 2007); 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 FCC LEXIS 7261 (WCB 2003). 18 Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Notice of Proposed Rulemaking, 27 FCC Rcd 16629, 16629-30, 16636, paras. 1, 17 (2012) (2012 ICS Notice). 19 These interim interstate rate caps were first adopted in 2013, Rates for Inmate Calling Services, WC Docket No. 12-375, Report and Order and Further Notice of Proposed Rulemaking, 28 FCC Rcd 14107, 14111, para. 5 (2013) (2013 ICS Order), and readopted in 2015, Rates for Inmate Calling Services, WC Docket No. 12-375, Second Report and Order and Third Further Notice of Proposed Rulemaking, 30 FCC Rcd 12763, 12770, para. 9 tbl. 1 (2015) (2015 ICS Order or 2015 ICS Notice), and remain in effect as a result of the vacatur, by the D.C. Circuit, of the permanent rate caps adopted in the 2015 ICS Order. GTL v. FCC, 866 F.3d at 404. Under the Commission s rules,  Debit Calling means  a presubscription or comparable service which allows an Inmate, or someone acting on an Inmate's behalf, to fund an account set up [through] a Provider that can be used to pay for Inmate Calling Services calls originated by the Inmate. 47 CFR § 64.6000(g).  Prepaid calling means  a presubscription or comparable service in which a Consumer, other than an Inmate, funds an account set up [through] a Provider of Inmate Calling Services. Funds from the account can then be used to pay for Inmate Calling Services, including calls that originate with an Inmate. Id. § 64.6000(p).  Collect calling means  an arrangement whereby the called party takes affirmative action clearly indicating that it will pay the charges associated with a call originating from an Inmate Telephone. Id. § 64.6000(d). 5 Federal Communications Commission FCCCIRC2105-01 rate caps.20 In the 2014 ICS Notice, the Commission sought comment on reforming charges for services ancillary to the provision of inmate calling services and on establishing rate caps for both interstate and intrastate calls.21 14. The Commission adopted a comprehensive framework for interstate and intrastate inmate calling services in the 2015 ICS Order, including limits on ancillary service charges22 and permanent rate caps for interstate and intrastate inmate calling services calls in light of  egregiously high rates for inmate calling services calls.23 The Commission set tiered rate caps of $0.11 per minute for prisons; $0.14 per minute for jails with average daily populations of 1,000 or more; $0.16 per minute for jails with average daily populations of 350 to 999; and $0.22 per minute for jails having average daily populations of less than 350.24 The Commission calculated these rate caps using industry-wide average costs based on data from the First Mandatory Data Collection and stated that this approach would allow providers to  recover average costs at each and every tier. 25 The Commission also readopted the interim interstate rate caps it had adopted in 2013, and extended them to intrastate calls, pending the effectiveness of the new rate caps, and sought comment on whether and how to reform rates for international inmate calling services calls.26 At the same time, the Commission adopted a Second Mandatory Data Collection to 20 2013 ICS Order, 28 FCC Rcd at 14111-12, paras. 5, 7. 21 Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Second Further Notice of Proposed Rulemaking, 29 FCC Rcd 13170, 13179, para. 19 (2014) (2014 ICS Notice). Ancillary service charges are fees that providers assess on calling services used by incarcerated people that are not included in the per-minute rates assessed for individual calls. 47 CFR § 64.6000(a). 22 2015 ICS Order, 30 FCC Rcd at 12838-39, paras. 144-45. Because of continued growth in the number and dollar amount of ancillary service charges that inflated the effective price paid for inmate calling services, the Commission limited permissible ancillary service charges to only five types and capped the charges for each: (1) Fees for Single- Call and Related Services billing arrangements whereby an incarcerated person s collect calls are billed through a third party on a per-call basis, where the called party does not have an account with the inmate calling services provider or does not want to establish an account; (2) Automated Payment Fees credit card payment, debit card payment, and bill processing fees, including fees for payments made by interactive voice response, web, or kiosk; (3) Third-Party Financial Transaction Fees the exact fees, with no markup, that providers of calling services used by incarcerated people are charged by third parties to transfer money or process financial transactions to facilitate a consumer s ability to make account payments via a third party; (4) Live Agent Fees fees associated with the optional use of a live operator to complete inmate calling services transactions; and (5) Paper Bill/Statement Fees fees associated with providing customers of inmate calling services an optional paper billing statement. 47 CFR §§ 64.6000(a), 64.6020. 23 The Commission relied on section 276 and section 201(b) of the Act to adopt its rate caps for both intrastate and interstate inmate calling services. 2015 ICS Order, 30 FCC Rcd at 12768, 12813-18, paras. 7, 106-16. 24 Id. at 12775, para. 22. 25 2015 ICS Order, 30 FCC Rcd at 12790, para. 52 & n.170. The Commission did not include site commission payments in its permanent rate caps finding these payments were not costs reasonably related to the provision of inmate calling services. See 2015 ICS Order, 30 FCC Rcd at 12818-19, paras. 117-18; see also 2013 ICS Order, 28 FCC Rcd at 14124-25, paras. 33-34 (describing site commissions as  payments made from [inmate calling services] providers to correctional facilities and related state authorities and recognizing that such payments  can take the form of a percentage of gross revenue, a signing bonus, a monthly fixed amount, yearly fixed amount, or in-kind contributions ); Implementation of Pay Telephone Reclassification & Compensation Provisions of the Telecommunications Act of 1996, CC Docket No. 96-128, Order on Remand and Notice of Proposed Rulemaking, 17 FCC Rcd 3248, 3262, para. 38 (2002) (2002 Pay Telephone Order) (describing site commissions as  location rents that are negotiable by contract with the facility owners and represent an apportionment of profits between the facility owners and the providers of the inmate payphone service ). 26 2015 ICS Order, 30 FCC Rcd at 12769, 12771, paras. 9, 11; see also Wireline Competition Bureau Addresses Applicable Rates for Inmate Calling Services and Effective Dates for Provisions of the Inmate Calling Services Second Report and Order, WC Docket No. 12-375, Public Notice, 31 FCC Rcd 2026, 2026-28 (WCB 2016). 6 Federal Communications Commission FCCCIRC2105-01 identify trends in the market and form the basis for further reform as well as an annual filing obligation requiring providers to report information on their current operations, including their interstate, intrastate, and international rates as well as their ancillary service charges.27 15. In the 2016 ICS Reconsideration Order, the Commission reconsidered its decision to entirely exclude site commission payments from its 2015 permanent rate caps.28 The Commission increased those permanent rate caps to account for claims that certain correctional facility costs reflected in site commission payments are directly and reasonably related to the provision of inmate calling services.29 The Commission set the revised rate caps at $0.13 per minute for prisons; $0.19 per minute for jails with average daily populations of 1,000 or more; $0.21 per minute for jails with average daily populations of 350 to 999; and $0.31 per minute for jails with average daily populations of less than 350.30 C. Judicial Actions 16. In January 2014, in response to providers petitions for review of the 2013 ICS Order, the D.C. Circuit stayed the application of certain portions of the 2013 ICS Order but allowed the Commission s interim rate caps to remain in effect.31 Later that year, the court held the petitions for review in abeyance while the Commission proceeded to set permanent rates.32 In March 2016, in response to providers petitions for review of the 2015 ICS Order, the D.C. Circuit stayed the application of the 2015 ICS Order s permanent rate caps and ancillary service charge caps for Single Call Services33 while the appeal was pending.34 Later that month, the court stayed the application of the Commission s interim rate caps to intrastate inmate calling services.35 In November 2016, the D.C. Circuit also stayed the 2016 ICS Reconsideration Order, pending the outcome of the challenge to the 2015 ICS Order.36 17. In 2017, in GTL v. FCC, the D.C. Circuit vacated the permanent rate caps adopted in the 2015 ICS Order.37 First, the panel majority held that the Commission lacked the statutory authority to cap intrastate calling services rates.38 The court explained that the Commission s authority over intrastate calls is, except as otherwise provided by Congress, limited by section 2(b) of the Act and nothing in section 276 of the Act overcomes this limitation.39 In particular, section 276  merely directs the Commission to  ensure that all providers [of calling services to incarcerated people] are fairly 27 2015 ICS Order, 30 FCC Rcd at 12862, 12891-92, paras. 198, 266-67. 28 See Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Order on Reconsideration, 31 FCC Rcd 9300 (2016) (2016 ICS Reconsideration Order). 29 See generally id. at 9307, para. 12. 30 Id. 31 Securus Techs., Inc. v. FCC, No. 13-1280, 2014 U.S. App. LEXIS 13669, at *3 (D.C. Cir. Jan. 13, 2014). 32 GTL v. FCC, 866 F.3d at 405 (citing Securus Techs., Inc. v. FCC, No. 13-1280, 2014 U.S. App. LEXIS 25157, at *3 (D.C. Cir. Dec. 16, 2014)). 33 Single-Call Services mean  billing arrangements whereby an Inmate s collect calls are billed through a third party on a per-call basis, where the called party does not have an account with the Provider of Inmate Calling Services or does not want to establish an account. 47 CFR § 64.6000(a)(2). 34 GTL v. FCC, 866 F.3d at 405 (citing GTL v. FCC, No. 15-1461 (D.C. Cir. Mar. 7, 2016)). 35 Id. at 405-06 (citing GTL v. FCC, No. 15-1461 (D.C. Cir. Mar. 23, 2016)). 36 Id. at 406 (citing Securus Techs., Inc. v. FCC, No. 16-1321, 2016 U.S. App. LEXIS 24370, at *4 (D.C. Cir. Nov. 2, 2016)). 37 Id.at 402, 415. 38 Id. at 408-12. 39 See GTL v. FCC, 866 F.3d at 409-12. 7 Federal Communications Commission FCCCIRC2105-01 compensated for their inter- and intrastate calls, 40 and it  is not a  general grant of jurisdiction over intrastate ratemaking. 41 The court noted that it  need not decide the precise parameters of the Commission s authority under § 276. 42 18. Second, the D.C. Circuit concluded that the  Commission s categorical exclusion of site commissions43 from the calculus used to set [inmate calling services] rate caps defie[d] reasoned decision making because site commissions obviously are costs of doing business incurred by [inmate calling services] providers. 44 The court noted that some site commissions were  mandated by state statute, while others were  required by state correctional institutions and were thus also a  condition of doing business. 45 The court directed the Commission to  assess on remand which portions of site commissions might be directly related to the provision of [inmate calling services] and therefore legitimate, and which are not. 46 The court did not reach the providers remaining arguments  that the exclusion of site commissions denies [them] fair compensation under [section] 276 and violates the Takings Clause of the Constitution because it forces providers to provide services below cost. Instead, the court stated that the Commission should address these issues on remand when revisiting the categorical exclusion of site commissions.47 19. Third, the D.C. Circuit held that the Commission s use of industry-wide averages in setting rate caps was arbitrary and capricious because it lacked justification in the record and was not supported by reasoned decision making.48 More specifically, the court found the Commission s use of a weighted average per-minute cost to be  patently unreasonable given that such an approach made calls with above-average costs unprofitable and thus did  not fulfill the mandate of § 276 that  each and every  call be fairly compensated.49 Additionally, the court found that the 2015 ICS Order  advance[d] an efficiency argument that the larger providers can become profitable under the rate caps if they operate more efficiently based on data from the two smallest firms, which  represent[ed] less than one percent of the industry, and that the Order did not account for conflicting record data.50 The court therefore vacated this portion of the 2015 ICS Order.51 40 Id. at 409 (quoting 47 U.S.C. § 276(b)(1)(A)). 41 Id. at 412 (internal citation omitted). 42 Id. 43 See 47 CFR § 64.6000 (defining site commissions as  any form of monetary payment, in-kind payment, gift, exchange of services or goods, fee, technology allowance, or product that a Provider of Inmate Calling Services or affiliate of a Provider of Inmate Calling Services may pay, give, donate, or otherwise provide to an entity that operates a correctional institution, an entity with which the Provider of Inmate Calling Services enters into an agreement to provide Inmate Calling Services, a governmental agency that oversees a correctional facility, the city, county, or state where a facility is located, or an agent of any such facility ). 44 GTL v. FCC, 866 F.3d at 413. 45 Id. 46 Id. at 414. 47 GTL v. FCC, 866 F.3d at 414. Judge Pillard dissented from this view, noting that site commissions are not legitimate simply because a state demands them. Id. at 424 (Pillard, J., dissenting). 48 GTL v. FCC, 866 F.3d at 402, 415. Judge Pillard also dissented on this point, noting that the Commission has  wide discretion under section 201 of the Act to decide  which costs to take into account and to use industry-wide averages that do not necessarily compensate  each and every call. Id. at 424-25 (Pillard, J., dissenting). 49 GTL v. FCC, 866 F.3d at 414 (internal citation omitted). 50 Id. at 415 (internal citation omitted). 51 Id. at 417. 8 Federal Communications Commission FCCCIRC2105-01 20. Finally, the court remanded the ancillary service charge caps.52 The court held that the Commission  had no authority to impose ancillary fee caps with respect to intrastate calls. 53 Because the court could not  discern from the record whether ancillary fees can be segregated between interstate and intrastate calls, it remanded the issue so the Commission could determine whether it could segregate ancillary fee caps on interstate calls (which are permissible) and on intrastate calls (which are impermissible).54 The court also vacated the video visitation annual reporting requirements adopted in the 2015 ICS Order.55 21. In December 2017, after it issued the GTL v. FCC opinion, the D.C. Circuit in Securus v. FCC ordered the 2016 ICS Reconsideration Order  summarily vacated insofar as it purports to set rate caps on inmate calling service because the revised rate caps in that 2016 Order were  premised on the same legal framework and mathematical methodology rejected by the court in GTL v. FCC.56 The court remanded  the remaining provisions of that Order to the Commission  for further consideration . . . in light of the disposition of this case and other related cases. 57 As a result of the D.C. Circuit s decisions in GTL and Securus, the interim rate caps that the Commission adopted in 2013 ($0.21 per minute for debit/prepaid calls and $0.25 per minute for collect calls) remain in effect for interstate inmate calling services calls. D. 2020 Rates and Charges Reform Efforts 22. 2020 ICS Order on Remand and Notice. In February 2020, the Wireline Competition Bureau (Bureau or WCB) issued a public notice seeking to refresh the record on ancillary service charges in light of the D.C. Circuit s remand in GTL v. FCC.58 In the Ancillary Services Refresh Public Notice, the Bureau sought comment on  whether each permitted [inmate calling services] ancillary service charge may be segregated between interstate and intrastate calls and, if so, how. 59 The Bureau also defined jurisdictionally mixed services as   [s]ervices that are capable of communications both between intrastate end points and between interstate end points  and sought comment on, among other issues, how the Commission should proceed if any permitted ancillary service is  jurisdictionally mixed and cannot be segregated between interstate and intrastate calls.60 23. In August 2020, the Commission adopted the 2020 ICS Order on Remand and 2020 ICS 52 GTL v. FCC, 866 F.3d at 402, 415. The D.C. Circuit held that  the Order s imposition of ancillary fee caps in connection with interstate calls is justified given the Commission s  plenary authority to regulate interstate rates under § 201(b), including  practices . . . for and in connection with interstate calls. Id. at 415. 53 GTL v. FCC, 866 F.3d at 415. 54 Id. 55 Id. at 402. 56 Securus Techs., Inc. v. FCC, No. 16-1321, 2017 U.S. App. LEXIS 26360, at *4-5 (D.C. Cir. Dec. 21, 2017) (2017 Securus). 57 Id. at *5. 58 Wireline Competition Bureau Seeks to Refresh the Record on Ancillary Service Charges Related to Inmate Calling Services, WC Docket No. 12-375, Public Notice, 35 FCC Rcd 189, 189 (WCB 2020) (Ancillary Services Refresh Public Notice). This Public Notice was published in the Federal Register. FCC, Wireline Competition Bureau Seeks to Refresh the Record on Ancillary Service Charges Related to Inmate Calling Services, 85 Fed. Reg. 9444 (Feb. 19, 2020). 59 Ancillary Services Refresh Public Notice, 35 FCC Rcd at 190. The Bureau also sought comment on any steps the Commission should take to ensure, consistent with the D.C. Circuit s opinion, that providers of interstate inmate calling services do not circumvent or frustrate the Commission s ancillary service charge rules. Ancillary Services Refresh Public Notice, 35 FCC Rcd at 191. 60 Id. at 190. 9 Federal Communications Commission FCCCIRC2105-01 Notice.61 The Commission responded to the court s remands and took action to comprehensively reform inmate calling services rates and charges.62 First, the Commission addressed the D.C. Circuit s directive that the Commission consider whether ancillary service charges separate fees that are not included in the per-minute rates assessed for individual inmate calling services calls can be segregated into interstate and intrastate components for the purpose of excluding the intrastate components from the reach of our rules.63 The Commission found that ancillary service charges generally are jurisdictionally mixed64 and cannot be practicably segregated between the interstate and intrastate jurisdictions except in the limited number of cases where, at the time a charge is imposed and the consumer accepts the charge, the call to which the service is ancillary is clearly an intrastate call.65 As a result, the Commission concluded that inmate calling services providers are generally prohibited from imposing any ancillary service charges other than those permitted by the Commission s rules and providers are generally prohibited from imposing charges in excess of our applicable ancillary service fee caps.66 24. Second, the Commission proposed rate reform of the inmate calling services within its jurisdiction.67 As a result of the D.C. Circuit s decisions, the interim interstate rate caps of $0.21 per minute for debit and prepaid calls and $0.25 per minute for collect calls that the Commission adopted in 2013 remain in effect today.68 Commission staff performed extensive analysis of the data it collected in the Second Mandatory Data Collection69 as well as the data in the April 1, 2020, annual reports. Based on 61 Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Report and Order on Remand and Fourth Further Notice of Proposed Rulemaking, 35 FCC Rcd 8485 (2020) (2020 ICS Order on Remand or August 2020 ICS Notice or 2020 ICS Notice). 62 2020 ICS Order on Remand, 35 FCC Rcd at 8485, para. 2. 63 GTL v. FCC, 866 F.3d at 415. 64 Ancillary Services Refresh Public Notice, 35 FCC Rcd at 190 (quoting Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, WC Docket No. 03-211, Memorandum Opinion and Order, 19 FCC Rcd 22404, 22413, para. 17 (2004) (Vonage Order)). 65 2020 ICS Order on Remand, 35 FCC Rcd at 8495, para. 28. 66 Id. 67 Id. at 8486, para. 3. 68 2013 ICS Order, 28 FCC Rcd at 14111, para. 5 (adopting interim rate caps); 2015 ICS Order, 30 FCC Rcd at 12768, 12813-18, paras. 7, 106-16 (adopting permanent rate caps); 2016 ICS Reconsideration Order, 31 FCC Rcd at 9307, para. 12 (revising permanent rate caps); GTL v. FCC, 866 F.3d at 415 (vacating permanent rate caps); 2017 Securus, 2017 U.S. App. LEXIS 26360, at *4-5 (vacating revised rate caps). 69 In the 2015 ICS Order, the Commission directed that the Second Mandatory Data Collection be conducted  two years from publication of Office of Management and Budget (OMB) approval of the information collection. 2015 ICS Order, 30 FCC Rcd at 12862, para. 198. The Commission received OMB approval in January 2017, and Federal Register publication occurred on March 1, 2017. FCC, Rates for Interstate Inmate Calling Services; Correction, 82 Fed. Reg. 12922 (Mar. 8, 2017), correcting FCC, Rates for Interstate Inmate Calling Services, 82 Fed. Reg. 12182 (Mar. 1, 2017). Accordingly, on March 1, 2019, inmate calling services providers submitted their responses to the Second Mandatory Data Collection. See Wireline Competition Bureau Reminds Providers of Inmate Calling Services of the March 1, 2019 Deadline for Data Collection Responses, WC Docket No. 12-375, Public Notice, 34 FCC Rcd 515 (WCB 2019) (2019 Data Collection Public Notice). WCB and Office of Economics and Analytics (OEA) undertook a comprehensive analysis of the Second Mandatory Data Collection responses, and conducted multiple follow-up discussions with providers to supplement and clarify their responses, in order to conduct the data analysis upon which the proposals in the August 2020 ICS Notice are based. See, e.g., Letter from Chérie R. Kiser, Counsel for GTL, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 (filed May 19, 2020) (GTL Amended Description and Justification) (amending GTL s Second Mandatory Data Collection response  to address questions raised by Commission staff ); Letter from Sharon R. Warren, Consultant to Crown Correctional Telephone, Inc., to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 (filed May 5, 2020); Letter from Sharon R. Warren, Consultant to Network Communications International Corp., to Marlene H. Dortch, (continued& .) 10 Federal Communications Commission FCCCIRC2105-01 that analysis, the Commission proposed to lower the interstate rate caps to $0.14 per minute for debit, prepaid, and collect calls from prisons and $0.16 per minute for debit, prepaid, and collect calls from jails. In so doing, the Commission used a methodology that addresses the flaws underlying the Commission s 2015 and 2016 rate caps (which used industry-wide averages to set rate caps) and that is consistent with the mandate in section 276 of the Act that inmate calling services providers be fairly compensated for each and every completed interstate call.70 The Commission also proposed to adopt a waiver process that would permit providers to seek waivers of the proposed rate caps on a facility-by-facility or contract basis if the rate caps would prevent a provider from recovering the costs of providing interstate inmate calling services at a facility or facilities covered by a contract.71 The 2020 ICS Notice also proposed  to adopt a rate cap formula for international inmate calling services calls that permits a provider to charge a rate up to the sum of the inmate calling services provider s per-minute interstate rate cap for that correctional facility plus the amount that the provider must pay its underlying international service provider for that call on a per-minute basis (without a markup). 72 The Commission explained that this cap  would enable inmate calling services providers to account for widely varying costs, be consistent with the  just and reasonable standard in section 201(b) of the Act, and comport with the  fair compensation provision of section 276 of the Act.73 25. In response to the 2020 ICS Notice, the Commission received over 90 comments and reply comments and 9 economic studies. Filers included providers of calling services to incarcerated people, public interest groups and advocates for the incarcerated, telecommunications companies, organizations representing individuals who are deaf or hard of hearing, and providers of telecommunications relay service. 26. Intrastate Rate Reform Efforts. By April 1 of each year, inmate calling services providers file annual reports with the Commission that include rates, ancillary service charges, and site commissions. In an effort to compare interstate inmate calling services rate levels with intrastate rate levels, Commission staff analyzed the intrastate rate data submitted as part of the providers April 1, 2020, annual reports. Commission staff s review revealed that intrastate rates for debit or prepaid calls exceed interstate rates in 45 states, with 33 states allowing rates that are at least double the Commission s interstate cap and 27 states allowing  first-minute charges that can be more than 25 times that of the first minute of an interstate call.74 For example, one provider reported a first-minute intrastate rate of $5.34 and additional per-minute intrastate rates of $1.39 while reporting the per-minute interstate rate of $0.21 for the same correctional facility. Similarly, another provider reported a first-minute intrastate rate of (Continued from previous page) Secretary, FCC, WC Docket No. 12-375 (filed May 5, 2020) (explaining Network Communications International Corp. s amendment to its Mandatory Data Collection responses in response to questions raised by Commission staff); Letter from Marcus W. Trathen, Counsel to Pay Tel Communications, Inc., to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 (filed Apr. 28, 2020) (Pay Tel Amended and Supplemental Second Mandatory Data Collection Response) (amending Pay Tel s Second Mandatory Data Collection response and noting questions raised by Commission staff). 70 The Commission s methodology included a proposed 10% reduction in GTL s costs to account, in part, for seemingly substantially overstated costs. 2020 ICS Notice, 35 FCC Rcd at 8517-20, paras. 92-98. 71 2020 ICS Notice, 35 FCC Rcd at 8523-24, paras. 108-11. 72 Id. at 8530, para. 124. 73 2020 ICS Notice, 35 FCC Rcd at 8530, 8532, paras. 124, 130. 74 Letter from Ajit V. Pai, Chairman, FCC, to Brandon Presley, President, NARUC (July 20, 2020), https://docs.fcc.gov/public/attachments/DOC-365619A1.pdf; see also Letter from Brandon Presley, President, NARUC, and Ajit V. Pai, Chairman, FCC, to The Honorable Andrew Cuomo, Governor, State of New York, and Chair, National Governors Association, and The Honorable Asa Hutchinson, Governor, State of Arkansas, and Vice Chair, National Governors Association (Sept. 22, 2020), https://docs.fcc.gov/public/attachments/DOC- 367049A1.pdf (Sept. 22, 2020, Letter to National Governors Association). 11 Federal Communications Commission FCCCIRC2105-01 $6.50 and an additional per-minute intrastate rate of $1.25 while reporting the per-minute interstate rate of $0.25 for the same correctional facility. Further, Commission staff identified instances in which a 15- minute intrastate debit or prepaid call costs as much as $24.80 almost seven times more than the maximum $3.15 that an interstate call of the same duration would cost. 27. In light of these data, in September 2020, former Chairman Pai and Brandon Presley, then president of the National Association of Regulatory Utility Commissioners (NARUC), jointly sent a letter to the co-chairs of the National Governors Association urging state governments to take action to reduce intrastate rates and related fees.75 At least one state has enacted a law to reduce intrastate inmate calling services rates and fees,76 at least one state commenced a regulatory proceeding aimed at reducing intrastate inmate calling services rates and fees,77 and several states are considering legislation.78 III. THIRD REPORT AND ORDER 28. In this Third Report and Order, we take several important steps to provide significant financial relief to incarcerated people and their families, all substantially consistent with the August 2020 ICS Notice, except where the record evidence requires us to take a more conservative approach. We take these actions now in light of the exigent circumstances facing incarcerated people as they continue to deal with hardships related to the pandemic. First, we reform per-minute inmate calling services rates on an interim basis, capping interstate rates at $0.12 per minute for prisons and $0.14 per minute for larger jails. Second, we reform the current treatment of site commissions by adopting two distinct site commission- related rate components reflecting the different types of site commissions: site commission payments that providers are obligated to pay under formally codified laws or regulations; and payments that providers agree, by contract, to make. Third, we cap international calling rates for the first time. These and other reforms adopted here will enable consumers incarcerated people and their families to obtain essential communications capability at just and reasonable rates while we remain faithful to our obligations under section 276 of the Act. 29. The reforms we adopt today reflect our findings, as detailed below, regarding the monopoly power that each calling service provider has over the individual correctional facilities it serves; the numerous negative impacts the providers exercise of that market power has had on incarcerated people, their families and communities, and society as a whole; and the substantial record evidence of the need for at least interim reforms to our rate caps and related regulations. In these circumstances, we exercise our authority under section 201(b) of the Act to  prescribe such rules and regulations as may be necessary to ensure that  [a]ll charges [and] practices . . . for and in connection with [interstate and 75 Sept. 22, 2020, Letter to National Governors Association. 76 An Act Concerning the Fee Charged for a Phone Call by an Inmate in a Correctional Facility; And for Other Purposes, 2021 Arkansas Laws Act 702 (S.B. 550) (Apr. 13, 2021) (capping the cost per minute for inmate calling services calls and limiting the types of permitted ancillary services that providers may charge). 77 See, e.g., Public Utilities Commission of the State of California, Order Instituting Rulemaking to Consider Regulating Telecommunications Services Used by Incarcerated People, Rulemaking 20-10-002 (Oct. 6, 2020). 78 See, e.g., S.B. 387, 81st (2021) Sess. (Nev. 2021) (directing the Public Utilities Commission of Nevada to regulate suppliers of inmate calling services and adopt rate caps and certain limitations on charges for inmate calling services); H.B. 1201, 73rd Gen. Assemb., 1st Reg. Sess. (Colo. 2021) (requiring the Public Utilities Commission to establish maximum per-minute rates for telephone calls made to or from correctional facilities; S.B. 303, 67th Reg. Sess. (Mont. 2021) (decreasing the cap on intrastate fees to $0.05 per minute from the current $0.10 per minute); H.B. 219, 2021 Gen. Sess. (Utah 2021) (imposing limits on the rate an incarcerated person may be charged for telephone use which must be lesser of the corresponding rate set by the FCC and the rate established by the Utah Department of Corrections); S.B. 1776, 55th Leg., 1st Reg. Sess. (Ariz. 2021) (prohibiting the Department of Corrections from entering a contract or agreement for inmate telephone services that allows the department to receive excess revenue); H.B. 1484, Ind. Gen. Ass., 2021 Sess. (Ind. 2021) (requiring intrastate inmate calling services rates to adhere to the caps for comparable interstate rates set by the FCC). 12 Federal Communications Commission FCCCIRC2105-01 international] communication service by wire or radio are  just and reasonable.  79 This provision provides the Commission with ample authority to regulate the interstate and international rates and the practices of providers of calling services for incarcerated people, including setting interim rate caps for interstate and international calls given that providers have monopoly power in the facilities they serve.80 30. Although the record makes clear that the current interim rate caps for calling service to prisons and larger jails are unreasonably high, limitations in the reported data  arising in significant part from shortcomings in certain providers responses to the Second Mandatory Data Collection make us wary of establishing permanent rate caps based on the current record. Nor does the record allow us to reasonably set permanent or even new interim interstate rate caps for jails with less than 1,000 average daily population, adjust our caps on ancillary service fees beyond the new cap on fees for single-call services and third-party-financial transaction fees, or ensure that incarcerated people with disabilities have any greater access to functionally equivalent communications capabilities than they have today. We therefore institute a Mandatory Data Collection to provide the Commission and interested parties with more complete and accurate data regarding the costs of providing inmate calling services. We anticipate that those data, in combination with the record developed in response to the attached Fifth Further Notice of Proposed Rulemaking, will enable us to take these important steps in the near future. We also delegate authority to the Consumer and Governmental Affairs Bureau (CGB) to undertake a separate data collection related to service providers costs and other key aspects of their provision of telecommunications relay services (TRS) and other assistive technologies if necessary to help us resolve the critically important disability access issues we explore in the Further Notice. A. Unique Marketplace for Telephone Services Provided to Incarcerated People 31. The Commission has previously determined that providers of telephone services to incarcerated people have monopoly power in the facilities they serve.81 We reaffirm this long-established finding, one that applies equally not only to the rates and charges for calling services provided to incarcerated people, including ancillary services, but also to providers practices associated with their provision of calling services. 32. The record demonstrates, as the Commission previously found and reiterated in the August 2020 ICS Notice, that incarcerated people have no choice in the selection of their calling services provider.82 The authorities responsible for prisons or jails typically negotiate with the providers of inmate calling services and make their selection without input from the incarcerated people who will use the 79 47 U.S.C. § 201(b). 80 The Commission has previously exerted jurisdiction over rates where it found it necessary to constrain monopoly power exercised by competitive LECs. See Access Charge Reform et al., CC Docket No. 96-262, Eighth Report and Order and Fifth Order on Reconsideration, 19 FCC Rcd 9108, 9162, para. 119 (2004) ( [A]n [interexchange carrier] may have no choice but to accept traffic from an intermediate competitive LEC chosen by the originating or terminating carrier and it is necessary to constrain the ability of competitive LECs to exercise this monopoly power. ). 81 See 2002 Pay Telephone Order, 17 FCC Rcd at 3252-53, para. 10; see also GTL v. FCC, 866 F.3d at 404 ( Winning [inmate calling services] providers thus operate locational monopolies with a captive consumer base of inmates . . . . ). 82 See, e.g., 2002 Pay Telephone Order, 17 FCC Rcd at 3253, para. 12 (finding that  neither the inmates who initiate the call nor the individuals who bear the cost of inmate calls most often the inmates families have a choice among providers ); 2020 ICS Notice, 35 FCC Rcd at 8520-21, para. 100 (acknowledging that incarcerated people are unable to choose an inmate calling services provider  other than the provider the correctional facility selects ); see also, e.g., National Association of State Utility Consumer Advocates Comments at 1 (NASUCA Comments); Wright Petitioners et al. Comments (Public Interest Parties Comments) Appx. A, Coleman Bazelon et al., The Brattle Group, Brattle Report at 8 (Public Interest Parties Brattle Report). For these consumers, the relevant market is the incarcerating facility. 13 Federal Communications Commission FCCCIRC2105-01 service.83 Once the facility makes its choice often resulting in contracts with providers lasting several years into the future incarcerated people in such facilities have no means to switch to another provider, even if the chosen provider raises rates, imposes additional fees, adopts unreasonable terms and conditions for use of the service, or offers inferior service.84 On the contrary, correctional authorities exercise near total control over how incarcerated people are able to communicate with the outside world.85 This control extends to control over visitation rights, the use of traditional mail and courier services, and the ability to use any form of electronic communication.86 Indeed, the only way an incarcerated person may legally communicate with the outside world is with the explicit permission of the correctional authority. Therefore, no competitive forces within the facility constrain providers from charging rates that far exceed the costs such providers incur in offering service.87 33. Some commenters argue the market for inmate calling services is competitive because 83 Prison Legal News, The Price to Call Home: State-Sanctioned Monopolization in the Prison Phone Industry (Oct. 2012), https://www.prisonlegalnews.org/news/2012/oct/15/the-price-to-call-home-state-sanctioned-monopolization- in-the-prison-phone-industry/ (explaining that a  government entity has an incentive to select the highest bidder and that the actual consumers have no input in the bidding process ); Prison Phone Justice, About (Mar. 18, 2019), https://www.prisonphonejustice.org/about/ ( Prisoners quite literally a captive market are forced to rely upon monopolistic, predatory operators chosen for them by state agencies. ) (emphasis omitted). 84 ASL Services Holdings, LLC dba GlobalVRS Reply at 2-3 (GlobalVRS Reply) (acknowledging that one of the restrictions on incarcerated people is their inability to choose a service provider); Human Rights Defense Center Comments at 2 (asserting that the inmate calling services providers  exploit their captive market ); 2020 ICS Notice, 35 FCC Rcd at 8521, para. 100 (explaining that by requiring the incarcerated person to use the provider selected by the correctional facility, the facility effectively creates a monopoly for inmate calling services within a prison or jail); see also GTL v. FCC, 866 F.3d at 404; Securus Technologies, LLC, Comments at 27 (Securus Comments) (recognizing that  correctional facilities generally choose a single [inmate calling services provider] for each facility ). 85 See Pay Tel Communications, Inc. Reply (Pay Tel Reply) Exh. A, Letter from Marcus W. Trathen, Counsel to Pay Tel Communications, Inc., to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, Exh. B at 6-7 (filed July 3, 2013) (Pay Tel July 3, 2013, Ex Parte) (describing the limits on the pre-approved numbers that the incarcerated person may call and on the number of calls the person may make); GTL Comments at 33 (acknowledging  correctional facility-imposed limits on access to telephones and associated limits on call lengths ); Securus Comments at 9 (describing a service for correctional facilities to use to verify that the number being called is in a  Personal Allowed Number List and to enforce time limits). 86 See, e.g., 18 U.S.C. § 1791 (pursuant to the Cell Phone Contraband Act of 2010, it is a crime for someone in a federal prison to possess a cell phone); GlobalVRS Reply at 3 (acknowledging that one of the restrictions on incarcerated people is limited access to real time text); Federal Bureau of Prisons, Stay in Touch, https://www.bop.gov/inmates/communications.jsp (last visited Feb. 9, 2021) (restricting whom the inmate may email and how long the messages may be, precluding attachments, and specifying that the messages will be screened for content, while also requiring the incarcerated person to use a service that does not provide access to the Internet but relays emails to and from the Internet); Contra Costa County, California, Outgoing Inmate Mail, https://www.contracosta.ca.gov/DocumentCenter/View/379/OUTGOING-INMATE-MAIL (last visited Feb. 9, 2021) (explaining that indigent incarceratd people may send no more than two non-legal letters per week); Contra Costa County, California, Visiting Rules and Regulations, https://www.contracosta.ca.gov/DocumentCenter/View/ 382/Visting-Rules-and-Regulations-2?bidId= (last visited Feb. 9, 2021) (listing restrictions on visitation including requiring the visitor to follow a strict dress code and to not bring a purse or cell phone, and stating that the individual facility determines the number of visitors allowed at one time); Federal Bureau of Prisons, Correspondence at 2 (Apr. 5, 2011) ( The Warden or designee must give prior approval for an inmate to receive or send a package. ), https://www.bop.gov/policy/progstat/5265_014.pdf (referenced in Federal Bureau of Prisons, Stay in Touch, https://www.bop.gov/inmates/communications.jsp (last visited Apr. 26, 2021)). 87 See 2020 ICS Notice, 35 FCC Rcd at 8520-21, para. 100; 2016 ICS Reconsideration Order, 31 FCC Rcd at 9304, para. 7; see also United States v. Microsoft Corp., 253 F.3d 34, 51 (D.C. Cir. 2001) (United States v. Microsoft) (explaining that direct evidence of monopoly power is evidence that a firm  can profitably raise prices substantially above the competitive level ); cf. AT&T Corp. v. FCC, 292 F.3d 808, 809 (D.C. Cir. 2002) (AT&T v. FCC). 14 Federal Communications Commission FCCCIRC2105-01 providers of those services bid against each other to win contracts with correctional facilities.88 GTL, in particular, makes much of this claim.89 Because correctional officials typically allow only one provider to serve any given facility, however, there are no competitive constraints on a provider s rates once it has entered into a contract to serve a particular facility.90 The Commission has observed that  because the bidder who charges the highest rates can afford to offer the confinement facilities the largest location commissions, the competitive bidding process may result in higher rates. 91 Thus, even if there is  competition in the bidding market as some providers assert, it is not the type of competition the Commission recognizes as having an ability to  exert downward pressure on rates for consumers. 92 B. Impact on Consumers and Society 34. The Commission has long recognized the far-ranging consequences that high calling rates inflict on incarcerated people, their families, and society as a whole.93 The record in this proceeding confirms that excessive telephone rates continue to impose an unreasonable burden on the ability of incarcerated people one of the most economically disadvantaged segments of our population to maintain vital connections with the outside world.94 And reduced prison visitation as a result of the 88 See, e.g., Securus Comments Attach. C, Harold Furchtgott-Roth, Report on the Economic Aspects of the Federal Communications Commission s Report and Order on Remand and Fourth Further Notice of Proposed Rulemaking in WC Docket 12-375, at 12 (Securus Furchtgott-Roth Report); GTL Reply Attach., Paul E. Godek, Economists Incorporated, Supplemental Report in Support of Comments of Global Tel*Link Corporation Regarding the FCC s Report and Order on Remand and Fourth Further Notice of Proposed Rulemaking at 6-7 (GTL Godek Reply Report); Pay Tel Reply Attach., Reply Report of Don J. Wood at 6 (Pay Tel Wood Reply Report). 89 GTL Comments Attach., Paul E. Godek, Economists Incorporated, Report in Support of Comments of GTL Regarding the FCC s Report and Order on Remand and Fourth Further Notice of Proposed Rulemaking at 10 (GTL Godek Report); Letter from Chérie R. Kiser, Counsel for GTL and Its Subsidiaries, Cahill Gordon & Reindel LLP, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, Attach., Paul E. Godek, Economists Incorporated, Second Supplemental Report in Support of Comments of Global Tel*Link Corporation Regarding the FCC s Report and Order on Remand and Fourth Further Notice of Proposed Rulemaking at 3, 7 (filed Apr. 26, 2021) (GTL Apr. 26, 2021, Ex Parte Godek Report).. 90 Some experts representing inmate calling services providers recognize this to be the case. See Pay Tel Comments Attach., Expert Report of Don J. Wood at 6 n.7 (Pay Tel Wood Report). 91 2002 Pay Telephone Order, 17 FCC Rcd at 3253, para. 12. 92 Id.; 2013 ICS Order, 28 FCC Rcd at 14129, para. 41 (reaffirming finding); see also AT&T v. FCC, 292 F.3d at 809 (citation omitted) (recognizing that competitive local exchange carriers (LECs)  possess a  series of bottleneck monopolies over access to each individual end user  even though each competitive LEC has a  small market share ). 93 E.g., 2013 ICS Order, 28 FCC Rcd at 14130, para. 42 (finding excessive rates  impose an unreasonable burden on families of incarcerated people and discourage communication between incarcerated people and their support network); 2020 ICS Order on Remand, 35 FCC Rcd at 8487, para. 5 ( Unconscionably high [inmate calling services] rates inflict significant economic, social, and emotional harms impacting some of the most vulnerable members of society. ); 2014 ICS Notice, 29 FCC Rcd at 13181, para. 23 (acknowledging that the level of site commission payments  has potentially life-altering impacts on prisoners and their families ). 94 MediaJustice et al. Comments at 2 (MediaJustice Comments) ( The economic burden [of inmate calling services] on already low-income people is intense . . . . ); Prisoners Legal Services et al. Comments at 3 (Prisoners Legal Services Comments) (arguing that even with the proposed rate reductions, inmate calling services charges  will continue to place a tremendous burden on low-income parents and children or spouses who need to speak several times a day, especially during the pandemic (emphasis in original)); Multicultural Media, Telecom and Internet Council et al. Reply at 2 (Multicultural Media et al. Reply) (explaining that  a disproportionate number of incarcerated people are racial minorities from low-income families ); Letter from Jesse Hahnel, Executive Director, National Center for Youth Law, to Marlene Dortch, Secretary, FCC, WC Docket No. 12-375, at 2 (filed Apr. 21, 2021) (National Center for Youth Law Apr. 21, 2021, Ex Parte) (emphasizing the importance of calling services for (continued& .) 15 Federal Communications Commission FCCCIRC2105-01 COVID-19 pandemic has made these consequences even more dire, exacerbating the urgent need for inmate calling rate reform.95 35. A national survey identified the cost of phone calls as the primary barrier preventing incarcerated people from keeping in touch with loved ones.96 As one commenter sums it up:  A sentence to jail or prison should not include the additional punishment of being cut off from family, friends, legal assistance, and community resources. 97 Studies confirm that incarcerated people who have regular contact with family members are more likely to succeed after release and have lower recidivism rates because they are able to maintain vital support networks.98 36. The high cost of calling services causes damaging consequences not only for incarcerated people but also for their families. The record suggests that as many as 34% of families go into debt to keep in touch with an incarcerated family member.99 Some low-income families are forced  to choose between calling an incarcerated family member and buying essential food and medicines. 100 Rate reform will reduce these financial burdens and also promote increased communication101 which preserves essential family ties, allowing incarcerated people  to parent their children and connect with their spouses, helping families stay intact, and decreasing the trauma suffered by children whose parents have been incarcerated.102 37. The benefits of lowering inmate calling services rates also ripple throughout communities and (Continued from previous page) incarcerated youth and explaining that the vast majority of incarcerated youth come from low-income families who are the least able to pay for these vital calls). 95 Human Rights Defense Center Comments at 2; Leadership Conference on Civil and Human Rights et al. Reply at 1 (Leadership Conference Reply). 96 San Francisco Financial Justice Project Comments at 1-2 (citation omitted) (Financial Justice Project Comments). 97 Verizon Comments at 3. 98 See, e.g., 2015 ICS Order, 30 FCC Rcd at 12766-67, para. 3 & n.13 (citing research and explaining that  family contact during incarceration reduces recidivism and allows inmates to be more present parents for the 2.7 million children who suffer when an incarcerated parent cannot afford to keep in touch ); Worth Rises, Request for Emergency Action and Relief, WC Docket No. 12-375, at 4 (filed Apr. 7, 2020), https://ecfsapi.fcc.gov/file/ 10407148512696/Worth%20Rises%20-%20Emergency%20Request%20(12-375).pdf (maintaining that  lack of communication [between incarcerated people and their families] disrupts the real connections needed for successful reentry into society ); Letter from Cheryl A. Leanza, Policy Advisor, United Church of Christ, OC Inc. et al., to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 2-3 (July 29, 2020) (Public Interest Parties July 29, 2020, Ex Parte) (explaining that  family contact has consistently been shown to lower recidivism ); National Center for Youth Law Apr. 21, 2021, Ex Parte at 2-3 (discussing the benefits of interactions with family members for incarcerated youth). 99 Ella Baker Center for Human Rights et al., Who Pays? The True Cost of Incarceration on Families at 16 (Sept. 2015), http://whopaysreport.org/who-pays-full-report/. 100 Multicultural Media et al. Reply at 3. 101 Financial Justice Project Comments at 1 (identifying a 41% increase in call volume overnight when San Francisco County made calls free); Worth Rises Comments at 11 (explaining that when New York City made calls from correctional facilities free in May 2019, the call volume increased by 40%). But see GTL Comments at ii (arguing that lower rates may not lead to an increase in call volume). 102 See Verizon Comments at 3; Prisoners Legal Services Comments at 1; Public Interest Parties Comments at 2; Public Interest Parties Reply at 2; Episcopal Church and United States Conference of Catholic Bishops Reply at 1 (Episcopal Church Reply); MediaJustice Comments at 1; Prisoners Legal Services Comments Attach. 1, Massachusetts Prison and Jail Phone Rates Reform Background Sheet at 1 (Prisoners Legal Services Massachusetts Background Sheet). 16 Federal Communications Commission FCCCIRC2105-01 society in other tangible and intangible ways.103 For example, making communications less costly and easier to use for incarcerated people promotes their ability to plan for housing, employment, and successful integration into communities once released from prison.104 In financial terms, increased communications helps reduce repeated incarceration, which benefits society by saving millions of dollars in incarceration-related costs annually.105 Additionally, the record shows that the ability to communicate regularly with families  reduces foster placement of children of incarcerated people, which result[s] in measurable savings to society of tens of millions of dollars per year. 106 38. The COVID-19 pandemic has intensified the need to reform inmate calling services rates. Even before the pandemic, it could be impractical, costly, and time-prohibitive for family members to make regular visits to those in prisons often located hundreds of miles away.107 But as a result of the pandemic, most jails and prisons have prohibited or severely limited in-person visitation.108 Thus, telephone calls have become even more of  an essential lifeline for connection  adding to the exigency and importance of the reforms that we adopt today.109 C. Interim Interstate Rate Cap Components 39. In the 2020 ICS Notice, the Commission proposed to adopt permanent interstate rate caps of $0.14 per minute for all calls from prisons and $0.16 per minute for all calls from jails.110 These proposed caps included an allowance of $0.02 per minute added to provider-related rate caps of $0.12 and $0.14 per minute, respectively, to account for the costs correctional facilities incur that are reasonably related to the provision of inmate calling services.111 The proposed rate caps generated extensive debate in the record, with providers contending that the available data do not justify any reduction in the existing interstate rate caps of $0.21 per minute for debit and prepaid calls, and public interest groups suggesting even lower rates than those the Commission proposed.112 40. After carefully considering the record, including data from the Second Mandatory Data Collection and commenting parties analyses of those data, and refining our analysis based on record feedback, we take the following actions. First, as proposed in the August 2020 Notice, we eliminate a separate rate cap for all collect calls. Second, we adopt new interim provider-related interstate rate caps of $0.12 per minute for calling services provided to incarcerated people in prisons and $0.14 per minute 103 Worth Rises Comments at 10; see Episcopal Church Reply at 2. 104 Prisoners Legal Services Massachusetts Background Sheet at 1. 105 2013 ICS Order, 28 FCC Rcd at 14130-31, para. 43. 106 Public Interest Parties Comments at 2. 107 Multicultural Media et al. Reply at 3. 108 Public Interest Parties Comments at 2. 109 See Episcopal Church Reply at 2; Worth Rises Reply at 1. 110 2020 ICS Order on Remand, 35 FCC Rcd at 8486, para. 3. 111 2020 ICS Notice, 35 FCC Rcd at 8520, para. 99. 112 See, e.g., GTL Comments at 4 (arguing that the existing rate cap system should be left in place); Pay Tel Comments at 15-19 (arguing that the Commission s rate cap proposal does not account for variances of costs incurred by providing inmate calling services at facilities of different sizes); Prisoners Legal Services Comments at 3 (advocating for lower interstate rate caps than the Commission proposed); Public Interest Parties Comments at 6-9 (recommending the Commission lower the proposed rate caps); Securus Comments at 49 (stating the proposed rate caps are insufficient to allow providers to recover all of their costs); Worth Rises Comments at 1, 4 (finding that the Commission s reliance on self-reported data has artificially inflated the proposed rate caps, and proposing rate caps be set to $0.05 for both jails and prisons). Although collect calls are subject to a separate rate cap of $0.25 per minute under the existing interim interstate caps, as discussed below, the parties agree that there is no longer a need to maintain this distinction. Infra Part III.C.1. 17 Federal Communications Commission FCCCIRC2105-01 for calling services provided to incarcerated people in larger jails, as proposed in the August 2020 Notice.113 We refrain from adopting new interim rate caps for jails with average daily populations below 1,000, which remain subject to the interstate total per-minute rate cap of $0.21. Next, we adopt new interim facility-related rate caps associated with site commission payments. Together, these rate cap components result in new lower total interstate rate caps that will remain interim in status, pending a further data collection which we also adopt today in order to facilitate our adoption of permanent interstate rate caps. 41. Consistent with the 2020 ICS Notice, the new interim interstate rate cap components will apply to all calls that a provider identifies as interstate as well as to all calls that the provider cannot definitively identify as intrastate, as determined through the application of the Commission s traditional end-to-end jurisdictional analysis, which we affirm in the companion Order on Reconsideration we adopt today.114 Under this analysis, the jurisdictional nature of a call  depends on the physical location of the endpoints of the call and not on whether the area code or NXX prefix of the telephone number, or the billing address of the credit card associated with the account, are associated with a particular state. 115 Thus, to the extent that a provider cannot determine that the physical endpoints of a call are within the same state, that provider must comply with our new interim interstate rate caps for that call. 1. Eliminating Separate Rate Caps for Collect Calls 42. Consistent with the proposal in the 2020 ICS Notice, we eliminate the separate interim rate cap that has applied to interstate collect calls since 2013.116 The record overwhelmingly supports this action, which recognizes the limited role that collect calls play in today s inmate calling services marketplace and the relatively small, if any, difference in cost between collect and non-collect inmate calling services calls. 43. Under the interim rate caps the Commission first adopted in 2013, interstate debit and prepaid calls are capped at $0.21 per minute, while interstate collect calls are capped at $0.25 per minute.117 In the 2015 ICS Order, the Commission adopted a two-year phasedown for collect calls, after which rate caps for those calls were to be the same as those of debit and prepaid calls.118 The Commission found that the number of collect calls had dropped significantly over the preceding few years and predicted that the number of collect calls  will most likely be at a nominal level in two years. 119 Although this phasedown 113 As we explain below, and in recognition of the concerns raised by various commenters, we do not establish new interim rate caps for jails having average daily populations below 1,000. Those facilities remain subject to the maximum total per-minute rate cap of $0.21. See 2013 ICS Order, 28 FCC Rcd at 14147, para. 73 (setting interim rate caps of $0.21 for debit and prepaid calling and of $0.25 for collect calls); infra Part III.C.1. 