Andrew D. Lipman Counsel for Securus Technologies, LLC 1 in The

Andrew D. Lipman Russell M. Blau [email protected] [email protected]

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November 23, 2020

VIA ECFS

Ms. Marlene H. Dortch, Secretary Federal Communications Commission Office of the Secretary 45 L Street, N.E. Washington, DC 20554

Re: In the Matter of Rates for Interstate Inmate Calling Services WC Docket No. 12-375

Dear Ms. Dortch:

On behalf of Securus Technologies, LLC (“Securus”) enclosed for filing is the redacted version of the Comments of Securus Technologies on the Fourth Further Notice of Proposed Rulemaking regarding Inmate Calling Services for filing in the above referenced proceeding in accordance with the Protective Order1 issued in the proceeding. This version of the filing has been marked “REDACTED – FOR PUBLIC INSPECTION”, in accordance with the Protective Order2 issued in the proceeding.

Any questions relating to this submission should be directed to the undersigned.

Respectfully Submitted,

/s/ Andrew D. Lipman

Andrew D. Lipman Russell M. Blau

Counsel for Securus Technologies, LLC

1 In the Matter of Rates for Interstate Inmate Calling Services, Report and Order on Remand and Fourth Further Notice of Proposed Rulemaking, WC Docket No. 12-375, 35 FCC Rcd 8485 (2020). 2 In the Matter of Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Protective Order, 28 FCC Rcd 16954 (WCB 2013). Morgan, Lewis & Bockius LLP

1111 Pennsylvania Avenue, NW Washington, DC 20004-2541 +1.202.739.3000 United States +1.202.739.3001 REDACTED – FOR PUBLIC INSPECTION

Before the FEDERAL COMMUNICATIONS COMMISSION Washington, DC 20554

In the Matter of WC Docket No. 12-375 Rates for Interstate Inmate Calling Services

COMMENTS OF SECURUS TECHNOLOGIES, LLC

Andrew D. Lipman Russell M. Blau MORGAN, LEWIS & BOCKIUS LLP 1111 Pennsylvania Ave., N.W. Washington, DC 20004-2541 Tel: (202) 739-3000 [email protected] [email protected]

Counsel to Securus Technologies, LLC REDACTED – FOR PUBLIC INSPECTION

Table of Contents

EXECUTIVE SUMMARY iii I. INTRODUCTION 1 A. Embracing Regulation and Reform ...... 1 B. About Securus ...... 4 C. About Inmate Calling Services ...... 8 II. THE DATA PROVIDED TO THE COMMISSION IS INCOMPLETE AND INCONSISTENT AND THEREFORE HAS PRODUCED RATE CAPS THAT ARE INSUFFICIENT TO COVER ALL REASONABLE COSTS 10 A. Providers Did Not Report Their Costs Using a Consistent Methodology ...... 11 B. The Results of the Staff’s Analysis Are Inconsistent with Provider Experience and Individual Company Data ...... 16 C. The Proposed Ratemaking Methodology Lacks Support for the Exclusion of High Cost Facilities ...... 19 D. Lack of Basis for the Proposed Cost Data Adjustments ...... 20 1. The Proposed Goodwill Adjustment is Not Justified ...... 21 2. Securus’ Costs Were Accurately Reported in Response to the MDC, but the Company is Prepared to Review the Data in Detail with the Commission to Ensure Clarity and Consistency ...... 23 E. Site Commissions ...... 25 1. Site Commissions Must Be Addressed in the Costs of Providing ICS ...... 26 2. The Proposed $0.02 Per Minute Allowance for Facility Costs is Without Basis ...... 31 3. The FCC Should Consider Allowing a Direct Pass-Through of Site Commissions... 34 III. OTHER ISSUES IDENTIFIED IN THE FNPRM 35 A. Application of Interstate Rate Caps and Enforcement Advisory (DA 20-1364) ...... 35 B. Securus Agrees with Uniform Caps for Prepaid/Debit and Collect Calls ...... 39 C. Different Caps for Prisons and Jails Are Appropriate ...... 40 D. Allocation of Indirect Costs ...... 40 E. Rate Ceilings Should Allow Reasonably Efficient Providers to Cover Their Total Costs ...... 41 F. Rate Ceilings Should Not Be Used to Address Ancillary Fee Revenues ...... 42 G. The Cost-Benefit Analysis is Incomplete ...... 43 H. International Rate Ceilings ...... 45 REDACTED – FOR PUBLIC INSPECTION

I. Securus Encourages Updates to Reflect Marketplace Developments and to Allow for Greater Innovation ...... 47 IV. CONCLUSION 49

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EXECUTIVE SUMMARY

Under the direction of new ownership and new leadership, Securus Technologies has launched an expansive and holistic transformation to make its products more accountable, affordable and accessible to help drive better outcomes for all stakeholders, and to embrace reasonable, responsible regulation rather than oppose it. Securus is committed to working collaboratively with the Commission and other stakeholders to ensure that all rates for calling services provided to incarcerated individuals (“Incarcerated Calling Services” or “ICS”) are just and reasonable. Over the last three years average consumer pricing for a minute of calling time with Securus has been reduced by more than 30% and in 2020, more than 50% of all calls on the Securus network cost consumers less than $1.00.

In the spirit of collaboration and transparency, Securus is submitting a detailed study of its

ICS costs, commissioned from an independent third party (the “Cost Study”). We trust that the

Cost Study and the methodologies therein will be helpful to the Commission in conducting a fair and balanced ratemaking process.

ICS is an inherently different service to provide than traditional consumer outbound calling services due to myriad factors explained below. So as to ensure no consumer communities are left with degraded or lower quality services, end user rates for ICS must be sufficient for providers to recover the costs of service, including site commissions, with a reasonable return on capital, while maintaining standards of affordability for consumers.

We support the Commission’s effort to appropriately undertake ratemaking proceedings based upon thorough consideration of relevant cost data, analyzed with an understanding of the complexity of the ICS market. We appreciate the Commission’s efforts to collect market data, and we are concerned that the data collected from various providers are not sufficiently comparable or

- iii - REDACTED – FOR PUBLIC INSPECTION verifiable to effectively evaluate cost structure. The statistical methods used to analyze data appear to be unsound in several respects. We also demonstrate in our attached analysis that a one-size- fits-all rate for interstate calls originating from different sized county and city jails does not sufficiently account for the markedly different costs of serving large facilities vs. small facilities. Con- sequently, we believe that the new interstate rate caps proposed in the FNPRM may be insufficient to permit providers to recover all reasonable costs, especially in jail facilities.

Alongside the cost data, we believe it is vitally important for the Commission to address the impact of site commissions, which are fees mandated by corrections agencies, built into the price of a phone call and collected from consumers by the ICS providers, and then passed back to the agency customers. We are not asking the Commission to pass judgment on them, but only to acknowledge their existence and address them in the calculation of costs subject to the FNPRM.

Securus does not benefit from nor have any say in whether site commissions are imposed by corrections agencies. As long as site commissions exist, they must be fully acknowledged – either within the rate ceilings or as an add-on cost of service. The failure to allow for recovery of costs that are necessarily incurred as a condition of providing service would be contrary to the guidance provided by the D.C. Circuit Court of Appeals in its review of the previous ICS rulemaking.

We encourage the Commission to consider the variety of functionalities offered by ICS providers, as well as the diversity of correctional policies that are closely intertwined with both the delivery and the pricing of ICS, in considering rate caps.

Securus also supports the Commission’s proposal to cap international rates, but proposes a technical change to the method of determining the cap to make it more practical to administer.

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As it relates to last week’s Enforcement Advisory, the question here is not simply the application of new guidance on jurisdictional determination being applied more broadly or a procedural question about addressing new regulation. The expansion of a new jurisdictional standard to calling rate caps will have a substantive, meaningful impact to provider costs and agency receipts that requires a more robust collection and analysis of data, as well as a more sufficient implementation period to renegotiate thousands of existing contracts. The change will directly impact state and local authorities, particularly those which rely upon the collection of commissions from consumer pricing structures, and they will need an opportunity to reconfigure their operations. The

Commission may also want to evaluate potential implications to state legislatures and public utility commissions which could see lower tax revenue than expected. The FNPRM before us today provides a valuable opportunity to collect and review practical cost impacts as part of that process, and we hope the Commission will take the opportunity to address it within this rulemaking.

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Before the FEDERAL COMMUNICATIONS COMMISSION Washington, DC 20554

In the Matter of WC Docket No. 12-375 Rates for Interstate Inmate Calling Services

COMMENTS OF SECURUS TECHNOLOGIES, LLC

Securus Technologies, LLC (“Securus”), by its undersigned counsel, submits these comments in response to the Fourth Further Notice of Proposed Rulemaking (“FNPRM”) published by the Commission in this docket on August 7, 2020.1

I. INTRODUCTION

A. Embracing Regulation and Reform

The social, economic and emotional value of improving communications between incarcerated individuals and their loved ones has been well documented. Under the direction of new ownership and new leadership, Securus has launched an expansive and holistic transformation to make its products more accountable, affordable and accessible; to help drive better outcomes for all stakeholders; and to embrace reasonable, responsible regulation rather than oppose it. Securus is committed to working collaboratively with the Commission and other stakeholders to ensure

1 Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Report and Order on Remand and Notice of Proposed Rulemaking, FCC 20-111, 35 FCC Rcd 8485 (released August 7, 2020) (“Remand Order” or “FNPRM”). REDACTED – FOR PUBLIC INSPECTION

that all rates for calling services provided to incarcerated individuals (“Incarcerated Calling Ser- vices” or “ICS”) are just and reasonable. We support the Commission in its pursuit of responsible regulation to meet these goals.

We trust that the tone and substance of this filing convey our willingness to work cooper- atively on these matters, both in areas where we agree and in other areas where we disagree or believe more work is needed to reach a proper conclusion.

In that same spirit, we are submitting a detailed study of our costs, commissioned from an independent third party (the “Cost Study,” Attachment B hereto). We trust that the Cost Study and the methodologies therein will be helpful to the Commission in conducting a fair and balanced ratemaking process.

This Commission has clear authority to determine “just and reasonable rates” for interstate and international communications services, 47 U.S.C. § 201. We support the Commission’s effort to identify appropriate rate caps based upon thorough consideration of relevant cost data, analyzed with an understanding of the complexity of the current ICS market.

Any ratemaking process should be rationally based on relevant data, including consideration of all aspects of the service being regulated. While we appreciate the Commission’s efforts to collect market data, we are concerned that the Commission has not received from all providers adequate data in the comparable sets necessary to appropriately evaluate cost structure. Conse- quently, we believe that the new interstate rate caps proposed in the FNPRM may be insufficient to permit providers to recover all reasonable costs,2 especially in jail facilities. We have provided

2 Section 276 of the 1996 Telecommunications Act mandates that all service providers be fairly compensated for each and every completed call.

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to the Commission in Attachment B what we consider to be a comprehensive view of our cost structure and encourage the Commission to consider similar data collection from other providers to address this issue.

For the avoidance of doubt, Securus derives no benefit from site commissions. For the purpose of this rulemaking, we are neither advocating a position on site commissions nor asking the Commission to pass judgment on them. Rather, we are asking the Commission to acknowledge their existence and address them in the calculation of costs subject to the FNPRM.

Shifting to market complexity, Securus is concerned that some of the proposals in the

FNPRM take a one-size-fits-all approach to an ICS market that is nuanced and multilayered. We encourage the Commission to consider the variety of functionalities offered by ICS providers, as well as the diversity of correctional policies that are closely intertwined with both the delivery and the pricing of ICS, in considering rate caps. We also demonstrate in our attached analysis that a one-size-fits-all rate for interstate calls originating from different sized county and city jails does not sufficiently account for the markedly different costs of serving large facilities vs. small facilities.

ICS is an inherently different service to provide than traditional consumer outbound calling services due to the extensive user verification and facility-specific security requirements of correctional facilities (e.g., costs associated with the logging, monitoring and retention of calls), facility-specific infrastructure installation requirements, a vast variety of facility sizes and unique

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requirements, and site commissions which are required by correctional agencies and are added on top of provider rates; all of which result in higher costs than those of traditional landline telephone carriers. So as to ensure no consumer communities are left with degraded or lower quality services, any end user rates for ICS must be sufficient for providers to recover the costs of service with a reasonable return on capital, while maintaining standards of affordability for consumers. As described further herein, we believe that the cost-of-service calculation should include site commissions (the fees imposed by corrections agencies, built into the price of a phone call, collected by the ICS provider and then passed through to the agency).

Rate ceilings that prevent providers from recovering all of their costs would impair, not enhance, connections between incarcerated individuals and their friends, families, attorneys, spir- itual advisers, and other outside contacts.

B. About Securus

Securus, a subsidiary of Aventiv Technologies LLC (“Aventiv”), headquartered in Carroll- ton, Texas, serves more than 1 million incarcerated individuals in thousands of correctional institutions across North America. For more than 30 years, Securus and its predecessor organizations have provided vital services that connect incarcerated individuals and their family and friends through easy to use calling options. The company has been criticized in the past regarding the accessibility and affordability of its products and services. Under new ownership and leadership,

Securus has acknowledged those criticisms and taken meaningful steps to raise the quality and lower the price of its services, and to work collaboratively with corrections agencies and federal and state regulators to provide more services at lower price. Securus provides its services in compliance with applicable state and federal regulations, as well as the requirements of each correctional facility.

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Since March 13, 2020, when the President formally declared a state of national emergency for the COVID-19 pandemic, Securus worked with hundreds of its correctional facility partners to provide a variety of free programs, including free calls, free video connections, free electronic messaging, etc. This emergency program was developed to support re-entry efforts and to help incarcerated individuals stay connected with loved ones during this challenging time. To date,

Securus has provided:

 More than 31.3 million free call credits for incarcerated individuals and their families, resulting in nearly 245.6 million free minutes of phone connection time;  Approximately 5.6 million free video connections to friends and family of incarcerated individuals; and  More than 16.9 million free JPay Stamps for electronic messaging;  Over 178,000 free monthly subscriptions to Newsstand; and  Nearly 649,000 free game downloads.3

In addition to this ongoing assistance, Securus is offering compassion credits designed to accommodate incarcerated individuals who fall ill with COVID-19. Securus also is making free calls available to public defenders at many locations. This expanded assistance is in addition to the no-cost resources, including educational offerings, free eBooks, podcasts and other self-help tools that are always available free of charge. Securus also committed to the Commission’s Keep Amer- icans Connected Pledge in April 2020, and extended its commitment to the Pledge each time the

Commission made such a request. These efforts remain in place today, as the pandemic continues to impact visitation and operations at facilities nationwide.

3 See, e.g., Securus Technologies, Update: Securus Technologies Provides 50 Million Free Connections for Incarcerated Individuals During Pandemic, https://securustechnologies.tech/update-securus-technologies-provides-over-50-million-free-connections-for-incarcerated-individuals-during-pandemic/ (last accessed Nov. 16, 2020).

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Securus endeavors to reduce costs and provide more accessible communications to incarcerated individuals and their loved ones. In connection with the parent company, Aventiv, Securus launched a comprehensive initiative in 2020 that expanded and accelerated efforts to transform how the needs of correctional facilities and consumers are met. The transformation initiative focuses on five primary areas described further below: (1) access and affordability; (2) transparency;

(3) education, reentry and recidivism; (4) listening and responsiveness; and (5) technology and innovation.4

Access and Affordability: Since January 2020, Securus has eliminated third party single-call service providers, reduced fees by 35 percent and provided free communications valued at over $30 million. Securus renegotiated contracts with almost 100 correctional agencies to reduce call rates that had previously exceeded national averages, or included higher first minute rates,5 began offering commission-free and agency-paid options for telephone calls to existing and new institutions,6 and obtained reduced pricing on certain third party vendor contracts to reduce costs for consumers by more than 50 percent.7 Securus’ efforts to negotiate a new contract with a major county resulted in lowering the cost of phone calls by more than 60 percent for over 6,000 incarcerated individuals and their loved ones.8

Transparency: The company commissioned an annual report of ICS costs, to be produced and published by an independent third party, including a breakdown of

4 See Aventiv Technologies, Our Commitment, https://transformation.aventiv.com/our- commitment/ (last accessed Nov. 16, 2020). 5 See Securus Technologies, Investing in What Matters: Aventiv Technologies Dedicates Additional Resources Towards Expanding and Improving Relationships with Those That Mean the Most, https://securustechnologies.tech/investing-in-what-matters-aventiv-technologies-dedicates-additional-resources-towards-expanding-and-improving-relationships-with-those-that- mean-the-most/ (last accessed Nov. 16, 2020). 6 Id. 7 See Securus Technologies, Update: Securus Technologies Reports More Than 50 Percent Reduction in Fees for Third-Party Transactions on Calling Accounts, https://securustechnologies.tech/update-securus-technologies-reports-more-than-50-percent-reduction-in-fees-for-third- party-transactions-on-calling-accounts/ (last accessed Nov. 16, 2020). 8 See Aventiv Technologies, Access and Affordability, https://transformation.aventiv.com/our-commitment/access-and-affordability/ (last accessed Nov. 16, 2020).

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what is being charged beyond the specific cost of the call (e.g., additional costs necessary for the provision of safety protocols and service).9 We intend to file this study with the Commission as part of this docket. Securus is also working to make call rates more prominent and easier to understand on the company website.

Education, Reentry and Recidivism: The company has contributed a total of $3 million to efforts and organizations focused on reducing recidivism, including community groups like Freedom Rides, a nonprofit that helps formerly incarcerated individuals purchase cars to facilitate essential transportation to get to job interviews or doctor appointments, and Academy of Hope, a nonprofit with the goal of encouraging inmates to step away from a life of violence.

Listening and Responsiveness: In 2020, the company convened quarterly consumer forums with formerly incarcerated individuals and their families, to hear firsthand about their experiences and how to better serve them. We met with leaders and participants of job training and placement organizations operating inside and outside of correctional facilities to learn about employment best practices and help guide development of re-entry support.10

Technology and Innovation: Securus also has invested millions of dollars in new infrastructure and the development of new technology including further strength- ening cyber security measures for its products and services.11 As a result of Se- curus’ development and deployment of new technology to reduce reliance on third- party payment services, Securus has been able to eliminate certain fees and provide consumers with savings averaging 30 percent in the total cost of each call.12

As shown by the company’s annual reports to the Commission in this docket, Securus’ total ICS charges to consumers have declined by more than 30% on a per-minute basis over the

9 See Aventiv Technologies, Transparency, https://transformation.aventiv.com/our-commitment/transparency/ (last accessed Nov. 16, 2020). 10 See Aventiv Technologies, Listening and Responsiveness, https://transformation.aventiv.com/our-commitment/listening-and-responsiveness/ (last accessed Nov. 16, 2020). 11 See Securus Technologies, Investing in What Matters: Aventiv Technologies Dedicates Additional Resources Towards Expanding and Improving Relationships with Those That Mean the Most, https://securustechnologies.tech/investing-in-what-matters-aventiv-technologies-dedicates-additional-resources-towards-expanding-and-improving-relationships-with-those-that- mean-the-most/ (last accessed Sept. 29, 2020). 12 See Aventiv Technologies, Technology and Innovation, https://transformation.aventiv.com/our-commitment/technology-and-innovation/ (last accessed Nov. 16, 2020).

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last 3 years. In 2020, more than 50% of all calls on the Securus network cost consumers less than

$1.00 and 90% cost less than $4.00. Those cost reductions occurred during a time when the FCC’s rate ceiling for ICS remained unchanged.

C. About Inmate Calling Services

Telephone services made available to incarcerated individuals are implemented in cooper- ation with and according to the policies and requirements of the correctional and detention facilities in which they are housed. Each facility dictates a multitude of requirements related to ICS: for example, how many telephones to make available, when incarcerated persons can use them, how many calls and of what duration to permit, whether calls must be recorded (where legally permis- sible), who incarcerated individuals can call and which numbers must be blocked from calling for security purposes (e.g., witnesses, victims, judges, etc.), and what call records must be kept by the provider, among other things. An ICS provider cannot offer its service to incarcerated individuals until it has been awarded a contract, typically through an extensive Request for Proposals (“RFP”) process; has installed infrastructure at such facility (at the ICS provider’s cost); and has complied with all of the correctional facility specific requirements. Crucially, in addition to the other factors noted above, these contracts specify the price the provider will charge for its services, who is responsible for paying the charges, and the amount of any site commission owed to the facility.

Although ICS is often compared to voice services offered by traditional landline and mobile carriers, these services (and the way they are provided) are vastly different from traditional telephone offerings. Securus provides service to a correctional facility via dedicated connections from the correctional facility into Securus’ calling platform managed from its data center. Among other things not required for consumer-grade voice services, Securus’ services require: (1) dedi-

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cated, hardened phones with vandal-proof equipment, ongoing maintenance, replacement and ser- vicing thereof at no additional cost; (2) unique billing options; (3) admonishments to be played at the outset and termination of a call; (4) use of a Secure Call Platform;13 (5) support for administrative functions by the correctional facilities; and (6) online recording and monitoring of conver- sations (including recording and playback). Additionally, Securus provides a variety of optional services to facilities at the request and discretion of such correctional facilities to enhance security and facilitate enforcement of correctional policies.

Securus’ Secure Call Platform performs a number of functions that are critical to Securus’ ability to comply with the requirements of correctional facilities. There are at least 30 steps that the Platform must perform to process outbound calls. See Attachment A, Secure Call Platform

Outbound Call Processing Diagram. For example, the Secure Call Platform is used for managing

PINs assigned to incarcerated individuals that restrict access to approved numbers (including a system for matching PINs to individuals through use of voice biometric matching, verifying that the dialed number is on a Personal Allowed Number List, and determining whether the dialed number is to an attorney or clergy to ensure that recording is disabled). The Platform also determines the correct call routing, completes the call, and offers unique branding of voice messages for each facility blocking incoming calls. The Secure Call Platform also is used for monitoring of non-privileged ICS calls, including detection of three-way calling and remote call forwarding, enforcement of time limits, and fraud detection. The Platform also enables flagging of calls to specific numbers and calls from various cell blocks within a facility to the same number. Non-

13 See Securus Technologies, Telephone Service, https://securustechnologies.tech/corrections/communication/telephone-service/ (last accessed Nov. 16, 2020).

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privileged calls placed using Securus’ services can be monitored in real-time and recorded for playback using full time, dual channel recording. These security features help ensure public safety and protect incarcerated individuals from threats of physical and financial harm by other incarcerated individuals.

Although other ICS providers may not operate in precisely the same manner as Securus, and many do not offer the same range of security and enforcement features as Securus does, all of them face similar operational requirements.

II. THE DATA PROVIDED TO THE COMMISSION IS INCOMPLETE AND INCONSISTENT AND THEREFORE HAS PRODUCED RATE CAPS THAT ARE INSUFFICIENT TO COVER ALL REASONABLE COSTS

We appreciate the considerable effort the Commission has gone through to secure cost data from the industry, and we believe the data received to date has been inconsistent across providers.

In the spirit of transparency and collaboration, we have commissioned an independent third-party cost study as an illustrative view of what we believe can support a more thorough analysis. We welcome the opportunity to work with the Commission on this issue.

The FNPRM proposes to reduce the current interstate rate cap to $0.14 per minute for calls from prisons and $0.16 for calls from jails with no distinction among jails based on size, a critical cost factor of providing these services as shown in the submitted Cost Study. Although Securus’ rates have decreased dramatically in the last several years and many of our rates at large facilities are now less than the proposed caps, this is not true for all sites and the caps would not cover the cost of providing services at other facilities. For example, the proposed caps would not allow Se- curus to recover its costs at many jail facilities and at those facilities requiring higher investment in infrastructure and security due to their unique requirements. See, e.g., Attachment B, Cost Study,

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Figure 1. As pointed out by the U.S. Court of Appeals for the D.C. Circuit in its 2017 Order,14 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.15

The Commission states that its proposed rate caps are “based on our analyses of detailed cost data submitted by inmate calling services providers in their Second Mandatory Data Collec- tion responses.”16 Securus appreciates the difficulty of obtaining consistent and reliable cost data from a diverse group of fiercely competitive providers who also have a wide range of experience in producing regulatory-based cost analysis. As discussed below there are significant issues with the data submitted and with the Commission’s methodology in analyzing that data, consequently rendering the results unreliable.

Securus discusses below a more robust cost allocation methodology that, when used in conjunction with a more statistically sophisticated analysis of that data, should allow the Commis- sion to identify industry cost patterns more accurately and determine more reasonable rate ceilings.

Earlier this year we commissioned the detailed Cost Study from an independent third party that more fully provides insight and transparency into our cost to provide ICS. The Cost Study is provided under seal as Attachment B. We will work collaboratively with the Commission in the event it has questions about the details or methodology of the Cost Study.

A. Providers Did Not Report Their Costs Using a Consistent Methodology

Each of the twelve providers that responded to the Mandatory Data Collection (“MDC”) appears to have used a different methodology to report its costs which creates serious deficiencies

14 Global Tel*Link v. FCC, 866 F.3d 397, 414 (D.C. Cir. 2017) (“GTL”). 15 See Am. Pub. Commc’ns Council v. FCC, 215 F.3d 51, 54, 57–58 (D.C. Cir. 2000). 16 FNPRM, para. 71.

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in the analysis of that data to propose rate caps. The deficiencies must be overcome to validate the findings in support of an equitable ratemaking process.

As the Commission itself acknowledges, at least one provider appears to have “ignored” the MDC instructions to report direct costs for each contract, reporting only bad debts and site commissions as direct costs.17 Two other providers reported zero direct costs at all facilities they serve, and another provider reported all costs as direct, with zero indirect costs. For the remaining providers, direct costs appear to range anywhere from 13% to 86% of total costs.18

Those huge variations likely stem from the fact that the MDC instructions told providers to report their direct costs, but gave no guidance on how to do this apart from very generic one- sentence definitions of “direct costs” and “indirect costs.” It seems probable that every company used a different, undisclosed approach to measure its costs and divide them (if at all) between the

“direct” and “indirect” categories. Further, as the Commission itself observed, these methodologies very likely resulted in inconsistent allocation of common costs between ICS and other, non- regulated services offered by some of these providers.19

17 FNPRM, para. 95. 18 Attachment D, para. 14. This calculation is based on the staff’s compilation of MDC data, which excluded site commissions from both direct and indirect costs. Securus submits that site commissions are a direct cost of providing ICS, as discussed in Section II.E of these Comments, but uses staff’s computations in this section for purposes of consistency with the data presented in the FNPRM. 19 FNPRM, para. 96 (noting “the possibility that the company also failed to properly identify the direct costs of its non-inmate calling services operations. In that case, [this] method of identifying its indirect inmate calling services cost … almost certainly overstated its inmate calling services costs.”).

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Because companies were not required to, and did not, disclose how they ascertained their direct costs, nor (beyond a very general description) how they allocated indirect costs between regulated and non-regulated services, it is likely that each company’s measure of “costs” is unique to itself and inconsistent with that of every other company. Industry averages cannot be meaningful if the data on which they are based is not internally consistent.

There are other anomalies in the MDC dataset that indicate either data entry errors or failure to follow the instructions. For example, 90 out of 2,935 contracts (over 3%) reported an Average

Daily Population (“ADP”) of zero, which is impossible, and which renders any computations based on ADP entirely unreliable.20 One provider reported a contract with an ADP of one, but which generated over one million minutes of use in 2018. Another provider ({{ }}) reported that

{{ }} of its {{ }} contracts all had an ADP of exactly {{ }}, which seems improbable.21

Similarly, the average number of minutes per call (derived by dividing the “mou_ics_total” column by the “calls_total” column) shows 274 contracts (almost 10% of all contracts) supposedly averaged more than 30 minutes per call (and one as high as 3,512 minutes or nearly two and a half days). Since most facilities do not even permit calls to exceed 15 minutes, it is highly unlikely that the average call could be this long.22 This calls into question any statistics based on the dataset.23

20 These clearly are not merely rounding errors for facilities with very low ADPs, since some of these contracts report high numbers of calls and minutes of use. 21 Attachment D, para. 21. 22 Attachment D, para. 22. 23 All contracts with an average of over 30 minutes per call were reported by a single provider, or by a reseller of that provider.

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Two small providers reported costs that are so low as to raise questions about the data’s validity. {{ }} reported costs per minute around {{ }} for most of its facilities, which is significantly lower the overall average of $0.084. At the same time, {{ }} also reported costs of above {{ }} for several contracts, including one that is {{ }} per minute, which is the highest among all contracts in the dataset. Not quite as extreme, {{ }} reported costs per minute between {{ }} for most of its contracts, which is unlikely given that it is a relatively small provider.24

Given the inconsistencies in the data, a more rigorous analysis would seek to validate data and/or exclude outliers so as to substantiate computations derived from the analysis.25 The Cost

Study uses 1.5 times the interquartile range of the dataset as a metric for identifying outliers.

Finally, it appears that the MDC database used by the Commission staff is itself internally inconsistent. The database contains fields that represent the various ways of allocating indirect costs discussed in Appendix E.26 Because these fields represent different ways of allocating the same total indirect costs across contracts, the sum of each of these fields should be equal — but they are not. The sums range from a low of ${{ }} (indirect_costs_adp) to a high of

${{ }} (indirect_costs_revenues), a variance of nearly 20%.27 Further, since indirect

24 Attachment D, para. 20. 25 Staff did exclude one “outlier” from the dataset, based on ad hoc criteria, but apparently had no systematic process for identifying or excluding outliers. FNPRM, Appendix E, para. 3. 26 These are the “indirect_costs_adp”, “indirect_costs_calls”, “indirect_costs_contracts”, “in- direct_costs_facilities”, “indirect_costs_mou”, “indirect_costs_mou_half”, “indi- rect_costs_mou_none”, and “indirect_costs_revenues” fields. 27 The FCC produced four spreadsheets that are similar but reflect combinations of two adjustments that the FCC has proposed – reducing GTL’s costs by 10% and the elimination of Cen- turyLink’s subcontractor costs. These sums reflect the version that does not reduce GTL’s costs

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costs were reported on a per-company basis, the sums of these fields should be equal for all contracts held by each company, but this also is not the case. The field totals are unequal for all but three companies, including the two that reported zero indirect costs. Since the data files made available to parties by the Commission only included the results of staff’s computations and not the computation formulas, it is impossible for outside parties to identify the reasons for these data inconsistencies.28

Given these inherent flaws, the Commission should not rely on the MDC dataset as a basis for conclusions about costs or rates. To be most useful, a data collection should provide more specific instructions to each company on how to measure direct and indirect costs and should require each company to provide detailed work papers showing how it complied with these instructions. The Commission should require providers to follow a standard cost-causation modeling methodology to attribute costs to specific products and, where not possible, properly allocate those costs across the products in a cost-causative manner to the extent possible. 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. A detailed approach to cost attribution and allocation ensure that costs are properly reflective of size and scale of each facility.

and does not eliminate CenturyLink’s subcontractor costs, which the staff used for their calculations in Appendix E. 28 See Letter from Chérie R. Kiser and Angela F. Collins, Counsel to Global Tel*Link Corp., to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 (filed Oct. 19, 2020) (requesting “the workpapers and other documentation underlying the analysis and methodologies used by the FCC to reach the tentative conclusions in the FNPRM”); Letter from Kris Anne Monteith, Chief, Wireline Competition Bureau, FCC, to Chérie R. Kiser and Angela F. Collins, Counsel to Global Tel*Link Corp., WC Docket No. 12-375 (Nov. 13, 2020) (denying GTL’s request).

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To be absolutely clear, Securus is committed to full transparency about its costs and is prepared to work with the Commission and its staff not only to provide all necessary information but also to review it, explain it and answer any questions about it in an expedited fashion to avoid unnecessary delay in this rulemaking process.

B. The Results of the Staff’s Analysis Are Inconsistent with Provider Experience and Individual Company Data

Due in part to the above-described inconsistencies in the raw data, the results are incom- patible with the common experience of ICS providers and independent analysis of individual company data. In many cases, analyzing costs for each company individually leads to results that are completely different from the industry-wide averages.

The staff’s analysis relies heavily on computations of the “mean contract cost per minute,” which is not a meaningful measure. This statistic is generated by computing a cost per minute for each separate contract held by a company, then taking a simple average of these costs regardless of facility size or traffic volumes. To illustrate, consider a hypothetical company that has only two contracts:

Total Minutes of Cost per Contract Cost Use Minute A $400 2,000 $0.20 B $1800 18,000 $0.10 Total $2200 20,000 $0.11

In this example, the company’s average cost per minute is $0.11, but the “mean contract cost per minute” is $0.15, because contracts A and B are given equal weight in the average, even though contract B accounts for far more of the overall cost and usage. This simple average tends to present a distorted and inaccurate picture of any individual company’s costs, or of cost trends throughout

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the industry as a whole. In particular, the “mean contract cost per minute” tends to give excessive weight to outliers in the data.

The combination of unreliable data and a flawed averaging methodology led to some ques- tionable conclusions. For example, staff found that “facility size (measured by average daily population) … provided negligible predictive value [of cost].”29 This is counter-intuitive and runs contrary to the expectations on which the Commission based its ratemaking decision in 2015,30 and is also inconsistent with the actual experience reported by every ICS provider. When the data is analyzed on a company level, nearly every individual company’s data showed that cost decreases with increasing facility size (as expected). This relationship disappears only when the inconsistently-reported data of the different companies are averaged together:

29 FNPRM, para. 84. 30 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, 12792-96, paras. 58-64 (2015) (“2015 ICS Order”). 31 Width of bars represents relative number of contracts. See Attachment D, p. 22.

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The staff’s analysis also found the mean contract cost per minute for jails to be slightly lower than for prisons.32 This is contrary to industry experience and contrary to Securus’ independent cost analysis. Significantly, as the staff acknowledges, only six companies of the twelve responding to the MDC serve prisons, and one of those was a pure reseller of other companies’ services.33 Actually, {{ }} of the 131 prison contracts in the MDC dataset were served by only three companies, either directly or indirectly through resale. Because companies did not report costs consistently, any attempt to compare these three companies’ costs of serving prisons against all 12 companies’ costs of serving jails cannot be expected to produce meaningful results. In fact, every company that served both jails and prisons reported a lower average cost per minute at prisons than at jails, as shown below:34

{{

}}

32 FNPRM, Appendix E, Table 2. 33 FNPRM, Appendix E, Table 7. 34 Attachment D, p. 24.

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The clear conclusion from this data is that the cost of service at jails is significantly greater than at prisons, and that the industry-wide averages are thrown off by combining inconsistently reported data and using an invalid averaging metric.35 The Commission itself appears to recognize this distinction as it set a different cap for prisons and jails, a key step in the right direction.

The Commission’s analysis also is curious in that the cost per-minute and standard deviations vary significantly by provider, likely due to the differences in how providers reported direct versus indirect costs. This results in a standard deviation for the industry as a whole that is quite a bit higher than any provider on its own.

C. The Proposed Ratemaking Methodology Lacks Support for the Exclusion of High Cost Facilities

The FNPRM proposes to determine rate caps based on the mean of the contract cost per minute plus one standard deviation (plus an allowance for supposed correctional facility costs, which is discussed in Section II.E, below).36 There is no explanation of why the mean plus one standard deviation is an appropriate point at which to establish the rate cap. Securus is unaware of any economic or statistical literature supporting the idea that a price less than or equal to the mean plus one standard deviation is reasonable, while a greater price is unreasonable. There is no economic basis for supposing that prices in a competitive market would be constrained by this arbitrary cutoff point.

35 As noted earlier, one provider reported very little direct costs, so almost all of its contract- specific costs in the dataset represent the staff’s allocation of indirect costs. Because these costs were allocated on a per-minute basis, the resulting cost per minute is nearly identical for every contract. 36 FNPRM, paras. 83-84.

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If ICS contract costs were normally distributed (although in fact they are not), excluding contract costs above the mean plus one standard deviation would result in approximately one-sixth of the facilities having contracts for which the ICS provider cannot recover its costs. This outcome potentially could result in degraded or lower quality service to certain facilities. For all distributions, contract costs for some facilities would not be covered under such a rate cap. For the specific distribution of contract costs reviewed by the Commission, many contracts have costs above the mean plus one standard deviation threshold and thus would not be able to recover those costs under the proposed rate structure. For its final rate cap, the Commission should calculate how many facilities will have contract costs above rate caps and explain why they will not be fully compensated.

Additionally, cost and rate data reflect a much wider disparity based on facility ADP size, individual contractual requirements, usage patterns by type of facility, commissions required and services provided. These variances are effectively eliminated in an enterprise averaging of costs.

Therefore, if the Commission elected to establish rates based on average costs, in order to fully recover costs across all contracts, all minutes would be required to be rated at the average rates.

This means consumers paying below average rates would need to see their rates increased to the average, while consumers paying above average rates would see a decrease.

D. Lack of Basis for the Proposed Cost Data Adjustments

Because of the problems cited above with respect to the MDC, there is no basis for making any of the specific adjustments to the reported costs discussed in paragraphs 92-98 of the FNPRM.

The problems with the MDC data cannot be solved by making a few subjective adjustments, but require a completely refreshed approach to collecting cost information.

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1. The Proposed Goodwill Adjustment is Not Justified

The FNPRM proposes to resolve concerns about apparent overstatement of costs by one

ICS provider’s data by making an adjustment to that company’s indirect costs that the staff believes represents “expected market rents” embedded in the company’s goodwill account.37 It appears that this provider was an outlier in terms of how it reported its “direct” and “indirect” costs of service, as discussed above, but this is a consequence of inconsistency in provider reported cost data. It has no necessary relationship to the company’s past acquisitions or the goodwill asset carried on its books as a result.

Counsel for Securus asked Dr. Harold Furchtgott-Roth to review and to comment on the economic and historical concepts in the record of this docket. Dr. Furchtgott-Roth, who has a PhD in economics from Stanford University, has special expertise in telecommunications competition and regulation. He served as a member of the FCC under Presidents Clinton and Bush, and before that was chief economist for the U.S. House Committee on Commerce, where he was one of the principle staff members responsible for drafting the Telecommunications Act of 1996. As Dr.

