Texas Business Report: Prison Phone Calls Break the Bank
Thanks to a near monopoly on inmate calling services. Plus: shipping strikes, SeaWorld’s IPO, and stalled stem cell therapy.
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The Texas economy is one of the most robust in the world. Wildly profitable companies and ingenious entrepreneurs call this state home, and what happens here influences businesses around the nation. Here’s a slice of the profits, losses, big deals, and backroom decisions happening across Tex
Houston dockworkers continued to work through the first week of the year after their union reached an agreement with shipping companies that avoided a nationwide strike. As a result of the temporary deal, which only extends the existing contract until Feb. 6, the International Longshoremen’s Association cancelled plans to begin a strike on Sunday that would have halted container shipments at 14 ports on the East and Gulf Coasts—including the Port of Houston—the New York Times reports.
If a new agreement is not reached by the February deadline, Houston-area companies that transport shipped goods could lose customers to West Coast ports, according to The Houston Business Journal.
The Bottom Line: At the center of the dispute is the future of container royalty payments, an arrangement in which shipping companies compensate dockworkers based on the weight of the cargo they handle. According to the Times, the longshoremen’s union “had for months denounced the companies’ proposal to freeze those payments for current longshoremen and eliminate them for future employees.”
Cell to Pay
Sugar Land stem cell treatment provider Celltex Therapeutics is fighting to resume operations after an investigation by the Food and Drug Administration pressured it to close down its lab in October. This week the company was featured in a Businessweek profile that detailed its endeavors to develop experimental treatments for multiple sclerosis, Alzheimer’s, diabetes and other conditions using adult stem cells—procedures that have demonstrated positive results in some patients but have not been granted federal approval.
Celltex has a key supporter in Gov. Rick Perry, who became the company’s first patient when he received stem cell treatment for back pain there last summer. “Hopefully, the FDA will realize that what’s going on in Texas is good medicine and good economics,” Perry told Businessweek.
The Bottom Line: The FDA has been slow to embrace stem cell therapy, which has been used to treat multiple sclerosis, Alzheimer’s, diabetes and other conditions. The agency has only approved one product thus far, and regulations are unclear about whether the treatments should be classified as FDA-regulated drugs or state-regulated medical procedures. Until those issues are resolved, all Celltex can do is wait.
SeaWorld Entertainment Inc., which owns Sea World San Antonio and 10 other theme parks in the U.S., is considering whether to pursue a private sale or move forward with an initial public offering. Reuters reported this week that the company “has held early talks with interested parties” to determine which option would be more profitable.
SeaWorld filed for the IPO in December and hopes to raise $100 million in capital, according to The San Antonio Business Journal. Analysts estimate the company’s value at about $4 billion.
The Bottom Line: For now it appears most likely that the company will most likely pursue the IPO. That decision would be well-timed with a resurgence in the amusement park industry. SeaWorld reported a net income of $19.1 million in 2011, compared to a $45.5 million loss the year before, according to the SABJ. Meanwhile, shares in Six Flags have increased in value by more than 50 percent in the last year, Reuters reports.
Winners of the Week: Wyoming Environmentalists
The Trust for Public Land won its fight to save part of a national forest in western Wyoming this week by raising enough money to buy out oil and gas leases owned by Houston-based Plains Exploration and Production. According to Businessweek, the company had planned to drill 136 gas wells on the land, but the conservation organization was able to collect $8.75 million in private donations to buy the 58,000 acres by the Dec. 31 deadline.
About 1,000 people contributed to the cause, including dozens of nonprofits, business leaders and a Swiss billionaire. The forestland will be donated back to the U.S. Forest Service and permanently retired.
Loser of the Week: Securus Technologies
A new FCC proposal could require Dallas communications company Securus Technologies to cut back the rates it charges for prison inmates to make phone calls to friends and family members, NBC News reports. Securus and one other company, Global Tel*Link Corp., control about 70 percent of the $1.2 billion inmate calling services market, according to Businessweek.
Critics say this near-monopoly has led the companies to charge far higher rates than necessary, even considering the additional security features and call monitoring included in the service. FCC research indicates that the costs for a 15-minute interstate call were $6.45 in Texas, $6.65 in California, $2.04 in Montana, and $16.55 in Idaho. The FCC, which voted unanimously to move forward with the proposal, will hear public comments for the next two months before making a ruling.