The Key to Ending Private Prisoner Exploitation is Not Regulation but Competition

Perhaps you don’t think it should matter if prisoners get ripped off by their phone services. Maybe you’re right. But it still doesn’t make sense to give special monopoly favors to politically-connected corporations to make money off some of the poorest people (not just prisoners, but their families).

According to the New York Times,

Inside the razor wire on Eagle Crest Way, in rural Clallam Bay, Wash., telephone calls start at $3.15. Emails out, beyond the security fence, run 33 cents. Money transfers in, to what pass for bank accounts, cost $4.95.

Within that perimeter lies the Clallam Bay Corrections Center, a state prison — and an attractive business opportunity. One private company, JPay, has a grip on Internet and financial services. Another, Global Tel-Link, controls the phones.

These companies are part of a new breed of businesses flourishing inside American jails and prisons. Many of these players are being bankrolled by one of the most powerful forces in American finance: private equity. Private investment firms have invested many billions of dollars in the prison industry, betting — correctly — that it is a growth business.

Obviously, monopoly means higher prices and reduced quality. There is a Leftist notion, that we are seeing become a reality in the Affordable Care Act, that one giant service provider could offer those services at a reduced price.

But what is the New York Times’ solution?

It is a lucrative proposition, in part because these companies often operate beyond the reach of regulations that protect ordinary consumers. Inmates say they are being gouged by high costs and hidden fees. Friends and families say they have little choice but to shoulder the financial burden.

Say what? Consumers aren’t protected by regulations. Consumers are protected by competition. The more there is equal opportunity for any provider to offer his services, the more the price of those services will go down.

Now, I admit, I don’t know how to do that in all these cases, but for the phone calls it should be easy. Let prisoners by their own cell phones. Naturally, they can only have them at designated times and places, and these phones will need to be dumb phones (just in case there is an app for directing drug operations). But all the prison would need to do is have a system for retrieving a prisoners phone from a locker at the designated time and place. In that case, the prisoner wouldn’t need to pay a rate any higher than any other person on the outside. Furthermore, the prisoners would probably expect to not be able to all make phone calls at the same time, so there is no reason that ten prisoners could not split up the ownership of the mobile phone so that they don’t have to pay as much.

The prison system needs to allow entrepreneurs to compete with one another to serve the prison population—whenever that is feasible. That will bring the costs way down.