Furchtgott-Roth explains in his report provided as Attachment C (the “Furchtgott-Roth Report”), the citations in the FNPRM regarding goodwill in rate regulation do not apply to ICS.38 First, the cited cable rate regulation order from 1996 was in response to a statute requiring the Commission to set “reasonable” rates for cable services where those services were not subject to “effective

37 FNPRM, paras. 92-97. 38 Attachment C, pp. 16-18.

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competition.”39 That standard (i.e., looking to the “reasonableness” of rates balanced between consumer interests and the need to ensure that rates are not confiscatory) is different from the requirement under Section 276 that providers be “fairly compensated for each and every completed intrastate and interstate call using their payphone.” Second, Illinois Bell Tel. Co. v. FCC does not address the concepts of “market power” or “goodwill” but instead discusses that the rate of return on a regulated entity is based on “embedded cost of debt and estimated cost of equity capital” while specifically referencing “credit” of the utility.40 Although the case involved proposed exclusions from the rate base, those exclusions were in connection with specific individual investments of the utility, rather than the entire utility (as the Commission is proposing here).41

The Commission also assumes, rather than tests, that goodwill is associated with market power.42 Goodwill is not a measure of economic rent, and there is no economic or financial foundation to exclude any portion of goodwill (or financing).43 As used in accounting, “goodwill” refers to the difference between the purchase price of an asset and its depreciated book value immediately before the purchase.44 In contrast, economic rent is a concept for a monopolist relative to its market position and is not a balance sheet concept.45 Goodwill is the norm, not the exception,

39 FNPRM, para. 92, n.224 (citing Implementation of Sections of the Cable Television Con- sumer 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)). 40 Id. (citing Illinois Bell Tel. Co. v. FCC, 911 F.2d 776 (D.C. Cir. 1990). 41 Attachment C, p. 18. 42 Id., p. 16-17. 43 Id., pp. 18-20. 44 Id., p. 19. 45 Id.

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on corporate balance sheets, and does not reflect market rents as described in the FNPRM (i.e.,

“the amount over and above what one could earn from disposing of the underlying assets separately at a fair market rate, rather than together in a whole as part of the ongoing business”46).47 As Dr.

Furchtgott-Roth explains, disposing of assets at a fair market value has no relationship to whether the underlying assets have goodwill or not, as goodwill may be present or absent in a fair market.

There also is no need to evaluate assets separately, as goodwill can exist in an “ongoing” business or a business that is not “ongoing,” and can be measured for the entire (or only parts of a) business.

Construing goodwill as synonymous with “market rent” also conflicts with the Commission’s telecommunications plant accounting regulations that do not associate these concepts and account for non-depreciated goodwill.48 Capital costs associated with an ICS contract are a substantial part of the cost structure that must be fully accounted for.

2. Securus’ Costs Were Accurately Reported in Response to the MDC, but the Company is Prepared to Review the Data in Detail with the Commission to Ensure Clarity and Consistency

As stated earlier in this filing, Securus is committed to full transparency about its costs and is prepared to work with the Commission and its staff not only to provide the necessary information but also to review it, explain it and answer any questions about it in an expedited fashion to avoid unnecessary delay in this rulemaking process.

We respectfully disagree with the suggestion in the FNPRM that “other providers, notably

Securus, may have also overstated their inmate calling services costs, although likely not to the

46 FNPRM, Appendix G, para. 3. 47 Attachment C, p. 19. 48 Id., p. 21-22.

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same degree as GTL.”49 The only explanation for that assertion is a footnote stating, “The mean contract per minute costs of Securus are nearly {{

}}.”50

The suggestion that Securus overstated its costs is incorrect. Securus provided complete and accurate data to the Commission, and as discussed previously, is committed to full transparency in its costs. In furtherance of that goal, we commissioned the Cost Study that we are filing in conjunction with this response. We are happy to answer any questions the Commission or its staff has regarding our cost data.

The perception of overstatement of costs may have been driven by the misleading “mean contract cost per minute” metric. Because Securus has a large number of contracts with relatively small facilities, the costs associated with those smaller contracts have a disproportionate weight in the staff’s calculation, and this provides a distorted view of Securus’ actual costs. Securus’ average cost per minute across all facilities, computed by dividing total non-commission costs51 by total paid minutes of use, is {{ }}, and is less than the average cost per minute across all providers in the MDC dataset. Further, Securus does not know how {{ }} computed its costs, and it is possible that its methodology was different in some ways that further distorts the comparison between the two.

As explained more fully in the Cost Study, approximately 77.4% of Securus’ ICS costs can be attributed at the product level and 53.8% at both the product level and facility level.52 This

49 FNPRM, para. 98. 50 Id., n.238. 51 See note 18 above. 52 See Attachment B, para. 35.

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analysis indicates clear cost differences for basic ICS services between smaller jails and larger jails and between jails and prisons, which after taking into account a standard deviation and site commissions results in costs that exceed the Commission’s proposed rates in most cases.

E. Site Commissions

We remain committed to a collaborative process and encourage the Commission to work with providers and government agencies in the marketplace to reach a reasonable solution on site commissions. Securus does not benefit from nor have any say in whether site commissions are imposed by corrections agencies. As long as site commissions exist, they must be fully acknowledged – either within the rate ceilings or as an add-on cost of service.

For the purpose of this rulemaking, we are neither advocating a position on site commissions nor asking the Commission to pass judgment on them. Rather, we are asking the Commission to acknowledge their existence and address them in the calculation of costs subject to the FNPRM.

The FNPRM as drafted does not consider site commission payments as part of the “cost” of ICS to be recovered through interstate rates, except for an allowance of $0.02 per minute for “reasonable” correctional facility costs.53 This approach confuses the costs incurred by correctional facilities with the costs that must be collected by ICS providers, which must include site commissions.

To the extent site commissions exist, whether at $0.02 per minute or at contracted levels, they should be included in the “cost” side of the equation in calculating any rate caps.

With respect to the proposed allowance of $0.02 per minute for commissions: Because ICS contracts are individually constructed based on the unique needs of facilities, agencies elect to receive varying levels of commissions. As noted above, Securus does not benefit from nor have

53 FNPRM, para. 99.

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any say in whether site commissions are imposed by corrections agencies. But these commissions are a contractual obligation in many existing contracts today. As long as site commissions exist, they should be fully acknowledged either within the rate ceilings or as an add-on cost of service.

1. Site Commissions Must Be Addressed in the Costs of Providing ICS

As noted previously, site commissions are fees imposed by corrections agencies and added to the costs charged to ICS consumers. Securus and other ICS providers neither dictate nor retain these fees, which are instead passed through to the corrections agency, much like a sales tax that is levied by a governmental authority. The commission “tax” is collected via rates to end users and then directly and fully passed onto the appropriate governmental agencies. We are not asking the

Commission to pass judgment on the merits of site commissions, but only to acknowledge and deal with their existence, and to fully allow the recovery of all site commissions in providers’ costs.

The FNPRM correctly notes that many, but not all, correctional facilities require ICS providers to pay commissions, usually based on revenues, as a condition of offering their services to persons incarcerated in those facilities.54 It then asserts that these payments “compensate correctional facilities for the costs they reasonably incur in the provision of inmate calling services, and

… for the transfer of their market power over inmate calling services to the … services provider.”55

That analysis fails to recognize both the competitive nature and the financial realities of the ICS business. Even assuming for the sake of argument that some portion of site commissions is attributable to facilities’ market power, that does not mean that providers exercise market power or

54 FNPRM, para. 100. 55 Id.

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that it is unreasonable for providers to pay these amounts to facilities. Each contract is based on independent economics, due to the unique requirements of each correctional facility, including the services provided, call rates and commissions.

In his report, Dr. Furchtgott-Roth explains the highly competitive nature of the ICS industry and recognition by courts that bidding for ICS contracts is competitive. The fact that ICS providers have contracts with correctional agencies and facilities, and some of these contracts are long-term, does not have a bearing on the competitive nature of the ICS market. While correctional facilities generally choose a single ICS provider for each facility, competition for ICS contracts to serve correctional facilities appears to be universal and there are no barriers to any interested party submitting bids for ICS. Although site commissions may be a component of the bidding process, those are benefits not for the ICS providers (i.e., bidders), but required by the prison or jail governmental agencies. There is no evidence that bidding processes that result in higher ICS rates are the result of market power or anticompetitive bidding, and higher rates are more likely to be a result of higher cost than market power.56 As evidence, we provide a chart in Section III.G of these comments depicting how rates have materially been reduced over the past 5 years. Although site commissions may be a component of the bidding process, those are neither benefits for, nor determined by the ICS provider (i.e., bidders), but required components requested by and on behalf of the prison or jail governmental agency.

56 Attachment C, p. 12.

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In California, for example, although the state prison system is not permitted to receive commission payments,57 site commissions remain a legal and often-used feature of ICS rates at county facilities. California Penal Code § 4025(d) specifically allows sheriffs to receive commission payments from telephone service providers relating to “the use of pay telephones which are primarily used by inmates while incarcerated” and to deposit these amounts in the inmate welfare fund.

On September 30, 2020, California Governor, Gavin Newsom vetoed SB 555 which sought to, amongst other items, end the use of site commissions in telephone and communications services contracts. Despite his “strong support for the goals of [the] bill”, Governor Newsom expressed concern the bill as drafted “will have the unintended consequence of reducing important rehabili- tative and educational programming for individuals in custody”58 funded by those commissions.

Governor Newsom also expressed his “commit[ment] to working with the Legislature and stakeholders to address this issue in the next legislative session in a manner that mitigates impacts on programming.”59

Additionally, the D.C. Circuit in GTL remanded further consideration of site commissions, including “which portions of site commissions might be directly related to the provision of ICS

57 See SB 81 (2007) (phasing out “state concession fees” in contracts to “provide telephone services to wards and inmates in state facilities” by 2010-2011, and reducing rates in response to reductions in concession fees), available at: http://leginfo.legislature.ca.gov/faces/billTextCli- ent.xhtml?bill_id=200720080SB81. 58 See SB 555, available at: https://leginfo.legislature.ca.gov/faces/billTextCli- ent.xhtml?bill_id=201920200SB555. 59 Id.

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and therefore legitimate, and which are not.”60 The D.C. Circuit correctly found that “it does not matter that the states may use the commissions for purposes unrelated to the activities of correctional facilities. The ICS 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.”61 The court quoted with approval the petitioners’ argument that “[i]f agreeing to pay site commissions is a condition precedent to ICS providers offering their services, those commissions are `related to the provision of

ICS.’”62 If site commissions are directly related to the provision of ICS then prohibiting ICS providers from recovering these costs would be without merit. Because ICS providers are required to pay site commissions and have no say in the elimination or substantial reduction of such commissions, ICS providers must be compensated for the full cost of site commissions.

Further, it is not unusual for telecommunications providers to be required to pay a third party as a condition of access to some resource that is essential to serving consumers. For example, many carriers have to pay public and private landowners for access to rights-of-way; in some cases, carriers cannot offer a particular service unless they pay a license fee to a patent holder.

The FCC has considered similar requirements imposed by state and local entities for providers to pay “external” costs and whether such costs can be recovered from consumers. Similar to cable franchise fees, site commissions often are based on a percentage of revenues generated from the provision of ICS. The FCC found that negotiable payments made to a government for the

60 GTL, 866 F.3d at 414. 61 GTL, 866 F.3d at 413. 62 GTL, 866 F.3d at 413.

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privilege of selling cable television service are “external costs” that are recoverable from consumers even where those fees are incurred based on revenues not directly related to the provision of cable television services (e.g., franchise fees based on income generated by advertising sales and home shopping commissions).63

While individual communities may choose to eliminate site commissions associated with particular correctional facility or department contracts, the FCC cannot “assume[] away the problem of the uneconomical contracts to which [providers] are presently bound.”64 Nor can the FCC assume without evidence that ICS providers are able to renegotiate their contracts in a way that reduces the burden of site commissions.65 As part of Securus’ transformation agenda, it has made commission-free offers a standard offering and attempted to renegotiate contracts with many of its correctional facility partners. It is ultimately up to the correctional facilities, not the ICS providers, to allow lower commissions and thereby lower rates. Failure to permit ICS providers to charge rates sufficient to recover costs incurred due to site commissions would be “arbitrary and capricious”.66

63 See, e.g., Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992, First Order on Reconsideration, Second Report and Order, and Third Notice of Proposed Rulemaking, 9 FCC Rcd 1164, para. 89 (1993); Memorandum Opinion and Order, City of Pasadena, California, City of Nashville, Tennessee, and City of Virginia Beach, Virginia, 16 FCC Rcd 18192, para. 14 (2001) (noting that cable television rates subject to rate regulation are calculated initially without franchise fees included, but that franchise fees are added on as an “external cost” to providers). 64 Associated Gas Distribs. v. FERC, 824 F.2d 981, 1024 (D.C. Cir. 1987). 65 See id. (noting that the Federal Energy Regulatory Commission “seems to confuse … incentives to renegotiate [uneconomical] contracts with [an] ability to do so”) (emphasis in original). 66 See GTL, 866 F.3d at 412-14 (concluding that categorical exclusion of site commissions from the ratemaking calculus is arbitrary and capricious).

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Finally, setting rate caps at a level that is insufficient to allow providers to fully recover commission payments that they are contractually obligated to make to facilities would indeed raise serious issues under the Takings Clause.67 A takings analysis would depend on whether the total amount of revenue that a provider could receive under the proposed caps would be sufficient to cover the total cost of operating the business, including a reasonable return on investment.68 Thus, the takings issue depends on more than just the amount of site commissions, but excluding a significant category of costs from the calculation of the rate ceilings would greatly increase the prob- ability of an unconstitutional outcome.69

2. The Proposed $0.02 Per Minute Allowance for Facility Costs is Without Basis

Even if it was appropriate for the Commission to limit providers’ rates based on an estimate of a third party’s (the facility’s) reasonable costs, the method the FNPRM proposes to use to estimate these costs is without basis. The FNPRM states, “The $0.02 per minute that we propose reflects our analysis of the costs that correctional facilities incur that are directly related to providing inmate calling services and that the facilities recover from inmate calling services providers as reflected by comparing provider cost data for facilities with and without site commission requirements.”70 In other words, the Commission tries to infer the facilities’ cost structures by analyzing

67 FNPRM, para. 105. 68 See FPC v. Hope Natural Gas Co., 320 U.S. 591 (1944). 69 See Attachment B, Figure 8, Basic ICS Cost Averages by ADP Group. 70 FNPRM, para. 103 (emphasis supplied).

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the providers’ reported costs, which on its face doesn’t work. There is no inherent reason to sup- pose that the non-commission costs of serving a particular facility would vary depending on costs incurred by the facility operator rather than by the service provider.

Securus has not analyzed the costs that correctional facilities incur directly related to ICS, and to our knowledge, no such data is in the record. However, if the Commission determines that

$0.02 is in fact the correct amount that is attributable to facility costs and thereby commissions, it would then need to cap the maximum commission allowance at $0.02 per minute in any rate cap, or rate cap adder, and treat these commissions as a cost for providers to recover. Otherwise, ICS providers will not be able to fully recover their costs, if higher commissions are required to be paid pursuant to contracts with correctional facilities.

The staff’s methodology assumes that “higher per-minute costs for contracts without site commissions reflect, at least in part, give-and-take negotiations in which inmate calling services providers agree to incur additional inmate calling services-related costs in exchange for not having to pay site commissions.”71 It therefore compares the mean contract cost per minute (which, as already discussed, is a skewed and misleading statistic) with and without site commissions. One problem with this approach is that it fails to consider whether any characteristics other than facility costs might affect whether a particular contract pays a site commission. For example, New Jersey and New Mexico state laws prohibit facilities in those states from receiving commissions.72 On the other hand, Texas law requires that the state prison system receive a commission of 40 percent

71 FNPRM, Appendix H, para. 2. 72 See N.J. Stat. Ann. § 30:4-8.12(2)(b); N.M. Stat. Ann. § 33-14-1 (“A contract to provide inmates with access to telecommunications services in a correctional facility or jail shall not include a commission.”).

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of ICS revenues.73 The approach taken here assumes that any difference in the cost of serving facilities in these states reflects “give-and-take negotiations” that, as a factual matter, cannot have happened.74

The analysis is further flawed because the FCC pools the data among all providers in its commission analysis in Appendix H. In fact, a closer examination of the data at the provider level indicates that, if anything, contracts without site commissions have lower costs. For six out of ten jail providers in the FCC’s analysis, contracts without site commissions have lower average costs per minute than those with commissions. For four out of five prison providers, contacts without site commissions have lower average costs per minute than those with commissions. It is the mix of contracts by provider that drives an overall higher cost per minute for contracts without site commissions, not some underlying cost relationship as the FCC inferred.

More broadly, the analysis in Appendix H doesn’t consider the reality of how ICS contracts are negotiated and awarded. Much like call rates, a “one-size-fits-all” allowance for site commissions does not apply to the varying needs of each agency for site commissions. As detailed in the

Cost Study, commissions in large part are impacted by facility size and differ between county jail facilities and prisons.75 In fact, commissions actually increase up to the largest county ADP sizes and then drop off dramatically when comparing jails to prisons. This is due in part because com-

73 See Tex. Govt. Code Ann. § 495.027. 74 Further, the analysis in Appendix H appears to assume that if a facility does not receive site commissions, it incurs no costs related to the provision of ICS. There is no factual basis underlying such an assumption. See Attachment C, p. 23. 75 See Attachment B, Figure 8, Basic ICS Cost Averages by ADP Group.

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missions are a source of funds (allowed by state law). Material differences exist in types of facilities using ICS which directly impact their need or reliance on commissions. County jail facilities generally have lower populations and call volumes than prisons. They usually have higher calling rates, with larger commissions that contribute to county general funds, inmate welfare funds, or both. On the other hand, prisons are typically more fully funded by larger state budgets, and with larger call volume and have less dependence on commissions, which results in lower rates.

The assumptions underlying the proposed $0.02 allowance, therefore, are fatally flawed and cannot serve as a rational basis for ratemaking.

3. The FCC Should Consider Allowing a Direct Pass-Through of Site Commissions

While we feel it is important for the Commission to address site commissions, we appreciate that there are multiple approaches to the issue and make an additional suggestion for consideration here.

Currently, ICS providers collect site commissions through the rates they charge for calls originating from those facilities that require payment of commissions and then directly pass on the site commissions collected to such facilities. Since rates are set separately for each contract, this allows rates to be set at a level that covers the commission payments required at each specific facility as well as the other costs of serving consumers at that facility. At facilities without commissions, or with lower-than-average commissions, providers often charge rates that are well below the current interstate rate ceilings. That approach only works as long as the rate ceilings are sufficient to allow recovery of site commissions where they exist. Imposing a uniform rate ceiling based on the average cost would essentially force providers to price at the ceiling for all minutes.

In other words, if a rate ceiling were set at a level exactly equal to the average cost of service

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including commissions, ICS providers would have to charge the ceiling rate at all facilities to recover their total costs. That would mean that current rates below the ceiling would have to be increased to the ceiling in order to fully recover costs.

The Commission should consider allowing ICS providers to treat site commission costs as a direct pass-through, separate and distinct from the provider base rate. In this case, the provider would have to state its base price without commission, plus a surcharge to recover its commission payments under a particular contract, with no markup. This would allow the Commission to set a lower rate ceiling based on non-commission costs, and would increase public transparency of ICS provider costs.

III. OTHER ISSUES IDENTIFIED IN THE FNPRM

The FNPRM invites comments on a number of specific issues other than the proposed interstate rate ceilings. Securus responds to various of these issues in the following subsections.

A. Application of Interstate Rate Caps and Enforcement Advisory (DA 20-1364)

Securus supports the efforts of the Commission to ensure that incarcerated individuals and their loved ones have affordable and reasonable access to calling services, and believes that the regulations around calling jurisdiction and pricing could be modernized to keep up with changes in the practical applications of telecommunications today. For example, as reflected in Section

III.B below, we support the proposed elimination of pricing distinctions between collect calls and prepaid/debit calls because the distinction no longer adds value to consumers nor drives meaningful cost implications for providers. It is also why we accepted the practical expansion of the Com- mission’s jurisdiction in the application of ancillary fee caps over all calls where a provider cannot definitively identify the call as intrastate and intend to apply the ancillary fee caps to all calls on our system when that regulation takes effect today.

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The Enforcement Advisory (DA 20-1364) released on Friday, November 20, suggests for the first time, however, the Commission’s intent to apply this novel “definitively identify” standard in other areas of ICS, including to the existing interim interstate rate caps currently under review.

The Enforcement Advisory states, “If an ICS provider cannot definitively establish that a domestic call is intrastate, the ICS provider shall charge no more than the applicable interstate rate cap for that call.”76 A footnote to this sentence cites the Remand Order, para. 53.77 As noted below, though, paragraph 53 of the Remand Order specifically discussed jurisdiction in the context of the Com- mission’s ancillary charge rules, and made no mention of the existing interim rate caps.78 We support the expansion as it relates to ancillary fees because today the costs incurred by providers, intended to be recovered through ancillary fees, are not meaningfully different between interstate and intrastate activity. However, there remain myriad drivers of the broader cost base required to operate a calling platform – including commissions – and rates should be determined as a result of a thorough ratemaking process. Further, paragraph 70 in the FNPRM section of the document also did not mention the existing caps, and only “propose[d]” to apply this jurisdictional standard to any rate ceilings adopted in this pending proceeding. Nothing in the Remand Order gave the industry notice that the Commission intended to apply this jurisdictional principle retroactively to the existing interim rate caps.

The FNPRM proposes that interstate rate caps “would apply to all calls that a provider identifies as interstate and to calls that the provider cannot definitively identify as intrastate.”79 As

76 DA 20-1364, p. 2. 77 Id., n.8. 78 See note 81, infra. 79 FNPRM, para. 70.

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a practical matter, ICS providers cannot “definitively identify” the jurisdiction of every call based on the guidance provided in paragraph 53 of the Remand Order. Securus, like other ICS providers, relies on third parties that provide it with termination services to report the jurisdiction of calls, but these third parties do not have the information needed to apply the end-to-end analysis mandated by the Remand Order. Rather, these parties, like local exchange carriers and mobile carriers, have consistently used telephone numbers or, since the introduction of local number portability, the Local Routing Number (LRN), as a proxy for determining call jurisdiction. The Commission has repeatedly endorsed the use of these proxies for call rating and billing purposes, as well as to determine intercarrier compensation and to jurisdictionalize revenues for reporting purposes.80

80 See, e.g., Misuse of Internet Protocol (IP) Captioned Telephone Service, et al., 33 FCC Rcd 5800, ¶ 108 (2018) (recognizing that IP CTS providers use originating and terminating telephone numbers for jurisdictional allocations of IP CTS minutes, and asking for comment on other types of proxy allocations that could be used); Connect America Fund, et al., 26 FCC Rcd 4554, n.1099 (2011) (“wireline carriers often determine whether a phone call is local or toll by comparing the rating points associated with the originating and terminating NXX codes.”); High-Cost Uni- versal Service Support, et al., 24 FCC Rcd 6475, ¶ 327 (2008) (allowing use of “a proxy for the caller’s location” to determine jurisdiction); Developing a Unified Intercarrier Compensation Re- gime, 20 FCC Rcd 4685, ¶ 141 (2005) (“It is standard industry practice for telecommunications carriers to compare the NPA/NXX codes of the calling and called party to determine the proper rating of a call.”); Petition of WorldCom, Inc. Pursuant to Section 252(e)(5) of the Communica- tions Act for Preemption of the Jurisdiction of the Virginia State Corporation Commission Re- garding Interconnection Disputes with Verizon Virginia Inc., and for Expedited Arbitration, 17 FCC Rcd 27039, ¶ 301 (2002) (“We agree with the petitioners that Verizon has offered no viable alternative to the current system, under which carriers rate calls by comparing the originating and terminating NPA-NXX codes. … Verizon concedes that NPA-NXX rating is the established compensation mechanism not only for itself, but industry-wide. The parties all agree that rating calls by their geographical starting and ending points raises billing and technical issues that have no concrete, workable solutions at this time.”).

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However, the Remand Order expressly rejected the use of such proxies for determining call jurisdiction with respect to the applicability of the Commission’s ancillary charge rules.81 Therefore, since Securus can no longer rely on the jurisdictional information provided to it by its terminating service providers, the practical effect of the Commission’s proposal in paragraph 70 would be that

Securus would be required to apply the FCC interstate rate caps to all domestic calls.82

The question here is not simply the application of new guidance on jurisdictional determination being applied more broadly or a procedural question about addressing new regulation. The expansion of a new jurisdictional standard to calling rate caps will have a substantive, meaningful impact to provider costs and agency receipts that requires a more robust collection and analysis of data, as well as a more sufficient implementation period to renegotiate thousands of existing contracts. The change will directly impact state and local authorities, particularly those which rely upon the collection of commissions from consumer pricing structures, and they will need an opportunity to reconfigure their operations. The Commission may also want to evaluate potential implications to state legislatures and public utility commissions which could see lower tax revenue

81 Remand Order, para. 53 (“As such …, to the extent an inmate calling services provider cannot definitively establish the jurisdiction of a call, it may and should treat the call as jurisdictionally mixed and thus subject to our ancillary service charge rules.”) (emphasis supplied). 82 It is impracticable – if not impossible – for any carrier to “definitively identify” the jurisdiction of each call it handles unless the caller and call recipient both are customers of the same carrier (i.e., unless the call is an “on-net” call). Even wireless carriers that have access to location data generally only have location information for one side of the call (e.g., the origination point or termination point), except for on-net calls. Holding ICS providers (or any other category of provider) to a standard that they must “definitively identify” interstate or intrastate jurisdiction or else treat the call as being subject to interstate jurisdiction, without providing any practical guidance for carriers to do so in light of practical marketplace realities, will have dramatic impacts on intrastate regulation and on jurisdictional revenues available to state public utility commissions to assess for their public policy objectives.

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than expected. The FNPRM before us today provides a valuable opportunity to collect and review practical cost impacts as part of that process, and we hope the Commission will take the opportunity to address it within this rulemaking.

In the meantime, we encourage the Commission to clarify that the Enforcement Bureau’s

“advisory” concerning identification of jurisdiction applies only to ancillary charges under paragraph 53 of the Remand Order. It would be fundamentally unfair and inequitable to take enforcement action against ICS providers for “violating” a rate cap by billing a lawful intrastate rate on a call that was rated as intrastate by its terminating service provider using industry-standard call billing practices that have been in place for decades.83 We respectfully request that the Commission forbear from enforcing that advisory with respect to per-minute rates until the Commission enacts new rate caps at a level that will allow providers to fully recover all of their costs, including commissions, and receive a reasonable rate of return. Following such a proceeding we would anticipate sufficient time for providers and agencies to renegotiate the thousands of existing contracts to comply with any new regulations.

B. Securus Agrees with Uniform Caps for Prepaid/Debit and Collect Calls

Securus agrees with the proposal to eliminate the rate differential between prepaid/debit and collect calls.84 Historically, when collect calls were the norm, costs for collect calls were much higher, principally because of high bad debt (oftentimes, more than 20%). Today, given the decline

83 The Supreme Court has cautioned agencies against changing interpretations of rules in ways that would impose “new liability ... on individuals for past actions which were taken in good- faith reliance on [agency] pronouncements[.]” NLRB v. Bell Aerospace Co., 416 U.S. 267, 295 (1974); see also Christopher v. SmithKline Beecham Corp., 132 S. Ct. 2156, 2167 & n.15 (2012) (declining to defer to agency interpretation of regulation that would “impose potentially massive liability on respondent for conduct that occurred well before that interpretation was announced”). 84 FNPRM, para. 72.

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in volume of traditional collect calling, and growth in use of cell phones and thus prepaid calling, there is no significant cost difference between these types of calls.

C. Different Caps for Prisons and Jails Are Appropriate

The principle of allowing a higher rate ceiling for jails than for prisons is consistent with

Securus’ internal cost data as discussed in the submitted Cost Study.

One of the key components to cost differential is size of facility and length of stay. Securus’ independent cost analysis demonstrates that jails are more expensive to serve than prisons, and that small jails are more expensive to serve than large jails. Securus’ Cost Study shows a strong and consistent relationship between cost and facility size.85

We support the Commission’s proposal to establish separate rate ceilings for prisons and jails, and believe the rate ceilings for jails should also be further tiered by facility size to adequately address the distinctions. The size categories adopted in the 2015 ICS Order (that is, 0-349 ADP,

350-999 ADP, and 1,000 or greater ADP) appear to be reasonable, although other methods of categorization could be considered.86 The Cost Study clearly shows a distinct and different cost for jail facilities by ADP size (0–349; 350–999; and 1,000 or greater).87

D. Allocation of Indirect Costs

The FNPRM proposes to allocate indirect costs on the basis of minutes of use, and seeks comments on this approach.88 The justification for this proposal in Appendix E is circular. The

85 See Attachment B, Figure 8, Basic ICS Cost Averages by ADP Group. 86 FNPRM, paras. 74-75, 84. 87 See Attachment B, pp. 17-19. 88 FNPRM, para. 88.

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staff tested various methods of allocating indirect costs, and selected the one that resulted in the least variation in total cost per minute.89 It 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 attributing most of their cost as indirect. For a provider that reported no direct costs, this would result in equal costs per minute for every contract held by that provider.

In its independent Cost Study, Securus divided indirect costs into two categories – shared costs, which are costs that contribute to a specific subset of services but cannot be uniquely assigned to any one of those services; and common costs, which are the general corporate overhead that supports all services and activities of the company.90 These costs were allocated to services based on the share of direct costs previously identified for each service.91 Securus’ cost consultants explain in their report why they find this method of allocation to be more appropriate than a per- minute allocation. As a practical matter, this allocation will produce similar results to a per-minute allocation as between facilities that offer the same collection of services, but not as between facilities that offer different levels of service.

E. Rate Ceilings Should Allow Reasonably Efficient Providers to Cover Their Total Costs

Securus shares the Commission’s goal of improving affordability and can only comment on its own cost basis.

89 FNPRM, Appendix E, paras. 10-16. 90 See Attachment B, pp. 10-11. 91 See Attachment B, pp. 10.

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The Commission asks for comment on “whether it would be appropriate to set rates based on the costs of the vast majority of providers (for example, all but the one or two providers with the highest average costs per minute), in order to incent providers with above average costs to be more efficient.”92 Relatedly, it asks whether data showing that rates at some prisons and jails are already below the proposed caps means that “our proposed interstate rate caps should be lowered even further notwithstanding the fact that our proposed rates reflect what the providers have most recently reported as their inmate calling services costs. Is this evidence that some providers have indeed reported costs in excess of their actual costs?”93

Section 276 of the 1996 Telecommunications Act requires the Commission to “establish a per call compensation plan to ensure that all payphone service providers are fairly compensated for each and every completed intrastate and interstate call.” It does not provide that rates are to be set “in order to incent providers with above average costs to be more efficient.”

Securus believes that the fact that some jails and prisons have rates below the proposed ceilings is evidence that competitive bidding by providers to offer services at those facilities has driven down costs and therefore prices.

F. Rate Ceilings Should Not Be Used to Address Ancillary Fee Revenues

The FNPRM asks how the Commission should take ancillary fee revenues into account in setting interstate rate caps.94 Securus suggests that the Commission should require providers to separately determine the costs associated with ancillary charges, as Securus has done in its own cost study. Costs related to the services for which ancillary charges apply should be recovered

92 FNPRM, para. 88. 93 FNPRM, para. 89. 94 FNPRM, para. 90.

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through those ancillary charges, not through per-minute calling charges. However, the rate ceilings for calling charges should be sufficient to allow providers to recover the total cost of that service, not reduced on account of revenues from other services.

G. The Cost-Benefit Analysis is Incomplete

The Commission proposes to conclude that the benefits of lowering its interstate rate ceilings will greatly outweigh the costs.95 The primary benefit the Commission foresees is “an increase in interstate inmate call volumes elicited by lowered rates,” which in turn is expected to yield secondary benefits in reduced recidivism.96 Securus agrees that making it easier for incarcerated individuals to stay in contact with friends and family is a benefit, not only for the individuals and the called parties, but also for the public at large, because these contacts do help improve morale and reduce recidivism as well as violence within facilities. The Commission’s projection of benefits omits a crucial analytical step, though, by failing to take into account 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.

Based upon providers’ responses to the Second MDC in this docket, it appears that average

ICS rates declined significantly between 2014 and 2018, the years covered by the data collection.

Securus was only able to obtain meaningful revenue data for six companies (including itself);97 all

95 FNPRM, paras. 116-121. 96 Id., para. 116. 97 Pursuant to the Protective Order in this docket, Securus requested copies of responses to the Second MDC from all ICS respondents. Seven of the 11 other respondents provided the requested information; the other four (ATN, CPC, PayTel, and Prodigy) did not respond at all to Securus’ request. Of the seven, one (GTL) only provided the response in paper form, and did not respond to a subsequent request for an electronic copy. Without an electronic copy, it was not feasible to calculate GTL’s average revenue per minute. Also, one company’s response (Crown)

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six of these companies reported lower average ICS revenue per paid minute in 2018 than they did in 2014:

Average ICS Revenue Per Minute (REDACTED)

2014 2015 2016 2017 2018

Company 1 Company 2 Company 3 Company 4 Company 5 Company 6

The Commission’s current interstate rate caps took effect early in 2014, and have remained unchanged since then, so they do not account for rate reductions in subsequent years. Rather, ongoing rate reductions are the result of competition among providers and the operation of market

did not provide minute-of-use data because it acted as a reseller of another respondent’s services, so it could not be included in the analysis. Since the MDC database made available by the Com- mission in this proceeding only included 2018 data, it could not be used to calculate rate changes over time.

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forces, including the interests of providers and their investors in reducing costs and stimulating revenue through additional usage.98

Likewise, the only cost of regulation that the Commission takes into account in its analysis is the one-time cost of compliance measures. It entirely ignores the ongoing efficiency costs of regulation. In other circumstances, the Commission has recognized that price regulation imposes efficiency losses that affect not only the providers of the regulated service, but also consumers and the economy as a whole.99

H. International Rate Ceilings

Securus does not oppose adoption of rate caps for international ICS in principle, and agrees that these caps should reflect the cost differential between interstate and international calls which is based on the charges imposed by international carriers.

98 Attachment C, pp. 10-12. 99 Business Data Services in an Internet Protocol Environment, Report and Order, 32 FCC Rcd 3459, paras. 125-129 (2016) (“BDS Order”); see also Petition of USTelecom for Forbearance Pursuant to 47 U.S.C. § 160(c) to Accelerate Investment in Broadband and Next-Generation Net- works, Memorandum Opinion and Order, 34 FCC Rcd 6503, para. 30 (2019) (finding that forbearance from incumbents’ analog loop unbundling obligations “eliminates costly mandates that deter investment by incumbent LECs and competitive LECs alike, … and reduces market-distorting regulations that all Americans pay for through more costly and less efficient networks”); Regula- tion of Business Data Services for Rate-of-Return Local Exchange Carriers, Notice of Proposed Rulemaking, WC Docket No. 17-144 (2018) (“we recognize that ex ante pricing regulation is of limited use – and often harmful – in a dynamic and increasingly competitive market”); Connect America Fund, et. al, Report and Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd 17663 (2011), aff’d sub nom., In re: FCC 11-161, 753 F.3d 1015 (10th Cir. 2014) (removing switched access services from rate-of-return regulation); Unbundled Access to Network Elements; Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, Order on Remand, 20 FCC Rcd 2533, para. 36 (2005) (stating that unbundling is an “especially intrusive form of economic regulation”).

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For the first time, the Commission proposes to cap rates for international ICS and “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.”100

Outbound international calling accounts for less than one-half of one percent of Securus’

ICS operations. In Securus’ experience, 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. Although the average cost Securus pays its international carrier vendors is around $0.09 per minute, some countries have substantially higher rates; in particular, countries in Africa, the Middle East, and other areas where the telecommunications market has not been fully liberalized. International caps that are tied to the rates charged by underlying providers for each individual call would be very difficult for Securus (and likely other ICS providers) to implement on a real-time, call-by-call basis.

Securus maintains a continually updated set of “rate decks” which contain thousands of entries for international rates and offers over 50 different international rate plans to the facilities it serves. Securus’ costs are wildly different between its individual vendors (even among vendors that share common ownership) and the rate decks used to manage pricing of international calls are updated frequently. Like many telecommunications service providers, Securus uses a least cost routing system that includes rates for all of its vendors and steers traffic through the system based on which route (and provider) have the lowest rate. In some cases, a route that Securus formerly

100 FNPRM, para. 68.

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used to terminate a call to a foreign destination may no longer exist which requires Securus to find an alternate route (and accompanying rate) for those international calls. In other cases, Securus has reciprocal traffic exchange arrangements with its vendors whereby if Securus exceeds its limit under the arrangement, the route is no longer available and Securus must find an alternate route

(and accompanying rate) to terminate the calls.

Due to the ever-changing rates that Securus pays for international calling due to the complexity of international rates, rate changes by vendors and least cost routing, it would be highly impractical from a billing and systems integration perspective to charge based on the actual cost of terminating each individual call.

As an alternative, Securus proposes that the Commission set an international rate cap based on the interstate rate cap, plus the average amount paid by the ICS provider to underlying carriers to terminate international calls to the same destination over the preceding calendar quarter. Securus recommends the following revision to proposed Rule 64.6010(c):

(c) No Provider shall charge, in any Prison or Jail it serves, a per-minute rate for International Calls in excess of the applicable interstate rate set forth in paragraphs (a) and (b) plus the average amount that the provider must pay its underlying international service providers for that calls to the same international destination on a per-minute basis. A Provider shall determine the average amount paid for calls to each international destination for each calendar quarter, and shall adjust its maximum rates based on such determination within one month of the end of each calendar quarter.

I. Securus Encourages Updates to Reflect Marketplace Developments and to Allow for Greater Innovation

Securus would welcome rule changes that provide greater choices in public consumption of ICS calls. For example, the Commission should permit providers to offer subscription plans, in which consumers pay for a block of minutes in advance, or unlimited calling plans within the

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bounds of correctional facility policies and guidelines, in conjunction with traditional per minute pricing. Choices allow consumers the flexibility to decide how they want to consume calls that may provide for greater predictability in their budgets and increase communication at lower prices.

This approach could be more advantageous for calls from individuals who are incarcerated on a longer-term basis. We encourage the Commission to adopt a forward looking view of rates that may include subscriptions, bundles, or other offerings not yet available in the marketplace, as a means to allow consumers more choices, better access and greater affordability.

