In the fiercely competitive long-distance business, telephone companies bombard the public with aggressive ads for calling plans, inviting customers to chat with faraway friends and relatives for pennies a minute. But despite the variety of low-cost options, one segment of the calling market remains shackled with high rates: prison inmates.

In a little-known but increasingly controversial practice, state corrections agencies and private prison companies have been garnering tens of millions of dollars annually in recent years in what critics call "monopolistic" deals with MCI, AT&T, Sprint and numerous smaller phone service providers. The revenue comes at the expense of those who want to stay in touch by phone with imprisoned friends or family members, and can do so only by accepting collect calls from them.

Specifics of the deals vary. But generally, in return for giving a service provider an exclusive contract to handle outgoing pay-phone calls from a prison, a state corrections agency or private prison company gets a lucrative share of the revenue from the calls, sometimes 60 percent. The contract typically goes to the bidder who is willing to give back the biggest percentage or "commission." Phone companies agree to such terms because they can pass the cost to their captive customers: prisoners whose collect calls are billed at rates often far exceeding what the free market would bear. In Youngstown, Ohio, for example, Laurie Lamancusa, a teacher, said she routinely pays a $3 connection fee and 45 cents a minute to talk with her boyfriend, Darrell Nelson, in a privately run prison in Arizona. He is serving a sentence of 20 years to life for a late-1980s armed robbery in the District.

Nelson is one of 119 District inmates in the prison, which is run by the Corrections Corp. of America (CCA). By Lamancusa's recent calculation, if she and Nelson were allowed to shop for calling rates, their chats usually would cost about half as much, sometimes less. But Nelson can make collect calls only through the service provider chosen by CCA. The company--which operates more than 70 detention centers nationwide, and has custody of about 1,400 District inmates in Ohio, New Mexico and Arizona--declined to say how much money it takes in annually in phone commissions.

At $20 or more for a half-hour of conversation, Nelson's mother, Maggie, 60, who lives on a fixed income in Anacostia, said she can afford to talk with her son only once a month. "It's very painful, and I don't think it's fair," she said, adding, "I haven't complained to anyone because I don't know who to complain to."

Phone companies say commission-based contracts were a money-making innovation conceived by prison administrators a decade ago, when inmate populations were growing rapidly. States say most of the phone revenue is spent on programs for inmates that otherwise would have to be scrapped or funded by taxpayers. And private prison companies say contract prices for housing inmates would be higher without the revenue.

But inmate advocates say they are skeptical that prisoners ultimately benefit from the phone revenue collected by prison systems. Not all states have laws mandating that the money be used for inmate programs.

Pauline Sullivan, co-director of Citizens United for the Rehabilitation of Errants (CURE), an advocacy group with more than 30 chapters across the country, said her group has tried to track the spending of phone revenue in several states, "but it's very hard to get at exactly what it's used for." In some states, the money goes into the general treasury, she said, and in others it is used for prison improvements that benefit employees more than inmates.

Phone companies said security requirements also contribute to the high rates. Inmates usually are not allowed to receive calls and can place them only by reversing the charges from pay phones. To prevent phone scams and other illegal activity, the system has to be set up to block inmates from calling people not on their approved lists and to allow authorities to monitor conversations.

In New Mexico, however, a class action lawsuit filed recently by inmates' families alleges that four private prison companies, including CCA, and two phone service providers are violating the state's antitrust act and other laws by charging high rates for prison calls and allowing no alternatives. Attorneys for the plaintiffs said similar lawsuits and complaints to public utility regulators have been filed against other prisons and phone companies in Illinois, Kentucky, New York, Michigan and elsewhere.

"There's no reason why a select portion of the population ought to carry a greater burden for funding prisons just because they're related to somebody who happens to be in a prison," said Mark H. Donatelli, a lawyer in the New Mexico case.

The defendants have yet to file responses to the lawsuit, and CCA spokeswoman Susan Hart declined to discuss the case. "What I will tell you is, in a correctional environment, telephone use is a privilege, not a right," she said.

In Florida, where the state prison system collected $13.8 million in commissions in fiscal 1997-98, a legislative committee found that big prison systems in 10 other states took in more than $115 million in the same budget year. New York topped the list with $20.5 million. In Virginia, MCI gave the state $10.4 million, or 39 percent of the revenue from prison calls. Maryland receives a 20 percent commission on local calls by inmates, which must be made through Bell Atlantic, and gets 42 percent of revenue from long-distance calls, all of which are handled by AT&T. Maryland officials said they could not immediately provide information on the amount of money the state receives annually.

"The family members surveyed [in Florida] reported spending an average amount of $69.19 per month accepting phone calls," the committee's report said. "Several family members surveyed stated that, although they wanted to continue to maintain contact with the inmate, they were forced to remove their names from the inmate's approved calling list because they simply could not afford to accept the calls.

"One mother described the guilt experienced in having to tell her son he could not call . . . because she could not afford the bill," the report said. Prison officials and phone companies deny allegations that they are exploiting prisoners for profit, knowing that inmates and their families lack political clout and are unlikely to gain public sympathy in complaining about the rates. "We don't consider it gouging, we don't consider it unfair, we don't consider it inappropriate," said James B. Flateau, a spokesman for New York's prison system.

He said: "Now inmates will tell you, 'We don't pay it, our families do.' Yes, but who made the call? If they think it's gouging, then don't make the calls." New York's phone revenue pays for critical items such as AIDS drugs and such luxuries as cellblock cable TV and prison nurseries for female inmates' infants, Flateau said. In Florida, state law requires the money to be spent on prison "education programs, libraries, chapels, visiting pavilions, inmate clubs, inmate legal services, substance abuse treatment and life skills training programs."

"They're obviously looking for as much revenue as they can get," said Sandy Vaello, chief operating officer of Texas-based Evercom Systems Inc., which provides phone services at prisons across the country and is a defendant in the New Mexico lawsuit. To be successful in bidding for contracts, he said, "we have to set a rate structure that will give the facility the highest possible commission."

It was deregulation that bought about lower, market-driven rates for ordinary phone services, Vaello noted. "But this was one of the areas that the deregulation process didn't provide for," he said. "The benefits of deregulation obviously haven't made it down to the prison inmates."

Locked-In Phone Rates

In many states, phone service providers bid for prison contracts, which are awarded based on how much money a provider will give back to the state. The provider becomes the only service an inmate can use. Here are such contracts in some of the largest prison systems in fiscal 1997-98.

State

Inmates

Providers (returns)

State profit

Calif.

124,813

MCI (43%)

GTE (33%)

$20.5 million

N.Y.

69,117

MCI (60%), Bell Atlantic (60%)

$20.5 million

Fla.

65,117

MCI (50%), Sprint (57.5%)

$13.8 million

Ohio

47,166

MCI (35%), Shawntech (35%)

$14.1 million

Mich.

41,625

Sprint (34%), Ameritech (30%), GTE local calls (18%)

$10.3 million*

Ill.

40,686

Consolidated (50%), AT&T (50%), Ameritech (50%)

$12-$16 million

Ga.

36,753

Sprint (37%), Bell South (46%)

$10-$12 million

Pa.

34,696

Tenetics (50%), Bell Atlantic (50%), AT&T (50%), GTE (30%)

$3 million

N.C.

31,312

Taltons (46%)

$7 million (projected)

Va.

24,629

MCI (39%)

$10.4 million

Mo.

23,850

MCI (55%), Eagle Com. (25%), Southwest Bell (25%)

$9-$11 million

SOURCE: Florida House of Representatives, Corrections Committee

*In the first three quarters of the fiscal year.