TRS Providers Oppose Shifting to Cost-Based Rates; USTelecom Cites Contributions

Sorenson Communications and affiliate CaptionCall opposed using a cost-based methodology for IP captioned telephone service (IP CTS) compensation rates. They said the FCC should continue to move toward market-based TRS rates, which "best encourage" providers to offer efficient relay services -- which use sign-language interpreters -- that are "functionally equivalent" to general telecom services. The commission has proposed moving away from "unpredictable, destructive cost-based" video relay service (VRS) rates to "stable," market-based rates set by auction, they said. Until that process is complete, IP CTS remains the only TRS category utilizing market-based rates, under the multistate average rate structure (MARS) of competitive bids, they said.

"Under no circumstances should" the FCC reverse course and "adopt an 'allowable cost' methodology for IP CTS rates," Sorenson and CaptionCall said. They called it "highly alarming" the FCC sought comment on Rolka's recommendation to consider IP CTS rates based on provider costs. "The 'allowable cost' approach has had detrimental effects on IP Relay and VRS, and it would serve only to dampen competition, diminish consumer choice, work irreparable harm to the IP CTS industry, and undermine pursuit of the functional equivalence mandate," they said. If the FCC nevertheless pursues this methodology, it should base it on the highest reported provider costs, since an average-cost approach would force the highest-cost providers to discontinue service, they said.

Hamilton Relay also opposed departing from the "superior" MARS methodology. "Rather than focusing on harmful rate cuts that have been opposed by consumer groups, the Commission should instead focus on implementing GAO-recommended compliance measurements and provider-led innovations in providing relay services," Hamilton said. "These efforts should include the adoption of clearly defined, measurable standards for IP CTS, including answer speed, captioning accuracy standards, and verbatim transcribing."

Purple Communications urged the FCC to show "extreme caution" in considering a shift from a market-based to a cost-based approach for IP CTS rates. The MARS methodology has yielded just a 17 percent rate increase over 10 years and it's "well-documented" that cost-based rate structures "have failed," driving providers out of business and reducing consumer choice, Purple said. Using weighted average costs in quasi-monopoly markets "virtually assures vastly inequitable margins among providers" and restricts competition, it said.

Small VRS providers backed changing their compensation methodology. "This approach continues to result in a skewed compensation rate that does not compensate Tier 1 (with less than 500,000 minutes/month) providers for their service costs," ASL Services Holdings said. "The perpetuation of this approach will exacerbate Tier 1 provider losses upon the conclusion of the interim Tier 1 rate freeze" (see 1603020033). Convo Communications said Rolka's use of weighted average costs tilts toward the lower operating costs of the "dominant VRS provider," a reference to Sorenson. Convo said it "would be extremely hard pressed to provide anything more than video interpreting" if VRS rates are driven to $2.72/minute, as proposed by Rolka: "Instead of stripping away ... services, Convo believes that the true path in crafting an effective and balanced future rate methodology must be premised on the development of quality of service standards."

Sprint objected to a proposed IP relay rate cut from $1.37 per minute to $1.21/minute, noting it was the only provider of IP Relay services to people who are deaf, hard-of-hearing and deaf-blind. "Sprint cannot sustain service at this rate," it said. "Sprint urges the commission to suspend the rate at $1.37 and to move quickly to open a proceeding to overhaul IP Relay service including, importantly, abandoning the cost-plus rate-setting methodology which was based on a capital-intensive, competitive dynamic that no longer exists."

USTelecom said carriers paying into the fund still face a "fundamental timing issue" in accounting for the TRS contribution factor in their annual tariffs, though it called the FCC's May 9 PN release helpful compared with last year's May 20 release. It said wireline telcos generally recover TRS contributions through tariff filings in mid-June that take effect July 1, but Form 499A, which is the basis for the TRS contribution factor, is due April 1, and the contributions aren't usually set until close to July 1. "Ideally, the Bureau should strive to ensure that the TRS contribution factor is established well in advance of the mid-June annual access filing period ... and further adjust the timing of these various filing windows," it said.

The FCC should also "address the alarming increase in the TRS Fund," which is exacerbated by the continuing decline of its long-distance revenue base, USTelecom said. The FCC proposed an increase of 14 percent in the TRS contribution factor, from 1.63 percent to 1.86 percent of interstate and international telecom revenue, to cover a $1.14 billion TRS Fund for the next funding year (up from $1.05 billion), the telco group said. The continuing funding growth raises questions "about the long-term programmatic, legal, and financial integrity of the TRS program," the costs of which are "shouldered by a shrinking group of rate-payers," it said.