The FNPRM asks whether the Commission should change its rules in light of marketplace developments, “such as emerging pay models where local jails pay for calls … on a per-line rather than a per-minute basis.”101 Securus has no contracts involving payment for ICS calls on a per-line basis. Although Securus does have a contract with New York City under which it is compensated for its services by the City rather than by incarcerated persons or called parties, the compensation under that contract is still paid on a per-minute-of-use basis.102

The FNPRM also asks for comment on allegations that “inmate services providers pressure correctional facilities to sign contracts that allow the providers to provide additional items and services ….”103 Although Securus does have contracts that cover multiple services, it offers these to facilities on an optional basis in response to RFPs and requests from public agencies. Securus

101 FNPRM, para. 134. 102 The description of this contract in footnote 317 of the FNPRM seems to be based on a misunderstanding of the agreement between the City and Securus. Also, the reported reduction in “the overall cost of telephone service” in City jails largely resulted from the elimination of the site commissions formerly paid to the City Department of Corrections. 103 FNPRM, para. 135.

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does not inappropriately “pressure” any jail or prison regardless of its size to purchase any of its services.

Nearly all ICS contracts are the result of public procurements by government agencies.

These agencies are responsible to state legislatures, county supervisors, or city councils, with for- mal procurement processes and standards that make it highly unlikely they could be “pressured” into purchasing products or services their facilities did not actually need.

IV. CONCLUSION

Securus supports the efforts of the Commission to ensure just and reasonable rates for telephone calling services provided to incarcerated individuals and their loved ones. We are committed to supporting the Commission in its efforts to collaboratively work with all providers to better ensure affordability of services in the industry.

As laid out above, we believe the cost data provided by the industry to date is insufficient to permit an accurate and reliable measurement of costs necessary to ensure the validity of this ratemaking process. In addition, we believe the inconsistent data is further hindered by an improper economic methodology, producing new proposed rate caps that are insufficient to permit providers to recover all of their costs.

The Commission is tasked with conducting a fair and balanced ratemaking process and to set rates at a level that will allow providers to fully recover all costs and receive a reasonable rate of return. The rates proposed in the FNPRM do not allow providers to fully recover their costs, and fail to fully address commissions which should be included in the calculation. Therefore, the proposed outcome is directly contrary to the mandate of § 276 of the 1996 Telecommunications

Act.

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We respectfully suggest that a better approach, consistent with the D.C. Circuit Court’s remand, would be to include site commissions and some goodwill in the calculation of “costs” to ensure that the proposed rate structure allows providers to recover costs for “each and every” call.

Securus offers its own internal review of costs (via the Cost Study) as a model for the

Commission to use in conducting an analytically sound study of costs across the industry. Should the Commission choose to utilize the Cost Study as a model, we look forward to collaborating with the Commission and supporting its efforts, including further investigation if warranted, and to do so in an expedited manner so as not to unduly slow next steps in the ratemaking process.

Thank you for the opportunity to provide comments as part of this process, and to collab- orate on meaningful regulation ensuring that ICS rates are just and reasonable, and that communications between incarcerated individuals and their families are more accessible, more affordable and more expansive.

Respectfully submitted,

/s/Andrew D. Lipman Andrew D. Lipman Russell M. Blau MORGAN, LEWIS & BOCKIUS LLP 1111 Pennsylvania Ave., N.W. Washington, DC 20004-2541 Tel: (202) 739-3000 [email protected] [email protected]

Counsel to Securus Technologies, LLC

November 23, 2020

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ATTACHMENT A

Secure Call Platform Outbound Call Processing Diagram REDACTED – FOR PUBLIC INSPECTION

ATTACHMENT B

FTI Consulting, Inc. Inmate Calling Services Cost Analysis for Securus Technologies, LLC

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FTI CONSULTING, INC.

INMATE CALLING SERVICES COST ANALYSIS

FOR SECURUS TECHNOLOGIES, LLC.

Robert O. Fisher Brian F. Pitkin Steven E. Turner

November 2020 REDACTED – FOR PUBLIC INSPECTION

TABLE OF CONTENTS

I. Executive Summary ...... 1 II. Qualifications ...... 2 III. ICS Cost-of-Service ...... 3 Source Materials ...... 3 Cost Categories and Methodologies ...... 4 1. General Support Attribution...... 4 2. Product Attribution ...... 5 3. Facility Attributions ...... 8 4. Shared Cost Allocations ...... 10 5. Common Cost Allocations ...... 11 6. Cost of Equity ...... 11 7. Site Commissions ...... 13 Demand ...... 13 IV. Outliers...... 14 V. Standard Deviation ...... 16 VI. Summary ...... 18 Exhibit-FTI-A (Curriculum Vitae of Robert O. Fisher) ...... 1 Exhibit-FTI-B (Curriculum Vitae of Brian F. Pitkin) ...... 1 Exhibit-FTI-C (Curriculum Vitae of Steven E. Turner) ...... 1 Exhibit-FTI-D (General Support Attribution) ...... 1 Performance Bonuses ...... 1 Headcount ...... 1 1. Human Resources ...... 1 2. Facilities ...... 1 3. Network Operations ...... 2 4. Operations Management ...... 2 Time Tracker ...... 2 1. Reporting and Analysis ...... 2 2. Customer Satisfaction ...... 3 HEAT Tickets ...... 3 Exhibit-FTI-E (Product Attribution) ...... 1 Direct Assignments ...... 1 HEAT Tickets ...... 1 1. Departments ...... 1 2. Dispatchee Departments ...... 1 Client Management – Salesforce ...... 2 Call Center – Disposition Codes ...... 2

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Guarded Exchange ...... 4 Paper Bills ...... 4 Termination ...... 4 Sales ...... 4 Site Commissions...... 5 ActiTime ...... 6 Transaction ...... 7 Depreciation – Datacenter, Site Equipment ...... 7 Amortization – Capitalized Labor, Software ...... 9 Exhibit-FTI-F (Facility Attribution) ...... 1 A. Sales ...... 1 B. Termination ...... 1 Exhibit-FTI-G (Demand) ...... 1 Call Minutes ...... 1 Transactions ...... 1 Paper Bill ...... 2 Prepaid Calling Cards ...... 2 Exhibit-FTI-H (Comparable Companies) ...... 1

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I. Executive Summary

1. FTI Consulting, Inc. (“FTI”) has performed a detailed and rigorous analysis to quantify Securus’s cost of providing inmate calling services (“ICS”) using widely accepted cost- causation principles. Through this process, FTI determined that the key drivers of Securus’s ICS costs at the contract level are the size and type of the facility as well as the level of commissions associated with each facility. Larger facilities (as measured by average daily population, or ADP) correlate with higher minutes of use. Moreover, specifically for jails, larger facilities correlate with higher associated commission costs. Facilities with more minutes of use (prisons and larger jails) demonstrate tighter cost per minute spreads across ADP group, and are not prone to the same swings in cost variance as smaller facilities. Using 2018 and 2019 internal company data, FTI was able to calculate the following costs for Securus’s basic ICS platform (excluding transaction costs, ancillary services, and advanced and investigative services):

Figure 1 Range of ICS Cost per Minute by ADP Group

Wtd. Avg. Facility Wtd. Avg. Min. Site Max. Site ADP Group Min. Cost Max. Cost Site Type Cost Commission Commission Commission

00000 - 00099 00100 - 00349 Jail 00350 - 00999 01000+

Prison All

2. In addition, Securus offers the following advanced and investigative services not included in the above costs that are primarily used at large jails and prisons:

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Figure 2 Advanced and Investigative Services Cost per Minute

Advanced / Investigative Service Cost/Min. THREADS iPRO (CVV & ICER) Investigative Call Monitoring (ICM) National Cellular Forensics (NCF) Wireless Containment Solutions (WCS) Automated Information Services (AIS)

II. Qualifications

3. The FTI effort was led by three well-established telecommunications cost experts:

Robert O. Fisher, Brian F. Pitkin, and Steven E. Turner (combined, the “FTI Panel”). Each member of the FTI Panel has developed and/or evaluated numerous models pertaining to service providers’ underlying component costs. The three experts that make up the FTI Panel have a deep combined knowledge base regarding regulatory requirements and industry best practices in the telecommunications field, having provided expert testimony, financial due diligence, strategic planning, and other professional services to companies that operate in the space over the past three decades, both as external consultants and in prior management positions within the industry.

4. Of particular relevance to this present report, the FTI Panel has had extensive experience in developing and evaluating a wide variety of cost studies utilizing different costing methodologies (e.g., incremental costs, accounting costs, valuation costs, stand-alone costs, total element long run incremental costs, or TELRIC, total service long run incremental costs, or

TSLRIC, rate of return costs, jurisdictional separations cost, etc.). In short, the work effort requested by Securus is exactly the type of detailed and thorough cost analysis that these three experts are uniquely qualified to provide to their clients. The curricula vitae for Messrs. Fisher,

Pitkin and Turner are included, respectively, as Exhibit-FTI- A (Curriculum Vitae of Robert O.

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Fisher), Exhibit-FTI- B (Curriculum Vitae of Brian F. Pitkin), and Exhibit-FTI- C (Curriculum

Vitae of Steven E. Turner).

III. ICS Cost-of-Service

5. FTI’s cost-of-service analysis relies on extensive data that ultimately results in attributing Securus’s costs using approximately 100 distinct cost metrics.

Source Materials

6. Securus is a wholly owned subsidiary of Aventiv Technologies, LLC (Aventiv).

During this exercise, FTI attributed {{ }} of Aventiv’s total cost structure to ICS-related services. To avoid confusion, we will generally refer to Securus in this report, which is the Aventiv entity providing ICS services.

7. The foundation of the analysis is Securus’s Great Plains accounting system, with general ledger detail provided at a granular level (and often at the journal line entry level) for 2018 and 2019. In addition, Securus provided company, department, account, and subaccount data used to categorize costs in Great Plains. Combined, these two sources of information contain the raw accounting information used in the cost analysis. Finally, Securus provided its audited income statements for the same time periods, which were used to validate the general ledger information.

8. Securus also provided a substantial additional data to facilitate cost-causation based attributions. To obtain this data, FTI conducted dozens of interviews with Securus personnel covering a wide variety of its departments and operations to better understand how costs are incurred and to identify relevant metrics for attributing those costs. By way of illustration, Securus provided headcount data by department over time, information on each of its acquired companies and associated services, depreciation and amortization schedules, call and minute data by facility

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and service, information from its ActiTime system (used to track hours spent on research and development projects), HEAT Tickets (used to track both internal and facility requests), datacenter server reports, interactive voice response call logs, call center disposition codes, sales pipeline reports, transport costs, termination costs, transaction data, and a wide variety of other information.

Cost Categories and Methodologies

9. FTI followed standard cost-causation modeling methodologies to attribute costs to specific products and, where not possible, properly allocated those costs across the products in an appropriate manner. This approach involved the application of over 90 different attribution allocators:

 10 general support attributions;

 78 product attributions;

 4 shared cost allocations;

 a common cost allocation; and

 a cost of equity allocation.

10. Moreover, FTI developed a return on equity input, quantified commissions, and calculated demand for each product to develop a cost per unit (i.e., per minute).

1. General Support Attribution

11. General support departments are those Securus groups that support specific functions or departments. For example, Securus’s internal IT department runs a help desk that does not support a specific product or service but does support other departments. Securus uses its

HEAT Ticket system to track these support requests that enable the internal IT department costs to be attributed to those other departments they are supporting. Similarly, the human resource

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department supports all employees throughout Securus, and costs can be reasonably attributed to each department based on the number of employees in each department during each period.

12. The first step in the cost-of-service analysis involves attributing departments that provide general support functions to other departments within Securus that they support and, where specific information exists, that reasonably estimates how those costs are caused. The following ten departments provide general support functions that were attributed based on the approach identified:

Figure 3 General Support Attribution

Department Methodology Aventiv Employee Bonuses Salaries - Exempt Aventiv Emp Bonuses & Other Salaries - Exempt Human Resources Headcount Facilities Headcount Ops - Network Operations Headcount for Supported Departments Customer Care - Operations Mgmt Headcount for Supported Departments Customer Care - Reporting and Analysis Time Tracker - ROA Customer Satisfaction Time Tracker - QA IT - Enterprise Operations Heat Tickets for Department IT - Security Heat Tickets for Department

13. Additional details related to the attribution of general support department costs are provided in Exhibit-FTI-D (General Support Attribution).

2. Product Attribution

14. Once costs associated with general support departments are attributed to those departments they support, they are then attributed to specific products using a variety of methods and at varying levels of detail. Some costs are attributed based on the Aventiv company providing

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the product (e.g., AllPaid1 provides transaction services having nothing to do with correctional facilities and those costs are attributed away from ICS). Some costs can be attributed at the department level (e.g., department {{ }} is related to Securus’s Automated Information System product). Other costs are attributed based on the specific general ledger account within a department (e.g., account {{ }} within department {{ }} is related to cost of goods sold for Securus’s iPro product as opposed to cost of goods sold for other products). Finally, there are some costs associated with two different products that are captured within a given department and account, requiring a review of individual journal line entries to identify the type of cost (e.g.,

Securus captures printing costs within its billing cost department under an account for collect calls, but uses separate vendors for printing and mailing paper bills and for performing credit checks).

15. While the above examples are straightforward, the vast majority of companies, departments and accounts support more than one product, so different attribution methodologies are used to identify costs associated with each product. For example, department {{ }} houses the DBA – Production Support group that is involved with maintaining and enhancing various platforms, including its ICS platform, its funding platform, as well as some of its advanced investigative products. The ActiTime system is used to track the time its developers spend on each project, allowing for the attribution of costs to specific products.

16. The following figure identifies the 78 attribution methodologies used in the cost- of-service analysis:

1 AllPaid is another subsidiary of Aventiv Technologies, LLC. 6 | P a g e REDACTED – FOR PUBLIC INSPECTION

Figure 4 Product Attribution2

Category Methodology Category Methodology Excluded Excluded ICS | AdvanceConnect ICS | AdvanceConnect Strategy & Transformation ActiTime - Dept. ICS | Collect ICS | Collect IT - SCN ActiTime - Dept. ICS | Collect | Paper Bill ICS | Collect | Paper Bill IT - Architecture & Capacity ActiTime - Dept. ICS | Debit ICS | Debit IT - DBA - Production Support ActiTime - Dept. ICS | Instant Pay ICS | Instant Pay Ops - Systems ActiTime - Dept. ICS | Outbound Voicemail ICS | Outbound Voicemail Ops - Network ActiTime - Dept. ICS | Pay per Call ICS | Pay per Call IT - Investigative Software Development ActiTime - Dept. ICS | Platform ICS | Platform FL - R&D ActiTime - Dept. ICS | Prepaid Cards ICS | Prepaid Cards FL - IT Internal ActiTime - Dept. ICS | Transaction ICS | Transaction Agency Automation Agency Automation iPRO N/A Capitalized Labor Capitalized Labor Medical Solutions Medical Solutions Datacenter Datacenter AllPaid AllPaid Disposition Codes Disposition Codes Archonix Archonix Field Services for IL DOC IL DOC JobView JobView Field Services for Broward County Broward County JPay JPay GEX Employees Guarded Exchange Employees Kiosk Kiosk Heat Tickets - All Service Heat Tickets - All Service Primonics Primonics IT - Enterprise Management Systems Heat Tickets - Dept. Secure Instant Mail Secure Instant Mail East Field Services [Manager 1] Heat Tickets - Dept. STOP STOP Implementation Project Management Heat Tickets - Dept. Tablets Tablets West Field Services [Manager 1] Heat Tickets - Dept. Video Visitation Video Visitation West Field Services [Manager 2] Heat Tickets - Dept. Sales | Engineering Sales | Engineering East Field Services [Manager 2] Heat Tickets - Dept. Sales | New | County Large Sales | New | County Large West Field Services [Manager 3] Heat Tickets - Dept. Sales | New | County SMB Sales | New | County SMB West Field Services [Manager 4] Heat Tickets - Dept. Sales | New | DOC Sales | New | DOC East Field Services [Manager 3] Heat Tickets - Dept. Sales | Retention | County Large Sales | Retention | County Lge Tech Support Heat Tickets - Dept. Sales | Retention | County Mid Sales | Retention | County Mid West Field Services [Manager 5] Heat Tickets - Dept. Sales | Retention | DOC Sales | Retention | DOC East Field Services [Manager 4] Heat Tickets - Dept. Sales | Retention | SMB Sales | Retention | SMB East Field Services [Manager 5] Heat Tickets - Dept. Salesforce Salesforce Ops - Telecom Services Heat Tickets - Dept. Site Commissions Site Commissions Service - Warehouse and Facilities Heat Tickets - Dept. Site Equipment Site Equipment East Field Services [Manager 6] Heat Tickets - Dept. Software Software West Field Services [Manager 6] Heat Tickets - Dept. Termination Termination East Field Services [Manager 7] Heat Tickets - Dept. THREADS THREADS East Field Install Heat Tickets Dispatchee Wholesale | Wholesale | Central Field Install Heat Tickets Dispatchee Wholesale | Wholesale | West Field Install Heat Tickets Dispatchee Wireless Containment Wireless Containment

17. Additional details related to the attribution of costs to specific products are provided in Exhibit-FTI-E (Product Attribution).

2 Many of the products described above are not associated with ICS, but are nevertheless products to which shared and common costs must be attributed. “Exclude” in Figure 4 above refers to products that Aventiv no longer provides. We captured those costs to ensure they received their proper allocation of shared and common costs but did not separate those costs or calculate demand for the purpose of developing unit costs.

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3. Facility Attributions

18. Using the process identified above, costs are directly assigned to various ICS products. Much of the information captured by Securus also provides details regarding the facilities being supported.3 Where available, this facility information was gathered separately for each product in order to directly attribute costs to a correctional facility.4 Any costs that could not be assigned to a particular facility were allocated across all demand minutes for all facilities and then combined with those costs specifically attributed to a given facility.

19. For example, HEAT Tickets for department {{ }} (Implementation Project

Management) identify that {{ }} of that department’s costs are attributable to the ICS services in 2019 and, of that {{ }} can be associated with specific facilities. The

{{ }} of cost associated with ICS, but not attributable to a given facility, are spread among all facilities on a per-minute basis.

20. The following figure identifies those attribution methodologies with sufficient information to attribute costs to individual facilities using this approach:

3 Aventiv also provides the infrastructure to support ICS services on a wholesale basis, wherein another entity has the contract with the correctional facility. These costs are not included as ICS costs in this analysis. 4 Transaction (funding) costs are not broken out by facility. 8 | P a g e REDACTED – FOR PUBLIC INSPECTION

Figure 5 Facility Attribution

Category Methodology Field Services for IL DOC IL DOC Field Services for Broward County Broward County GEX Employees Guarded Exchange Employees Heat Tickets - All Service Heat Tickets - All Service IT - Enterprise Management Systems Heat Tickets - Dept. East Field Services [Manager 1] Heat Tickets - Dept. Implementation Project Management Heat Tickets - Dept. West Field Services [Manager 1] Heat Tickets - Dept. West Field Services [Manager 2] Heat Tickets - Dept. East Field Services [Manager 2] Heat Tickets - Dept. West Field Services [Manager 3] Heat Tickets - Dept. West Field Services [Manager 4] Heat Tickets - Dept. East Field Services [Manager 3] Heat Tickets - Dept. Tech Support Heat Tickets - Dept. West Field Services [Manager 5] Heat Tickets - Dept. East Field Services [Manager 4] Heat Tickets - Dept. East Field Services [Manager 5] Heat Tickets - Dept. Ops - Telecom Services Heat Tickets - Dept. Service - Warehouse and Facilities Heat Tickets - Dept. East Field Services [Manager 6] Heat Tickets - Dept. West Field Services [Manager 6] Heat Tickets - Dept. East Field Services [Manager 7] Heat Tickets - Dept. East Field Install Heat Tickets Dispatchee Central Field Install Heat Tickets Dispatchee West Field Install Heat Tickets Dispatchee Sales | Engineering Sales | Engineering Sales | New | County Large Sales | New | County Large Sales | New | County SMB Sales | New | County SMB Sales | New | DOC Sales | New | DOC Sales | Retention | County Large Sales | Retention | County Lge Sales | Retention | County Mid Sales | Retention | County Mid Sales | Retention | DOC Sales | Retention | DOC Sales | Retention | SMB Sales | Retention | SMB Site Commissions Site Commissions Site Equipment Site Equipment Termination Termination Transport Transport

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21. Additional details related to the attribution of costs to specific facilities are provided in Exhibit-FTI-F (Facility Attribution).

4. Shared Cost Allocations

22. Shared costs are those that are allocable to a specific subset of products, but where there is insufficient information to identify exactly how those costs should be allocated. By way of example, transport costs represent the cost of connecting the correctional facility to Securus’s datacenters, but Securus does not have information to determine how much of those costs should be associated with ICS versus, for example, video visitation.5 For these categories, costs are allocated to various products and services based on direct costs previously attributed to those products and services.6 Similarly, Securus has a team that trains its salespeople, and the costs associated with that team are allocated to each of the other sales teams based on their direct costs.

23. The following figure identifies those categories of shared costs allocated to a specific subset of direct costs:

Figure 6 Shared Cost Allocation

Category Shared Cost - Growth Shared Cost - Sales Shared Cost - Service Shared Cost - Transport

5 The costs are specific to a given facility, so any costs attributable to ICS are attributed to each facility based on that facility’s portion of total transport costs. 6 Because there are a variety of products and services that do not rely on per-minute connectivity, minutes cannot be used to attribute costs to non-ICS services. 10 | P a g e REDACTED – FOR PUBLIC INSPECTION

5. Common Cost Allocations

24. There are a variety of costs incurred by any company, including Securus, that are truly common costs that support the entire organization. By way of example, Securus’s accounting department supports payroll, accounts receivable and accounts payable for the entire organization.

There is no metric to identify which products are responsible for specific portions of those common costs. As such, common costs are allocated across all products and facilities based on the previously calculated direct costs. The following categories represent the majority of Securus’s common costs.

Figure 7 Common Cost Categories

Category CEO CFO Legal Marketing Amortization Interest Transaction

25. Overall, common costs account for {{ }} of Securus’s overall cost structure in 2018 and 2019.

6. Cost of Equity

26. The cost of capital is based on two components: the cost of debt and the cost of equity. The cost of debt is already accounted for in the interest payments incorporated in the common costs identified above (allocated based on direct costs). Both Aventiv and Securus are privately held companies. As such, the cost of equity has been determined utilizing a comparable

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company analysis evaluating the cost of equity for 28 comparable publicly-traded companies.7

With privately held companies, it is important to both capture the diversified risk (reflected in Beta for the Capital Asset Pricing Model or “CAPM”) as well as the undiversified business risk of privately holding a company such as Aventiv.8 These undiversified risks are typically reflected in the Modified CAPM (“MCAPM”) with a small stock risk premium as well as a company-specific risk premium. A well-known approach for identifying these risks using a quantitative technique and the resultant cost of equity necessary for undiversified, privately held firms is set forth in Dr.

Aswarth Damodaran’s approach for calculating total beta.9

27. The cost of equity is calculated as of 2017, when Securus was purchased, because it avoids the need to approximate Aventiv’s market value and cost of debt (both are readily identifiable). The purchase was financed by a mix of debt and equity. The total annual dollars required by equity holders is calculated by applying the percent cost of equity for each year to the equity component of the 2017 market value. The resulting cost of equity is then scaled up by the statutory corporate tax rate10 to determine the annual pre-tax return on equity.

7 See Exhibit-FTI-H (Comparable Companies). Comparable companies were selected using industry sectors similar to Aventiv from S&P’s CapIQ data. Companies that are not local incumbent carriers (ILECs) were selected from the Diversified Telecommunications Services sector. Companies from the IT Consulting and Other Services, Security and Alarm Services, and Systems Software sectors were also included. 8 It is our understanding that any proposed rate setting will be applied to privately held ICS providers and therefore must account for the cost of equity from the perspective of an undiversified investor in these providers. 9 Damodaran, Dr. Aswarth, Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, 3rd Edition, Wiley, 2012, Chapter 24 (Valuing Private Firms), pp. 667-701. This approach has been specifically adopted by the courts in Village at Camp Bowie I. Many other cases before courts have set out the use of small stock and company specific risk premia for addressing privately held firms such as Wacht v. Continental Holdings Ltd., Reis v. Hazelett Strip-Casting Corporation, Estate of Giustina v. Commissioner, CNB International v. Kelleher, and LaSalle National Bank Association v. Paloian. 10 The federal tax rate was reduced from 35% to 21% in January 2018. State taxes are assumed to be 4.25%. 12 | P a g e REDACTED – FOR PUBLIC INSPECTION

7. Site Commissions

28. In both 2018 and 2019, Securus incurred approximately ${{ }} million in site commission expenses each year, of which roughly {{ }}% was associated with ICS. Again, no shared costs, common costs, or return on equity are attributed to site commission expenses – these are amounts paid to correctional facilities without any markup. Over this period, site commissions in jails increased with facility size: ADP group 00000 – 00099 had average commission costs of

${{ }} per minute, group 00100 – 00349 had average commission costs of ${{ }} per minute, group 00350 – 00999 had average commission costs of ${{ }} per minute, and group

01000+ had average commission costs of ${{ }} per minute, respectively. For prisons, the average site commission costs were about ${{ }} per minute in 2018-2019. Overall, site commissions averaged roughly ${{ }} per minute of use across all facilities for these two years.

Demand

29. FTI has separately determined the demand associated with each of Securus’s ICS products to derive per-unit rates. Details supporting these calculations are included in Exhibit-FTI-

G (Demand). In the figure below, note that demand is inversely proportional to facility size, with the small number of larger facilities capturing the majority of minutes of demand in 2018 and

2019:

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Figure 6 Aventiv Minutes by Facility Size

IV. Outliers

30. For a subset of facilities, calculated costs per minute are distorted, primarily due to an individual facility only operating for a small portion of a particular year. For example, if

Aventiv’s field services group installed ICS services at a facility and recorded minutes for only a few months out of the year, that facility would appear to have significant start-up costs but artificially low demand minutes for the year, resulting in inflated costs. A common statistical approach to account for these outliers is to remove data points that are either less than the first quartile minus 1.5 times the interquartile range of the dataset (“Lower Fence”) or are greater than the third quartile plus 1.5 times the interquartile range (“Upper Fence”). When applied on a group- by-group basis, this methodology eliminates only high-cost facilities, thereby lowering average costs in each ADP group.

31. Further, the removal of these outliers leads to a substantially lower cost per minute variance within groups. As such, the best proxy for a representative cost per minute range in each 14 | P a g e REDACTED – FOR PUBLIC INSPECTION

ADP group should exclude these outliers. To illustrate this analysis, the box-and-whisker charts below plot each facility along its respective grouping’s horizontal cost per minute axis. Note that the only facilities that appear as outliers (circled in red) are those that exceed the Upper Fence (i.e., the high-cost facilities) and that the other non-outlier facilities are more tightly clustered toward the centers and lower ends of the individual plots, with fewer outliers as the size of the facilities increase:

Figure 7 Interquartile Range Results11

11 This chart has been restricted for readability to facilities with costs-per-minute of $1.00 or less. Facilities with higher costs-per-minute are extreme outliers. These outliers appear in only the smallest ADP groups, and have been excluded (along with the pictured outliers) in subsequent calculations for each grouping.

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V. Standard Deviation

32. Alternatively, in its 2020 ICS Notice, the FCC “propose[s] rate caps based on … our calculated mean contract costs per paid minute to provide inmate calling services as reported by providers plus one standard deviation.”12 In a normally distributed data set, the FCC’s approach will, by definition, set rate caps such that the cost for 15.9% of all sites will be above the rate cap.

As such, we believe the use of 1.5 times the interquartile range setting the upper fence as discussed above (thereby excluding outliers) is a better reflection of the cap that should be set for ICS costs, and we have followed the FCC’s standard deviation approach for demonstrative purposes only.

For this analysis, we have similarly excluded outliers with costs beyond the Upper or Lower Fences in each group to prevent any potential distortion of the results. This methodology nevertheless results in Securus’s costs (excluding commissions) for 13.4% of its facilities exceeding its average costs plus one standard deviation.

33. Further, FTI believes that a weighted average cost per minute (essentially, total cost divided by total minutes) is a better indication of Securus’s average cost in each ADP group than a simple average of each contract’s cost as outlined in the FCC’s proposed methodology. Costs by

ADP group have been calculated using each averaging approach for comparison:

12 2020 ICS Notice, ¶ 71. 16 | P a g e REDACTED – FOR PUBLIC INSPECTION

Figure 8 Basic ICS Cost Averages by ADP group

Facility Average Standard Cost + Site ADP Group Total Cost Type Cost Deviation St. Dev. Commission

Weighted Average Methodology

00000 - 00099 00100 - 00349 Jail 00350 - 00999 01000+

Prison All

Simple Average Methodology

00000 - 00099 00100 - 00349 Jail 00350 - 00999 01000+

Prison All

34. Though not directly material to the above total cost calculations, site commissions also demonstrate a relatively high degree of variance across ADP groups, with standard deviations greater than 50% of the average cost per minute within each grouping. Given this variance, FTI believes that subsequent analyses involving commission costs should also reflect the spread of values for facilities that have not been identified as outliers. The below chart plots each facility by commission costs per minute in its corresponding ADP group. Note that the standard deviations for each grouping ranges from ${{ }} to ${{ }} (indicated by the shaded gray areas on either side of the average line for each group):

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Figure 9 Standard Deviation for Site Commissions by ADP group

VI. Summary

35. FTI’s rigorous review of Securus’s information enabled a much more thorough and accurate reflection of its costs to provide ICS than previously performed.13 Overall, FTI was able to attribute {{ }}% of Securus’s ICS costs at the product level and {{ }}% at both the product level and the facility level. Performing the cost analysis at this level of detail indicates clear cost differences for basic ICS services between smaller jails and larger jails and between jails and prisons.

13 In a prior report to the FCC, FTI relied on revenue allocations, rather than attributing costs based on cost-causation principles, because there was “no other information that Securus ha[d] in its possession to allocate these shared costs in the short timeframe required by the Mandatory Data Collection,” recognizing that “[i]deally, cost based allocations would be used.” [FTI Consulting, Inc. Report Implementing the FCC Mandatory Data Collection on Behalf of Securus Technologies, Inc., July 17, 2014] 18 | P a g e REDACTED – FOR PUBLIC INSPECTION

36. It is also worth noting the extensive costs that ICS providers incur that are not part of providing basic telephone service, including substantial costs at the facility premise (site equipment and field service). Moreover, the cost per minute associated with Securus’s core platform costs—including its datacenter costs, capitalized labor, research and development, and software costs—are fairly concentrated given the relatively small, specialized consumer base that relies on these services and that these costs are distributed across. The chart below provides a breakdown of some of these cost categories (excluding site commissions):

Figure 10 ICS Costs by Year and Cost Categories

37. Additionally, Securus provides a variety of advanced and investigative services that are predominantly used by large jails and prisons but are generally not offered by (and not included

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in the costs of) other, smaller ICS providers. The following table identifies these costs based on the total minutes of the facilities using these products:14

Figure 11 Cost per Minute for Advanced and Investigative Services

38. Moreover, it is the larger facilities that rely on these advanced and investigative products – services that smaller ICS providers do not have the capability to provide and are therefore not included in the underlying cost structures that these providers report externally. The figure below illustrates this relationship for Securus’s differing ADP groups:

14 For example, if a given state department of corrections only uses these products at given facilities, all minutes in those facilities are used to derive these per-minute costs. 20 | P a g e REDACTED – FOR PUBLIC INSPECTION

Figure 12 Relative Usage (Minutes) of Advanced and Investigative Products by ADP group

39. Finally, it is worth noting that Securus as an organization is larger than most ICS providers and experiences economies of scale not available to other ICS providers. Some of these economies relate to greater purchasing power (e.g., ICS equipment), and some relate to the ability to share its common costs (such as the accounting function) across a larger number of products and services (including non-ICS-related products and services). As such, the costs for stand-alone

ICS providers are likely higher than those experienced by Securus.

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Exhibit-FTI-A (Curriculum Vitae of Robert O. Fisher)

Professional Experience

FTI Consulting, Inc. Managing Director, Telecommunications, Media & Technology 2020 – Present Senior Director, Telecommunications, Media & Technology 2018 – 2019 Senior Director, Network Industries Strategies 2009 – 2018 Director, Network Industries Strategies 2007 – 2009

TARGUSInfo Vice President 2005 – 2007

Verisign Director, Solutions 2004 – 2005

InCode Consulting Senior Manager 2002 – 2004

Marconi Pacific Manager Director 2000 – 2002

PricewaterhouseCoopers (PwC) Principle 1999 – 2000 Senior Associate 1997 – 1999 Associate 1995 – 1997

MCI Product Manager 1992 – 1993

Accenture Associate 1989 – 1991

Education

University of Michigan, Ross School of Business, Ann Arbor, Michigan Master of Business Administration, Finance 1993

Georgetown University, School of Foreign Service, Washington, District of Columbia Bachelor of Science, International Politics 1989

Certifications

Certified Public Accountant

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Professional Biography

Rob Fisher is a Managing Director in the Telecom, Media and Technology industry practice and specializes in dispute advisory services. He has over 20 years of experience working with big data and performing sensitivity analyses across a range of potential legal and financial outcomes.

Mr. Fisher has extensive financial analysis and modeling experience. He recently developed a detailed product and regional profitability tool for a telecom services company. The recommendations led to cost-cutting opportunities that enabled the company to avoid immediate restructuring. He also recently assessed the solvency of a Texas toll road operator in a fraudulent transfer dispute. Other cases have involved calculating financial damages in a dispute involving switched access charges for conference calling services and assessing a cable provider’s leased modem capabilities compared to the various data plans offered. In addition, he recently represented a senior lender in the bankruptcy proceedings of a local telecom carrier.

Mr. Fisher previously developed expert testimony for railroad clients in litigation disputes involving the delivery of large coal and chemical shipments. He directed the volume and price forecasts and financial analysis to demonstrate the reasonableness of railroad rates before the Surface Transportation Board. He also calculated financial damages in railroad breach of contract disputes.

Prior to joining FTI Consulting, Mr. Fisher worked for two telecom services companies, most recently as Vice President of Strategic Marketing, where he held profit and loss responsibility for the company’s largest product. Before that, he spent 10 years as a Strategy Consultant, working with dozens of telecom clients on financial analysis, marketing strategy and operational improvement.

Mr. Fisher holds a B.S. from the School of Foreign Service at Georgetown University and an M.B.A. in finance from the University of Michigan. He is a Certified Public Accountant.

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List of Proceedings/Cases

Surface Transportation Board

Docket No. 42121 Total Petrochemicals & Refining USA, Inc. v. CSX Transportation, Inc. Reply Evidence of CSX Transportation, Inc. July 21, 2014 Supplemental and Compliance Evidence of CSX Transportation, Inc. October 7, 2015

Docket No. 42088 Western Fuels Association, Inc. and Basin Electric Power Cooperative, Inc. v. BNSF Railway Company BNSF Railway Company's Reply Comments on Remand September 19, 2014

Docket No. 42136 Intermountain Power Agency v. Union Pacific Railroad Company Reply Evidence of Union Pacific Railroad Company April 12, 2013

Docket No. 42130 SunBelt Chlor Alkali Partnership v. Norfolk Southern Railway Company Norfolk Southern Railway Company Motion to Hold Case in Abeyance Pending Completion of Rulemaking September 21, 2012 Reply Evidence of Norfolk Southern Railway Company January 7, 2013

Docket No. 42125 E.I. DuPont De Nemours & Company v. Norfolk Southern Railway Company Reply Evidence of Norfolk Southern Railway Company November 30, 2012

Docket No. 42127 Intermountain Power Agency v. Union Pacific Railroad Company Reply Evidence of Union Pacific Railroad Company November 10, 2011

Docket No. 42113 Arizona Electric Power Cooperative, Inc. v. BNSF Railway Company and Union Pacific Railroad Company Joint Reply Evidence of BNSF Railway Company and Union Pacific Railroad Company May 7, 2010

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Exhibit-FTI-B (Curriculum Vitae of Brian F. Pitkin)

Professional Experience

FTI Consulting, Inc. Senior Managing Director, Telecommunications, Media & Technology 2020 – Present Managing Director, Telecommunications, Media & Technology 2018 – 2019 Contractor, Network Industries Strategies 2015 – 2017 As-Needed Consultant, Network Industries Strategies 2009 – 2014

Pitkin Analytics LLC President 2009 – 2014

WorldNet Telecommunications, Inc. Senior Vice President 2007 – 2009

Pitkin Consulting LLC President 2006 – 2007

QSI Consulting, Inc. Senior Vice President 2004 – 2006

InterLink, Inc. President 2003 – 2004

FTI Consulting, Inc. Director, Network Industries Strategies 1999 – 2003

Klick, Kent & Allen, Inc. Employee 1994 – 1999

Peterson Consulting, LLP Consultant 1993 - 1994

Education

University of Virginia, McIntire School of Commerce, Charlottesville, Virginia Bachelor of Science in Commerce, Dual Concentrations in Finance and Management Information Systems 1993

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Professional Biography

Brian Pitkin is a Senior Managing Director in the Telecom, Media and Technology (“TMT”) practice and is the Co- Leader of the TMT Dispute Advisory group. Mr. Pitkin’s expertise is in assisting general counsel, outside counsel and boards of directors evaluate a wide range of strategic priorities, prepare for settlement negotiations and understand the risks of litigation. He has more than 25 years of dispute resolution experience, serving law firms and general counsel with a wide range of legal services, including expert testimony and non-testifying expert advisory services.

Mr. Pitkin has testified in over 60 proceedings, including in U.S. federal court, arbitrations, the Federal Communications Commission and more than 25 states public utility commissions. In commercial litigation, he has focused on disputes relating to industry practices, cost-of-service and cost-based pricing in multi-product firms, as well as class certification under Federal Rule 23, contract terms and conditions, damages, fraud, interconnection and intercarrier compensation. In the regulatory arena, he has provided extensive expert testimony around the country on policy, modeling methodologies, compliance issues and financial analysis. Mr. Pitkin also has a long history in the modeling of complex networks, including data analytics and detailed geospatial analyses.

He has worked extensively in matters across the TMT industries, including integrated communications platforms, media content, distribution and transportation systems. Mr. Pitkin has evaluated transaction operations, costs and pricing across the TMT industries related to taxes, fees and charges in telecommunications, cable television and toll roads, including investigations by the Consumer Financial Protection Bureau. Outside of litigation, Mr. Pitkin has worked on a variety of matters related to regulatory review of mergers, both pre- and post-closing. Mr. Pitkin continues to assist clients with their most complex and data intensive modeling efforts, managing a variety of due diligence, restructuring and integration projects that focus on operational and infrastructure synergy scenarios on behalf of companies and/or external investors.

