FCC Adopts Interim Rates for VRS Compensation
The FCC adopted video relay services (VRS) rates that are higher than those proposed by the National Exchange Carrier Association. The rates will be in effect from this July to next June. Providers under Tier 1 will be compensated at about $6.24 per minute, Tier 2 providers at $6.23 and at $5.07 for providers under Tier 3, an FCC order Monday said. The rate was established for an interim period of one year while the FCC seeks comment on a related inquiry, the order said. Industry officials had expressed concern over the rates proposed by NECA, which some had expected the FCC to codify in an order (CD June 10 p7). The commission also issued a notice of inquiry to address issues of fair compensation, VRS user data collection and other factors affecting market structure.
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NECA’s proposed rates were $5.77 for Tier 1, $6.03 for Tier 2 and $3.89 for Tier 3. The commission opted not to reduce the rates to the NECA-proposed level “in light of concerns expressed by providers and users,” the agency said. The commission estimated that the new compensation levels “will save the [Telecommunications Relay Services] Fund about $275 million over last year’s estimated costs."
The FCC found reasonable NECA’s methodology and use of actual cost information submitted by providers. “We decline to perpetuate the large discrepancy between actual costs and provider compensation in the face of substantial evidence that providers are receiving far more in compensation than it costs them to provide service,” the order said. The FCC tried to find “a reasonable balance between the past rates based on projections that consistently overstate true costs and overcompensate VRS providers, and the NECA-proposed rates based on actual costs that would represent a significant and sudden cut to providers’ compensation.”
The current tier structure is “a workable, reliable way to account for the different costs incurred by carriers based on their size and volume of TRS minutes relayed,” the commission said. The order “sets new levels of compensation that are within the range of rates proposed by providers and are closer to their actual costs than past rates,” Consumer & Governmental Affairs Bureau Chief Joel Gurin said in a e-mail addressed to the VRS industry and sent to it and media.
With the inquiry, the FCC intends to begin combating fraud and abuse within the industry and to contain the growth of the TRS Fund. Its administrator projected that the fund “would have reached a requirement of $891 million” for the current fund year, with 80 percent going toward VRS compensation, the notice said. The growth represents increased access to VRS users, but “to the extent that such increases are attributable to fraudulent or abusive activities designed to generate illegitimate VRS minutes, steps need to be taken to reform the program."
The inquiry seeks comment on several factors it said were fundamental to VRS rates like interoperability of videophones, availability and reliability of communications assistants and market distortions. It also asked how best to provide cost incentives for providers. Comments are due 30 days after publication in the Federal Register, replies 15 days later. “The FCC expects to complete the NOI proceeding before fund year 2011-2012, which begins July 1, 2011,” the agency said.
No. 1 VRS provider Sorenson Communications called the interim rates a disappointment. “It’s an improvement over the $3.89 rate that was originally proposed, but it still is a very significant reduction over the current rate,” Chief Marketing Officer Paul Kershisnik said in an interview. The FCC “had access to detailed audited financial materials we gave them, but still chose a rate that is below what’s necessary to sustain” our business, he said. The rates throw the industry into a period of uncertainty, because “it’s anybody’s guess whether it'll be for a year,” he said.
The long-term process the FCC has undertaken will be good for the industry, Purple Communications said. “However, in the short term, we are disappointed that the Tier 2 range was not expanded, which causes Purple to be the only provider other than Sorenson reimbursed at the lower rate for Tier 3 at a time when Sorenson is literally 10x our size,” said Kelby Brick, Purple regulatory vice president. “Hopefully even during this interim period, the FCC will continue to make progressive policy steps to improve competition and narrow the functional equivalency gap.”
"It is positive that the confidence of many VRS providers and customers had in the FCC in setting a sustainable rate was justified,” said Jeff Rosen, Snap VRS general counsel. The regulator should help providers in the interim “with immediate improvements in its compensation of billed VRS calls.” The inquiry asks the correct and constructive questions, he said, but “my reservation is whether the 30-day comment period is too brief to permit the necessary dialogue among stakeholders and perhaps to allow themes and consensus to emerge.”