The Prison Phone Industry Faces a New Video Challenge

  • The U.S. prison phone system industry totals $1.2B
  • In 2014 500 million phone calls took place to and from prison facilities

Prison phone system companies Securus and GTL are making a push for video calls to replace in-person visits in correctional facilities across the U.S. These two companies dominate the prison phone industry, yet there are competitors who provide low-cost alternatives vying for a larger market share. What needs to happen to create more opportunities for these companies to level the playing field in the industry?

Why This Matters: Securus and GTL are the two dominant players in the $1.2 billion prison phone industry. The question is whether Pigeonly and Flikshop will be able to scale enough to take significant market share away from Securus and GTL. Video calls are the latest service they are rolling out in the correctional facilities they contract with. The revenue opportunity here is large because an off-site 20-minute video call can cost $14 or more in some prison systems, not including additional fees. To get a better sense of the revenue opportunity for video calls, consider there were 500 million similarly expensive phone calls that took place to and from prisons in 2014.

Two startups run by formerly incarcerated individuals are trying to create more competition in this industry. Pigeonly, which is run by Frederick Hutson, offers services ranging from sending photos to providing low phone call rates through its VoIP technology. The company currently averages more than $175,000 in monthly revenue and has raised more than $5 million in venture funding. The company plans to expand to more incarceration facilities and add a payments platform.

Flikshop, founded by Marcus Bullock, is focused on using postcards to ease the ability families have in communicating with loved ones. Families can use the Flikshop app to upload photos that Flikshop sends to their incarcerated loved ones for $0.99.

Situational Awareness: FCC Chairman Ajit Pai has committed to working with the prison phone industry to lower the cost of communicating with incarcerated loved ones. Look out for what steps the FCC takes to make this happen.

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