Prior to joining FTI Consulting, Mr. Pitkin worked as a Management Consultant focused on acquisitions, strategic initiatives and intercarrier relations. In industry, he served as Senior Vice President of WorldNet Telecommunications, Inc., where he led the business analysis, product development, marketing, sales, finance and regulatory departments.

Mr. Pitkin holds a B.S. in finance and management information systems from the University of Virginia.

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List of Proceedings/Cases

United States District Court, Central District of California, Western Division

Case No. 99-11641 RSWL (RCx) Arthur Simon and John Galley III on Behalf of Themselves and All Persons Similarly Situated vs. American Telephone & Telegraph Crop; At Home Corporation; Arahova Communications, Inc.; Cox Communications, Inc.; Comcast Corporation; Cablevision Systems Corp.; Garden State Cable Vision LP; Jones Intercable, Inc.; Time Warner, Inc.; Time Warner Entertainment Co., L.P.; TWE-A/N Partnership; TWI Cable, Inc.; MediaOne Group; ServiceCo L.L.C.; and Tele-Communications Inc. Declaration of John C. Klick and Brian F. Pitkin in Support of Defendants’ Motion in Opposition to Plaintiffs’ Motion for Class Certification December 4, 2000

United States District Court, Northern District of Iowa, Central Division

Case No. 3:18-cv-03075 BTC, Inc. d/b/a Western Iowa Networks, Plaintiff, v. AT&T Corp., Defendant. AT&T Corp., Counter-Plaintiff, v. BTC, Inc., d/b/a Western Iowa Networks, Counter-Defendant. Expert Report of Brian F. Pitkin September 30, 2019

United States District Court, District of Massachusetts

Case No. 1:18-cv-11130 Kellie Pearson and The Law Offices of Mark Booker, on behalf of themselves and those similarly situated, Plaintiffs, v. Thomas M. Hodgson, In His Official Capacity as Sheriff of Bristol County and Securus Technologies, Inc. Declaration of Brian F. Pitkin October 15, 2019 Supplemental Declaration of Brian F. Pitkin November 27, 2019

United States District Court, District of Puerto Rico

Civil Action No. 11-CV-01152 Puerto Rico Telephone Company, Inc., Plaintiff, v. Telecommunications Regulatory Board of Puerto Rico; Sandra Torres Lopes; Vincent Aguirre Iturrino, Nixyvette Santini Hernandez in their Official Capacities as Members of the Telecommunications Regulatory Board of Puerto; and WorldNet Telecommunications, Inc., Defendants Affidavit May 26, 2011

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United States District Court, Eastern District of Tennessee at Chattanooga

Docket No. 1:14-cv-376, Jury Demand Bedford County Emergency Communications District, Blount County Emergency Communications District, Bradley County Emergency Communications District, Cheatham County Emergency Communications District, Coffee County Emergency Communications District, Cumberland County Emergency Communications District, Franklin County Emergency Communications District, Giles County Emergency Communications District, Hamilton County Emergency Communications District, Knox County Emergency Communications District, Meigs County Emergency Communications District, Rhea County Emergency Communications District, Roane County Emergency Communications District, Van Buren Emergency Communications District, and Warren Emergency Communications District, Plaintiffs, vs. Level 3 Communications, LLC, Defendant. Rebuttal Expert Report of Brian F. Pitkin September 30, 2019 Declaration of Brian F. Pitkin October 31, 2019

Superior Court of New Jersey – Law Division, Middlesex County

Docket No. MID-L-3006-19 James Long and Homer Walker, Plaintiffs, v. New Jersey Turnpike Authority, Defendant. Expert Report of Steven E. Turner and Brian F. Pitkin February 3, 2020 Expert Reply Report of Steven E. Turner and Brian F. Pitkin February 11, 2020

Federal Communications Commission

WC Docket No. 18-60 In the Matter of Iowa Network Access Division Tariff FCC No. 1 Declaration of Brian F. Pitkin December 5, 2018 Supplemental Declaration of Brian F. Pitkin February 14,2019 Second Supplemental Declaration of Brian F. Pitkin June 3,2019

WC Docket No. 12-375 In the Matter of Rates for Interstate Inmate Calling Services Report Implementing the FCC Mandatory Data Collection July 17, 2014 Report on Price Elasticity of Demand for Interstate Inmate Calling Services January 12, 2015 Response to Second Further Notice Declaration January 27, 2015 Report on Financial Impact of FCC Second Report and Order December 22, 2015

WC Docket No. 02-314 In the Matter of Qwest Communications International Inc. Application for Authority to Provide In-Region, InterLATA Services in Colorado, Idaho, Iowa, Montana, Nebraska, North Dakota, Utah, Washington, and Wyoming Declaration of Michael R. Lieberman and Brian F. Pitkin October 16, 2002

WC Docket No. 02-307 In the Matter of Application by BellSouth Corporation for Authorization to Provide In-Region, InterLATA Services in the States of Florida and Tennessee Declaration of John C. Klick and Brian F. Pitkin October 10, 2002 Reply Declaration of John C. Klick and Brian F. Pitkin November 1, 2002 Supplemental Declaration of John C. Klick and Brian F. Pitkin November 18, 2002 4 | P a g e REDACTED – FOR PUBLIC INSPECTION

WC Docket No. 02-306 In the Matter of Application of SBC Communications Inc., Pacific Bell Telephone Company, and Southwestern Bell Communications Services, Inc., for Provision of In-Region, InterLATA Services in California Declaration of Michael R. Lieberman and Brian F. Pitkin October 9, 2002 Supplemental Joint Declaration of Michael R. Lieberman and Brian F. Pitkin November 26, 2002

WC Docket No. 02-148 In the Matter of Qwest Communications International Inc. Consolidated Application for Authority to Provide In- Region, InterLATA Services in Colorado, Idaho, Iowa, Nebraska, and North Dakota Declaration August 23, 2002

WC Docket No. 02-214 In the Matter of Application by Verizon Virginia Inc., Verizon Long Distance Virginia Inc., Verizon Enterprise Solutions Virginia Inc., Verizon Global Networks Inc., and Verizon Select Services of Virginia Inc., for Authorization to Provide In-Region, InterLATA Services in Virginia Declaration August 21, 2002

WC Docket No. 02-157 In the Matter of Application by Verizon New England Inc., Verizon Delaware Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks, Inc., and Verizon Select Services Inc. for Authorization to Provide In-Region, InterLATA Services in New Hampshire and Delaware Reply Declaration of Michael R. Lieberman and Brian F. Pitkin August 12, 2002

WC Docket No. 02-189 In the Matter of Qwest Communications International Inc. Consolidated Application for Authority to Provide In- Region, InterLATA Services in Montana, Utah, Washington, and Wyoming Declaration of Michael R. Lieberman and Brian F. Pitkin August 1, 2002 Reply Declaration August 26, 2002

CC Docket No. 00-251, 00-218 In the Matter of Petition of AT&T Communications of Virginia, Inc., and WorldCom, Inc., Pursuant to Section 252(e)(5) of the Communications Act, for Preemption of the Jurisdiction of the Virginia State Corporation Commission Regarding Interconnection Disputes with Verizon-Virginia, Inc. Direct July 31, 2001 Surrebuttal September 21, 2001

CC Docket No. 96-98 Implementation of the Local Competition Provisions of the Telecommunications Act of 1996 Affidavit of John C. Klick and Brian F. Pitkin May 26, 1999 Affidavit of Michael J. Boyles, John C. Klick, and Brian F. Pitkin May 26, 1999 Reply Affidavit of Michael R. Baranowski, John C. Klick, and Brian F. Pitkin June 10, 1999

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American Arbitration Association

CC Docket No. 01-17-0001-6046 CoreCivic, Inc. f/k/a Corrections Corporation of America, Inc., Claimant, v. Securus Technologies, Inc., Respondent Expert Report November 30, 2018 Expert Rebuttal Report January 15, 2019

Case No. 32 494 00100 09 In the matter of WorldNet Telecommunications, Inc., Claimant, vs. Puerto Rico Telephone Company, Inc., Respondent Direct Testimony April 9, 2009

Private Dispute Resolution Process

Private Arbitration July 1, 1987 License Agreement Between US Sprint Communications Company and Norfolk and Western Railway Company, Et Al. Report August 19, 2019

Alabama Public Service Commission

Docket No. 25980 Implementation of the Universal Support Requirements Rebuttal February 13, 1998

Regulatory Commission of Alaska

Docket No. U-14-113 In the Matter of the Application Filed by Securus Technologies, Inc. for a Certificate of Public Convenience and Necessity to Provide Private Pay Telephone Service to Inmates in Alaska Department of Corrections Facilities Inmate Calling Services Cost Analysis for the State of Alaska November 13, 2014

California Public Utilities Commission

Rulemaking 93-04-003, Investigation 93-04-002. Rulemaking on the Commission’s Own Motion to Govern Open Access to Bottleneck Services and Establish A Framework for Network Architecture Development of Dominant Carrier Networks Declaration of John C. Donovan, Brian F. Pitkin, and Steven E. Turner August 6, 2004 Rebuttal Declaration of Robert A. Mercer, Brian F. Pitkin and Steven E. Turner November 9, 2004

Rulemaking 95-04-043, Investigation 95-04-044 Order Instituting Rulemaking on the Commission’s Own Motion into Competition for Local Exchange Service Opening December 12, 2003 Reply January 16, 2004

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Application 01-02-035 Application of AT&T Communications of California, Inc. (U 5002 C), and WorldCom, Inc., for the Commission to Reexamine the Recurring Costs and Prices of Unbundled Loops in Its First Annual Review of Unbundled Network Element Costs Pursuant to Ordering Paragraph 11 of D.99 11-050. Also, Applications 01-02-024, -2- 02-031, 02-02-032, 02-02-034, 02-03-002 Declaration of John C. Donovan, Brian F. Pitkin, and Steven E. Turner February 7, 2003 Rebuttal Declaration March 12, 2003

Florida Public Service Commission

Docket No. 990649-TP Investigation into Pricing of Unbundled Network Elements Rebuttal Testimony of John C. Donovan and Brian F. Pitkin July 31, 2000 Supplemental Rebuttal Testimony of John C. Donovan and Brian F. Pitkin August 28, 2000 Rebuttal Testimony of Brian F. Pitkin December 10, 2001 Supplemental Rebuttal Testimony of Brian F. Pitkin February 11, 2002

Docket No. 980696-TP Determination of the Cost of Basic Local Telecommunications Service, Pursuant to Section 364.025, Florida Statutes Rebuttal Testimony of Don J. Wood and Brian F. Pitkin September 2, 1998

Georgia Public Service Commission

Docket No. 18870-U GPSC Generic Proceeding to Investigate ALL Local and Long Distance Telephone Charges from Institutional/Correctional Facilities FTI Report Modifying the July 17, 2014 Report Implementing the FCC Mandatory Data CollectionJuly 28, 2016

Docket No. 14361-U Generic Proceeding to Review Cost Studies, Methodologies, Pricing Policies, and Cost-Based Rates for Interconnection and Unbundling of BellSouth Telecommunications, Inc.’s Network Rebuttal Testimony of John C. Donovan and Brian F. Pitkin April 5, 2002 Direct July 26, 2004 Supplemental Direct October 22, 2004 Rebuttal December 1, 2004

Docket No. 5825-U Universal Access Fund, Transition to Phase II Pursuant to O.C.G.A. § 46-5-167 Direct Testimony of John C. Donovan and Brian F. Pitkin August 1, 2000 Rebuttal Testimony of John C. Donovan and Brian F. Pitkin September 8, 2000 Reply to Rebuttal Testimony of John C. Donovan and Brian F. Pitkin October 2, 2000

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Illinois Commerce Commission

Docket No. 02-0864 Illinois Bell Telephone Company Filing to increase Unbundled Loop and Nonrecurring Rates Direct Testimony of Brian F. Pitkin and Steven E. Turner May 6, 2003 Reply Testimony of Brian F. Pitkin and Steven E. Turner February 20, 2004 Rebuttal Testimony of Brian F. Pitkin and Steven E. Turner March 5, 2004

Indiana Utility Regulatory Commission

Cause No. 42393 In the Matter of the Commission Investigation and Generic Proceeding of Rates and Unbundled Network Elements and Collocation for Indiana Bell Telephone Company, Incorporated d/b/a SBC Indiana Pursuant to the Telecommunications Act of 1996 and Related Indiana Statutes Response Testimony of Brian F. Pitkin and Steven E. Turner August 15, 2003

State Corporation Commission of the State of Kansas

Docket No. 99-GIMT-326-GIT Investigation into the Kansas Universal Service Fund (KUSF) Mechanism for the Purpose of Modifying the KUSF and Establishing a Cost-Based Fund Direct Testimony May 25, 1999

Maryland Public Service Commission

Case No. 8879 In the Matter of the Investigation into Rates for Unbundled Network Elements Pursuant to the Telecommunications Act of 1996 Direct May 25, 2001 Supplemental Direct July 24, 2001 Surrebuttal October 15, 2001

Case No. 8745 In the Matter of the Provision of Universal Service to Telecommunications Consumers Direct March 23, 2001 Rebuttal May 21, 2001 Surrebuttal June 11, 2001

Michigan Public Service Commission

Case No. U-13531 In the Matter, on the Commission’s Own Motion, to Review the Costs of Telecommunications Services Provided by SBC Michigan Opening Affidavit of Brian F. Pitkin and Steven E. Turner January 20, 2003 Final Reply Affidavit of Brian F. Pitkin and Steven E. Turner May 10, 2004

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Minnesota Public Utilities Commission

Docket No. P-442, 5321, 3167, 466, 421/CI-96-1540 Commission’s Generic Investigation of US West Communications, Inc.’s Cost of Providing Interconnection and Unbundled Network Elements Supplemental Direct Testimony of John C. Klick and Brian F. Pitkin July 14, 1998

Mississippi Public Service Commission

Docket No. 98-AD-035 Mississippi Universal Service Docket Rebuttal March 6, 1998

Public Service Commission of Missouri

Docket No. TO-98-329 Investigation into Various Issues Related to the Missouri Universal Service Fund Rebuttal Testimony of Brian F. Pitkin, adopted by John C. Klick September 25, 1998

Public Service Commission of the State of Montana

Docket No. D97.9.167 Investigation of the Commission Implementation of a Forward-Looking Universal Service Cost Model Direct Testimony of Brian F. Pitkin, adopted by Michael Hydock December 31, 1997 Supplemental Testimony of Brian F. Pitkin, adopted by Michael Hydock February 13, 1998 Rebuttal Testimony of Brian F. Pitkin, adopted by Michael Hydock February 20, 1998

Public Service Commission of the State of Nebraska

Application No. C-2872 In the Matter of the Petition of Great Plains Communications, Inc. for Arbitration to Resolve Issues Relating to an Interconnection Agreement with WWC License L.L.C Rebuttal April 25, 2003

North Carolina Utilities Commission

Docket No. SC-1427, Sub 9 Verified Petition for Waiver of Rule R13-9(d) FTI Report Modifying the July 17, 2014 Report Implementing the FCC Mandatory Data CollectionAugust 30, 2016

Docket No. P-100, Sub 133d Proceeding to Determine Permanent Pricing for Unbundled Network Elements Rebuttal October 15, 2002

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State of North Dakota Public Service Commission

Case No. PU-2077-02-308 Petition of WWC Holding Co., Inc. for Arbitration Under the Telecommunications Act of 1996 Rebuttal September 17, 2002

Public Utilities Commission of Ohio

Case No. 02-1280-TP-UNC In the Matter of the Review of SBC Ohio’s TELRIC Costs for Unbundled Network Elements Testimony May 28, 2004

Pennsylvania Public Utility Commission

Docket No. R-00016683 Generic Investigation of Verizon Pennsylvania, Inc.’s Unbundled Network Element Rates Direct December 7, 2001 Rebuttal January 11, 2002 Surrebuttal February 8, 2002

Telecommunications Regulatory Board of Puerto Rico

Case No. JRT-2008-CCG-0002 In Re: Puerto Rico Telephone Company, Inc. d/b/a CLARO TV Petitioner Statement August 8, 2011

Case No. JRT-2010-AR-0001 In the matter of WorldNet Telecommunications, Inc. Petition for arbitration pursuant to Section 47 U.S.C. 252(b) of the Federal Communications Act and Section 5(b), Chapter III, of the Puerto Rico Telecommunications Act, Regarding Interconnection rates, terms and conditions with Puerto Rico Telephone Company Direct Testimony June 22, 2010 Reply Testimony July 6, 2010 Sworn Declaration December 2, 2010 Attestation April 25, 2011

Case No. JRT-2007-AR-0001 In the matter of WorldNet Telecommunications, Inc. Petition for arbitration pursuant to Section 47 U.S.C. 252(b) of the Federal Communications Act and Section 5(b), Chapter III, of the Puerto Rico Telecommunications Act, Regarding Interconnection rates, terms and conditions with Puerto Rico Telephone Company Direct Testimony on Liquidated Damages May 10, 2007 Direct Testimony on Pricing Issues May 14, 2007 Reply Testimony on Liquidated Damages May 16, 2007 Reply Testimony on Pricing Issues May 18, 2007

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Case Nos. JRT-2005-Q-0121, JRT-2005-Q-0128, JRT-2003-Q-0297 & JRT-2005-Q-0068 Telefonica Larga Distancia de Puerto Rico, Inc., Et Al Complainants v. Puerto Rico Telephone Company, Inc. Respondent Prefiled Testimony on Cost Methodology August 4, 2005 Prefiled Direct October 21, 2005 Prefiled Reply November 10, 2005

PRTC Local Tariff Section 15 WorldNet Telecommunications, Inc. and Puerto Rico Telephone Company, Inc. Affidavit May 20, 2005

Case No. JRT-2003-AR-0001 Petition for Arbitration Pursuant to Section 252(b) of the Federal Communications Act, and Section 5(b), Chapter II, of the Puerto Rico Telecommunications Act, Regarding Interconnection Rates, Terms, and Conditions Direct January 20, 2004 Reply February 20, 2004

Case No. JRT-2003-CCG-0004 Review of High- Capacity Business Customer Local Circuit Switching Direct Testimony of Don J. Wood and Brian F. Pitkin November 7, 2003 Rebuttal Testimony of Don J. Wood and Brian F. Pitkin November 14, 2003

Case No. JRT-2001-AR-0002 In the matter of Arbitration of Interconnection Rates, Terms, and Conditions between WorldNet Telecommunications, Inc., and Puerto Rico Telephone Company Direct November 9, 2001

Case No.’s 97-Q-0001 & 97-Q-0003 In the matter of Puerto Rico Telephone Company Tariff K-2 Direct May 1, 2001 Rebuttal May 15, 2001

South Carolina Public Service Commission

Docket No. 97-239-C. Intrastate Universal Service Fund Adopted the Direct Testimony of John C. Klick November 10, 1997 Rebuttal March 2, 1998

Public Utilities Commission of the State of South Dakota

Docket No. TC02-176 Petition of WWC License L.L.C. for Arbitration under the Telecommunications Act of 1996 Rebuttal February 14, 2003 Surrebuttal February 28, 2003 11 | P a g e REDACTED – FOR PUBLIC INSPECTION

Tennessee Regulatory Authority

Docket No. 97-00888 (USF) Universal Service Generic Contested Case Rebuttal Testimony of Don J. Wood and Brian F. Pitkin April 9, 1998

Public Utilities Commission of Texas

Docket No. 18515 Compliance Proceeding for Implementation of the Texas High-Cost Universal Service Plan Live Rebuttal July 16, 1998

Public Service Commission of Utah

Docket No. 03-2403-02 In the Matter of the Petition Of WWC Holding Co., Inc. for Arbitration of an Interconnection Agreement Rebuttal October 17, 2003 Additional Direct December 19, 2003

Washington Utilities and Transportation Commission

Docket No. UT-980311(a) Determining Costs for Universal Service Testimony August 3, 1998 Rebuttal August 24, 1998

Public Service Commission of Wisconsin

Docket No. 6720-TI-187 Petition of Wisconsin Bell, Inc., d/b/a SBC Wisconsin, to Establish Rates and Costs for Unbundled Network Elements Rebuttal July 15, 2004

Public Service Commission of the State of Wyoming

General Order No. 81 Investigation by the Commission of the Feasibility of Developing Its Own Costing Model for Use in Determining Federal Universal Service Fund Support Obligations in Wyoming Direct January 23, 1998 Rebuttal February 6, 1998

County Board, Arlington, Virginia

Consideration of the January 18, 2000 Application of Starpower Communications, LLC for an Arlington County Certificate of Public Convenience and Necessity for Cable Television Testimony August 5, 2000

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Exhibit-FTI-C (Curriculum Vitae of Steven E. Turner)

Professional Experience

FTI Consulting, Inc. Senior Managing Director, Telecommunications, Media & Technology 2013 – Present Managing Director, Network Industries Strategies 2006 – 2012

Kaleo Consulting President 1997 – 2006

ALT Communications President 1998 – 1999

AT&T Communications District Manager, Local Infrastructure and Access Management 1996 – 1996 Manager, Strategic Access Planning 1994 – 1996 Project Manager / System Engineer, Network Operations 1992 – 1994 Departmental Quality Manager, Network Operations 1990 – 1992 Engineer / Operations Supervisor, Network Operations 1987 – 1989

General Electric Research Engineer, Advanced Technologies Department 1986 – 1987

Education

Georgia State University Master of Business Administration in Finance 1990

Auburn University Bachelor of Science in Electrical Engineering 1986

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Professional Biography

Steven Turner is a Senior Managing Director in the Telecom, Media and Technology (“TMT”) industry practice and is Co-Leader of the TMT Dispute Advisory group. He has over 30 years of experience providing expert testimony in a broad range of technical and financial areas covering the engineering and operations of integrated communications networks, transportation systems and transaction investigations. He also leads many of TMT’s due-diligence and performance improvement engagements related to technology, engineering and network operations, with his work covering the breadth of the TMT industries.

In telecommunications, he and his team provide specific expertise in the wireline (copper, coaxial, fiber, HFC), wireless (4G and 5G) and integrated communications arenas as both industry experts and testifying experts in the U.S. and abroad. In media, Mr. Turner’s work focuses on digital content and distribution systems, often involving an evaluation of capacity and contention issues. In technology, Mr. Turner specializes in transaction applications and technology, including funding mechanisms, cost-of-service analysis, traffic forecasts, and toll road fee structures.

Mr. Turner has testified in nearly 150 separate proceedings on behalf of many of the largest integrated communications carriers, toll roads and other service providers in a variety of jurisdictions on matters related to class certification under Federal Rule 23, industry practices, regulatory compliance, contract interpretation, cost-of-service and pricing, damages, fraud, lost profits, network performance and technical standards and capabilities. Outside of litigation, Mr. Turner leverages his unique combination of engineering, financial, and industry expertise to advise stakeholders on company strategy, acquisitions, divestitures, synergies and due diligence.

Prior to joining FTI Consulting, Mr. Turner worked at AT&T and held a variety of engineering, operations and management positions overseeing the switching, transport and signaling disciplines. Prior to the passage of the Telecom Act of 1996, Mr. Turner worked in the organization responsible for AT&T’s re-entry strategy into the local infrastructure market and evaluated AT&T’s potential entry alternatives through switch and fiber builds, hybrid fiber- coax service, broadband fixed wireless, and others. Mr. Turner was ultimately responsible for developing AT&T’s market entry network plan for the Southwestern Region and the regulatory issues associated with the unbundling of local exchange company networks.

In 1997, Mr. Turner founded Kaleo Consulting, a boutique consulting firm specializing in providing expert testimony in the engineering and operations of integrated communications networks and market entry strategic consulting services.

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List of Proceedings/Cases

United States District Court for the Western District of Arkansas

Civil Action No. 14-5258 Susan Mojica, Individually and on behalf of All Others Similarly Situated, Plaintiffs, v. Securus Technologies, Inc., Defendant Expert Report of Steven E. Turner September 7, 2016 Steven E. Turner Response to Tardiff Rebuttal Report October 24, 2016 Expert Report of Steven E. Turner April 27, 2017 Expert Rebuttal Report of Steven E. Turner May 22, 2017

In the United States District Court – Central District of California

Case No. CV-04-10460 (PJWx) U.S. TelePacific Corp., d/b/a TelePacific Communications, a California corporation, Plaintiff, v. Qwest Communications Corporation, a Delaware corporation, Defendant Preliminary Expert Witness Report August 15, 2005 Preliminary Rebuttal Expert Witness Report September 14, 2005

In the United States District Court – Central District of California – Western Division

Case No. CV 04-10081 (SSx) U.S. TelePacific Corp., d/b/a TelePacific Communications, a California corporation, Plaintiff/Counter- Defendant, v. MCI WorldCom Network Services, Inc., a Delaware corporation, Defendant/Counter-Claimant Preliminary Expert Witness Report October 11, 2005 Preliminary Rebuttal Expert Witness Report November 2, 2005

Before the United States District Court for the Northern District of Illinois – Eastern Division

Case No. 16 cv 06976 INTELIQUENT, INC., Plaintiff & Counterclaim Defendant, v. FREE CONFERENCING CORPORATION, individually and d/b/a HD TANDEM; HDPSTN, LLC d/b/a HD TANDEM; WIDE VOICE, LLC; and JOHN DOES 1-10, Defendants, and MATTHEW CARTER, JR., Counterclaim Defendant. Expert Report of Steven E. Turner August 6, 2019 Expert Rebuttal Report of Steven E. Turner September 30, 2019

Before the United States District Court for the Southern District of Iowa

Civil Action No. 09-CV-2393 CM/KGS In the Matter of Iowa Network Services, Inc., Complainant v. Sprint Nextel Corporation, Sprint United Management Company, and Sprint Corporation, Defendants Expert Report Regarding Tariffed Services and Functional Equivalency September 27, 2010 Responsive Expert Report Regarding Tariffed Services and Functional Equivalency October 26, 2010

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United States District Court for the Southern District of Mississippi (Hattiesburg Division)

Civil Action No. 02:03cv115-KS-MTP Unity Communications, Inc., Plaintiff v. AT&T Mobility, LLC, Defendant Preliminary Responsive Analysis on Expert Witness Report of Mr. Allen G. Buckalew March 17, 2009 Amended Preliminary Responsive Analysis on Expert Witness Report of Mr. Allen G. Buckalew April 9, 2009

United States District Court Western District of North Carolina Charlotte Division

Civil Action No. 3:11cv00597-FDW-DCK The FairPoint Communications, Inc., et al., Litigation Trust, Plaintiff, v. Verizon Communications Inc., The NYNEX Corporation, Verizon New England Inc., CELLCO Partnership d/b/a Verizon Wireless of the East LP, Defendants Expert Report of Steven E. Turner of FTI Consulting Submitted on behalf of Mark Holiday Litigation Trustee December 3, 2012 of the FairPoint Inc. et al. Litigation Trust

United States District Court of South Carolina Charleston and Columbia Division

Case Nos. 2:17-cv-02534-RMG and 3:18-cv-01295-RMG County of Charleston, South Carolina, Plaintiff, v. AT&T Corp., et al., Defendants and County of Richland, South Carolina, Plaintiff, v. AT&T Corp. Rebuttal Expert Report of Steven E. Turner July 17, 2019

United States District Court Eastern District of Tennessee at Chattanooga

Case No. 1:11-cv-330 Hamilton County Emergency Communications District, Plaintiff v. BellSouth Telecommunications, LLC, Defendant Expert Report of Steven E. Turner on behalf of AT&T November 15, 2013 Declaration of Steven E. Turner December 3, 2013 Expert Report of Steven E. Turner on behalf of AT&T Supplemented February 28, 2014 Expert Report of Steven E. Turner in Rebuttal to Expert Report Submitted by Dr. Mohammed AhmadiMarch 7, 2014 and Randal B. Hebert Expert Report of Steven E. Turner on behalf of AT&T Second Supplement March 21, 2014 Expert Report of Steven E. Turner in Rebuttal to Expert Report Submitted by Dr. Mohammed Ahmadi and March 21, 2014 Randal B. Hebert First Supplement Supplemental Expert Report of Steven E. Turner on behalf of BellSouth January 2, 2018 Declaration of Steven E. Turner February 13, 2018 Supplemental Declaration of Steven E. Turner March 6, 2018

Case Nos. 1:14-cv-370 and 1:14-cv-371 Blount County Emergency Communications District, et al., Plaintiffs, vs. AT&T Corp., Defendant and Blount County Emergency Communications District, et al., Plaintiffs, vs. Teleport Communications America, LLC Rebuttal Expert Report of Steven E. Turner September 30, 2019 Declaration of Steven E. Turner in Support of AT&T October 28, 2019

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In the United States District Court for the Northern District of Texas – Dallas Division

Civil Action No. 3:10-CV-0868-G Mirna Reyes, et al., Plaintiffs, vs. North Texas Tollway Authority (NTTA), Defendant Oral and Videotaped Deposition of Steven Turner as the 30(b)(6) Representative of the North TexasJuly 24, 2015 Tollway Authority Expert Report of Steven E. Turner on behalf of North Texas Tollway Authority October 29, 2015 Expert Rebuttal Report of Steven E. Turner on behalf of North Texas Tollway Authority December 4, 2015

In the United States District Court – Eastern District of Virginia – Alexandria Division

Civil Action No. 1:04-VC-1479 MCI-WorldCom Network Services, Inc., Plaintiff/Counterclaim Defendant, v. PAETEC Communications, Inc., Defendant/Counterclaim Plaintiff Expert Witness Report May 23, 2005 Affidavit of Steven E. Turner July 15, 2005

Superior Court of New Jersey – Law Division, Middlesex County

In the Circuit Court of Cook County, Illinois

Case No. 2015 L 003210 (Consolidated with 15 L 3448) Guaranteed Rate, Inc., Plaintiff/Counter-Defendant, v. Netrix, LLC, Defendant/Counter-Plaintiff Expert Rebuttal Report of Steven E. Turner April 24, 2019

In the Court of Chancery of the State of Delaware

C.A. No. 8508-VCL ACP Master, LTD., Aurelius Capital Master, LTD., and Aurelius Opportunities Fund II, LLC, Plaintiffs v. Sprint Corporation, Sprint Communications Inc., Starburst I, Inc. and Softbank Corp., Defendants Expert Rebuttal Report of Steven E. Turner October 23, 2015

C.A. No. 5878-VCL Hebert Chen and Derek Sheeler Individually and on Behalf of All Others Similarly Situated vs. Robert Howard- Anderson et al. Expert Report of Steven E. Turner October 17, 2014 Rebuttal Report of Steven E. Turner November 18, 2014

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In the United States Bankruptcy Court for the District of Hawaii

Case No. 08-02005 (Chapter 11) In re: Hawaiian Telcom Communications, Inc. et al. Debtors and Debtors-in-Possession Valuation of the Telecommunications Assets of Hawaiian Telcom’s Network Located in the State of Hawaii October 7, 2009 on the Islands of Oahu, Maui, Hawaii, Kauai, Molokai, and Lanai for Unsecured Creditors Committee by Steven E. Turner, Managing Director, Network Industry Strategies – Telecom, FTI Consulting Declaration of Steven E. Turner in Support of the Objection of the Official Committee of Unsecured November 2, 2009 Creditors of Hawaiian Telcom Communications, Inc., to Confirmation of the Joint Chapter 11 Plan of Reorganization of Hawaiian Telcom Communications, Inc. and Its Debtor Affiliates

In the United States Bankruptcy Court for the Western District of Texas – Austin Division

Case Nos. 16-10262, 16-10263, and 16-10264 (Chapter 11) Jointly Administered Under Case No. 16-10262- TMD Adversary No.: 18-cv-01030 In re: SH 130 Concession Company, LLC, Zachry Toll Road, Debtors and SH 130 Concession Company, LLC, Plaintiff, against Central Texas Highway Constructors, LLC, et al, Defendants Expert Report of Steven E. Turner December 4, 2019 Expert Rebuttal Report of Steven E. Turner May 1, 2020

American Arbitration Association

CarrierCom Corporation v. Lucent Technologies Inc., et al., Defendants Preliminary Responsive Analysis by Steven E. Turner March 24, 2003

International Centre for Dispute Resolution

Case No. 01-19-0003-0648 WorldNet Telecommunications, Inc., Claimant, v. Puerto Rico Telephone Company, Inc., Respondent Direct Testimony of Steven E. Turner June 5, 2020

Case No. 50 494 T 0035512 WorldNet Telecommunications, Inc., Claimant, v. Puerto Rico Telephone Company, Inc., Respondent Direct Testimony of Steven E. Turner July 17, 2013 Direct Testimony of Steven E. Turner August 5, 2013

Financial Industry Regulatory Authority, Inc. (FINRA), Division of Arbitration

FINRA Case No. 18-00974 S. Robert Levine, Individually and as trustee of the Levine Family Charitable Trust, Tare Levine, Michael Allen, as trustee of the S. Robert Levine Retained Annuity Trust 2010 and the S. R. Levine Children’s Trust, and Joe Russillo, as trustee of the S.R. Levine Children’s Trust, Claimants, vs. Merrill Lynch, Pierce, Fenner & Smith Incorporated, Respondent. Live Testimony of Steven E. Turner April 25, 2019

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JAMS/ENDISPUTE, San Francisco, California

JAMS Reference No. 1110016198 FORTIS ADVISORS LLC, as Effective Time Holders’ Agent, Claimant vs. SHORETEL, INC., Respondent Expert Report of Steven E. Turner on behalf of Fortis Advisors LLC July 31, 2014

Before the Canadian Radio-television and Telecommunications Commission

CRTC 2010-43 Proceeding to Review Access to Basic Telecommunications Services and Other Matters Expert Report of Mr. Steven E. Turner on behalf of Bell Canada and Bell Aliant April 26, 2010

Before the Federal Communications Commission

WC Docket No. 12-375 Rates for Interstate Inmate Calling Services Report Implementing the FCC Mandatory Data Collection on behalf of Securus Technologies, Inc. July 17,2014 Report on Price Elasticity of Demand for Interstate Inmate Calling Services on behalf of SecurusJanuary 12, 2015 Technologies, Inc. Response to Second Further Notice Declaration of Coleman Bazelon and Expert Report of Don J. Wood January 27, 2015 on behalf of Securus Technologies, Inc. FTI Consulting, Inc. Comments on FCC Order on behalf of Securus Technologies, Inc. December 22, 2015

CG Docket Nos. 10-51 and 03-123 In the Matter of Structure and Practices of the Video Relay Service Program; Telecommunications Relay Services and Speech-to-Speech Services for Individuals with Hearing and Speech Disabilities Report of Steven E. Turner November 14, 2012

FCC File No. EB-07-MD-001 In the Matter of Qwest Communications Corporation, Complainant v. Farmers and Merchants Mutual Telephone Company, Defendant Responsive Expert Report Regarding Functional Equivalency August 31, 2010

CC Docket No. 03-XXX In the Matter of: IDS Complaint Against BellSouth Telecommunications Corp. Regarding Non Cost-Based Pricing of Daily Usage Feeds Affidavit of Steven E. Turner on behalf of IDS September 2003

CC Docket Nos. 00-218, 00-249, and 00-251 In the Matter of Petition of WorldCom, Inc. Pursuant to Section 252(e)(5) of the Communications Act for Expedited Preemption of the Jurisdiction of the Virginia State Corporation Commission Regarding Interconnection Disputes with Verizon Virginia Inc., and for Expedited Arbitration, et al. Rebuttal Testimony of Steven E. Turner on behalf of AT&T and WorldCom August 27, 2001 Surrebuttal Testimony of Steven E. Turner on behalf of AT&T and WorldCom September 20, 2001

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CC Docket No. 00-217 In the Matter of Joint Application by SBC Communications Inc., Southwestern Bell Telephone Company, Southwestern Bell Communications Services, Inc. d/b/a Southwestern Bell Long Distance for Provision of In- Region, InterLATA Services in Kansas and Oklahoma Declaration of Steven E. Turner on behalf of AT&T Corp. November 12, 2000

CC Docket No. 00-04 In the Matter of Application of SBC Communications Inc., Southwestern Bell Telephone Company, and Southwestern Bell Communications Services, Inc., d/b/a Southwestern Bell Long Distance for Provision of In- Region, InterLATA Services in Texas Declaration of A. Daniel Kelley and Steven E. Turner on behalf of AT&T Corp. January 31, 2000

CC Docket No. 00-65 In the Matter of Application of SBC Communications Inc., Southwestern Bell Telephone Company, and Southwestern Bell Communications Services, Inc., d/b/a Southwestern Bell Long Distance for Provision of In- Region, InterLATA Services in Texas Supplemental Declaration of A. Daniel Kelley and Steven E. Turner on behalf of AT&T Corp. April 24, 2000

CC Docket No. 97-121 In the Matter of Application of SBC Communication Inc. for Authorization Under Section 271 of the Communications Act to Provide In-Region, InterLATA Service in the State of Oklahoma Affidavit of Steven E. Turner on behalf of AT&T Corp. May 1997

Before the Enforcement Bureau of the Federal Communications Commission

File No. EB-11-TC-028 Purple Communications Inc. Letter of Inquiry from the FCC Enforcement Bureau of January 23, 2012 Expert Report of Steven E. Turner on behalf of Purple Communications Inc. Regarding Internet Protocol Relay July 20, 2012 Service Eligibility for ITRS Funds

State of Florida – Division of Administrative Hearings

Case No. 15-5002BID AT&T Corp, Petitioners, vs. Department of Management Services, Respondent(s) Expert Deposition of Steven E. Turner on behalf of AT&T Corp. October 5, 2015 Expert Deposition of Steven E. Turner on behalf of AT&T Corp. October 12, 2015 Oral Direct Testimony and Cross-Examination of Steven E. Turner on behalf of AT&T Corp. October 13, 2015

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Before the State Office of Administrative Hearings for Texas

SOAH Docket No. 473-16-3891, Texas PUC Docket No. 45470 Complaint of Crown Castle NG Central LLC Against the City of Dallas for Imposition of a License Agreement and Fees for Use of Public Right-of-Way in Violation of Chapter 283 of the Texas Local Government Code and P.U.C. Subst. R. 26.461, 26.465 and 26.467 Direct Testimony of Steven E. Turner on behalf of the City of Dallas September 7, 2016 Rebuttal Testimony of Steven E. Turner on behalf of the City of Dallas October 11, 2016 Affidavit of Steven E. Turner August 8, 2017

SOAH Docket No. 473-16-1861, Texas PUC Docket No. 45280 Complaint of Extenet Network Systems, Inc. Against the City of Houston for Imposition of Fees for Use of Public Right-of-Way in Violation of Chapter 283 of the Texas Local Government Code and P.U.C. Subst. R. 26.461, 26.465 and 26.467 Direct Testimony of Steven E. Turner on behalf of the City of Houston August 9, 2016 Rebuttal Testimony of Steven E. Turner on behalf of the City of Houston September 13, 2016

Gwinnett County Superior Court

Case No. 14-A-07233-1 BellSouth Telecommunications v. Sago Networks, et al. Expert Report of Steven E. Turner – FTI Consulting, Inc. on behalf of BellSouth Telecommunications November 10, 2014

In the District Court of Collin County, Texas 401st Judicial District

Case No. 401-1014-01 The Telephone Connection of Los Angeles Inc., Plaintiff, vs. Lucent Technologies Inc., Excel Switching Corporation, Intercall Communications and Consulting Inc., Nathan Franzmeier, and Emergent Network Solutions, Inc., Defendants Responsive Analysis on Preliminary Damages Report of Mr. George P. Roach by June 11, 2002 Kaleo Consulting – Steven E. Turner Responsive Analysis on Preliminary Damages Report of Mr. George P. Roach by August 29, 2002 Kaleo Consulting – Steven E. Turner

Before the Alabama Public Service Commission

Docket No. 29054 In re: Implementation of Federal Communications Commission’s Triennial Review Order (Phase II – Local Switching for Mass Market Customers), Direct Testimony of Steven E. Turner on behalf of AT&T Communications of the Southern States, LLC January 20, 2004 Surrebuttal Testimony of Steven E. Turner on behalf of AT&T Communications of the Southern States, LLC March 24, 2004

Rebuttal Testimony of Steven E. Turner on behalf of the City of Houston September 13, 2016

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Docket No. 25835 In Re: Petition for Approval of a Statement of Generally Available Terms and Conditions Pursuant to §252(f) of the Telecommunications Act of 1996 and Notification of Intention to File a Petition for In-region InterLATA Authority with the FCC Pursuant to §271 of the Telecommunications Act of 1996 Rebuttal Testimony of Steven E. Turner on behalf of AT&T Communications of the South Central States, Inc. and June 5, 2001 TCG Midsouth, Inc.

