If I get a discounted Telephone do I still have to buy prepay phone cards from GTL?

Yes, you still need to do business with the prison phone company - their role is to monitor all of the calls and they have a monopoly arrangement to do so. Instead of registering your old "long distance number" and paying $15-18 per call, you register the new "Local number" and Global Tel can only charge the local line fee - approximately $1.75 per call.