114 See 2020 ICS Notice, 35 FCC Rcd at 8510, para. 70; infra Part IV; see also GTL Comments at 14-15; Securus Comments at 39. Securus asks that we forbear from enforcing the end-to-end analysis reflected in the Enforcement Bureau s November 2020 Enforcement Advisory to per-minute interstate rates. See Securus Comments at 39; Enforcement Bureau Reminds Providers of Inmate Calling Services that They Are Responsible for Complying with the Commission s Rules Relating to Those Services, Enforcement Advisory, WC Docket No. 12-375, 35 FCC Rcd 12999 (EB 2020) (Enforcement Advisory). We decline to do so at this time. As we explain in the Order on Reconsideration, the end-to-end analysis is, and has been, the generally applicable jurisdictional standard for determining the jurisdiction of a telephone call in the absence of an express Commission determination that some other method is permissible. As the Commission has never expressly permitted another method of jurisdictional classification for inmate calling services calls, the end-to-end analysis continues to apply to those calls. See infra Part IV. 115 See, e.g., 2020 ICS Notice, 35 FCC Rcd at 8503, para. 53; Vonage Order, 19 FCC Rcd at 22413, para. 17. 116 See 2020 ICS Notice, 35 FCC Rcd at 8510, para. 72. 117 47 CFR § 64.6030. 118 See 2015 ICS Order, 30 FCC Rcd at 12805-08, paras. 84-92. 119 Id. at 12805-06, paras. 86-87, 89. 18 Federal Communications Commission FCCCIRC2105-01 was vacated by the D.C. Circuit in GTL as part of that court s larger vacatur of the 2015 ICS Order, the court did not criticize the Commission s phasedown of collect calls.120 44. In the 2020 ICS Notice, the Commission proposed to eliminate the distinct rate cap for collect calls, given  the absence of any data demonstrating a material difference in the costs of providing these different types of calls. 121 Commenters overwhelmingly support this proposal, with both providers and public interest groups agreeing that there is no longer any need for a separate rate cap for collect calls.122 Both Securus and GTL point out that collect call volumes continue to decline.123 And commenters agree that there are no longer significant cost differences between collect calls and debit or prepaid calls.124 Indeed, the record provides no support for a separate rate cap for collect calls, and comments make clear that eliminating the  collect-only rate cap will benefit all stakeholders by making it easier for providers to administer, and for consumers to understand, rate caps for interstate and international calls.125 45. We find that the lack of cost disparity in providing prepaid, debit, or collect calling services, coupled with the low and ever-diminishing demand for collect calls and the benefits to all stakeholders from having a single cap for all calls from a facility, support ending the distinction between prepaid, debit, and collect calling rates.126 We therefore eliminate the separate interim cap for interstate collect calls for jails with average daily populations below 1,000 that remain subject to the 2013 interim rate caps. As a result of this change, all interstate calls from jails with average daily populations below 1,000 will be subject to a single, uniform, interim rate cap of $0.21 per minute. All interstate calls from prisons and larger jails will be subject to the new uniform interim rate caps we adopt today for each type of facility, without regard to whether the interstate calls are collect, debit, or prepaid, as those terms are defined in our rules. 2. Setting a Threshold of 1,000 Average Daily Population for Larger Jails 46. We adopt an average daily population threshold of 1,000 or greater to differentiate larger jails from smaller jails and apply our new interim provider-related and facility-related rate caps to larger jails, while leaving jails with average daily populations below 1,000 subject to the existing total interim rate cap of $0.21 per minute for all interstate calls. This larger jail threshold is aligned with the approach the Commission adopted in 2015, when it likewise used an average daily population of 1,000 to distinguish between rate cap tiers.127 As one commenter points out, many of the cost analyses in the record segment 120 See GTL v. FCC, 866 F.3d at 414-15. 121 2020 ICS Notice, 35 FCC Rcd at 8510, para. 72. 122 GTL Comments at 11; Securus Comments at 35; Public Interest Parties Comments at 9-10. 123 See GTL Comments at 11 (pointing out that  use of collect calls is declining ); Securus Comments at 39-40 (discussing  the decline in volume of traditional collect calling ); see also 2020 ICS Notice, 35 FCC Rcd at 8510, para. 72 (recognizing that  collect calling is no longer a popular method of inmate calling, and data show that the number of collect calls is small and has been declining ). 124 Public Interest Parties Comments at 9 ( [T]he data in the record [do] not show different costs based on the type of call prepaid/debit and collect calls all show the same cost structure. ); Securus Comments at 39-40 ( [T]here is no significant cost difference between collect and debit/prepaid calls.); see also GTL Comments at 11 (stating that the cost differences between prepaid/debit and collects calls  are minimal ). 125 See GTL Comments at 11; Public Interest Parties Comments at 9. 126 See Securus Comments at 35 ( [T]he distinction between collect calls and prepaid/debit calls . . . no longer adds value to consumers nor drives meaningful cost implications for providers. ). 127 In the 2015 ICS Order, the Commission adopted 1,000 average daily population as the larger jail size threshold. 2015 ICS Order, 30 FCC Rcd at 12785-86, paras. 44, 46 (adopting rate tiers based on the following average daily population for jails: 0-349, 350-999, and 1,000 and greater, and noting that WCB had determined different potential contract size numbers for jails which include 1-99, 100-349, 350-999, and 1,000 average daily population and (continued& .) 19 Federal Communications Commission FCCCIRC2105-01 jails by reference to the same 1,000 average daily population figure,128 a fact that supports our decision to set the average daily population threshold at 1,000 here. Numerous commenters have advanced the 1,000 average daily population figure to segment their own data analyses and resultant proposals, and none have criticized this cutoff as irrational or unduly difficult to administer.129 47. Our decision to exclude jails having average daily populations below 1,000 from the new interim caps is based on record evidence suggesting that providers incur higher costs per minute for jails with average daily populations below 1,000 than for larger jails. Securus asserts that  small jails are more expensive to serve than larger jails. 130 Securus points to its cost study showing  a strong and consistent relationship between cost and facility size. 131 Pay Tel also broadly argues that inmate calling services  costs vary substantially based on facility size. 132 More specifically, Pay Tel explains that its  experiences regarding its costs of providing ICS demonstrate that costs increase  in terms of jail average daily population, providing further evidence that providers incur greater costs to serve smaller jails.133 We agree with these commenters that, based on the current record, providers appear to incur somewhat higher costs in serving jails with average daily populations less than 1,000 than larger jails and we find this evidence credible and sufficient to support a cutoff of 1,000 average daily population for distinguishing larger jails from those with average daily population below 1,000 for purposes of applying our new interim rate caps. 48. The available data in this record, preclude any specific determination of the extent to which the costs of providing calling services vary with jail size, and we therefore disagree with the Public Interest Parties assertion that  size does not impact costs, 134 at least on the basis of this record.135 Given this, we take a bifurcated approach with regard to our new interim rate caps for jails. First, because we are convinced that providers costs of serving larger jails are likely below the industry average for all jails,136 we use the available data to set interim provider-related rate caps for larger jails. These interim caps are separate from those we set for prisons. Second, because the available data do not allow us to (Continued from previous page) greater, and that the U.S. Department of Justice s Bureau of Justice Statistics collected jail data based on the following facility sizes: 0-49; 50-99; 100-249; 250-499; 500-999; and 1,000 or greater). 128 See, e.g., Pay Tel Comments at 17. 129 See National Sheriffs Association Comments at 7; Pay Tel Comments at 2, 13, 16-17; Securus Comments at 40; Securus Comments Attach. B, Robert O. Fisher et al., FTI Consulting, Inc., Inmate Calling Services Cost Analysis for Securus at 1, 13, 17-21 (Securus Cost Study); NCIC Inmate Communications Reply at 3 (NCIC Reply) (citing National Sheriffs Association Comments at 7); National Sheriffs Association Reply at 2; Pay Tel Reply at 11; Pay Tel Wood Reply Report at 17-19. Although some commenters have argued that turnover may provide a more accurate indicator of costs, we have not received turnover-rate data in the record and must work with the data provided. See Pay Tel Reply at 8. However, we find that the cost data available from jails with average daily populations less than 1,000, including turnover and admission rates, deserves further investigation, and specifically seek such data in the Further Notice we issue today accompanying this Report and Order. See infra Part VI.B.2. 130 Securus Comments at 40. 131 Id. 132 Pay Tel Comments at 15. 133 Id. at 15-17 & Exh. B at 7; Pay Tel Comments, WC Docket No. 12-375, at 11-25, 32-37 (filed Jan. 12, 2015) (explaining that  not only does it cost more to provide [inmate calling services] in jails than in prisons, but also that it costs more to provide [inmate calling services] in smaller jails than larger ones ). 134 Public Interest Parties Reply Appx. A, Coleman Bazelon et al., Brattle Group, Brattle Report at 5 (Public Interest Parties Brattle Reply Report). 135 For example, the Second Mandatory Data Collection did not collect data on turnover rates so we cannot determine how that variable affects providers or facilities costs. 136 See Securus Comments at 40. 20 Federal Communications Commission FCCCIRC2105-01 quantify the extent to which providers cost of serving jails with average daily populations below 1,000 exceed the industry average,137 we defer further rate cap setting with respect to these jails until such time as we are able to gather and analyze additional cost information.138 On the record before us, we find it reasonable and appropriate to exclude these jails from the new interim rate caps we adopt today for interstate calls.139 3. Accounting for Providers Costs 49. Deciding to Adopt Separate Interim Interstate Provider-Related Rate Caps for Prisons and Larger Jails. In the 2020 ICS Notice, the Commission found that the reported data showed greater variations from mean costs for jails than for prisons (and therefore a greater standard deviation from the mean for jails than for prisons).140 These greater variations from mean costs were one reason that led the Commission to propose a higher interstate rate cap for jails than for prisons.141 After analyzing the record, consistent with the proposal in the 2020 ICS Notice, we adopt separate interim interstate provider- related rate caps for prisons and larger jails. 50. As set forth in Appendix F, our refined analysis suggests that it costs service providers approximately 22% more to provide calling services in jails than in prisons.142 That analysis also shows greater variations from mean costs for jails.143 At least one commenter provides credible evidence that providers generally incur higher costs to serve jails than prisons and therefore  support[s] the Commission s proposal to establish separate rate ceilings for prisons and jails. 144 Pay Tel agrees that the evidence demonstrates greater costs per minute for jails than prisons, and explains that its examination of the reported costs of three of the six providers that serve both types of facilities shows that the costs of serving jails are roughly 40% higher.145 51. Not all commenters agree with drawing a distinction between prisons and jails. The Public Interest Parties point out that some providers have argued that there are no real cost differences between serving prisons and jails and therefore there is no basis for a separate, higher cap for jails.146 They urge 137 See generally Appx. E, infra (discussing the difficulties posed by the data in calculating the prison and jail cost differential). 138 In today s Further Notice, we seek detailed information on provider costs associated with serving jails with average daily populations below 1,000. 139 As explained in Part III.C.2 above, we also use the 1,000 average daily population threshold to distinguish larger jails for purposes of the facility-related rate component. 140 2020 ICS Notice, 35 FCC Rcd at 8514, paras. 74, 84. A mean is the arithmetic average of numbers in a distribution. A standard deviation is a measure of dispersion calculated as the square root of the average of the squared differences from the mean. See G. Udny Yule & M.G. Kendall, An Introduction to the Theory of Statistics 105, 126 (14th ed. 3rd Impression) (1958), https://archive.org/details/in.ernet.dli.2015.233345/page/n6/mode/2up. 141 2020 ICS Notice, 35 FCC Rcd at 8514, paras. 74, 84. 142 See Appx. F (describing the results of the refined  double selection Lasso analysis which suggest a 22% difference in cost between facility types); see also Appx. G, tbl. 5 (analyzing contract-level cost differences and finding that providers costs of serving larger jails appear 25% higher than their costs of serving prisons). Securus Cost Study at 1, 17. 143 Appx. E, infra. 144 Securus Comments at 40 (highlighting that  jails are more expensive to serve than prisons, and that small jails are more expensive to serve than large jails ). Securus also concludes that, for jails, costs per minute decrease as facility size increases, and that costs per minute for prisons are lower than for jails. Securus Cost Study at 1, 17. 145 See Pay Tel Reply at 7; Pay Tel Wood Reply Report at 11-13. 146 Public Interest Parties Comments at 9-10 (citing 2015 ICS Order, 30 FCC Rcd at 12778, para. 29); Worth Rises Comments at 5 (explaining that  there are many jail systems with remarkably similar profiles to existing prisons (continued& .) 21 Federal Communications Commission FCCCIRC2105-01 that we move towards a unitary rate structure that would  eliminate the multi-tier rate structure for jails and create a  unified rate cap for prisons and jails. 147 Although the record indicates that some jails bear the characteristics we otherwise associate with prisons, on this record we are not persuaded that these situations are the norm, and we find that, overall, the evidence suggests higher provider costs at jails than prisons. At the same time, we reject the notion that we should delay any action until the Commission collects more detailed cost data.148 We have sufficient record evidence now to set interim rate caps for prisons and larger jails, consistent with our obligations and authority under the Act.149 We therefore find it appropriate to set different interstate provider-related rate caps for prisons than for jails on an interim basis.150 52. Methodology. As with any exercise in cost-based ratemaking, setting reasonable interim interstate provider-related rate caps for inmate calling services requires a determination of the costs providers incur in providing those services. Traditionally, agencies have set regulated rates through company-specific cost-of-service studies that measure the regulated firms total cost of providing the regulated service using the firms accounting data.151 Regulators typically establish rules that specify how costs, including those arising from affiliate transactions, are to be accounted for, apportioned between the firms regulated operations and nonregulated operations, and assigned to, or allocated among, different jurisdictions and services.152 53. The Commission s approach toward regulating inmate calling services rates has been less prescriptive. The Commission, to date, has not adopted accounting rules for calling service providers. Nor has it specified complex rules for directly assigning or allocating a provider s and its affiliates costs between their calling services operations and nonregulated operations, or assigning or allocating a provider s calling services costs to or among the providers contracts or facilities. And it did not require calling service providers to submit cost of service studies requiring each provider to show in detail each step of its costing process. 54. Instead, the Commission has relied on data obtained through Mandatory Data Collections to set reasonable cost-based rate caps for inmate calling services. The Second Mandatory Data Collection, in particular, required every calling service provider to submit detailed information regarding its operations, costs, and revenues, including: (1) lists of its inmate calling services contracts and the (Continued from previous page) systems, including size, geography, and security needs and that providers should therefore not have a higher rate cap  merely for serving jails ). 147 Public Interest Parties Comments at 9-10; see also Worth Rises Comments at 4 (asking the Commission to lower rate caps for prisons and jails to no more than $0.05 per minute). 148 See, e.g., Pay Tel Comments at 4 (suggesting that the data on which the Commission relied are unsuitable for ratemaking); Securus Comments at 2 (explaining that Securus is  concerned that the Commission has not received from all providers adequate data in the comparable sets necessary to appropriately evaluate cost structure ). 149 47 U.S.C. § 201. 150 We do not, however, distinguish between prisons and larger jails for purposes of our facility-related rate component designed to recover portions of contractually-prescribed site commission payments. As explained in Part III.C.4 below, there is record support that the same facility-related allowance for prisons and larger jails is appropriate and we proceed that way on an interim basis. To the extent that the record developed in response to today s Further Notice reveals that we should distinguish between prisons and larger jails, we will revisit that at such time as we develop permanent rate caps. 151 The costs of service include operating expenses (e.g., operating, maintenance and repair, and administrative expenses), depreciation expenses (the loss of value of the firm s assets over time due to wear and tear and obsolescence), cost of capital (the cost incurred to finance the firm s assets with debt and equity), and income and other tax expenses. 152 See, e.g., 47 CFR pts. 32, 36, 68, 69. 22 Federal Communications Commission FCCCIRC2105-01 correctional facilities to which they apply; (2) the average daily populations, number of calls annually, and minutes of use annually at each of those facilities; (3) the direct costs of providing inmate calling services on a total company basis and at each of those facilities; and (4) the indirect costs of providing inmate calling services on a total company basis.153 Providers were required to provide information about costs in several steps. First, providers had to identify which of their and their corporate affiliates total costs were directly attributable to inmate calling services and which were directly attributable to other operations. Providers were then required to allocate the remainder of their costs and their affiliates total costs the costs identified as indirect costs or overhead between inmate calling services and other, nonregulated, operations. Providers were then required to allocate the inmate calling services portion of their direct costs to specific facilities but were not required to allocate their indirect costs to specific facilities.154 55. In the 2020 ICS Notice, the Commission proposed to use data from the Second Mandatory Data Collection, as compiled into a database by Commission staff, to calculate the costs each provider incurs in providing inmate calling services under each of its contracts for prisons and jails separately.155 The Commission proposed to calculate the mean (or arithmetical average) of those costs, add one standard deviation to that mean, and use the resulting sum to determine the provider cost portions of the interstate rate caps.156 The Commission reasoned that this  mean contract costs per minute . . . plus one standard deviation methodology would allow the vast majority of providers to recover at least their reported costs under each of their contracts.157 56. Reliance on Data from the Second Mandatory Data Collection. As proposed in the 2020 ICS Notice, our interim rate cap methodology begins with the calculation of mean contract costs paid per minute in the provision of calling services to incarcerated people.158 To perform this calculation, we rely on the 2018 data submitted in response to the Second Mandatory Data Collection, as supplemented and clarified by the providers in response to follow-up discussions with Commission staff, as the Commission proposed in the 2020 ICS Notice.159 This approach reflects both the robustness and the limitations of the data submitted in response to the Second Mandatory Data Collection. On the one hand, those data provide an unprecedented wealth of information about the inmate calling services industry and individual calling service providers. The reported information allows us to perform sophisticated analyses that help us estimate the providers actual costs of providing interstate inmate calling services.160 57. On the other hand, as the Commission explained in the 2020 ICS Notice, the collected data have certain limitations. First, although the Commission had sought facility-level data in the Second Mandatory Data Collection, in many instances, providers reported data only at the contract level, reflecting the fact that  many providers assess their inmate calling services operations on a contract-by- 153 See Inmate Calling Services Mandatory Data Collection, WC Docket No. 12-375, General Instructions, https://docs.fcc.gov/public/attachments/DOC-343708A3.docx (Second Mandatory Data Collection Instructions); Appx. E, infra. Direct costs are costs that are  completely attributable to a particular service such as inmate calling services. Second Mandatory Data Collection Instructions at 3. Indirect costs are all costs related to a service other than direct costs and include  overhead, depreciation, or other costs that are allocated among different products or services. Id. Determining a company s indirect costs requires a calculation: subtracting the company s indirect costs from its total costs. 154 2019 Data Collection Public Notice; Second Mandatory Data Collection Instructions at 10-11. 155 2020 ICS Notice, 35 FCC Rcd at 8513, para. 83. 156 Id. 157 Id. at 8513, 8514-15, paras. 83, 87. 158 2020 ICS Notice, 35 FCC Rcd at 8511, para. 78. 159 Id. at 8512, para. 78 n.196. 160 See Appendices E-H, infra. 23 Federal Communications Commission FCCCIRC2105-01 contract basis, although many contracts include multiple correctional facilities. 161 Given the lack of facility-level data, the Commission proposed to analyze the information on a contract, rather than a facility, basis and sought comment on this approach.162 Second, the Commission recognized that some providers had interpreted different steps in the cost reporting instructions for the Second Mandatory Data Collection in different ways.163 The Commission sought comment on the submitted data and asked commenters to identify other data issues for consideration.164 58. The Public Interest Parties argue that the 2018 data  provide more than sufficient evidence to support immediate rate reform. 165 We agree. As the Public Interest Parties expert asserts, variations in internal cost records among providers affect how costs are reported, not the overall level of costs.166 In other words, the lack of uniformity in cost data reporting need not result in further delay in our rate reform efforts.167 Further, as explained in Appendix E, providers reports of call minutes and revenues are likely to be accurate down to the level of the contract. All providers bill on a per-minute basis, and revenue tracking, and thus reported revenues, are also likely to be reliable because providers are incentivized to accurately track them.168 Accordingly, we find the reported minutes of use and revenue data to be reliable and suitable for setting interim interstate rate caps. 59. Certain providers argue that the 2018 cost data from the Second Mandatory Data Collection are unsuitable for setting new rate caps. Securus, for example, contends that the Commission should not rely on the 2018 data because providers did not report their costs using a consistent methodology.169 In particular, Securus emphasizes that because providers were not required to, and did not, disclose how they calculated their direct costs or how they allocated indirect costs between regulated and nonregulated services,  each company s measure of  costs is unique to itself and inconsistent with that of every other company. 170 Pay Tel and its outside consultant highlight  numerous inconsistencies in the manner in which costs were reported which, they argue, make the data unsuitable for cost-based ratemaking.171 Pay Tel s outside consultant points to providers differing understandings of how to report direct and indirect costs and the accuracy of reported direct costs based on the chosen allocator for those costs.172 For its part, GTL finds it unsurprising that  there are differences in the data among [inmate calling services] providers given the different reporting methodolog[ies] because no uniform accounting is required or necessary. 173 GTL also notes that calling service providers are not subject to Part 32 accounting rules or 161 2020 ICS Notice, 35 FCC Rcd at 8512, paras. 78-79. 162 Id. para. 79. 163 Id. at 8512, para. 80. 164 Id. 165 Public Interest Parties Reply at 3. 166 Public Interest Parties Brattle Reply Report at 3. 167 Id. 168 See generally Appx. E, infra. 169 Securus Comments at 11-16. 170 Id. at 13. 171 Pay Tel Comments at 4; Pay Tel Wood Report at 7-11. 172 Pay Tel Wood Report at 8-9 (explaining that while some providers track direct costs through, for example, costs associated with equipment, telecommunications facilities, sales, or ongoing product support at specific facilities, others track such costs using allocators like the number of phones or shares of minutes or revenues that  have a more tenuous connection to a specific location or contract). 173 GTL Reply at 6. 24 Federal Communications Commission FCCCIRC2105-01 any other uniform system of accounts.174 We do not find these concerns sufficient to justify abandoning any reforms at this time, and find that  variations in internal cost records and lack of a common methodology do not preclude us from lowering egregiously high interstate rates now on an interim basis while waiting to obtain more reliable and consistent cost data.175 In sum, the 2018 data from the Second Mandatory Data Collection are the best data available upon which we may, and do, reasonably rely here.176 60. The limitations in the cost data identified in the record do, however, warrant a departure from the approach the Commission proposed in the 2020 ICS Notice. That approach was premised on the Commission s ability to calculate providers collective mean contract costs of providing inmate calling services to prisons and jails with a high degree of accuracy. Based on that premise, the Commission proposed relying on single measures of the industry-mean costs of providing calling services to permanently cap the interstate rate for prisons and jails, respectively.177 61. After carefully considering the record, including providers criticisms of the approach proposed in the 2020 ICS Notice, we take a different approach than the one the Commission originally proposed and rely on the costs providers reported in response to the Second Mandatory Data Collection to develop separate zones, or ranges, of cost-based rates for prisons and larger jails from which we select the respective interim interstate provider-related rate caps.178 First, the costs, as reported in response to the Second Mandatory Data Collection, allow us to calculate ceilings or upper bounds above which any interstate rate caps for prisons and larger jails would be unreasonably high. Second, we adjust the reported data to correct for outliers and contracts with reported costs that are significantly higher than other providers. These adjusted data allow us to calculate floors or lower bounds below which any interstate rate caps for prisons and larger jails could be perceived as unreasonably low on the current record. These upper and lower bounds thus establish zones of reasonableness from which we select the interim interstate provider-related rate caps. 62. The approach we take here is fully consistent with judicial precedent and a logical outgrowth from the approach proposed in the 2020 ICS Notice. Courts widely recognize that an agency may reasonably rely on the best available data where perfect information is unavailable.179 Indeed, the 174 Id.; Pay Tel Wood Report at 6 ( There are no Part 32 accounting rules and no Uniform System of Accounts that apply to how . . . books and records are kept or how categories of cost are reported. ). 175 Public Interest Parties Reply at 4-5. 176 See, e.g., FCC v. Prometheus Radio Project, 141 S. Ct. 1150, 1160 (2021) (Prometheus) (explaining that  while the FCC did not have perfect empirical or statistical data it  made a reasonable predictive judgment based on the evidence it had in concluding that certain media ownership rules no longer served the public interest); Am. Pub. Gas Ass n v. Federal Power Comm n, 567 F.2d 1016, 1046 (D.C. Cir. 1977) (American Public Gas v. FPC) (concluding that the Federal Power Commission s choice  to use the best available data, and to make whatever adjustments appeared necessary and feasible in a gas rate proceeding was not unreasonable); see also MCI Telecomms. Corp. v. FCC, 627 F.2d 322, 340-42 (D.C. Cir. 1980) (MCI v. FCC) (explaining that years-long ratemaking delays resulting from a desire to obtain better or perfect data undermine the Commission s credibility and the requirement of just and reasonable rates under the Act). 177 2020 ICS Notice, 35 FCC Rcd at 8513-15, paras. 83-89. 178 See infra paras. 81-92. 179 American Public Gas v. FPC, 567 F.2d at 1044 (After the Federal Power Commission (FPC) had relied on unverified data supplied by the American Gas Association, the court held that the FPC s approach in using these data was not unreasonable, articulating the  best available data rule:  [T]he Commission s choice to use the best available data, and to make whatever adjustments appeared necessary and feasible, is within its competence. Courts cannot fairly demand the perfect at the expense of the achievable. ); see also Prometheus, 141 S. Ct. at 1159-60; MCI v. FCC, 627 F.2d at 340-42 (explaining that  [t]he best must not become the enemy of the good, as it does when the FCC delays making any determination ). 25 Federal Communications Commission FCCCIRC2105-01 Supreme Court has recognized that the available data may not always settle a particular issue and that in such cases an agency must use its judgment to move from the facts in the record to a policy conclusion.180 Here, we apply our judgment to the record before us and reach results that rationally connect  the facts found and the choice[s] made. 181 Importantly, by setting lower bounds that adjust for anomalies in the reported data, we minimize our reliance on data that we find inaccurate or unreliable.182 63. We recognize, of course, that our reliance on imperfect data is not ideal, but a lack of perfect data is not fatal to agency action. The D.C. Circuit has held that an agency s decision should be upheld when from  among alternatives all of which are to some extent infirm because of a lack of concrete data, [the agency] has gone to great lengths to assemble the available facts, reveal its own doubts, refine its approach, and reach a temporary conclusion. 183 Here, we have undertaken a robust analysis of all the data in the record and fully accounted for why the rate methodology we employ is reasonable, despite some providers failure to meaningfully respond to Commission data requests and inaccuracies in their reported data. In the process, we explain our misgivings about reliance on certain data and lay out our rationale for adopting these rate caps as an interim step, with a commitment going forward to collect further data to be used to set permanent rate caps. 64. GTL and Pay Tel claim that the absence of the Commission s underlying work papers limits their  ability to comment on the methodology proposed in the 2020 ICS Notice and prevents them from determining whether the adjustments to the data proposed in that Notice are appropriate.184 We find these assertions to be meritless. The record in this proceeding contradicts these views, as do the comments GTL and Pay Tel themselves offer concerning the Commission s methodology and treatment of data.185 Contrary to these providers claims, the database on which the calculations in the 2020 ICS Notice relied was made available to interested parties in this proceeding, subject to the terms of a protective order;186 and the record reflects that at least two parties have been able to replicate the Commission s rate cap 180 Motor Vehicle Mfrs. Ass n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co. 463 U.S. 29, 52 (1983) (State Farm). 181 State Farm, 463 U.S. at 43 (citing Burlington Truck Lines v. United States, 371 U.S. 156, 168 (1962)). 182 See District Hosp. Partners, L.P. v. Burwell, 786 F.3d 46, 56 (D.C. Cir. 2015); Kennecott v. EPA, 780 F.2d 445, 458 (4th Cir. 1985); Citizens Telecomms. Co. of Minnesota v. FCC, 901 F.3d 991, 1014 (8th Cir. 2018) (Citizens) (explaining that  the FCC was not unreasonable in declining to use the limited data at hand when it had doubts about the reliability of that data ). 183 Nat l Ass n of Regulatory Utility Commissioners v. FCC, 737 F.2d 1095, 1141-42 (D.C Cir. 1984) (NARUC); see also Prometheus, 141 S. Ct. at 1159 (highlighting that the Commission had  acknowledged the gaps in the data it relied on in evaluating the continuing need for certain media ownership rules). 184 GTL Comments at 9 n.34 (stating that  [t]he Commission has not provided its underlying work papers or other data supporting its analysis, which limits GTL s ability to comment on the methodology used by the Commission to determine its proposed rate caps ); Pay Tel Comments at i, 5 n.15 (claiming that by withholding work papers, the Commission has rendered the data set irreconcilable). 185 2020 ICS Notice, 35 FCC Rcd at 8511-17, paras. 78-91; GTL Comments at 21 (objecting to the Commission s adjustment of GTL s data due to GTL s use of revenue as a cost allocator); Pay Tel Wood Report at 19-25 (critiquing the Commission s cost allocation methodology); Pay Tel Wood Reply Report at 4-5 (summarizing comments on the record and the expert s own report discussing and critiquing the Commission s cost allocation methodology). 186 Wireline Competition Bureau and Office of Economics and Analytics Make Inmate Calling Services Database Available to Eligible Individuals Pursuant to Protective Order, WC Docket No. 12-375, Public Notice, 35 FCC Rcd 10456 (2020); see also GTL Godek Report at 12-14 (using the Commission s dataset to discuss differences in the inmate calling services provider-submitted data). We also refer to this inmate calling services database as the  dataset. 26 Federal Communications Commission FCCCIRC2105-01 analysis on their own, on the basis of the data available to them.187 The Commission made the underlying data available and specified its analytical approach. We are not required to do more. 65. Allocation of Indirect Costs Based on Minutes of Use. Consistent with the approach proposed in the 2020 ICS Notice, our rate cap methodology relies on providers collective mean contract costs per paid minute of use, plus one standard deviation.188 Because the instructions for the Second Mandatory Data Collection did not require providers to allocate their indirect costs (including their overhead costs) of providing inmate calling services among contracts,189 we need to adopt a mechanism for allocating those costs. In the 2020 ICS Notice, the Commission proposed allocating the providers indirect costs of providing inmate calling services among contracts based solely on relative minutes of use, a method that apportions a provider s indirect costs among its individual calling services contracts in proportion with each contract s share of the total minutes of use reported by that provider.190 The Commission sought comment on this proposal and on whether a different allocator would more effectively capture how costs are caused.191 We adopt the proposed minute of use method of allocation for our new interim rate caps as one of only two reasonable allocation methods based on the current record. 66. Parties disagree whether minutes of use provides an appropriate method for allocating indirect costs, with some comments pointing out its shortcomings and others supporting its use.192 Although several parties argue that minutes of use does not provide an appropriate allocation method,193 our independent analysis shows that, while imperfect, minutes of use provides the most reasonable allocator given the data before us. Specifically, after examining seven potential allocators minutes of use, average daily population, number of calls, revenue, contracts, facilities, and direct costs for allocating providers indirect costs among contracts, we find minutes of use both reasonable and preferable to each potential alternative.194 Although none of these allocators fully capture the reasons for which providers incur inmate calling services costs, minutes of use constitutes the best available allocator under the circumstances because it produces plausible per-minute rates while ensuring that most calling services contracts would remain commercially viable, even assuming the accuracy of providers reported costs. 67. We calculated the per-minute caps that would apply under each potential allocator to compare 187 See Public Interest Parties Brattle Report at 10; Securus Comments Attach. D, FTI Consulting, Inc., Declaration of Robert O. Fisher, Brian F. Pitkin & Steven E. Turner at 6 (Securus FTI Report) (observing that Securus s expert could replicate all of the Commission s data tables within a reasonable degree of variance). 188 2020 ICS Notice, 35 FCC Rcd at 8513-15, paras. 83-89. 189 Second Mandatory Data Collection Instructions at 6-11. These overheads include costs attributable to inmate calling services and to particular contracts, but not reported as such by the provider. See Second Mandatory Data Collection Instructions at 6-11. 190 2020 ICS Notice, 35 FCC Rcd at 8513, para. 81. 191 Id. 192 See, e.g., GTL Comments at 21 (arguing that revenue is an appropriate cost allocation method for inmate calling services); Pay Tel Wood Report at 10 (arguing that minutes of use and the Commission s methodology  creates the appearance that costs vary less among locations/contracts than they actually do ); Securus Comments at 41 (asserting that  [i]t is to be expected that allocating indirect costs based on minutes of use will result in relatively uniform costs per minute, particularly when several providers indicated very little direct cost instead of attributing most of their cost as indirect ); Free Press Comments at 4 (supporting the Commission s longstanding position that revenue should not be used for cost allocation purposes); Public Interest Parties Reply at 4 (supporting the Commission s use of minutes of use as the cost allocator ). 193 E.g., GTL Comments at 21; Pay Tel Wood Report at 10; Securus Comments at 41. 194 2020 ICS Notice, 35 FCC Rcd at 8513, para. 82 (rejecting allocations based upon contracts and facilities), 8559- 60; Appx. E, infra Part B. 27 Federal Communications Commission FCCCIRC2105-01 the allocators.195 We find that only minutes of use ($0.149) and number of calls ($0.208) produce results below the current cap for prepaid and debit calls. In contrast, the implied per-minute rate caps for the revenue ($0.333), direct costs ($2.417), average daily population ($11.114), facilities ($303.685), and contracts ($318.636) allocators all suggest that interstate inmate calling services rate caps are presently unreasonably low, a proposition that not even any of the providers has tried to argue. This disparity is one of the reasons we find that minutes of use and number of calls are the only plausible allocators among the available alternatives.196 68. Understanding that there is an element of circularity in using a minutes-based cost allocator when setting per-minute rate caps,197 we further evaluated whether each potential allocator produces per- minute costs that are consistent with the rates currently set by providers. Specifically, we calculated the percentage of contracts for which the provider reported per-minute revenues that are greater than the per- minute costs allocated to each contract under each allocator.198 Minutes of use yielded a higher percentage of viable contracts than did any other cost allocator.199 This confirms that minutes of use is the allocator that is most consistent with provider cost recovery, as it is illogical to assume that providers are entering into a significant number of contracts that are not commercially viable (i.e., that do not allow providers to recover their costs).200 We therefore find minutes of use preferable to number of calls and use it in our provider-related rate caps calculations.201 69. We recognize that our choice of allocator is affected, in part, by our decision to continue to require providers to charge per-minute rates for inmate calling services.202 But changing that rate 195 See Appx. E, infra tbl. 3. We refer to these per-minute caps as  implied rate caps. Our calculations employed the mean contract costs per minute plus one standard deviation methodology proposed in the 2020 ICS Notice. For simplicity, we performed these calculations collectively for all facilities, rather than separately for different types or sizes of facilities. Id. 196 We recognize, as Securus and Pay Tel point out, allocating indirect costs based on minutes of use results in relatively uniform costs per minute in comparison to the other allocation methods. Securus Comments at 41; Pay Tel Wood Report at 20. We also agree that this relative uniformity will necessarily result in a lower standard deviation from the mean for a minutes of use allocator than for any alternative method. Securus Comments at 41; Pay Tel Wood Report at 20 (implying that the Commission chose minutes of use  to minimize the standard deviation ), and the standard deviation we calculate for minutes of use ($0.056) is significantly lower than those for each of the other potential allocators. See Appx. E, infra tbl. 3 (showing standard deviations ranging from $0.056 for minutes to $300.136 for contracts). But the implied rate caps for revenue ($0.220 = $0164 + $0.056) and direct costs ($0.284 = $0228 + $0.0506) would exceed current interstate rate levels if the standard deviation for those allocators were reduced to $0.056, and the implied rate caps for average daily population ($0.789), facilities ($16.485), and contracts ($18.499) would exceed those levels even without any standard deviation component. 197 See Appx. E, infra; Securus FTI Report at 16-17. 198 See Appx. E, infra tbl. 4. 199 Minutes of use yielded 87.3% of contracts with per-minute provider revenues greater than their per-minute allocated costs. The next closest allocators are direct costs at 81.6% and number of calls at 81.3%. See Appx. E, infra tbl. 4. 200 See Appx. E, infra. 201 The comparison of our per-minute cap to per-minute revenues is not subject to the objection that using a per- minute allocator will produce relatively uniform costs per minute in comparison to the other allocation methods. 202 Pay Tel Wood Report at 20 (noting  the ubiquity of call minute pricing supports the development of rate caps on a per-[minute-of-use (MOU)] basis, and therefore supports the calculation of costs on a per-MOU basis ); Securus FTI Report at 13-16 (arguing in favor of allocating costs by calls). We also reject most of the cost allocators for additional reasons that are not subject to the objection that using a per-minute allocator will produce relatively uniform costs per minute in comparison to the other allocation methods. For example, use of the facility and direct cost allocator would require throwing our substantial amounts of data, while the remaining data would include egregious flaws, making any resulting cost allocation arbitrary. See Appx. E, infra Part E. This critique applies to a (continued& .) 28 Federal Communications Commission FCCCIRC2105-01 structure would likely impose significant burdens on providers, and we find no basis for requiring such a change in connection with our adoption of new interim rate caps. We also cannot meaningfully assess, on the record before us, how different rate structures would affect incarcerated persons and their families. We therefore defer action on alternative rate structures under which calling services consumers might be charged a predetermined monthly fee for unlimited calls, for example pending the development of a more complete record in response to the Further Notice.203 70. Some commenters contend that the available data preclude us from allocating providers costs with sufficient precision to support any changes in interstate rate caps.204 Pay Tel emphasizes that  the observed inability of many [inmate calling services] providers to track and assign direct costs results in high levels of indirect costs to be allocated, which makes providers costs appear more  homogenous across locations and contracts than is actually the case.205 Securus s outside experts are particularly critical of using minutes of use as the only allocator, arguing that  the majority of [providers ] costs, which include connectivity to the facilities, developing and implementing the call platform, on-site equipment and SG&A [(selling, general, and administrative expenses)], do not vary by the number of minutes. 206 71. We find that such issues do not require us to postpone reforming our interstate rate caps pending the availability of better data that might allow us to allocate providers indirect costs in a more cost-causative manner.207 We find that the better course is to adopt interim interstate provider-related rate caps for prisons and larger jails now, using the available data, while requiring that providers submit more accurate, consistent, and disaggregated data that will allow us to set permanent interstate provider-related rate caps for all correctional facilities that more closely reflect providers costs of serving individual correctional facilities. As the D.C. Circuit has explained,  [w]here existing methodology or research in a new area of regulation is deficient, the agency necessarily enjoys broad discretion to attempt to formulate a solution to the best of its ability on the basis of available information. 208 Consistent with this principle, we choose  to use the best available data, and to make whatever adjustments appear[] necessary and (Continued from previous page) more limited extent to average daily population, but it would still be a poor choice relative to the alternatives of call minutes or number of calls. See Appx. E, infra Part E. Another example is our exclusion of the revenue allocator. See Appx. E, infra Part E. 203 See Appx. E, infra Part E. This reasoning is again is not subject to the objection that using a per-minute allocator will produce relatively uniform costs per minute in comparison to the other allocation methods. 204 Pay Tel Comments at 4-8 (arguing the dataset is unreliable for the purposes of reasoned ratemaking); Securus Comments at 10-15 (arguing that given the inherent flaws with the dataset, the Commission should not rely on it in establishing rate caps); Securus FTI Report at 24-25 (asserting that setting rate caps based on a dataset that is not a normal distribution is inappropriate); GTL Comments at 20 (stating there are inconsistencies in reporting the data including differing allocation methods). 205 Pay Tel Wood Report at 22. We agree there is some merit in these observations, particularly that the collected data appears to obscure cost differences between prisons and jails. 206 Securus FTI Report at 15. 207 We are not required to pursue  the perfect at the expense of the achievable. American Public Gas v. FPC, 567 F.2d at 1046 (internal quotation marks and citation omitted). 208 Am. Pub. Commc ns Council v. FCC, 215 F.3d 51, 56 (D.C. Cir. 2000) (American Public Communications) (upholding Commission action that had relied on disputed cost data) (internal citations omitted); see also NARUC, 737 F.2d at 1131-42 (finding that an agency had not acted arbitrarily or capriciously when it has made  rational choices from among alternatives all of which are to some extent infirm because of a lack of concrete data, and has gone to great lengths to assemble the available facts, reveal its own doubts, refine its approach, and reach a temporary conclusion ); Public Interest Parties Brattle Reply Report at 15. 29 Federal Communications Commission FCCCIRC2105-01 feasible to ensure that interstate inmate calling services rates are just and reasonable.209 72. We independently reject the  use of direct costs to allocate indirect costs and related approaches at this time.210 Pointing to its own cost-tracking processes, Pay Tel argues that allocating indirect costs based on directly attributable costs would be  not only reasonable and consistent with prior Commission conclusions but also  consistent with how [inmate calling services] providers incur costs. 211 Although we agree that allocating indirect costs based on directly attributable costs could yield reasonable results when providers have properly identified their directly attributable costs, the data from many of the providers fall far short of that mark. Indeed, allocation by direct costs would require us to ignore all data submitted by the two providers that reported no direct costs.212 Similarly, this approach also would allocate essentially all of GTL s costs on the basis of bad debt, a measure that bears little, if any, relationship to the reasons GTL incurs costs in its provision of inmate calling services.213 Accordingly, we find allocating indirect costs based on direct costs would provide less reliable results than allocating indirect costs based on minutes of use. We likewise reject the use of facilities to allocate costs, as providers often failed to report where multiple facilities were supplied under a single contract. In light of the drawbacks to these approaches, we have a higher degree of confidence in providers' reported minutes of use by contract. 73. We similarly decline at this time to divide indirect costs into  shared costs and  common costs and develop separate allocators for each set of costs, as Securus suggests, because the available data do not allow us to make such granular distinctions.214 We likewise reject any allocation key based on percentages of total company revenue.215 The Commission has long disclaimed this allocation methodology because it fails to provide a reliable method for determining costs, given that  revenues measure only the ability of an activity to bear costs, and not the amount of resources used by the activity. 216 74. Accurate Analysis Compels Adjustments to GTL s Reported Cost Data. As the Commission recognized in the 2020 ICS Notice, the critical question posed by our reliance on the available data is how to address the various issues reflected in the cost data reported by GTL, the largest provider of inmate 209 See American Public Gas v. FPC, 567 F.2d at 1044-46 (upholding an agency s decision to rely on the best available data in setting rates for new natural gas). 210 Securus Comments at 15, 41 (suggesting that providers should be required to follow a standard cost-causation modeling methodology to attribute costs to specific products and, where not possible, allocate those costs across products in a cost-causative matter); Pay Tel Wood Report at 21, 26 (maintaining that Securus s suggested approach is  reasonable and consistent with prior Commission conclusions ). 211 Pay Tel Wood Report at 21. 212 The providers that did not report direct costs are {[ ]}. See Appx. E, infra Part F. 213 Alone among providers, GTL reported a bad debt expense as their only identifiable direct cost. The evidence supports no relationship between bad debt expense and cost causation, and the bad debt expense amounts only to {[ ]}, making any related assumptions even more speculative. See Appx. E, infra Part E. 214 The available data do not allow us to analyze or allocate costs on the basis that Securus suggests. What Securus identifies as  common costs most closely tracks the  indirect costs reported in the Second Mandatory Data Collection. Second Mandatory Data Collection Instructions at 3 (defining  indirect costs to mean  any cost related to a service that is not completely attributable to that service (e.g., overhead, depreciation, or other costs that are allocated among different products or services) ). 215 GTL Comments at 21 (defending its use of revenues to allocate costs). 216 Separation of Costs of Regulated Telephone Service from Costs of Nonregulated Activities, CC Docket No. 86- 111, Report and Order, 2 FCC Rcd 1298, 1318, para. 160 (1987) (internal quotation marks omitted); see 2020 ICS Notice, 35 FCC Rcd at 8513, para. 82 (discussing flaws with allocating costs by revenue). 30 Federal Communications Commission FCCCIRC2105-01 calling services, with an estimated market share approaching 50%.217 Today, we confirm the Commission s preliminary assessment that the issues plaguing GTL s cost data render those data unreliable.218 In particular, we find it likely that GTL s submissions significantly overstate its actual costs of providing inmate calling services. As a consequence, including GTL s cost data as reported in our calculations for the entire industry skews the results, particularly given GTL s market share.219 We conclude that we must make certain adjustments to GTL s reported data if we are to arrive at a more accurate estimate of industry costs.220 75. The most fundamental problem with GTL s data is that its reported costs are significantly higher than the costs reported by other providers, a result that is inconsistent with GTL s market position. On a company-wide basis, GTL s total costs per minute dwarf the industry: GTL s reported unit costs, which do not rely on cost allocation,221 are higher than those of all but one (much smaller) provider, and are nearly {[ ]} the average of all the other providers excluding GTL.222 These results are inconsistent with the record evidence establishing that providers are able to achieve significant economies of scale.223 As the largest inmate calling services provider, GTL should be better enabled to spread its fixed costs over a relatively large portfolio of contracts relative to other providers, especially because GTL serves a higher proportion of larger facilities than other providers. Instead, taking GTL s reported costs at face value would imply that it achieves essentially no economies of scale a result contrary to rational expectation and unsupported by any comments in the record.224 GTL s unit costs are also high when compared with the providers that are most like it. GTL s unit costs are nearly {[ ]} times those of Securus, the second largest provider, nearly {[ ]} times those of CenturyLink, and nearly {[ ]} times 217 2020 ICS Notice, 35 FCC Rcd at 8513, 8517-19, paras. 82, 92-96. One estimate from 2017 placed GTL s market share between 46% and 52.9% before it acquired Telmate, a company whose market share was between 1.9% and 3.1%. See Peter Wagner, Prison Policy Initiative, Prison Phone Giant GTL Gets Bigger, Again (Aug. 28, 2017), https://www.prisonpolicy.org/blog/2017/08/28/merger/. Our internal analysis suggests GTL s share is around {[ ]}. See 2020 ICS Notice, 35 FCC Rcd at 8518, para. 94 n.226; infra Part VI.G. 218 2020 ICS Notice, 35 FCC Rcd at 8518, para. 94 n.228 (explaining that GTL  is a reasonably effective competitor, which in turn suggests it is not a high cost provider, and therefore, its reported costs are likely significantly overstated ). 219 See generally Appx. E, infra tbl. 2. 220 Courts have upheld the Commission s exclusion or substitution of flawed or inadequate data when the Commission has explained the evidence and demonstrated a rational connection between the facts found and the choice made, as we do here. See, e.g., State Farm, 463 U.S. at 52; American Public Communications, 215 F.3d at 55 (upholding the Commission s decision to exclude data on the basis of reliability); see also Citizens, 901 F.3d at 1014 (explaining that  the FCC was not unreasonable in declining to use the limited data at hand when it had doubts about the reliability of that data ). 221 Unit costs are measured as the quotient of reported total costs and reported minutes. 222 See Appx. E, infra tbl. 2 (noting that GTL s reported unit costs are {[ ]}, while unit costs for the industry average excluding GTL are {[ ]}. This remains true for GTL s allocated costs per minute for prisons or larger jails both are higher than nearly all other providers allocated costs, regardless of facility type. Despite being the largest provider, and commanding a disproportionate share of the larger contracts, GTL reports an average contract per-minute cost of {[ ]}, approximately {[ ]} times larger than its nearest peers in size, Securus and CenturyLink, and more than {[ ]} times larger than the average contract per-minute costs of the next largest provider, ICSolutions. Staff analysis of the Second Mandatory Data Collection; see also Appx. G, infra fig. 1. 223 See, e.g., Securus Cost Study at 21 (recognizing that as a larger provider, it experiences economies of scale not available to smaller providers, such as greater purchasing power and the ability to share common costs among a large number of products and services). 224 The record is bereft of any explanation why GTL might incur higher inmate calling services costs than the rest of the industry. 