Before the Regulatory Commission of Alaska

Docket No. U-14-113 In the Matter of the Application Filed by Securus Technologies, Inc. for a Certificate of Public Convenience and Necessity Inmate Calling Services Cost Analysis for the State of Alaska November 13, 2014

Before the Public Service Commission of the State of Arkansas

Docket No. 00-211-U In the Matter of the Application of Southwestern Bell Telephone Company for Authorization to Provide In-Region InterLATA Services Pursuant to Section 271 of the Telecommunications Act of 1996 and for Approval of the Arkansas 271 Interconnection Agreement Direct Testimony of Steven E. Turner on behalf of AT&T Communications of the Southwest, Inc.October 16, 2000

Docket No. 97-XXX-U In the Matter of Southwestern Bell Telephone Company – Arkansas’ Application for Approval of SGAT Statement of Robert V. Falcone and Steven E. Turner on behalf of AT&T Communications of the Southwest, Inc. June 5, 1997

Before the Public Utilities Commission of the State of California

Rulemaking 93-04-003 and Investigation 93-04-002 Rulemaking on the Commission’s Own Motion to Govern Open Access to Bottleneck Services and Establish a Framework for Network Architecture Development of Dominant Carrier Networks and Investigation on the Commission’s Own Motion into Open Access and Network Architecture Development of Dominant Carrier Networks Declaration of John C. Donovan, Brian F. Pitkin, and Steven E. Turner in Support of Reply CommentsAugust 6, 2004 of Joint Commentors Declaration of Robert A. Mercer and Steven E. Turner in Support of Reply Comments of Joint Commentors October 8, 2004 Joint Declaration of Robert A. Mercer, Brian F. Pitkin, and Steven E. Turner in Support of Reply Comments November 9, 2004 of Joint Commentors

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Case No. R.95-04-043 and Case No. I.95-04-044 Order Instituting Rulemaking on the Commission’s Own Motion into Competition for Local Exchange Service; and Order Instituting Investigation on the Commission’s Own Motion into Competition for Local Exchange Service Rebuttal Testimony of Steven E. Turner on behalf of AT&T Communications of California, Inc.January 28, 2004

Application 01-02-024 (Filed February 21, 2001) et al., Joint Application of AT&T Communications of California, Inc. (U 5002 C) and WorldCom, Inc. for the Commission to Reexamine the Recurring Costs and Prices of Unbundled Switching in Its First Annual Review of Unbundled Network Element Costs Pursuant to Ordering Paragraph 11 of D.99-11-050. Declaration of John C. Donovan, Brian F. Pitkin, and Steven E. Turner in support of Joint Applicants’ Reply February 7, 2003 Comments

Docket Nos. R.93-04-003 (Filed April 7, 1993) – I.93-04-002 (Filed April 7, 1993) Rulemaking on the Commission’s Own Motion to Govern Open Access to Bottleneck Services and Establish a Framework for Network Architecture Development of Dominant Carrier Networks Investigation of the Commission’s Own Motion to Open Access and Network Architecture Development of Dominant Carrier Networks Supplemental Direct Testimony of Steven E. Turner on behalf of AT&T Communications of California, Inc., March 15, 2000 Covad Communications Company, FirstWorld Communications, Inc., ICG Telecom Group, Inc., WorldCom Inc., NEXTLINK California, and Rhythms Links, Inc. Supplemental Reply Testimony of Steven E. Turner on behalf of AT&T Communications of California, Inc., April 20, 2000 Covad Communications Company, FirstWorld Communications, Inc., ICG Telecom Group, Inc., WorldCom Inc., NEXTLINK California, and Rhythms Links, Inc. Supplemental Rebuttal Testimony of Steven E. Turner on behalf of AT&T Communications of California, Inc., April 26, 2000 Covad Communications Company, FirstWorld Communications, Inc., ICG Telecom Group, Inc., WorldCom Inc., NEXTLINK California, and Rhythms Links, Inc. Supplemental Testimony of Steven E. Turner on Collocation Outside the Central Office on behalf ofMay 2, 2000 AT&T Communications of California, Inc., Covad Communications Company, FirstWorld Communications, Inc., ICG Telecom Group, Inc., MCI WorldCom Inc., MGC Communications, Inc., New Edge Network, Inc. d/b/a New Edge Networks, NEXTLINK California, Northpoint Communications, Inc., and Rhythms Links, Inc.

Notice of Intent to File Section 271 Application of SBC Communications Inc., Pacific Bell, and Pacific Bell Communications Inc., for Provision of In-Region, InterLATA Services in California Affidavit of Steven E. Turner on behalf of AT&T Communications of California, Inc. August 13, 1999

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Docket Nos. R.93-04-003 – I.93-04-002 (Collocation Phase) Rulemaking on the Commission’s Own Motion to Govern Open Access to Bottleneck Services and Establish a Framework for Network Architecture Development of Dominant Carrier Networks Investigation of the Commission’s Own Motion to Open Access and Network Architecture Development of Dominant Carrier Networks Direct Testimony of Steven E. Turner on behalf of Accelerated Connections, Inc., December 18, 1998 AT&T Communications of California, Inc., Covad Communications Company, FirstWorld Communications, Inc., ICG Telecom Group, Inc., NEXTLINK California, MCI Telecommunications Corporation, MGC Communications, Inc., and WorldCom Technologies, Inc. Reply Testimony of Steven E. Turner on behalf of Accelerated Connections, Inc., January 11, 1999 AT&T Communications of California, Inc., Covad Communications Company, FirstWorld Communications, Inc., ICG Telecom Group, Inc., NEXTLINK California, MCI Telecommunications Corporation, MGC Communications, Inc., and WorldCom Technologies, Inc. Rebuttal Testimony of Steven E. Turner on behalf of Accelerated Connections, Inc., February 8, 1999 AT&T Communications of California, Inc., Covad Communications Company, FirstWorld Communications, Inc., ICG Telecom Group, Inc., NEXTLINK California, MCI Telecommunications Corporation, MGC Communications, Inc., and WorldCom Technologies, Inc.

Docket Nos. R.93-04-003 – I.93-04-002 (Pacific Bell) Rulemaking on the Commission’s Own Motion to Govern Open Access to Bottleneck Services and Establish a Framework for Network Architecture Development of Dominant Carrier Networks Investigation of the Commission’s Own Motion to Open Access and Network Architecture Development of Dominant Carrier Networks Direct Testimony of Steven E. Turner on behalf of AT&T Communications of the Southwest, Inc. andApril 6, 1998 MCIMetro Transmission Access Services, Inc. Rebuttal Testimony of Steven E. Turner April 22, 1998

Unknown Application of AT&T Communications of the Southwest, Inc. for Compulsory Arbitration to Establish an Interconnection Agreement between AT&T and Pacific Bell Telephone Company Joint Declaration of Steven E. Turner and Rick Bissell December 15, 1997 Rebuttal Statement of Steven E. Turner March 4, 1998 Supplemental Rebuttal Statement of Steven E. Turner March 20, 1998

Public Utility Commission of Colorado

Docket No. 97A-011T In Re: Application of US West Communications, Inc. for the Interconnection Cost Adjustment Mechanism Testimony of Steven E. Turner August 8, 1997

Before the Public Service Commission of Delaware

PSC Docket No. 99-251 In the Matter of the Application of Bell Atlantic-Delaware, Inc. for Approval of CLEC Collocation Interconnection Services (Filed May 28, 1999) Direct Testimony of Steven E. Turner January 14, 2000 Rebuttal Testimony of Steven E. Turner February 24, 2000 Surrebuttal Testimony of Steven E. Turner March 31, 2000 13 | P a g e REDACTED – FOR PUBLIC INSPECTION

Before the Florida Public Service Commission

Docket No. 030851-TP In re: Implementation of Requirements Arising from Federal Communications Commission Triennial UNE Review: Local Circuit Switching for Mass Market Customers Direct Testimony of Steven E. Turner December 4, 2003 Supplemental Direct Testimony of Steven E. Turner December 22, 2003 Surrebuttal Testimony of Steven E. Turner January 27, 2004

Docket No. 981834-TP and Docket No. 990321-TP In re: Petition of Competitive Carriers for Commission Action to Support Local Competition in BellSouth’s Service Territory; In re: Petition of ACI Corp. d/b/a Accelerated Connections, Inc. for Generic Investigation to Ensure that BellSouth Telecommunications, Inc., Sprint-Florida, Incorporated, and GTE Florida Incorporated Comply with Obligations to Provide Alternative Local Exchange Carriers with Flexible, Timely, and Cost- Efficient Physical Collocation Rebuttal Testimony of Steven E. Turner April 18, 2003

Docket No. 960786-TL In the Matter of Consideration of BellSouth Telecommunications, Inc.’s Entry into InterLATA Services Pursuant to Section 271 of the Federal Communications Act of 1996 Rebuttal Testimony of Steven E. Turner July 20, 2001

Docket No. 000731-TP In the Matter of Petition by AT&T Communications of the Southern States d/b/a AT&T for Arbitration of Certain Terms and Conditions of a Proposed Agreement with BellSouth Communications, Inc. Pursuant to 47 U.S.C. Section 252 Rebuttal Testimony of Steven E. Turner January 3, 2001

Before the Georgia Public Service Commission

Docket No. 17749-U In re: Federal Communications Commission’s Order Regarding the Impairment of Local Switching for Mass Market Customers Direct Testimony of Steven E. Turner December 23, 2003 Supplemental Direct Testimony of Steven E. Turner December 26, 2003 Surrebuttal Testimony of Steven E. Turner February 18, 2004

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Docket No. 14361-U In Re: Generic Proceeding to Review Cost Studies, Methodologies, Pricing Policies and Cost-Based Rates for Interconnection and Unbundling of BellSouth Telecommunications, Inc.’s Network Rebuttal Testimony of Steven E. Turner April 5, 2002

Docket No. 6863-U In Re: Consideration of BellSouth Telecommunications, Inc.’s Entry into InterLATA Services Pursuant to Section 271 of the Telecommunications Act of 1996 Affidavit of Steven E. Turner May 31, 2001

Before the Public Utilities Commission of the State of Hawaii

Docket No. 7702 In the Matter of the Public Utilities Commission Instituting a Proceeding on Communications, Including an Investigation of the Communications Infrastructure of the State of Hawaii Affidavit of Steven E. Turner August 19, 1999 Direct Testimony of Steven E. Turner June 2, 2000 Reply Testimony of Steven E. Turner September 27, 2000 Rebuttal Testimony of Steven E. Turner November 1, 2000 Surrebuttal Testimony of Steven E. Turner December 13, 2000 Declaration of Steven E. Turner April 2001

Docket No. 7702 In the Matter of Instituting a Proceeding on Communications, Including an Investigation of the Communications Infrastructure of the State of Hawaii Rebuttal Testimony of Steven E. Turner August 27, 1997

State of Illinois, Illinois Commerce Commission

ICC Docket No. 05-0675 In the Matter of the Proposed Revision to the Collocation Tariffs to Eliminate Charges for DC Power on a Per Kilowatt-hour Basis and to Implement Charging on a Per Amp Basis Direct Testimony of Steven E. Turner February 2, 2006 Rebuttal Testimony of Steven E. Turner February 22, 2006 Surrebuttal Testimony of Steven E. Turner March 29, 2006

ICC Docket No. 03-0593 In the Matter of the Implementation of the Federal Communications Commission’s Triennial Review Regarding Local Circuit Switching in SBC llinois Mass Market Rebuttal Testimony of Steven E. Turner February 16, 2004

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ICC Docket No. 02-0864 Illinois Bell Telephone Company Filing to Increase Unbundled Loop and Nonrecurring Rates Direct Testimony of Brian F. Pitkin and Steven E. Turner May 6, 2003 Direct Testimony of Steven E. Turner May 6, 2003 Rebuttal Testimony of Brian F. Pitkin and Steven E. Turner February 20, 2004 Rebuttal Testimony of Steven E. Turner February 20, 2004 Surrebuttal Testimony of Brian F. Pitkin and Steven E. Turner March 5, 2004 Surrebuttal Testimony of Steven E. Turner March 5, 2004 Direct Testimony of Steven E. Turner May 6, 2004

Docket No. 01-0662 Illinois Commerce Commission on Its Own Motion Investigation Concerning Illinois Bell Telephone Company’s Compliance with Section 271 of the Telecommunications Act of 1996 Direct Testimony of Steven E. Turner March 20, 2002 Rebuttal Testimony of Steven E. Turner May 20, 2002

ICC Docket No. 00-0393 Illinois Bell Telephone Company Proposed Implementation of High Frequency Portion of Loop (HFPL)/Line Sharing Service Direct Testimony of Steven E. Turner September 1, 2000 Rebuttal Testimony of Steven E. Turner October 4, 2000

Docket No. 98-0396 Illinois Commerce Commission on its Own Motion – Investigation into the compliance of Illinois Bell Telephone Company with the order in Docket 96-0486/0569 Consolidated regarding the filing of tariffs and the accompanying cost studies for interconnection, unbundled network elements and local transport and termination and regarding end to end bundling issues Direct Testimony of Steven E. Turner March 29, 2000 Surrebutal Testimony of Steven E. Turner July 12, 2000

ICC Docket No. 99-0511 Illinois Commerce Commission on its Own Motion Revision of 83 Ill. Adm. Code 790 Direct Testimony of Steven E. Turner March 3, 2000 Rebuttal Testimony of Steven E. Turner April 10, 2000 Surrebuttal Testimony of Steven E. Turner June 27, 2000

ICC Docket No. 98-0555 In the Matter of the Commission’s Review of the SBC – Ameritech Merger for the State of Illinois Testimony of Steven E. Turner July 9, 1999

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Before the Indiana Utility Regulatory Commission

Case No. 42500-SI In the Matter of the Indiana Utility Regulatory Commission’s Investigation of Matters Related to the Federal Communication Commission’s Report and Order on Remand and Further Notice of Proposed Rulemaking in CC Docket Nos. 01-338, 96-98, and 98-147 Rebuttal Testimony of Steven E. Turner March 15, 2004

Case No. 42393 In the Matter of the Commission Investigation and Generic Proceeding of Rates and Unbundled Network Elements and Collocation for Indiana Bell Telephone Company, Incorporated d/b/a SBC Indiana Pursuant to the Telecommunications Act of 1996 and Related Indiana Statutes Response Testimony of Brian F. Pitkin and Steven E. Turner August 15, 2003 Response Testimony of Steven E. Turner August 15, 2003

Case No. 40611-S1 In the Matter of the Commission Investigation and Generic Proceeding on Ameritech Indiana’s Rates for Interconnection, Service, Unbundled Elements, and Transport and Termination Under the Telecommunications Act of 1996 and Related Indiana Statutes Direct Testimony of Steven E. Turner October 15, 2001 Rebuttal Testimony of Steven E. Turner November 20, 2001 Surrebuttal Testimony of Steven E. Turner December 11, 2001

Before the State Corporation Commission of the State of Kansas

Docket No. 07-RRLT-717-COM In the Matter of a Complaint Regarding Failure of Rural Telephone Service Company, Inc., to Provide Interconnection Direct Testimony of Steven E. Turner February 7, 2007

Docket No. 04-SWBT-544-COM In the Matter of the Complaint of South Central Wireless, Inc. d/b/a SC Telcom Against Southwestern Bell Telephone, L.P. d/b/a SBC Kansas for Overcharges Related to Power Use for Collocation Direct Testimony of Steven E. Turner April 15, 2005 Rebuttal Testimony of Steven E. Turner June 3, 2005

Case No. TO-2004-0207 Direct Testimony of Steven E. Turner January 30, 2004

Docket No. 97-SWBT-411-GIT In the Matter of Southwestern Bell Telephone Company – Kansas’ Compliance with Section 271 of the Federal Telecommunications Act of 1996, Direct Testimony of Steven E. Turner July 19, 2000

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Docket No. 00-SWBT-733-TAR In the Matter of Southwestern Bell Telephone Company Filing Tariff Revisions to Establish a New Local Access Services Tariff for Physical Collocation Arrangements Furnished or Made by SWBT in the State of Kansas Direct Testimony of Steven E. Turner April 24, 2000 Direct Testimony Supplement of Steven E. Turner September 26, 2000 Rebuttal Testimony of Steven E. Turner November 9, 2000

Unknown In the Matter of Southwestern Bell Telephone Company – Kansas’ Compliance with Section 271 of the Federal Telecommunications Act of 1996 Statement of Steven E. Turner May 1998

Unknown In the Matter of Southwestern Bell Telephone Company – Kansas’ Compliance with Section 271 of the Federal Telecommunications Act of 1996 Statement of Steven E. Turner March 13, 1997

Commonwealth of Kentucky, Before the Public Service Commission

Case No. 2006-00316 In the Matter of: Petition of SouthEast Telephone, Inc. for Arbitration of Certain Terms and Conditions of Proposed Agreement with BellSouth Telecommunications, Inc., Concerning Interconnection Under the Telecommunications Act of 1996 Direct Testimony of Steven E. Turner November 3, 2006 Rebuttal Testimony of Steven E. Turner December 15, 2006

Case No. 2006-00099 Petition of: Dialog Telecommunications for Arbitration of Certain Terms and Conditions of Proposed Agreement with BellSouth Telecommunications, Inc. Concerning Interconnection under the Telecommunications Act of 1996 Direct Testimony of Steven E. Turner July 26, 2006 Rebuttal Testimony of Steven E. Turner August 9, 2006

Case No. 2003-00379 Review of the Federal Communications Commission’s Triennial Review Order Regarding Unbundling Requirements for Individual Network Elements Direct Testimony of Steven E. Turner February 11, 2004 Surrebuttal Testimony of Steven E. Turner LLC, April 13, 2004

Docket No. 2001-105 In the Matter of Application of BellSouth Telecommunications, Inc. to Provide In-Region InterLATA Services Pursuant to Section 271 of the Telecommunications Act of 1996 Rebuttal Testimony of Steven E. Turner July 6, 2001

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Before the Louisiana Public Service Commission

Docket No. U-22252 In re: Consideration and review of BellSouth Telecommunications, Inc.’s pre-application compliance with Section 271 of the Telecommunications Act of 1996, including but not limited to, the fourteen requirements set forth in Section 271(c)(2)(B) in order to verify compliance with Section 271 and provide a recommendation to the Federal Communications Commission regarding BellSouth Telecommunications, Inc.’s application to provide InterLATA services originating in-region Affidavit of Steven E. Turner June 8, 2001

Commonwealth of Massachusetts Department of Telecommunications and Energy

Docket No. DTE 01-20 Investigation by the Department of Telecommunications and Energy on its own Motion into the Appropriate Pricing, based upon Total Element Long-Run Incremental Costs, for Unbundled Network Elements and Combinations of Unbundled Network Elements, and the Appropriate Avoided Cost Discount for Verizon New England, Inc. d/b/a Verizon Massachusetts’ Resale Services in the Commonwealth of Massachusetts Rebuttal Testimony of Steven E. Turner July 18, 2001 Surrebuttal Testimony of Steven E. Turner December 17, 2001 Affidavit of Steven E. Turner March 1, 2002 Direct Testimony of Steven E. Turner on Reconsideration October 2, 2002 Rebuttal Testimony of Steven E. Turner on Reconsideration October 16, 2002

DTE 98-57 Investigation by the Department on its Own Motion as to the Propriety of the Rates and Charges Set Forth in the Following Tariffs: M.D.T.E. Nos. 14 and 17, Filed with the Department on December 11, 1998, to become Effective January 10, 1999, by New England Telephone and Telegraph Company d/b/a Bell Atlantic – Massachusetts Direct Testimony of Steven E. Turner January 24, 2000

Before the Michigan Public Service Commission

Case No. U-13531 In the Matter, on the Commission’s Own Motion, to Review the Costs of Telecommunications Services Provided by SBC Ameritech Michigan Affidavit of Brian F. Pitkin and Steven E. Turner January 20, 2004 Sworn Statement of Steven E. Turner January 20, 2004 Sworn Statement of Steven E. Turner March 22, 2004 Reply Testimony of Brian F. Pitkin and Steven E. Turner May 10, 2004 Reply Testimony of Steven E. Turner May 10, 2004 Reply Testimony of Steven E. Turner Regarding Collocation Costs May 10, 2004

Case No. U-12320 In the matter, on the Commission’s own motion, to consider Ameritech Michigan’s compliance with the competitive checklist in Section 271 of the Telecommunications Act of 1996 Affidavit of Steven E. Turner June 29, 2001

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MPSC Case No. U-11831 In the Matter, on the Commission’s Own Motion, to Consider the Total Service Long Run Incremental Costs and to Determine the Prices for All Access, Toll, and Basic Local Exchange Services Provided by Ameritech Michigan Opening Affidavit of Steven E. Turner April 1, 1999 Reply Affidavit of Steven E. Turner June 17, 1999 Opening Affidavit of Steven E. Turner (Phase II) August 26, 1999 Reply Affidavit of Steven E. Turner (Phase II) September 30, 1999

Before the Mississippi Public Service Commission

Docket No. 97-AD-0321 In the Matter Of: Investigation Concerning the Propriety of Provision of InterLATA Services by BellSouth Telecommunications, Inc. Pursuant to the Telecommunications Act of 1996 Rebuttal Testimony of Steven E. Turner June 22, 2001

Before the Missouri Public Service Commission

Case No. TO-2008-225 Socket Telecom, LLC, Complianant, v. CenturyTel of Missouri, LLC DBA CenturyTel and Spectra Communications Group, LLC DBA CenturyTel, Respondents Direct Testimony of Steven E. Turner March 17, 2008 Surrebuttal Testimony of Steven E. Turner February 17, 2009

Case No. TO-2006-0299 Petition of Socket Telecom, LLC for Compulsory Arbitration of Interconnection Agreements with CenturyTel of Missouri, LLC and Spectra Communications, LLC Pursuant to Section 252(b)(1) of the Telecommunications Act of 1996 Confidential Direct Testimony of Steven E. Turner March 21, 2006 Confidential Rebuttal Testimony of Steven E. Turner April 6, 2006 Confidential Supplemental Rebuttal Testimony of Steven E. Turner May 31, 2006

Case No. TO-2002-222 Petition of MCIMetro Access Transmission Services, LLC, Brooks Fiber Communications of Missouri, Inc., and MCI WorldCom Communications, Inc. for Arbitration of an Interconnection Agreement with Southwestern Bell Telephone Company under the Telecommunications Act of 1996 Direct Testimony of Steven E. Turner December 18, 2001 Rebuttal Testimony of Steven E. Turner January 7, 2002

Case No. TO-2001-438 In the Matter of the Determination of Prices, Terms, and Conditions of Certain Unbundled Network Elements Rebuttal Testimony of Steven E. Turner October 26, 2001

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Unknown In the Matter of Southwestern Bell Telephone Company’s Proposed Tariff PSC Mo. No. 42 Local Access Service Tariff Regarding Physical and Virtual Collocation Direct Testimony of Steven E. Turner December 27, 2000 Rebuttal Testimony of Steven E. Turner February 1, 2001 Surrebuttal Testimony of Steven E. Turner March 8, 2001

Docket No. TO-99-727 Application of Southwestern Bell Telephone Company to Provide Notice of Intent to File an Application for Authorization to Provide In-Region InterLATA Services Originating in Missouri Pursuant to Section 271 of the Telecommunications Act of 1996 Direct Testimony of Steven E. Turner August 28, 2000

Unknown In the Matter of Southwestern Bell Telephone Company – Missouri’s Compliance with Section 271 of the Federal Telecommunications Act of 1996 Statement of Steven E. Turner January 25, 1999

Unknown In the Matter of AT&T Communications of the Southwest, Inc.’s Petition for Second Compulsory Arbitration Pursuant to Section 252(b) of the Telecommunications Act of 1996 to Establish an Interconnection Agreement with Southwestern Bell Telephone Company Joint Position Statements November 1997

Before the Nebraska Public Service Commission

Application FC-1336 Nebraska Technology & Telecommunications, Inc., Complianant, v. Windstream Nebraska, Inc., Respondent Direct Testimony of Steven E. Turner August 19, 2009

Docket No. C-3847 In the Matter of the Petition of Nebraska Technology & Telecommunications, Inc. for Arbitration of an Interconnection Agreement with Windstream Nebraska, Inc. Pursuant to Section 252 of the Telecommunications Act of 1996 Direct Testimony of Steven E. Turner September 25, 2007 Rebuttal Testimony of Steven E. Turner October 5, 2007

Docket No. C-1415 In the Matter of the Commission, on its Own Motion, to Investigate US West Communications’ Cost to Establish Rates for Interconnection, Unbundled Network Elements, Transport and Termination and Resale Services Direct Testimony of Steven E. Turner August 12, 1998 Rebuttal Testimony of Steven E. Turner September 9, 1998

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Before the Nevada Public Utilities Commission

Docket No. 00-7006 In re filing of Nevada Bell Telephone Company of revisions to Tariff PUCN No. C19 to add physical and virtual collocation as part of its access services tariff Reply Testimony of Steven E. Turner November 30, 2000

Docket No. 99-11035 In re petition of the Staff of the Public Utilities Commission to open a docket to investigate costing and pricing issues related to industry-wide collocation costs pursuant to the Telecommunications Act of 1996 and the Commission’s Regulations Direct Testimony of Steven E. Turner November 3, 2000 Responsive Testimony of Steven E. Turner December 15, 2000 Prepared Testimony of Steven E. Turner Concerning Unresolved Issues April 17, 2001 Affidavit of Steven E. Turner in Support of Opening Brief Regarding Unsettled Issues May 18, 2001

Docket No. 99-12033, Docket No. 99-12034, Docket No. 00-4001 In re filing by Nevada Bell of its Unbundled Network Elements (UNEs) Nonrecurring Cost Study pursuant to the Order in Docket No. 98-6004 In re filing by AT&T Communications of Nevada, Inc. of its Nonrecurring Cost Study for Unbundled Network Elements (UNEs) purchased from Nevada Bell pursuant to the Order issued on Docket No. 98-6004 In re petition of Nevada Bell for review and approval of its cost study and proposed Nonrecurring Cost Study pursuant to the Order in Docket No. 98-6004 Reply Testimony of Steven E. Turner September 1, 2000

Cost Proceeding before the Nevada Public Utilities Commission to Determine Cost-Based Rates for Unbundled Elements and Interconnection for Nevada Bell and Sprint-Centel of Nevada Rebuttal Testimony of Steven E. Turner Regarding Collocation June 1997

State of New Hampshire, New Hampshire Public Utilities Commission

DE 97-171 DC Power Costs (TELRIC/SGAT Remand on Collocation) Rebuttal Testimony of Steven E. Turner July 28, 2003

Before the State of New York Public Service Commission

Case No. 98-C-1357 Proceeding on Motion of the Commission to Examine New York Telephone Company’s Rates for Unbundled Network Elements Panel Reply Testimony June 26, 2000

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Before the New York Public Utilities Commission

Case 03-C-0980 Proceeding on Motion of the Commission as to the Rates, Charges, Rules and Regulations Relating to the Provisioning of Direct Current Power by Verizon New York Inc. for Use in Connection with Collocation Spaces Direct Testimony of Steven E. Turner October 31, 2003 Reply Testimony of Steven E. Turner November 24, 2003

Before the North Carolina Utilities Commission

Docket No. SC-1427, Sub 9 Verified Petition for Waiver of Rule R13-9(d) Report Modifying the July 17, 2014 Report Implementing the FCC Mandatory Data Collection August 30, 2016

Docket No. P-100, SUB 133Q In the Matter of: Triennial Review Order – UNE-P Direct Testimony of Steven E. Turner January 5, 2004 Surrebuttal Testimony of Steven E. Turner March 1, 2004

Docket No. P-100, Sub 133d In Re: Proceeding to Determine Permanent Pricing for Unbundled network Elements Rebuttal Testimony of Steven E. Turner October 15, 2002

Docket No. P-55, Sub 1022 Unknown Rebuttal Testimony of Steven E. Turner September 10, 2001

Before the Public Utilities Commission of Ohio

Case No. 02-1280-TP-UNE In the Matter of the Review of SBC Ohio’s TELRIC Costs for Unbundled Network Elements Response Testimony of Steven E. Turner May 28, 2004

Case No. 04-34-TP-COI In the Matter of the Implementation of the Federal Communications Commission’s Triennial Review Regarding Local Circuit Switching in SBC Ohio’s Mass Market Direct Testimony of Steven E. Turner January 27, 2004

Case No. 00-942-TP-COI In the Matter of the Further Investigation into Ameritech Ohio’s Entry into In-Region InterLATA Service under Section 271 of the Telecommunications Act of 1996 Testimony of Steven E. Turner September 17, 2001

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Case No. 00-1532-TP-COI In the Matter of the Commission Ordered Investigation of an Elective Alternative Regulation Framework for Incumbent Local Exchange Companies Testimony of Steven E. Turner September 10, 2001

Case No. 00-1368-TP-ATA In the Matter of the Application of Ameritech Ohio for Approval of Carrier to Carrier Tariff Direct Testimony of Steven E. Turner October 10, 2000 Rebuttal Testimony of Steven E. Turner January 16, 2001

Before the Oklahoma Corporation Commission

Case No. PUD 200300646 Application of Joyce E. Davidson, Director of the Public Utilities Division, Oklahoma Corporation Commission, to Initiate a Proceeding for the Implementation of the Federal Communications Commission’s Triennial Review Order Direct Testimony of Steven E. Turner March 22, 2004

Case No. PUD 200200518 Applicant: Southwestern Bell Telephone Company Relief Sought: Approval of Revisions to Local Access Service Tariffs (Physical & Virtual Collocation) Direct Testimony of Steven E. Turner December 16, 2003 Rebuttal Testimony of Steven E. Turner January 12, 2004

Case No. PUD 970000560 Application of the Attorney General of the State of Oklahoma, AT&T Communications of the Southwest, Inc., Brooks Fiber Communications of Oklahoma, Inc., Brooks Fiber Communications of Tulsa, Inc., Cox Oklahoma Telecom, Inc., MCI Telecommunications Corporation, and Sprint Communications, L.P. to Explore Southwestern Bell Telephone Company’s Compliance with Section 271(c) of the Telecommunications Act of 1996 Direct Testimony of Steven E. Turner August 17, 2000

Case No. PUD 970000213 Application of Cox Oklahoma Telcom, Inc., for a Determination of the Costs of, and Permanent Rates for the Unbundled Network Elements of Southwestern Bell Telephone Company Direct Testimony of Steven E. Turner January 12, 1998 Rebuttal Testimony of Steven E. Turner February 24, 1998 Summary of Rebuttal Testimony of Steven E. Turner March 4, 1998

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Case No. PUD 970000064 Application of Ernest G. Johnson, Director of the Public Utility Division, Oklahoma Corporation Commission to Explore the Requirements of Section 271 of the Telecommunications Act of 1996 Statement of Steven E. Turner March 2, 1997

Before the Pennsylvania Public Utility Commission

Docket Nos. R-00994697 and R-00994697C0001 Pennsylvania Public Utility Commission Rhythm Links, Inc. vs. Bell Atlantic-Pennsylvania, Inc. Rebuttal Testimony of Steven E. Turner December 21, 1999 Surrebuttal Testimony of Steven E. Turner January 14, 2000 Supplemental Surrebuttal Testimony of Steven E. Turner March 13, 2000

Before the Telecommunications Regulatory Board of Puerto Rico

Case No. JRT-2010-AR-0001 In the matter of WORLDNET TELECOMMUNICATIONS, INC. Petition for arbitration pursuant to Section 47 U.S.C. 252(b) of the Federal Communications Act and Section 5(b), Chapter III, of the Puerto Rico Telecommunications Act, regarding Interconnection rates, terms and conditions with PUERTO RICO TELEPHONE COMPANY Testimony of Steven E. Turner June 22, 2010 Testimony of Steven E. Turner June 22, 2010 Attestation of Steven E. Turner April 25, 2011

Case No. 32 494 00100 09 In the Matter of WORLDNET TELECOMMUNICATIONS, INC. Claimant, v. PUERTO RICO TELEPHONE COMPANY, INC., Respondent Oral Rebuttal Testimony of Steven E. Turner April 17, 2009

Case No. JRT-2007-AR-0001 In the Matter of WORLDNET TELECOMMUNICATIONS, INC. Petition for arbitration pursuant to Section 47 U.S.C. 252(b) of the Federal Communications Act and Section 5(b), Chapter III, of the Puerto Rico Telecommunications Act, regarding Interconnection rates, terms, and conditions with PUERTO RICO TELEPHONE COMPANY Testimony of Steven E. Turner May 20, 2008

Case No. JRT-2007-ARP-0005 In the Matter of Regulation for Quality of Service Measurement and Reporting Declaration of Steven E. Turner January 8, 2008

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Case No. JRT-2007-AR-0001 In the matter of WORLDNET TELECOMMUNICATIONS, INC. Petition for arbitration pursuant to Section 47 U.S.C. 252(b) of the Federal Communications Act and Section 5(b), Chapter III, of the Puerto Rico Telecommunications Act, regarding Interconnection rates, terms and conditions with PUERTO RICO TELEPHONE COMPANY Declaration of Steven E. Turner and Brian F. Pitkin May 4, 2007 Direct Testimony of Steven E. Turner May 10, 2007 Direct Testimony of Steven E. Turner Regarding FLM Restatement May 14, 2007 Reply Testimony of Steven E. Turner May 16, 2007 Supplemental Reply Testimony of Steven E. Turner May 18, 2007

Before the Public Service Commission of South Carolina

Docket No. 2003-326-C IN RE: Analysis of Continued Availability of Unbundled Local Switching for Mass Market Customers Pursuant to the Federal Communications Commission’s Triennial Review Order Direct Testimony of Steven E. Turner January 29, 2004 Surrebuttal Testimony of Steven E. Turner March 31, 2004

Before the Public Utilities Commission of the State of South Dakota

Docket No. TC02-176 Petition of WWC License L.L.C. for Arbitration under the Telecommunications Act of 1996 Rebuttal Testimony of Steven E. Turner February 14, 2003 Surrebuttal Testimony of Steven E. Turner February 28, 2003

Before the Public Utility Commission of Texas

PUC Docket No. 34723 Petition for Review of Monthly per Line Support Amounts from the Texas High Cost Universal Service Plan Pursuant to PURA § 56.031 and P.U.C. SUBST. R. 26.403 Direct Testimony of Steven E. Turner November 16, 2007

Docket No. 29175 Proceeding to Determine Mass Market Hot Cut Process for State Implementation of the Federal Communications Commission’s Triennial Review Order Direct Testimony of Steven E. Turner March 5, 2004 Rebuttal Testimony of Steven E. Turner March 26, 2004

Docket No. 28607 Impairment Analysis of Local Circuit Switching for the Mass Market Direct Testimony of Steven E. Turner February 9, 2004 Rebuttal Testimony of Steven E. Turner March 19, 2004

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Docket No. 28600 Arbitration of Successor Interconnection Agreements to the Texas 271 Agreement Direct Testimony of Steven E. Turner Regarding NRC Cost Studies December 5, 2003 Direct Testimony of Steven E. Turner Regarding Recurring Cost Studies December 5, 2003 Rebuttal Testimony of Steven E. Turner Regarding NRC Cost Studies January 5, 2004 Rebuttal Testimony of Steven E. Turner Regarding Recurring Cost Studies January 5, 2004 Affidavit of Steven E. Turner August 18, 2004

Docket No. 25834 Proceeding on Cost Issues Severed from P.U.C. Docket No. 24542 Direct Testimony of Steven E. Turner November 4, 2002 Rebuttal Testimony of Steven E. Turner February 14, 2003 Affidavit of Steven E. Turner April 23, 2003

Docket No. 24542 Petition of MCIMetro Access Transmission Services, LLC, Sage Telecom, Inc., Texas UNE Platform Coalition, McLeodUSA Telecommunications Services, Inc., and AT&T Communications of Texas, L.P. for Arbitration with Southwestern Bell Telephone Company under the Telecommunications Act of 1996 Direct Testimony of Steven E. Turner December 7, 2001 Rebuttal Testimony of Steven E. Turner December 21, 2001 Affidavit of Steven E. Turner March 7, 2002

Docket No. 22315 Petition of Southwestern Bell Telephone Company for Arbitration with AT&T Communications of Texas, L.P., TCG Dallas, and Teleport Communications, Inc. Pursuant to Section 252(B)(1) of the Federal Telecommunications Act of 1996 Direct Testimony of Steven E. Turner – DSL DLP – All Issues June 15, 2000 Rebuttal Testimony of Steven E. Turner – DSL DLP – All Issues June 29, 2000

Project No. 16251 Investigation of Southwestern Bell Telephone Company’s Entry into the InterLATA Telecommunications Market Affidavit of Steven E. Turner October 27, 1999

Docket No. 20939 Southwestern Bell Telephone Company Request for Post-Interconnection Resolution to Develop Permanent Rates Affidavit of Steven E. Turner August 11, 1999

Docket No. 20170 Complaint of American Local Telecommunications, L.L.C. d/b/a ALT Communications, L.L.C. Against Southwestern Bell Telephone Company Regarding Parity Provisioning of One-Way Optional Extended Area Service Direct Testimony of Steven E. Turner December 29, 1998 Rebuttal Testimony of Steven E. Turner January 5, 1999 Affidavit of Gary P. Nutall and Steven E. Turner February 5, 1999

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Docket No. 16285 Petition of MCI Telecommunications Corporation and its Affiliate MCIMetro Access Transmission Services, Inc. for Arbitration and Request for Mediation under the Federal Telecommunications Act of 1996 Direct Testimony of Steven E. Turner Regarding Virtual Collocation and Entrance Facilities September 1, 1998 Rebuttal Testimony of Steven E. Turner Regarding Virtual Collocation and Entrance FacilitiesSeptember 15, 1998 Supplemental Direct Testimony of Steven E. Turner Regarding SWBT’s DS3 Entrance Facility Cost Study September 15, 1998 Affidavit of Steven E. Turner October 30, 1998

Docket No. 17579 Application of AT&T Communications of the Southwest, Inc. for Compulsory Arbitration of Further Issues to Establish an Interconnection Agreement between AT&T and Southwestern Bell Telephone Company Direct Testimony of Robert Falcone and Steven E. Turner July 28, 1997 Supplemental Direct Testimony of Steven E. Turner (Filed Under Seal) July 28, 1997

Docket No. 16226 Application of AT&T Communications of the Southwest, Inc. for Compulsory Arbitration to Establish an Interconnection Agreement between AT&T and Southwestern Bell Telephone Company Comments of Steven E. Turner April 21, 1997 Direct Testimony of Steven E. Turner Regarding Physical Collocation September 9, 1997 Direct Testimony of Steven E. Turner and Nina W. Cornell September 15, 1997 Prefiled Direct Testimony of Steven E. Turner Regarding Physical Collocation November 26, 1997 Statement of Steven E. Turner Regarding Entrance Facilities January 26, 1998

Before the Washington Utilities Commission and Transportation Commission

Docket No. UT-023003 In the Matter of Unbundled Loop and Switching Rates and Review of the Deaveraged Zone Rate Structure Joint Declaration of Steven E. Turner and David C. Cook September 12, 2003 Rebuttal Testimony of Steven E. Turner April 20, 2004

Docket No. UT-960371 In the Matter of the Pricing Proceeding for Interconnection, Unbundled Elements, Transport and Termination, and Resale, Docket No. UT-960369, In the Matter of the Pricing Proceeding for Interconnection, Unbundled Elements, Transport and Termination, and Resale for US West Communications, Inc., Docket No. UT-960370, In the Matter of the Pricing Proceeding for Interconnection, Unbundled Elements, Transport and Termination, and Resale for GTE Northwest Incorporated Collocation Response Testimony of Steven E. Turner September 18, 1998

Before the Public Service Commission of Wisconsin

Docket No. 6720-TI-187 Petition of Wisconsin Bell, Inc., d/b/a SBC Wisconsin, to Establish Rates and Costs for Unbundled Network Elements Rebuttal Testimony of Brian F. Pitkin and Steven E. Turner June 15, 2004

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Case No. 6720-TI-170 In the matter, on the Commission’s own motion, to consider Ameritech Wisconsin’s compliance with the competitive checklist in Section 271 of the federal Telecommunications Act of 1996 Affidavit of Steven E. Turner July 2, 2002

Before the Wisconsin Commerce Commission

Docket No. 6720-TI-161 Investigation into Ameritech Wisconsin’s Unbundled Network Elements Direct Testimony of Steven E. Turner December 15, 2000 Rebuttal Testimony of Steven E. Turner January 22, 2001 Surrebuttal Testimony of Steven E. Turner February 24, 2001

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Exhibit-FTI-D (General Support Attribution)

Performance Bonuses

1. Securus categorizes its performance bonuses into two general ledger departments. These

performance bonuses were attributed to each supporting department based on the total salaries

in those departments, with the exclusion of the Sales department where the bonuses are

captured directly.

