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The inmates are not the customers, of course. Customers demand a service, and few people would demand to be incarcerated.

It is difficult to discuss such a complex arena without oversimplifying at all, but I'll try.

The service is "protection from crime."

Customers are the people who demand a service, typically the same people who pay for it. So the customers are the people who demand and pay for protection from crime. We might call them "taxpayers" at risk of ignoring some significant exceptions (criminals who pay taxes, perhaps, or people who receive such poor service that they would rather not pay).

The service providers are the prisons and associated criminal justice apparatus, whether run by bureaus or private firms.