31 Federal Communications Commission FCCCIRC2105-01 those of ICSolutions.225 Of equal concern, GTL uniquely reports large losses across all inmate calling services operations, totaling nearly {[ ]} of GTL s reported costs.226 GTL s total revenues are {[ ]} less than its reported costs, suggesting that GTL operates these facilities at a cumulative loss an irrational result contradicted by GTL s longevity in the market, the depth of its market presence, and common sense.227 76. GTL s accounting practices also prevent reliance on GTL s reported data. In contrast to every other provider and the costs they reported, GTL alone reported  bad debt expense as its only cost directly related to the provision of inmate calling services, though it almost certainly incurs other costs that are causally related to providing inmate calling services.228 As the record reflects, even a cursory analysis of GTL s own reported costs demonstrates the absurdity of this result: GTL s reported direct costs  represent only 0.01% of its Total [inmate calling services] costs, effectively reporting a cost structure that is 0% direct and 100% indirect. 229 Compounding this problem, GTL then allocated its indirect costs between its inmate calling services operations and its other operations based on the percentages of total company revenue each operation generated, which fails to reflect the purposes for which GTL incurs costs.230 77. Considering the impact that overstatements of this magnitude by the market s largest provider would have on its analysis, the Commission has repeatedly tried to obtain more accurate and complete data from GTL. These efforts began with several calls between staff and GTL representatives that sought to obtain a fuller explanation of the composition of the data provided by GTL in response to the Second Mandatory Data Collection. Following from these efforts, on July 15, 2020, before the release of the 2020 ICS Order on Remand, the Wireline Competition Bureau directed GTL to provide  additional documents and information regarding GTL s operations, costs, revenues, and cost allocation procedures to supplement GTL s previously filed submissions, and to enable the Commission  to make a full and meaningful evaluation of GTL s cost data and methodology. 231 This directive encompassed 14 separate categories of additional information.232 GTL s response, however, provided little additional information that would enable us to determine the costs it actually incurs in providing calling services to incarcerated people. Instead, GTL objected to the requests on multiple grounds, routinely asserting that the Bureau sought information that GTL cannot provide and arguing that it does not maintain records that would allow it to respond.233 Without the requested information, and in light of the issues we describe above, we 225 See Appx. E, infra tbl. 2. Securus s reported unit costs are {[ ]}; CenturyLink s reported unit costs are {[ ]}; and ICSolutions reported unit costs are {[ ]}. 226 See Appx. E, infra Part D (discussing reported costs and revenues). 227 GTL is the only provider which records making a loss. See Appx. E, infra Part F. See generally GTL Amended Description and Justification. 228 2020 ICS Notice, 35 FCC Rcd at 8519, para. 95; Securus Comments at 12; see also Public Interest Parties Brattle Reply Report at 13; 2020 ICS Notice, 35 FCC Rcd at 8516-17, paras. 92-93; GTL Amended Description and Justification at 9. 229 Pay Tel Wood Report at 8-9. 230 2020 ICS Notice, 35 FCC Rcd at 8512-13, 8518-20, paras. 80-82, 94-98; see also Public Interest Parties Brattle Report at 6-7 (arguing that GTL s approach will overstate inmate calling services costs). 231 Letter from Kris Anne Monteith, Chief, Wireline Competition Bureau, to Chérie R. Kiser, Counsel for GTL and Its Subsidiaries, Cahill Gordon & Reindel LLP, 35 FCC Rcd 7028, 7028 (WCB July 15, 2020) (GTL Letter). This followed up on the Bureau s prior efforts to obtain additional information from GTL. See GTL Amended Description and Justification (amending GTL s Second Mandatory Data Collection response  to address questions raised by Commission staff ); see also GTL Letter, 35 FCC Rcd at 7028. 232 GTL Letter, 35 FCC Rcd at 7029-34. 233 These objections included, inter alia, that the Bureau s requests lacked relevance, placed an undue burden on GTL, and were overbroad. See Letter from Chérie R. Kiser, Counsel for GTL and Its Subsidiaries, Cahill Gordon & (continued& .) 32 Federal Communications Commission FCCCIRC2105-01 are unable to take GTL s reported costs at face value in our analyses.234 We therefore adjust GTL s reported cost data with data that more accurately reflect the underlying characteristics of the prisons and larger jails that GTL serves.235 Specifically, as we explain below, in establishing the lower bounds of our zones of reasonableness we use a generally accepted statistical tool the k-nearest neighbor method to replace the data reported for each prison and larger jail contract served by GTL with the weighted average of the data for the three most comparable (i.e., nearest neighbor) contracts served by other providers.236 78. Ancillary Service Costs. In the 2020 ICS Notice, the Commission observed that its proposed rate cap calculations did not account for revenues earned from certain ancillary services even though providers reported the costs of these services as inmate calling services costs in their responses to the Mandatory Data Collection.237 The Commission sought comment on whether it should exclude the costs of these services from its rate cap calculations.238 79. Based on the record before us, we find that there is no reliable way to exclude ancillary service costs from our provider-related rate cap calculations at this time. Accordingly, those costs will remain as a part of the industry costs that we use in our calculations of those interim rate caps. The instructions for the Second Mandatory Data Collection required certain ancillary service revenues to be reported separately, but providers were not required to report their ancillary service costs separately from other inmate calling services costs.239 Further, providers were not required to separately report costs relating to any specific ancillary service,240 and no commenter has suggested a way of identifying the providers ancillary service costs.241 As a result, we cannot isolate with any degree of accuracy the costs providers incur in providing ancillary services from their overall cost data. 80. We recognize that this approach will result in interim interstate rate caps that allow for the recovery of costs incurred in the provision of ancillary services that calling services consumers already pay for through separate charges and fees, a result that substantially increases the likelihood that our interim caps are too high. We intend to collect detailed data on ancillary services costs from each inmate calling services provider in our next data collection and to use those data to set permanent provider- (Continued from previous page) Reindel LLP, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 (filed Sept. 14, 2020) (GTL Sept. 14, 2020, Letter). GTL Sept. 14, 2020, Letter at 1-33, Attach., Documents - GTL Response to Request #14. 234 Two commenters share our concerns and urge that we adjust GTL s data. See, e.g., Free Press Comments at 4 (supporting the Commission s proposed discount for GTL s claimed capital costs, even though it appears that the 10% discount is not enough and that the Commission should identify other ways GTL s costs are inflated and consider expanding the discount to account for them); Public Interest Parties Comments at 5 (arguing that the proposed 10% reduction to GTL s data is necessary but is not sufficient to account for the inconsistencies in GTL s reporting). 235 See American Public Communications, 215 F.3d at 56 (upholding Commission action which relied on disputed cost data, stating that  we cannot require an agency to enter precise predictive judgments on all questions as to which neither its staff nor interested commenters have been able to supply certainty ). 236 We describe this method in greater detail and show its application to GTL s data in Appendix G, infra. 237 2020 ICS Notice, 35 FCC Rcd at 8515-16, para. 90. 238 Id. 239 Second Mandatory Data Collection Instructions at 9-10 (requiring the reporting of automated payment fee revenues and paper bill/state fee revenues separately, for example). 240 See generally id. 241 The Public Interest Parties argue that we should deduct all revenues from ancillary services from the costs that go into our per-minute rate cap calculations. Public Interest Parties Brattle Report at 8-9. We decline to take this step because doing so would lower the rate caps equally for all providers and therefore disproportionately affect those providers having the lowest ancillary service revenues. 33 Federal Communications Commission FCCCIRC2105-01 related rate caps that eliminate this problem.242 81. Implementing the Zone of Reasonableness Approach. We determine the levels of the interim interstate provider-related rate caps using a zone of reasonableness approach. In the 2020 ICS Notice, the Commission proposed to set separate caps for prisons and all jails at the mean contract costs per paid minute plus one standard deviation, as calculated separately for each of those two categories of facilities.243 After considering the record, including comments that make clear that limitations in the available data make it impossible for us to estimate true mean contract costs per paid minute with any degree of precision,244 we find that a zone of reasonableness approach is particularly well-suited to our task because it will allow us to use different measures of mean contract costs per paid minute to establish separate ranges of rates one for prisons and another for larger jails from which we can select just and reasonable interim provider-related rate caps.245 82. It is well-established that rates are lawful if they fall within a zone of reasonableness.246 Precedent also teaches that we are  free, within the limitations imposed by pertinent constitutional and statutory commands, to devise methods of regulation capable of equitably reconciling diverse and competing interests. 247 A zone of reasonableness approach allows us to reconcile, to the extent possible on the record before us, the providers and their customers competing concerns regarding the rates incarcerated people and those they call pay to communicate. We therefore rely on a zone of reasonableness approach to set rates in this instance, which helps avoid giving undue weight to the assumptions that would lead to either unduly high or unduly low per-minute rate caps. 83. Given the available data, any upper and lower bounds based on those data are necessarily estimates. We find it likely that our estimates overstate providers inmate calling services costs. All providers have an incentive to overstate their costs in their responses to the Commission s data collections, as this would lead to higher interstate rate caps, thus resulting in both higher revenues and higher profits. In addition, imprecisions in the instructions for the Second Mandatory Data Collection regarding fundamental steps in the costing process, such as how providers should make sure that their 242 See infra Part III.H.3 (instituting an additional data collection). 243 2020 ICS Notice, 35 FCC Rcd at 8514, para. 84. (discussing cost variations between prisons and jails and seeking comment on this approach). 244 See, e.g., GTL Comments at 20 (stating there are inconsistencies in the data); Pay Tel Comments at 4-8 (arguing the dataset is unreliable for the purposes of reasoned ratemaking); Public Interest Parties Comments at 4-9 (discussing deficiencies in the data); Pay Tel Reply at 5-7; Securus Comments at 10-13 (identifying issues with the submitted data); Securus FTI Report at 24-25 (finding the dataset non-representative), at 30 (stating that the cost data lead to misleading conclusions); see also 2020 ICS Notice, 35 FCC Rcd at 8511-13, paras. 78-82 (highlighting shortcomings in providers Second Mandatory Data Collection responses). 245 As a result of our new approach, which differs from the approach proposed in the 2020 ICS Notice, we find that comments critical of the data analysis, including proposed adjustments to data, underlying the rate caps proposed in the 2020 ICS Notice are now moot. See, e.g., Securus Comments at 20-23 (arguing that the Commission s proposed goodwill adjustment is unjustified); Securus Furchtgott-Roth Report at 15-22 (opining on the impropriety of excluding goodwill from costs); Pay Tel Wood Report at 13-17 (suggesting that the Commission s underlying analysis did not produce reliable results); Public Interest Parties Comments at 6-9 (discussing methodological flaws in the Commission s calculations). 246 See, e.g., Verizon v. FCC, 535 U.S. 467, 487-88 (2002); In re Permian Basin Area Rate Cases, 390 U.S. 747, 767 (1968) (Permian Basin); NARUC, 737 F.2d at 1141 (explaining that when  a figure selected by the agency reflects its informed discretion, and is neither patently unreasonable nor  a dictate of unbridled whim, then the agency's decision adequately satisfies the standard of review ); FPC v. Nat. Gas Pipeline Co., 315 U.S. 575, 585 (1942) (Natural Gas Pipeline) (describing a  zone of reasonableness within which the agency is free to fix a rate). 247 Permian Basin, 390 U.S. at 767; see Natural Gas Pipeline, 315 U.S. at 586 (explaining that ratemaking involves the making of  pragmatic adjustments ); see also FPC v. Hope Nat. Gas Co., 320 U.S. 591, 602-03 (1944) (Hope Natural Gas) (describing the ratemaking process and the balancing of interests). 34 Federal Communications Commission FCCCIRC2105-01 costs of providing inmate calling services exclude all costs properly assignable to their non-inmate calling services operations, enabled providers to inflate their reported costs. We find that this combination of incentives and reporting latitude almost certainly resulted in some overstatement of the providers costs of providing inmate calling services.248 Additionally, because the instructions for the Second Mandatory Data Collection did not require providers to separate the costs they incur in providing ancillary services from their total inmate calling services costs, our bounds include ancillary services costs for which providers separately recover fees and charges under our rules. Each of these factors skew the cost data upwards, resulting in upper and lower bounds that are likely higher than any bounds based on more accurate data. 84. Our zone of reasonableness approach involves three distinct steps. We begin by using data that providers submitted in response to the Second Mandatory Data Collection to establish upper bounds of potentially reasonable interstate provider-related rate caps for prisons and larger jails, respectively. Because the data we use in setting the upper bounds significantly overstate the providers actual mean contract costs per minute of providing inmate calling services beyond the general factors we have just discussed, we then make reasonable, conservative adjustments to the reported data and use those data to establish the lower bounds of our zones of reasonableness.249 Finally, we rely on our analysis of the record evidence and on our agency expertise to pick, from within those zones, reasonable interim interstate provider-related rate caps for prisons and larger jails. 85. Determining Upper Bounds for the Zones of Reasonableness. We find that the method proposed in the 2020 ICS Notice, taking the sum of the mean contract costs per minute plus one standard deviation relative to that mean, provides a reasonable method for determining the upper bounds of the zones of reasonableness for prisons and for larger jails.250 Under this approach, using the data submitted by all 12 providers, the mean contract cost per minute for prisons is $0.092, and the standard deviation relative to this mean is $0.041 per minute, resulting in a mean plus one standard deviation of $0.133 per minute.251 Similarly, the mean contract cost per minute for larger jails is $0.100, and the standard deviation from that mean is $0.118 per minute, making the mean plus one standard deviation $0.218 per minute.252 86. We find that these upper bounds overstate, by a wide margin, the providers actual costs of providing interstate inmate calling services for two reasons beyond the general effects we recounted above. First, at least two providers, GTL and Securus, calculated the return component of their costs using the prices their current owners paid to purchase the companies, rather than the amounts that they 248 See Second Mandatory Data Collection Instructions at 7-11; 2020 ICS Notice, 35 FCC Rcd at 8513, para. 82 (discussing inmate calling services providers that used relative revenues to allocate their indirect costs among contracts). 249 We describe these adjustments fully in Appendix G, infra. 250 One standard deviation from the mean of a normal distribution accounts for approximately 68% of the data, with half of the remaining 32% being above the mean and half below the mean, thus creating an additional buffer making it more likely that a provider will be able to recover its costs for any particular contract or facility. See Appx. E, infra; 2020 ICS Notice, 35 FCC Rcd at 8513-14, para. 83 (describing the method of calculation); see also Public Interest Parties Brattle Report at 11 ( In the FCC rates, 62% of the contracts have costs lower than the mean. Using the mean plus one standard metric, 93% get reimbursed at a rate higher than their per-minute costs. ). 251 We calculate these statistics for prisons after removing the cost-per-minute outlier related to GTL s contract for juvenile prisons in Maryland. By comparison, the mean cost per minute for prisons based on the data for the 12 responding providers including this outlier is $0.149, and the standard deviation is $0.658 per minute, resulting in the mean plus one standard deviation being $0.807 per minute. Appendix E explains why we exclude the Maryland juvenile prison contract. Appx. E, infra Part B. 252 See Appx. E, infra Part E (discussing and reviewing the calculation of the mean and standard deviation for larger jails). 35 Federal Communications Commission FCCCIRC2105-01 and the prior owners had invested in property used to provide interstate inmate calling services.253 Use of those purchase prices to calculate GTL s and Securus s costs is inconsistent with the well-established principle that the purchase prices of companies that possess market power  are not a reliable or reasonable basis for ratemaking. 254 Instead, the return component of GTL s and Securus s costs is properly calculated using the original cost of the property they use to provide inmate calling services at the point that property was first dedicated to public use through its use in the provision of inmate calling services.255 And, contrary to GTL s argument,256 the Commission has long held that payphone calling providers, including inmate calling services providers, possess monopoly power when (as is the case with GTL and Securus) they have obtained the exclusive right to provide calling services to correctional facilities.257 We reiterate that finding and, to eliminate any possible doubt, apply it to the purchase prices which GTL and Securus used in calculating the return component of their costs. 87. Second, and more significantly, these upper bounds incorporate GTL s costs as reported, even though (1) GTL admits that it lacks the accounting records that it would need to determine its actual costs of providing inmate calling services and (2) GTL s reported costs far exceed those reported by other providers serving comparable facilities.258 Despite these shortcomings, the data from the providers Second Mandatory Data Collection responses provide the best available data for determining the upper bounds of the zones of reasonableness.259 We therefore use $0.133 per minute as the upper bound for 253 Securus Cost Study at 12; 2020 ICS Notice, 35 FCC Rcd at 8517, para. 92 (explaining that GTL calculates the return component of costs by using  the invested capital of GTL ) (citing GTL Amended Description and Justification at 10); see also Jersey Cent. Power & Light Co. v. FERC, 810 F.2d 1168, 1175 (D.C. Cir. 1984) (recognizing that regulated rates are  calculated to generate a reasonable return on the original cost of property dedicated to public use) (emphasis in original). Under rate-of-return ratemaking, a company s cost of service equals a return component (i.e., allowed rate of return times the company s rate base) plus the expenses the company incurs in providing the regulated service. The use of the sale prices of a company as what amounts to its rate base absent a showing specifically justifying that practice is inconsistent with fundamental ratemaking principles. See Amendment of Part 65 of the Commission's Rules to Prescribe Components of the Rate Base and Net Income of Dominant Carriers, CC Docket No. 86-497, Order on Reconsideration, 4 FCC Rcd 1697, 1703, para. 58 (1989) (Rate Base Reconsideration Order); American Tel. and Tel. Co., Docket No. 19129, Phase II Final Decision and Order, 64 F.C.C.2d 1, 39-40, paras. 116-20 (1977) (AT&T Phase II Order) (rejecting AT&T s attempt to earn a return on  the amount of investment capital its investors had provided to AT&T, rather than on AT&T s prudent investment in property used and useful in the provision of service to the public). 254 Implementation of Sections of the Cable Television Consumer Protection & Competition Act of 1992: Rate Regulation, CS Docket No. 94-28, Second Report and Order, First Order on Reconsideration, and Further Notice of Proposed Rulemaking, 11 FCC Rcd 2220, 2244, para. 52 (1996); see, e.g., Illinois Bell Tel. Co. v. FCC, 911 F.2d 776 (D.C. Cir. 1990); see also Public Interest Parties Reply at 7-9 (arguing that the inclusion of GTL s invested capital when calculating rates is inconsistent with the principle that the purchase prices of companies possessing market power are not a reliable or reasonable basis for ratemaking). 255 See Rate Base Reconsideration Order, 4 FCC Rcd at 1703, para. 58; see also Louisiana Public Service Commission, 476 U.S. at 355, 365 ( The total amount that a carrier is entitled to charge for services, its  revenue requirement, is the sum of: (a) its current operating expenses, including taxes and depreciation expenses; plus (b)  a return on its investment  rate base. The original cost of a given item of equipment enters the rate base when that item enters service. ). 256 GTL Comments at 18-19; see also Securus Furchtgott-Roth Report at 16-18. 257 See 2002 Pay Telephone Order, 17 FCC Rcd at 3252-53, para. 10; supra Part III.C; see also GTL v. FCC, 866 F.3d at 404 (discussing winning bidders  locational monopolies ). 258 See Appx. G, infra Part B (indicating that GTL's average per-minute reported costs for prisons and larger jails are about twice as high as those of all other providers); GTL Sept. 14, 2020, Letter passim. 259 NARUC, 737 F.2d at 1141-42 (upholding the Commission s ratemaking action when a lack of concrete data rendered alternative options  to some extent infirm ); MCI v. FCC, 627 F.2d at 340-42 (stating that  [t]he best must (continued& .) 36 Federal Communications Commission FCCCIRC2105-01 determining a reasonable interstate provider-related rate cap for prisons and $0.218 per minute as the upper bound for determining a reasonable interstate provider-related rate cap for larger jails. In establishing these upper bounds, we are well-aware that the industry s actual mean contract costs of providing inmate calling services plus one standard deviation are significantly lower. 88. Determining Lower Bounds for the Zones of Reasonableness. We find the approach we use to determine the upper bounds of the zones of reasonableness relying on data from the Second Mandatory data collection and calculating the mean cost per minute plus one standard deviation relative to that mean separately for prisons and larger jails provides an appropriate starting point for determining the lower bounds of the zones. Because of the shortcomings in the providers reported data, we adjust those data using generally accepted statistical tools to remove outlier contracts and to replace GTL s reported data with data derived from contracts comparable to those GTL serves.260 Under this approach, the mean cost per minute for prisons is $0.052, the standard deviation relative to that mean is $0.012, and the mean plus one standard deviation is $0.064 per minute. Similarly, the mean cost per minute for larger jails is $0.065, the standard deviation from that mean is $0.015, and the mean plus one standard deviation is $0.080 per minute.261 These numbers $0.064 per minute and $0.080 per minute constitute the lower bounds of our zones of reasonableness for prisons and larger jails, respectively. 89. The construction of the lower bound begins by removing three outlying observations that skew the data and that would otherwise render the mean and standard deviation to be less precise measures of the data s central tendency.262 These three outlier contracts report costs of {[ ]} per minute for larger jails in Williamson, Texas, San Luis, Arizona, and West Texas, Texas, respectively.263 To put these cost levels in context, {[ ]} per minute is the highest cost per minute for any contract regardless of facility type or size, and {[ ]} and {[ ]} per minute are approximately three times and twice as large as the cost per minute for the next highest larger jail contract. Excluding these three outliers, costs per minute for larger jail contracts range from $0.03 to $0.17.264 Nothing in the record supports using such extreme costs to set provider-related rate caps. Further, these contracts would remain outliers, even under alternative methods of outlier identification proposed in the record.265 90. Next, we substitute reasonable surrogates for GTL s reported cost data to address significant (Continued from previous page) not become the enemy of the good, when holding that a lengthy delay caused by the Commission awaiting perfect data was unreasonable). 260 The related assumptions and adjustments are described at greater length below, and in Appendix G, infra, (reviewing the data and concluding that these adjustments are reasonable); see also Public Interest Parties Brattle Report at 14. 261 See Appx. G, infra (discussing and reviewing the calculations of the mean and standard deviation of the adjusted contract cost data for prisons and larger jails). 262 The central tendency of a distribution refers to the degree to which data is clustered around a central value, frequently measured by the mean, median, or mode. In general, the data s dispersion (as measured by the standard deviation) and central tendency are the main properties defining a distribution. 263 The outliers we address here were identified using the Grubbs method, a statistical approach we describe at length in Appendix G, infra. 264 See, e.g., Appx. G, infra Part A (reviewing these observations and the magnitude by which they differ from the rest of the dataset). As we describe in Appendix E, a single observation from a prison contract reports a cost per minute of {[ ]}, which we conclude is clearly erroneous and omit in entirety. Appx. E, infra Part B. 265 See, e.g., Securus Comments at 14 (identifying an alternative method using 1.5 times the interquartile range of the dataset to identify outliers, which would also identify and exclude these observations); Securus Cost Study at 14- 16 (discussing the use of 1.5 times the interquartile range to exclude outliers); see also Appx. E, infra (identifying several additional reasons why these contracts are considered outliers). 37 Federal Communications Commission FCCCIRC2105-01 and unresolved issues with those data, as identified in the 2020 ICS Notice and discussed more fully in this Report and Order.266 These issues remain unresolved and incurable on the record before us because GTL failed to provide meaningful cost data in its Second Mandatory Data Collection response or in its response to the Bureau s July 15, 2020 Letter, or to suggest any alternative means of assisting the Commission in its efforts to estimate GTL s costs of providing inmate calling services. We find that the best way to address this situation is to adjust GTL s reported contract-level cost data using the k-nearest neighbor method.267 Specifically, we replace the cost-per-paid-minute data reported for each prison and larger jail contract served by GTL with the weighted average of the data for the three most comparable (i.e., nearest neighbor) contracts served by other providers. To determine a contract s  neighbors, we compare its average daily population, total inmate calling services minutes, total commissions paid, and facility type to all other contracts in our dataset.268 This approach reasonably preserves the non-cost information GTL reported for the prisons and larger jails it serves, while reducing the likelihood that the cost data for those facilities are overstated to a significant extent. We find that this approach, in combination with the removal of outlier observations as described above, provides a reasonable method for determining the lower bounds of the zones of reasonableness. 91. In the 2020 ICS Notice, the Commission proposed to reduce GTL s reported costs by 10% in order to address its data reporting issues, an approach we now abandon in light of convincing opposition in the record.269 Instead, we rely on the k-nearest neighbor method, rather than alternative methods for addressing the deficiencies in GTL s reported data, because we find it provides the best approach for setting the lower bounds of the zones of reasonableness. In particular, although the Winsor method also would provide a reasonable method for replacing GTL s data with surrogate data, that method would simply replace GTL s outlier data with the next-highest observation, as opposed to the multifactor comparison provided by our adopted approach.270 In other words, the Winsor method would adjust costs downward to the next-highest observation without consideration of whether the contract with the next highest costs is similar in any other dimensions, such as minutes of use or average daily population. We find the k-nearest neighbor method s reliance on three comparable contracts makes it a superior tool for 266 2020 ICS Notice, 35 FCC Rcd at 8518-20, paras. 94-98; see Boroughs of Ellwood City, Grove City, New Wilmington, Wampum, & Zelienople, Pa. v. FERC, 731 F.2d 959, 965 (D.C. Cir. 1984) (declining to disturb the agency s interim decision to proceed with establishing a uniform method of calculating rate base elements despite a temporary sacrifice in accuracy). As we recount above, alone among providers, GTL reported no direct costs for inmate calling services other than bad debt costs, although it certainly incurs other costs that are causally related to providing inmate calling services. Additionally, GTL s reported costs are much higher than most other providers, in contradistinction to our expectations of economies of scale. In fact, GTL s total revenues per minute from prisons are less than its allocated costs per minute, the only provider for which this is true. See generally Appx. G, infra. 267 See American Public Communications, 215 F.3d at 56 (upholding Commission action that relied on disputed cost data, stating that  we cannot require an agency to enter precise predictive judgments on all questions as to which neither its staff nor interested commenters have been able to supply certainty ). We describe this method in greater detail and show its application to GTL s data in Appendix G, infra. 268 See Appx. G, infra (discussing the k-nearest neighbor approach). 269 See 2020 ICS Notice, 35 FCC Rcd at 8517-18, para. 93. Commenters addressing this proposal were nearly unanimous in rejecting it. Some commenters observe that a 10% decrease would fail to resolve all of the issues presented by GTL s reported data, while others argue this approach suffers fundamental methodological flaws of its own. See, e.g., GTL Godek Report at 20 (contending that the proposed 10% discount lacks an economic basis); Public Interest Parties Comments at 5 (describing the reduction as  necessary but not sufficient ); Securus Comments at 20, 22-23 (criticizing the proposal for conflating financial data with accounting data); Securus Furchtgott-Roth Report at 17-21; Worth Rises Comments at 3-4 (arguing that a 10% decrease was inadequate to resolve all the flaws in GTL s reported data). 270 Public Interest Parties Brattle Report at 14 n.70 (describing winsorization as  a technique where the outlier values are substituted with the highest value in the distribution without outliers, and citing Bonifacio Llamazares, An Analysis of Winsorized Weighted Means, 28 Group Decision and Negotiation 907-33 (2019)). 38 Federal Communications Commission FCCCIRC2105-01 addressing the dataset before us because it identifies a greater degree of similarity between observations. 92. We also considered removing all of GTL s data from our lower bound calculations, an approach on which the Commission sought comment in the 2020 ICS Notice.271 We find this approach too sweeping, however, because it would exclude all of GTL s prisons and larger jails from our analysis. GTL s Second Mandatory Data Collection response includes extensive non-cost information on these facilities, regarding matters such as average daily population and paid minutes of use, that depict the inmate calling services operations of roughly {[ ]} of all prisons and larger jails, or roughly {[ ]} of reported average daily population for those facilities. Excluding this information from our analysis would create a significantly incomplete picture of the industry, resulting in considerably less accurate estimates of industrywide mean contract costs.272 Additionally, the remaining contract information from GTL s data provides necessary distinguishing characteristics that informed our selection of the nearest neighboring contracts. 93. Determining Interim Interstate Provider-Related Rate Caps for Prisons and Larger Jails. The upper bound of the zone of reasonableness for the provider-related rate cap for prisons is $0.133 per minute and the lower bound is $0.0643 per minute. For larger jails, the upper bound is $0.218 per minute and the lower bound is $0.0802 per minute. Based on our analysis of the available information, we find that $0.12 per minute will provide a reasonable interim interstate provider-related rate cap for prisons and that $0.14 per minute will provide a reasonable interim interstate provider-related rate cap for larger jails. Significantly, our analysis confirms that these interim interstate rate caps will allow most, if not all, providers to recover their costs (as reported in their responses to the Second Mandatory Data Collection and allocated among their contracts as described above) of providing interstate calling services to incarcerated people.273 And, because those fully distributed costs likely overstate the actual costs of providing inmate calling services under any particular contract, we find it unlikely that any provider will be unable to recover its actual costs of providing interstate inmate calling services under any contract. To the extent that there are some small number of situations where a provider cannot recover its actual costs of providing interstate inmate calling services under our interim caps, we adopt a waiver process that will allow us to grant relief from those caps if we find such relief is warranted based on our analysis of data that allows us to more accurately and precisely identify that provider s cost of providing interstate inmate calling services than can be achieved using the data currently before us. 94. A provider-related rate cap component of $0.12 per minute for prisons is $0.02 above the midpoint between the upper and lower bounds of the zone of reasonableness (approximately $0.10). The providers incentives to overstate costs provide a compelling reason to give less weight to the upper bound estimate. We find that removal of outliers as reflected in the lower bound number based on our statistical approach to be appropriate as a general matter, given the need to measure the central tendency of the data as accurately as possible. We are reluctant to give this adjustment too much weight at this time, however, because we do not know the precise reason why these outlier estimates are so high. Although we also find the adjustment to GTL s costs to be fully justified, we are reluctant to place too much weight on this adjustment because this is an empirical approximation relying on the consistency and validity of the contract data reported by all other firms. After closely examining the imperfect data reported by providers that have an incentive to overstate their costs, and after developing the calculation of both of the upper and lower bounds, we find that an interim provider-related rate component of $0.12 per minute for prisons will allow providers to recover their actual costs of providing inmate calling services at those facilities, and the foregoing reasons counseling less reliance on the upper bound make 271 See 2020 ICS Notice, 35 FCC Rcd at 8518, para. 94 (recognizing that GTL appeared to overstate its inmate calling services costs). 272 See Appx. G, infra. 273 See Appx. E, infra Part F (showing that under the interim caps, providers will recover their fully distributed reported costs for approximately {[ ]} of prison contracts and {[ ]} of larger jail contracts). 39 Federal Communications Commission FCCCIRC2105-01 this choice even more conservative, thereby ensuring that the providers will receive reasonable compensation for their services. 95. Likewise, we find that an interim rate cap of $0.14 per minute for larger jails will enable providers to recover their costs of providing interstate inmate calling services. In selecting this value, we assign significant weight to the result from the cost study conducted by Securus s outside consultant. This estimate, suggesting that Securus s cost of serving larger jails is at most {[ ]} per minute, is based on highly disaggregated cost data and a relatively sophisticated set of cost allocation procedures tailored specifically to the business of providing inmate calling services and appears to be consistent with cost-causation principles.274 This number is the maximum per-minute cost estimate among the estimates Securus s consultant developed for Securus s larger jails, and we find that it provides a cushion large enough for providers to earn at least a normal risk-adjusted rate of return. Further, because there are relatively few providers for larger jails, as compared to the larger number of both large and small providers that serve jails with average daily populations less than 1,000, we would expect a small variance in the true per-minute costs of providing inmate calling services at larger jails, relative to the overall variance. A rate cap of $0.14 per minute provides an even larger cushion, further ensuring that providers will have the opportunity to recover actual costs. 96. A provider-related rate cap component of $0.14 per minute for larger jails is just below the midpoint between the upper and lower bounds of the zone of reasonableness (approximately $0.15), but still well above the lower bound of approximately $0.08. As with prisons, the providers incentives to overstate their costs provide a compelling reason to give less weight to the upper bound estimate. We again are reluctant to place too much weight on the GTL data adjustment for the reasons discussed regarding prisons. After closely examining the data, we find that an interim provider-related rate component of $0.14 per minute for larger jails will enable the majority of providers to recover their actual costs of providing inmate calling services at those facilities. Further, we note that this $0.02 differential between the rates we select for prisons and larger jails approximates the 22% cost differential shown in the record.275 97. As we describe in Appendix E, we find that setting the provider-related rate component at these levels for prisons and larger jails will allow providers at substantially all facilities to recover their reported costs.276 The responses to the Second Mandatory Data Collection provide data for 129 prisons and 182 larger jails.277 Following the process outlined in Appendix E, we find that 66 prisons and 15 larger jails reported per-minute costs above the respective interim provider-related rate caps.278 Looking at these outliers more closely, however, reveals that all but three of these facilities (66 prisons and 12 larger jails) are served by GTL, which lacked the records to accurately determine its costs of providing calling services to incarcerated people.279 This alone creates doubt as to whether these facilities should be viewed as legitimate outliers, rather than simply illustrations of the issues we observe throughout GTL s reported data.280 The remaining facilities (three larger jails) all exhibit per-minute costs that exceed their 274 Securus Cost Study at 1 fig. 1 (identifying the maximum per-minute cost for Securus jails with an average daily population over 1,000 as {[ ]}). 275 See, e.g., Appx. E, infra. 276 Analysis of contract revenues and underlying contract characteristics also suggests a significant majority of these contracts would be viable at our proposed caps. See generally Appx. E, infra. 277 See generally id. (reporting the number of facilities of different types reflected in the data). 278 See generally id. See also Securus Comments at 20 (arguing that  the Commission should calculate how many facilities will have contract costs above rate caps and explain why they will not be fully compensated ). 279 See Appx. G, infra; supra paras. 88-89. 40 Federal Communications Commission FCCCIRC2105-01 per-minute revenues, suggesting that the actual costs of providing inmate calling services to them are lower than our estimates.281 Finally, we reiterate that to the extent the actual costs of serving a facility exceed the applicable interim rate cap, a provider may request a waiver using the process set forth in this Report and Order.282 98. The record supports these interim rate cap choices. The cost study presented by Securus s outside consultant estimates that Securus incurs maximum per-minute costs of {[ ]} to serve prisons and {[ ]} to serve larger jails, exclusive of site commissions.283 Although we find that these figures are likely overstated,284 the study s cost estimates suggest that interim provider-related rates caps of $0.12 for prisons and $0.14 for larger jails will provide a cushion large enough for the providers at those facilities to earn at least a normal risk-adjusted rate of return on their capital investment in providing inmate calling services.285 Although we do not agree with every aspect of this study, we find that a number of factors support its credibility and that it therefore provides valuable supporting evidence that the rate caps we choose here provide an adequate interim allowance for differences among providers and markets, relative to the average inmate calling services costs reflected in the data filed in response to the Second Mandatory Data Collection.286 99. Our analysis of the mean per-minute revenues from prisons and larger jails further corroborates our choices. As discussed in Appendix E, our revenue analysis indicates that it will be commercially viable for providers to serve the vast majority of prisons and larger jails under the provider- related rate caps we adopt today.287 For example, as the Appendix illustrates, approximately 74% of prisons and 65% of larger jails have reported per-minute revenues net of site commissions under those interim caps.288 Because profit-maximizing firms are unlikely to bid for contracts at which they will operate at a loss, this suggests the interim interstate caps will not undermine providers profitability.289 And a large portion of the remaining prisons and larger jails those with per-minute revenues that are higher than $0.12 and $0.14 per minute, respectively have allocated per-minute costs less than the applicable interim provider-elated rate caps, which likewise suggests they will remain profitable under (Continued from previous page) 280 Repeating this analysis after adjusting GTL s cost data using the k-nearest neighbor approach used to set the lower bound shows that all of GTL s facilities would have per-minute costs below the interim interstate provider- related rate caps. See Appx. G, infra. 281 See, e.g., Appx. E, infra. 282 As indicated in the 2020 ICS Notice,  the Commission has permitted inmate calling services providers to file a petition for a waiver if it believed it could not recover its costs under the Commission-adopted rate caps. 2020 ICS Notice, 35 FCC Rcd at 8523-24, para. 108 (citing 2013 ICS Order, 28 FCC Rcd at 14153, para. 82); see 2015 ICS Order, 30 FCC Rcd at 12871, para. 219. We refine our waiver procedure today. Infra Part III.C.5. 283 See Securus Cost Study at 2-4 (discussing source materials and methodologies); Appx. E, infra Part F (same). 284 See Appx. E, infra Part F. 285 As the {[ ]} per minute cost has been specifically developed for providers at these largest jails, and there are relatively few of these providers, we would not expect there to be a big variance in the true per-minute costs of providing inmate calling services at these jails. See generally Securus Cost Study at 17, fig. 8; Appx. E, infra Part E (observing that, using a simple average methodology, Securus calculated costs plus a standard deviation of {[ ]} for its prisons and {[ ]} for its larger jails). 286 See generally Appx. E, infra Part E (discussing the abundant rationale in favor of credibility). 287 See generally Appx. E, infra Part F (reviewing the revenue analysis). 288 Revenues net of site commissions are reported revenues minus reported site commission payments. 289 We expect these revenues to cover costs of service below $0.12 per-minute for prisons and $0.14 per minute for larger jails, because higher costs would make such contracts unprofitable, and providers would have no reason to voluntarily accept such terms. See Appx. E, infra Part F. 41 Federal Communications Commission FCCCIRC2105-01 those caps.290 In total, therefore, our interim rate caps will allow approximately 81% of all prison contracts and approximately 96% of all larger jail contracts to cover the costs the providers reported in response to the Second Mandatory Data Collection.291 These percentages would be even higher if we were to exclude the providers costs of providing ancillary services and otherwise rely on the providers actual, rather than reported, costs.292 These percentages are also higher if we allow for the increased call minutes that will likely result because our new interim caps will, by lowering prices, increase call volumes.293 And these cost recovery figures ignore that all costs are likely overstated, such that there is further reason to believe these percentages would be even higher in practice. 4. Accounting for Correctional Facility Costs 100. Based on the record, we adopt additional new rate cap components (the facility-related rate components) reflecting two different types of site commission payments294 those required under codified law or regulations and those payments prescribed under negotiated contracts made to correctional facilities.295 The 2020 ICS Notice proposed to permit providers to recover an additional $0.02 per minute for all types and sizes of facilities to account for the costs correctional facilities incur that are directly related to the provision of inmate calling services.296 We adopt a modified version of that proposal based on record evidence that $0.02 per minute for every facility may not permit recovery of all legitimate facility costs related to inmate calling services, and may not be required at others.297 For the time being, we decline to adopt defined facility-related rate components for jails with average daily populations below 1,000. Instead, for prisons and larger jails only, we adopt two distinct site commission-related rate components reflecting the different types of site commissions: site commission payments that providers are obligated to pay under formally codified laws or regulations and payments 290 See Appx. E, infra Part F (concluding that 89% of the larger jails that present high revenues (greater than $0.14 per minute) have allocated per-minute costs of less than $0.14, and that 27% of high-revenue prisons (greater than $0.12 per minute) have allocated per-minute costs of less than $0.12). 291 See generally Appx. E, infra. 292 See Appx. E (observing that  our revenue analysis includes revenues from automated billing and paper billing fees, our cap only applies to per call fees and that  providers can earn additional revenues through these fees ). 293 See Appx. E, infra Part F. 294 See 47 CFR § 64.6000(t) (defining site commissions). Site commission payments are payments made by calling services providers to correctional facilities and broadly encompass any form of monetary payment, in-kind payment requirement, gift, exchange of services or goods, fee, technology allowance, product or the like. They can be expressed in a variety of ways, including as per-call or per-minute charges, a percentage of revenue, or a flat fee. 2015 ICS Order, 30 FCC Rcd at 12818, para. 117 & n.371. 295 See, e.g., GTL v. FCC, 866 F.3d at 413 (explaining that site commissions can be  mandated by state statute or  required by state correctional institutions as a condition of doing business with [inmate calling services] providers ); GTL Godek Reply Report at 8 (highlighting that site commissions are  determined by the facilities or by regulations ); GTL Apr. 26, 2021 Ex Parte Godek Report at 6 (commenting that site commissions  are determined by one or more of the following conditions: they can be a) set or constrained by regulation, b) set by the facility at some level or within some range, and c) determined as part of the competitive bidding process established by the facility ). 296 2020 ICS Notice, 35 FCC Rcd at 8520-23, paras. 99-107. 297 See, e.g., California State Sheriffs Association Comments at 2 (cautioning that a one-size-fits-all approach may not allow for consideration of the  many variables associated with the cost of providing inmate calling services); National Sheriffs Association Comments at 1 (highlighting that the proposed $0.02 allowance  does not accurately capture the costs for smaller jails ); Securus Comments at 33 (emphasizing that  a  one-size-fits-all allowance for site commissions does not apply to the varying needs of each agency for site commissions ); Pay Tel Reply at 11 (explaining that the Commission s proposed $0.02  flat recovery across all facilities is at odds with the Commission s prior conclusions regarding the impact of facility size on costs). 42 Federal Communications Commission FCCCIRC2105-01 that providers agree, by contract, to make. 101. With regard to the former type of site commission, we adopt a legally-mandated facility rate component that reflects payments that providers make to correctional facilities pursuant to federal, state, or local law, regulation, statute, or other rule or law that operates independently of the contracting process between correctional institutions and providers.298 These mandatory payments take varied forms, including per-call charges299 or prescribed revenue percentages,300 and may be imposed on calling service providers by state and local governments through statutes, regulations, or local ordinances. Given the codified nature of these payments, for the purpose of the interim actions we take herein and based on the current record, we recognize them as a cost that providers may recover through rates for interstate and international inmate calling services, consistent with section 276 s fair compensation provision.301 Providers may recover the costs of these payments, without any markup, as a separate component of the total permissible interstate and international rate caps we adopt today. 102. Next, we adopt a contractually-prescribed facility rate component that permits providers to recover, as a component of their total per-minute interstate and international calling rates for prisons and larger jails, that portion of such site commission payments that we determine for the purpose of this interim action is reasonably related to the facility s cost of enabling inmate calling services at that facility. Site commission payments prescribed under negotiated contracts impose contractual obligations on the provider and, in our judgment, on the current record, reflect not only correctional officials discretion as to whether to request site commission payments as part of requests for proposals,302 and if so in what form and amount,303 but also providers voluntary decisions to offer payments to facilities that are mutually beneficial304 in the course of the bidding and subsequent contracting process.305 Providers may recover up 298 See, e.g., GTL Comments at 28-30 (providing examples of state and local site commission requirements); Securus Comments at 32-33 (contrasting jurisdictions prohibiting site commissions with those that require them). 299 See, e.g., Tenn. Code Ann. § 41-7-104 (West 2013) (requiring a fee of $0.10 for each completed inmate calling services call). 300 See, e.g., Tex. Gov t Code Ann. § 495.027(a) (West 2021) (requiring a commission amounting to 40% of gross revenue). 301 GTL v. FCC, 866 F.3d at 413. 302 See GTL Godek Report at 21 (highlighting that  site commissions . . . are determined through the various competitive processes used in the award of [inmate calling services] contracts ); Pay Tel Comments at 10 (explaining that  facilities generally impose these . . . required costs on [inmate calling services] providers as a condition precedent to the providers ability to offer [inmate calling services] that flows through the site- commission-imposing correctional facility ); Securus Comments at 26-27. 303 Where a law, rule, or regulation merely allows a correctional facility to collect site commissions, or requires a correctional facility to collect some amount of site commission payment but does not prescribe any specific amount, site commissions arising from this type of law would also fall into the category of a site commission payment prescribed by contract, because the correctional facilities and providers can negotiate, in their discretion, regarding how much the providers will pay in site commissions. See, e.g., Wis. Stat. Ann. § 301.105 (West 2020) ( The department shall collect moneys for commissions from telephone companies for contracts to provide telephone services to inmates. ); Or. Rev. Stat. Ann. § 169.681 (West 2020) (limiting site commission fees to $0.05 per minute or less). 304 See, e.g., Agreement for the Installation, Configuration and Maintenance of an Inmate Telephone System Between Department of Correction, City of New York, and Securus at 14, 19, paras. 3.51, 9.7 (July 16, 2014), https://www.prisonphonejustice.org/media/publications/2019_Amended_NYC_Securus_Contract.pdf (Securus-New York City Contract) (City of New York contract with Securus, providing for a revenue share model of 81.1% with minimum $5 million guarantee in exchange for Securus s exclusive right to serve the City s correctional facilities not only for interstate and intrastate phone calls but also for  messaging,  email, and all other  existing and future inmate related communications ). This contract was subsequently amended (Amendment 3, executed May 1, 2019) to exclude all revenue-share payments, among other changes, resulting from changes in the applicable local law. See New York City Council, Local Law No. 2018/144 (codified at N.Y.C. Admin. Code § 9-154 (West 2021)). 43 Federal Communications Commission FCCCIRC2105-01 to $0.02 per minute to account for these facility costs. 103. To promote increased transparency regarding the total rates charged to consumers of inmate calling services, we require providers to clearly label a legally-mandated facility rate component or a contractually-prescribed facility rate component, as applicable, in the rates and charges portion of an calling services consumer s bill, including disclosing the source of such provider s obligation to pay that facility-related rate component.306 104. Finally, to avoid any confusion, we reiterate that nothing in this section, or any other section of this Report and Order, is intended to result in a higher permissible total rate cap for any interstate call from any size facility than the $0.21 that existed for interstate debit and prepaid calls before today and that continues to apply to all providers for all types of calls from jail facilities with average daily population below 1,000.307 During the eight-year period that providers have been subject to the $0.21 rate cap for all facilities, they have had the ability to avail themselves of a waiver process if they deemed that rate cap to be insufficient to enable them to recover their inmate calling services costs. With the exception of a single temporary waiver request relating specifically to the interim rate caps dating back to 2014, no other provider has sought a waiver of the $0.21 interstate rate cap claiming that cap fails to permit recovery of that provider s costs at any size facility.308 The absence of further waiver requests over the past eight years leads us to conclude that $0.21 is sufficient for providers to recover their costs, (Continued from previous page) 305 The fact that a state law specifically permits certain correctional facilities to recover site commissions from providers but does not mandate such payments does not change the nature of these discretionary payments. See, e.g., Or. Rev. Stat. Ann. § 169.681 (West 2020) (limiting site commission fees to $0.05 per minute or less); Securus Comments at 28 (describing Cal. Penal Code § 4025(d) (West 2021) which specifically allows sheriffs to receive commission payments from inmate calling services providers); see also, e.g., Response of GTL to Request for Information and Documents Regarding GTL s Inmate Calling Services Costs, WC Docket No. 12-375, Attach. (Documents  GTL Response to Request #14) (filed Sept. 14, 2020) {[ ]}; Response of GTL to Request for Information and Documents Regarding GTL s Inmate Calling Services Costs, WC Docket No. 12-375, Attach. (Documents  GTL Response to Request #14) (filed Sept. 14, 2020) {[ ]}. 306 Providers that make no site commission payments (and thus are not permitted to pass any facility-related rate component on to consumers) are not required to include a facility-related rate component line item on end user bills. 