Headcount

1. Human Resources

2. The human resource department supports all other departments within the organization. Costs

within the human resources department are attributed to other departments based on the

number of employees in each department.

2. Facilities

3. Securus’s general ledger captures facility expenses associated with each of its subordinate

businesses. Therefore, only facility expenses attributable to the original Securus business are

attributable to its ICS operations and these are attributed to other departments based on the

number of Securus employees in each department (excluding employees from its other

businesses).15

15 This attribution would ideally attribute facility costs based on the space occupied by each department supporting ICS services, but this information is not maintained by Aventiv. 1 | P a g e REDACTED – FOR PUBLIC INSPECTION

3. Network Operations

4. The network operations department contains the managers and staff that oversee various

information technology and network infrastructure departments, such as software

development, architecture capacity, applications and database support, network infrastructure,

and datacenter (among others). Securus identified the departments supported by the network

operations staff and cost were attributed based on the headcounts of these supported

departments.

4. Operations Management

5. The operations management department contains the managers and staff that oversee various

service and customer care departments, such as field service, client management, and customer

satisfaction (among others). Securus identified the departments supported by the operations

management staff and costs were attributed based on the headcounts of these supported

departments.

Time Tracker

1. Reporting and Analysis

6. The reporting and analysis department primarily supports the client management, field

services, and call center departments. The group provides data analysis and reports ranging

from department metrics to facility performance. The group also has workforce management

as a subgroup which tracks staffing utilization and performance. Securus provided Time

Tracker data that identifies both the group performing the work and the department for which

the activity is performed. These two pieces of information identify the departments for which

the reporting and analysis group works, along with the amount of time spent supporting those

departments. This data was used to determine the percentage of the reporting and analysis costs

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that should be attributed to each of the supported departments, based on aggregate hours for

each group.

2. Customer Satisfaction

7. The customer satisfaction group also supports multiple client facing departments including client management, field services, tech support and implementation. Much of its work focuses on quality assurance, developing and implementing training programs for products and handling complaints. Securus provided Time Tracker data that identifies both the group performing the work and the department for which the activity is being performed. These two pieces of information identify the departments for which the customer satisfaction group’s work is being performed, along with the amount of time spent supporting those departments. This data was used to determine the percentage of the customer satisfaction costs that should be attributed to each of the supported departments, based on aggregate hours for each group.

HEAT Tickets

8. To track tasks across a multitude of departments and functions, Securus relies on

HEAT Software, a project management and ticketing system that is employed company-wide.

Securus provided HEAT data in multiple large “data dump” spreadsheets that accounted for over one million unique tickets created and closed between 2018-2019. Relevant tickets were identified and aggregated, then used to attribute costs for at least 20 separate departments.

9. The first step in the aggregation process involved identifying departments to which costs can be attributed using the tickets found in the HEAT data. In order for this attribution to be valid, there should be a significant volume of tickets as well as strong correlation between the tasks identified and department function. It was also determined that the weighting for attributions should be derived from raw ticket counts instead of via a time-oriented approach.

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10. After mapping the data, nearly three-quarters (~728,000) of all applicable HEAT tickets could be used in attributions to specific departments and/or products and facilities. Tickets that were assignable by following these steps were then split out by year, then converted to attribution percentages accordingly. Support departments costs were allocated using ticket data identifying which departments were being supported.

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Exhibit-FTI-E (Product Attribution)

Direct Assignments

1. Many general ledger accounts were specifically identifiable with an ICS-related product or

with products (or categories of products) not associated with ICS. For example, general ledger

accounts associated with STOP, a non-ICS product, were simply attributed away from ICS

services in that manner. In other cases, Securus uses specific accounts for specific products

(i.e., Securus uses a specific account to track field services for the Illinois DOC). Direct cost

attributions on the general ledger basis were used wherever possible.

HEAT Tickets

2. As explained above, HEAT is a system used to track activity within the organization, whether

that activity is internal-facing or external-facing. In addition to using HEAT Tickets for

attributing general support costs, HEAT tickets were also used to attribute costs to individual

products.

1. Departments

3. Departments that supported a specific product, as opposed to other departments, were mapped to individual products based on identifying metadata within each ticket.16

2. Dispatchee Departments

4. Attributing dispatchee department costs to products proved to be a little less straightforward. According to Securus, dispatchee department personnel work on installations and

16 Sometimes the Product was explicitly populated, other times the Ticket Type would have a product name such as WCS to indicate Wireless Containment Solutions. 1 | P a g e REDACTED – FOR PUBLIC INSPECTION

jump from project to project. Therefore, they do not have an assigned service area nor dedicated cost center. Company and department IDs did not appear in the HEAT ticket data for dispatchee departments (such as “WEST FIELD INSTALL”), despite indications from Securus that these departments are also tracked via HEAT ticketing.

5. To attribute dispatchee department costs by product, tickets for these departments had to be assigned based on a mapping of individual dispatchees to their respective departments.

Dispatchee department tickets were then assigned to products by following the same methodology outlined above.

Client Management – Salesforce

6. The client management group is responsible for directly interfacing with agencies and facilities to ensure there are no issues with their products. This organization tracks its activities and interactions using Salesforce, a popular customer relationship management tool used by companies across various industries. Salesforce reports indicate, for a given interaction, which product was central to the interaction and the duration of time spent.

7. Cost attribution percentages were determined using the aggregated total hours that belonged to each product during the relevant period, divided by the total hours per year.

Interactions that did not have an identifiable product were excluded from the calculation.

Call Center – Disposition Codes

8. The call center department assists family and friends with a wide variety of inquiries. Securus provided customer service disposition data which details each call center interaction. The call center operator categorizes each call to identify the type of interaction that occurred. These categories are then mapped to Securus’s product offerings.

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9. The data indicated both the creation and closing of each recorded interaction. The calculated difference between the two indicates the duration of the interaction (such as the duration of the call) but in some rare cases the interaction could last for several days or even weeks. This indicated that not every interaction was strictly a continuous phone conversation but could also record the total amount of elapsed time (not worked time) needed to resolve the issue. For example, credit card disputes (chargebacks) had interactions that would last for months before being resolved.

10. The following histogram of calculated “minutes” provides an idea of the distribution of interaction durations. The vast majority of call interactions were resolved in under a half hour.

Figure 13 Distribution of Call Minutes

11. The data was filtered to include only interactions that were 30 minutes or less to exclude call duration outliers. Call durations were then aggregated by category and weighted by minutes to calculate product attributions. 3 | P a g e REDACTED – FOR PUBLIC INSPECTION

Guarded Exchange

12. Guarded Exchange offers two primary ICS-related products: Investigative Call

Monitoring and National Cellular Forensics. Securus provided salary data for Guarded Exchange employees and contractors, as well as the function or product that they served. Only salaries specifically related to the two products were used to calculate the annual percent weighting.

Paper Bills

13. Paper bill costs are a subset of collect call costs. Securus provided journal entry details for every general ledger account that contains descriptive details of the nature of the credit or debit entry. Securus also identified that it uses a company named Metroplex for the printing of these statements. The portion of costs identified were used to calculate the percent attribution to paper bills by year.

Termination

14. Termination costs represent carrier costs for completing ICS calls. Securus provided carrier costs by each individual site by month. The overwhelming majority of sites are facilities providing ICS services.17 All of the costs were attributed to the SCP Platform with the exception of wholesale facilities that are attributed to the wholesale product.

Sales

15. ICS Sales costs in the general ledger are categorized and split according to facility

ADP size (Jails < 200, Jails 200 – 750, Jails > 750, Prisons) as well as the sales type (renewal or

17 Only 0.03% of the overall carrier expected costs were attributed to sites that didn’t match Aventiv’s master list of ICS providing facilities during the relevant period.

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win). A detailed list of sales contracts by product type (whether ICS or non-ICS) that were won or renewed was used to create product attributions corresponding to these sales departments. Costs for contracts that were not won18 were still attributed to their related products because it required efforts by the sales team to win the contract. The size (dollar amount) of the contract award was used to determine the percent attribution of sales costs to the respective products because Securus has indicated that larger contracts generally require more resources to bid.

16. The sales engineering department has personnel that support specific territories defined by their ADP size. A product attribution was created by prorating and combining each territory’s product mix by the amount of time each employee worked supporting that territory in each year. The combined, prorated product attribution was applied to the remainder of sales engineering costs that were not assigned to Securus’s public safety products. This exception for public safety was necessary because one of the site engineering employees exclusively supported public safety products rather than a territory and that employee’s costs were all directly attributed to the public safety products. Site engineering costs were distributed by facility using the overall call demand data by facility weighting.

Site Commissions

17. Site commissions are paid to facilities as part of the contract terms. Securus provided data detailing the dollar amounts, the product the site commission was paid for, and the facility that received the site commission. A small minority of site commission dollars were unattributable to a specific product and were distributed using the existing product attributions. A

18 Aventiv indicated that contracts in the sales list that did not correspond to ICS contracted facilities meant the sale was unsuccessful (whether due to dispute or renege). 5 | P a g e REDACTED – FOR PUBLIC INSPECTION

percent attribution by product was calculated using these site commission details for the relevant period.

ActiTime

18. Securus uses ActiTime time tracking software to keep track of hours spent by team members on various projects. A number of departments used this tool to varying degrees. Nine departments recorded a significant number of hours in ActiTime; therefore, their costs were attributed based on their ActiTime entries.

19. The ActiTime data indicates the employee, the task (usually the project name), the period of time worked (number of hours as well as the week of the year) and the project type

(capital, expense, or administrative). In cases where the department was not specified, the employee’s assigned department identified in the headcount data was used to make the assignment.

20. Only non-capitalized project hours were considered for attribution (i.e., expense and administrative project hours). In order to determine the product associated with each department, each product was assigned a product type using a variety of methods.

21. The first step in the assignment analysis involved using keyword searches in the

Project Name. For example, “SCN” identifies the Secure Calling Network (also referred to as the

Secure Calling Platform), the platform that handles all ICS calls. The keywords were not definitive indicators but proved helpful in making assignments.

22. Another resource used in attributing costs was a list of capitalized projects and their descriptions. While the focus of the ActiTime analysis revolved around non-capitalized projects, there were instances where expense hours were attributed to a capital project.

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23. Finally, generic project names such as “2018 – Production Support” required further analysis of their subtasks in order to attribute costs. For example, the subtask “PS –

THREADS,” provides more description of the product being supported.

24. Hours identifying PTO or sick leave were excluded from the analysis. Any general support project or task hour categories such as “Infrastructure Optimization” or “System

Administration” were distributed out using the existing product attributions.

Transaction

25. Transaction expenses are costs incurred from merger and acquisition activity.

Wherever possible, these costs are attributed directly to the products supported by the acquisition.

For example, Aventiv’s purchase of Government Payment Services, Inc.19 in 2017 are attributed away from ICS. Any remaining transaction costs are allocated based on direct costs.

Depreciation – Datacenter, Site Equipment

26. The depreciation of fixed assets is captured in several expense accounts. The attribution of these accounts to products is determined by the type of asset in each account. This determination is based on subledger detail for each account. The following figure shows depreciation expense attribution.

19 Government Payment Services, Inc. is a wholly owned subsidiary of Aventiv Technologies LLC. 7 | P a g e REDACTED – FOR PUBLIC INSPECTION

Figure 14 Depreciation Expense Attribution

Account Number Asset Group Attribution TELCOM EQ Site Equipment Wintel Discount Site Equipment TELCOM EQ RM Site Equipment FURN/EQUIP Direct Costs COMPUTER HW Datacenter HW SVV Video Visitation LH IMPROVE Direct Costs VEHICLE Direct Costs TOOLS Direct Costs TABLETS Securus Tablet TELCOM EQ New Site Equipment TELCOM EQ Ren Site Equipment TELCOM EQ MAC Site Equipment LEASED MISC Direct Costs DEINSTALLS Site Equipment DEINSTALLS NEW Site Equipment Disposals HW SVV Video Visitation DEINSTALLS REN Site Equipment DEINSTALLS MAC Site Equipment DEINSTALLS SVV Video Visitation Impairment Direct Costs

27. Accounts associated with Securus’s datacenter use a production hardware and storage attribution inventory to assign each piece of hardware to specific products that they support

(e.g., the value of the server that supports the THREADS application is attributed to THREADS).

28. The hardware inventory does not indicate which year a piece of equipment came into service and therefore the product attribution percentages are assumed to be the same for all relevant years. This attribution applies to site hardware as well as datacenter attributions. Accounts attributed to video visitation or tablets were fully attributed to those respective products and away from ICS. The remaining depreciation expense accounts, which are not associated with specific products or products, have been attributed based on direct costs. 8 | P a g e REDACTED – FOR PUBLIC INSPECTION

Amortization – Capitalized Labor, Software

29. The amortization of intangible assets is captured in five separate expense accounts.

Three of these accounts are attributed based on direct costs because no further subledger detail is available. The largest amortization account is primarily comprised of customer relationships and acquired technology associated with the November 2017 acquisition of Securus.

Figure 15 Amortization Expense Attribution

Account Number Account Description Attribution Amortization Direct Costs AMORT Expense - Capital Labor Capital Labor Detail AMORT Expense - Purchased Software Software Detail AMORT Expense - Patents/Trademarks Direct Costs mortization Expense - Cost to Fulfill Direct Costs

30. Capital labor and purchased software amortization were attributed based on information available in the subledger for each account. The subledger included an asset description for each entry, which was used to assign costs to products. Subledger detail was only available for 2020, so amortization of each subledger asset entry was estimated for prior years based on the depreciation term and cost basis. Securus uses the straight-line method for amortization.

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Exhibit-FTI-F (Facility Attribution)

A. Sales

1. Sales contracts are broken out by facility and the product attributions are categorized using the facility ADP size. There are instances where a contract in the data does not match the list of active ICS facilities, often due to the contract falling through or being unawarded due to bid disputes. In those instances, the dollars associated with the unassigned contracts are distributed across facilities within the sales data with the same territory definitions using call demand minutes as a weighting.

2. Sales engineering costs are similarly broken out only to facilities within the sales data; however, because the department supports all territories. unassigned costs are distributed to all facilities within the combined territory pool. Sales engineering also relies on call demand minutes for those facilities to create a weighted distribution.

B. Termination

3. The vast majority of termination costs were attributed to a specific site. Only 0.03% of all termination costs were considered unassigned, and due to the significant amount of coverage, these costs were not further distributed.

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Exhibit-FTI-G (Demand)

Call Minutes

1. Securus provided data with a listing of contracts, the relevant ICS products, and the time period these contracts were active. The relevant period was applied to the overall ICS minutes by facility to calculate the number of minutes of each ICS product. Contracts associated with wholesale facilities were excluded from the calculation of total product minutes.

Transactions

2. Securus provided a comprehensive data set of all funding transactions by type. This data is utilized to determine the number of transactions by transaction product within the cost study. Transactions were categorized by the payment product (e.g., Advance Connect, Direct

Billed, PayPerCall) as well as the payment source (e.g., a web transaction, interactive voice response). The combination of these two data pieces informed the overall quantification of transactions by product.

3. The Inmate Debit product grouping had to be adjusted to exclude inmate-funded transactions as a payment source, as there are no transaction costs. Only Inmate Debit funding transactions from external (outside the prison/jail) were counted.

4. Outbound voicemail data was separately provided with monthly call, revenue, and minute data. For outbound voicemail demand, yearly number of calls served as the denominator/demand figures for the cost study.

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Paper Bill

5. Monthly data for mailed invoices was used to calculate demand, or usage, for paper bills. The data only provides invoice counts sent out from April 10, 2018 onwards. As such, it was necessary to retroactively prorate invoice counts to make up the missing data prior to April 10th using similar monthly invoice cycles.

Prepaid Calling Cards

6. Securus provided a list of prepaid calling cards ordered and distributed to various facilities during the relevant period. The total quantity of cards was calculated from this data and served as a proxy to represent the number of calling cards sold to customers.

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Exhibit-FTI-H (Comparable Companies)

Sector Company Name Alternative Carriers Cogent Communications Holdings, Inc. Alternative Carriers Vonage Holdings Corp. Integrated Telecommunication Services ATN International, Inc. IT Consulting and Other Services Cognizant Technology Solutions Corporation IT Consulting and Other Services DXC Technology Company IT Consulting and Other Services EPAM Systems, Inc. IT Consulting and Other Services LiveRamp Holdings, Inc. IT Consulting and Other Services Amdocs Limited IT Consulting and Other Services Perficient, Inc. IT Consulting and Other Services Virtusa Corporation IT Consulting and Other Services Information Services Group, Inc. IT Consulting and Other Services PFSweb, Inc. Security and Alarm Services The Brink's Company Systems Software Palo Alto Networks, Inc. Systems Software ServiceNow, Inc. Systems Software Fortinet, Inc. Systems Software Proofpoint, Inc. Systems Software FireEye, Inc. Systems Software NortonLifeLock Inc. Systems Software Varonis Systems, Inc. Systems Software Teradata Corporation Systems Software Qualys, Inc. Systems Software Rapid7, Inc. Systems Software Commvault Systems, Inc. Systems Software Appian Corporation Systems Software OneSpan Inc. Systems Software Xperi Holding Corporation Systems Software Progress Software Corporation

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ATTACHMENT C

Report by Harold Furchtgott-Roth

Securus Technologies, LLC November 23, 2020 REDACTED - FOR PUBLIC INSPECTION

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

Harold Furchtgott-Roth*

November 2020

• President, Furchtgott-Roth Economic Enterprises. I gratefully acknowledge the costs of preparing this report have been partially underwritten by counsel for Securus. The opinions expressed in this report, and any errors in this report, are entirely those of the author and should not be attributed to anyone else.

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A. Background and Summary

Over many years, the Commission has documented the positive social value that phone calls have for incarcerated individuals and their families.1 Outside the Commission, many governmental bodies, including the federal, state, and local governments already incur substantial costs for housing incarcerated individuals and many additional costs for law enforcement and judicial systems. These governmental bodies would presumably have incentives to encourage phone calls by incarcerated individuals.2

For much of the past decade, the Commission has sought to encourage telephone calls in an indirect way by regulating rates for inmate calling services (ICS). On an appeal of the

Commission’s most recent set of ICS rules, the D.C. Circuit Court in 2017 vacated parts of the rules and remanded other parts for the Commission’s further consideration.3 Among other issues, the Court vacated the Commission’s price regulations of ICS that excluded site commissions and that used average costs that do not cover the costs of “each and every” call.4

1 See, e.g., Report and Order on Remand and Fourth Further Notice of Proposed Rulemaking in WC Docket 12-375 (“Fourth FNPRM”), paragraph 5. 2 For example, the Federal Bureau of Prisons reports that in FY2018, the Cost of Incarceration Fee was $102.60 per day for individuals incarcerated in Bureau Facilities and $94.50 per day for incarcerated individuals in Community Correction Facilities. See https://www.federalregister.gov/documents/2019/11/19/2019-24942/annual-determination-of- average-cost-of-incarceration-fee-coif, accessed November 10, 2020. 3 Global Tel*Link v. FCC, Case No. 15-1461, filed June 13, 2017. 4 Ibid., pp. 29-30. “The FCC’s suggestion that site commissions ‘have nothing to do with the provision of ICS,’ 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 ICS providers, 17 FCC Rcd. at 3252–53. “If agreeing to pay site commissions is a condition precedent to ICS providers offering their services, those commissions are ‘related to the provision of ICS.’” Joint Br. for Pet’rs at 21. And it does not matter that the states may use the

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The Commission recently issued the Fourth FNPRM. The Fourth FNPRM raises many economic issues including the regulation of ICS rates. Faced with a Court that vacated prior regulated rates because they excluded site commissions, the Commission surprisingly again proposes regulated rates that exclude site commissions and that are based on a formula that does not cover the costs for “each and every” call. Moreover, the Commission, without an economic basis, further proposes to exclude other costs such as part of goodwill.

As an economist who has worked on competition issues in telecommunications since the drafting of the Telecommunications Act of 1996 including as a commissioner of the Commission,

I have been asked by outside legal counsel for Securus to review and to comment on the economic and historical concepts in the record of this docket. Based on my review, I offer the following opinions:

• The Commission has attempted unsuccessfully to regulate ICS rates and site commissions

for many years;

• ICS contracts are competitively bid; and

• The Commission’s proposed interstate rate caps are based on economically flawed methods

that exclude costs such as site commissions and goodwill.

commissions for purposes unrelated to the activities of correctional facilities. The ICS 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. “On the record before us, we simply cannot comprehend the agency’s reasoning. Where, as here, an agency’s “explanation for its determination . . . lacks any coherence,” we owe “no deference to [the agency’s] purported expertise.” Tripoli Rocketry Ass’n v. Bureau of Alcohol, Tobacco, Firearms, and Explosives, 437 F.3d 75, 77 (D.C. Cir. 2006); see also Coburn v. McHugh, 679 F.3d 924 (D.C. Cir. 2012). Not only does the FCC’s reasoning defy comprehension, the categorical exclusion of site commissions cannot be easily squared with the requirements of § 276 and § 201. We therefore vacate this portion of the Order.”

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B. The Commission’s past efforts to regulate ICS rates.

As the Commission noted in the Fourth FNPRM, “The Commission’s attempts to reform inmate calling services rates and charges have a long history in the courts and have not always been well received.”5 Section 276 of the Communications Act, as amended by the

Telecommunications Act of 1996, specifically authorizes the Commission to consider the regulation of payphone services—including “inmate telephone services.”6 Among the provisions of Section 276 is that the Commission shall “establish a per call compensation plan to ensure that all payphone service providers are fairly compensated for each and every completed intrastate and interstate call using their payphone…”7 The Fourth FNPRM reviews the history of Commission attempts to regulate ICS rates and ancillary service charges.8

The phrase “each and every completed intrastate and interstate call using their payphone” is unique in the Communications Act and appears to be intended to emphasize that the Commission lacks discretion to compensate some but not all calls. The term “each and every” is found in five other instances in the Communications Act, but in those instances the Act is referring to “each and every” day for the applicability of penalties9 or “each and every” railroad and telegraph company for the duty to file reports with the Commission.10 The clearest interpretation is that the statute

5 Fourth FNPRM, Paragraph 10. 6 47 U.S.C. § 276. 7 47 U.S.C. § 276(b)(1)(A) (emphasis added). 8 Fourth FNPRM, paragraphs 10-26. 9 47 U.S.C. §202(c), §240(e), §219(b), §502. 10 47 U.S.C. §14.

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removes Commission discretion from requiring less than “each and every.” The importance of compensating “each and every” call has been emphasized by the Courts.11

The Commission opened a proceeding in 1996 to address Section 276.12 Most of the

Commission’s attention until 2002 in the 276 proceeding was focused on wholesale issues: compensation arrangements between long-distance service providers, on the one hand, and consumer payphone operators and ICS providers, on the other. The Commission did not at the time propose to regulate ICS rates.

The Commission adopted rules on payphone services, including ICS, in a Report and

Order13 in September 1996 and provided more discussion of ICS in an Order on Reconsideration in November 1996.14 The Commission’s rules on payphones including ICS were challenged in court, and the D.C. Circuit Court in July 1997 remanded the rules back to the FCC for further consideration based on the Court’s instructions.15 In October 1997, in response to the Court

11 See, e.g., Illinois Pub. Tel. Ass’n v. FCC, 117 F.3d, 555, (D.C. Cir. 1997), and Global Tel*Link v. FCC, 15-1461, (D.C. Cir. 2017). 12 FCC Docket 96-128. 13 Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Report and Order, 11 FCC Rcd at 20622, September 20, 1996. See Appendix D and Appendix E for Amendments to Part 64 rules of Title 47. 14 Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Order on Reconsideration, 11 FCC Rcd 21233, November 8, 1996. 15 “Doing so, we hold that the issue must be remanded to the Commission. Section 276 requires the Commission to promulgate regulations that will ensure that PSPs receive fair compensation ‘for each and every completed intrastate and interstate call using their payphone.’ 47 U.S.C. § 276(b)(1)(A). Under the regulations the Commission has promulgated, PSPs will receive no compensation for coinless calls made from inmate phones during the first interim year. This appears to be blatantly inconsistent with the language of the statute. The Commission has not explained why it is not. The Commission’s interim compensation plan must therefore be remanded.” Illinois Pub. Tel. Ass’n v. FCC, 117 F.3d, 555, (D.C. Cir. 1997).

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remand, the Commission issued the Second Report and Order.16 The Court once again remanded it back to the Commission in May 1998.17 Earlier in 1998, the Court separated and remanded ICS issues to the Commission.18 In 1999, the Commission issued a third set of rules on payphones and indicated that ICS calls were “to be specifically addressed in a separate proceeding.”19 The third set of rules issued in 1999 survived court review.20

One of the parties appealing the Commission’s initial Order on Reconsideration was the

Inmate Calling Services Providers Coalition (“ICSPC”). As the Commission reviewed the situation in 2002:

ICSPC, along with numerous other parties, initially sought review of the Order on Reconsideration before the United States Court of Appeals for the District of Columbia Circuit and consolidated its appeal under the lead case Illinois Public Telecommunications Association v. FCC. In its appeal, ICSPC challenged the Commission’s denial of its request for an additional $0.90 per call surcharge on local inmate calls and the Commission’s refusal to impose the nonstructural safeguards that ICSPC sought. The court subsequently severed ICSPC’s appeal, and later remanded it at the Commission’s request. The Commission issued a Public Notice asking parties to update and refresh the record with respect to the issues raised in ICSPC’s appeal.21

16 Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Second Report and Order, 13 FCC Rcd 1778, October 9, 1997. 17 “Although we conclude that the Commission did not adequately explain the action at issue here, we exercise our discretion to remand the rule for further explanation without vacating it.” MCI v. FCC, 143 F.3d 606 (D.C. Cir. 1998). 18 Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Order on Remand & Notice of Proposed Rulemaking, 17 FCC Rcd 3248, February 21, 2002 (“2002 NPRM”), paragraph 2. 19 Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, Third Report and Order, and Order on Reconsideration of the Second Report and Order, 14 FCC Rcd 2545, February 4, 1999 (“Third Report and Order (1999)”), paragraph 16. 20 American Public Comm. Council v. FCC, 215 F.3d 51 (D.C. Cir. 2000). 21 2002 NPRM, paragraph 2. (footnotes omitted)

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The first Commission document that focuses exclusively on ICS issues within the Section

276 proceeding was the 2002 Order on Remand and Notice of Proposed Rulemaking.22 From 1996

– 2002, the Commission continued to receive comments on ICS rates. This included comments on site commissions. In the 2002 NPRM, the Commission was well aware of site commissions, and discussed them at length. In this document, the Commission said:

[t]ypically, the confinement facility awards a contract to provide calling services by competitive bidding and grants the winning provider a monopoly on all inmate calling services. To have a realistic chance of winning a contract, the bidder must include an amount to cover commissions paid to the inmate facility. … In fact, under most contracts, the commission is the single largest component affecting the rates for inmate calling service.23

At that time, the Commission did not adopt any rules about site commissions specifically, or about ICS rates generally. Instead, the Commission sought comments “to examine the costs associated with the provision of inmate calling services.”24 Not until 2013 did the Commission promulgate specific rules with respect to ICS.

The 2002 NPRM did, however, confuse two separate economic markets. Payphones in public areas are competitively supplied and have many possible locations. Between 1996 and 2002, the Commission in Docket 96-128 focused on the market structure between commercial payphone providers and payphone location owners, particularly in the Third Report and Order released in

1999. The Commission argued that it expected owners of high-traffic locations, such as a “busy bus station,” where (at that time) there were many potential payphone customers, to attempt to

22 Ibid., paragraphs 1-3. In early 1998, in a different docket 92-77, the Commission adopted rules on disclosure of rates for InterLATA 0+ Calls. 47 CFR § 64.710. See, Billed Party Preference for InterLATA 0+ Calls, Second Report and Order and Order on Reconsideration, 13, FCC Rcd, 6122, January 29, 1998 (“1998 InterLATA 0+ Report and Order”). 23 2002 NPRM, paragraph 10. 24 Ibid., paragraph 3.

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limit entry of payphone providers in order to increase profitability of payphones and then demand at least a share of the profits in the form of a location rent.25 As such, the Commission “decline[d] to consider location rents as a cost of a dial-around call.”26

The FCC began promulgating ICS rules in 2013. ICS rules have repeatedly been challenged in court, and the Court has stayed many of the provisions of each set of new rules.

Various ICS providers requested stays of the FCC-ordered price caps on the grounds that the caps do not allow ICS providers to recover costs.27 The Court of Appeals stayed the 2013 rule limiting rates to “costs that are reasonably and directly related to the provision of ICS.”28 It also stayed the rules on Interim Safe Harbor Rates29 and Annual Reporting and Certification Requirements.30 The

2015 Report and Order substantially revised the rules, but many of those rules were again stayed including rate caps, part of the restrictions on ancillary service charges,31 and intrastate rate caps.32

The 2016 Order on Reconsideration revising rate caps was stayed in its entirety.33 In 2017, in GTL v. FCC, the D.C. Circuit vacated the rate caps in the 2015 ICS Order, finding that the Commission

25 Third Report and Order (1999), paragraph 37. 26 Third Report and Order (1999), paragraphs 37, 97. 27 See, e.g., discussion in Pai Dissent in 2016 Order on Reconsideration; Securus Technologies, et al. v. FCC, Case No. 13-1280, Securus Technologies, Inc. Emergency Motion for Stay of FCC Order Pending Review (D.C. Cir. Nov. 25, 2013), p. 8; Securus Technologies, et al. v. FCC, Case No. 13-1280, Motion of CenturyLink Public Communications, Inc. for a Stay Pending Judicial Review (D.C. Cir. Dec. 4, 2013), p. 8. 28 Securus Technologies, et al. v. FCC, Case No. 13-1280, Order (D.C. Cir. Jan. 13, 2014, Rule 64.6010). 29 Ibid., Rule 64.6020. 30 Ibid., Rule 64.6060. 31 Global Tel*Link v. FCC, Case No. 15-1461, Order (D.C. Cir. Mar. 7, 2016, Rules 64.6010 and 64.6020(b)(2)). 32 Global Tel*Link v. FCC, Case No. 15-1461, Order (D.C. Cir. Mar. 23, 2016, Rule 64.6030). 33 Securus Technologies, Inc., et al. v. FCC, Case No. 16-1321, Order, (D.C. Cir., Nov. 2, 2016).

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lacked the statutory authority to regulate intrastate rates and that the methodology used to set the caps was arbitrary and capricious.34 The court remanded for further proceedings certain rate cap issues; remanded the ancillary service charge caps in that Order; and vacated one of the annual reporting requirements in that Order.35

ICS, although statutorily under Section 276, are different from consumer payphone services and have an entirely different market structure. From an economic perspective, the

Commission erred in attempting to analogize market characteristics between consumer payphones and ICS.36 Fundamentally, fees paid to government agencies are inescapable and not conditional on profits.37 Site commissions are not location rents attributable to ICS providers. The Commission is well aware that government-mandated fees are not “profits,” and the Court noted that site commissions are often necessary fees to provide ICS.38 The Commission’s operating budget is entirely paid by such user fees and license fees, and the Commission has never considered such fees as reflective of “profits.” Neither the Commission nor government correctional institutions have the authority to assess or to apportion profits. Site commissions are nothing more nor less than a type of fee paid to government agencies.

34 GTL v. FCC, 866 F.3d at 415-416. 35 Ibid. 36 Paradoxically, the FCC acknowledged important economic differences between public payphone services and ICS in its 1996 Declaratory Ruling deregulating ICS. Inmate Calling Services-Prison Payphones, Declaratory ruling, FCC, Federal Register Volume 61, Number 45, March 6, 1996. 37 For the Commission’s misinterpretation of this issue and improper reliance on payphones as discussed in the Third Report and Order (1999), see, e.g., 2002 NPRM, paragraph 38 and Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Report and Order and Further Notice of Proposed Rulemaking, 28 FCC Rcd 14107, September 26, 2013, paragraph 54. 38 Global Tel*Link v. FCC, Case No. 15-1461, pp. 29-30.

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The Court vacated the categorical exclusion of site commissions.39 Although the Court remanded for further consideration the partial exclusion of site commissions,40 it is difficult to see how the Commission justifies excluding some costs when Section 276 requires that “all payphone service providers are fairly compensated for each and every completed intrastate and interstate call using their payphone.”

C. ICS contracts are competitively bid.

As the Commission approvingly notes:

Both economic theory and our own experience support the views of many commenters in this docket that these purposes [of rate setting] generally are best accomplished by actual competition or, where this does not exist or is not fully effective, by policies that replicate the effects of competition to the extent possible.41

For any number of reasons including security, correctional facilities have universally decided to have a single ICS provider for a facility awarded through a competitively bid contract rather than having competing providers at the same facility.

Competition is the ultimate goal of Section 276, as noted by the Court of Appeals and the

FCC. Section 276 was “specifically aimed at promoting competition in the payphone service industry.”42 The Commission made it clear that it meant to “g[i]ve primary importance to

Congress’s objective of establishing a market based, deregulatory mechanism for payphone compensation, as required both in section 276 and the generally pro-competitive goals of the 1996

39 Ibid. pp. 30-31. 40 Ibid., p. 31. 41 Fourth FNPRM, footnote 212, quoting Price Cap Performance Review for Local Exchange Carriers, WC Docket No. 94-1, First Report and Order, 10 FCC Rcd 8961, 9002, para. 91 (1995). 42 New England Public Communications Council, Inc., Petitioner, v. Federal Communications Commission and United States of America, Respondents, American Public Communications Council, et al., Intervenors, 334 F.3d 69, at 71.

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Act.”43 Courts have also found that bidding for ICS contracts is competitive.44 Competition in bidding for ICS contracts appears to be universal in all states, and the conditions appear to be economically competitive. Firms may enter the ICS market. Firms may also exit the market. There are no barriers to submitting bids for ICS. To my knowledge, there are no allegations of anticompetitive conduct by ICS providers.

Many markets have competition for contracts. Consumers choose contractors for a wide range of competitive services including household repairs and automotive repairs. The fact that contracts are involved, sometimes long-term contracts, does not make the service markets less competitive. Nor are the vast majority of the many markets with competition for contracts subject to any form of rate regulation. Quite simply, contracts are found in many competitive markets.

In some cases, competition for a service may be foreclosed or limited by government prohibitions. For example, during the infancy of the space program, NASA had a government- established monopoly on space launches preventing competition. Until the 1980s, government regulation prohibited most forms of interstate banking, thereby limiting competition. But none of these conditions preventing or limiting competition as a result of government regulation has been shown to hold true for ICS. Many firms compete for ICS contracts.

In some industries even with permitted competition, a single firm may have uniformly lower costs than any possible competitors discouraging competition. This condition of a natural monopoly for ICS has not been examined, much less demonstrated, by the Commission.

43 14 FCC Rcd. at 2548. As cited in Global Tel*Link v. FCC, pp. 23-24. 44 “ICS providers now compete with one another to win bids for long-term ICS contracts with correctional facilities.” U.S. Circuit Court of Appeals for the DC Circuit, Global Tel*Link v. FCC, 15-1461, p. 10. The D.C. Circuit Court also cited an incorrect finding of the Commission regarding locational monopolies. Global Tel*Link v. FCC, 15-1461, p. 11. As I explained above, the locational monopoly reasonably characterized the payphone industry but not the ICS industry.

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Different prisons and jails have different cost structures. If a cost structure combined with competitive bidding for contracts results in rates that are lower than the Commission seeks through regulation, rate regulation seems unnecessary. If a cost structure combined with competitive bidding for contracts results in rates that are higher than the Commission seeks through regulation, rate regulation would not cover costs, inconsistent with the Court’s finding with respect to regulated rates that “each and every” call “be fairly compensated.”45 The Commission has not asked, much less received a record to demonstrate, that bidding processes that result in higher ICS rates are the result of market power or anticompetitive conduct by bidders. The Commission has no evidence of differences in competitive bidding processes.

Higher prices under competition for the contract likely reflect higher costs rather than market power. Any prospect of above-market economic profits would, in a competitive bidding process, be bid away by the competitive bidders leaving the winning bidder with nothing more than a risk-adjusted return on investment. The bidding process may result in benefits not for the

ICS bidder but for the seller of the ICS rights—the prison or jail.

D. The Commission’s proposed interstate rate caps are based on economically flawed methods that exclude costs.

The Commission proposes interstate rate caps of “$0.14 per minute for debit, prepaid, and collect calls from prisons and $0.16 per minute for such calls from jails.”46 The proposed rates and the methods to calculate them are economically flawed and contradict the court’s findings.47 The proposed rate caps are based on the following economically incorrect steps:

45 DC Circuit, Global Tel*Link v. FCC, 15-1461, p. 32. 46 Fourth FNPRM, paragraph 70. 47 DC Circuit, Global Tel*Link v. FCC, 15-146.

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• The Commission collected information on some ICS costs at one point in time and

erroneously excluded site commissions;

• The Commission improperly excluded part of goodwill;

• Based on arbitrary methods, the Commission added back in $0.02 per minute as facility

costs; and

• Based on arbitrary and unexplained methods, the Commission obtained $0.14 and

$0.16 rates.

For any of these mistakes, the resulting rates would be arbitrary and flawed. The combination of the mistakes leads to arbitrary and capricious rates that are economically indefensible. I review each of these points below,

1. The Commission collected information on some ICS costs at one point in time and erroneously excluded site commissions

As the DC Circuit found in 2017, site commissions are a cost of providing ICS service.48

The court further concluded:

We find that the Order’s proposed wholesale exclusion of site commission payments from the FCC’s cost calculus is devoid of reasoned decisionmaking and thus arbitrary and capricious.49

The Court’s conclusion was not based on the specific nature of site commissions as an unusual cost, but rather that site commissions, like other costs, were merely a cost of doing business.

48 U.S. Circuit Court of Appeals for the DC Circuit, Global Tel*Link v. FCC, 15-1461, 49 Ibid., p. 7.

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The Commission’s categorical exclusion of site commissions from the calculus used to set ICS rate caps defies reasoned decisionmaking because site commissions obviously are costs of doing business incurred by ICS providers.50

The Court further explains that the Commission provided no basis to exclude site commissions.51

Although the Court remanded the issue to the Commission, it is difficult to see how the

Commission could still exclude site commissions from rate regulation given the court’s findings that commissions are a cost to ICS providers and with respect to regulated rates that “each and every” call “be fairly compensated.”52

Appendix E of the Fourth FNPRM describes the data collected for purposes of Commission analyses. The Commission lists the types of information collected under eight bullet points, but

“costs” are limited to but one bullet point: “Each provider’s inmate calling services costs in total, exclusive of site commissions.” Throughout Appendix E and throughout the Fourth FNPRM,

50 Ibid., p. 28. 51 Ibid., p. 29. The FCC’s suggestion that site commissions “have nothing to do with the provision of ICS,” 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 ICS providers, 17 FCC Rcd. at 3252–53. “If agreeing to pay site commissions is a condition precedent to ICS providers offering their services, those commissions are ‘related to the provision of ICS.’” 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 ICS 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. 52 DC Circuit, Global Tel*Link v. FCC, 15-1461, p. 32.

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reported “costs” exclude site commissions. This presentation of costs excluding site commissions contradicts the court opinion.53

Based on the public version of the Fourth FNPRM, it is impossible to correct the

Commission’s mistake of omitting site commissions because cost statistics including site commissions are not presented. The repeated discussion throughout the Fourth FNPRM about

“costs” and related statistics are incomplete in their exclusion of site commissions and consequently unreliable; statements about the number of facilities that would be able to cover reported “costs” based on the proposed rate caps are simply wrong because the reported “costs” exclude site commissions.54 Actual costs for facilities including site commissions are likely substantially higher than presented in the Fourth FNPRM. Thus, the approach presented in the

Fourth FNPRM fails to meet the “each and every” standard of Section 276.

The Commission bases its analyses in Appendix E on just one set of information collected in 2019.55 If costs would change in subsequent years, as they almost certainly will, even independent of the exclusion of site commission costs, the analyses provided in Appendix E would be outdated and limited to the reported years. It would be better to use a formula to allow underlying costs to vary over time rather than a fixed rate measured at one point in time.

2. The Commission improperly excluded part of goodwill

The Commission improperly excluded part of goodwill from costs as described below.

53 Global Tel*Link v. FCC, Case No. 15-1461, pp. 29-30. 54 See, e.g., Fourth FNPRM paragraphs 85-88; paragraph 115. Appendix E, Table 8. 55 See Appendix E, footnote 1.

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a. Adjusting data is improper

Central to the scientific method is to test hypotheses based on empirical observations, not assumptions or preconceived ideas. When scientists alter or manufacture observations, the scientific method is defeated. Thus, it is troubling the Commission has a major heading in the

Fourth NPRM entitled “Necessary adjustments to data.”56 The Commission states:

The interstate rate caps we propose reflect certain adjustments to some provider data to correct for anomalies that would improperly skew our results and lead to unreasonably high interstate rate caps vis-à-vis rate caps that approximate the true costs of providing inmate calling service.57

Stated differently, absent “certain adjustment,” calculated interstate rate caps would be

“unreasonably high.” This statement is troubling. It indicates the following:

(1) The Commission has a prior notion of “reasonable” interstate rate caps;

(2) Empirically observable information would lead to a higher interstate rate cap;

(3) Rather than accept empirical information and a higher rate cap, the Commission adjusted

the empirical data in order that the interstate rate cap met the Commission’s a priori sense

of reasonability in ICS rates.

This process turns the scientific method on its head—adjust data until one obtains the predetermined results.

b. Exclusion of a portion of capital base from the rate base is not justified in the Fourth FNPRM

Not only is the methodology of data adjustment scientifically unsound, but the

Commission’s application of this methodology to a single company leads to a form of company- specific regulation. To defend this method, the Commission claims that use of invested capital

56 Fourth FNPRM, p. 33. 57 Ibid., paragraph 92.

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as a basis for a regulated cost-based rate 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.”58

The Commission merely assumes, rather than tests, the proposition that any provider has market power. To support the above statement, the Commission provides two citations: (1) a Commission order on cable rate regulation from 1996;59 and a 1990 D.C. Circuit Court review of an FCC telephone rate case.60 Neither case is relevant to ICS.

The Commission’s cable rate decision was in response to the 1992 Cable Act which required the Commission to set “reasonable” rates for cable services where not subject to “effective competition.”61 The Commission decision was released on January 26, 1996, less than three weeks before the “reasonable” rates provision was repealed by the Telecommunications Act of 1996 on

February 8, 1996, and thus was never fully implemented nor adjudicated in court.

The Cable Act’s “reasonable” standard is different from Section 276’s standard of “fairly compensated for each and every completed intrastate and interstate call using their payphone.” As such, the Commission in the cable rate case did not discuss the “fairly compensated” standard. As the Commission explained, the focus was on the “reasonableness” of rates, balanced to be sure that the rates are not confiscatory:

As has been recognized by courts since the Supreme Court's decision in Hope, establishing reasonable rates involves the balancing of consumer and investor interests. Thus, there is a zone of reasonableness, bounded on the one end by investor interest against confiscation and at the other by consumer interest against

58 Fourth FNPRM, paragraph 92 (footnotes omitted). 59 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). 60 Illinois Bell Tel. Co. v. FCC, 911 F.2d 776 (D.C. Cir. 1990). 61 47 U.S.C. 623, repealed by the Telecommunications Act of 1996.

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exorbitant rates, within which rates must fall. In determining whether rates are confiscatory, we must look at whether the rates established under a particular ratemaking methodology "jeopardize the financial integrity of the companies-, either by leaving them insufficient operating capital or by impeding their ability to raise future capital." Moreover, we must consider whether the rates fail to compensate investors for the risk associated with their investments.62

The 1990 Illinois Bell Tel. Co. v. FCC case cited by the Commission does not mention

“market power” or “goodwill.” To the contrary, the case cites Breyer and Stewart that the rate of return on a regulated entity is based on “embedded cost of debt and estimated cost of equity capital” without specific reference to exclusions but with specific reference to the “credit” of the utility.63 The case reviews the appeal of specific exclusions from the rate base proposed by the

Commission, but those exclusions pertained to specific individual investments of the utility rather than the entire utility, and the case does not address either market power or goodwill.

Consequently, neither the Commission’s 1996 Cable order nor the 1990 Illinois Bell Tel.

Co. v. FCC case supports the Commission’s contention that it can adjust invested capital as a basis for rate regulation under Section 276.

c. Goodwill is not a measure of economic rent

Goodwill is not a measure of economic rent as suggested by the Commission in Appendix

G and elsewhere in the NPRM.64 Not surprisingly, Appendix G and the entire Fourth FNPRM is

62 11 FCC Rcd 2220, 2244, para. 53 (1996). 63 S. BREYER & R. STEWART, ADMINISTRATIVE LAW & REGULATORY POLICY 224 (2d ed. 1985). The rate of return, which is based upon the utility's embedded cost of debt and estimated cost of equity capital, as calculated by the regulator, is set at the minimum level necessary for the utility to maintain its credit and attract the capital needed to provide service. See United States v. FCC, 707 F.2d 610, 612 (D.C.Cir.1983); see also American Tel. & Tel. Co., 57 F.C.C.2d 960, 960-61, p 2 (1976) (rate of return set at "lowest possible cost consistent with [utility's] overall responsibility to provide modern, efficient service at reasonable rates and to maintain the financial integrity of the enterprise"). 64 Fourth FNPRM, Appendix G, paragraphs 2-3. See also Fourth FNPRM, paragraph 93.

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devoid of any citation to the economics or financial literature to support the claim of a relationship between goodwill and economic rent.

Goodwill (as an accounting term) is simply the difference between the purchase price of an asset and its depreciated book value immediately before the purchase. Homeowners who purchase a used house, condominium, or cooperative in a competitive housing market often purchase at a price above the depreciated book value of the asset. In a strict accounting sense, part of the purchase price might be recorded as goodwill. No one would suggest that the homeowner has market power or economic rent,

Economic rent, to the extent it has an economic meaning suggestive of market power,65 is a market concept for a monopolist relative to its market position and is not a balance sheet concept for an individual firm. There is no basis to identify a certain balance sheet characteristic for an individual firm as evidence of a certain economic rent for an entire market. If such a relationship held, one would expect to find it used by antitrust authorities, but federal antitrust authorities do not use such a tool.66

Goodwill is the norm, not the exception, on corporate balance sheets. As Gary Buesser recently reported at FASB.org:

65 “Economic rent” is a concept that is not universally used in contemporary economics. The term sometimes means the increase in producer surplus, graphically the area beneath price but above the marginal cost curve, from raising prices above competitive levels. See, e.g., J. Tirole, The Theory of Industrial Organization, MIT Press, pp. 76-77. Economic rent is sometimes associated simply with producer surplus even in the absence of market power. For a discussion, see “Economic Rent: Definition and Determinants,” at https://www.economicsdiscussion.net/rent/economic-rent/economic-rent-definition-and- determinants-with-diagram/25857, accessed October 26, 2020. “Economic rent” is not an unambiguous indication of lack of competition or market power; in a competitive market, competitive firms with upward-sloping marginal cost curves at market-clearing prices would all have producer surplus or economic rent. 66 See Department of Justice 2010 Horizontal Merger Guidelines, Section 4.1, available at https://www.justice.gov/atr/merger-enforcement.

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Goodwill is also becoming a bigger component of U.S. company balance sheets. By one estimate from CFA Institute, goodwill on U.S. companies’ balance sheets was $5.6 trillion in 2018, or 6% of assets ($95.4 trillion) and 32% of equity ($17.6 trillion). Approximately 90% of all S&P 500 companies have goodwill balances.67

The proper inference is not that, because 90% of S&P 500 companies have goodwill on their books,

90% of S&P 500 companies have economic rents. Rather, the proper interpretation is that goodwill and economic rents are not related.

d. The Fourth FNPRM makes incorrect claims about goodwill

The Fourth FNPRM claims:

Thus, goodwill should reflect these market rents—the amount over and above what one could earn from disposing of the underlying assets separately at a fair market rate, rather than together in a whole as part of the ongoing business.68

Let me catalog just a few of the errors in this sentence:

• As discussed above, “goodwill” does not reflect “market rents.”

• The “disposing of the underlying assets separately at a fair market rate” has no relationship

to whether the underlying assets have goodwill or not. “Fair market rate” is not a standard

economic, financial, or accounting term. The author likely meant either:

o “Fair market value,” which means “the amount at which property would change

hands between a willing seller and a willing buyer when neither is acting under

compulsion and when both have reasonable knowledge of the relevant facts, as of

a specific date.”69; or

67 FASB.org, Gary Buesser, “Goodwill: An Investor Perspective,” February 24, 2020, at https://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176174189818#: accessed October 26, 2020. 68 Ibid., paragraph 3. 69 American Society of Appraisers, Business Valuation Standards, at https://www.appraisers.org/Disciplines/Machinery-Technical-Specialties/mts-appraiser-

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o “Fair value,” which is the price that would be received to sell an asset or paid to

transfer a liability in an orderly transaction between market participants at the

measurement date. (FASB Statement No. 157, 2007)70

Neither of these terms is related to goodwill. Goodwill may be present or absent in fair

market value or fair value.

• Moreover, for purposes of estimating goodwill, there is no necessity of evaluating the value

of assets “separately;” the entire asset can be assessed for goodwill.

• The statement “rather than together in a whole as part of the ongoing business” does not

make sense. Goodwill can be measured for the entire business or based on parts of

business; goodwill can exist in an “ongoing” business or a business that is no longer

“ongoing.”

Surprisingly, the Fourth FNPRM does not refer to existing definitions of “goodwill” under

FCC regulations. For example, under telecommunications plant account regulations:

Goodwill -- This account shall include any portion of the plant purchase price that cannot be assigned to specifically identifiable property acquired and such amount should be identified as ‘‘goodwill’’. Such amounts included in this account shall be amortized to Account 7300, Nonoperating income and expense, on a straight line basis over the remaining life of the acquired plant, not to exceed 40 years.71

Nothing in current Commission rules associates goodwill with market rents.

resources/DefinitionsOfValue, accessed November 5, 2020. See also Internal Revenue Ruling 59- 60. 70 American Society of Appraisers, at https://www.appraisers.org/Disciplines/Personal- Property/pp-appraiser-resources/definitions-of-value, accessed November 5, 2020. 71 47 CFR 32.2007(a).

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e. The Fourth FNPRM does not provide a legal or economic foundation to exclude any portion of goodwill

There is no economic or financial foundation for the Commission to exclude any portion of goodwill, or the financing of the goodwill, in rate regulation. The Commission has not excluded non-depreciated goodwill in other areas of rate regulation such as telecommunications plant.

Regardless of how an ICS provider finances its bid for an ICS contract, the capital costs are a substantial part of its cost structure. These costs must be fully accounted for in price regulation to meet the court’s finding and the statute’s requirement that “each and every” call “be fairly compensated.”72

3. Based on an arbitrary method, the Commission added $0.02 per minute as facility costs

The Fourth FNPRM adds $0.02 to the proposed regulated rates for “correctional facility costs.”73 The Commission asserts that the $0.02 adjustment reflects “an allowance for site commission payments in the interstate rate caps to the extent those payments represent legitimate correctional facility costs that are directly related to the provision of inmate calling services.”74

But the calculation of the $0.02 adjustment in Appendix H has nothing to do with actual site commissions or any measurement of “legitimate correctional facility costs.” The $0.02 is an approximation of the difference between average “costs”—that exclude site commissions—per minute for facilities with site commissions and those without site commissions.75 It turns out that

72 DC Circuit, Global Tel*Link v. FCC, 15-1461, p. 32. 73 Fourth FNPRM, paragraph 83. See also paragraphs 99-107 and Appendix H. 74 Ibid., paragraph 103. 75 Ibid., Appendix H.

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the average rate—excluding site commissions—per minute for facilities with site commissions is

$0.013 less than the average rate per minute for facilities without site commissions.76

The Commission does not explain why this difference has any particular economic meaning, much less that it should reflect “legitimate correctional facility costs.” If the interpretation were that facilities that do not charge site commissions have implicit facility costs embedded in the costs while facilities with site commissions do not, there is no explanation of why other costs are not embedded in the rates, with or without site commissions. Do facilities with site commissions incur no costs at all? There is nothing in the record to justify such an inference.

The Commission’s interpretation is troubling for at least two reasons:

• Facilities that do not have site commissions did not record this difference at all,

much less record it as facility costs. The Commission’s interpretation is speculative.

• “Adding” this difference to the mean of rates is at best a fudge factor, and at worst

double counting because the “difference” is an amount already included in the mean

values for “costs.” Again, it would be more accurate, and it would avoid double

counting, to use actual site commissions.

Nor is there an explanation in Appendix H of why simple differences in the “facility costs” without standard deviations are employed. The Commission chose to add one standard deviation to the mean of the rate. If one added one standard deviation to the mean of the Commission’s estimate of “facility cost,” the difference would be $0.038.77 If one added two standard deviations, the difference would be $0.063, or more than 6 cents per minute.78

76 Ibid., Appendix H, Table 1. 77 Ibid. 78 Ibid.

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It is important to emphasize that the $0.02 adjustment does not include any site commissions. The Court vacated prior Commission efforts to set ICS rates by excluding all site commissions. The $0.02 adjustment does not address the Court’s concerns.

4. Based on arbitrary and unexplained methods, the Commission obtained $0.14 and $0.16 rates.

Although in the Fourth FNPRM the Commission abandons its prior efforts to regulate ICS rates based on average reported costs that were struck down by the Courts, the Commission still seeks to regulate ICS rates based on certain statistics derived from averages of reported “costs” that exclude site commissions that the court recognized as a cost of providing service.79 As the

Court noted:

This makes calls with above-average costs in each tier unprofitable, however, and thus does not fulfill the mandate of § 276 that “each and every” inter- and intrastate call be fairly compensated. See Am. Pub. Commc’ns Council v. FCC, 215 F.3d 51, 54, 57–58 (D.C. Cir. 2000).80

The important point the Court makes is not about averages but about that “each and every” call

“be fairly compensated.” The Commission’s proposed rules, however, mean that “each and every” call will not “be fairly compensated.”

The Fourth FNPRM does not reveal the exact formula the Commission uses to obtain the

$0.14 rate for prisons and the $0.16 rate for jails. The Commission states:

We establish our proposed rate caps based on (1) our calculated mean contract costs per paid minute to provide inmate calling services as reported by providers plus one standard deviation; and (2) an allowance for recovery of correctional facility costs directly related to the provision of inmate calling services observed in that data.81

79 Fourth FNPRM, Appendix E. 80 DC Circuit, Global Tel*Link v. FCC, 15-1461, p. 32. 81 Fourth FNPRM, paragraph 71.

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But the calculation is not verifiable. In Table 1, I present the mean contract cost on a per-minute basis and one standard deviation from Appendix E as well as the adjustment for facility costs in

Appendix H. The total rates, excluding all site commissions, according to paragraph 71, should be $0.151 per minute for prisons and $0.166 per minute for jails, not the reported $0.14 and $0.16 respectively.

Table 1

Calculation of regulated rates based on Fourth FNPRM, paragraph 71 Excluding all site commissions

Mean Standard Facility cost Total deviation adjustment

Prison 0.091 0.04 0.02 0.151 Jail 0.084 0.062 0.02 0.166

Source: Appendices E and H

It is not explained why the Commission chose to include one, but not two, standard deviations in adjusting the mean rates per minute. For a normally distributed population, 95% of observations should be within two standard deviations, or 2.5% should be above two standard deviations. The use of two standard deviations rather than one standard deviation is more common in scientific reports. If the Commission had used two standard deviations both for the mean rate per minute and for its assumed “facility expense” the results would be as presented in Table 2. The rates, still excluding all site commissions, would be $0.234 per minute for prisons and $0.271 per minute for jails.

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Table 2

Calculation of regulated rates based on Fourth FNPRM, paragraph 71 Adding two standard deviations Excluding all site commissions

Facilty costStandard deviation Mean Standard mean mean Total deviation difference difference

Prison 0.091 0.04 0.013 0.025 0.234 Jail 0.084 0.062 0.013 0.025 0.271

Source: Appendix E, table 2, 3, and 4, and Appendix H, Table 1.

Although in the Fourth FNPRM the Commission abandons its prior efforts to regulate ICS rates based on average reported costs that were struck down by the courts, the Commission still seeks to regulate ICS rates based on certain statistics of reported costs that even the Commission acknowledges are below the Commission’s incorrect calculation of the costs of some ICS providers.82

The values presented in Table 2 still have a deficiency similar to that identified by the Court

—setting a rate based on average costs means that facilities with above-average costs will not be able to recover those costs while the statutory standard is “each and every” call.83 Using a statistic of the mean plus two standard deviations still means that one might expect 2.5% of facilities to have higher costs than can be recovered through regulated rates, still not meeting the “each and every” call standard. The Commission has not: (1) accounted for all costs, since it excluded site commissions and some goodwill; and (2) proposed a rate that would cover all such costs for “each

82 Fourth FNPRM, Appendix E. 83 DC Circuit, Global Tel*Link v. FCC, 15-1461, p. 32.

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and every” call. A better approach, consistent with the Court’s remand, would be to include all costs including site commissions and goodwill and to provide a formula allowing providers to recover costs for “each and every” call.

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I declare under penalty of perjury that the foregoing is true and correct to the best of my knowledge.

Executed on November 23__, 2020.

______Harold Furchtgott-Roth

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ATTACHMENT D

Declaration of Robert O. Fisher, Brian F. Pitkin, and Steven E. Turner

Securus Technologies, LLC November 23, 2020 REDACTED – FOR PUBLIC INSPECTION

Before The FEDERAL COMMUNICATIONS COMMISSION Washington, DC 20554

Rates for Interstate Inmate Calling Services WC Docket No. 12-375

DECLARATION OF

ROBERT O. FISHER BRIAN F. PITKIN, and STEVEN E. TURNER

November 23, 2020 REDACTED – FOR PUBLIC INSPECTION

TABLE OF CONTENTS

I. Executive Summary ...... 1 II. Historical Background ...... 2 III. Qualifications ...... 3 IV. Background on the FCC Report and Corresponding Data ...... 5 V. Data on Which the FCC Relies Is Flawed ...... 7 The Data Collection Approaches Vary Significantly Among Providers ...... 7 Certain Providers Report Irregular Data ...... 9 VI. Call Minutes Is Not an Appropriate Allocator ...... 12 Most ICS Costs Do Not Vary by Minutes ...... 15 The FCC’s Approach Is Circular ...... 16 Allocation Based on Call Minutes Understates the Standard Deviation ...... 17 VII. The FCC’s Methodology Creates Flawed Results and Conclusions...... 20 Data Incorrectly Suggests Costs Increase as ADP Increases ...... 20 Data Incorrectly Suggests Prisons Are Higher Cost than Jails ...... 23 The FCC Draws Conclusions from a Non-Normal Dataset ...... 24 The FCC Incorrectly Concludes that Costs per Minute Are Higher for Facilities Without Site Commissions ...... 26 VIII. Conclusion ...... 30 Exhibit-FTI-A (Curriculum Vitae of Robert O. Fisher) ...... 1 Exhibit-FTI-B (Curriculum Vitae of Brian F. Pitkin) ...... 1 Exhibit-FTI-C (Curriculum Vitae of Steven E. Turner) ...... 1

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I. Executive Summary

1. FTI Consulting, Inc. (“FTI”) has performed a detailed analysis of the data that the

FCC utilized to calculate the proposed rate caps for inmate calling services (“ICS”) providers in its 2020 ICS Notice.1 In its analysis, FTI found three main issues with the FCC’s calculations and methodology:

 The data on which the FCC relies is flawed. The data collection and cost

information reporting varies substantially among providers creating a number of

irregularities that renders the data unusable for the FCC’s rate-setting purposes.

 The use of call minutes as an allocator for indirect costs is inappropriate. Most ICS

costs do not vary by minutes, the FCC’s approach for selecting call minutes as the

allocation key is based on circular logic, and the call minute approach suppresses

the variation in cost between contracts, which thereby reduces the standard

deviation on costs – a key variable in the rate-setting methodology.

 The FCC’s methodology for calculating rate caps creates flawed results and

conclusions because the data is improperly pooled together. The FCC’s simple

average by contract approach is not representative of the underlying data at the

provider level.

1 Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Report and Order on Remand and Fourth Further Notice of Proposed Rulemaking, FCC 20-111, released August 7, 2020 (2020 ICS Notice).

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II. Historical Background

2. On August 7, 2020 the Federal Communications Commission (“FCC” or

“Commission”) released its 2020 ICS Notice.2 In its order, the FCC responded to a ruling from the

U.S. Court of Appeals for the District of Columbia Circuit that stated that the FCC had no jurisdiction over intrastate rates charged at correctional facilities. In response to a question from the court, the FCC confirmed that ancillary services are jurisdictionally mixed and therefore are subject to the FCC’s existing rules. In its 2020 ICS Notice, the FCC proposed lowering its interstate rate caps (currently $0.21 per minute for debit and prepaid calls and $0.25 per minute for collect calls) 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 as well as setting rate caps on other, ancillary services.

3. Securus Technologies, LLC (“Securus”) and its parent Aventiv Technologies, LLC

(“Aventiv”)3 retained FTI to evaluate its cost of providing ICS services and ancillary services subject to the 2020 ICS Notice. In particular, FTI has evaluated Aventiv’s general ledger accounts, as well as journal line entries, to attribute costs to specific products (or services)4 based on cost- causation principles.5 To the extent possible, costs associated with specific ICS products are further

2 Id. 3 Aventiv was then called Securus Technologies, Inc. Securus changed its name to Aventiv in October 2019. See, https://www.aventiv.com/dave-abel-named-chief-executive-officer-of-aventiv-technologies-and-its-corrections- subsidiary-securus-technologies/ last accessed 10/20/2020. 4 This report generally uses the term “service” to refer to a package offer to a facility and the term “product” to refer to a specific platform (i.e., basic ICS platform, various funding platforms, ancillary functions, and advanced investigative capabilities). 5 In a prior report, FTI relied on revenue allocations, rather than attributing costs based on cost-causation principles, because there was “no other information that Securus ha[d] in its possession to allocate these shared costs in the short timeframe required by the Mandatory Data Collection,” recognizing that “[i]deally, cost based allocations would be used.” [FTI Consulting, Inc. Report Implementing the FCC Mandatory Data Collection on Behalf of Securus Technologies, Inc., July 17, 2014] 2 | P a g e REDACTED – FOR PUBLIC INSPECTION

attributed to the specific facilities causing those costs to be incurred (such as field service costs, transport costs establishing connectivity to the facility, costs of terminating the call using third party termination providers, etc.). FTI also evaluated costs associated with products ancillary to the provision of ICS (“ancillary services”), including funding transactions, live agent interaction, and issuing paper bills. Finally, FTI evaluated costs associated with advanced products provided in addition to basic ICS, such as investigative services and facility administration tools.

III. Qualifications

4. The FTI effort was led by three well-established telecommunications cost experts,

Robert O. Fisher, Brian F. Pitkin, and Steven E. Turner (combined, the “FTI Panel”). Mr. Fisher is a Managing Director with the Telecom, Media, and Technology Dispute Advisory Group (TMT-

DA) at FTI. He is a Certified Public Accountant and holds a Bachelor of Science degree from

Georgetown University School of Foreign Service and a Master of Business Administration in

Finance from the University of Michigan. Mr. Pitkin is a Senior Managing Director at FTI in the

TMT-DA group and holds a Bachelor of Science in Commerce degree from the University of

Virginia McIntire School of Commerce with concentrations in both Finance and Management

Information Systems. Mr. Turner is a Senior Managing Director at FTI in the TMT-DA group and holds a Bachelor of Science degree in Electrical Engineering from Auburn University and a Master of Business Administration in Finance from Georgia State University.

5. Each member of the FTI Panel has developed and/or evaluated numerous models pertaining to a service provider’s underlying component costs. The FTI Panel has a deep knowledge base regarding regulatory requirements within the telecommunications industry, combining to provide expert testimony on telecommunications regulation before public utility

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commissions in thirty-eight states, before the FCC, the Department of Justice, and in state and federal court proceedings involving the regulation of telecommunications carriers.

6. Of particular relevance to this present report, the FTI Panel has had extensive experience in developing and evaluating a wide variety of cost studies utilizing different costing methodologies (e.g., incremental costs, accounting costs, valuation costs, stand-alone costs, total element long run incremental costs (TELRIC), total service long run incremental costs (TSLRIC), rate of return costs, jurisdictional separations cost, etc.). Together, they have provided testimony on virtually every cost model submitted by local exchange carriers in both state and federal proceedings related to unbundled network elements and universal service following passage of the

Telecommunications Act of 1996. In short, the work effort requested by Aventiv is exactly the type of detailed and thorough cost analyses that FTI is expert in providing for its clients.

7. Messrs. Pitkin and Turner have been working in the ICS industry since 2013, following the FCC’s ICS 2012 NPRM.6 Since then, Messrs. Pitkin and Turner have filed reports on behalf of Securus and Telmate LLC. FTI was first engaged by Securus in April of 2014 to review its costs in preparation for responding to the FCC’s Mandatory Data Collection,7 and subsequently filed the FTI Consulting, Inc. Report Implementing the FCC Mandatory Data

Collection on Behalf of Securus Technologies, Inc., filed on July 17, 2014 and the FTI Consulting,

Inc. Report Implementing the FCC Mandatory Data Collection on Behalf of Telmate, LLC, filed on August 18, 2014. Messrs. Pitkin and Turner subsequently filed a Report on Price Elasticity of

6 Before the Federal Communications Commission, In the Matter of Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Notice of Proposed Rulemaking, FCC 12-167, Released: December 24, 2012 (“ICS 2012 NPRM”). 7 Before the Federal Communications Commission, In the Matter of Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Public Notice, Commission Announces Inmate Calling Services Data Due Date, June 17, 2014 (“Mandatory Data Collection”). 4 | P a g e REDACTED – FOR PUBLIC INSPECTION

Demand on January 12, 2015, a Response to Second Further Notice Declaration of Coleman

Bazelon and Expert Report of Don J. Wood on January 27, 2015, and a Report on Financial Impact of the FCC Second Report and Order on Behalf of Securus Technologies, Inc. on December 22,

2015.

8. The curricula vitae for Messrs. Fisher, Pitkin and Turner are included, respectively, as Exhibit-FTI- A (Curriculum Vitae of Robert O. Fisher), Exhibit-FTI- B (Curriculum Vitae of

Brian F. Pitkin), and Exhibit-FTI- C (Curriculum Vitae of Steven E. Turner).

IV. Background on the FCC Report and Corresponding Data

9. In April 2020, ICS providers submitted cost data pursuant to the second mandatory data collection (“MDC”) required by the FCC.8 The MDC instructs providers to identify various

ICS costs and statistics (e.g., calls, minutes, average daily population) at a contract or facility level.

The FCC used these data submissions, which reflect 2018 performance, as the basis for its analyses to support its new proposed interstate rate caps in its 2020 ICS Notice.

10. FTI received several sets of background documents and data that complement the public 2020 ICS Notice. First, the FCC provided FTI the confidential, unredacted version of the

2020 ICS Notice, which showed provider-level cost figures unavailable in the public version.

11. Second, the FCC produced the spreadsheets that it used to calculate the various data tables in the 2020 ICS Notice. These spreadsheets are based on the aggregated 2018 provider data and include FCC calculations such as allocations of indirect costs under various allocation schemes. The FCC produced four spreadsheets that are similar but reflect combinations of two

8 FCC Second Report and Order and Third Further Notice of Proposed Rulemaking, released November 5, 2015, and the Public Notice of February 14, 2019. 5 | P a g e REDACTED – FOR PUBLIC INSPECTION

adjustments that the FCC proposed – reducing GTL’s costs by 10% and the elimination of

CenturyLink’s subcontractor costs. FTI was able to replicate all of the FCC’s data tables in

Appendix E of the 2020 ICS Notice within a reasonable degree of variance using the version of the spreadsheet that includes GTL’s full costs and does not eliminate CenturyLink’s subcontractor costs. FTI utilized this spreadsheet for all of its analysis in this report. FTI was able to replicate

Table 1 in Appendix H within a reasonable degree of variance using the version of the spreadsheet that includes a 10% reduction of GTL’s full costs and does not eliminate CenturyLink’s subcontractor costs.

12. Third, FTI received the April 2020 MDC submissions for ten of the twelve providers included in 2020 ICS Notice. These submissions are standard spreadsheets based on an

FCC template that identifies ICS costs at aggregated levels and at a facility or contract level. FTI did not receive submissions for ATN or Crown.

13. The 2020 ICS Notice includes a significant number of data tables and analyses, but the proposed rate caps are based on a rather simple calculation. The simple average of the cost per paid minutes of use (“MOU”) for each contract is calculated for jails and prisons.9 The FCC adds one standard deviation to the mean and then $0.02 is added as a provision for site commissions.

Each total is rounded to arrive at the proposed $0.16 cap for jails and $0.14 cap for prisons. The approach is simple, but the FCC does not explain why it is an appropriate methodology to set the rate caps. For example, there is no explanation why one standard deviation is a sufficient upper

9 Although the 2020 ICS Notice does not definitively lay out the rate cap calculations, the data tables in Appendix E, which are based on the unadjusted data, suggest slightly higher caps of $0.17 and $0.15. It appears the proposed rates reflect the calculations in Appendix H, which are based on the dataset that includes a 10% reduction for GTL’s costs. 6 | P a g e REDACTED – FOR PUBLIC INSPECTION

bound for rate setting purposes as opposed to other alternatives. The simplicity of the calculation hides flaws in the underlying data and in the aggregated nature of the methodology.

Figure 1 FCC’s Proposed Rate Caps Type Mean SD Adder Total Rounded Jails $0.082 $ 0.060 $0.020 $ 0.162 $ 0.160 Prisons 0.084 0.034 0.020 0.138 0.140

V. Data on Which the FCC Relies Is Flawed

The Data Collection Approaches Vary Significantly Among Providers

14. The process for the April 2020 MDC was revised to make the data collection process easier for providers.10 However, the data reporting methodologies actually used still varied significantly among the ICS providers. For example, as Figure 2 below shows, the degree to which providers reported costs in the April 2020 MDC as direct vs. indirect differs widely across the 12 respondents. For example, one of the 12 providers reported zero indirect costs while three reported little or no direct costs. For the remaining providers, direct costs range anywhere from 13% to 86% of total costs. Given that the FCC then intended to allocate the indirect costs in several different alternatives, having a standardized approach for determining which costs are direct and indirect was vital for performing analysis. Given the wide range of data submissions, it was clear that a consistent approach was not utilized.

15. Some of the submissions included email correspondence between the providers and the FCC. When the FCC asked {{ }} how it distributed indirect costs, which were not included in its submission, the provider responded, {{

10 2020 ICS Notice, ¶ 25.

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11}} As discussed later in this declaration, the majority of {{ }} contracts have inordinately low costs per minute as a result of what appears to be an apparent omission of indirect costs. Developing rate caps for an industry when one of the participants has not included all of its costs will by definition cause the resulting rate caps to be incorrectly low.

Figure 2 Jails Cost Breakdown by Provider {{

}}

16. Another example of nonstandard data reporting is the different approaches providers used to include a return on capital component in their ICS costs. Several providers responded in their recent MDC submissions that the rate of return used was “N/A” or “actual costs used” or zero/blank, which implies that a return component was not included. The capital return is an important and sizeable cost that ICS providers must recover through the prices of their services to ensure sufficient profitability to encourage investment in their businesses.

11 {{ }} 8 | P a g e REDACTED – FOR PUBLIC INSPECTION

Figure 3 Responses to “Rate of Return Used in Estimating ICS Costs” {{

}}

17. With these different data reporting methodologies, there is little chance that any meaningful conclusions about costs can be drawn that can be accurately applied to the industry as a whole.

Certain Providers Report Irregular Data

18. Whether driven by the different methodologies or not, individual provider data reveal irregularities that likely do not accurately reflect costs to provide ICS services. For example,

Figure 4 shows the cost per minute distributions for two providers with unusually low costs,

{{ }} and {{ }}.