307 See supra Part III.C.1. 308 See Rates for Interstate Inmate Calling Services; Pay Tel Communications, Inc. s Petition for Waiver of Interim Interstate ICS Rates, WC Docket No. 12-375, Order, 29 FCC Rcd 1302 (WCB 2014). We note that Securus filed a general  me too waiver request in 2014 asking the Commission to extend Pay Tel s limited waiver to all other providers serving the same size jails. See Rates for Interstate Inmate Calling Services; Securus Technologies, Inc., Petition to Expand Pay Tel Waiver; Securus Technologies, Inc., Petition for Leave to Add Fee for Voice Biometrics Technology, WC Docket No. 12-375, Order, 29 FCC Rcd 5973 (WCB 2014) (Securus Waiver Order). The Commission denied Securus s waiver request without prejudice as Securus failed to make an adequate showing for a waiver to be granted, and also failed to provide sufficient, or any, cost and revenue data to support its claims. Securus Waiver Order, 29 FCC Rcd at 5978, para. 12. In addition, a handful of other waiver requests relating to other sections of the inmate calling services rules have also been filed but these waivers typically related to timeframes within which new regulations associated with ancillary services reforms became effective. See, e.g., GTL Petition for Waiver of Deadline to Implement Rule 64.6110 for Prisons, WC Docket No. 12-375 (filed Jan. 5, 2016), https://ecfsapi.fcc.gov/file/60001400604.pdf; GTL Petition for Waiver of Deadline to Implement Rule 64.6100(a) for Prisons, WC Docket No. 12-375 (filed Jan. 8, 2016), https://ecfsapi.fcc.gov/file/60001402728.pdf; GTL Petition for Waiver of Deadline to Implement Rules 64.6080 and 64.6090 for Jails, WC Docket No. 12-375 (filed June 1, 2016), https://ecfsapi.fcc.gov/file/60002090309.pdf. 44 Federal Communications Commission FCCCIRC2105-01 including any costs related to site commission payments. Thus, no provider may assess a provider-related rate component and facility-related rate component that, added together, results in a total interstate rate for any interstate call from any size facility of more than $0.21. Operationally, providers remain free to impose the legally-mandated facility rate component at the level specified by the relevant statute or rule. If the resulting cumulative total rate exceeds $0.21 per minute, providers would need to charge a lower provider-related rate. Based on our understanding and awareness of the various state statutes or rules that underlie legally-mandated facility rate components, we do not expect this to occur, however. Nevertheless, providers that cannot cover their inmate calling services costs under the $0.21 per minute total maximum rate cap may seek a waiver of our interim rate caps. 105. Background. The Commission has historically described site commission payments as  a division of locational monopoly profit. 309 Over the past five years, however, the Commission has recognized that site commissions may not always exclusively compensate correctional facilities  for the transfer of their market power over inmate calling services to the inmate calling services provider; in some instances, site commission payments may serve in part to compensate correctional facilities for costs that the facilities  reasonably incur in the provision of inmate calling services. 310 Although the Commission and the D.C. Circuit each have recognized the distinction between portions of these payments,311 we agree with commenters that it is  difficult to disentangle which part of the site commission payment goes towards reasonable costs and which portion is due to the transfer of market power. 312 106. Although the Commission declined to permit the recovery of any portion of site commission payments to account for facility-related costs in the 2015 ICS Order,313 the Commission explained that record evidence suggested that if  facilities incurred any legitimate costs in connection with [inmate calling services], those costs would likely amount to no more than one or two cents per billable minute. 314 In 2016, when the Commission reconsidered its decision to categorically exclude site commissions in the 2015 ICS Order, it concluded that some facilities likely incur costs directly related to the provision of inmate calling services that may amount to more than one or two cents a minute.315 The Commission therefore increased the rate caps it had adopted in the 2015 ICS Order to  better ensure that providers are able to receive fair compensation for their services by adopting an additive to the 2015 rate 309 See, e.g., Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, CC Docket No. 96-128, Third Report and Order, and Order on Reconsideration of the Second Report and Order, 14 FCC Rcd 2545, 2562 para. 37 (1999) (1999 Pay Telephone Order); Public Interest Parties Comments at 7 n.36; Letter from Cheryl A. Leanza, Policy Advisor, United Church of Christ, OC Inc. & Al Kramer, Senior Fellow, Public Knowledge, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 1-2 (filed Mar. 28, 2021) (UCC and Public Knowledge Mar. 28, 2021, Ex Parte) (highlighting that the Commission  rejected that these locational payments could be treated as costs in the 1999 Pay Telephone Order). 310 See, e.g., 2020 ICS Notice, 35 FCC Rcd at 8520, para. 100; see also Public Interest Parties Comments at 7 n.36. 311 GTL v. FCC, 866 F.3d at 414 ( We also leave it to the Commission to assess on remand which portions of site commissions might be directly related to the provision of [inmate calling services] and therefore legitimate, and which are not. ); 2013 ICS Order, 28 FCC Rcd at 14135-36, para. 54 n.203 ( Although it is clear that site commissions are a revenue stream to the correctional facility, we cannot foreclose the possibility that some portion of payments from [inmate calling services] providers to some correctional facilities may, in certain circumstances, reimburse correctional facilities for their costs of providing [inmate calling services] ). 312 Public Interest Parties Brattle Reply Report at 14. 313 2015 ICS Order, 30 FCC Rcd at 12835, para. 139 (leaving the issue of site commissions  to [inmate calling services] providers and facilities to negotiate the amount of any payments from the providers to the facilities, provided that those payments do not drive the provider s rates above the applicable rate cap ). 314 Id. 315 2016 ICS Reconsideration Order, 31 FCC Rcd at 9309, para. 17. 45 Federal Communications Commission FCCCIRC2105-01 caps that differed among facility size.316 The data and other evidence supporting the 2016 facility-cost additives suggested that per-minute facility costs associated with inmate calling services were higher in smaller facilities than in larger ones, so the Commission adopted a tiered framework for site commission payments based on facilities average daily populations.317 These rate tiers mirrored the tiers the Commission had used to establish the permanent rate caps adopted in the 2015 ICS Order.318 107. The D.C. Circuit s 2017 vacatur of the 2015 ICS Order rate caps in GTL v. FCC, based in part on the finding that the Commission s decision to categorically exclude site commission payments from those rate caps was arbitrary and capricious,319 led the Commission to ask questions in the 2020 ICS Notice aimed at determining  which portions of site commissions might be directly related to the provision of inmate calling services and therefore legitimate, and which are not. 320 The 2020 ICS Notice proposed a $0.02 per minute additive based on staff  analysis of the costs correctional facilities incur that are directly related to providing inmate calling services and that the facilities recover from calling service providers as reflected by comparing provider cost data for facilities with and without site commissions. 321 The Commission sought comment on its analysis, including whether it should vary the allowance for site commission payments based on a facility s average daily population.322 It also sought comment on whether a $0.02 per minute allowance would be adequate to cover the costs that jails with average daily populations less than 1,000 incur in connection with the provision of interstate and international inmate calling services.323 The Commission asked correctional facilities to  provide detailed information concerning the specific costs they incur in connection with the provision of inmate calling services. 324 108. Full Recovery of Site Commissions Is Not Required. Some providers argue that the Commission must allow for full recovery of all site commission payments because inmate calling services providers  are required to pay site commissions and have no say in the elimination or substantial reduction of such commissions. 325 We disagree. 109. The D.C. Circuit held that, because the Commission acknowledged that some portion of some providers site commission payments might represent  legitimate costs of providing inmate calling services, the Commission could not reasonably  categorically exclude[] site commissions and then set the rate caps at below cost. 326  Ignoring costs that the Commission acknowledges to be legitimate, the court explained,  is implausible. 327 But the court left it to the Commission to determine  which portions of site commissions might be directly related to the provision of ICS and therefore legitimate, and which 316 Id. at 9307, para. 12. 317 Id. at 9307, 9311, paras. 12, 22. 318 2015 ICS Order, 30 FCC Rcd at 12787, para. 48. 319 GTL v. FCC, 866 F.3d at 417. Because the revised rate caps adopted on reconsideration in 2016 to provide for the recovery of site commission costs were based on the same methodology the court had vacated in GTL v. FCC, the D.C. Circuit also vacated and remanded the 2016 ICS Reconsideration Order. 2017 Securus, 2017 U.S. App. LEXIS 26360, at *4-5. 320 2020 ICS Notice, 35 FCC Rcd 8522, para. 103. 321 2020 ICS Notice, 35 FCC Rcd at 8522, para. 103; see also 2020 ICS Notice, 35 FCC Rcd at 8572, Appx. H. 322 Id. at 8522, para. 103. 323 Id. para. 104. 324 Id. paras. 103-04. 325 Securus Comments at 29; see GTL Comments at 30; Pay Tel Comments at 8-9. 326 GTL v. FCC, 866 F.3d at 413 (internal quotation marks omitted). 327 Id. 46 Federal Communications Commission FCCCIRC2105-01 are not. 328 110. Under section 201(b), the Commission has a duty to ensure that  charges and  practices  for and in connection with interstate and international telecommunications services including inmate calling services are not  unjust or unreasonable. 329 As explained, incarcerated people and the people they call have no choice in their telephone service provider.330 Instead, each correctional facility has a single provider of inmate calling services that operates as a monopolist within that facility. And very often, correctional authorities award the monopoly franchise for inmate calling services based in part on what portion of inmate calling services revenues a provider has offered to share with the facility.331 Without effective regulation, providers bidding for a facility s monopoly franchise compete to offer the highest site commission payments, which they then recover through correspondingly higher rates charged to incarcerated people and their families. 111. As discussed in greater detail below, in view of these market dynamics, and based on the record, we reject the claim that any and all site commission payments that a provider might elect to offer a correctional facility in the course of contract negotiations for the facility s monopoly franchise are  real, required costs [forced] on [inmate calling services] providers as a condition precedent to the providers ability to offer [inmate calling services]. 332 That claim is at odds with well-established principles of ratemaking.333 And the providers position has no limiting principle. Under their logic, incarcerated people and the people with whom they communicate by telephone may be forced to pay rates for the calling services they use that cover items wholly unrelated to those services.334 This cannot be reconciled with our statutory duty to ensure that incarcerated people and the people with whom they speak are 328 Id. at 414 (emphasis added); see also UCC and Public Knowledge Mar. 28, 2021, Ex Parte at 5 (explaining that the D.C. Circuit s remand  left it open to the Commission, based on a reasoned analysis, to conclude that no portion of the site commissions are part of the legitimate cost of providing the service if that is what the record reveals ). 329 47 U.S.C. § 201(b). 330 See supra Part III.A. 331 See, e.g., Human Rights Defense Center Comments at 2 (highlighting that calling service providers  surrendered larger and larger shares of their billed phone rates as kickbacks to the detention facilities that offered them monopoly contracts ). 332 Pay Tel Comments at 10; see also GTL Reply at 11 (claiming that site commissions are  a condition of doing business ). 333 See, e.g., NARUC v. FERC, 475 F.3d 1277, 1280 (D.C. Cir. 2007) ( [A] common test for the lawfulness of rates is their connection to the reasonably-incurred costs of providing the regulated service. ); NAACP v. FPC, 425 U.S. 662, 666-69 (1976) (holding that the Federal Power Commission s statutory authority to  establish  just and reasonable rates gave the agency  ample authority to prevent a regulatee from charging consumers for  unnecessary or illegitimate costs that the regulatee might incur through  racially discriminatory employment practices ); see also infra paras. 114-35 (discussing contractually-prescribed and legally-mandated site commissions in the context of the longstanding section 201(b) framework recognizing that just and reasonable rates are focused on recovering prudently incurred investments and expenses that are used and useful in the provision of the regulated services). 334 See, e.g., Human Rights Defense Center Comments at 3 (explaining that  no one really knows how much these . . . companies spend in kickbacks, criminal bribes, campaign donations, lobbying and other expenses to secure these contracts ); Peter Wagner & Alexi Jones, Prison Policy Initiative, On Kickbacks and Commissions in the Prison and Jail Phone Market (Feb. 11 2019), https://www.prisonpolicy.org/blog/2019/02/11/kickbacks-and-commissions/ (Prison Policy Initiative Site Commissions Briefing) (referencing campaign contributions and payments to  influential sheriff-led associations ); 2015 ICS Order, 30 FCC Rcd at 12825, para. 127 (explaining that site commissions  fund a wide and disparate range of activities, including general governmental or correctional activities unrelated to the costs of providing [inmate calling services] by either the provider or the facility ). 47 Federal Communications Commission FCCCIRC2105-01 charged  just and reasonable rates for inmate calling services.335 112. Neither GTL v. FCC nor section 276 of the Act compels a different conclusion. As we have observed, and as the court acknowledged in GTL v. FCC, the Commission is entitled  to assess on remand which portions of site commissions might be directly related to the provision of [inmate calling services] and therefore legitimate, and which are not. 336 And  fair compensation for providers of inmate calling services, under section 276, does not mean that providers must be able to recover, through rates for interstate and international inmate calling services, revenue-sharing payments that they agree voluntarily to make to encourage a correctional facility to select them as the monopoly franchise holder for inmate calling services (both interstate/international and intrastate) and often other nonregulated services, too.337 113. On the present record, we cannot conclude that Commission precedent requires that we treat site commissions solely as a division of locational monopoly profits none of which recoverable through rates, as the United Church of Christ and Public Knowledge urge.338 The United Church of Christ 335 The claim that any and all site commission payments are costs reasonably related to the provision of interstate and international inmate calling services is particularly implausible with respect to future contracts. At least where site commissions are not required under formally codified laws or regulations, providers of inmate calling services cannot reasonably contend that they are bound to offer, or agree to pay, site commissions that are uneconomical for them on a going forward basis. The record before us suggests that if, in the wake of this Report and Order, providers of inmate calling services should offer to pay site commissions at levels higher than they can recover through interstate and international inmate calling services rates, that is because they expect to profit from obtaining the franchise at a given facility in other ways (e.g., by recovering the cost of the site commission payments they offer through intrastate inmate calling services rates or through revenue generated by providing other, nonregulated services). See, e.g., Public Interest Parties July 29, 2020, Ex Parte at 5 (discussing the bundling of products and services); Prison Policy Initiative Site Commissions Briefing (alleging that providers make money by  bundling other profitable services into the contract, and sharing none of this additional revenue with the facilities ); Letter from Stephen Raher, Pro Bono Counsel, Prison Policy Initiative, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 1-2 (filed Mar. 23, 2021) (Prison Policy Initiative Mar. 23, 2021, Ex Parte) (providing evidence that inmate calling services providers bundle voice service with other nonregulated services). Even with respect to existing contracts, we disagree that any and all site commissions that a provider has agreed to pay are costs reasonably related to the provision of interstate and international inmate calling services. As we discuss above, see supra Part II, the Commission s proceeding on how to regulate rates for interstate inmate calling services has been underway for many years. Throughout this period, providers have understood that the Commission might seek to bar the recovery of some or all site commissions through interstate rates. See 2014 ICS Notice, 29 FCC Rcd at 13187, para. 37. Under the circumstances, whatever the providers offered to pay, they offered at their own risk. See infra paras. 116-22. 336 GTL v. FCC, 866 F.3d at 414; see also id. at 425 (Pillard, J., dissenting) (highlighting that  the majority invites the FCC to determine whether  some portions of site commissions are illegitimate and non-compensable ). Due to the D.C. Circuit s remand on the issue of site commissions, we decline NCIC s recommendation that the Commission simply  not disturb site commissions. See Letter from Glenn S. Richards & Lee G. Petro, Counsel for NCIC, to Marlene Dortch, Secretary, FCC, WC Docket No. 12-375, at 1 (filed Apr. 22, 2021). To leave the issue of site commissions untouched by our actions today would be contrary to our mandate to ensure just and reasonable rates under section 201(b) of the Act. 337 See 2002 Pay Telephone Order, 17 FCC Rcd at 3255-56, para. 18 (explaining that compensation is fair if each call  recovers at least its incremental costs, and no one service [(e.g., interstate calling services)] recovers more than its stand-alone cost ); UCC and Public Knowledge Mar. 28, 2021, Ex Parte at 7 ( There was no intent that the Commission make sure that every particular call was compensated at or above its cost. ); cf. Public Interest Parties Reply at 13 (explaining that the allowance for site commissions  allows for a reasonable portion of the cost of a site commission to be compensated on a per-call basis under section 276 of the Act) (emphasis added). 338 UCC and Public Knowledge Mar. 28, 2021, Ex Parte at 1-2. See also Letter from Cheryl A. Leanza, Policy Advisor, United Church of Christ, Office of Communications Inc., to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 1 (filed Apr. 26, 2021) (UCC Apr. 26, 2021 Ex Parte) (arguing that  site commission (continued& .) 48 Federal Communications Commission FCCCIRC2105-01 and Public Knowledge rely on the Commission s conclusion in the 1999 Pay Telephone Order that site commissions  should be treated as a form of profit rather than a cost. 339 The Commission reasoned that site commission payments are not costs because the ability to offer a site commission payment occurs  only when a particular payphone location generates a number of calls that exceeds the break-even number of calls thereby producing  additional profit that can be paid to the location owner.340 As explained above, while the Commission has historically viewed site commissions as a division of monopoly profits, it took a different view in later decisions.341 For example, in the 1999 Pay Telephone Order the Commission reasoned that site commission payments are not costs because the ability to offer a site commission payment occurs  only when a particular payphone location generates a number of calls that exceeds the break-even number of calls thereby producing  additional profit that can be paid to the location owner.342 The 1999 Pay Telephone Order also expressed confidence that providers reasonably could expect there to be locations where they would be allowed to operate payphones without paying locational rent.343 On the current record, we are not persuaded that we can apply those conclusions regarding locational rents from the traditional payphone context at the time of the 1999 Pay Telephone Order to site commission payments in the inmate calling service context today given their tension with the Commission s views regarding the recoverability of certain correctional facility costs in the 2016 ICS Reconsideration Order,344 as well as the D.C. Circuit s rejection of the categorical exclusion of site commission payments from recovery in inmate calling service rates at issue in GTL v. FCC.345 Thus, while we conclude that full recovery of site commissions is not required, we cannot conclude on the current record that no recovery of site commissions is justified.346 114. Legally-Mandated vs. Contractually-Prescribed Site Commission Requirements. On the record now before us, we see a meaningful difference between site commission payments in an amount that is prescribed under formally codified laws or regulations and other site commission payments that ultimately are embodied in contracts with correctional facilities or systems. We draw this distinction based on an updated, more nuanced analysis of the marketplace circumstances that result in site commission payments, viewed through the framework for cost recovery under section 201(b) of the Act. (Continued from previous page) payments are not mandated by either federal law or court precedent and that, in fact, the FCC precedent requires the opposite ). 339 UCC and Public Knowledge Mar. 28, 2021, Ex Parte at 1-2; 1999 Pay Telephone Order, 14 FCC Rcd at 2562, para. 37 n.72. 340 1999 Pay Telephone Order, 14 FCC Rcd at 2562, para. 37 n.72. 341 See supra para. 105. The United Church of Christ and Public Knowledge also argue that we cannot  treat the costs of communications providers for incarcerated people differently from the costs of communications providers via payphones when the economic incentives and factual circumstances are nearly identical and both are governed by the same statute. UCC and Public Knowledge Mar. 28, 2021, Ex Parte at 2. As the Commission has recognized since 2002, however, calling services for the incarcerated are  are economically different than other payphone services. 2002 Pay Telephone Order, 17 FCC Rcd at 3253, para. 12. Our actions here reflect a reasonable approach to responding to GTL v. FCC and Commission precedent in the inmate calling services context in light of the current record. 342 1999 Pay Telephone Order, 14 FCC Rcd at 2562, para. 37 n.72. 343 1999 Pay Telephone Order, 14 FCC Rcd at 2615-16, para. 156. 344 2016 ICS Reconsideration Order, 31 FCC Rcd at 9307, para. 12. 345 GTL v. FCC, 866 F.3d at 413. 346 For this reason, and on the record before us, we disagree with the Public Interest Parties insofar as they suggest that it may be reasonable to fully exclude site commission payments. See Public Interest Parties Reply at 7; Public Interest Parties Brattle Report at 14; see also GTL Reply at 10 (arguing that the Public Interest Parties position on the full exclusion of site commission payments conflicts with section 276 of the Act). 49 Federal Communications Commission FCCCIRC2105-01 115. In GTL v. FCC, the D.C. Circuit rejected the FCC s categorical exclusion of site commission payments from costs to be recovered through inmate calling services rates in the regulations under review.347 In significant part, the D.C. Circuit reasoned: The FCC s suggestion that site commissions  have nothing to do with the provision of [inmate calling services], Order, 30 FCC Rcd. at 12822 (internal quotation marks omitted), makes no sense in light of the undisputed record in this case. In some instances, commissions are mandated by state statute, Rates for Interstate Inmate Calling Services, 27 FCC Rcd. 16629, 16643 (2012), and in other instances commissions are required by state correctional institutions as a condition of doing business with [inmate calling services] providers, 17 FCC Rcd. at 3252- 53.  If agreeing to pay site commissions is a condition precedent to [inmate calling services] providers offering their services, those commissions are  related to the provision of [inmate calling services].  Joint Br. for Pet rs at 21. And it does not matter that the states may use the commissions for purposes unrelated to the activities of correctional facilities. The [inmate calling services] providers who are required to pay the site commissions as a condition of doing business have no control over the funds once they are paid. None of the other reasons offered by the Commission to justify the categorical exclusion of site commissions passes muster.348 As we have already discussed when explaining why the Commission is not required under GTL to allow the full recovery of any and all site commissions, as some providers contend,349 the court s statements rejecting  the categorical exclusion of site commissions from the rate analysis in the 2015 ICS Order must be interpreted in the context of the court s express recognition that it is  [up] to the Commission to assess on remand which portions of site commissions might be directly related to the provision of [inmate calling services] and therefore legitimate, and which are not. 350 In light of that recognition, we read the analysis excerpted above as turning on the particularities of the 2015 ICS Order and its underlying record.351 We now revisit and revise both our understanding and expectations regarding the operation of the inmate calling services marketplace and our approach to evaluating what nexus to interstate and international inmate calling services is required for a cost to warrant recovery through the rates for those services. The predicates for our actions regarding site commission payments in this Report and Order thus differ materially from the predicates underlying the D.C. Circuit s analysis in GTL v. FCC. 116. More Nuanced Understanding of the Inmate Calling Services Marketplace. With respect to the inmate calling services marketplace, rather than the two basic scenarios of site commission payments identified by the D.C. Circuit in GTL v. FCC based on prior Commission decisions, we identify three conceptual scenarios where site commission payments can arise. First, site commission payments at a specified level sometimes are mandated by state statute or perhaps by some other legal compulsion like a rule or regulation, that operates independently of the inmate calling contracting process.352 Second, 347 GTL v. FCC, 866 F.3d at 412-14. 348 GTL v. FCC, 866 F.3d at 413. 349 See supra paras. 108-13. 350 GTL v. FCC, 866 F.3d at 414. 351 2015 ICS Order, 30 FCC Rcd at 12824-26, para. 127 (cited in GTL v. FCC, 866 F.3d at 413). 352 See, e.g., GTL v. FCC, 866 F.3d at 413; 2012 ICS Notice, 27 FCC Rcd at 16643, para. 38; Tenn. Code Ann. § 41- 7-104 (West 2013) (requiring a fee of $0.10 for each completed inmate calling services call); Tex. Gov t Code Ann. § 495.027(a) (West 2021) (requiring a commission amounting to 40% of gross revenue). As discussed above, some laws permit but do not require correctional institutions to collect site commissions, and others require site (continued& .) 50 Federal Communications Commission FCCCIRC2105-01 there can be situations where the correctional institution s request for proposal, or the like, asks bidders to agree to pay site commissions at a specified level.353 Third, in other situations, no state law compels site commission payments and the correctional institution soliciting bids does not request any specific payment (even if it indicates that offers to pay site commissions will influence bid selection).354 117. In light of GTL v. FCC,355 we wish to examine how the 2002 Pay Telephone Order which recognized the use of competitive bidding to award exclusive access to a single provider, and stated that  [t]o have a realistic chance of winning a contract, the bidder must include an amount to cover commissions paid to the correctional facility 356 applies in each of these three conceptual scenarios. 118. In the case of the first scenario where state law requires site commission payments at a particular level the 2002 Pay Telephone Order seems a reasonable description today. Although some parties have advocated that the Commission preempt or otherwise prohibit the payment of site commissions, the Commission has not yet taken that step.357 Consequently, as the law stands today, it is reasonable to conclude that neither correctional institutions nor providers can avoid the need for site commission payments in this scenario. By that logic, under scenario one, for a provider to gain access to a correctional institution to provide inmate calling services, it must include the site commission payment required by statute or rule. 119. At the other extreme, in the case of the third scenario, we think a more nuanced understanding is warranted. When no site commission payment is legally compelled, and the correctional institution soliciting bids does not request any specific payment, providers are free to seek to serve the correctional institutions without offering site commission payments. On the current record, we conclude that whether a provider would have  a realistic chance of winning a contract 358 without a site (Continued from previous page) commission payments but do not specify any particular level. See supra note 303, 305. We do not consider those to fall within category one instead, they fall within category two and/or three (depending on how the correctional institution approaches the request for proposal process). 353 See, e.g., Request for Proposals for Inmate Telephone System and Services, Los Angeles County Sheriff s Department, Bid No. RFP 388-SH, Appx. C, Telephone Rates and Payment Schedule at 1-2 (Dec. 31, 2009), http://shq.lasdnews.net/shq/contracts/388-SH/Bulletin_1.pdf (requiring a Minimum Annual Guarantee of $15,000,000 for the Sheriff s department, $59,000 for the probation department, and a county commission rate of a minimum of 53% of total billable amounts for each year of the agreement). 354 E.g., Request for Proposal # 2019-016, Inmate Telephone Services, Union County Government, 36 (due Oct. 16, 2018), https://www.unioncountync.gov/application/files/4315/3737/2144/2019-016_Inmate_Telephone_ Services_RFP_FINAL.pdf (While providing blank spaces for the commission percentage, the request for proposal warns:  Failure to state commissions as a percentage of gross revenue, using only rates and fees that are compliant with all pertinent regulations, will cause Proposer's proposal to be deemed non-compliant and ineligible for contract award."); Request for Proposal, Offender/Client/Resident Phone/Kiosk/Debit-Credit Card System, 88 (due Sept. 10, 2018), https://www.bidnet.com/bneattachments?/525586332.pdf (while not providing a specific amount for the commission, the request for proposal provides:  The State reserves the right to negotiate commission with the Successful Respondent. ) (emphasis added); Request for Proposal, Incarcerated Individual Communications Systems (IICS), Iowa Telecommunications and Technology Commission, RFP 19-000, at 11, 27, 37, Attach. 4 at 60 (due Feb. 24, 2020), https://bidopportunities.iowa.gov/Home/GetBidOpportunityDocument/cebe908e-8e04-4831- b3fa-5cef01140258 (explaining that the  current phone system is not a commission based service, that  the current vendor is paid a fixed monthly cost, and that the bidder can suggest a percentage, so that the inmate calling services provider would collect the funds and pay a commission, if the bidder elects to operate that way). 355 GTL v. FCC, 866 F.3d at 413 (citing 2002 Pay Telephone Order, 17 FCC Rcd at 3252-53, para. 10). 356 2002 Pay Telephone Order, 17 FCC Rcd at 3252, para. 10. 357 2016 Reconsideration Order, 31 FCC Rcd at 9319-20, paras. 35-38. 358 2002 Pay Telephone Order, 17 FCC Rcd at 3252, para. 10; see also, e.g., 2020 ICS Order on Remand, 35 FCC Rcd at 8491-92, para. 16 (discussing Commission precedent and describing  site commissions as  payments made (continued& .) 51 Federal Communications Commission FCCCIRC2105-01 commission payment turns not on any inherent feature of the provision of inmate calling services, but on competing bidders discretionary business decisions informed by a range of regulatory and marketplace considerations that could affect those entities judgments about which strategies will prove more or less profitable.359 Indeed, it is increasingly clear that when providers offer site commission payments as part of their bids, they do so to gain a benefit for themselves, rather than to satisfy a formal precondition of access to a correctional facility.360 For one, Securus reports that  it has made commission-free offers a standard offering and attempted to renegotiate contracts with many of its correctional facility partners. 361 In addition, a number of jurisdictions have limited or entirely eliminated site commission payments.362 This undercuts the view that, from the correctional institution s perspective, site commission payments are inherently necessary to allow a provider access to its facilities.363 Further, since at least the 2012 ICS Notice it has been clear that the Commission might deem site commission payments unrecoverable through inmate calling services rates.364 Because providers have for many years lacked any reasonable certainty of recovering site commissions through end-user rates, we find that providers who agree to pay site commissions in this context either anticipate that they will benefit from doing so even if they cannot recover the cost of commissions through rates,365 or are willing to assume the risk of nonrecovery through (Continued from previous page) by inmate calling services providers to correctional facilities or state authorities that are often required to win the contract for provision of service to a given facility ). 359 See 2015 ICS Order, 30 FCC Rcd at 12836, para. 142 (explaining that providers  are in the best position to decide whether to bid to offer service subject to the contours of the request for proposal and that there is no obligation  to submit bids or to do so at rates that would be insufficient to meet the costs of serving the facility ). 360 See GTL v. FCC, 866 F.3d at 416 (noting petitioners calling service providers, state and local correctional authorities, and correctional facility organizations argued that  site commissions are  incentive payments designed to influence a correctional authority s selection of its monopoly service provider  ). 361 Securus Comments at 30. 362 See, e.g., Prisoners Legal Services Comments at 5-6 (identifying three Massachusetts counties that eliminated site commissions); Worth Rises Comments at 11 (discussing New York City, N.Y., Code § 9-154, which requires New York City to provide domestic inmate calling services at no cost to incarcerated people or the receiving parties and prevents the city from receiving revenue from inmate calling services); 2015 ICS Order, 30 FCC Rcd at 12787- 88, para. 49 (discussing actions in Ohio, West Virginia, and New Jersey). 363 Indeed, in San Francisco, incarcerated people and their loved ones pay nothing for their telephone calls including for site commissions while the city and GTL have agreed that payment under the contract will not exceed $1,590,616 for the initial term of three years. See Agreement between the City and County of San Francisco and GTL, Contract ID 1000017882 at 3, § 3.3.1 (Aug. 1, 2020), https://sfgov.org/financialjustice/sites/default/files/ 2020-08/GTL%20Contract%20No.%2017882%20-%20FINAL%20SIGNED%2007.30.2020_0.pdf. As one commenter has explained, the  innovative cost structure embodied in this contract  better reflects the cost of service paid by the vendor to provide access to phones in all county jails. Financial Justice Project Comments at 2. While we do not know whether there is some portion of the overall contract that goes to facility costs, the limitation on the overall payment under the contract undercuts the notion that correctional facilities view site commissions as required in all circumstances. Further, and most importantly, the fact that incarcerated people in San Francisco still have access to calling services strongly suggests that facilities do not require these types of payments to continue to allow calling services. 364 2012 ICS Notice, 27 FCC Rcd at 16632-33, paras. 5, 7 (seeking comment on site commission payments and the possibility of denying recovery for those payments through inmate calling services rates). 365 See, e.g., 2020 ICS Notice, 35 FCC Rcd at 8520, para. 100 (recognizing that other than  compensat[ing] correctional facilities for the costs they reasonably incur in the provision of inmate calling services, site commission payments  compensate those facilities for the transfer of their market power over inmate calling services to the inmate calling services provider ); Public Interest Parties Brattle Report at 10 (observing that site commission  payments have two components: they may compensate correctional facilities for the costs they reasonably incur in the provision of inmate calling services to the extent any such costs exist, and they compensate those facilities for the transfer of their market power over inmate calling services to the inmate calling services (continued& .) 52 Federal Communications Commission FCCCIRC2105-01 rates for other reasons. Site commission payments in this scenario are thus not reasonably understood as a condition precedent to doing business at the correctional institution. 120. This leaves the second scenario where state law does not compel site commissions at a specified level, but a correctional institution requests specified site commissions anyway. Superficially, this could seem analogous to the first scenario; upon analysis, we find it more akin to the third scenario. Under our current understanding of the marketplace dynamics at play, we do not agree that providers of inmate calling services can reasonably claim they are compelled to offer to pay site commissions at levels that they cannot recover through interstate and international rates as a precondition of providing interstate and international inmate calling services. Indeed, while facilities may include a site commission component in the request for proposal s description along with other bid  requirements, we understand that most, if not all, requests for proposals include some form of an  exception provision that enables bidding providers to explain why they are deviating from the request for proposal s bidding specifications or requirements, and that gives the issuer the discretion to accept such bids nonetheless.366 In this scenario, a correctional institution is under no legal compulsion to insist upon receiving site commission payments, or payments at a particular level. If no provider accedes to the institution s request for such payments, the institution will be constrained to entertain noncompliant offers if it wants the individuals in its custody to have access to interstate and international inmate calling services. Given the well- documented benefits, for communities and correctional institutions alike, in allowing incarcerated people access to inmate calling services,367 we do not anticipate that correctional facilities would forgo making (Continued from previous page) provider. ); Public Interest Parties Brattle Reply Report at 14 (similar, and further observing that  [w]hether or not any providers possess market power in the market for [inmate calling services], all providers have market power from the exclusivity of all [inmate calling services] contracts ); Prisoners Legal Services Comments at 5 n.17 (In Bristol, Massachusetts, Securus must provide the county with a $100,000 per year  technology grant that is   for the exclusive right to provide inmate telephone services.  (citation omitted)); Securus-New York City Contract at 14, 31, paras. 3.51, 9.7 (City of New York contract with Securus, providing for a revenue share model of 81.1% with a minimum $5 million guarantee in exchange for Securus s exclusive right to serve the City s correctional facilities). 366 See, e.g., Request for Proposal, Addendum No. 1, Inmate Telephone & Video Visitation Services, County of Fresno, at 7 (July 24, 2014), http://www2.co.fresno.ca.us/0440/BidDocuments/915-5281/915-5281%20 Add%201.pdf (stating that the county wants the current commission rate of 56%, but  would consider a different rate if services/hardware levels are increased ); Request for Proposal, Comprehensive Inmate Communications Services, Alabama Department of Corrections, RFP 2018-05, at 70, 75 (Nov. 27, 2018), http://doc.state.al.us/ images/RFP/RFP%202015-05%20Final.pdf (explaining that the Alabama Department of Corrections  currently receives an average monthly . . . revenue share of between $300,000.00 and $350,000.00, that the award may be made on the basis of cost alone or on the basis of quality alone, and that bids may be rejected in the best interest of the state); see also Request for Proposal (RFP) No. 1790-16474 for Corrections Communication System, Office of the Chief Procurement Officer, Cook County Government, at 17, 27, paras. 6.1, 8.17 (June 23, 2017), https://www.prisonphonejustice.org/2017/IL/il-cook-county-rfp-2017/ (an example of a general exception provision providing discretion by the reviewers to consider bids that do not contain all the requirements and providing for an explanation of exceptions to specifications and general conditions). While we do not have comprehensive visibility into the requirements of all requests for proposals industry wide, the presence of the  exception language in each of the foregoing examples persuades us that such language is likely to be representative of requests for proposals generally. 367 Supra Part I; GTL Comments at 2 nn.3-4 (discussing the recidivism-reducing effect of inmate calling services on preparing incarcerated people to rejoin society); Prisoners Legal Services Massachusetts Background Sheet at 1; Verizon Comments at 3; Episcopal Church Reply at 2; see also Council of Economic Advisors, Returns on Investments in Recidivism-Reducing Programs, at 3 (May 2018), https://trumpwhitehouse.archives.gov/wp-content/ uploads/2018/05/Returns-on-Investments-in-Recidivism-Reducing-Programs.pdf; U.S. Government Accountability Office, Child Welfare: More Information and Collaboration Could Promote Ties Between Foster Care Children and Their Incarcerated Parents, at 11 (Sept. 2011), https://www.gao.gov/assets/590/585386.pdf; Nicholas Zill, Better Prospects, Lower Costs: The Case for Increasing Foster Care Adoption, at 3 (May 2011), https://web.archive.org/ (continued& .) 53 Federal Communications Commission FCCCIRC2105-01 interstate and international inmate calling services available merely because providers decline to pay site commissions (or to pay them at the facilities desired levels) at least insofar as facilities do not incur financial losses in making those services available. Consistent with this view, we note that, in the past, both providers and other advocates have recommended that the Commission restrict site commission payments, without manifesting concerns that the result would be that correctional institutions would eliminate or substantially limit communications services for incarcerated people, particularly so long as correctional institutions remained able to recover the otherwise-uncompensated costs (if any) they themselves incur to enable the provision of those communications services.368 Such restrictions or denials based on a lack of site commission payments above and beyond the level needed for correctional institutions to recover any costs they incur in making inmate calling services available also could have legal implications that make them unlikely.369 121. Thus, although it seems prudent, for interim purposes on the present record, to anticipate that correctional institutions will insist on site commissions at the level that enables them to recover any costs they incur in making inmate calling services available,370 we find no basis to assume that they would insist on site commission payments above that level, absent voluntary action by providers to offer such site commission payments. For one, providers can anticipate that correctional institutions will not formally insist on site commission payments above the level required to cover the institutions own costs if the alternative is to go without inmate calling services (and all the other services typically offered by providers) at the facility. To the extent that providers nonetheless offer site commissions above that level, we regard that as a marketplace choice different in kind from the scenario where site commissions at a given level are required by a statute or rule. Separately, we reach the same conclusion when considering the broader context in which calling service providers bid. In a world in which providers of interstate and international inmate calling services bid to supply solely those services unbundled from intrastate inmate calling services, email, and messaging services, and other services that the record suggests that (Continued from previous page) web/20151005185803/https:/www.adoptioncouncil.org/images/stories/NCFA_ADOPTION_ ADVOCATE_NO35.pdf. 368 See, e.g., 2015 ICS Order, 30 FCC Rcd at 12824-26, para. 127 (discussing advocacy favoring a prohibition on site commission payments and observing that of those opposed to such action,  many . . . appear to be concerned mostly with ensuring that facilities can recover costs they incur in allowing access to [inmate calling services] ); 2016 ICS Reconsideration Order, 31 FCC Rcd at 9319-20, paras. 36-37 & n.146 (discussing advocacy favoring a prohibition on site commission payments); 2016 ICS Reconsideration Order, 31 FCC Rcd at 9319-20, para. 37 (quoting concerns from NCIC that  prohibiting or capping site commissions . . . will lead to a reduction in inmate access if the restrictions  will result in facilities being unable to recover their [inmate calling services]-related costs ). 369 See, e.g., Johnson v. California, 207 F.3d 650, 656 (9th Cir. 2000) ( Although prisoners have a First Amendment right to telephone access, this right is subject to reasonable limitations arising from the legitimate penological and administrative interests of the prison system. ); Washington v. Reno, 35 F.3d 1093, 1100 (6th Cir. 1994) (finding that  federal court opinions have previously held that persons incarcerated in penal institutions retain their First Amendment rights to communicate with family and friends, and have recognized that  there is no legitimate governmental purpose to be attained by not allowing reasonable access to the telephone, although  an inmate  has no right to unlimited telephone use  ) (internal citations omitted); Benzel v. Grammer, 869 F.2d 1105, 1108 (8th Cir. 1989) ( Although in some instances prison inmates may have a right to use the telephone for communication with relatives and friends, prison officials may restrict that right in a reasonable manner,  subject to rational limitations in the face of legitimate security interest[s] of the penal institution.  ) (internal citations omitted). But see, e.g., Arsberry v. Illinois, 244 F.3d 558, 564-65 (7th Cir. 2001) ( Not to allow [prisoners] access to a telephone might be questionable on other grounds, but to suppose that it  would infringe the First Amendment would be doctrinaire in the extreme.  ) (internal citations omitted). 370 Where correctional institutions have such costs, we would expect that their requests for proposals would formally request site commission payments of at least that level, putting them in scenario two, rather than scenario three. 54 Federal Communications Commission FCCCIRC2105-01 providers in fact bid to supply alongside interstate and international calling services371 providers would not offer to pay site commissions that they could not recover through rates, and facilities (at least so long as they were recovering their own costs) would not insist upon receiving such payments. Even if a request for proposal stated that a specific site commission was required from any prospective bidder, providers would know that without any formally codified legal mandate to demand site commissions the correctional institution responsible for the request for proposal would not ultimately be able to demand site commissions that no provider would be able to recover through rates. Thus, if providers offer site commissions at levels that are not recoverable under the Commission s interstate and international rate caps, we believe that they do so as a matter of their own business judgment as discussed above under the third scenario. As with the third scenario, simplistic labels do not adequately convey the full marketplace context necessary to an understanding of site commissions in the second scenario. Consequently, we do not regard site commissions under the second scenario as a condition precedent of doing business at correctional institutions at least above the level required for institutions to recover of any costs they incur in making inmate calling services available. 122. In sum, with respect to scenarios two and three discussed above, we reject any claim that site commission payments are somehow  required, or determined by the correctional institution: we find on this record that providers offer such payments voluntarily, in their own business judgment.372 Whereas some commenters attempt to analogize site commissions of this kind to payments that landowners demand in exchange for granting access to rights-of-way or the like,373 we conclude that, at most, inmate calling providers appear concerned about a collective action problem that makes providers, as a group, reluctant to limit or omit site commission payments in their bids for fear that competitors fail to do so, and that correctional institutions will select competitors that do offer site commissions (or offer higher site commissions) instead. A collective action problem of that kind is not sufficient to require that we allow full recovery of site commission payments through end-user rates. 123. Revisions in the Approach to Evaluating Cost Recovery. In evaluating this more nuanced understanding of the operation of various types of site commission payments in the inmate calling services marketplace, we consider which costs reflected in site commission payments are so related to the provision of inmate calling services that they should be recoverable, at the present time, through interstate and international inmate calling services rates under section 201(b) of the Act and relevant precedent.374 Updating our approach to cost recovery in this manner accounts for the GTL v. FCC decision and the legal approach the Commission set out in the 2020 ICS Notice. 124. Prior to the GTL v. FCC decision, the Commission evaluated cost recovery in a manner 371 See, e.g., Securus-New York City Contract at 14, 19, paras. 3.51, 9.7 (giving Securus the exclusive right to provide interstate and intrastate telephone service as well as other nonregulated services such as messaging and email); Prison Policy Initiative Mar. 23, 2021, Ex Parte at 1, Attach. (explaining that 12 of 13 California jurisdictions analyzed by the Prison Policy Initiative in connection with a California Public Utilities Commission proceeding required voice service to be bundled with other services, including video calling). 372 See, e.g., NCIC Comments at 5; Pay Tel Comments at 10-11; Securus Comments at 25-30; GTL Godek Reply Report at 8, para. 20. 373 See, e.g., Securus Comments at 29-30. 374 We thus reject as inapposite attempts to rely by analogy on what the Commission has done in other contexts under different statutory schemes. See, e.g., Implementation of Sections of the Cable Television and Consumer Protection and Competition Act of 1992; Rate Regulation, MM Docket No. 92-266, First Order on Reconsideration, Second Report and Order, and Third Notice of Proposed Rulemaking, 9 FCC Rcd 1164, 1217, 1219-20, paras. 98, 101-02 (1993) (1993 Cable Television Consumer Protections Act Order) (explaining how the evaluation of recovery of the cost of franchise flows from the requirements of the Cable Act of 1992); see also 1993 Cable Television Consumer Protections Act Order, 9 FCC Rcd at 1211-12, para. 90 (rejecting telephone company arguments that the approach to cost recovery for cable operators should be the same as that used for common carriers subject to price cap regulation). 55 Federal Communications Commission FCCCIRC2105-01 that sought to effectuate its theory of legal authority, which relied on the combination of sections 201(b) and 276(b)(1) of the Act.375 The Commission described its general approach to inmate calling services cost recovery in the 2013 ICS Order, which  conclude[d] that only costs that are reasonably and directly related to the provision of [inmate calling services], including a reasonable share of common costs, are recoverable through [inmate calling services] rates consistent with sections 201(b) and 276(b)(1). 376 Beyond discussing illustrative examples, the Commission did not otherwise elaborate on the framework for evaluating what costs would or would not be recoverable. Applying that approach in the order under review in GTL v. FCC, the Commission concluded that  the site commissions [inmate calling services] providers pay to some correctional facilities are not reasonably related to the provision of [inmate calling services] and should not be considered in determining fair compensation for [inmate calling services] calls, going on to quote one party as stating  that site commissions often  have nothing to do with the provision of [inmate calling services]. 377 125. In light of the GTL v. FCC decision, it is necessary to update and more thoroughly explain our approach to evaluating cost recovery. In the 2020 ICS Notice, the Commission did not propose revisiting whether section 276(b)(1) represented a grant of regulatory authority for the Commission to prevent excessive inmate calling services rates.378 Rather, the Commission proceeded based on its authority under section 201(b).379 In the specific context of whether and to what extent site commission payments should be recoverable costs in interstate and international inmate calling services rates, the Commission sought comment on whether particular approaches would  result in unjust and unreasonably high rates for incarcerated people and their loved ones to stay connected, 380 consistent with the  just and reasonable standard in section 201(b) of the Act.381 126. Given our focus on applying our section 201(b) authority, it makes sense to evaluate cost recovery otherwise described as an evaluation of whether the costs are directly and reasonably related to the provision of inmate calling services under the longstanding principles the Commission has relied upon when implementing section 201(b) in the past. Under this framework, just and reasonable rates are focused on recovering prudently incurred investments and expenses that are used and useful in the provision of the regulated service for which rates are being set.382 In applying this framework, the Commission considers whether the investment or expense  promotes customer benefits, or is primarily for the benefit of the carrier. 383 The Commission not only has applied this in the context of carriers 375 See, e.g., 2013 ICS Order, 28 FCC Rcd at 14133-37, paras. 50-53, 55. 376 2013 ICS Order, 28 FCC Rcd at 14134-35, para. 53. 377 2015 ICS Order, 30 FCC Rcd at 12821-22, para. 123 (quoting Letter from Andrew D. Lipman, Morgan, Lewis, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 9 (filed Apr. 8, 2015)). 378 2020 ICS Notice, 35 FCC Rcd at 8525-26, paras. 112-15 (discussing the role of section 276 in the Commission s analysis). 379 See, e.g., 2020 ICS Order on Remand, 35 FCC Rcd at 8486-87, paras. 4, 6; 2020 ICS Notice, 35 FCC Rcd at 8509, 8529-30, paras. 68, 123-24. 380 2020 ICS Notice, 35 FCC Rcd at 8520, para. 101. 381 47 U.S.C. § 201(b). 382 See, e.g., Sandwich Isles Communications, Inc., WC Docket No. 10-90, Order on Reconsideration, 34 FCC Rcd 577, 580, para. 7 (2019) (Sandwich Isles Reconsideration Order) (discussing the standard and citing precedent such as AT&T Phase II Order, 64 F.C.C.2d at 38, paras. 111-13 and AT&T Communications Revisions to Tariff F.C.C. Nos. 1, 2, 11, 13, and 14 Application for Review, CC Docket No. 87-611, Memorandum Opinion and Order, 5 FCC Rcd 5693, 5695, para. 17 (1990) (1990 AT&T Tariff Investigation Order)). 383 Establishing Just and Reasonable Rates for Local Exchange Carriers, WC Docket No. 07-135, Notice of Proposed Rulemaking, 22 FCC Rcd 17989, 17997 n.47 (2007); see also, e.g., 1990 AT&T Tariff Investigation Order, 5 FCC Rcd at 5695, para. 17. 