19. Most of the contracts for {{ }} have costs per minute around {{ }}, which is extremely low for an ICS provider, especially compared to the overall average of $0.084.

{{ }} reported only direct costs, and the email exchange referenced previously in this report indicated that the provider omitted all indirect costs from its reporting. The overall average per minute for {{ }} is {{ }} because it has several contracts above {{ }},

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including one that is {{ }} per minute.12 With so many contracts at unrealistically low levels and so many on the extreme high end, {{ }} reported data is unreliable. Yet the FCC included this data in its rate-setting calculations.

Figure 4 Jail: Cost per Minute Distributions ({{ }}) {{

}}

20. {{ }} also had unusually low costs per minute, most of which were between

{{ }} and {{ }}. {{ }} had a lower average cost per minute, {{ }}, than

{{ }} due to a lack of contracts with unusually high cost per minutes as shown in

12 These averages are calculated using a simple average by contract which is the methodology employed by the FCC in its analysis.

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Figure 4. Given that {{ }} of {{ }} costs were indirect, there is less variability compared to other providers since most of the costs were allocated based on minutes.

21. The dataset upon which the FCC relied is littered with other irregular datapoints.

The 2020 ICS Notice acknowledges that Average Daily Population (“ADP”) data is often inaccurate,13 and the dataset reflects such errors. Figure 5 below shows, for example, that 90 out of 2,935 contracts (over 3%) reported an ADP of zero. One provider {{( )}} reported that

{{ }} of its {{ }} contracts all had an ADP of exactly {{ }}. On the other end of the spectrum, {{ }} and {{ }} each list a contract with an ADP over 120,000 at one facility.

Figure 5 Distribution of ADP with Provider Breakdown14 {{

}}

13 See 2020 ICS Notice, Appendix E ¶ 13. 14 Histogram filtered ADP to below 100 ADP to provide best view of distribution. 11 | P a g e REDACTED – FOR PUBLIC INSPECTION

22. Call minute data is also problematic. For example, {{ }} lists a contract with an ADP of less than one, but with over 1 million total minutes. Similarly, 274 contracts (almost

10% of all contracts) have an average of more than 30 minutes per call. One contract has an average of 3,512 minutes, or nearly two and a half days. Since most facilities do not even permit calls to exceed 15 minutes, it is impossible that the average call could be this long.

Figure 6 Distribution of Minutes per Call

500 450 400 s t c 350 a r t

n 300 o C

f 250 o

e 200 b m

u 150 N 100 50 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 28 >30 Minutes per Call

23. The unusually low cost per minute figures for {{ }} and {{ }} and other data anomalies throughout the dataset call into question the accuracy of the cost data that was reported by these providers as well the FCC’s calculations from the irregular data.

VI. Call Minutes Is Not an Appropriate Allocator

24. The FCC considered six different allocation methods to distribute indirect costs to contracts: call minutes, ADP, calls, revenue, contracts, and facilities.15 For each of the six

15 Id., Appendix E ¶ 10. 12 | P a g e REDACTED – FOR PUBLIC INSPECTION

allocation methods, the FCC calculated the cost per minute for each of the contracts and then calculated average cost per minute and standard deviation across all contracts. It then used a process of elimination to determine that call minutes is the appropriate allocation key. It arrived at this conclusion by simplistically concluding that the contracts- and facilities-based cost allocations resulted in costs that were too high.16 Further, the FCC concluded that the ADP data was unreliable, and believed that revenue is not an appropriate cost driver.17 Call minutes and calls remained, and the FCC chose minutes because “(i)t is common in inmate calling services supply to charge per-minute rates, and not per call rates, even if sometimes the first minute has a different rate from subsequent rates.”18

25. As Figure 7 shows, the FCC essentially selected the allocation method that yielded the lowest mean, standard deviation and coefficient of variation (standard deviation divided by mean), and then used flimsy logic to justify it. The FCC could just as easily have used calls as the allocation method, which would have resulted in rate caps of $0.22 for jails and $0.21 for prisons.19

16 Id., Appendix E ¶ 12-15 17 Id. 18 Id., Appendix E ¶ 16. 19 Based on the Mean + Standard Deviation in Table 4 of Appendix E + $0.02. 13 | P a g e REDACTED – FOR PUBLIC INSPECTION

Figure 7 FCC Appendix E: Table 3 FCC Appendix E: Table 3 Allocation Key Facility Type Cost per Minute Coefficient Mean St. Dev of Variation Minutes Jail $0.08 $0.06 73% Minutes Prison 0.09 0.04 44% ADP Jail 6.97 236.85 3,396% ADP Prison 0.58 4.18 725% Calls Jail 0.11 0.10 91% Calls Prison 0.10 0.09 91% Revenue Jail 0.13 0.12 90% Revenue Prison 0.10 0.17 170% Contracts Jail 42.66 1,005.68 2,358% Contracts Prison 3.87 37.99 982% Facilities Jail 41.28 1,002.77 2,429% Facilities Prison 3.79 37.12 980%

26. The FCC also does not explain why it did not include direct costs among its allocation options. The FCC has used direct costs as the basis for allocating indirect costs in past proceedings,20 and yet it made no mention of direct costs in this Notice. Perhaps the reason the

FCC avoided this alternative is that three providers reported no direct costs further highlighting the core problem of data quality previously discussed.

27. Before further addressing the flaws in the FCC’s call minute allocation approach, it should be noted that FCC’s dataset is inconsistent in the amount of indirect costs it allocates under each allocation scheme. The total amount of indirect costs should be the same for each company and in total, but that is not the case. These discrepancies appear to indicate a calculation error in the FCC’s cost allocation.

20 47 C.F.R. § 64.901(b). 14 | P a g e REDACTED – FOR PUBLIC INSPECTION

Figure 8 Indirect Costs in the FCC’s Dataset by Allocation Key ($000s) {{

}}

Most ICS Costs Do Not Vary by Minutes

28. Minutes can be an appropriate allocation method for some costs in the telecom industry. For example, switched access costs are directly variable depending on the minutes of use.

However, in the ICS business only a very small portion of costs, primarily termination fees, are directly related to minutes. The overwhelming majority of costs, which include connectivity to the facilities, developing and implementing the calling platform, on-site equipment and SG&A, do not vary by the number of minutes. The FCC may have chosen call minutes because it is convenient and produces desired results, but that approach does not reflect proper cost causation.

29. Ironically, the FCC was quite critical of GTL’s approach in the Second Mandatory

Data Collection response of allocating indirect costs on the basis of revenue noting the following:

In developing its Second Mandatory Data Collection response, one provider, GTL, allocated indirect costs between its inmate calling services operations and its other operations based on the percentages of total company revenue each operation generated. GTL and certain other providers also used relative revenues to allocate their indirect costs among contracts. The Commission has long disclaimed this allocation methodology because it fails to provide a reliable method for determining the costs of providing inmate calling services given that “revenues 15 | P a g e REDACTED – FOR PUBLIC INSPECTION

measure only the ability of an activity to bear costs, and not the amount of resources used by the activity.”21

We agree that the use of revenue is not appropriate for the allocation of indirect costs. However, the FCC in the same 2020 ICS Notice in attempting to defend its use of minutes (after eliminating the other considered alternatives) as an allocator of indirect costs justified this selection because of how correlated minutes are to revenue:

This leaves call minutes and calls as potential cost allocation keys. A call minute cost allocation key is the natural choice for setting per-minute inmate calling services rates. It is common in inmate calling services supply to charge per-minute rates, and not per call rates, even if sometimes the first minute has a different rate from subsequent rates.22

This is true, but it does not make minutes an appropriate cost allocation method for all indirect costs. In fact, the FCC is acknowledging here that service providers charge by minutes and those charges are typically on a per minute basis. As such, when minutes are multiplied by rates per minute, this essentially turns the allocation back into the revenue allocation methodology that the

FCC criticized GTL for utilizing.

The FCC’s Approach Is Circular

30. The FCC’s effective criteria of choosing the allocation method with the lowest mean and standard deviation is based on a circular approach that predetermines the outcome.

Because the criteria used to compare the allocation methods are based on cost per minute, the method that allocates costs based on call minutes would clearly provide the results with the least variability. The allocation method determines the outcome.

21 2020 ICS Notice, ⁋ 82. 22 2020 ICS Notice, ⁋ 16.

16 | P a g e REDACTED – FOR PUBLIC INSPECTION

31. If the FCC had evaluated each allocation method based on costs per ADP or per call, for example, those allocation methods likely would have been deemed the appropriate approach. Figure 9 recreates the FCC’s allocation key analysis but adds columns that reflect costs per ADP and costs per call.23 When the cost per ADP is evaluated, the ADP allocation key yields the lowest mean and standard deviation. The same is true using cost per call as the evaluation criteria. The FCC’s conclusion was predetermined by the cost criteria that it chose.

Figure 9 Cost per Allocation Key Comparison Cost per Allocation Key Comparison (Minutes, ADP, Calls) Allocation Key Facility Type Cost per Minute Cost per ADP Cost per Call Coefficient Coefficient Coefficient Mean St. Dev of Variation Mean St. Dev of Variation Mean St. Dev of Variation Minutes Jail $0.08 $0.06 73% $275.67 $768.67 279% $2.32 $9.33 402% Minutes Prison 0.09 0.04 44% 363.54 373.89 103% 9.75 20.90 214% ADP Jail 6.97 236.85 3,396% 227.08 144.73 64% 8.61 148.41 1,723% ADP Prison 0.58 4.18 725% 290.59 133.58 46% 13.32 28.05 211% Calls Jail 0.11 0.10 91% 319.69 679.26 212% 2.00 6.78 338% Calls Prison 0.10 0.09 91% 366.95 394.97 108% 6.31 11.75 186% Revenue Jail 0.13 0.12 90% 397.18 1,145.16 288% 2.75 10.46 380% Revenue Prison 0.10 0.17 170% 317.75 377.66 119% 8.70 18.81 216% Contracts Jail 42.66 1,005.68 2,358% 2,489.84 6,620.26 266% 85.48 1238.20 1,448% Contracts Prison 3.87 37.99 982% 697.22 1,768.92 254% 36.57 259.12 709% Facilities Jail 41.28 1,002.77 2,429% 2,193.83 6,127.69 279% 78.12 1204.29 1,542% Facilities Prison 3.79 37.12 980% 690.03 1,725.64 250% 36.13 253.13 701%

Allocation Based on Call Minutes Understates the Standard Deviation

32. As described earlier in this report, the reporting of direct vs. indirect costs varies considerably among providers. For providers that reported zero or near zero direct costs, their calculated cost by contract is entirely driven by the FCC’s allocation scheme. Since indirect costs are allocated to contracts based on a common metric (i.e., minutes), there should be little to no standard deviation in the indirect portion of the cost per minute. As shown in Figure 10, ICS

23 Contracts with ADP of 0 were excluded from this analysis. 17 | P a g e REDACTED – FOR PUBLIC INSPECTION

providers with wholly indirect costs for both prisons and jails tend to have a lower standard deviation of cost per minute. Because the standard deviation is a key factor in the rate-setting calculation, lower standard deviations directly reduce the proposed rate caps. In other words, the

FCC’s allocation approach lowers the proposed rate caps.

Figure 10 Jails: Standard Deviation of Cost per Minute v. Percentage of Indirect Costs

$0.25 e t u n i $0.20 M

r e p

s $0.15 o C

f o

v $0.10 e D

d r a

d $0.05 n a t S $0.00 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Percentage of Indirect Costs

33. {{ }} is a prime example of this dynamic. Nearly all of {{ }} costs are indirect, and thus allocated based on total ICS minutes. As a result, all {{ }} contracts, both jails and prisons have the same cost per total minute {{ .}} The only variation in the cost per minute among the contracts shown below in Figure 11 is caused by the difference between total ICS minutes (used for the allocation) and paid ICS minutes (used for the rate-setting calculation).

18 | P a g e REDACTED – FOR PUBLIC INSPECTION

Figure 11 {{ }} Cost per Minute Distribution {{

}}

34. {{ }} standard deviation for jails is under {{ }}, which translates to a coefficient of variation of {{ }}, the lowest of all jail providers. Since {{ }} is the second largest jail provider, its low standard deviation has a large impact in driving down the overall standard deviation for jails. Likewise, for prisons, {{ }} is the largest provider. Its standard deviation is {{ }}, for a coefficient of variation of {{ }}, which is second lowest only to {{ }}, another provider that reports no direct costs. {{ }} resulting costs demonstrates two important factors: (1) the FCC’s allocation method based on minutes directly drives down the standard deviation and thus the proposed rate caps; and (2) carriers that did not identify any meaningful direct costs by contract cause the vast majority of cost assignment to be based on the FCC’s allocation methodology thereby, again, reducing the real variability in costs and the resulting rate caps.

19 | P a g e REDACTED – FOR PUBLIC INSPECTION

VII. The FCC’s Methodology Creates Flawed Results and Conclusions

35. For its rate-setting calculations, the FCC relies on a dataset of cost data at the contract level that is pooled together from several providers. However, drawing conclusions from the pooled dataset is flawed for various reasons.

Data Incorrectly Suggests Costs Increase as ADP Increases

36. The FCC, in a previous report, proposed rate caps for jails based on the idea of economies of scale: “Specifically, we adopt a rate cap of $0.22/MOU for debit and prepaid calls from jails with an ADP of 0-349; a $0.16/MOU cap for debit and prepaid calls from jails with an

ADP of 350-999; and a $0.14/MOU cap for debit and prepaid calls from jails with an ADP of

1,000 or more.”24 These declining rate caps for increasing sizes of facilities were established because the cost data reflected the economies of scale for larger facilities. The 2020 ICS Notice did not include proposed rate caps based on ADP and instead set a single rate for jails. However, given the historical cost dynamics between small and large facilities, it is critical that proposed rate caps include different rates by ADP.

37. FTI analyzed the FCC dataset by facility size and identified a clear issue with the

FCC’s pooled data approach – at an overall contract level, as ADP increases, the cost per minute increases. For jails, the average cost per minute is slightly lower for mid-sized jails (350-999 ADP), but the cost per minute is significantly higher for large jails (1,000+ ADP). For prisons, the average cost per minute increases as the size of the ADP grouping increases. This trend runs counter to

24 Before the Federal Communications Commission, In the Matter of Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Second Report and Order on Remand and Third Further Notice of Proposed Rulemaking, By the Commission: Chairman Wheeler and Commissioners Clyburn and Rosenworcel issuing separate statements; Commissioners Pai and O’Reilly dissenting and issuing separate statements. October 22, 2015, ¶ 22.

20 | P a g e REDACTED – FOR PUBLIC INSPECTION

what is understood with regards to economies of scale – as the number of customers increases and the corresponding volume of minutes, the cost per minute by contract should decrease.

Figure 12 Jails: Average Cost per Minute & Standard Deviation by Size

Size(ADP) Contracts Cost/Min Std Dev 0-349 2,251 0.083 0.057 350-999 413 0.082 0.050 1,000+ 140 0.104 0.127 Total 2,804 0.084 0.062

Figure 13 Prisons: Average Cost per Minute & Standard Deviation by Size

Size(ADP) Contracts Cost/Min Std Dev 0-349 20 0.079 0.036 350-999 38 0.083 0.038 1,000+ 73 0.097 0.041 Total 131 0.091 0.040

38. This anomalous trend of costs increasing with size falls apart when the data is examined on a provider by provider basis. As demonstrated in Figure 14, only one provider,

{{ }}, shows a significant increase in cost per minute as size increases; all the other providers experience a decrease in cost per minute as size increases.

21 | P a g e REDACTED – FOR PUBLIC INSPECTION

Figure 14 Jails: Cost per Minute by Provider and Size25 {{

}}

39. Figure 15 displays the average cost per minute across the 0-349, 350-999, and

1000+ ADP groups for jails. There is significant variation in costs per minute among providers in each ADP group. The figure shows how the mix of contracts is driving the overall increase in cost per minute as the facility size increases. {{ }} contracts ({{ }} bubble size represents number of contracts) represent a higher portion of the overall contracts as size increases.26 {{

}} The other factor driving up the average cost in the 1,000+ is the group of high-cost outliers in the {{ }} data, which has been highlighted throughout this report and is shown on the charts at {{ }} per minute.

25 Width of bars represents relative number of contracts. 26 {{ }} is represented in pink. 22 | P a g e REDACTED – FOR PUBLIC INSPECTION

Figure 15 Jails: Cost per Minute by Size and Provider

40. When FCC aggregates data across all providers, it produces illogical results. This is further support that the FCC’s methodology to set rates based on overall averages across all contracts is flawed.

Data Incorrectly Suggests Prisons Are Higher Cost than Jails

41. The FCC calculates the average cost per minute for prisons to be $0.091 and for jails to be $0.084.27 The higher average cost per minute for prisons than for jails runs counter to industry experience and FCC’s prior conclusions that costs to serve prisons are lower than for jails.28 As Figure 16 below shows, for those providers that serve both jails and prisons, the cost for

27 2020 ICS Order, Appendix E ¶ Table 2. 28 In the Matter of Rates for Interstate Inmate Calling Services, ¶ 33.

23 | P a g e REDACTED – FOR PUBLIC INSPECTION

each one to serve prisons is lower than for jails, but again it is the mix of contracts among providers that is driving the higher costs for prisons at an aggregate level.

Figure 16 Jails vs. Prisons: Average Cost per Minute {{

}}

42. This higher average cost for prisons is another example of how the FCC’s pooling of data across providers leads to illogical results. This contrary result should also have caused the

FCC to evaluate whether the underlying cost data that it was receiving was contributing to the incongruous result.

The FCC Draws Conclusions from a Non-Normal Dataset

43. The distribution of costs per minute from the pooled dataset that the FCC utilizes is multimodal, not a normal distribution, for both prisons and jails. Multimodal means the distribution contains one or more modes or local maxima; in simpler terms, a distribution that contains two or more peaks. A multimodal distribution is typically indicative of distinctive groups within the overall distribution. As seen in Figure 17 and Figure 18 below, the breakdown of the

24 | P a g e REDACTED – FOR PUBLIC INSPECTION

distributions by provider for both jails and prisons clearly shows that certain providers are represented in certain peaks within the distribution. The fact that there are distinct groups in the multimodal distributions means that any average calculated from the whole of the cost per minute data is not truly representative of the center of the distribution. Therefore, the approach of setting rate caps based on simple averages of contract costs across all providers is not appropriate.

Figure 1729 Jails: Cost per Minute Distribution with Provider Breakdown {{

}}

29 Histogram was filtered to below $0.22 to provide best view of distribution 25 | P a g e REDACTED – FOR PUBLIC INSPECTION

Figure 18 Prisons: Cost per Minute Distribution with Provider Breakdown {{

}}

The FCC Incorrectly Concludes that Costs per Minute Are Higher for Facilities Without Site Commissions

44. To calculate the proposed rate caps, the FCC adds $0.02 to the sum of the average cost per minutes and the standard deviation. They offer the following justification for this $0.02 adder: “It is reasonable that the higher per-minute costs for contracts without site commissions reflect, at least in part, give-and-take negotiations in which inmate calling services providers agree to incur additional inmate calling services-related costs in exchange for not having to pay site commissions.”30

30 2020 ICS Order, Appendix H ¶ 2. 26 | P a g e REDACTED – FOR PUBLIC INSPECTION

45. The FCC’s rationale is confusing at best. The FCC asserts without support that the cost of providing ICS services is determined by “give-and-take negotiations” with corrections facilities. ICS providers try to offer services at the lowest costs possible, regardless of whether or not site commissions are paid. There is no evidence that site commissions impact costs incurred by the service suppliers at all. In fact, a closer examination of the data indicates that, if anything, contracts without site commissions have lower costs. The FCC determined the $0.02 adder by calculating the overall difference in average cost per minute among all jail and prison contracts with and without commissions, $0.013, which it rounded that number up to the nearest cent,

$0.02.31 However, costs per minute at the provider level tend to be lower for non-commission contracts, not higher as the FCC concluded using pooled data.

46. Figure 19 and Figure 20 identify for each provider the difference in average cost per minute for contracts with without commissions and those with.32 The bars below zero indicate providers where average cost per minute is lower without commissions than with and vice versa for the bars above zero. For six out of ten providers, jails without site commissions have lower average costs per minute than those with commissions.

31 Id., Appendix H ¶ Table 1. 32 To keep things consistent, FTI uses the cost dataset that does not reduce costs for {{ }} and {{ }} for Figure 19 and Figure 20. 27 | P a g e REDACTED – FOR PUBLIC INSPECTION

Figure 19 Jails: No Commission Contracts v. Commission Cost per Minute {{

}}

47. For four out of five providers, prisons without site commissions have lower average costs per minute than those with commissions.33 The table below the chart shows how the mix of contracts drives an overall higher cost per minute for contracts without site commissions when at the provider level the dynamic is flipped. {{ }} once again drives the overall averages. It has a relatively higher cost per minute and its share of contracts without site commissions higher {{

}} than with commissions {{ }}. So even though {{ }} costs are higher with commissions, its lower share drives down the commission average.

33 Two providers were excluded from the graph for jails as they did not report any site commissions. One provider was excluded from the graph for prisons as they did not report any site commissions. 28 | P a g e REDACTED – FOR PUBLIC INSPECTION

Figure 20 Prisons: No Commission Contracts v. Commission Cost per Minute {{

}}

48. This discrepancy among the pooled provider data and the individual provider data indicates that the overall industry trend that the FCC finds of contracts with commissions having lower per minute costs than without commissions is driven by the mix of contracts rather than truly reflective of what is going on in industry. Put simply, drawing conclusions from the pooled dataset would lead to a different conclusion from when drawing conclusions from the data on a provider basis.

29 | P a g e REDACTED – FOR PUBLIC INSPECTION

VIII. Conclusion

49. FTI’s evaluation of the FCC’s cost analysis has identified glaring issues with the data and methodology that the FCC utilizes in its calculation of the proposed rate caps. These issues include considerable variation in data collection methods among providers, an improper indirect cost allocation methodology, and the use of a cost dataset that leads to misleading conclusions. The FCC’s aggregated calculations mask data deficiencies and do not reflect the underlying cost dynamics the providers are experiencing in the market. ICS rate caps should not be based on this faulty data and methodology.

30 | P a g e CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER IN WC DOCKET NO. 12-375 BEFORE THE FEDERAL COMMUNICATIONS COMMISSION

We declare under penalty of perjury that the foregoing is true and correct. Executed on November

23, 2020.

______

Robert O. Fisher

______

Brian F. Pitkin

______

Steven E. Turner

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Exhibit-FTI-A (Curriculum Vitae of Robert O. Fisher)

Professional Experience

TARGUSInfo Vice President 2005 – 2007

Verisign Director, Solutions 2004 – 2005

InCode Consulting Senior Manager 2002 – 2004

Marconi Pacific Manager Director 2000 – 2002

PricewaterhouseCoopers (PwC) Principle 1999 – 2000 Senior Associate 1997 – 1999 Associate 1995 – 1997

MCI Product Manager 1992 – 1993

Accenture Associate 1989 – 1991

Education

University of Michigan, Ross School of Business, Ann Arbor, Michigan Master of Business Administration, Finance 1993

Georgetown University, School of Foreign Service, Washington, District of Columbia Bachelor of Science, International Politics 1989

Certifications

Certified Public Accountant

1 | P a g e REDACTED – FOR PUBLIC INSPECTION

Professional Biography

Mr. Fisher holds a B.S. from the School of Foreign Service at Georgetown University and an M.B.A. in finance from the University of Michigan. He is a Certified Public Accountant.

2 | P a g e REDACTED – FOR PUBLIC INSPECTION

List of Proceedings/Cases

Surface Transportation Board

Docket No. 42088 Western Fuels Association, Inc. and Basin Electric Power Cooperative, Inc. v. BNSF Railway Company BNSF Railway Company's Reply Comments on Remand September 19, 2014

Docket No. 42136 Intermountain Power Agency v. Union Pacific Railroad Company Reply Evidence of Union Pacific Railroad Company April 12, 2013

Docket No. 42125 E.I. DuPont De Nemours & Company v. Norfolk Southern Railway Company Reply Evidence of Norfolk Southern Railway Company November 30, 2012

Docket No. 42127 Intermountain Power Agency v. Union Pacific Railroad Company Reply Evidence of Union Pacific Railroad Company November 10, 2011

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Exhibit-FTI-B (Curriculum Vitae of Brian F. Pitkin)

Professional Experience

Pitkin Analytics LLC President 2009 – 2014

WorldNet Telecommunications, Inc. Senior Vice President 2007 – 2009

Pitkin Consulting LLC President 2006 – 2007

QSI Consulting, Inc. Senior Vice President 2004 – 2006

InterLink, Inc. President 2003 – 2004

FTI Consulting, Inc. Director, Network Industries Strategies 1999 – 2003

Klick, Kent & Allen, Inc. Employee 1994 – 1999

Peterson Consulting, LLP Consultant 1993 - 1994

Education

University of Virginia, McIntire School of Commerce, Charlottesville, Virginia Bachelor of Science in Commerce, Dual Concentrations in Finance and Management Information Systems 1993

1 | P a g e REDACTED – FOR PUBLIC INSPECTION

Professional Biography

Mr. Pitkin holds a B.S. in finance and management information systems from the University of Virginia.

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List of Proceedings/Cases

United States District Court, Central District of California, Western Division

United States District Court, Northern District of Iowa, Central Division

United States District Court, District of Massachusetts

United States District Court, District of Puerto Rico

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United States District Court, Eastern District of Tennessee at Chattanooga

Superior Court of New Jersey – Law Division, Middlesex County

Federal Communications Commission

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American Arbitration Association

Case No. 32 494 00100 09 In the matter of WorldNet Telecommunications, Inc., Claimant, vs. Puerto Rico Telephone Company, Inc., Respondent Direct Testimony April 9, 2009

Private Dispute Resolution Process

Private Arbitration July 1, 1987 License Agreement Between US Sprint Communications Company and Norfolk and Western Railway Company, Et Al. Report August 19, 2019

Alabama Public Service Commission

Docket No. 25980 Implementation of the Universal Support Requirements Rebuttal February 13, 1998

Regulatory Commission of Alaska

California Public Utilities Commission

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Florida Public Service Commission

Georgia Public Service Commission

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Illinois Commerce Commission

Indiana Utility Regulatory Commission

State Corporation Commission of the State of Kansas

Docket No. 99-GIMT-326-GIT Investigation into the Kansas Universal Service Fund (KUSF) Mechanism for the Purpose of Modifying the KUSF and Establishing a Cost-Based Fund Direct Testimony May 25, 1999

Maryland Public Service Commission

Case No. 8745 In the Matter of the Provision of Universal Service to Telecommunications Consumers Direct March 23, 2001 Rebuttal May 21, 2001 Surrebuttal June 11, 2001

Michigan Public Service Commission

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Minnesota Public Utilities Commission

Mississippi Public Service Commission

Docket No. 98-AD-035 Mississippi Universal Service Docket Rebuttal March 6, 1998

Public Service Commission of Missouri

Docket No. TO-98-329 Investigation into Various Issues Related to the Missouri Universal Service Fund Rebuttal Testimony of Brian F. Pitkin, adopted by John C. Klick September 25, 1998

Public Service Commission of the State of Montana

Public Service Commission of the State of Nebraska

North Carolina Utilities Commission

Docket No. SC-1427, Sub 9 Verified Petition for Waiver of Rule R13-9(d) FTI Report Modifying the July 17, 2014 Report Implementing the FCC Mandatory Data CollectionAugust 30, 2016

Docket No. P-100, Sub 133d Proceeding to Determine Permanent Pricing for Unbundled Network Elements Rebuttal October 15, 2002

9 | P a g e REDACTED – FOR PUBLIC INSPECTION

State of North Dakota Public Service Commission

Case No. PU-2077-02-308 Petition of WWC Holding Co., Inc. for Arbitration Under the Telecommunications Act of 1996 Rebuttal September 17, 2002

Public Utilities Commission of Ohio

Case No. 02-1280-TP-UNC In the Matter of the Review of SBC Ohio’s TELRIC Costs for Unbundled Network Elements Testimony May 28, 2004

Pennsylvania Public Utility Commission

Docket No. R-00016683 Generic Investigation of Verizon Pennsylvania, Inc.’s Unbundled Network Element Rates Direct December 7, 2001 Rebuttal January 11, 2002 Surrebuttal February 8, 2002

Telecommunications Regulatory Board of Puerto Rico

Case No. JRT-2008-CCG-0002 In Re: Puerto Rico Telephone Company, Inc. d/b/a CLARO TV Petitioner Statement August 8, 2011

10 | P a g e REDACTED – FOR PUBLIC INSPECTION

PRTC Local Tariff Section 15 WorldNet Telecommunications, Inc. and Puerto Rico Telephone Company, Inc. Affidavit May 20, 2005

Case No.’s 97-Q-0001 & 97-Q-0003 In the matter of Puerto Rico Telephone Company Tariff K-2 Direct May 1, 2001 Rebuttal May 15, 2001

South Carolina Public Service Commission

Docket No. 97-239-C. Intrastate Universal Service Fund Adopted the Direct Testimony of John C. Klick November 10, 1997 Rebuttal March 2, 1998

Public Utilities Commission of the State of South Dakota

Tennessee Regulatory Authority

Docket No. 97-00888 (USF) Universal Service Generic Contested Case Rebuttal Testimony of Don J. Wood and Brian F. Pitkin April 9, 1998

Public Utilities Commission of Texas

Docket No. 18515 Compliance Proceeding for Implementation of the Texas High-Cost Universal Service Plan Live Rebuttal July 16, 1998

Public Service Commission of Utah

Docket No. 03-2403-02 In the Matter of the Petition Of WWC Holding Co., Inc. for Arbitration of an Interconnection Agreement Rebuttal October 17, 2003 Additional Direct December 19, 2003

Washington Utilities and Transportation Commission

Docket No. UT-980311(a) Determining Costs for Universal Service Testimony August 3, 1998 Rebuttal August 24, 1998

Public Service Commission of Wisconsin

Docket No. 6720-TI-187 Petition of Wisconsin Bell, Inc., d/b/a SBC Wisconsin, to Establish Rates and Costs for Unbundled Network Elements Rebuttal July 15, 2004

Public Service Commission of the State of Wyoming

County Board, Arlington, Virginia

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Exhibit-FTI-C (Curriculum Vitae of Steven E. Turner)

Professional Experience

FTI Consulting, Inc. Senior Managing Director, Telecommunications, Media & Technology 2013 – Present Managing Director, Network Industries Strategies 2006 – 2012

Kaleo Consulting President 1997 – 2006

ALT Communications President 1998 – 1999

General Electric Research Engineer, Advanced Technologies Department 1986 – 1987

Education

Georgia State University Master of Business Administration in Finance 1990

Auburn University Bachelor of Science in Electrical Engineering 1986

1 | P a g e REDACTED – FOR PUBLIC INSPECTION

Professional Biography

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List of Proceedings/Cases

United States District Court for the Western District of Arkansas

In the United States District Court – Central District of California

In the United States District Court – Central District of California – Western Division

Before the United States District Court for the Northern District of Illinois – Eastern Division

Before the United States District Court for the Southern District of Iowa

3 | P a g e REDACTED – FOR PUBLIC INSPECTION

United States District Court for the Southern District of Mississippi (Hattiesburg Division)

United States District Court Western District of North Carolina Charlotte Division

United States District Court of South Carolina Charleston and Columbia Division

United States District Court Eastern District of Tennessee at Chattanooga

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In the United States District Court for the Northern District of Texas – Dallas Division

In the United States District Court – Eastern District of Virginia – Alexandria Division

Superior Court of New Jersey – Law Division, Middlesex County

In the Circuit Court of Cook County, Illinois

In the Court of Chancery of the State of Delaware

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In the United States Bankruptcy Court for the District of Hawaii

In the United States Bankruptcy Court for the Western District of Texas – Austin Division

American Arbitration Association

CarrierCom Corporation v. Lucent Technologies Inc., et al., Defendants Preliminary Responsive Analysis by Steven E. Turner March 24, 2003

International Centre for Dispute Resolution

Case No. 01-19-0003-0648 WorldNet Telecommunications, Inc., Claimant, v. Puerto Rico Telephone Company, Inc., Respondent Direct Testimony of Steven E. Turner June 5, 2020

Financial Industry Regulatory Authority, Inc. (FINRA), Division of Arbitration

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JAMS/ENDISPUTE, San Francisco, California

Before the Canadian Radio-television and Telecommunications Commission

CRTC 2010-43 Proceeding to Review Access to Basic Telecommunications Services and Other Matters Expert Report of Mr. Steven E. Turner on behalf of Bell Canada and Bell Aliant April 26, 2010

Before the Federal Communications Commission

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Before the Enforcement Bureau of the Federal Communications Commission

State of Florida – Division of Administrative Hearings

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Before the State Office of Administrative Hearings for Texas

Gwinnett County Superior Court

Case No. 14-A-07233-1 BellSouth Telecommunications v. Sago Networks, et al. Expert Report of Steven E. Turner – FTI Consulting, Inc. on behalf of BellSouth Telecommunications November 10, 2014

In the District Court of Collin County, Texas 401st Judicial District

Before the Alabama Public Service Commission

Rebuttal Testimony of Steven E. Turner on behalf of the City of Houston September 13, 2016

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Before the Regulatory Commission of Alaska

Before the Public Service Commission of the State of Arkansas

Before the Public Utilities Commission of the State of California

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Public Utility Commission of Colorado

Docket No. 97A-011T In Re: Application of US West Communications, Inc. for the Interconnection Cost Adjustment Mechanism Testimony of Steven E. Turner August 8, 1997

Before the Public Service Commission of Delaware

Before the Florida Public Service Commission

Before the Georgia Public Service Commission

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Before the Public Utilities Commission of the State of Hawaii

State of Illinois, Illinois Commerce Commission

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ICC Docket No. 98-0555 In the Matter of the Commission’s Review of the SBC – Ameritech Merger for the State of Illinois Testimony of Steven E. Turner July 9, 1999

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Before the Indiana Utility Regulatory Commission

Before the State Corporation Commission of the State of Kansas

Docket No. 07-RRLT-717-COM In the Matter of a Complaint Regarding Failure of Rural Telephone Service Company, Inc., to Provide Interconnection Direct Testimony of Steven E. Turner February 7, 2007

Case No. TO-2004-0207 Direct Testimony of Steven E. Turner January 30, 2004

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Unknown In the Matter of Southwestern Bell Telephone Company – Kansas’ Compliance with Section 271 of the Federal Telecommunications Act of 1996 Statement of Steven E. Turner May 1998

Unknown In the Matter of Southwestern Bell Telephone Company – Kansas’ Compliance with Section 271 of the Federal Telecommunications Act of 1996 Statement of Steven E. Turner March 13, 1997

Commonwealth of Kentucky, Before the Public Service Commission

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Before the Louisiana Public Service Commission

Commonwealth of Massachusetts Department of Telecommunications and Energy

Before the Michigan Public Service Commission

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Before the Mississippi Public Service Commission

Before the Missouri Public Service Commission

Case No. TO-2001-438 In the Matter of the Determination of Prices, Terms, and Conditions of Certain Unbundled Network Elements Rebuttal Testimony of Steven E. Turner October 26, 2001

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Unknown In the Matter of Southwestern Bell Telephone Company – Missouri’s Compliance with Section 271 of the Federal Telecommunications Act of 1996 Statement of Steven E. Turner January 25, 1999

Before the Nebraska Public Service Commission

Application FC-1336 Nebraska Technology & Telecommunications, Inc., Complianant, v. Windstream Nebraska, Inc., Respondent Direct Testimony of Steven E. Turner August 19, 2009

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Before the Nevada Public Utilities Commission

State of New Hampshire, New Hampshire Public Utilities Commission

DE 97-171 DC Power Costs (TELRIC/SGAT Remand on Collocation) Rebuttal Testimony of Steven E. Turner July 28, 2003

Before the State of New York Public Service Commission

Case No. 98-C-1357 Proceeding on Motion of the Commission to Examine New York Telephone Company’s Rates for Unbundled Network Elements Panel Reply Testimony June 26, 2000

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Before the New York Public Utilities Commission

Before the North Carolina Utilities Commission

Docket No. SC-1427, Sub 9 Verified Petition for Waiver of Rule R13-9(d) Report Modifying the July 17, 2014 Report Implementing the FCC Mandatory Data Collection August 30, 2016

Docket No. P-100, SUB 133Q In the Matter of: Triennial Review Order – UNE-P Direct Testimony of Steven E. Turner January 5, 2004 Surrebuttal Testimony of Steven E. Turner March 1, 2004

Docket No. P-100, Sub 133d In Re: Proceeding to Determine Permanent Pricing for Unbundled network Elements Rebuttal Testimony of Steven E. Turner October 15, 2002

Docket No. P-55, Sub 1022 Unknown Rebuttal Testimony of Steven E. Turner September 10, 2001

Before the Public Utilities Commission of Ohio

Case No. 02-1280-TP-UNE In the Matter of the Review of SBC Ohio’s TELRIC Costs for Unbundled Network Elements Response Testimony of Steven E. Turner May 28, 2004

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Before the Oklahoma Corporation Commission

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Before the Pennsylvania Public Utility Commission

Before the Telecommunications Regulatory Board of Puerto Rico

Case No. 32 494 00100 09 In the Matter of WORLDNET TELECOMMUNICATIONS, INC. Claimant, v. PUERTO RICO TELEPHONE COMPANY, INC., Respondent Oral Rebuttal Testimony of Steven E. Turner April 17, 2009

Case No. JRT-2007-ARP-0005 In the Matter of Regulation for Quality of Service Measurement and Reporting Declaration of Steven E. Turner January 8, 2008

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Before the Public Service Commission of South Carolina

Before the Public Utilities Commission of the State of South Dakota

Before the Public Utility Commission of Texas

Docket No. 28607 Impairment Analysis of Local Circuit Switching for the Mass Market Direct Testimony of Steven E. Turner February 9, 2004 Rebuttal Testimony of Steven E. Turner March 19, 2004

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Project No. 16251 Investigation of Southwestern Bell Telephone Company’s Entry into the InterLATA Telecommunications Market Affidavit of Steven E. Turner October 27, 1999

Docket No. 20939 Southwestern Bell Telephone Company Request for Post-Interconnection Resolution to Develop Permanent Rates Affidavit of Steven E. Turner August 11, 1999

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Before the Washington Utilities Commission and Transportation Commission

Before the Public Service Commission of Wisconsin

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Before the Wisconsin Commerce Commission

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