56 Federal Communications Commission FCCCIRC2105-01 operating under rate-of-return context, but rates set on that basis also were used as the foundation for price caps.384 127. Contractually-Prescribed Site Commission Payments. Given the regulatory backdrop and the state of the record here, we conclude that contractually-prescribed site commission payments that simply compensate a correctional institution for the costs (if any) an institution incurs to enable interstate and international inmate calling services to be made available to its incarcerated people, can, at least at this time, be considered a prudent expense the provider incurs, at least as long as the Commission continues to permit providers of interstate and international inmate calling services to continue to make site commission payments. In GTL the court faulted the Commission s  categorical exclusion of site commissions from the calculus used to set [inmate calling services] rate caps, 385 and even the 2016 ICS Reconsideration Order found that  it is reasonable for [correctional] facilities to expect providers to compensate them for those costs[] the facilities incur to enable the provision of inmate calling services.386 Against that backdrop, the record here does not persuade us to reach a contrary conclusion in our analysis under section 201(b). In light of the regulatory backdrop and current state of the record, we likewise find that contractually-prescribed site commission payments that simply compensate a correctional institution for costs an institution incurs to enable access for incarcerated people to interstate and international inmate calling services can, at least at this time, be considered used and useful in the provision of interstate and international inmate calling services. In the 2016 ICS Reconsideration Order the Commission found that  some facilities likely incur costs that are directly related to the provision of [inmate calling services], 387 and determined that  it is reasonable for those facilities to expect [inmate calling services] providers to compensate them for those costs . . . [as] a legitimate cost of [inmate calling services] that should be accounted for in [the] rate cap calculations. 388 The current record here again does not persuade us to reach a contrary conclusion in our analysis under section 201(b). While a different record might persuade us to reach a different conclusion in the future, under this record we will treat such payments as prudently incurred expenses used and useful in the provision of interstate and international inmate calling services. 128. By contrast, we find that contractually-prescribed site commission payments do not warrant recovery insofar as they exceed the level needed to compensate a correctional institution for the costs (if any) an institution incurs to enable interstate and international inmate calling services to be made available to its incarcerated people. First, we conclude that such expenses are not prudently incurred. Under Commission precedent, expenses are imprudent if they are excessive.389 We find that to be the case here. As demonstrated by our marketplace analysis above, we are not persuaded that a correctional institution would decline to make inmate calling services available to its incarcerated people absent contractually-prescribed site commission payments above and beyond any amount necessary to recover the institution s costs to enable inmate calling services to be provided to its incarcerated people. That alone persuades us that such payments are excessive. Separately, we also conclude that the imprudence of such expenses is confirmed by the ongoing regulatory scrutiny and questions about recovery through interstate inmate calling services rates that have surrounded site commission payments since the 2012 ICS 384 See, e.g., Policy and Rules Concerning Rates for Dominant Carriers, CC Docket No. 87-313, Second Report and Order, 5 FCC Rcd 6786, 6816, 6823, paras. 246, 301 (1990) (LEC Price Cap Order); Policy and Rules Concerning Rates for Dominant Carriers, CC Docket No. 87-313, Report and Order and Second Further Notice of Proposed Rulemaking, 4 FCC Rcd 2873, 3092, para. 436 (1989). 385 GTL v. FCC, 866 F.3d at 413. 386 2016 ICS Reconsideration Order, 31 FCC Rcd at 9307, para. 12. 387 Id. 388 Id. 389 See, e.g., Sandwich Isles Reconsideration Order, 34 FCC Rcd at 580, para. 7; 1990 AT&T Tariff Investigation Order, 5 FCC Rcd at 5695, para. 17; AT&T Phase II Order, 64 F.C.C.2d at 38, para. 112. 57 Federal Communications Commission FCCCIRC2105-01 Notice. This further bolsters our conclusion that such site commission payments are imprudent. 129. As an independent, alternative basis for rejecting recovery through interstate and international inmate calling services rates, we find that contractually-prescribed site commission payments, insofar as they exceed the level needed to compensate a correctional institution for the costs (if any) an institution incurs to enable interstate and international inmate calling services to be made available to its incarcerated people, are not used and useful in the provision of interstate and international inmate calling services. The used and useful concept is designed, in part, based on the principle that regulated entities  must be compensated for the use of their property in providing service to the public. 390  Equally central to the used and useful concept, however, is the equitable principle that the ratepayers may not fairly be forced to pay a return except on investment which can be shown directly to benefit them. 391 And it is that element of the used and useful analysis that we find dispositive here. Under our marketplace analysis of contractually-prescribed site commission payments, we are unpersuaded that site commission payments above the level needed to compensate a correctional institution for costs the institution reasonably incurs to make interstate and international inmate calling services available are required to ensure that incarcerated people have access to those services. Instead, we conclude that such payments are a means (sometimes the sole or at least primary means) by which a given provider seeks to overcome its competitors to become the exclusive provider of multiple services, including nonregulated services, at a correctional facility. And the record does not reveal that correctional institutions, in contracting with providers that offer comparatively higher contractually-prescribed site commission payments, are somehow benefitting customers of interstate and international inmate calling services as compared to the selection of some other provider. Rather, we conclude here that given the anomalous nature of the inmate calling services marketplace, the primary benefits flow to the chosen provider which overcame its competitors and now has the exclusive ability to serve the correctional facility and the correctional facility itself (or the state or local government more generally), which can avail itself of the revenue stream such site commission payments provide, all to the detriment of interstate and international inmate calling services customers. 130. Where site commissions of a particular level are not required under formally codified 390 AT&T Phase II Order, 64 F.C.C.2d at 38, para. 112. We do not view site commission payments whatever their origin as involving the use of provider property and investment in a manner analogous to the circumstances addressed in our provider-based rate caps. As a result, even for those site commission payments that we find recoverable through interstate and international inmate calling services rate caps under our interim rules, we are not persuaded that we should allow more than a pass-through and instead should go further and provide for providers to make a profit on those site commission payments. Viewed one way, the site commission payments that we find permissible to recover are akin to exogenous costs  costs that are triggered by administrative, legislative or judicial action beyond the control of the carriers  which, in the event of cost increases, result in upward adjustment of price caps without guaranteeing carriers profit on those exogenous costs. LEC Price Cap Order, 5 FCC Rcd at 6807, para. 166. Our permitted recovery of certain site commission payments through interstate and international inmate calling services charges could be viewed as an analogous adjustment to the rate cap we set for the provider- specific costs. Independently of that precedent, we separately justify our decision as a matter of the flexibility provided by the  just and reasonable framework of section 201(b) of the Act under the particular circumstances here. Specifically, we find it likely that setting providers interstate and international rates in a manner that provides for a profit on the providers site commission payments is likely to exacerbate the already-perverse incentives of providers and correctional institutions (as well as state or local governments mandating site commission payments at specified levels) to increase the magnitude of site commission payments to the ultimate detriment of customers of interstate and international inmate calling services. By contrast, we are not persuaded that allowing more than a pass-through of the site commission expenses that we find prudently incurred and used and useful here is necessary to ensure the continued economic viability of the provision of interstate and international inmate calling services. Thus, we conclude that our approach adequately accounts for the use of providers property in the provision of interstate and international inmate calling services balanced with the equitable interest of customers of interstate and international inmate calling services. 391 AT&T Phase II Order, 64 F.C.C.2d at 38, para. 113. 58 Federal Communications Commission FCCCIRC2105-01 laws or rules external to the contracting process, providers of inmate calling services cannot reasonably contend that they are bound to offer, or agree to pay, site commissions above the level for which recovery is permitted going forward under the Commission s rules. In this way, to the extent providers concerns stem from a collective action problem in the marketplace, the Commission s rules could help address that issue. The record before us further suggests that if, in the wake of this Report and Order, providers of inmate calling services should offer to pay site commissions at levels higher than they can recover through interstate and international inmate calling services rates, that is because they expect to profit from obtaining the franchise at a given facility in other ways e.g., by recovering the cost of the site commission payments they offer through intrastate inmate calling services rates or through revenue generated by providing other, nonregulated services.392 While our analysis might have particular force in the case of newly entered or renewed contracts, even with respect to existing contracts the analysis above justifies our refusal to set rates in a way designed to recover contractually-prescribed site commission payments above the level needed for a correctional institution to recover its costs of making inmate calling services available to its incarcerated people. 131. Legally-Mandated Site Commission Payments. We next conduct the cost recovery analysis for scenario one (referred to for convenience as  legally-mandated site commission payments ). Our analysis begins the same as for contractually-prescribed site commission payments. For the same reasons explained above in that context, given the regulatory backdrop we find on the record here that legally-mandated site commission payments, insofar as they simply compensate a correctional institution for the costs (if any) an institution incurs to enable interstate and international inmate calling services to be made available to its incarcerated people, are at least plausibly a prudent expense that is used and useful in the provision of interstate and international inmate calling services. 132. Our analyses of contractually-prescribed and legally-mandated site commission payments part ways when it comes to site commission payments insofar as they exceed the level that simply compensates a correctional institution for any costs the institution incurs to enable interstate and international inmate calling services to be made available to its incarcerated people at least up to the level of the site commission payment specified by law or rule.393 As a threshold matter, we conclude on this record that making legally-mandated site commission payments at the level required by the relevant statute or rule is a prudent expense. We do not find it excessive or otherwise imprudent because, under the currently applicable law, we see no evidence that either the provider or the correctional institution could agree to a lower amount (or no site commissions at all). 133. Whether legally-mandated site commission payments at the level specified by the statute or rule are  used and useful in providing interstate and international inmate calling services to the extent that exceeds the level of a facility s recovery of its own costs of making inmate calling services available to its incarcerated people is a closer call. At first blush, the used and useful analysis would seem to be the same for both contractually-prescribed site commission payments and legally-mandated site commission payments i.e., the expenses would not be used and useful in either case. But at least on an interim basis, we see enough distinctions between contractually-prescribed and legally-mandated site commission payments to warrant a different outcome in our used and useful analysis on the record here. For one, in a jurisdiction that has codified a requirement that providers of inmate calling services pay site commissions at a specified level, facilities have no immediate ability to entertain offers from providers 392 See, e.g., Public Interest Parties July 29, 2020, Ex Parte at 5 (discussing the bundling of products and services); Prison Policy Initiative Site Commissions Briefing (alleging that providers make money by  bundling other profitable services into the contract, and sharing none of this additional revenue with the facilities ); Prison Policy Initiative Mar. 23, 2021, Ex Parte at 1-2. 393 We are not aware of situations where a statute or rule external to the contracting process requires a specific site commission and the provider nonetheless pays a site commission even higher than such level. Should such a situation occur, we would find such expenses both imprudent and not used and useful for the same reasons discussed in connection with contractually-prescribed site commission payments, discussed above. See supra paras. 127-30. 59 Federal Communications Commission FCCCIRC2105-01 that wish to supply a facility without paying the site commission demanded. And absent further legislative process to amend the governing statute or rule that requires site commissions, facilities must elect to forgo making interstate and international inmate calling services available if they cannot collect the legally-mandated site commission payments. In this sense, by contrast to contractually-prescribed site commission payments, we think legally-mandated site commission payments are qualitatively different. Additionally, by agreeing to pay site commissions that are required by statute or ordinance, providers do not obtain any benefit or leverage over competing providers. For this reason, too, legally-mandated site commissions do not, in our judgment, reflect the independent business judgment of service providers in the same way that contractually-prescribed site commissions do. On balance, then, based on the current record we find legally-mandated site commission payments at the level required by the relevant statute or rule to be used and useful in the provision of interstate and international inmate calling services, again, like with contractually-prescribed site commissions, as long as the Commission continues to permit providers of interstate and international inmate calling services to continue to make these site commission payments. We emphasize that this is a close question, however, and reiterate that a different record might persuade us to reach a different conclusion in the future.394 134. While formally distinct from our prudence and used and useful analysis, we take comfort that our conclusion with respect to legally-mandated site commission payments is unlikely to cause long- term harm. For one, we only adopt interim rules here, and if subsequent events or additional arguments or evidence come forward justifying a different outcome, we can revisit our decision at that time. In addition, on balance we find legally-mandated site commission payments less pernicious than contractually-prescribed site commission payments. The legislative process is transparent, and laws are enacted by elected officials who are accountable to their constituents. At least as an interim matter, while we collect additional information on this subject in today s Further Notice, we take comfort in the legislative process as a potential check on the ability of providers and governmental authorities to impose unjust and unreasonable rates for interstate and international inmate calling services. 135. For these reasons, and taking into account the court s vacatur in GTL, we will permit providers of inmate calling services to recover through interstate and international rates as a line item distinct from the generally applicable interim interstate and international provider-related rate cap component any site commissions that they pay pursuant to formally codified federal, state, or local statutes, regulations or ordinances, so long as the total per-minute rate that users pay does not exceed the $0.21 cap, which remains, as it has since 2013, the highest permissible rate for interstate debit and prepaid calls,395 and by this Report and Order, the highest permissible rate for collect calls too.396 136. Determining the Appropriate Contractually-Prescribed Facility Rate Component. We permit providers of prisons and larger jails to recover no more than $0.02 per minute over and above the otherwise applicable provider-related rate cap to account for site commissions actually paid but not required by formally codified law or regulation. The total rate charged for interstate inmate calling services is also bound by the overall upper limit of $0.21 per minute that has been effective since 2013. 394 See, e.g., UCC and Public Knowledge Mar. 28, 2021, Ex Parte at 4 (highlighting Judge Pillard s position in dissent in GTL v. FCC that simply because a state requires certain site commissions does not make them legitimate costs of providing inmate calling services). 395 See supra para. 104. Operationally, providers remain free to impose a legally-mandated site commission facility charge at the level specified by the relevant statute or rule, consistent with the analysis above. If their resulting cumulative rate otherwise would exceed the current $0.21 per minute rate cap, they would need to charge a lower provider-related rate to stay within that rate cap under our rules. As explained above, supra para. 104, providers have been operating under the $0.21 per minute rate cap since 2013, and despite the opportunity to justify a waiver of that cap, no provider has done so. Consequently, we decline to presume, for purposes of establishing new rules, that aggregate interstate and international inmate calling services charges above that level will be justified, although, as before, a waiver process is available if a provider seeks to make that case. 396 See supra Part III.C.1. 60 Federal Communications Commission FCCCIRC2105-01 137. We reach our decision to adopt a $0.02 per-minute facility-related rate component for prisons and larger jails on two separate and independent bases.397 First, this allowance is based on estimates of the portion of site commissions that are legitimately related to inmate calling services based on the methodology first described in Appendix H of the 2020 ICS Notice but since updated with corrected cost data consistent with the record.398 As the Public Interest Parties expert suggests, that methodology reflects the Commission s  reasonable attempt in light of  data limitations on site commissions to compare per-minute costs for facilities that are paid site commissions and those that are not as a way to  isolate the gap in costs that could be covered by site commission payments. 399 This methodology, derived from cost and site commission data that providers reported in response to the Second Mandatory Data Collection, incorporated no correctional facility-provided cost data. Thus, the Commission s proposed methodology reflected its reasoned judgment as to the best estimation of legitimate facility costs related to inmate calling services in the absence of cost data from correctional facilities themselves. The Public Interest Parties agree that the proposed $0.02 allowance for all facilities  strikes an appropriate balance between the statutory mandates that [inmate calling services] providers receive fair compensation and that [inmate calling services] rates are just, reasonable and promote access to [inmate calling services] by incarcerated people and their families and support networks. 400 They explain that the site commission allowance is not designed to necessarily compensate providers for the entirety of all site commission payments,401 pointing out that would be inconsistent with the GTL decision, which recognized as  legitimate only those site commissions that are  directly related to the provision of [inmate calling services]. 402 138. Our updated site commission analysis in Appendix H reflects even lower potential estimates for legitimate facility costs related to inmate calling services. As explained above, the record convinces us that adjustments and corrections to the cost data underlying the 2020 ICS Notice proposals were necessary for determining the provider-related rate component,403 and we updated our site commission analysis using these revised cost data. This updated analysis supports a facility-related rate component of less than the $0.02 allowance we originally calculated.404 However, we are unwilling to reduce the $0.02 allowance at this time, especially on an interim basis, given record opposition to that allowance on the basis that it is too low, was not based on facility-provided cost data, and relied on cost 397 Supra Part III.C.3. 398 See Appx. E, infra (updating cost data from that used in the 2020 ICS Notice consistent with the record). We continue to rely on this methodology because it most conservatively estimates the site commission allowance by rounding up and applying the same rate to jails and prisons to  ensure we do not harm unusual prison contracts. See 2020 ICS Notice, 35 FCC Rcd at 8572, Appx. H, para. 2; Public Interest Parties Brattle Report at 9. The Public Interest Parties expert replicated the Commission s initial analysis and concluded the proposed $0.02 facility-cost allowance estimate is  reasonable given the difficulty of disaggregating the portion of site commission payments directly attributable to inmate calling services from the portion that is due to the transfer of market power. See Public Interest Parties Brattle Reply Report at 14. Because the Commission s initial analysis, like our updated analysis, continues to be based on imperfect cost data that is not sufficiently disaggregated so as to reflect potential differences in costs for smaller jail facilities as commenters claim, we limit our actions here to only prisons and larger jails as well. 399 Public Interest Parties Brattle Reply Report at 14. 400 Public Interest Parties Reply at 10. 401Id. 402 GTL v. FCC, 866 F.3d at 414. 403 See supra Part III.C.3. 404 Indeed, these updated data show that prison contracts without site commissions had per-minute allocated costs which were on average $0.008 higher than prison contracts that required the payment of site commissions, whereas the gap for jails was $0.004. See Appx. H, infra. 61 Federal Communications Commission FCCCIRC2105-01 data aggregated for the most part at the contract level rather than facility level where size variations would likely be reflected.405 And, as discussed below, we have independent record data that supports the $0.02 allowance. 139. Several commenters oppose the $0.02 allowance as too low for two primary reasons.406 First, providers criticize the Commission s methodology for estimating reasonable facility costs in the 2020 ICS Notice insofar as this methodology  fails to consider whether any characteristics other than facility costs might affect whether a particular contract pays a site commission. 407 Second, the National Sheriffs Association and others argue that $0.02 per minute is inappropriate for smaller jails,408 and claim that adopting a uniform $0.02 per-minute allowance for all facilities conflicts with the approach the Commission took in the 2016 ICS Order, which adopted additive amounts to the rate caps to account for site commissions based on facility size.409 140. We agree that the 2020 ICS Notice methodology resulted in a proposed facility-related rate component that does not distinguish between different types of site commission payments and that may not sufficiently reflect that smaller correctional facilities might face higher facility costs related to inmate calling services than the initially calculated $0.02. We therefore depart from our initial proposal to apply a specific uniform facility cost allowance cap to all facilities for all types of site commissions in two ways to address these criticisms. 141. First, we distinguish between the two distinct types of site commission payments and permit providers, when serving prisons and larger jails, to recover each in a distinct manner. For payments required under codified law or regulation, as explained above, we permit recovery of the full commission amount, without markup, provided that the total interstate rate charged for interstate inmate calling services at those facilities does not exceed the $0.21 per-minute rate that represents the highest interstate rate cap currently in effect for debit and prepaid calls for any size correctional facilities. Second, for contractually-prescribed site commission payments, we adopt a $0.02 cap on recovery through interstate rates but limit its applicability solely to prisons and larger jails. 142. We limit the applicability of the $0.02 cap for recovery of contractually-prescribed site commission payments to prisons and larger jails, in response to criticism that this value would not be sufficient to recover the alleged higher facility-related costs incurred by jails with average daily populations below 1,000. Likewise, we do not adopt a separate legally-mandated rate component for these facilities. Instead, inmate calling services for jails with average daily populations below 1,000 will remain subject only to the single, aggregate $0.21 per-minute total rate cap. We agree that the cost data methodology underlying the calculation of the contractually-prescribed facility rate component may have masked facility size cost variations due to the aggregated nature of those data. Given that these data obscure cost differences at the level of provider contracts, it is likely to be even harder to identify the variation, among jail contracts of different sizes, in costs that are in some cases incurred by providers and 405 See, e.g., GTL Comments at 26; Pay Tel Comments at 11-12; Securus Comments at 33. 406 GTL Comments at 26-27; Pay Tel Comments at 11; Securus Comments at 31-34; see also California State Sheriffs Association Comments at 1-2; National Sheriffs Association Comments at 7-8; GTL Apr. 26, 2021 Ex Parte Godek Report at 4-6. 407 GTL Comments at 28 (arguing that state law and correctional facility policy account for variances in site commission payments); Securus Comments at 32 (suggesting that state law can have an effect on whether site commissions are paid) (emphasis in original). 408 California State Sheriffs Association Comments at 1-2; National Sheriffs Association Comments at 7; Pay Tel Comments at 12-13; National Sheriffs Association Reply at 2; NCIC Reply at 3 (explaining that the proposed $0.02 allowance for jails  may fail to adequately remunerate smaller jails ). 409 Pay Tel Comments at 12. 62 Federal Communications Commission FCCCIRC2105-01 in other cases incurred by incarceration authorities.410 Thus, our decision to limit adopting a facility- related rate component to only prisons and larger jails on this interim basis, as we do for the provider- related rate component, and to refrain from changing the current interim rate cap of $0.21 for jails with average daily populations less than 1,000, should address the concern raised in the record about facility size variations in facility-related costs for jails with average daily populations less than 1,000. 143. In addition to comparing providers cost data with and without site commissions to determine a conservative estimate of facilities cost from data that was provided solely by providers and not facilities, the second and separate basis for reaching a decision to adopt $0.02, as the contractually- prescribed facility-related rate component for contractually-prescribed site commissions applicable in prisons and larger jails, is record data and information reintroduced by Pay Tel and the National Sheriffs Association that independently supports a $0.02 allowance for correctional facility costs at these size facilities.411 The Commission has previously relied on these data and thus, we conclude they are largely credible insofar as they come from the National Sheriffs Association,  which, as an organization representing sheriffs, is well situated to understand and estimate the costs that facilities face to provide [inmate calling services]. 412 Indeed, in the 2015 ICS Order, while declining to establish any additional rate component to reflect facility costs related to inmate calling services, the Commission, in referring to record evidence at that time that included this same National Sheriffs Association data, stated  [w]e note, however, that evidence submitted . . . indicates that if facilities incurred any legitimate costs in connection with [inmate calling services], those costs would likely amount to no more than one or two cents per billable minute. 413 144. Some commenters contend that the numbers contained in these data support a $0.02 allowance for prisons and larger jail facilities,414 while also lending support for the argument advanced by other commenters that facility-related inmate calling services costs are higher for jails with fewer incarcerated people415 and that such costs decrease with an increase in facility size.416 According to these data, facilities with average daily populations of 1,000 and up, can have site commission costs as low as $0.003 per minute, up to 85% less than the $0.02 allowance we adopt here.417 One reason commenters assert that jails with average daily populations less than 1,000 may have higher site commission costs is that they have higher weekly inmate-turnover rates and shorter lengths of stay than larger jails. This higher turnover causes such jails to incur much greater costs, including costs related to  setting up an account, funding an account, closing an account . . . administering account funds after an inmate s 410 See supra Part III.C.2. 411 National Sheriffs Association Comments at 7 (referring to the 2015 cost survey); Pay Tel Comments at 12 (referring to data submitted by the National Sheriffs Association); National Sheriffs Association Comments, WC Docket No. 12-375, at 3 (filed Jan. 12, 2015) (National Sheriffs Association Jan. 12, 2015, Comments). 412 2016 ICS Reconsideration Order, 31 FCC Rcd at 9316, para. 28. 413 2015 ICS Order, 30 FCC Rcd at 12835, para. 139 (emphasis added). 414 See National Sheriffs Association Comments at 8 (supporting a $0.02 rate for jails with an average daily population of 2,500 or greater); National Sheriffs Association Reply at 2 (implying that the proposed $0.02 figure could be sufficient for larger jails); Pay Tel Reply at 11 (showing the site commission allowances adopted in the 2016 ICS Reconsideration Order, which were based, in part, on the National Sheriffs Association data). 415 National Sheriffs Association Jan. 12, 2015, Comments, Exh. A, NSA Member Data Summary  ADP 1-99 at 1 (providing survey results showing that jails with fewer incarcerated people have higher costs than larger jails). 416 See, e.g., National Sheriffs Association Comments at 9 (explaining that jails with fewer incarcerated people have higher turnover rates than larger jails and thus less time to recover the costs of processing newly incarcerated people). 417 National Sheriffs Association Jan. 12, 2015, Comments, Exh. A, NSA Member Data Summary  ADP 1,000+ at 1. 63 Federal Communications Commission FCCCIRC2105-01 release or  enrolling inmates for voice biometrics. 418  On average, jails with an [average daily population] of 2,500 or more inmates held inmates about twice as long (34 days) as jails with an [average daily population] of less than 100 inmates (15 days). 419 Other commenters have found similar cost differentials between larger jails and jails with fewer incarcerated people, regardless of the data sets they rely upon.420 Some of this cost difference can likewise be attributed to  differences in officer, supervisor and other employee hours spent on various duties; the compensation rates for officers, supervisors and other employees; and differences in minutes of use. 421 While we recognize that the data in the National Sheriffs Association survey are more than five years old, they are the best data available from correctional facility representatives regarding their estimated costs related to inmate calling services that correctional facilities incur. Although the Commission asked correctional facilities to provide detailed information about their specific costs, nothing more current was submitted.422 Nevertheless, we find the survey results for facilities with average daily population greater than or equal to 1,000 largely sufficient to support our interim $0.02 allowance for prisons and larger jail facilities in the absence of more current data. 145. We are concerned, however, that some of the facilities included in the National Sheriffs Association survey report an exceedingly high number of hours of correctional facility officials time compared to most other reporting facilities.423 For example, one facility with an average daily population of approximately 1,500 reports approximately 694 total hours per week on inmate calling services-related activities, roughly 400 hours more than the next highest facility with an equal or lower average daily population. Given a total 168 hours in a week (7 days per week x 24 hours per day), this equates to more than 17 full-time 40-hour-a-week correctional facility personnel (or four full time personnel working 24 hours a day every day) devoting all their time to inmate calling services. We do not find these data credible when comparing them to data of similarly sized reporting facilities that have no incentive to under-report their hours or costs. For example, more than 80% of the larger jails having the same or less average daily population as the facility reporting 694 hours report total hours spent on inmate calling services at fewer than 250 total hours a week and, of those facilities, roughly half spend fewer than 100 hours a week on inmate calling services-related activities.424 Indeed the majority of facilities between 1,000 and 1,500 average daily population report average total costs per minute less than $0.02. Nevertheless, in the absence of any other facility-provided data for purposes of our interim rate caps, we conclude that reliance on these data best balances our objectives to ensure just and reasonable rates under section 201 of the Act with the requirement to ensure fair compensation under section 276 of the Act. We 418 National Sheriffs Association Comments at 7 n.6 (identifying various inmate calling services tasks performed at jails); Pay Tel Reply at 8-9 (noting the costs to release incarcerated people as well, such as costs involved in  closing an account, and administering account funds after an inmate s release );. 419 U.S. Department of Justice, Bureau of Justice Statistics, 2018 Jail Report at 8 (Mar. 2020), https://www.bjs.gov/ content/pub/pdf/ji18.pdf; see Pay Tel Wood Reply Report at 13 (asserting that turnover  directly drives many of the costs incurred by both [inmate calling services] providers and the operators of confinement facilities ). Further, the record suggests that this trend continues as jail size falls even further; e.g., as jails with an average daily population below 50 have an  average time in jail of 11.2 days. National Sheriffs Association Comments at 9. 420 See Pay Tel Comments at 17 (observing an average cost per minute of $0.102 for jails of 1-99 average daily population, compared to an average cost per minute of $0.060 for jails of over 1,000 average daily population). 421 National Sheriffs Association Comments at 9. In the Further Notice we adopt today, we seek comment on the effect of turnover on facility costs. See infra Part VI.B.3. 422 2020 ICS Notice, 35 FCC Rcd at 8522, para. 103. 423 See National Sheriffs Association Jan. 12, 2015, Comments, Exh. A, NSA Member Data Summary  ADP 1,000+ at 1 (showing at line 15, Provider ID 148 having an average daily population of 1,525 and an average reported cost per minute of $0.176). 424 And the remaining facilities of the same or smaller average daily population report total hours less than 300, well less than half the amount of time claimed by the facility reporting 694 hours. 64 Federal Communications Commission FCCCIRC2105-01 therefore conclude that a $0.02 allowance for the contractually-prescribed facility rate component is reasonable for this interim step based on this record until more updated facility-related data are submitted into the record. 146. In adopting the $0.02 allowance, we decline the Public Interest Parties suggestion that we round the $0.02 figure down to $0.01 based on the analysis done for the 2020 ICS Notice.425 The Public Interest Parties experts argue that the rounding adjustment is appropriate given typical rounding conventions.426 In the 2020 ICS Notice, the Commission calculated the difference in mean costs per minute for contracts with and without site commissions, which came out to $0.013.427 The Commission explained that it rounded this figure upward  to allow for individual contracts for which this matters more than the average contract. 428 Our revised calculations reflect even lower numbers as we have noted, yet we see no reason to adjust our proposed conservative approach here for this interim solution, particularly in light of the reintroduction of the National Sheriffs Association facility-related data. To the extent that there are contracts covered by the new interim rate caps that we adopt today where the facility-related costs to provide inmate calling services are higher than our even lower revised calculations or the previously calculated $0.013, particularly in light of the fact that National Sheriffs Association prefers a higher rate for larger jails,429 we maintain the more conservative $0.02 rate cap component as our interim contractually-prescribed facility rate component at this time. 147. The Public Interest Parties also raise concerns about  double counting costs 430 in both the provider-related and facility-related rate cap components. As they explain,  [t]he base rate (i.e., the mean plus one standard deviation) is calculated based on the full data set which includes observations of contracts that pay commissions and those that do not. 431 Facilities that do not require site commissions  already incorporate the unobserved or unreported costs that this adjustment is intended to account for. 432 Site commission payments have been removed from the calculation to determine the new lower provider- related interim rates we adopt today. Unlike the Commission s proposal in the 2020 ICS Notice where all providers would have been able to recover the $0.02 rate component for all facilities regardless of whether site commissions were actually paid, under our rules adopted today providers that do not pay site commission payments may not assess the separate facility-related rate components on inmate calling services customers. We find that this addresses the potential double counting concern raised by the Public Interest Parties. We also reject the arguments of Prisoners Legal Services of Massachusetts that  [t]here is no need or justification for a two cent markup on telephone rates. 433 These commenters highlight that  [i]n three of six recently negotiated Massachusetts county contracts, the sheriffs voluntarily eliminated their commissions. 434 While eliminating site commission payments related to interstate and international inmate calling services altogether may be a laudable objective, on the record before us and taking into account the D.C. Circuit s decision in GTL, we decline to do so at this time.435 425 Public Interest Parties Comments at 8; Public Interest Parties Reply at 10. 426 Public Interest Parties Brattle Report at 19. 427 2020 ICS Notice, 35 FCC Rcd at 8572, Appx. H, para. 2. 428 Id. 429 National Sheriffs Association Comments at 8 (seeking $0.05 for jails between 350-2,499 average daily population). 430 Public Interest Parties Reply at 10. 431 Public Interest Parties Brattle Report at 15. 432 Id. 433 Prisoners Legal Services Comments at 5. 434 Id. 435 See GTL v. FCC, 866 F.3d at 414. 65 Federal Communications Commission FCCCIRC2105-01 148. We also reject the National Sheriffs Association s request that we establish a rate component of $0.05 for facilities having an average daily population between 350 and 2,499.436 The National Sheriffs Association s proposal covers a much greater range of jail facilities than we have determined we can reasonably address based on the current record; accordingly, we decline to adopt its proposal. We are not confident that the data we currently have can reasonably estimate legitimate facility-related costs for smaller facilities.437 And, our interim rate components will cover facilities with average daily populations of 1,000 or more i.e., facilities that the survey data suggest can accommodate less than the $0.02 per minute we adopt as an interim measure.438 149. Some providers oppose our calculated $0.02 number because it is lower than their average site commission payments across all their contracts.439 We find their arguments unpersuasive and contrary to law. For example, GTL argues that its site commissions average is {[ ]} per minute and that the site commissions for { ]} of its jail contracts exceed the Commission s proposed rate cap.440 Securus explains that in 2018 and 2019, the company incurred approximately {[ ]} million in site commission expenses, of which roughly {[ ]} was associated with inmate calling services.441 Securus also highlights that site commissions paid over the same period increased with facility size, ranging from {[ ]} per minute for the facilities with the fewest incarcerated people to {[ ]} per minute for the largest facilities.442 The problem with both GTL s and Securus s claims is that their figures are based on total site commissions paid, and fail to isolate or otherwise account for only those portions of payments related to reasonable facility-related costs of providing inmate calling services. In other words, their calculations vastly overstate legitimate facility-related costs because they include the full site commission payments, under the mistaken view that they should be permitted to recover the entire amount of site commission payments from incarcerated people or the loved ones they call. We agree with the Public Interest Parties that such analysis  includes site commission payments that compensate correctional facilities for the transfer of market power from the facility to the [inmate calling services] provider that should not reasonably be included in the cost base. 443 Given the failure to isolate inmate calling services-related costs from the site commission figures provided by GTL and Securus, we are not persuaded that they represent reasonable allowances for inmate calling services-related facility costs. Furthermore, these figures include site commission payments that would fall into the category of the legally-mandated facility rate component that we separately adopt today that permits providers to recover these site commission payments in a manner other than through the $0.02 contractually- prescribed facility-related rate component. To rely on the Securus or GTL averages to arrive at a facility- related rate component for prisons and larger jails would necessarily result in double recovery with respect to many of these payments. 150. Security and Surveillance Costs. We cannot determine, based on the current record, whether security and surveillance costs that correctional facilities claim to incur in providing inmate 436 National Sheriffs Association Comments at 8 437 Supra Part III.C.2. 438 See supra Part III.C.2. 439 See GTL Comments at 26-27; Securus Cost Study at 13. 440 GTL Comments at 26-27. 441 Securus Cost Study at 13. 442 Id. Securus s figures run counter to the claims of other commenters and correctional facility evidence showing that facility costs per calling minute tend to decrease as facility size increases. See National Sheriffs Association Comments at 7-8; Pay Tel Comments at 13; Pay Tel Reply at 10; National Sheriffs Association Jan. 12, 2015, Comments, Exh. A (showing costs for facilities of different sizes). 443 Public Interest Parties Brattle Reply Report at 15; see also National Sheriffs Association Comments at 6 (recognizing that  at least some portion of commission payments are not locational rents ). 66 Federal Communications Commission FCCCIRC2105-01 calling services are  legitimate inmate calling services costs that should be recoverable through interstate and international calling rates. The 2020 ICS Notice sought comment on this issue,444 and the record is mixed. Several commenters support the exclusion of security and surveillance costs from the base of recoverable inmate calling services costs under section 276, arguing that these tasks are  not related to the provision of communication service and provide no benefit to consumers. 445 As Worth Rises explains, security and surveillance services  used in a prison or jail reflect policy decisions made by administrators that differ dramatically from one state or county to another and even one facility to another and are  generally not responsive to any local, state, or federal law requirements, and are thus incredibly varied. 446 And the United Church of Christ and Public Knowledge argue that costs associated with monitoring, call blocking, and enrolling incarcerated people in voice biometrics systems are security costs not related to  communications functions. 447 GTL and the National Sheriffs Association argue that  correctional facilities incur administrative and security costs to provide incarcerated people with access to [inmate calling services] and that these costs should be recovered through calling rates.448 The data provided by the National Sheriffs Association suggest that correctional facilities do include security and surveillance costs that they assert could reasonably be related to providing calling services.449 These data and descriptions also suggest a troubling and apparent duplication of some of the same security functions claimed by providers in their costs.450 The National Sheriffs Association also asserts that the data suggest that it is possible to arrive at a per-minute cost to perform these duties.451 151. We are skeptical of these data given the wide unexplained variations that appear across some of the facilities. At the same time, we recognize that the data upon which the National Sheriffs Association relies are self-reported costs purportedly incurred in relation to inmate calling services.452 Those data do not suggest a methodology that would permit the Commission to verify or otherwise isolate legitimate telephone calling-related security and surveillance costs, such as costs associated with court- ordered wiretapping activity, from general security and surveillance costs in correctional facilities that would exist regardless of inmate calling services. As Worth Rises emphasizes, isolating and thus being able to quantify calling-related security and surveillance costs is an important step in determining how, if 444 2020 ICS Notice, 35 FCC Rcd at 8523, para. 107. 445 MediaJustice Comments at 2 ( The Commission should not incorporate the cost of security and surveillance in rates. ); Worth Rises Comments at 8; Public Interest Parties Reply at 9 ( Constant observation of incarcerated people is a core function of jail and prison facilities, not a function specific only to [inmate calling services]. ). 446 Letter from Bianca Tylek, Founder and Executive Director, Worth Rises, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 2 (filed Mar. 24, 2021) (Worth Rises Mar. 24, 2021, Ex Parte). 447 UCC and Public Knowledge Mar. 28, 2021, Ex Parte at 3; UCC Apr. 26, 2021 Ex Parte at 1 (highlighting that security services  are separate from the services provided to two people communicating with each other and should not be treated as  mandatory elements of the rate ). 448 GTL Comments at 28; National Sheriffs Association Comments at 3 (listing various security and administrative functions). 449 National Sheriffs Association Jan. 12, 2015, Comments at 3 (listing various security responsibilities related to the provision of inmate calling services including call monitoring and responding to  system alerts ). 450 National Sheriffs Association Comments at 4 ( It is clear that Sheriffs and jails perform some of the same functions that [inmate calling services] providers perform in some cases and, presumably, whose cost were included in the cost studies filed with the Commission. ). 451 Id. (explaining that data obtained from a cost survey (that the National Sheriffs Association provided in 2015) were used to calculate the  per minute cost to perform duties associated with [inmate calling services] for each jail ). 452 National Sheriffs Association Jan. 12, 2015, Comments at 4 nn.4-5. 67 Federal Communications Commission FCCCIRC2105-01 at all, such costs should be recovered through rates.453 152. On the present record, however, commenters have not provided the Commission with any plausible method for doing so, much less a methodology for determining recoverable security and surveillance costs, if any, versus non-recoverable costs. In the absence of an ability to distinguish or quantify security cost duplication at this time, we seek comment on this issue in the Further Notice so we can continue to evaluate whether and, if so, how to exclude these costs from interstate and international inmate calling services rates.454 153. Takings. In GTL v. FCC, the D.C. Circuit directed that the Commission address on remand whether  the exclusion of site commissions . . . violates the Takings Clause of the Constitution because it forces providers to provide services below cost. 455 Consistent with that directive, the 2020 ICS Notice sought comment on the takings issue with respect to site commission payment cost recovery.456 The Commission indicated it did not believe that there were any potential taking concerns arising from the rate cap proposals in the 2020 ICS Notice.457 We find that the Takings Clause is not implicated by the actions we take today in adopting separate and distinct facility-related rate components that providers may recover. 154. As an initial matter, the interim rate cap reforms we adopt in this Report and Order with respect to site commission payments are based on a cautious, data-driven approach to lowering total interstate rate caps, carefully balancing the needs of providers to receive fair compensation while ensuring just and reasonable rates and practices. The D.C. Circuit s concern about takings due to the categorical exclusion of any portion of site commission payments in the 2015 ICS Order is obviated by our two-part facility-related rate component mechanism. 155. As the Supreme Court has recognized, the  guiding principle has been that the Constitution protects utilities from being limited to a charge for their properly serving the public which is so  unjust as to be confiscatory. 458 As a general matter,  [r]ates which enable [a] company to operate successfully, to maintain its financial integrity, to attract capital, and to compensate its investors for the risk assumed certainly cannot be condemned as invalid, even though they might produce only a meager return on the so called  fair value rate base. 459 In making this evaluation,  it is not theory but the impact of the rate order which counts. If the total effect of the rate order cannot be said to be unreasonable, judicial inquiry . . . is at an end. The fact that the method employed to reach that result may contain infirmities is not then important. 460 Whether a given rate is confiscatory  will depend to some extent on what is a fair rate of return given the risks under a particular rate-setting system, and on the amount of 453 Cf. Worth Rises Comments at 9 (suggesting that isolating security and surveillance costs would facilitate greater visibility into provider rate structures and bids). 454 See infra Part VI.B.3. 455 See 2020 ICS Notice, 35 FCC Rcd at 8522, para. 105 n.254 (citing GTL v. FCC, 866 F.3d at 414); see also U.S. Const. amend. V ( [P]rivate property [shall not] be taken for public use, without just compensation. ). 456 See 2020 ICS Notice, 35 FCC Rcd at 8523, para. 105. 457 See id. 458 Duquesne Light Co. v. Barasch, 488 U.S. 299, 307 (1989) (Duquesne Light). 459 Hope Natural Gas, 320 U.S. at 605; see also, e.g., Verizon v. FCC, 535 U.S. at 524 (A rate is  so unjust as to be confiscatory where it  threaten[s] an incumbent s financial integrity. (quoting Duquesne Light, 488 U.S. at 307 (internal quotation marks omitted))); Ill. Bell Tel. Co. v. FCC, 988 F.2d 1254, 1263 (D.C. Cir. 1993) (1993 Illinois Bell) (rejecting a takings claim where  [t]here simply has been no demonstration that the FCC s rate base policy threatens the financial integrity of the [service providers] or otherwise impedes their ability to attract capital ). 460 Hope Natural Gas, 320 U.S. at 602. 68 Federal Communications Commission FCCCIRC2105-01 capital upon which the investors are entitled to earn that return. 461 In evaluating the  total effect of a rate on a company, courts do not consider the profitability of a company s nonregulated lines of business.462 Carriers face a  heavy burden to prevail on a takings claim and must demonstrate that a rate  threatens [the carrier s] financial integrity or otherwise impedes [its] ability to attract capital. 463 156. Considered in their totality, our interim per-minute provider-related rate caps and allowances for site commissions do not threaten providers financial integrity such that they could be considered confiscatory. The rate caps and site commission allowances are based on data supplied by providers and, as applicable to site commissions, correctional facilities. Neither correctional facilities nor providers have incentives to understate their costs in the context of a rate proceeding, lest the Commission adopt rates that are below cost. Indeed, the manner in which these cost data were collected gave  providers every incentive to represent their [inmate calling services] costs fully, and possibly, in some instances, even to overstate these costs. 464 Thus, there is no reason to believe that the data understate the actual costs of providing interstate and international inmate calling services. 157. Further, as the Commission observed in 2015,  [t]he offering of [inmate calling services] is voluntary on the part of the [inmate calling services] providers, who are in the best position to decide whether to bid to offer service subject to the contours of the request for proposal. There is no obligation on the part of the [inmate calling services] provider to submit bids or to do so at rates that would be insufficient to meet the costs of serving the facility or that result in unfair compensation. 465 And unlike the rate caps adopted in 2015, our new interim rate framework includes an explicit allowance for site commission payments. Considering these circumstances, we conclude that the  total effect of our interim rate regime is not confiscatory and reject arguments that the reforms adopted here will result in unconstitutional takings.466 158. Our actions also do not constitute a per se taking as they do not involve the permanent condemnation of physical property.467 Nor do our actions represent a regulatory taking.468 The Supreme Court has stated that in evaluating regulatory takings, three factors are particularly significant: (1) the economic impact of the government action on the property owner; (2) the degree of interference with the 461 Duquesne Light, 488 U.S. at 310. 462 See, e.g., Brooks-Scanlon Co. v. R.R. Comm n, 251 U.S. 396, 399 (1920) (A company cannot  be compelled to spend revenues from its unregulated sawmill and lumber business  to maintain a [rate-regulated] railroad that regularly operates at a loss.); Mich. Bell Tel. Co. v. Engler, 257 F.3d 587, 594 (6th Cir. 2001) (The rate freeze mandated by state law did  not include any provisions which adequately safeguard against imposition of confiscatory rates, and the carriers were  not required to subsidize their [rate] regulated services with income from rates . . . deemed to be competitive, or with revenues generated from unregulated services. ). 463 Hope Natural Gas, 320 U.S. at 602; 1993 Illinois Bell, 988 F.2d at 1263; see also Texas Office of Pub. Util. Counsel v. FCC, 183 F.3d 393, 437 (5th Cir. 1999) (stating that to succeed on a takings claim, a party must demonstrate that the losses caused by the regulation in question  are so significant that the  net effect is confiscatory ). 464 2015 ICS Order, 30 FCC Rcd at 12799, para. 73. 465 Id. at 12836, para. 142. 466 GTL Comments at 30; Securus Comments at 31. 467 Loretto v. Teleprompter Manhattan City Corp., 458 U.S. 419, 427 (1982) ( When faced with a constitutional challenge to a permanent physical occupation of real property, this Court has invariably found a taking. ); Tahoe- Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302, 322 (2002) ( When the government physically takes possession of an interest in property for some public purpose, it has a categorial duty to compensate the former owner. ). 468 GTL Comments at 31 n.157. 69 Federal Communications Commission FCCCIRC2105-01 property owner s investment-backed expectations; and (3) the  character of the government action.469 None of these factors suggest a regulatory taking here. 159. First, the interim steps we take with respect to inmate calling services rates including site commission payments are unlikely to have adverse economic impacts on providers. Providers have a waiver mechanism available to them should they find that in limited instances, the rate cap components do not cover the legitimate costs of providing inmate calling services. And, as explained above, the Supreme Court has long recognized, when a regulated entity s rates  enable the company to operate successfully, to maintain its financial integrity, to attract capital, and to compensate its investors for the risks assumed, the company has no valid claim to compensation under the Takings Clause, even if the current scheme of regulated rates yields  only a meager return compared to alternative rate-setting approaches.470 160. Second, these interim actions do not improperly impinge on providers reasonable investment-backed expectations. The Commission has long been examining how to address inmate calling services rates and charges and has taken incremental steps to address areas of concern as they arise.471 Various proposals, especially those targeting rate reform, have been raised and extensively debated in the record. Given this background, we are not persuaded that any reasonable investment- backed expectations can be viewed as having been upset or impinged by our actions here.472 161. Third, our actions today substantially advance the legitimate governmental interest in protecting incarcerated people, and the familial and other support systems upon which they rely through telephone service, from unjust and unreasonable interstate and international inmate calling services rates and charges. This is an interest that Congress has required the Commission to protect.473 Thus, our actions do not compel a physical invasion of providers property, but merely  adjust[] the benefits and burdens of economic life to promote the common good by ensuring that providers are fairly compensated while also directly protecting the interests of ratepayers and, indirectly, the broader public.474 162. Recovering Facility-Related Rate Components on Consumers Bills. Having adopted the two aforementioned distinct facility-related rate components today to account for payments required under codified law and our reasonable estimate of legitimate correctional facility costs, we also find it necessary to ensure increased transparency in the rates and charges imposed upon incarcerated people and their loved ones for interstate and international inmate calling services. Under our interim rules, we adopt different caps on the facility-related rate component of interstate and international inmate calling services depending on the circumstances that led to the site commission payment. In contrast to someone s status as an inmate of a prison versus a jail, or of a jail of a particular size for which we also have differing rates caps we find it less likely that customers of interstate and international inmate calling services will know the circumstances that led to a given provider s site commission payment. Absent information 469 Penn Central Transp. Co. v. New York City, 438 U.S. 104, 124 (1978) (Penn Central). 470 Hope Natural Gas Co., 320 U.S. at 605. 471 See generally 2013 ICS Order; 2015 ICS Order; 2020 ICS Order on Remand and Notice. 472 See, e.g., Exclusive Service Contracts for Provision of Video Services in Multiple Dwelling Units and Other Real Estate Developments, MB Docket No. 07-51, Report and Order and Further Notice of Proposed Rulemaking, 22 FCC Rcd 20235, 20263, para. 58 (2007) (concluding that there was no interference with investment-backed expectations as  exclusivity clauses in [multiple dwelling unit (MDU)] contracts have been under active scrutiny for over a decade ); Connolly v. Pension Ben. Guaranty Corp., 475 U.S. 211, 226-27 (1986) (declining to find interference with investment-backed expectations where the subjects of regulation had been of  legislative concern for years). 473 47 U.S.C. § 201(b). 474 Penn Central, 438 U.S. at 124. 70 Federal Communications Commission FCCCIRC2105-01 separately breaking out the facility-related rate component of the service charge, and some identifier tying the charge to the relevant category under the Commission s rules, customers will be substantially less able to evaluate their bills and monitor whether they are receiving the protections of Commission rate caps to which they are entitled. To this end, we exercise our authority to require providers choosing to recover the facility-related rate components in their total interstate or international inmate calling services rates to include those rate components separately on inmate calling services bills.475 The facility-related rate components on such bills should contain the source of the obligation underlying that component, the amount of the component on a per unit basis, and the total interstate or international rate component resulting from the facility-related rate component charged for interstate or international calls and reflected on bills. We provide more detailed guidance on the mechanics of implementing these requirements later in this section. 163. The Commission has previously found that it has the jurisdiction to  regulate the manner in which a carrier bills and collects for its own interstate offerings, because such billing is an integral part of that carrier s communications service. 476 In the 2013 ICS Order, the Commission used this authority to address billing-related call blocking, explaining that  the Commission and the courts have routinely indicated that billing and collection services provided by a common carrier for its own customers are subject to Title II of the Act.477 And, in adopting ancillary service charge rules in the 2015 ICS Order, the Commission reaffirmed its jurisdiction to regulate the manner in which providers bill and collect charges associated with inmate calling services.478 Because these facility-related rate components concern the  manner in which calling service providers bill for their interstate and international services, we conclude that we have the necessary authority to require implementation as specified herein. 164. The strong public interest in facilitating greater transparency with respect to site commission payments likewise justifies the disclosure of facility-related rate component information. Given that incarcerated people and their loved ones ultimately bear the burden of these payments through the total per-minute rates charged by providers, there is a strong interest in transparency regarding the charges that incarcerated people and their families bear. Absent our requirements we find a substantial risk that billing information will lack the detail about correctional facility-related charges necessary for consumers to ensure they are receiving the protections of our rate caps in that regard. 165. Calling service providers in this proceeding have similarly encouraged us to account for the effect of state law in assessing site commission payments. GTL explains that there are  significant variances in site commission requirements, some of which are driven by state law.479 And Securus points to variations in state laws governing site commissions that  might affect whether a particular contract pays a site commission. 480 Securus expressly encourages us to treat site commissions  separate 475 We believe that the requirements we adopt advance truthfulness and accuracy in billing, consistent with the Commission s existing Truth-In-Billing rules. 47 CFR §§ 64.2400-64.2401. To the extent that the requirements of these rules differ from the requirements of our Truth-In-Billing rules with respect to the detail and specifications required or otherwise, we make clear that these more specific billing requirements for the facility-related component of interstate and international inmate calling services charges are controlling over the more general Truth-In-Billing rules to the extent of any divergence but only to that extent. Providers thus must treat our interstate and international inmate calling services disclosure requirements as controlling within their self-described scope and otherwise comply with the more general Truth-In-Billing rules. 476 Truth-In-Billing and Billing Format, CC Docket No. 98-170, First Report and Order and Further Notice of Proposed Rulemaking, 14 FCC Rcd 7492, 7507, para. 25 (1999). 477 2013 ICS Order, 28 FCC Rcd at 14168, para. 114 (citations omitted). 478 2015 ICS Order, 30 FCC Rcd at 12860, para. 194. 479 GTL Comments at 28. 480 Securus Comments at 32. 71 Federal Communications Commission FCCCIRC2105-01 and distinct from the provider base rate. 481 Securus highlights that  [t]his would allow the Commission to set a lower rate ceiling based on non-commission costs, and would increase public transparency of [inmate calling services] provider costs. 482 We agree. By accounting for legally-mandated and contractually-prescribed site commissions separately, we are better able to account for certain variances in site commission costs and increase transparency to end users with respect to what portion of their total interstate and international rates relate to site commission payments. 166. Our treatment of correctional facility-related costs as a separate and distinct rate component from the lower provider-related interim rate caps we adopt is consistent with GTL v. FCC. While the D.C. Circuit rejected the  categorical exclusion of site commission costs from  the calculation used to set [inmate calling services] rate caps, 483 nothing in the court s decision dictates how we implement recovery of such costs. The facility-related rate components we adopt herein merely disaggregate correctional facility-related costs from provider-related costs and direct providers to recover these costs through separate interim rate components. 167. Mechanics of the Legally-Mandated Facility Rate Component. For providers subject to site commission payments required under codified laws or regulations, we permit providers to pass through to consumers this cost of providing inmate calling services, without any mark up, capped at the maximum total interstate rate cap currently in effect for debit and prepaid calls from any size correctional facilities.484 We agree, for present purposes, that site commissions prescribed under formally codified laws are meaningfully distinguishable from contractually negotiated site commission payments.485 At least on the current record, while we collect additional information through today s Further Notice, we consider it prudent to regard site commissions of this type as reasonably related to the provision of inmate calling services. 168. Consistent with our transparency objectives, providers shall: (1) specify the federal, state, or local law, regulation, statute, or other rule or law that operates independently of the contracting process between correctional institutions and providers giving rise to the mandatory nature of the obligation to pay; (2) disclose the amount of the payment on the applicable per-unit basis, e.g., per-call or per-minute if based on a revenue percentage; and (3) identify the total amount of this facility rate component charged for the interstate and international calls on the bill. For example, a provider serving a local jail in Tennessee is required to collect $0.10 for each completed telephone call.486 In issuing an inmate calling services customer bill, that provider must clearly label487 the legally-mandated facility- related rate component, specify section 41-7-104 of the Tennessee Code as the relevant statutory code section giving rise to the obligation, specify the amount as $0.10 per call, and include a line item indicating the total charge to the customer resulting from multiplying the $0.10 per call charge by the number of interstate and international calls. Similarly, for a statutory obligation to remit a percentage of 481 Id. at 35. Pay Tel also supports  the adoption of a specific rate element intended to offset facility costs as a reasonable means of compensating facilities for cost incurred. Pay Tel Comments at 14. 482 Securus Comments at 35. 483 GTL v. FCC, 866 F.3d 413. 484 Providers may never charge a total rate for interstate calls that exceed $0.21, the highest interstate rate cap permissible as a result of today s actions. As we indicated, nothing we do today increases any interstate calling rate above the $0.21 rate cap in effect prior to today for prepaid and debit calls from all sizes and types of facilities. Supra Part I. 485 See supra paras. 116-22. 486 Tenn. Code Ann. § 41-7-104 (West 2020). 487 Providers are not required to use the terms  legally-mandated facility rate component or  contractually- prescribed facility rate component, but may do so if they choose. Other terms may be appropriate as long as providers clearly label the facility-related rate components. 72 Federal Communications Commission FCCCIRC2105-01 gross revenue, like the 40% reflected in the Texas code,488 we require a provider to identify the Texas code section, specify that it requires an additional 40% charge on top of the applicable per-minute interstate or international provider-related rate component, and include a line item reflecting how much of the total interstate and international rate charges are attributable to the mandatory 40% charge. We recognize the possibility that not all mandatory site commission payments may be easily expressed as a percentage of revenue or easily converted to a per-call or per-minute rate. Under these circumstances, providers must use their best judgment to comply with our billing-related disclosure obligations to reflect the legally-mandated rate component in the manner we prescribe for interstate and international calls on their inmate calling services customer bills. We direct the Bureau staff to assist with questions that may arise on a case-by-case basis should providers encounter difficulty implementing our billing transparency requirements. 169. Mechanics of the Contractually-Prescribed Facility Rate Component. Providers subject to contractually-prescribed site commissions pursuant to contract with correctional facilities or agencies may charge up to $0.02 per minute to recover those discretionary payments.489 Similar to the requirements for our legally-mandated rate component, should providers decide to recover this discretionary amount from their interstate or international calling customers, they must clearly label the rate component on their bill and indicate that this rate component is required by the correctional facility per contract. They must also show this rate component charge as an additional (up to $0.02, as applicable) per minute rate component on top of the applicable provider-related per-minute rate component, and then compute the total amount attributable to the $0.02 rate component charged to the end user for that call, determined by multiplying $0.02 by the number of interstate and international minutes reflected on that bill.490 170. Finally, NCIC asks us to clarify that our $0.02 allowance  does not prohibit the payment of additional site commissions should the inmate calling services provider and correctional facility so negotiate. 491 We confirm that the $0.02 figure does not prevent or prohibit the payment of additional site commissions amounts to correctional facilities should the calling services provider and the facility enter into a contract resulting in the provider making per-minute payments to the facility higher than $0.02. All we do here is limit the providers ability to recover these commissions to $0.02.492 Our recognition here that existing site commission payment obligations may contain legitimate facility-related costs is not an invitation for correctional facilities not currently incorporating these discretionary payments into their 488 Tex. Gov t Code Ann. § 495.027 (West 2021). 489 Of course, should a provider s total contractually-prescribed site commission payment obligation result in a lower per-minute rate than $0.02 per minute of use, that provider s contractually-prescribed facility rate component would be limited to the actual amount of its per-minute site commission payment up to a maximum of $0.02. An illustration may prove helpful. If the provider charges $0.12 per minute for a call from a larger jail and the correctional facility imposes a 10% site commission payment obligation on all gross revenue, the provider would be required to pay the correctional facility $0.012 (an amount lower than $0.02). In such a case the provider is only able to charge a contractually-prescribed facility rate component of $0.012 rather than the full $0.02 amount. For this reason, providers must calculate any contractually-prescribed facility rate component to three decimal points for all intermediate calculations occurring before the total amount of such charges related to interstate and international calling are determined. 490 To the extent providers believe they are unable to recover their costs through the interstate and international rate components we adopt today, they may seek waivers through the waiver process we also adopt today. 491 NCIC Comments at 4. 492 Consequently, we reject NCIC s assertion that the $0.02 allowance could raise Tenth Amendment concerns  by infringing on a state s right to require or permit site commissions. NCIC Comments at 5. With respect to state prescribed statutory or legal obligations, we allow recovery for such mandatory site commission payments as described herein, leaving states free to require them as they wish. As the Public Interest Parties correctly highlight, our actions do not  affect a state s ability to require or permit site commissions. Public Interest Parties Reply at 14. 73 Federal Communications Commission FCCCIRC2105-01 bidding and contracting process to do so in the future. Indeed, in the Further Notice, we seek comment on whether providers should be prohibited from entering into any correctional facility contract that requires the payment of site commission payments with respect to interstate and international inmate calling services pursuant to our authority under section 201(b) of the Act.493 5. Waiver Process for Outliers 171. We readopt and modify the waiver process applicable to calling service providers and codify this process in our inmate calling services rules.494 The 2020 ICS Notice proposed to adopt a modified waiver process to better enable the Commission to understand why circumstances associated with a provider s particular facility or contract differ from those at other similar facilities it serves, and from other facilities within the same contract, if applicable.495 The record, while not robust on this issue, generally supports our proposed waiver process modifications. For instance, GTL agrees with the Commission s proposal to apply the waiver process on a facility-by-facility basis rather than at the holding company level as required under the present rules.496 Significantly, no commenter opposes the proposed waiver process modifications.497 172. A waiver process provides an important safety valve for providers that may face unusually high costs in providing interstate or international inmate calling services at a particular facility or under a particular contract that are otherwise not recoverable through the per-minute charges for those services and through ancillary service fees associated with those services. Such a process helps us ensure that providers rates for interstate and international inmate calling services and ancillary services are not unreasonably low within the meaning of section 201(b) of the Act and also is essential to our ability to ensure that providers are fairly compensated for each and every completed call, as section 276(b)(1)(A) of the Act requires.498 Accordingly, we establish a modified waiver process requiring providers of inmate calling services that seek waivers of our interstate or international rate or ancillary fee caps to do so on a facility-by-facility or contract basis, consistent with our proposal in the 2020 ICS Notice.499 We similarly modify our waiver process to specifically permit providers to seek waivers of the international rate caps we adopt in this Report and Order.500 The Commission has previously delegated authority to the Bureau to review and rule on petitions for waiver of its caps for inmate calling services,501 and we reaffirm that delegation of authority today. 173. Throughout the course of this proceeding, various parties have argued that reductions in inmate calling services rates would threaten their financial viability, imperiling their ability to provide service,502 and risking degraded or lower quality service.503 We find that these claims are best handled on 493 47 U.S.C. § 201; infra Part VI.B.3. 494 See 2013 ICS Order, 28 FCC Rcd at 14153, para. 82. The Commission reaffirmed its waiver process for inmate calling services providers in the 2015 ICS Order. 2015 ICS Order, 30 FCC Rcd at 12871, para. 219; see also 47 CFR § 1.3. These portions of the 2015 ICS Order were left unaltered by the GTL v. FCC court s 2017 vacatur. See GTL v. FCC, 866 F.3d 397 passim. 495 2020 ICS Notice, 35 FCC Rcd at 8524, para. 110. 496 GTL Comments at 5 n.13. 497 See, e.g., id. at 5 n.13, 34 n.171; Public Interest Parties Comments at 11-12. 498 47 U.S.C. §§ 201(b), 276(b)(1)(A). 499 2020 ICS Notice, 35 FCC Rcd at 8523-24, paras. 108-11; see also 2013 ICS Order, 28 FCC Rcd at 14154, para. 84 (requiring providers to request waivers on a holding company basis). 500 2020 ICS Notice, 35 FCC Rcd at 8532, para. 129; see also GTL Comments at 34 n.171. 501 See 2015 ICS Order, 30 FCC Rcd at 12868, para. 212; 2013 ICS Order, 28 FCC Rcd at 14154, para. 84. 502 See, e.g., GTL Comments at 13 (recognizing that providers  will require time to determine whether they can continue to provide [inmate calling services] under the new rate caps at a particular correctional facility ). To the (continued& .) 74 Federal Communications Commission FCCCIRC2105-01 a case-by-case basis through a waiver process that focuses on the costs the provider incurs in providing interstate and international inmate calling services, and any associated ancillary services, at an individual facility or under a specific contract. We find these levels of analysis to be the most appropriate because they permit the evaluation of detailed information about individualized circumstances that are best measured at those disaggregated levels of operations, unlike our prior waiver process which was based at the holding company level.504 This approach also recognizes that in some instances the circumstances at a particular facility may prevent the provider from recovering its costs of providing interstate and international inmate calling services and associated ancillary services under our rate and ancillary service fee caps, while in other instances circumstances applicable to all facilities covered by a contract may prevent such cost recovery. 174. As with all waiver requests, the petitioner bears the burden of proof to show that good cause exists to support the request.505 Any inmate calling services provider filing a petition for waiver must clearly demonstrate that good cause exists for waiving our rate or fee caps at a given facility or group of facilities, or under a particular contract, and that strict compliance with our rate or fee caps would be inconsistent with the public interest.506 We do not expect the Bureau to grant waiver requests routinely. Rather, we expect the Bureau to subject any waiver requests to a rigorous review.507 Relief would be granted only in those circumstances in which the petitioner can demonstrate that adhering to our (Continued from previous page) extent any provider desires to cease serving a facility or facilities because it determines that it is no longer an economically attractive business operation, correctional facilities and incarcerated people need not fear an abrupt disruption or cessation of service, as some providers suggest could occur. If an inmate calling services provider seeks to discontinue offering service at any facility, it would first need to obtain authority from this Commission pursuant to section 214 of the Act, a provision which serves to ensure that customers of any telecommunications services provider have alternative service options available to them prior to the carrier discontinuing its service at any facility. 47 U.S.C. § 214; see also 47 CFR § 63.71; Comments Invited on Section 214 Application(s) to Discontinue Domestic Non-Dominant Carrier Telecommunications and/or Interconnected VoIP Services, WC Docket No. 20-52 et al., Public Notice, 35 FCC Rcd 12045 (WCB 2020) (citing 47 CFR § 63.71); Application of Legacy Long Distance International, Inc., WC Docket No. 20-52 (filed Feb. 18, 2020), https://ecfsapi.fcc.gov/ file/1021706369350/FCC%20Legacy%20Discontinuance%20Application%20IXC%20and%20 OSP%202020%20as%20Filed.pdf (seeking authorization to discontinue interexchange services in all 50 states, and including customer notices that explain how to obtain a new service provider). Moreover, based on the contractual arrangements between the relevant correctional facility and provider, the inmate calling services contract would likely be transferred to another provider to ensure continuity of service for the incarcerated people residing in the facility in question, a transfer which also would require prior approval from the Commission pursuant to section 214 of the Act. See, e.g., Section 214 Applications Granted, WC Docket No. 20-207 et al., Public Notice, 35 FCC Rcd 13089 (WCB IB 2020) (granting application for the transfer of the jail contracts of Legacy Long Distance International, Inc. d/b/a Legacy Inmate Communications to Network Communications International Corp. d/b/a NCIC Inmate Communications, an existing inmate calling services provider, thereby ensuring the continuity of service to the correctional facility customers); see 47 U.S.C. § 214; 47 CFR §§ 63.03-63.04. 503 See, e.g., Securus Comments at 43. 504 See Securus Comments, WC Docket No. 12-375, at iii, 40-41 (filed Jan. 12, 2015) (asserting that requiring waiver petitions to be evaluated at the holding company level would be far too onerous and suggesting that the Commission allow providers to seek waivers on a site-by-site basis). 505 47 CFR § 1.3 ( Any provision of the rules may be waived by the Commission . . . on petition if good cause therefor is shown. ). 506 See Northeast Cellular Telephone Co. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 1990) (recognizing that the Commission may exercise its discretion to waive a rule where the particular facts make strict compliance inconsistent with the public interest). 507 See, e.g., Connect America Fund et al., WC Docket No. 10-90 et al., Report and Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd 17663, 17840, para. 540 (2011) (USF/ICC Transformation Order), pets. for review denied sub nom. In re FCC 11-161, 753 F.3d 1015 (10th Cir. 2014). 75 Federal Communications Commission FCCCIRC2105-01 rate or fee caps would prevent it from recovering its costs of providing interstate inmate calling services at a particular facility or pursuant to a particular contract. Moreover, we agree with commenters that suggest that the interim rate reform adopted in this Report and Order should minimize the need for providers to avail themselves of the Commission s waiver process.508 175. Petitions for waiver must include a specific explanation of why the waiver standard is met in the particular case. Conclusory assertions that reductions in interstate or international rates, or associated ancillary service fees, will harm the provider or make it difficult for the provider to expand its service offerings will not be sufficient. We agree with commenters that providers requesting a waiver of our inmate calling services rules should provide a detailed explanation of their claims, as well as a comparative analysis of the reasons the provider cannot recover its costs when similar facilities or contracts served by the provider do.509 In addition, waiver petitions must include all required financial data and other information needed to verify the carrier s assertions. Failure to provide the information listed below will be grounds for dismissal without prejudice. Furthermore, the petitioner must provide any additional information requested by Commission staff needed to evaluate the waiver request during the course of its review.510 This additional information may include information regarding facilities or contracts of the provider that have characteristics similar to those for which waiver is sought, and the provider s interstate and international rates, and associated ancillary service charges, at or below our caps. Petitions for waiver must include, at a minimum, the following information: " The provider s total company costs, including the nonrecurring costs of the assets it uses to provide inmate calling services, and its recurring operating expenses for these services at the correctional facility or under the contract; " The methods the provider used to identify its direct costs of providing interstate and international inmate calling services, to allocate its indirect costs between its inmate calling services and other operations, and to assign its direct costs to and allocate its indirect costs among its inmate calling services contracts and correctional facilities; " The provider s demand for interstate and international inmate calling services at the correctional facility or at each correctional facility covered by the contract; " The revenue or other compensation the provider receives from the provision of interstate and international inmate calling services, including the allowable portion of any permissible ancillary services fees attributable to interstate and international inmate calling services, at the correctional facility or at each correctional facility covered by the contract; " A complete and unredacted copy of the contract for the correctional facility or correctional facilities, and any amendments to such contract; " Copies of the initial request for proposals and any amendments thereto, the provider s bid in response to that request, and responses to any amendments (or a statement that the provider no longer has access to those documents because they were executed prior to the effective date of the waiver rules adopted in this Report and Order); " A written explanation of how and why the circumstances associated with that correctional 508 GTL Comments at 5 n.13; see also Public Interest Parties Comments at 12-13 (arguing  that there should be no need for the Commission to routinely grant [inmate calling services] rate cap waivers because the FNPRM already addresses outliers through its mean plus one standard deviation approach, and because the record shows that the vast majority of [inmate calling services] rates will remain below the caps proposed ). 509 Free Press Comments at 6. 510 This requirement is consistent with prior Commission inmate calling services waiver requirements. 2013 ICS Order, 28 FCC Rcd at 14154, para. 84; 2015 ICS Order, 30 FCC Rcd at 12868, para. 212. 76 Federal Communications Commission FCCCIRC2105-01 facility or contract differ from the circumstances at similar correctional facilities the provider serves, and from other correctional facilities covered by the same contract, if applicable; and " An attestation from a company officer with knowledge of the underlying information that all of the information the provider submits in support of its waiver request is complete and correct. 176. We decline to adopt Free Press s request that a provider s waiver request should terminate upon a showing either that facility costs have declined or that its revenue has increased, and that we should  require periodic updates on cost and revenue data to make these determinations. 511 Requiring a provider to provide updated and detailed cost and revenue data and analyses on an ongoing basis, beyond its initial detailed cost and data submissions, would be unnecessarily burdensome. Any waiver request filed with the Commission will be rigorously scrutinized and, if granted, time limited as appropriate, based on the circumstances of each particular request. Additionally, we view our waiver process as sufficiently narrow and rigorous to filter spurious waiver claims, and thus sufficiently addresses those commenters requests that any potential grant of a waiver of our inmate calling services rules be as narrowly tailored as possible.512 177. Consistent with our past waiver process for inmate calling services, we delegate to the Bureau the authority to approve or deny all or part of any petition for waiver of our inmate calling services rules.513 Such petitions will be placed on public notice, and interested parties will be provided an opportunity for comments and reply comments. The Bureau will endeavor to complete its review of any such petitions within 90 days of the provider s submission of all information necessary to justify such a waiver, including any information requested by the Bureau subsequent to receiving the waiver request. D. Interim International Rate Caps 178. Today we adopt, for the first time, interim rate caps on international inmate calling services calls, as proposed in the 2020 ICS Notice. In that Notice, the Commission proposed to  adopt a rate cap formula that permits a provider to charge an international inmate calling services rate up to the sum of the provider s per-minute interstate rate cap for that correctional facility plus the amount that the provider must pay its underlying international service provider for that call on a per-minute basis. 514 A diverse group of industry stakeholders strongly support the Commission s proposal to cap international calling rates.515 179. The record before us is replete with evidence that Commission action to address international inmate calling services rates is long overdue.516 Although international calling minutes from 511 Free Press Comments at 6. 512 Id.; Leadership Conference Reply at 3. 513 See 2013 ICS Order, 28 FCC Rcd at 14154, para. 84; 2015 ICS Order, 30 FCC Rcd at 12868, para. 212. 514 2020 ICS Notice, 35 FCC Rcd at 8509, para. 68 (emphasis in original). 515 MediaJustice Comments at 2; Prisoners Legal Services Comments at 6; Verizon Comments at 2; Episcopal Church Reply at 2; Leadership Conference Reply at 1-2. See generally Public Interest Parties Comments at 10 (supporting the capping of international rates at interstate levels); Securus Comments at 45-46 (requesting the amount added to the interstate rate be based on an average amount paid to the underlying carrier rather than what the underlying carrier charges on a call-by-call basis); GTL Reply at 16 n.72 (supporting Securus s solution). 516 See, e.g., Wright Petitioners, D.C. Prisoners Legal Services Project, and Citizens United for Rehabilitation of Errants Reply, WC Docket No. 12-375, at 16 (filed Feb. 8, 2016); Letter from Karina Wilkinson & Alix Nguefack, New Jersey Advocates for Immigrant Detainees, & Rebecca Hufstader and Alina Das, New York University School of Law Immigrant Rights Clinic, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 3-4 (filed June 30, 2015); Human Rights Defense Center Reply, WC Docket No. 12-375, at 11-12 (filed Feb. 8, 2016) (requesting (continued& .) 77 Federal Communications Commission FCCCIRC2105-01 correctional facilities represent only a fraction of all calling minutes from such facilities, for those incarcerated people who rely on international calling to stay connected with their loved ones abroad, current international calling rates present a heavy financial burden.517 The 2020 ICS Notice recognized that international rates are  exceedingly high in some correctional facilities, some as high as $45 for a 15- minute call. 518 Record evidence provides additional examples of extremely high international calling rates.519 180. Providers and public interest advocates alike broadly support Commission adoption of international rate caps.520 Notably, the record explains that providers have entered into contracts that limit international rates in certain states. In 2016, New Jersey, for example, prohibited state correctional authorities from contracting for international rates higher than $0.25 per minute.521 And in 2018, Illinois negotiated a contract with Securus capping international calls at $0.23 per minute.522 We applaud these state efforts to address excessive international calling rates through the states contracting authority, which complements our action today setting long-overdue rate caps for international calling services. 181. Calculating International Rate Caps. In the 2020 ICS Notice, the Commission proposed to adopt a rate cap formula for international inmate calling services calls that would allow a provider to  charge a rate up to the sum of the inmate calling services provider s per-minute interstate rate cap for that correctional facility plus the amount that the provider must pay its underlying international service provider for that call on a per-minute basis (without a markup). 523 Although some commenters support the proposed methodology for calculating the international rate caps,524 we acknowledge Securus s argument regarding the administrative difficulty of practically implementing the Commission s proposal (Continued from previous page) that the Commission implement rate caps that are just and reasonable after it  has reviewed sufficient cost data for international calls ); GTL Comments at 34; Securus Comments at iv. 517 2020 ICS Notice, 35 FCC Rcd at 8531-32, paras. 126-27. 518 Id. n.306 (noting some per-minute international rates ranging from $0.50 per minute to $1.50 per minute); see, e.g., Los Angeles County Sheriff's Department Comments, WC Docket No. 12-375, at 4-5 (filed Jan. 19, 2016) (Los Angeles County Sheriff's Department Jan. 19, 2016, Comments) (reporting that while a 15-minute phone call to Mexico costs $8.00, a 15-minute call to Canada costs $5.00, and that the rates charged for calls to certain European and Asian countries can total $19.25 for 15 minutes); Margaret Bick Express Comments, WC Docket No. 12-375, at 1 (filed Feb. 1, 2016) (explaining that a 15-minute call from California to Canada costs $0.75 a minute, for a total of $11.25); see also GTL Supplement to Annual Report, WC Docket No. 12-375, Attach. (filed Dec. 23, 2020) (Tab I. International ICS Rates, reporting certain international rates on the higher per-minute range of $1.89 per minute ($28.35 per 15-minute call) up to as high as $4.50 per minute ($67.50 per 15-minute call)). 519 See, e.g., Prisoners Legal Services Comments at 6 (reporting that rates for international calls in Massachusetts  vary from 21 cents per minute up to nearly 54 cents per minute, with most jails providing calls for 50 cents per minute ). 520 See, e.g., GTL Comments at 34; Securus Comments at 45; Verizon Comments at 2; Public Interest Parties Comments at 10; MediaJustice Comments at 2; Prisoners Legal Services Comments at 6-7. 521 Prisoners Legal Services Comments at 6 (citing the session law that has been codified at N.J. Stat. Ann. § 30:4-8.12 (West 2021)). N.J. Stat. Ann. § 30:4-8.12 also provides that international rates remain subject to the Commission s rules and regulations. N.J. Stat. Ann. § 30:4-8.12 (West 2021). 522 Worth Rises Comments at 12. 523 2020 ICS Notice, 35 FCC Rcd at 8530, para. 124. 524 MediaJustice Comments at 2; Prisoners Legal Services Comments at 6; Verizon Comments at 2; Episcopal Church Reply at 2; Leadership Conference Reply at 1-2. 78 Federal Communications Commission FCCCIRC2105-01 for international rate caps.525 182. According to Securus, the rate structures used by underlying international providers outside the United States can vary based on the destination.526 While the average cost that Securus pays for international calls is around $0.09 a minute, in some countries the international termination rates are significantly higher than $0.09.527 To handle the fluctuating costs of international calls, Securus, like many telecommunications service providers, has implemented a  least cost routing system for completing its inmate calling services customers international calls that relies on continually updated  rate decks containing thousands of entries for international rates.528 When an international call is made, Securus will steer the call through the route having the lowest rate at that time.529 When rates change or the route is no longer available, Securus must find an alternative route with the next lowest rate to terminate the calls.530 Securus states that this constant flux of different underlying international carriers charging Securus different wholesale rates makes it impractical for Securus and, likely, other providers to charge customers  based on the actual cost of terminating each individual call. 531 183. Securus, therefore, proposes a methodology to account for this constant variation in international rates to the same overseas destination. Under Securus s proposal, the per-minute international rate cap applicable to each  international destination would be based on the Commission s applicable total per-minute interstate rate cap for that facility, plus the average per-minute amount paid by the provider to its underlying wholesale international carriers to terminate international calls to the same  international destination over the preceding calendar quarter.532 Under this proposal, providers would be required to determine this average per-minute amount paid for calls to each international destination for each calendar quarter, and then adjust their maximum international per-minute rate caps based on such determination within one month of the end of each calendar quarter.533 The record supports Securus s proposal as being more administratively efficient than the Commission s proposal.534 184. Securus presents a convincing argument that compliance with international rate caps on a call-by-call basis, where the rates charged by underlying international carriers are constantly fluctuating, would be  impractical. 535 Moreover, this methodology takes into account not only the highest but also the lowest wholesale rate for international calls to the same destination over a reasonable period of time, 525 Securus Comments at 46 (explaining that  [i]nternational caps that are tied to the rates charged by underlying providers for each individual call would be very difficult for Securus (and likely other [inmate calling services] providers) to implement on a real-time, call-by-call basis ). 526 Id. 527 Id.; see also GTL Comments at 35 (noting that international mobile termination rates are  substantially higher than termination rates on fixed-line networks (citation omitted)). 528 Securus Comments at 46-47. 529 Id. at 46. 530 Id. at 46-47. 531 Id. at 47. 532 Id.; see also id. at 46 (observing that  rate structures used by providers outside of the United States are dramatically different depending on the destination country, or even between regions within a destination country ). We define  international destination as meaning the rate zone in which an international call terminates. For countries that have a single rate zone,  international destination means the country in which an international call terminates. 533 Securus Comments at 47. 534 See GTL Reply at 16 n.72. GTL initially supported the Commission s original proposal, but, in its reply comments, it supported Securus s proposal as being more efficient. Id. 535 Securus Comments at 47. 79 Federal Communications Commission FCCCIRC2105-01 benefiting incarcerated people by having a consistent, predictable international calling rate for every three-month period to the country or countries they need to call. No party has objected to this proposal. Accordingly, we adopt Securus s approach for interim international rate caps.536 This methodology will enable providers to recover the higher costs of international calling.537 And incarcerated people will enjoy reasonable and more affordable international calling rates, allowing them to better communicate with family and friends abroad. 185. Alternative Proposals. On the record before us, we decline the Public Interest Parties request that we cap international inmate calling services rates at a level no higher than our applicable interstate rate caps.538 The Public Interest Parties note that some providers reported no international costs but did report international minutes and revenue from the calls, which  suggests that international costs are already included in their total costs, and thus accounted for in the interstate rates. 539 According to the Public Interest Parties, the Commission will double count those costs if it allows providers to recover the costs of international calls separately.540 While some small degree of double counting may have occurred through failure to separately report international costs in response to the Second Mandatory Data Collection, the record indicates that some providers did include separate costs for international calls in their responses.541 Regardless, the method we are adopting recognizes that international calling does cost more than domestic calling and that providers are entitled to recover these extra costs through the method we adopt. We will continue to monitor international calling rates in providers annual reports and collect more uniform data on international costs at the same time we undertake our data collection for interstate costs. Should those data reflect double counting, we will adjust our permanent international rate caps accordingly.542 We also decline the proposal of the Human Rights Defense Center, which asserts that  $.05 per minute is more than adequate compensation for companies that provide all Inmate Calling Services (ICS) services, locally, interstate, intrastate and internationally. 543 The Human Rights Defense center provides insufficient support and basis for this proposal, in light of our obligations under section 276 of the Act. E. Consistency with Section 276 of the Act 186. Section 276(b)(1)(A) of the Act requires the Commission to  ensure that all payphone service providers are fairly compensated for each and every completed intrastate and interstate call. 544 We conclude, consistent with the Commission s proposal in the 2020 ICS Notice,545 that the interim rate 536 Because the interstate rate caps adopted today are interim rate caps pending our collection of new, more uniform, cost data, and because our international rate caps include our applicable interim interstate rate cap component for each facility, these international rate caps are similarly interim in nature. 537 In the unlikely scenario where an inmate calling services provider is unable to fully recover its international calling costs, such provider may avail itself of the waiver process we adopt in this Report and Order. See Part III.C.5. 538 Public Interest Parties Comments at 10. 539 Id. 540 Id. 541 E.g., Letter from Stephanie A. Joyce, Counsel, Securus, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, Attach., Description and Justification for Securus s Mandatory Data Collection Report at 3 (filed Jul. 22, 2019) (Securus s Mandatory Data Collection Description and Justification) (noting that Securus provided international cost data). 542 See generally infra Part III.H.3 (instituting the Mandatory Data Collection). 543 Human Rights Defense Center Comments at 1. 544 47 U.S.C. § 276. 545 2020 ICS Notice, 35 FCC Rcd at 8525, para. 112. 80 Federal Communications Commission FCCCIRC2105-01 caps we adopt in this Report and Order fully satisfy this mandate. In the vast majority of, if not all, cases, these rate caps will allow providers to generate sufficient revenue from each interstate and international call including any ancillary service fees attributable to that call (1) to recover the direct costs of that call; and (2) to make a reasonable contribution to the provider s indirect costs related to inmate calling services.546 To the extent there are legitimate but rare anomalous cases in which a provider cannot recoup such costs under the new rate caps, the provider may seek a waiver of those caps, to the extent necessary to ensure that it is fairly compensated, as required by the Act. 187. As the Commission observed in the 2020 ICS Notice, this approach recognizes that calling services contracts often apply to multiple facilities and that providers do not expect each call to make the same contribution toward indirect costs.547 The record confirms that  because the industry norm is to bid for one contract for multiple facilities and then offer a single interstate rate across facilities irrespective of cost differentials that may exist among facilities under the contract, it would be impossible to reach a methodology that would allow a direct, one-to-one recovery of costs. 548 Indeed, providers acknowledge that they do not presently keep the type of accounting records that would allow them to measure the costs of individual calls.549 And, although the Mandatory Data Collection that we adopt in this Report and Order will result in far more granular cost data than currently are available, the resulting data will necessarily rely on allocations of indirect costs among contracts and facilities and thus will fall far short of allowing a provider to directly assign all its inmate calling services costs to individual calls. 188. We find that the interim rate caps we adopt today are consistent with both section 276 of the Act and the D.C Circuit s decision in GTL v. FCC. In that decision, the court rejected the Commission s  averaging calculus in the 2015 ICS Order, which set tiered rate caps using industry-wide average costs derived from cost data submitted by providers.550 The court explained that the Commission erred in setting rate caps using industry-average costs because calls with above-average costs would be  unprofitable, in contravention of the  mandate of § 276 that  each and every inter- and intrastate call be fairly compensated. 551 The court found the Commission s reliance on industry-average costs unreasonable because, even disregarding site commissions, the proposed caps were  below average costs documented by numerous [inmate calling services] providers and would deny cost recovery for a substantial percentage of all inmate calls. 552 189. GTL argues that our new interim rate caps fail to address the court s criticism of the 546 See Public Interest Parties Comments at 11 (advocating that this approach with adjustments provides fair compensation). But see GTL Comments at 32 ( Setting interstate rate caps  that generate sufficient revenue for such calls (including any ancillary fees attributable to those calls) that (1) allow the provider to recover from those calls the direct costs of that call and (2) reasonably contribute to the provider s indirect costs related to inmate calling services does not satisfy the demands of Section 276. ). 547 2020 ICS Notice, 35 FCC Rcd at 8525, para. 112. 548 Public Interest Parties Comments at 11. No parties challenged this conclusion or commented otherwise. 549 See, e.g., GTL Sept. 14, 2020, Letter at 32 (asserting that GTL cannot attribute its inmate calling services costs to a specific correctional facility or contract); GTL Amended Description and Justification at 8-9 (same assertion); {[ )]}; Description and Justification for Talton Communication, Inc. s Mandatory Data Collection Report, WC Docket No. 12-375, at 1 (filed Mar. 1, 2019) (noting that its direct costs of providing inmate calling services are available in an aggregate form and are not separately reported by facility); CenturyLink Description and Justification, WC Docket No. 12-375, at 5 (filed Mar. 1, 2019) (indicating that cost data are reported at the correctional system level rather than at the individual correctional facility level). 550 GTL v. FCC, 866 F.3d at 414. 551 Id. (quoting American Public Communications, 215 F.3d at 54, 57-58). 552 GTL v. FCC, 866 F.3d at 414. 81 Federal Communications Commission FCCCIRC2105-01 Commission s prior rate caps, because they  will not, in all cases, cover the costs of providing service. 553 This argument ignores an important distinction between the rate cap methodology that was before the court in GTL v. FCC and the methodology we use in this Report and Order. Instead of setting rate caps at industry-wide average costs, our methodology begins by looking at industry-wide average costs but does not stop there. Instead, we adjust those mean costs upward by one standard deviation and use the results to establish zones of reasonableness from which we select separate provider cost components for prisons and larger jails. We then add an additional amount to account for the portion of site commission payments that we conservatively estimate is related specifically to inmate calling services.554 Our approach therefore incorporates assumptions and actions which lean toward over recovery of costs. We estimate that revenues from the capped per minute charges for individual interstate and international calls along with the revenues from related ancillary service fees will enable all providers to recover their actual costs of providing interstate and international inmate calling services, but provide a process for unusual cases where we might be mistaken. Thus, contrary to GTL s assertion,555 our interim rate caps, coupled with our new waiver process,  account for the real differences in costs among [inmate calling services] providers and ensure[] providers with higher costs receive fair compensation in a manner consistent with section 276(b)(1)(A).556 190.  Fair compensation under section 276(b)(1)(A) does not mean that each and every completed call must make the same contribution to a provider s indirect costs. Nor does it mean a provider is entitled to recover the total  cost it claims it incurs in connection with each and every separate inmate calling services call.557 Instead, compensation is fair if the price for each service or group of services  recovers at least its incremental costs, and no one service [e.g., interstate calling service] recovers more than its stand-alone cost. 558 The record indicates that, subject to one anomalous possible 553 GTL Comments at 9, 32 (emphasis added); see also, e.g., Pay Tel Comments at 3 ( [T]he Further Notice now proposes new interstate rate caps based again on industry average data this time the 2018 data each [inmate calling services] provider was required to provide to the FCC without taking into account any other data or evidence in the substantial record in this proceeding . . . . ). 554 See Public Interest Parties Comments at 11. As detailed in Part III.C.4, we adopt a modified version of the site commission proposal in the 2020 Further Notice based on record evidence that $0.02 per minute for every facility may not permit recovery of all legitimate facility costs related to inmate calling services and may not account for site commission payments required under codified law. We permit full recovery of site commission payments required under codified law and up to $0.02 per minute for contractually-prescribed site commission payments. At the same time, we also explain above that full recovery of site commissions is not required under GTL v. FCC or section 276. We therefore disagree with commenters asserting that section 276 requires full recovery of site commission payments in order to comply with section 276. See, e.g., Pay Tel Comments at i, 8-9; Securus Comments at 49. Our interim approach permits recovery of the portion of site commission payments that we estimate are directly related to the provision of inmate calling services. Nothing more is required. 555 See GTL Comments at 32. 556 Id. 557 See id. at 9, 32; UCC and Public Knowledge Mar. 28, 2021, Ex Parte at 6-7 (illustrating through legislative history that Congress used the  each and every call language to ensure that payphone providers would be compensated for all categories of calls, such as  dial around calls, but did not intend that language  to ensure that any single call taken on its own was fully compensatory ). 558 2002 Pay Telephone Order, 17 FCC Rcd at 3255-56, para. 18. GTL v. FCC did not disturb this long-standing Commission precedent. GTL v. FCC, 866 F.3d at 412-14. Economists generally agree that the price for each product (or group of products) is compensatory if it at least recovers its incremental costs but is an inefficiently high price if it recovers more than its standalone costs. See generally Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Interconnection Between Local Exchange Carriers and Commercial Mobile Radio Service Providers, CC Docket Nos. 96-98 and 95-185, First Report and Order, 11 FCC Rcd 15499, 15847-48, 14854, paras. 682, 698 (1996) (setting prices that recover incremental costs and explaining (continued& .) 82 Federal Communications Commission FCCCIRC2105-01 outlier contract, the rate cap methodology we adopt today will allow every provider of calling services for incarcerated people to charge a price that recovers its direct costs (i.e., costs that are directly attributable to producing all of the inmate calls under a given contract) and contributes to recovery of its indirect costs.559 Indeed, we demonstrate that virtually all contracts, except those which reflect the issues we have discussed regarding GTL, impacted by the rate caps this Report and Order imposes are commercially viable under conservative assumptions. That is, we expect they should be able to cover the contracts direct charges and make a commercially sound contribution to costs shared across the contracts sufficient to ensure each provider s viability.560 191. As the Commission recognized in the 2002 Pay Telephone Order, the  lion s share of payphone costs are those that are  shared or  common to all services, and there are  no logical or economic rules that assign these common costs to  each and every call.  561 As a result,  a wide range of compensation amounts may be considered  fair.  562 Here, contrary to the assertions of certain providers,563 we adopt conservative interim rate caps that fall squarely within the zones of reasonableness,564 as well as an allowance for site commissions reflected by our new facility-related rate component that is supported by analysis that reflects the variations in correctional facility costs, thus providing for fair compensation under the statute. 192. Providers fail to acknowledge that a wide range of compensation amounts may be considered fair, arguing generally that the Commission must adopt rate caps that enable them to recover their total costs  for each and every completed . . . interstate call. 565 In effect, providers argue that a rate- setting methodology that does  not, in all cases, cover the costs of providing service fails to satisfy section 276.566 We disagree. First, GTL s reliance on Illinois Public Telecommunications Assoc. v. FCC (Continued from previous page) that prices should not exceed standalone costs). 47 CFR § 51.505 (b)-(c); Gerald R. Faulhaber, Cross-Subsidization: Pricing in Public Enterprises, 65 Am. Econ. Rev. 966-77 (1975), https://www.jstor.org/stable/1806633. Our rate caps are consistent with these principles. 559 The one exception is an apparent anomalous contract for which that contract s indirect costs were reported by{[ ]} after the release of the 2020 ICS Notice. The per-minute cost we calculate for this contract is the single highest per-minute cost of all jail contracts and more than double the per-minute cost for the second highest jail contract. To the extent this contract possesses such unusual characteristics that the provider s costs are indeed legitimately this high, this is precisely the type of contract the waiver process we adopt today is meant to address. 560 Appx. E, infra Part F (showing that under the interim caps, providers will recover most of their reported costs). 561 2002 Pay Telephone Order, 17 FCC Rcd at 3255-56, paras. 16, 18. 562 Id. at 3255, para. 16 (citing 1999 Pay Telephone Order, 14 FCC Rcd at 2570, para. 56). 563 See Pay Tel Comments at 4, 8 (asserting problems with the Commission s proposed rate cap methodology that  reflect a false assumption that location costs are far more homogenous than they actually are ); GTL Reply at 8-9. 564 See Verizon v. FCC, 535 U.S. 467, 487-88 (2002) (noting that historically,  calculating a rate base and then allowing a fair rate of return on it was a sensible way to identify a range of rates that would be just and reasonable for both investors and ratepayers ). 565 See Pay Tel Comments at 10 ( Section 276 requires the Commission to set [inmate calling services] rates at a level sufficient to fairly compensate [inmate calling services] providers for the costs incurred for each and every call. ); GTL Comments at 32 ( The statutory language is clear that providers must be fairly compensated  for each and every call. ); Securus Comments at 11 (arguing that  to the extent calls with above-average costs in each tier are unprofitable the proposed caps do not fulfill the mandate of § 276 that  each and every inter- and intrastate call be fairly compensated ); Pay Tel Wood Report at 3 (explaining that  for all locations whose costs exceed the average, the [inmate calling services] provider would not be able to charge a rate sufficient to recover its costs to serve that location ); Securus Furchtgott-Roth Report at 15 ( Actual costs for facilities including site commissions are likely substantially higher than presented in the [2020 ICS Notice]. Thus, the approach presented in the [2020 ICS Notice] fails to meet the  each and every standard of Section 276. ). 566 See GTL Comments at 32; Securus Comments 11. 83 Federal Communications Commission FCCCIRC2105-01 for support is misplaced because totally different circumstances resulting in  no compensation for coinless calls made from inmate phones  were before the court in that case.567 The Illinois Public Telecommunications court s rejection of a  no compensation regime where providers received zero compensation for calls simply does not create a mandate that we adopt any particular compensation methodology, much less the methodology the providers urge. 193. Second, our rate cap methodology here differs materially from the methodology vacated in GTL v. FCC.568 There, the court found that the record  include[d] two economic analyses, both concluding that the [2015 ICS] Order s rate caps are below cost for a substantial number of [inmate calling services] calls even after excluding site commissions and that  [t]he [2015] Order does not challenge these studies or their conclusions. 569 As a result, the court held that  the use of industry- average cost data as proposed in the Order could not be upheld because  it lacks justification in the record and is not supported by reasoned decisionmaking. 570 Our methodology in this Report and Order, by contrast: (1) is designed to ensure that the costs of the vast majority of, if not all, calls are recovered; (2) includes a site commission allowance; (3) is based on a rigorous analysis of data submitted into the record by providers responding to a Commission data collection; and (4) as a backstop, provides the opportunity for providers to obtain a waiver if they can show that one is needed to ensure that they receive fair compensation, consistent with the statute. 194. But for the extraordinary case, providers will recover their costs under the new interim rate caps we adopt. Providers that continue to claim they will be unable to recover their costs of interstate or international inmate calling services under the interim rate caps we adopt today will be able to seek a waiver of those caps in accordance with the procedures set forth in this Report and Order. Any such waiver requests will be analyzed and resolved based on more comprehensive, current, and disaggregated cost data regarding that provider s cost of providing inmate calling services at the particular facility or facilities at issue.571 The combination of our carefully considered interim rate caps and our revised waiver process afford all providers the opportunity to recover fair compensation for each and every completed interstate and international inmate calling services call consistent with section 276(b)(1)(A). F. Cost-Benefit Analysis of Revised Interstate Rate Caps 195. Although our actions in this Report and Order are not dependent on our analysis of the relative costs and benefits of the revised interim interstate rate caps, we find that the benefits of our actions far exceed the costs. The benefits of lowering inmate calling services rates sweep broadly, affecting incarcerated people, their families and loved ones, and society at large.572 Although important and substantial, these benefits do not lend themselves to ready quantification. As one commenter aptly 567 Ill. Public Telecom. Assoc. v. FCC, 117 F.3d 555, 566 (D.C. Cir. 1997); GTL Comments at 32; UCC and Public Knowledge Mar. 28, 2021, Ex Parte at 7 n.2 (explaining that the court in Illinois Public Telecommunications  was addressing the fact that the Commission had eliminated a whole category of calls which is  precisely the issue Congress was trying to address, namely the  exclusion of a category of calls from compensation, not the rate for each call ) (emphasis in original). 568 See GTL v. FCC, 866 F.3d at 402. 569 Id. at 414. 570 Id. at 402. 571 See Pay Tel Comments at 7. We reject Securus s suggestion that, for purposes of assessing compliance with section 276, we should calculate the return component of a provider s costs using the price its current owners paid to purchase the provider. See Securus Furchtgott-Roth Report at 16-18. Instead, we conclude that we should calculate that component for purposes of assessing compliance with section 276 using the same rate base that we use in assessing compliance with section 201(b) the original cost of the property used to provide inmate calling services at the particular facility or facilities. See supra Part III.C.3. 572 Verizon Comments at 3 (explaining that maintaining connections  yields important benefits to us all ). 84 Federal Communications Commission FCCCIRC2105-01 explains, increased communication and ties to the outside world are important for  maintaining inmate mental health. 573 The formerly incarcerated can face myriad obstacles on reentry, including  limited occupational and educational experience and training to prepare them for employment, drug and alcohol addictions, mental and physical health problems, strained family relations, and limited opportunities due to the sigma of a criminal record. 574 Lower telephone rates will likely lead to increased communication by incarcerated people which, in turn, can help mitigate some of these issues by, for example, allowing incarcerated people to maintain family relationships and make plans for post-release housing or employment.575 196. Lower rates, and the resulting increase in calls, can also lead to improvements in the health and well-being of the families of incarcerated people. In particular, children of incarcerated parents are much more likely to suffer from behavioral problems, poor educational attainment, physical health problems, substance abuse, and adult incarceration.576 Studies show that contact with incarcerated parents can help mitigate these harmful effects.577 One study, for example, demonstrated that a child s chances of dropping out of school or being suspended decreased if child had increased contract with an incarcerated parent.578 As Verizon explains,  [p]reserving family ties allows incarcerated people to parent their children and connect with their spouses, helping families stay intact. Supporting strong families, in turn, makes our communities safer. 579 We agree. 197. Our actions will benefit incarcerated people, their families, and society in ways that cannot easily be reduced to monetary values but that standing alone support our actions. That being said, an analysis of the quantifiable benefits of our actions today shows that they far exceed the costs. In the 2020 ICS Notice, the Commission estimated that implementing the proposed changes would cost $6 million.580 These estimated implementation costs included one-time administrative, contract-revision, and billing-system costs.581 We now find that $6 million is a reasonable estimate for the costs of implementing the changes we adopt today. These costs are only a relatively small fraction of the $32 million in quantifiable benefits that we now estimate our actions will bring and pale in comparison to the qualitative benefits today s changes will confer on incarcerated people, their communities, and society as 573 See, e.g., Public Interest Parties Brattle Report at 2 (citing Kelle Barrick et al., Reentering Women: The Impact of Social Ties on Long-Term Recidivism, 94 Prison Journal 279 (2014)). 574 Reentering Women: The Impact of Social Ties on Long-Term Recidivism, supra note 573, at 281. 575 See, e.g., Prisoners Legal Services Massachusetts Background Sheet at 1; Letter from Chérie R. Kiser, Counsel to GTL, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 2 (filed Apr. 16, 2021) (identifying the importance of  improving the odds of finding adequate housing and employment post release ). 576 See, e.g., Eric Martin, Hidden Consequences: The Impact of Incarceration on Dependent Children, 278 Nat l Inst. Just. J. 10-16 (2017), https://www.ojp.gov/pdffiles1/nij/250349.pdf; Kristin Turney & Rebecca Goodsell, Parental Incarceration and Children s Wellbeing, 28 Future Children 147-68 (2018), https://www.jstor.org/stable/ 26641551?mag=what-should-we-do-about-our-aging-prison-population&seq=1. 577 See, e.g., Julie Poehlmann et al., Children s Contact with Their Incarcerated Parents, 65 Am. Psych. 575 (2010), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4229080/. 578 Ashton D. Trice & JoAnne Brewster, The Effects of Maternal Incarceration on Adolescent Children, 19 J. Police Crim. Psych. 27-25 (2004), https://link-springer-com.fcc.idm.oclc.org/article/10.1007/BF02802572. 579 Verizon Comments at 3. 580 2020 ICS Notice, 35 FCC Rcd at 8528, para. 119. 581 Id. These costs included costs associated with changing the rate for debit/prepaid calls at jails with average daily populations less than 1,000. 85 Federal Communications Commission FCCCIRC2105-01 a whole.582 Our estimate of $32 million in benefits is the sum of: (1) a gain of $9 million from inmate calling services users making more calls at lower rates (which is an increase of $2 million as compared with the Commission s previous estimate of $7 million);583 and (2) $23 million in benefits to society due to reduced recidivism, crime, and foster-child care costs that improved access to communications will bring.584 198. Expected Quantitative Benefits of Expanded Call Volumes. In the 2020 ICS Notice, the Commission calculated benefits based on a forecast of the increase in the number of calls that would occur if the Commission adopted the proposed rate caps. The Commission used estimates of current call minutes at prices above the proposed rate caps, the price decline on those call minutes implied by the proposed rate caps, and the responsiveness of demand to the changes in price.585 Using 2018 call volume data, the Commission estimated that approximately 592 million interstate prepaid and debit minutes and 3.3 million interstate collect minutes originated from prisons at rates above the proposed caps.586 Those data also showed that approximately 453 million interstate prepaid and debit minutes and 2 million interstate collect minutes were made from jails at rates above the proposed caps.587 In computing benefits, the Commission relied on a lower-end interstate calling estimate of demand price elasticity of 0.2,588 and estimated annual benefits of approximately $1 million, or a present value over ten years of approximately 582 In the 2020 ICS Notice, the Commission estimated benefits of $30 million, including a benefit of $7 million due to expanded call volumes plus at least $23 million for reduced recidivism, which would reduce prison operating costs, foster care costs, and crime. Id. at 8526, para. 116. 583 Id. GTL suggests that it  may not be the case that revised interstate rate caps will result in increased call volume. GTL Comments at 33 (emphasis added). GTL posits that this is because interstate calls are  only a small part of all inmate calling services calling and that  incarcerated individuals are not entitled to unfettered access to telephonic communications. GTL Comments at 33. We find GTL s arguments to be speculative and unsupported. We therefore reject these arguments in favor of the more data-driven approach we take here. 584 As the Commission has explained, rate reform will promote increased communication between incarcerated persons and their loved ones. See Report and Order, supra Part I (highlighting the benefits of increased communication). This additional communication will help preserve essential family ties, allowing children to stay in touch with an incarcerated parent, which, in turn, will make communities safer. See, e.g., Verizon Comments at 3. Being able to maintain communication also will help incarcerated persons plan for successful integration back into their communities upon release by providing a vital avenue to explore housing and employment opportunities. Prisoners Legal Services Massachusetts Background Sheet at 1. 585 2020 ICS Notice, 35 FCC Rcd at 8526-28, paras. 116-18. 586 Id. at 8526, para. 117. 587 To determine these numbers, the Commission used rate information from the 2019 Annual Reports and call volume data (interstate minutes) from the Second Mandatory Data Collection responses. We consider each of the following call types: interstate debit and prepaid calls for prisons and larger jails only; and interstate collect calls for prisons, larger jails, and jails with average daily populations less than 1,000. For each of these call types, we adjusted the reports for minutes downward by dropping the minutes recorded in nine states Alaska, Delaware, Hawaii, Maryland, New Mexico, Texas, Vermont, Washington, and West Virginia. We did this because each of these states has important contracts with rates below the caps we are adopting, and the rates under those contracts will only be affected by our actions if they are required to reduce their site commissions. This adjustment means our benefit estimates are likely substantially understated. 588 2020 ICS Notice, 35 FCC Rcd at 8526-28, para. 118 & n.280. Following common convention, we express own- price elasticities as positive numbers. An elasticity of 0.2 means that for each percentage point drop in rates, interstate inmate calling services demand would increase by 0.2%. Our analysis is based on pre-COVID-19 data and makes no adjustments for the COVID-19 pandemic. However, if post-COVID-19, there is an increased reliance on telecommunications, and acceptance by correctional authorities of such use, our estimates would be understated. 86 Federal Communications Commission FCCCIRC2105-01 $7 million.589 199. Our estimation methodology remains essentially the same as in the 2020 ICS Notice, with two exceptions. First, leaving intact the $0.21 per minute rate for interstate debit and prepaid calls from jails with average daily populations less than 1,000 excludes some call volume from the lower cap, lowering impacted call volumes.590 Second, our estimate of inmate calling services price elasticity has been revised upward to 0.3. With these changes, we estimate an annual welfare gain of $1.3 million, or a present value of $9 million from reduced inmate calling services rates.591 200. Inmate Calling Service Demand Elasticity. When prices fall, quantity demanded increases. Demand elasticity is a measure of the sensitivity of quantity changes to changes in prices.592 In 589 The present value of a 10-year annuity of $1 million at a 7% discount rate is approximately $7 million. See OMB, Circular A-4, Regulatory Analysis, 33-34 (Sept. 17, 2003), https://obamawhitehouse.archives.gov/ sites/default/files/omb/assets/regulatory_matters_pdf/a-4.pdf. The Office of Management and Budget recommends using discount rates of 7% and 3%. Erring on the side of understatement, we use the 7% rate. 590 Prior to our actions today, the interim interstate rate caps for all interstate calls were $0.21 per minute for debit and prepaid calls and $0.25 per minute for collect calls. The new interim provider-related rate caps we adopt today plus an allowance of $0.02 for contractually-prescribed facility rate components adopted in this Report and Order result in the following five price declines from these rates (assuming all calls include the $0.02 allowance and no legally-mandated site commission payment results in an allowance higher than $0.02 per minute, both of which will not be the case given that some facilities charge no site commissions and thus no facility cost allowance is permitted and some legally-mandated site commission payments may exceed $0.02 per minute: for prison debit and prepaid calls, 33% (= ($0.21 - $0.14) / $0.21); for prison collect calls, 44% (= ($0.25 - $0.14) / $0.25); for jail debit and prepaid calls, for jails with an average daily population of 1,000 or more, 24% (= ($0.21 - $0.16) / $0.21), with no change for jails with average daily populations less than 1,000; and for jail collect calls, for jails with an average daily population of 1,000 or more, 36% (= ($0.25 - $0.16) / $0.25), and for jails with average daily populations less than 1,000, 16% (= ($0.25 - $0.21) / $0.25). We cut these price changes in half to allow for contracts with rates below the current caps. (This is equivalent to assuming prices are evenly distributed around the midpoint between current caps and our new caps.) 591 We calculate the increase in surplus due to lower call prices separately for: debit and prepaid calls from prisons; collect calls from prisons; debit and prepaid calls from jails with an average daily population of 1,000 or more; collect calls from jails with an average daily population of 1,000 or more; and collect calls from jails having an average daily population less than 1,000. The calculated surpluses equal one half of the product of three items: minutes for each of the five call types; the demand elasticity estimate (0.3); and, respectively for each of the five call types, half the price decline from the earlier cap to the new interim cap. This is the area of the surplus triangle generated by an assumed price fall of one half the difference between our current caps and the new interim caps if demand and supply are linear and the final price represents costs. If the final price is still above costs, as is likely given our conservative assumptions, the surplus gain would be greater. Nonlinearities of both demand and supply have ambiguous impacts, so linearity is a good approximation in the absence of further information. We obtain an increase in surplus of $1.7 million, and then calculate the present value of a 10-year annuity of $1.7 million at a 7% discount rate to be approximately $12 million. See supra note 589. 592 For small changes, demand elasticity is the ratio of the percentage change in quantity to the percentage change in price, holding other things constant. However, for larger changes, again holding other things constant, demand elasticity is better estimated by the ratio of (1) the percentage change between the original quantity and the quantity midway between the original quantity and final quantity to (2) the percentage change between the original price and the price midway between the original price and the final price. This is because, due to the simple mathematics of percentage changes, for a large change in quantity or price, the elasticity of demand as measured by the simpler ratio can be materially different than the measure that would obtain if the change was reversed: a change from 1 to 0.80 is a 20% decline, but a rise from a 0.80 price to 1.00 is a 25% rise. University of Minnesota, Principles of Economics, § 5.1 The Price Elasticity of Demand, https://open.lib.umn.edu/principleseconomics/chapter/5-1-the-price-elasticity- of-demand/ (last visited Apr. 22, 2021) ( This measure of elasticity, which is based on percentage changes relative to the average value of each variable between two points, is called arc elasticity. The arc elasticity method has the advantage that it yields the same elasticity whether we go from point A to point B or from point B to point A. (emphasis omitted)). 87 Federal Communications Commission FCCCIRC2105-01 the 2020 ICS Notice, the Commission relied on demand elasticity estimated for voice telecommunications generally and chose a conservative estimate from these of 0.2.593 However, the record provides four pieces of direct evidence of the demand elasticity for inmate calling services, two of which are quite recent. These estimates, two of approximately 0.4 and two of approximately 0.3, lead us to conservatively conclude inmate calling services have a demand elasticity of at least 0.3.594 201. First, a 57.5% drop in calling rates in New York state in 2007 resulted in an increase in call volumes of 36%, suggesting a demand elasticity of 0.38.595 Second, 2018 data from the New York City contract suggests a demand elasticity of 0.38.596 Third, in 2019, in San Francisco, when calls became free, call volumes rose 81%, suggesting an elasticity of 0.29.597 Fourth, Securus s consultant FTI estimates price and quantity movements from the rate reduction seen in 2014 due to the Commission s earlier action. FTI s estimates suggest a demand elasticity of 0.31.598 In both the New York City and San 593 2020 ICS Notice, 35 FCC Rcd at 8527-28, para. 118 & n.280. 594 For the first three of our estimates we do not have sufficient data to ensure we are holding all other things constant, and for the fourth, from Securus s consultant FTI, we cannot verify FTI s approach. Thus, all these estimates should be viewed as approximate. To avoid overstating benefits, we use the lower bound of these estimates rounded to the first decimal place. 595 Martha Wright et al. Comments, WC Docket No. 12-375, Exh. C at 14 (filed Mar. 25, 2013). The 0.38 elasticity calculation is as follows. We normalize or change the units in which quantity and price are denominated, so the initial quantity is 100 and the initial price is $100. Using the quantity increase of 36% and price decline of 57.5%, we can determine the new quantity and price in these new normalized units. Normalization works because the arc elasticity calculation depends on the change between quantities and prices and therefore yields the same measure regardless of the units used to measure quantity and price. A quantity increase of 36% implies a new quantity of 136 (= 100 * (1 + 36%)). A price decrease of 57.5% implies a new price of 42.5 (= 100 * (1  57.5%)). The quantity change using the midpoint formula is 30.5% (= (136  100) / ((100 + 136) / 2)). The price change using the midpoint formula is 80.7% (= (100  42.5) / ((100 + 42.5) / 2)). Thus, the elasticity is 0.38 (= 30.5% / 80.7%). 596 Worth Rises Comments at 11 ( [T]he city . . . renegotiated the price of its calls with Securus from $0.50 for the first minute and $0.05 for every additional minute to $0.03 per minute across the board. The legislation went into effect in May 2019, saved families nearly $10 million annually, and increased call times by almost 40% overnight. ). We estimate the elasticity based on the price of a 15-minute phone call, the price of which dropped from $1.20 = ($0.50 + (14 * $0.05)) to $0.45 = (15 * $0.03). Normalizing the initial quantity to 100 implies a new quantity of approximately 140 (= 100 * (1 + 40%)). The quantity change in the midpoint formula is 33.3% (= (140  100) / ((100 + 140) / 2)); the price change in the midpoint formula is 90.9% (= ($1.20 - $0.45) / (($1.20 + $0.45) / 2)); therefore, the elasticity is 0.37 (= 33.3% / 90.9%). 597 Id. ( In 2019, San Francisco became the second city to make jail calls free to incarcerated people . . . . ); Financial Justice Project Comments at 1 ( Compared to this time last year, incarcerated people are spending 81 percent more time in communication with their families. ). The elasticity of 0.29 is derived as follows: Normalizing the initial San Francisco quantity to 100 and price to $100 implies the new quantity is 181, and the new price is zero. Thus, the quantity change in the midpoint formula is 57.7% (= (181  100) / ((100 + 181) / 2)); the price change in the midpoint formula is 200% (= (100 - 0) / ((100 + 0) / 2)); and the elasticity is 0.29 (= 57.7% / 200%). 598 FTI initially used regression analysis to estimate an elasticity of 1.25 for interstate calling for large facilities. Securus Comments Attach., FTI Consulting, Inc., Report on Price Elasticity of Demand for Interstate Inmate Calling Services on Behalf of Securus Technologies, Inc., WC Docket No. 12-375, at 16 (filed Jan. 12, 2015) ( The actual cross-section price elasticity of demand in 2013 was . . . "1.25 for large facilities . . . . ). However, FTI was concerned the regression model did not account for a range of factors, the two most important of which were substitution from intrastate/local inmate calling services to interstate inmate calling services, said to increase call volumes by 28.3%, and unexplained Securus initiatives, said to increase call volumes by 14.9%. After making adjustments to control for the impact of these factors, FTI estimates that a 38.2% fall in interstate prices increased demand by 15.5%. Id. at 21 ( Specifically, the analysis we performed shows that the FCC s interim rate caps result in an increase in interstate minutes of only 15.5% while reducing interstate rates by 38.2%. ),. From these measures the elasticity calculation is as follows. Normalizing the initial quantity and price to 100 implies the price fell to 61.8 (= 100 * (1 - 38.2%)) and the quantity rose to 115.5 (= (100 * (1 + 15.5%))). The midpoint formulas are 47.2% (continued& .) 88 Federal Communications Commission FCCCIRC2105-01 Francisco cases, our elasticity estimate is derived from a price decrease in which the initial price was closer to our current caps than will be the case for most of the contracts we discuss. Economic theory suggests that the demand elasticity for contracts with prices above our caps will be greater than the New York City or San Francisco estimates.599 202. We also expect lower rates for calling services to yield additional benefits by reducing recidivism and crime and the need for child foster care. Several commenters point to the link between affordable inmate calling, improved mental health, and lower recidivism. According to the Episcopal Church and the United States Conference of Catholic Bishops,  studies have shown that phone communication between families and their loved ones in prison and its associated mental health benefits make incarcerated people less likely to recidivate. 600 Citing the California Department of Corrections, GTL also emphasizes the recidivism-reducing effect that affordable inmate calling services can have by helping incarcerated people prepare for life after confinement.601 In the 2020 ICS Notice, the Commission estimated that the benefits from reduced recidivism would exceed $23 million over ten years.602 That estimate and the underlying reasoning continue to apply here. Although we cannot pinpoint how much increased telephone contact would reduce recidivism among incarcerated people, we estimate that even if our reforms resulted in only 100 fewer people being incarcerated due to recidivism, that would yield savings of approximately $3.3 million per year, or more than $23 million over 10 years in present value terms.603 Other savings would also be realized through reduced crime,604 and fewer children being placed (Continued from previous page) (= (100 - 61.8) / ((100 + 61.8) / 2)) for price; and 14.4% (= (100 -115.5) / ((100 + 115.5) / 2)) for quantity. Thus, the elasticity is 0.31 (= 14.4% / 47.2%). 599 In general, demand elasticity changes at different points along the good s demand curve, generally rising with price. (This is most easily seen for a linear demand curve. For small changes, demand elasticity is defined as the product of the demand curve s slope and the ratio of price to quantity. When demand is linear, its slope is constant, thus any change in elasticity is determined by how the ratio of price to quantity changes, and this ratio always rises with price, since a rising price implies a falling quantity. For realistic nonlinear curves, for which quantity demanded is finite at a zero price and for which a price exists at which quantity demanded is zero, this relationship will hold at low and high prices; as price approaches zero, elasticity also approaches zero, while as price approaches the point at which quantity demanded is zero, elasticity becomes large.) Both the New York City and San Francisco cases considered price changes that happened along a portion of the demand curve where price was less than our rate caps. Therefore, these estimates were taken over a portion of the demand curve where elasticity was likely smaller than it is for the contracts with current rates above our caps. In addition, economic theory predicts that a good has higher elasticity if it accounts for more of a consumer s overall budget. Every estimate for inmate calling elasticity that the Commission has seen has been below 1. This implies that incarcerated people residing in facilities with higher calling rates end up spending more on calling services overall even after accounting for differences in minutes purchased than incarcerated people in facilities with lower calling rates. It follows that because incarcerated people in facilities with prices above our caps spend more on inmate calling than incarcerated people in New York City and San Francisco did, these incarcerated people will have a higher demand elasticity than incarcerated people in New York City and San Francisco. For further explanation on what affects demand elasticity, see University of Minnesota, Principles of Economics, § 5.1 The Price Elasticity of Demand, https://open.lib.umn.edu/principleseconomics/chapter/5-1-the-price-elasticity-of-demand/ (last visited Apr. 22, 2021). 600 Episcopal Church et al. Reply at 2. 601 GTL Comments at 2 nn.3-4. 602 2020 ICS Notice, 35 FCC Rcd at 8527-28, para. 118. 603 Id. at 8526-28, para. 118 & nn.283-84. 604 Council of Economic Advisors, Returns on Investments in Recidivism-Reducing Programs, at 3 (May 2018), https://trumpwhitehouse.archives.gov/wp-content/uploads/2018/05/Returns-on-Investments-in-Recidivism- Reducing-Programs.pdf. 89 Federal Communications Commission FCCCIRC2105-01 in foster homes.605 The potential scale of fiscal saving in addition to the immense social benefits is suggested by the fact that, on average, state and local governments incur administrative and maintenance costs of $25,782 per foster placement.606 203. Costs of Reducing Rates for Interstate Inmate Calling Services Calls. We find most credible the cost estimate used in the 2020 ICS Notice, where the Commission estimated that the costs of reducing rates for interstate inmate calling services calls would amount to approximately $6 million.607 Approximately 3,000 calling services contracts will need to be revised based on the rules we adopt today, and a smaller number of administrative documents may need to be filed to incorporate lower interstate and international rates.608 We estimate that these changes would require approximately 25 hours of work per contract. We use a $70 per hour labor cost to implement billing system changes, adjust contracts, and to make any necessary website changes.609 The estimated cost of these actions is $5,139,750 (= 2,937 (number of contracts) * 25 (hours of work per contract) * $70 per hour), which we round up to $6 million to be conservative. 204. GTL argues that the Commission s estimate that it would take 25 hours of work per contract to revise calling services contracts is unrealistically low.610 According to GTL, its recent experience renegotiating contracts and implementing new rates in 2013 and 2015 indicates that the costs of such renegotiations are much higher than what the Commission estimated.611 GTL, however, did not provide any specific data about the costs it incurred and did not explain the methodology it used to arrive at its cost estimates. Accordingly, we cannot reasonably assess the merits of GTL s objection, much less rely on its filings to provide a different estimate. As a result, we find that the Commission s earlier estimate that our reforms would cost providers approximately $6 million continues to provide the best information for us to use in conducting our cost-benefit analysis. 205. Anticipated Effect on Inmate Calling Services Investment. Our new rate caps will give inmate calling services providers the opportunity for full cost recovery and a normal profit. This full cost recovery includes operating costs, common costs, a return on capital investment, and capital replacement. By adopting the new interim rate caps, the Commission seeks to lower the price of interstate and international inmate calling services closer to the costs companies incur in providing the services. GTL argues that we risk discouraging investment by ignoring components of providers total costs, particularly 605 U.S. Government Accountability Office, Child Welfare: More Information and Collaboration Could Promote Ties Between Foster Care Children and Their Incarcerated Parents, at 11 (Sept. 2011), https://www.gao.gov/ assets/590/585386.pdf. 606 Nicholas Zill, Better Prospects, Lower Costs: The Case for Increasing Foster Care Adoption, at 3 (May 2011), https://web.archive.org/web/20151005185803/https:/www.adoptioncouncil.org/images/stories/ NCFA_ADOPTION_ADVOCATE_NO35.pdf. 607 2020 ICS Notice, 35 FCC Rcd at 8528, para. 119. We continue to assume smaller jails incur costs for all calls. 608 Id. 609 We use an hourly wage of $46 for this work. We examined several potential wage costs. For example, in 2020, the median hourly wage for computer programmers was $45.98, and for accountants and auditors, it was $39.26. We chose the higher of these because of the specialized technical nature of the work. See Bureau of Labor Statistics, U.S. Department of Labor, Occupational Employment and Wage Statistics, https://www.bls.gov/oes/. This rate does not include non-wage compensation. To capture this, we mark up wage compensation by 46%. In March 2020, hourly wages for the civilian workforce averaged $25.91, and hourly benefits averaged $11.82, yielding a 46% markup on wages. See U.S. Department of Labor, Bureau of Labor Statistics, Employer Costs for Employee Compensation News Release (June 18, 2020), https://www.bls.gov/news.release/archives/ ecec_06182020.htm. Using this 46% markup on the $46 hourly wage, we obtain an hourly rate of $67.16 (= $46 x 1.46), which we round up to $70. 610 GTL Comments at 33. 611 Id. at 34. 90 Federal Communications Commission FCCCIRC2105-01 capital costs, and setting inmate calling services rates too low.612 Securus claims that  the proposed caps would not allow Securus to recover its costs at many jail facilities, and that the Commission has not accounted for  the potential negative outcomes of degraded or lower quality service at some facilities if providers are not able to fully recover all of their costs. 613 We disagree with both providers. The rate caps adopted in this Report and Order will allow every provider of calling services for incarcerated people to charge a price that recovers its direct costs namely the costs directly attributable to producing all of the calls under a given contract and that contributes to the recovery of the provider s indirect costs. With rates set to exceed estimated per-minute costs, including an allowance for the cost of capital, a provider should generate sufficient revenue to more than cover its total operating costs, thereby avoiding any disincentive to invest. As a fail-safe, however, our Report and Order also allows providers unable to recover their costs under the interim rate caps adopted herein to seek waivers of those caps. 206. Under our new policy, lower rates will enable more frequent inmate calling at lower prices. Incarcerated people and their families will enjoy added consumer surplus, measured by the difference between the lower price and their willingness to pay for the increased call volume. Some of the producer surplus, measured by the difference between the lower price and service providers marginal costs, will be transferred from providers to incarcerated people and their loved ones, thereby reducing provider profits. As discussed above, surplus gains may come from other sources besides provider profits. Any addition to consumer surplus that did not exist previously as provider profit is a net economic gain. Neither gain will come at the expense of provider investment. And, as noted above, lower calling rates will facilitate increased communication between incarcerated people and their loved ones, which will benefit all incarcerated persons and their families by fostering essential family ties and also allowing incarcerated people to plan for successful reentry upon release.614 G. Disability Access 207. The Commission is committed to using all of its authority to ensure that incarcerated people have access to functionally equivalent telecommunication services to communicate with their families, loved ones and other critical support systems. We specifically  acknowledge the injustice facing the scores of incarcerated people with disabilities who lack access to functionally equivalent communications. 615 In the 2020 ICS Notice, the Commission asked for comment on the needs of incarcerated people with communication disabilities.616 The response was voluminous.617 Commenters concerns generally fall into two categories. First, commenters allege that some providers are not following the Commission s rules for the provision of telecommunications relay services (TRS), and complain about egregiously high rates and the lack of necessary equipment at correctional facilities.618 We remind providers that they are obligated to comply with our existing inmate calling services and 612 GTL Godek Report at 2, 14; GTL Godek Reply Report at 5. FTI notes that  [t]he capital return is an important and sizable cost [inmate calling services] providers must recover through the prices of their services to ensure sufficient profitability to encourage investments in their business. Securus FTI Report at 8. 613 Securus Comments at 10, 43. 614 See, e.g., supra paras. 195-97. 615 Letter from Blake E. Reid, Counsel to Telecommunications for the Deaf and Hard of Hearing, Inc. (TDI), to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 2 (filed Mar. 24, 2021) (Accessibility Coalition Mar. 24, 2021, Ex Parte). 616 2020 ICS Notice, 35 FCC Rcd at 8534, para. 136. As we did in the 2015 ICS Order, we use  disabilities to include individuals who are deaf or hard of hearing, as well as those who are deafblind or have speech disabilities who also have policy concerns that are similar to those incarcerated people who are deaf or hard of hearing. 2015 ICS Order, 30 FCC Rcd at 12874-75, para. 226. 617 The Commission received 17 substantive responses in the comment cycle, and 68 express comments. 618 See, e.g., HEARD et al. Comments at 16-18 (Accessibility Coalition Comments). 91 Federal Communications Commission FCCCIRC2105-01 related rules, including rules requiring that incarcerated people be provided access to certain forms of TRS, rate caps for calls using a text telephone (TTY) device, rules prohibiting charges for TRS-to-voice or voice-to-TTY calls, and rules requiring annual reporting of the number of TTY-based calls and any complaints.619 In addition, like other communications service providers, inmate calling services providers must ensure that the services and equipment provided for use by incarcerated people are accessible and usable by incarcerated people with disabilities (subject to achievability),620 including when legacy telephone services are discontinued and replaced with advanced services such as Voice over Internet Protocol (VoIP).621 208. Second, several commenters argue that TTY is an outdated mode of communication for individuals with disabilities.622 We agree that given the changes in telecommunications technologies in the past decades, TTYs have become little used because of the widespread transition to Internet Protocol- based services.623 We also understand that TTYs may not be suitable for individuals who, for example, use American Sign Language as their primary mode of communication.624 To fill the void and to better serve incarcerated people with disabilities, commenters advocate that the Commission require providers to offer other types of functionally equivalent telecommunication services.625 We intend to address these concerns in the near future in a manner that best meets the needs of incarcerated persons who are deaf, hard of hearing, deafblind or have a speech disability, consistent with our jurisdiction and legal authority. Accordingly, we seek detailed comment to further explore this issue in the accompanying Further Notice.626 209. Public interest groups also urge the Commission to coordinate with the Department of Justice (DOJ).627 Through the Federal Bureau of Prisons, DOJ administers federal correctional facilities. In addition, DOJ has authority to adopt disability access regulations applicable to federal, state, and local government entities, including correctional authorities, under section 504 of the Rehabilitation Act of 1973 and Title II of the ADA.628 We agree that such coordination would be beneficial in assisting the 619 See 47 U.S.C. §§ 225, 276; 47 CFR §§ 64.603, 64.1330(b), 64.6040, 64.6060; 2015 ICS Order, 30 FCC Rcd at 12874-75, para. 226. 620 See 47 U.S.C. §§ 255, 617; 47 CFR pts. 6, 7, 14. 621 See Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment, WC Docket No. 17-84, Report and Order, Declaratory Ruling, and Further Notice of Proposed Rulemaking, 32 FCC Rcd 11128, 1185-86, para. 153 (2017). 622 See, e.g., HEARD et al. Comments at v, 9-12 (explaining that TTYs  in many cases no longer even work as a result of the years-long Internet Protocol (IP) transition and overall use has dropped by over 80% in the past 11 years); HEARD et al. Reply at 3 (explaining that  TTYs are not operational and no longer provide functional equivalence ); Convo Reply at 1 (describing difficulties incarcerated individuals may have when they request videophones and VRS); see also 2015 ICS Order, 30 FCC Rcd at 12876, para. 229. 623 See, e.g., Accessibility Coalition Comments at v (explaining that TTYs  in many cases no longer even work as a result of the years-long Internet Protocol (IP) transition ); Accessibility Coalition Reply at 3 (explaining that  TTYs are not operational and no longer provide functional equivalence ); Convo Communications, LLC, Reply at 1 (Convo Reply) (describing difficulties incarcerated people may have when they request videophones and VRS). 624 E.g., Leadership Conference Reply at 2; see Richard Ray Reply at 4-5. 625 See, e.g., Accessibility Coalition Comments at 3; Convo Reply at 1. 626 Infra Part VI.A. 627 Accessibility Coalition Comments at 19; Accessibility Coalition Mar. 24, 2021, Ex Parte at 2; Richard Ray Reply at 1; ZP Better Together, LLC, Reply at 4 (ZP Reply). The Federal Bureau of Prisons is part of DOJ. 628 See 29 U.S.C. § 794; 42 U.S.C. § 12131 et seq.; 28 CFR pt. 41 (regulations implementing the Rehabilitation Act of 1973); 28 CFR pt. 35 (regulations implementing Title II of the ADA). 92 Federal Communications Commission FCCCIRC2105-01 Commission with addressing issues such as those raised in the record and in the Further Notice.629 We therefore direct CGB to make all efforts to coordinate with DOJ to ensure that incarcerated people with communications disabilities have access to communications  in a manner that is functionally equivalent to the ability of a hearing individual who does not have a speech disability to communicate using voice communication services. 630 H. Other Issues 1. Ancillary Fee Cap for Single-Call Services and Third-Party Transaction Fees 210. We revise our rules for single-call services and third-party financial transaction fees to establish a uniform cap for both types of ancillary service fees for or in connection with interstate or international use of inmate calling services. Providers may no longer simply pass through third-party financial transaction fees, including those related to single-call services, to calling services consumers.631 The Commission sought comment in the 2020 ICS Notice on whether its ancillary services fee caps, generally, should be lowered or otherwise modified.632 It also sought comment on what limits, if any, should be placed on third-party transaction fees that providers may pass on to consumers, including those related to single-call services.633 Record evidence provided by the Prison Policy Initiative explains that Western Union, one of the most prominent third-party money transfer services used in this context,634 charges $6.95 to send money to GTL, the largest inmate calling services provider.635 We therefore modify our rules to limit the charges a provider may pass on to incarcerated people or their friends and family for third-party financial transaction fees associated with single-call services636 or for third-party money transfer service fees to $6.95 per transaction on an interim basis.637 These modifications are 629 See infra Part VI.A. 630 47 U.S.C. § 225. 631 See 47 CFR § 64.6020(b)(2), (b)(5) (permitting a pass-through to consumers of the exact fees, with no markup that result from these transactions prior to today s action). 632 2020 ICS Notice, 35 FCC Rcd at 8532, para. 131. 633 2020 ICS Order on Remand, 35 FCC Rcd at 8488, para. 9; 2020 ICS Notice, 35 FCC Rcd at 8532, para. 131. Single-call services are collect calls by incarcerated people that  are billed through third-party billing entities on a call-by-call basis to parties whose carriers do not bill collect calls. 2015 ICS Order, 30 FCC Rcd at 12854, para. 82; see also 2020 ICS Order on Remand, 35 FCC Rcd at 8532, para. 12. Specifically, the Commission defined single-call services as  billing arrangements whereby an Inmate's collect calls are billed through a third party on a per-call basis, where the called party does not have an account with the Provider of Inmate Calling Services or does not want to establish an account. 2015 ICS Order, 30 FCC Rcd at 12920, Appx. A, 47 CFR § 64.6000(a)(2). 634 See, e.g., 2015 ICS Order, 30 FCC Rcd at 12850, para. 171 (identifying Western Union and MoneyGram as third-party money transfer service providers); Wright Petitioners et al. Comments, WC Docket No. 12-375, at 17 (filed Mar. 20, 2020) (Wright Petitioners Mar. 20, 2020, Comments) (explaining that  many [inmate calling services] customers do not have bank accounts, they often use money transmitters such as Western Union or Money Gram to remit funds to prepay an [inmate calling services] account (emphasis added)). 635 Letter from Andrea Fenster, Staff Attorney, Prison Policy Initiative, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 2 (filed Feb. 21, 2021) (Prison Policy Initiative Feb. 21, 2021, Ex Parte) (highlighting  inexplicably high third-party financial transaction fees charged by GTL despite the fact that  Western Union charges consumers $6.95 to send payments to GTL ); Public Interest Parties July 29, 2020, Ex Parte Attach. at 8 (highlighting that Western Union charges $6.95 to send a $25 payment to GTL). 636 47 CFR § 64.6020(b)(2). 637 47 CFR § 64.6020(b)(5). 93 Federal Communications Commission FCCCIRC2105-01 warranted to close loopholes in our rules.638 211. In adopting the $6.95 interim cap for single-call services and third-party transactions fees, we decline to adopt at this time NCIC s proposal to cap single-call services at the $3.00 cap for automated payment fees or the $5.95 cap for live agent fees, as applicable, pending further input on this proposal, which we seek in today s Further Notice.639 We do not have sufficient evidence to adopt this proposal at this time, especially considering the data provided by the Prison Policy Initiative, which supports a higher rate ($6.95) than the highest rate NCIC s proposal would allow ($5.95). We encourage all interested parties to comment further on the NCIC proposal. At this time, however, we conclude that the number provided by the Prison Policy Initiative is a reasonable interim step that reduces excessively high third- party costs embedded in fees for single-call services and third-party transactions.640 212. Single-Call Services. In the 2015 ICS Order, the Commission first adopted rules for single-call and related services, one of five permissible ancillary service charges that providers were allowed to assess on their customers in connection with inmate calling services.641 The Commission found that providers were using single-call services  in a manner to inflate charges, 642 and limited fees for single-call and related services to the exact transaction fee charged by the third-party that bills for the call,  with no markup, plus the adopted, per-minute rate. 643 Because the D.C. Circuit stayed the rule on March 7, 2016, it never became effective;644 and the Commission reinstated it in the 2020 ICS Order on Remand without revision.645 213. In reinstating the single-call services rule, the Commission noted evidence in the record suggesting that certain providers may have entered into revenue-sharing arrangements with third parties in connection with single-call services that indirectly result in mark-up of fees charged by third-party processing companies and thus serve to circumvent the Commission s cap on pass-through fees for single-call services.646 This evidence included, for example, a then recent report prepared by the Prison Policy Initiative detailing the way some providers use these revenue-sharing arrangements with third parties, like Western Union and MoneyGram, to circumvent the caps on the fees they may charge for 638 2015 ICS Order, 30 FCC Rcd at 12769, para. 9 (citing  a disturbing trend in which ancillary service charges increased exponentially and unfairly, to the detriment of incarcerated [people] and their families and in contravention of the statute, the Commission limited the types and amounts of ancillary service charges that a provider may pass on to incarcerated people and their friends and family); see also Prison Policy Initiative Comments, WC Docket No. 12-375, at 1 (filed Jan. 19, 2016) (Prison Policy Initiative Jan. 19, 2016, Comments) (explaining how third parties charge consumers high fees to send money and then share profits with inmate calling services providers); Letter from Tim McAteer, President, Inmate Calling Solutions, LLC, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, Attach. 1 at 3-4 (filed Oct. 15, 2015) (arguing that  the loophole of allowing third-party financial transaction fees as a pass-through cost with no further restrictions or rate caps allows providers to  outsource payment services to third parties who are not restricted to such caps, thereby allowing [inmate calling services] providers to charge fees above the caps ). 639 NCIC Comments at 3; Letter from Lee G. Petro, Counsel to NCIC, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 1-2 (filed July 28, 2020) (NCIC July 28, 2020, Ex Parte). 640 Prison Policy Initiative Feb. 21, 2021, Ex Parte at 1. 641 2015 ICS Order, 30 FCC Rcd at 12769, para. 9. 642 Id. at 12854, para. 182. 643 47 CFR § 64.6020(b)(2); 2015 ICS Order, 30 FCC Rcd at 12857, para. 186. The  third-party transaction referred to in section 64.6020(b)(2) for single-call services is the same type of  third-party financial transaction referred to in section 64.6020(b)(5). See 2015 ICS Order, 30 FCC Rcd at 12846, para. 163 tbl. 4. 644 2020 ICS Order on Remand, 35 FCC Rcd at 8490, para. 12. 645 Id. at 8495, para. 27 n.86, 8497, para. 34 n.101. 646 Id. at 8502, para. 50; see also NCIC July 28, 2020, Ex Parte at 1-2 & Exh. A. 94 Federal Communications Commission FCCCIRC2105-01 single-call services.647 The third-party financial provider charges the inmate calling services provider as much as $12 to send it a payment in connection with a single-call service or to fund an account. The inmate calling services provider then passes this fee on to the family of the incarcerated person who placed the call, and the two companies split the $12 fee, each getting $6. Some providers freely admit that they engage in these revenue-sharing schemes.648 Other providers have asked the Commission to address this practice and preclude it.649 214. These  egregiously-high third-party transaction fees are unconnected to legitimate costs of inmate calling services.650 We, therefore, revise the single-call service rule and limit the third-party transaction fees providers may pass on with respect to single-call services to $6.95 per transaction. There is support in this record for this proposal.651 The Commission has previously found single-call services to be among  the most expensive ways to make a phone call. 652 And record evidence suggests some providers still may steer families of incarcerated people to these more expensive calls.653 Revising the rule applicable to single-call services in this way will ensure that consumers of inmate calling services, who may be unaware of, or confused by, other available calling options, are protected from unjust and unreasonable charges and practices when seeking to remain in contact with incarcerated friends or family, particularly when they are initially incarcerated and this immediate single-call method of communication is even more critical.654 215. Third-Party Financial Transaction Fees. For the same reasons we limit the third-party transaction fee associated with single-call services, we revise the rule pertaining to third-party financial transaction fees in connection with funding accounts directly with the inmate calling services provider that may be set up on behalf of incarcerated people by their friends and family or by the incarcerated people themselves.655 The same revenue-sharing practices that lead us to revise the single-call services rule are implicated in connection with the third-party financial transaction fees rule.656 647 Public Interest Parties July 29, 2020, Ex Parte Attach. at 8. 648 E.g., id. (explaining that Amtel has  admitted . . . that it receives a portion of Western Union s fees which Western Union calls   revenue share  and   referral fee  ). 649 See, e.g., NCIC July 28, 2020, Ex Parte at 1-2 & Exh. A. 650 Id. at 1. 651 Prison Policy Initiative Feb. 21, 2021, Ex Parte at 2; Public Interest Parties July 29, 2020, Ex Parte Attach. at 8. 652 2015 ICS Order, 30 FCC Rcd at 12855, para. 183; see also NCIC Comments at 2. 653 See Public Interest Parties July 29, 2020, Ex Parte at 3 & Attach. at 9. The Commission previously noted  concerns that providers may be using consumer disclosures as an opportunity to funnel end users into more expensive service options, such as those that may require consumers to pay fees to third parties. 2015 ICS Notice, 30 FCC Rcd at 12896, para. 279 n.974. 654 See 2015 ICS Order, 30 FCC Rcd at 12854-55, para. 182; NCIC Comments at 2-3. 655 Although the 2020 ICS Notice referred to  third-party transaction fees, the third-party financial transaction fee described in section 64.6020(b)(5) is the same as the third-party transaction fee referred to in the rule pertaining to single-call services. See 2015 ICS Order, 30 FCC Rcd at 12846, para. 163 tbl. 4; see also 2015 ICS Order, 30 FCC Rcd at 12857, para. 187 ( Accordingly, for single-call and related services, the Commission will allow [inmate calling services] providers to charge end users for each single call in a manner consistent with our approach to third- party financial transaction fees i.e., [inmate calling services] providers may charge the amount of the third-party financial transaction (with no markup) added to a per-minute rate no higher than the applicable rate cap. ). 656 2020 ICS Notice, 35 FCC Rcd at 8516, para. 91; 2015 ICS Notice, 30 FCC Rcd at 12915, para. 326; Pay Tel Comments, WC Docket No. 12-375, at 16 (filed Jan. 19, 2016) (Pay Tel Jan. 19, 2016, Comments); CenturyLink Public Communications, Inc., Comments, WC Docket No. 12-375, at 12-13 (filed Jan. 19, 2016) (CenturyLink Jan. 19, 2016, Comments); Prison Policy Initiative Jan. 19, 2016, Comments at 2-4; Human Rights Defense Center (continued& .) 95 Federal Communications Commission FCCCIRC2105-01 216. The Commission sought comment in the 2015 ICS Notice on a variety of issues relating to revenue-sharing, including how the Commission can  ensure that these revenue sharing arrangements are not used to circumvent our rules prohibiting markups on third-party fees. 657 In the 2020 ICS Notice, the Commission sought further comment on the use of revenue-sharing arrangements and whether the Commission should clarify the third-party financial transaction fee rule.658 CenturyLink previously contended that the rule governing third-party financial transaction fees already implicitly prohibits providers from recovering higher fees from consumers as a result of revenue-sharing agreements.659 In the 2020 ICS Notice, the Commission stated that  [m]arking up third-party fees, whether directly or indirectly, is prohibited. 660 217. Yet the record in this proceeding continues to suggest that the same types of revenue- sharing agreements that lead to indirect markups of third-party transaction fees for single-call services similarly lead to mark-ups of third-party financial transaction fees.661 Such practices serve to circumvent, either directly or indirectly, the limits placed by the Commission on ancillary service charges and lead to unjust and unreasonable charges. We thus revise our rule relating to third-party financial transaction fees, and limit the fees that a provider can pass through to a calling services consumer to $6.95. We clarify that we do not prohibit providers from entering into revenue-sharing agreements with third parties,662 despite at least one commenter proposal to do just that.663 But providers may not pass on fees exceeding $6.95 per transaction whether or not they are associated with such agreements to incarcerated people and their families. 2. Effect on State Regulation 218. As the Commission explained in the 2020 ICS Order on Remand, where the Commission has jurisdiction under section 201(b) of the Act to regulate rates, charges, and practices of interstate communications services,  the impossibility exception extends that authority to the intrastate portion of jurisdictionally mixed services  where it is impossible or impractical to separate the service s intrastate from interstate components and state regulation of the intrastate component would interfere with valid (Continued from previous page) Comments, WC Docket No. 12-375, at 10 (filed Jan. 19, 2016) (Human Rights Defense Center Jan. 19, 2016, Comments) (agreeing with the comment submitted by the Prison Policy Initiative). 657 2015 ICS Notice, 30 FCC Rcd at 12915, para. 326. 658 See 2020 ICS Notice, 35 FCC Rcd at 8517, para. 91 ( We seek comment on any additional modifications to the language in our current ancillary services rules that may be necessary to clarify what providers are permitted and not permitted to do with respect to ancillary services charges. ) (emphasis added). 659 CenturyLink Jan. 19, 2016, Comments at 12-13 ( Simply put, if an arrangement between an [inmate calling services] provider and a third party results in a higher cost to an end-user than would otherwise be charged by that third party directly (a  base cost), a markup has occurred. In other words, there is a markup regardless of whether it is the result of an explicit fee on top of the base cost, or whether a revenue-sharing agreement drives the cost above this base cost. ). 660 2020 ICS Notice, 35 FCC Rcd at 8516, para. 91. 661 See Pay Tel Jan. 19, 2016, Comments at 16; CenturyLink Jan. 19, 2016, Comments at 12-13; Prison Policy Initiative Jan. 19. 2016, Comments at 2-4; Human Rights Defense Center Jan. 19, 2016, Comments at 10; Public Interest Parties Comments at 13-15. 662 See GTL Reply at 35-37. 663 See Public Interest Parties Comments at 14-15 ( With respect to third-party transaction fees charged to customers by [inmate calling services] providers, the Commission should require proof (by way of copies of contracts with third-party vendors, as many states now demand) that there is no revenue-sharing arrangement between the provider and the vendor. ). 96 Federal Communications Commission FCCCIRC2105-01 federal rules applicable to the interstate component. 664 Consistent with that explanation and prior cases, we exercise our authority under the Supremacy Clause of the U.S. Constitution to preempt state regulation of jurisdictionally mixed services but only to the extent that such regulation conflicts with federal law.665 Thus, state laws imposed on inmate calling services providers that do not conflict with those laws or rules adopted by the Commission are permissible. The interim reforms we adopt in this Report and Order apply to interstate and international inmate calling services rates and certain ancillary services charges imposed for or in connection with interstate or international inmate calling services.666 To the extent that a call has interstate as well as intrastate components, the federal requirements will operate as ceilings limiting potential state action.667 To the extent a state allows or requires providers to impose or charge per-minute rates or fees for the affected ancillary services higher than the caps imposed by our rules, that state law or requirement is preempted except where a call or ancillary service fee is purely intrastate in nature, as the Commission did in the 2020 ICS Notice.668 To the extent that state law allows or requires providers to impose rates or fees lower than those in our rules, that state law or requirement is specifically not preempted by our actions here.669 664 2020 ICS Order on Remand, 35 FCC Rcd at 8496, para. 31 (citing Vonage Order, 19 FCC Rcd at 22413, para. 17). 665 See U.S. Const. art. VI; see also e.g., Vonage Order, 19 FCC Rcd at 22418, para. 23 n.86; Qwest Corp. v Minnesota Pub. Utils. Comm n, 380 F.3d 367, 372 (8th Cir. 2004) (explaining that  [t]he FCC has authority to preempt state regulation of telecommunications where it is not possible to separate the interstate and intrastate aspects of a communications service, and where the Commission concludes that federal regulation is necessary to further a valid federal regulatory objective ); Petition for Emergency Relief and Declaratory Ruling Filed by the BellSouth Corporation, Memorandum Opinion and Order, 7 FCC Rcd 1619, 1622-23, paras. 17-22 (using preemption under the Supremacy Clause for a Georgia voice mail regulation of a jurisdictionally mixed service). 666 See supra Parts III.C-D, H.1, 3. 667 See 2015 ICS Order, 30 FCC Rcd at 12864, para. 205; USF/ICC Transformation Order, 26 FCC Rcd at 17935, para. 801; see also Letter from Andrew D. Lipman, Morgan, Lewis & Bockius, LLP, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 1-2 (filed July 23, 2015). 668 In connection with ancillary service charges, we remind providers that  [t]o the extent a state allows or requires an inmate calling services provider to impose fees for ancillary services other than those permitted by our rules, or to charge fees higher than the caps imposed by our rules, that state law or requirement is preempted except where such ancillary services are provided only in connection with intrastate inmate calling services. 2020 ICS Order on Remand, 35 FCC Rcd at 8501, para. 47. Should a state allow or require providers to impose fees for ancillary service charges lower than those in the Commission s rules, that state law or requirement is not preempted. Id. 669 For example, we are aware that certain states have begun efforts to examine inmate calling services rates and charges subject to their jurisdiction. See, e.g., An Act Concerning the Fee Charged for a Phone Call by an Inmate in a Correctional Facility; And for Other Purposes, 2021 Arkansas Laws Act 702 (S.B. 550) (Apr. 13, 2021) (capping the cost per minute for inmate calling services calls and limiting the types of permitted ancillary services that providers may charge); S.B. 387, 81st (2021) Sess. (Nev. 2021) (directing the Public Utilities Commission of Nevada to regulate suppliers of inmate calling services and adopt rate caps and certain limitations on charges for inmate calling services); H.B. 1201, 73rd Gen. Assemb., 1st Reg. Sess. (Colo. 2021) (requiring the Public Utilities Commission to establish maximum per-minute rates for telephone calls made to or from correctional facilities; S.B. 303, 67th Reg. Sess. (Mont. 2021) (decreasing the cap on intrastate fees to $0.05 per minute from the current $0.10 per minute); H.B. 219, 2021 Gen. Sess. (Utah 2021) (imposing limits on the rate an incarcerated person may be charged for telephone use which must be lesser of the corresponding rate set by the FCC and the rate established by the Utah Department of Corrections); S.B. 1776, 55th Leg., 1st Reg. Sess. (Ariz. 2021) (prohibiting the Department of Corrections from entering a contract or agreement for inmate telephone services that allows the department to receive excess revenue); H.B. 1484, Ind. Gen. Ass., 2021 Sess. (Ind. 2021) (requiring intrastate inmate calling services rates to adhere to the caps for comparable interstate rates set by the FCC). We applaud these state initiatives, which appear consistent with our own efforts in this proceeding. The fact that we are also examining inmate calling services rates and charges involving jurisdictionally mixed services in no way precludes the states from also adopting rules governing such services so long as the states rules are not inconsistent with or conflict with (continued& .) 97 Federal Communications Commission FCCCIRC2105-01 3. Additional Data Collection 219. We adopt a new data collection obligation to collect, in a more consistent and directed manner, the data and information necessary to respond to the various criticisms in the record about the imperfections and inconsistencies in the data from the Second Mandatory Data Collection. The 2020 ICS Notice sought comment on whether and how the Commission should proceed with respect to any new data collection.670 We agree with commenters that a new collection must state more precisely what data we seek and how a provider should approximate or derive the type of data we request if it does not keep its records in such a manner. This is an essential prerequisite to adopting permanent interstate rate caps for both provider-related and facility-related costs.671 Accordingly, we delegate authority to WCB and the Office of Economics and Analytics (OEA) to implement a Mandatory Data Collection, including determining and describing the types of information required related to providers operations, costs, demand, and revenues, consistent with the directives in this section. In addition, we delegate authority to CGB to undertake, if necessary, a separate data collection related to inmate calling services providers costs and other key aspects of their provision of TRS and other assistive technologies, in conjunction with the disability access issues we explore in the accompanying Further Notice.672 220. Background. The Commission has conducted two mandatory data collections related to inmate calling services in the past eight years the 2013 First Mandatory Data Collection673 and the 2015 Second Mandatory Data Collection.674 To allow for consistent data reporting, the Commission directed WCB in both collections to develop a template for providers to use when submitting their data and to furnish providers with further instructions to implement the collection.675 The Commission also directed WCB to review the providers submissions and delegated to WCB the authority to require providers to (Continued from previous page) federal law or policy. Order Instituting Rulemaking, California Public Utilities Commission, Rulemaking 20-10- 002 (2020), https://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M348/K902/348902674.PDF (an on-going rulemaking by the California Public Utilities Commission which is considering ways to ensure incarcerated people and their families have access to intrastate telecommunication service at just and reasonable rates); Motion of the Prison Policy Initiative, Inc., to Compel GTL to Respond to Data Requests, California Public Utilities Commission, Rulemaking 20-10-002, at 2-5 (filed Mar. 18, 2021), https://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M372/ K332/372332177.PDF (seeking, among other things, documents that GTL declined to provide concerning its payment processing costs, and rebutting GTL s concern about the mixed jurisdiction of some ancillary services); Response of GTL (U 5680 C) to the Motion of the Prison Policy Initiative, Inc., to Compel, California Public Utilities Commission, Rulemaking 20-10-002, at 1-2, 5 (filed Mar. 29, 2021), https://docs.cpuc.ca.gov/ PublishedDocs/Efile/G000/M374/K627/374627002.PDF (challenging the request for information about payment processing costs as beyond the California Commission s jurisdiction, and contrary to a confidentiality agreement GTL signed with Prison Policy Initiative, Inc.). 670 2020 ICS Notice, 35 FCC Rcd at 8532-33, paras. 132-33. 671 See, e.g., Pay Tel Wood Reply Report at 7-11. 672 Infra Part VI.A. 673 2013 ICS Order, 28 FCC Rcd at 14172, paras. 124-26 (requiring providers to submit detailed cost information that subsequently formed the basis for the rate-cap calculations in the 2015 ICS Order). The 2013 collection required providers to report actual and forecasted costs, separately for jails and prisons and at a holding company level; specific categories of costs, including telecom costs, equipment costs, security costs, and other specified costs; and information on site commissions, minutes of use, number of calls, number of facilities, and information on charges for ancillary services. 2013 ICS Order, 28 FCC Rcd at 14172-73, paras. 124-26. 674 2015 ICS Order, 30 FCC Rcd at 12862, paras. 197-98 (requiring providers to report, among other information, the location of each facility they served, the classification of each facility (i.e., jail or prison), average daily population of the facility, number of calls by method of payment, minutes of use by method of payment, revenue, and site commissions at a facility level, as well as total inmate calling services costs, direct costs, revenues, and site commissions at the company level). These data form the basis for the interim rates caps we adopt herein. 675 Id. at 12863, para. 200; 2013 ICS Order, 28 FCC Rcd at 14173, para. 26. 98 Federal Communications Commission FCCCIRC2105-01 submit additional data as necessary to perform its review.676 221. In response to the 2020 ICS Notice seeking comment on whether the Commission should collect additional data and, if so, what data it should collect,677 several parties support additional data collection.678 GTL, however, suggests that the Commission should avoid the burden of an additional data collection, asserting that there is no reason to believe that providers will report their costs differently than they have in the past.679 GTL argues that the Commission should allow the market to adjust to any rules adopted as a result of the 2020 ICS Notice before imposing additional reporting requirements.680 GTL also suggests that relying on the Annual Reports that inmate calling services providers file pursuant to section 64.6000 of the Commission s rules would provide a less burdensome way of obtaining data and a better measure of rates in the marketplace.681 222. Mandatory Data Collection. We conclude that a Mandatory Data Collection is essential to enable us to adopt permanent interstate and international rate caps that more accurately reflect providers costs than the interim rate caps we adopt in this Report and Order. Such a data collection is also needed to enable us to evaluate and, if warranted, revise the current ancillary service charge caps. Because of the adverse impact that unreasonably high rates and ancillary services charges have on incarcerated people and those family and loved ones they call, we believe that the benefits of conducting a third collection far outweigh any burden on providers. Moreover, providers have long been on notice of the types of cost information we intend to collect and will have ample time to consider how best to prepare to respond. We delegate to WCB and OEA authority to implement this new data collection. We direct them to develop a template and instructions for the collection to collect the information we need to protect consumers against unjust and unreasonable rates and ancillary services charges for interstate and international inmate calling services, and to aid our continuing review of this unique inmate calling services marketplace682 that one provider quite aptly describes as  nuanced and multilayered. 683 223. Contrary to GTL s assertion,684 an additional data collection is warranted, particularly 676 2015 ICS Order, 30 FCC Rcd at 12863, para. 200; 2013 ICS Order, 28 FCC Rcd at 14173, para. 26. For example, staff analysis of responses to the Second Mandatory Data Collection revealed numerous deficiencies and areas requiring clarification. WCB and OEA conducted multiple follow-up discussions with providers to supplement and clarify their responses resulting in direction to several providers to amend their submissions and respond to questions from staff. See, e.g., Pay Tel Amended and Supplemental Second Mandatory Data Collection Response (amending Pay Tel s Second Mandatory Data Collection response and noting questions raised by Commission staff). 677 2020 ICS Notice, 35 FCC Rcd at 8532-33, para. 132. The Commission also sought comment on, among other things, whether providers should be required to update their responses to an additional data collection on a periodic basis. Id., 35 FCC Rcd at 8532, para. 132. We discuss this issue below. See infra Part VI.E. 678 See Free Press Comments at 2-3 (welcoming efforts to challenge and scrutinize the current data through additional data collections); MediaJustice Comments at 2; Securus Comments at 15; Public Interest Parties Reply at 2-3 (supporting a future data collection to remedy the deficiencies revealed in the Second Mandatory Data Collection). 679 E.g., GTL Comments at 36; GTL Reply at 21. GTL points out that providers are not subject to the Part 32 accounting rules. GTL Reply at 21. 680 GTL Comments at 36. 681 GTL Reply at 22; see 47 CFR § 64.6060 (requiring each inmate calling services provider to file an Annual Report setting forth the provider s current inmate calling services rates and ancillary service charges, among other information). 682 2015 ICS Order, 30 FCC Rcd 12862, paras. 197-98. 683 Securus Comments at 3. 684 GTL Reply at 21-22 (arguing that an additional data collection is unnecessary because  [t]here is no reason to believe . . . that [inmate calling services] providers will report their costs any differently than they did previously ). 99 Federal Communications Commission FCCCIRC2105-01 considering the deficiencies of its own and other providers responses to the Second Mandatory Data Collection. We are not persuaded by GTL s concern about the timing of an additional collection,685 as the potential benefits from expediting further reform far outweigh any burdens the collection may place on providers. Our cost-benefit analysis shows substantial benefits are gained from lowering interstate and international inmate calling services rates towards costs. If, as appears likely, the interim price caps put in place today are still significantly above costs, then bringing rates down to costs will bring substantial further benefits. Finally, while the Annual Reports contain useful and relevant marketplace information on providers rates and charges, we disagree with the contention that the Annual Reports provide sufficient data to establish just and reasonable interstate inmate calling services rates.686 As the Public Interest Parties explain, the Annual Reports only include information on rates and charges and not the type of cost data required to set cost-based rates.687 224. Details of Data Collection. In the 2020 ICS Notice, the Commission sought comment on whether we should consider other types of data that would more fully capture industry costs beyond the detailed and comprehensive data it had already collected.688 Securus asserts that the Commission should require providers to follow a standard cost-causation modeling methodology to attribute costs to specific products, and, where that is not feasible, properly allocate costs across the products in a cost-causative manner, to the extent possible.689 The Public Interest Parties contend that, among other things, the Commission should collect granular data with detailed components of direct and indirect costs, operations, and revenues, in addition to collecting costs at the facility level.690 In addition, they assert that the Commission should standardize a methodology for allocating indirect costs.691 The Public Interest Parties maintain that future data collections should require the submission of the costs of ancillary services and should be audited by an independent third party prior to submission to the Commission.692 They also assert that the Commission should collect data on marketplace trends, such as bulk purchasing at fixed monthly rates.693 225. Securus asks that we provide more specific instructions on how to measure direct and indirect costs and contends that each company should be required to provide detailed work papers showing how it complied with the Commission s instructions.694 Pay Tel supports modifications to forms, instructions, and guidance governing future data collections as necessary  to avoid the same or similar dataset issues currently presented. 695 Pay Tel asserts that detailed instructions would guide 685 GTL Comments at 36. 686 Id. at 22. 687 See, e.g., Public Interest Parties Comments at 15-16. 688 2020 ICS Notice, 35 FCC Rcd at 8512-13, para. 80. 689 Securus Comments at 15. Securus contends that cost drivers should be incorporated into the cost attribution analysis, such as time-tracking by software developers, IT support tickets, and physical inventory of computing hardware. Id. 690 Public Interest Parties Comments at 16. 691 Id. 692 Id. 693 Public Interest Parties Comments at 17. The Public Interest Parties further argue that the Commission should require certification of the submitted cost data by the Chief Executive Officer, Chief Financial Officer, or other senior executive of the provider, as required for the Annual Reports. Id. In addition, they assert that the Commission should take enforcement action against any parties violating the Commission s rules well in advance of any future data collection. Id. 694 Securus Comments at 15. 695 Pay Tel Reply at 17. 100 Federal Communications Commission FCCCIRC2105-01 providers when completing the data collection form, including by clearly and expressly defining terms that are crucial to the collection process. Pay Tel claims that many of the issues with the current dataset appear to have arisen due to differing provider interpretations of instructions and terms, and that the Commission should minimize the potential for such differing interpretations as much as possible.696 226. We direct WCB and OEA to consider all of the foregoing suggestions in designing the Mandatory Data Collection including considering whether to collect data for multiple years. They should also incorporate lessons learned from the two prior data collections to ensure that we collect, to the extent possible, uniform cost, demand, and revenue data from each provider. 227. To ensure that we have sufficient information to meaningfully evaluate each provider s operations, cost data, and methodology, we direct WCB and OEA to collect, at a minimum, information designed to enable us to: " Quantify the relative financial importance of the different products and services in each provider s business portfolio, including revenues from products supplied by any corporate affiliates, and ensure that the provider s inmate calling services are not being used to subsidize the provider s, or any corporate affiliate s, other products or services; " Quantify the relative financial importance of services, including revenues from each transmission service and ancillary service, included within the provider s inmate calling services operations; " Measure the demand for the provider s inmate calling services (e.g., in terms of paid and unpaid total minutes of use or completed calls); " Calculate the provider s gross investment (gross book value of an asset, i.e., prior to subtracting accumulated depreciation or amortization), accumulated depreciation or amortization, deferred state and federal income taxes, and net investment (net book value of an asset, i.e., after subtracting accumulated depreciation or amortization), in tangible assets, identifiable intangible assets, and goodwill; " Calculate the provider s capital costs and operating expenses, disaggregated among appropriate categories; " Ensure that the provider has directly assigned to its inmate calling services operations, and to its other operations, the investments and expenses that are directly attributable to those operations; " Ensure that the provider has allocated to its inmate calling services operations, and to its other operations, common investments and expenses (i.e., investment and expenses that are not directly assignable to inmate calling services or to any single non-inmate calling services line of business); " Ensure that the provider has directly assigned to specific contracts or facilities investments and expenses directly attributable to inmate calling services to the extent feasible; " Ensure that the provider has allocated any remaining unassigned inmate calling services and common investment and expenses to specific contracts or facilities using reasonable, cost-causative methods; and " Ensure that the provider has directly assigned any site commission payments to, or allocated any such payments between its inmate calling services and its other operations 696 Id. at 17-18. 101 Federal Communications Commission FCCCIRC2105-01 using reasonable, cost-causative methods.697 228. We also delegate to WCB and OEA the authority to require providers to submit any additional information that they deem necessary to help the Commission formulate permanent rate caps or to revise our rules governing ancillary service charges. WCB and OEA shall have the authority to require each provider to fully explain and justify each step of its costing process and, where they deem it appropriate, to specify the methodology the provider shall use in any or all of those steps. WCB and OEA also shall have the authority to require any provider to clarify and supplement its response to this data collection where appropriate to enable the Commission to make a full and meaningful evaluation of the company s cost, demand, and revenue data and costing methodology. Each provider shall keep all records necessary to implement this collection, and all providers shall make such records available to the Commission upon request. 229. Timeframes for Data Collection. We direct the template and instructions for the data collection to be completed for submission to the Office of Management and Budget (OMB) not later than 90 days after this Report and Order becomes effective. We also direct WCB to require providers to respond within 120 days after WCB announces in a Public Notice that OMB has approved the new data collection, such announcement to occur no later than seven business days after receipt of OMB s approval. WCB may, however, grant an extension of the 120-day response deadline for good cause. 230. Potential CGB Data Collection. We separately delegate authority to CGB to undertake a separate data collection related to inmate calling services providers costs and other key aspects of their provision of TRS and other assistive technologies should CGB determine such a data collection is necessary to assist the Commission s consideration of the record obtained with respect to assistive technologies for incarcerated people pursuant to our accompanying Further Notice.698 To the extent CGB undertakes such data collection, we delegate to it the authority to require providers to submit any additional information that it deems necessary to assist the Commission s consideration of reforms in this area. CGB shall also have the authority to require any provider to clarify and supplement its response to such data collection where appropriate. 4. Effective Dates 231. Our actions in this Report and Order, including our new interim interstate and international rate caps, will take effect 90 days after notice of them is published in the Federal Register, except that the delegations of authority in Part III.H.3 shall take effect upon such publication, and the rules and requirements that require approval from OMB under the Paperwork Reduction Act shall be effective on the date specified in a notice published in the Federal Register announcing OMB approval. This 90-day timeframe is the same transition timeframe the Commission proposed in the 2020 ICS Notice, and this period matches the timeframe the Commission adopted when providers first became subject to the current interim caps.699 We received varying proposals for effective dates in response our proposed 90-day timeframe. Certain commenters argue for an effective date of 30 days after publication in the Federal Register, on the basis that providers have been on notice of the pending changes for some time and that any further delay will only add to the costs that incarcerated people and their families will bear.700 Other commenters propose an effective date beyond 90 days or advocate for a staggered approach that would allow more transition time for jails, arguing that this additional time is necessary to 697 See GTL Letter, 35 FCC Rcd at 7031-34; Securus Comments at 15; Securus Cost Study. 698 Infra Part VI.A. 699 2020 ICS Notice, 35 FCC Rcd at 8511, para. 77; see also 2013 ICS Order, 28 FCC Rcd at 14147, paras. 72-73; 2015 ICS Order, 30 FCC Rcd at 12884, para. 251 ( The record does not indicate that providers experienced difficulties implementing the rate caps within 90 days after the 2013 [ICS] Order s publication in the Federal Register. ). 700 Free Press Comments at 5; Public Interest Parties Comments at 18-20. 102 Federal Communications Commission FCCCIRC2105-01 make billing system changes, or to renegotiate contracts among private parties.701 232. We conclude that a 90-day timeframe for implementing the new interim rate caps and other changes that do not require OMB approval strikes a reasonable balance between the competing interests. On the one hand, a rapid timeframe would help alleviate the burden of unreasonably high interstate and international rates on incarcerated people and those they call,702 a burden that the ongoing COVID-19 global pandemic has exacerbated.703 On the other hand, the record shows that providers and correctional officials will need more than 30 days to execute any contractual amendments necessary to implement the new interstate and international rate caps and otherwise adapt to those caps.704 Parties seeking a longer transition period rely primarily on the difficulties jails with average daily populations less than 1,000 may encounter in implementing relatively sweeping changes to the rate cap structure.705 The only rate cap change applicable to those jails, however, will be to reduce the per-minute charges for interstate collect calls from $0.25 per minute to $0.21 per minute. Further, as the Commission recognized in the 2020 ICS Notice, 90 days after publication in the Federal Register appears to have been sufficient for implementation of the rate cap changes adopted in the 2013 ICS Order.706 In view of the foregoing considerations, we find that a 90-day transition period after publication in the Federal Register appropriately balances the need for expedited reform with the difficulties of adapting to our new rules. 233. We find good cause for having our delegations of authority to WCB, OEA, and CGB take effect immediately upon publication of notice of them in the Federal Register. Making the delegations effective at that time will enable WCB and OEA to move as expeditiously as practicable toward finalizing the Mandatory Data collection and thereby reduce the time it will take us to set permanent rate caps for interstate and international inmate calling services and, if appropriate, revise the current ancillary service fee caps. Similarly, making the delegation to CGB effective upon publication in the Federal Register will enable CGB to move forward with any data collection as soon as practicable once it receives comments on the Further Notice. Given the importance of these areas to incarcerated people, including those with communication disabilities, any unnecessary delay in these initiatives would be inconsistent with the public interest. 5. Rule Revisions 234. We make two non-substantive changes to our inmate calling services rules. First, we amend section 64.6000(g) of our rules to fix a typographical error. Currently, this section erroneously uses the word  though instead of  through in defining  Debit Calling 707 whereas a parallel definition 701 See California State Sheriffs Association Comments at 2; GTL Comments at 4, 16-17 (advocating for a 90-day timeframe for prisons and a six-month timeframe for jails); National Sheriffs Association Reply at 3-4 (seeking a one-year transition for jails). 702 Free Press Comments at 5 (citing an example of an inmate calling services provider voluntarily lowering its rates in less than 90 days time); see also Public Interest Parties Reply at 19-20. 703 See Public Interest Parties Comments at 2-3 (recognizing that restrictions on in-person visitations as a result of the pandemic have only increased the difficulty for incarcerated people to communicate with friends, family, and loved ones); see also Verizon Comments at 2-3. But see Federal Bureau of Prisons, BOP Modified Operations (updated Nov. 25, 2020), https://www.bop.gov/coronavirus/covid19_status.jsp (reinstating in-person visits subject to conditions and limitations due to the COVID-19 pandemic). 704 GTL Comments at 12 (noting that the COVID-19 pandemic may delay county board meetings); National Sheriff s Association Reply at 7 (quoting GTL Comments at 12). 705 GTL Comments at 13, 14 n.52; National Sheriffs Association Reply at 3-4; 2015 ICS Order, 30 FCC Rcd at 12886-87, para. 256. 706 2020 ICS Notice, 35 FCC Rcd at 8511, para. 77 & n.195. 707 47 CFR § 64.6000(g). 103 Federal Communications Commission FCCCIRC2105-01 for  Prepaid Calling correctly uses  through. 708 We therefore change  though to  through in section 64.6000(g). Second, we remove the last sentence of section 64.6000(c) of our rules. That sentence references section 64.6010, which previously was removed and reserved for future use.709 235. We find good cause to make these revisions without notice and comment. The Administrative Procedure Act permits agencies to issue rule changes without notice and comment  when the agency for good cause finds (and incorporates the finding and a brief statement of the reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest. 710 We find good cause here because the rule changes are editorial and non- substantive.711 The rule changes correct a typographical error and conform our rules to previous rule amendments. The Commission need not seek comment on rule changes to  ensure consistency in terminology and cross references across various rules or to correct inadvertent failures to make conforming changes when prior rule amendments occurred. 712 IV. ORDER ON RECONSIDERATION 236. We deny the GTL Petition713 in full on the merits and, independently, dismiss that petition as procedurally defective, insofar as it relies on arguments the Commission already considered and rejected in the underlying order.714 GTL seeks reconsideration of a single sentence from the 2020 ICS Order on Remand reiterating that  the jurisdictional nature of a call depends on the physical location of the endpoints of the call and not on whether the area code or NXX prefix of the telephone number . . . associated with the account, are associated with a particular state. 715 GTL claims that this sentence (1) ignores telecommunications carriers historical reliance on NPA-NXX codes to classify calls as interstate or intrastate; (2) unfairly singles out providers of calling services for incarcerated people; (3) presents implementation issues; (4) potentially compromises state programs funded by assessments on intrastate revenues; and (5) promulgates a new rule without notice and an opportunity to comment.716 We find each of these claims to be without merit and affirm the Commission s continued use of the traditional end-to-end jurisdictional analysis relied upon in the 2020 ICS Order on Remand. 708 47 CFR § 64.6000(p). 709 2020 ICS Order on Remand, 35 FCC Rcd at 8508, 8539, para. 63, Appx. A. 710 See 5 U.S.C. § 553(b)(3)(B). 711 See, e.g., Authorizing Permissive Use of the  Next Generation Broadcast Television Standard, GN Docket No. 16-142, Second Report and Order and Order on Reconsideration, 35 FCC Rcd 6793, 6824, para. 62 (2020) (concluding that notice and comment are not required for  editorial and non-substantive rule changes). 712 Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment, WC Docket No. 17-84, Order, 33 FCC Rcd 5660, 5688-89, para. 63 (2018) (finding notice and comment unnecessary for non- substantive changes to the Commission s rules). 713 Petition for Reconsideration of GTL, WC Docket No. 12-375 (filed Nov. 23, 2020) (GTL Petition). 714 47 CFR § 1.429(l)(3) (stating that a petition for reconsideration that relies  on arguments that have been fully considered and rejected by the Commission within the same proceeding  plainly do not warrant consideration by the Commission ). The Commission considered and rejected GTL s arguments regarding so-called Commission  precedent purporting to establish a general policy of reliance on NPA-NXX as a proxy for jurisdiction and whether the Commission s statement required prior notice and an opportunity to comment. 2020 ICS Order on Remand, 35 FCC Rcd at 8504-06, paras. 54-58. 715 2020 ICS Order on Remand, 35 FCC Rcd at 8503, para. 53 (citation omitted); GTL Petition at 3. 716 See, e.g., GTL Petition at ii-iii, 4. The  NPA-NXX code  correspond[s] to the area code and first three digits of a telephone number. Federal-State Joint Board on Universal Services et al., CC Docket No. 96-45 et al., Further Notice of Proposed Rulemaking, 12 FCC Rcd 18514, 18538, para. 51 n.105 (1997). 104 Federal Communications Commission FCCCIRC2105-01 A. Background 237. Last year, the Commission responded to the D.C. Circuit s directive that it consider whether ancillary service charges can be segregated into interstate and intrastate components to exclude the intrastate components from the reach of the Commission s rules.717 The Bureau issued the Ancillary Services Refresh Public Notice seeking to refresh the record in light of the D.C. Circuit s remand.718 Based on the record developed in response to that public notice, the Commission found that  ancillary service charges generally cannot be practically segregated between the interstate and intrastate jurisdiction except in the limited number of cases where, at the time a charge is imposed and the consumer accepts the charge, the call to which the service is ancillary is a clearly intrastate-only call. 719 Thus, the Commission concluded that providers are generally prohibited from imposing ancillary service charges, other than those explicitly permitted by the Commission s rules, and are also generally prohibited from imposing ancillary service charges in excess of the permitted ancillary service fee caps in the Commission s rules.720 238. In the 2020 ICS Order on Remand, the Commission addressed record debate about the jurisdictional classification methodology for certain inmate calling services calls and the ancillary services provided in connection with those calls by reminding providers that  the jurisdictional nature of a call depends on the physical locations of the endpoints of the call, rather than on the area codes or NXX prefixes of the telephone numbers used to make and receive the call.721 GTL and Securus objected to this approach, asserting that relying on a call s endpoints was inconsistent with prior Commission decisions and with providers practice of using NPA-NXX codes as proxies for jurisdiction.722 GTL and Securus also claimed that the Commission s  clarification regarding how carriers are to determine the jurisdictional nature of a call required prior notice and an opportunity to comment.723 In addition, NCIC questioned  the FCC s determination that [inmate calling services] providers will be able to determine the location of the terminating point of an [inmate calling services] wireless call and thus determine whether the call is intrastate or interstate in nature. 724 239. In response to these objections, the Commission explained that although it has allowed the use of proxies to determine the jurisdictional nature of certain calls, it has done so only in specific contexts  typically related to carrier-to-carrier matters or payment of fees owed and that it  never 717 2020 ICS Order on Remand, 35 FCC Rcd at 8486, para. 2. 718 See Ancillary Services Refresh Public Notice, 35 FCC Rcd at 189-92. 719 2020 ICS Order on Remand, 35 FCC Rcd at 8495, para. 28. 720 Id.; 47 CFR §§ 64.6000(u), 64.6020. 721 2020 ICS Order on Remand, 35 FCC Rcd at 8503, para. 53. 722 GTL and Securus raised these objections in ex parte filings during the public circulation period of the 2020 ICS Order on Remand but before the Commission adopted that Order on August 6, 2020. Letter from Chérie R. Kiser, Counsel for GTL, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 3-4 & nn.11-14, 16 (filed July 30, 2020) (GTL July 30, 2020, Ex Parte) (citing various state and federal authorities); Letter from Dennis J. Reinhold, Senior Vice President and General Counsel, Securus, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 2 n.3 (filed July 30, 2020) (Securus July 30, 2020, Ex Parte) (citing various Commission actions relating to jurisdictional proxies for intercarrier compensation and revenue reporting purposes); see FCC, Reforming Rates and Charges for Inmate Calling Services (Jul. 16, 2020), https://www.fcc.gov/document/reforming-rates-and- charges-inmate-calling-services (releasing the draft text of the 2020 ICS Order on Remand, thereby commencing the public circulation period); see also 2020 ICS Order on Remand, 35 FCC Rcd at 8504, 8506, paras. 54, 58. 723 See GTL July 30, 2020, Ex Parte at 2 (suggesting that the Commission s clarification was a new requirement); Securus July 30, 2020, Ex Parte at 3 (explaining that  [t]he Commission should follow the process for a new rulemaking to address this significant policy change ). 724 NCIC July 28, 2020, Ex Parte at 2-3. 105 Federal Communications Commission FCCCIRC2105-01 adopted a general policy allowing the broad use of such proxies. 725 The Commission distinguished the so-called  precedent cited by GTL and Securus, explaining that none of those decisions established actual Commission policy or practice regarding the use of jurisdictional proxies and that the examples provided  relate specifically to carrier-to-carrier arrangements involving intercarrier compensation or applicable federal fees due between carriers and the Commission, not to using a proxy for charging a customer a higher or different rate than it would otherwise be subject to based on whether the customer s call is interstate or intrastate. 726 The Commission, therefore, rejected GTL s and Securus s argument that application of the end-to-end analysis required prior notice and an opportunity to comment, explaining that it was merely clarifying  the long-established standard that inmate calling services providers must apply in classifying calls for purposes of charging customers the appropriate rates and charges. 727 The Commission further explained that the Bureau s public notice seeking to refresh the record on ancillary service charges in light of the D.C. Circuit s remand provided  notice of, and a full opportunity to comment on, the jurisdictional status of inmate calling services calls because the public notice sought comment on how to proceed if ancillary services were  jurisdictionally mixed and defined jurisdictionally mixed services as those that are  capable of communications both between intrastate end points and between interstate end points. 728 240. In November 2020, GTL filed a petition seeking reconsideration of the application of the end-to-end jurisdictional analysis in the 2020 ICS Order on Remand.729 The Bureau released a Public Notice announcing the filing of GTL s Petition and establishing deadlines for oppositions and replies to the Petition.730 The Bureau received comments from Pay Tel Communications731 and replies from NCIC and GTL.732 B. Discussion 241. Standard of Review. Any interested party may file a petition for reconsideration of a final action in a rulemaking proceeding.733 Reconsideration  may be appropriate when the petitioner demonstrates that the original order contains a material error or omission, or raises additional facts that were not known or did not exist until after the petitioner s last opportunity to present such matters. 734 Petitions for reconsideration that do not warrant consideration by the Commission include those that:  [f]ail to identify any material error, omission, or reason warranting reconsideration; [r]ely on facts or 725 2020 ICS Order on Remand, 35 FCC Rcd at 8505, para. 54. 726 Id. at 8505-06, paras. 54-55. 727 Id. at 8506, para. 58. 728 Id. (internal quotation marks and citation omitted); Ancillary Services Refresh Public Notice, 35 FCC Rcd at 190. The Ancillary Services Refresh Public Notice was published in the Federal Register on February 19, 2020. FCC, Wireline Competition Bureau Seeks to Refresh the Record on Ancillary Service Charges Related to Inmate Calling Services, 85 Fed. Reg. 9444 (Feb. 19, 2020). 729 See generally GTL Petition. 730 Petition for Reconsideration of the 2020 Inmate Calling Services Report and Order on Remand, WC Docket No. 12-375, Public Notice, 35 FCC Rcd 14088, 14088-89 (WCB 2020). 731 Pay Tel Comments in Response to GTL s Petition for Reconsideration, WC Docket No. 12-375 (filed Jan. 11, 2021) (Pay Tel Reconsideration Comments). 732 NCIC Reply in Response to GTL s Petition for Reconsideration, WC Docket No. 12-375 (filed Jan. 21, 2021) (NCIC Reconsideration Reply); GTL Reply in Response to GTL s Petition for Reconsideration, WC Docket No. 12- 375 (filed Jan. 21, 2021) (GTL Reconsideration Reply). 733 47 CFR § 1.429(a). 734 Universal Service Contribution Methodology et al., WC Docket No. 06-122 et al., Order on Reconsideration, 27 FCC Rcd 898, 901, para. 8 (2012); see 47 CFR § 1.429(b). 106 Federal Communications Commission FCCCIRC2105-01 arguments which have not been previously presented to the Commission . . . ; [r]ely on arguments that have been fully considered and rejected by the Commission within the same proceeding; or  [r]elate to matters outside the scope of the order for which reconsideration is sought. 735 The Commission may consider facts or arguments not previously presented if: (1) they  relate to events which have occurred or circumstances which have changed since the last opportunity to present such matters to the Commission; 736 (2) they were  unknown to petitioner until after [their] last opportunity to present them to the Commission, and [the petitioner] could not through the exercise of ordinary diligence have learned of the facts or arguments in question prior to such opportunity; 737 or (3)  [t]he Commission determines that consideration of the facts or arguments relied on is required in the public interest. 738 1. GTL s Substantive Arguments Against the End-to-End Analysis Do Not Warrant Reconsideration 242. GTL s Petition provides no new substantive facts or arguments that justify reconsideration of the Commission s application of the end-to-end jurisdictional analysis to calling services for incarcerated people. Although GTL cites various documents it claims establish a general Commission policy on the use of jurisdictional proxies for classifying interstate and intrastate calls, none of the cited documents establish such a policy, especially in the provision of inmate calling services.739 We are also unpersuaded by GTL s arguments regarding the possible discriminatory treatment of providers of these calling services, its reliance on third parties to make jurisdictional determinations, or its unsubstantiated claims about the effects our jurisdictional analysis may have on state programs.740 243. GTL first argues that the end-to-end analysis ignores what it claims is the industry custom and practice of using NPA-NXX codes to determine whether a call is interstate or intrastate.741 GTL asserts that the  Commission s prior statements have recognized that using NPA-NXX is an appropriate industry standard for determining whether a call is interstate or intrastate. 742 In this regard, GTL emphasizes the 2003 Starpower Damages Order.743 For its part, NCIC argues that the Commission s  precedent has been  correctly cited by GTL, and that the Commission should  continue to follow that precedent in the context of calling services for incarcerated people.744 244. We disagree. We reaffirm the Commission s prior conclusion that not one of the decisions cited in GTL s Petition adopted a general policy allowing broad use of jurisdictional proxies, such as NPA-NXX codes.745 Those decisions primarily concern the use of jurisdictional proxies to determine the appropriate rating between and among various types of service providers routing calls originating from one NPA-NXX code to a terminating NPA-NXX code and vice versa. None of them allow for the use of jurisdictional proxies in the context of inmate calling services for which consumers may be charged different rates based on whether a call is classified as interstate or intrastate. Instead, the 735 47 CFR § 1.429(l)(1)-(3), (5). 736 47 CFR § 1.429(b)(1). 737 47 CFR § 1.429(b)(2). 738 47 CFR § 1.429(b)(3). 739 E.g., GTL Petition at 4-6. 740 E.g., id. at 6, 10, 12. 741 Id. at 4. 742 Id. (emphasis in original). 743 See GTL Petition at 5; Starpower Communications, LLC v. Verizon South Inc., File No. EB-00-MD-19, Memorandum Opinion and Order, 18 FCC Rcd 23625 (2003) (Starpower Damages Order or Starpower). 744 NCIC Reconsideration Reply at 2. 745 2020 ICS Order on Remand, 35 FCC Rcd at 8504, paras. 54. 107 Federal Communications Commission FCCCIRC2105-01 decisions GTL cites merely reflect that the Commission  has allowed carriers to use proxies for determining the jurisdictional nature of calls in specific contexts, typically related to carrier-to-carrier matters or payment of fees owed. 746 245. At bottom, GTL requests that we engraft into our inmate calling services rules a jurisdictional proxy relying on NPA-NXX codes for all telephone calls from incarcerated people to a called party regardless of the called parties service provider of choice that the Commission has never suggested might be used in determining the jurisdictional classification of an inmate calling services call. We thus are not persuaded that GTL s approach reflects a reasonable interpretation of our existing rules. 246. GTL seizes on certain language in the Starpower Damages Order that, GTL claims, establishes a  historical or  consistent use of NPA-NXX codes.747 Contrary to GTL s assertions, however, the Starpower decision did not announce a general policy permitting the use of jurisdictional proxies. Rather, Starpower was narrowly concerned with an intercarrier compensation dispute, the resolution of which hinged on the treatment of traffic under a Verizon tariff. In the liability phase of the proceeding, Starpower obtained an order from the Commission obligating Verizon to pay reciprocal compensation under an interconnection agreement  for whatever calls Verizon South bills to its own customers as local calls under the Tariff, regardless of whether a call is jurisdictionally interstate. 748 In the damages phase, Verizon argued that, under its tariff definition, the physical location of the called parties, and not the telephone numbers, determined whether service was  local. 749 But the Commission concluded that Verizon rated and billed ISP-bound traffic under its tariff by looking to the telephone numbers of the parties to a call and not the parties physical locations.750 The Commission held that since Verizon treated ISP-bound calls as  local under the Tariff, Verizon was obligated to pay reciprocal compensation under the interconnection agreement.751 Thus, although Starpower contains passing references to the use of NPA-NXX to determine the jurisdictional nature of certain traffic, the decision ultimately turned on the Commission s interpretation of Verizon s tariff and Verizon s own practices in applying that tariff. Accordingly, Starpower does not establish any Commission or industry-wide policy on the use of jurisdictional proxies.752 247. In any event, it is simply not reasonable or reliable now, nor has it been for many years, to assume that a called party is physically located in the geographic area (rate center) of the switch to which the party s NPA-NXX code is native. Before Congress adopted the 1996 Act, when incumbent LECs controlled 99% of the local voice marketplace,753 one could reasonably assume that a called party was physically located in the geographic area associated with a particular NPA-NXX, as NPA-NXX codes were associated only with a particular incumbent s rate center. Since that time, however, number 746 Id. at 8504-05, paras. 54-55. 747 See GTL Petition at 5. 748 Starpower Damages Order, 18 FCC Rcd at 23627, para. 5 (citing Starpower Communications, LLC v. Verizon South Inc., File No. EB-00-MD-19, Memorandum Opinion and Order, 17 FCC Rcd 6873, 6892-94, paras. 44-46, 49 (2002)). 749 Id. at 23630-31, para. 12. 750 Id. at 23631, para. 13. 751 Id. 752 The fact that Starpower involved Internet service provider-bound traffic i.e., traffic to another type of service provider, which at the time was a separate unsettled jurisdictional issue, rather than an end user telephone subscriber alone, makes this case entirely inapposite. 753 Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, CC Docket No. 96- 98, Notice of Proposed Rulemaking, 11 FCC Rcd 14171, 14174-75, para. 6 (1996). 108 Federal Communications Commission FCCCIRC2105-01 porting754 between and among competing wireline LECs,755 wireless carriers,756 and fixed and nomadic VoIP providers757 has rendered NPA-NXX codes an all-too-frequently unreliable means to determine whether a called party is physically located within a particular state when it receives and answers a given call.758 248. Today, consumers increasingly rely on nomadic VoIP and mobile voice services for 754 In the 1996 Act, Congress included the requirement that each LEC  provide, to the extent technically feasible, number portability in accordance with requirements prescribed by the Commission. 47 U.S.C. § 251(b)(2); 47 U.S.C. § 153(30) (Supp. II 1997) (defining  number portability as  the ability of users of telecommunications services to retain, at the same location, existing telecommunications numbers without impairment of quality, reliability, or convenience when switching from one telecommunications carrier to another ). This definition now appears in section 3(37) of the Act. 47 U.S.C. § 153(37); see also 47 CFR § 52.21(m). The number portability rules subsequently adopted by the Commission, as modified over time, limit number porting between wireline incumbents and wireline competitors to ports within the same rate center. E.g., Telephone Number Portability, CC Docket No. 95-116, First Report and Order and Further Notice of Proposed Rulemaking, 11 FCC Rcd 8352, 8447, para. 181 (1996) (First Number Portability Order) (declining, at the time, to require location portability). 755 With respect to wireline-to-wireless porting, the Commission requires wireline carriers to port to requesting wireless carriers  where the requesting wireless carrier s  coverage area overlaps the geographic location in which the customer s wireline number is provisioned, provided that the porting-in carrier maintains the number s [NPA- NXX] original rate center designation following the port. See Telephone Number Portability; CTIA Petitions for Declaratory Ruling on Wireline-Wireless Porting Issues, CC Docket No. 95-116, Memorandum Opinion and Order and Further Notice of Proposed Rulemaking, 18 FCC Rcd 23697, 23706, para. 22 (2003) . In other words, when the wireline number is ported to the wireless carrier s customer, the original rate center designation is maintained for routing and rating purposes by other service providers. 756 A wireless carrier may only port a number to a wireline carrier if the number is associated with the rate center of the wireline carrier where the customer is located. See id. at 23706, para. 22. 757 Nomadic VoIP  is usually a VoIP phone installed in a portable computer which can be taken with the subscriber so that  [c]alls can be made from anywhere in the world. IP-Enabled Services et al., WC Docket No. 04-36 et al., Order and Public Notice Seeking Comment, 22 FCC Rcd 18319, 18322, para. 6 n.19 (CGB 2007). By comparison, fixed VoIP is not movable.  The [fixed] service is provided by a cable company, for example, where the telephone does not leave the residence. APCO International, NG9-1-1 VoIP and SIP Trunking, https://www.apcointl.org/ resources/ng911/voip-and-sip-trunking/ (last visited Apr. 4, 2021). 758 The Commission began its work implementing the 1996 Act s number portability requirement with its 1996 First Number Portability Order, in which it adopted an initial set of rules governing wireline-to-wireline, wireless-to- wireless, and wireline-to-wireless number portability obligations. First Number Portability Order, 11 FCC Rcd at 8355, 8357, 8393, paras. 3-4, 8, 77; see also Telephone Number Portability, CC Docket No. 95-116, Memorandum Opinion and Order on Reconsideration, 12 FCC Rcd 7236, 7273, paras. 60-61 (1997) (clarifying that licensed commercial mobile radio service (CMRS) providers, such as cell phone companies, must be allowed to make a request for deployment of number portability); 47 CFR § 52.23(b)(2)(i) (1997). It required that LECs in the 100 largest Metropolitan Statistical Areas (MSAs) begin implementing a long-term number portability methodology on a phased deployment schedule, and that CMRS providers be able to port numbers by the wireline carriers deadline to complete number portability implementation and to support network-wide roaming thereafter. First Number Portability Order, 11 FCC Rcd at 8355, 8393, 8439-40, paras. 3-4, 77, 165-66. The Commission also established LEC number portability implementation obligations outside of the 100 largest MSAs. First Number Portability Order, 11 FCC Rcd at 8395, para. 82. Subsequently, in 2007, the Commission extended local number portability obligations to interconnected VoIP providers, both fixed and nomadic. See Telephone Number Requirements for IP- Enabled Services Providers et al., WC Docket No. 07-243 et al., Report and Order, Declaratory Ruling, Order on Remand, and Notice of Proposed Rulemaking, 22 FCC Rcd 19531, 19532, para. 1 (2007). In 2015, the Commission opened direct access to numbering resources to interconnected VoIP providers. See generally Numbering Policies for Modern Communications et al., WC Docket No. 13-97 et al., Report and Order, 30 FCC Rcd 6839, 6840, para. 2 (2015) (VoIP Direct Access to Numbers Order). 109 Federal Communications Commission FCCCIRC2105-01 telephone service.759 Nomadic interconnected VoIP services are provided as over-the-top applications and are not associated with any specific geographic location.760 Subscribers to these services can readily move to other rate centers throughout the country while retaining their telephone numbers.761 And nearly half of all assigned telephone numbers are associated with wireless pho