Sorenson Bucks Heads with Rivals, Consumers on Changing VRS Compensation Rates
Sorenson was alone seeking one compensation rate for all video relay service providers under the interstate Telecom Relay Service fund, in comments at the FCC last week. Sorenson is the biggest VRS provider and is paid the least under the current system. Responding to a notice of inquiry about taking a “fresh look” at the VRS program and reducing fraud, Sorenson’s rivals and consumer groups representing the deaf urged the FCC to maintain the current tiered approach, with some minor changes.
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Sorenson urged the FCC to adopt a “multi-year, unitary VRS rate plan,” with the initial rate “set at a level sufficient to allow a reasonably efficient provider to recover its total long-run economic costs.” The FCC could use a reverse auction to find that price, or “develop a model that approximates” costs going forward. Sorenson doesn’t want the FCC to use tiered rate structures, historical costs or “true-ups,” it said.
But Sorenson competitors urged the FCC to continue setting rates with tiers. In separate comments, AT&T, Sprint Nextel, Purple and CSDVRS backed tiers, though some suggested revisions to the current compensation system. Moving to a single tier, “while theoretically possible, could ultimately do immense damage to the industry as it could force out smaller providers and sustain the market dominance of the largest provider,” said CSDVRS.
Sprint said the FCC should retain the tiered rate structure, but cut the cap in half on the second tier to 250,000 minutes monthly from 500,000 minutes. Purple said the FCC should expand to “a five-tier rate structure based on a price cap system for reimbursing VRS providers.” The structure would be based upon “an objective, real-time market share basis” so as to promote competition, Purple said. Price caps in each tier “should be based on reasonable costs actually incurred by providers plus a reasonable profit margin,” it said. Reasonable costs should include marketing, outreach, and research and development, it said. AT&T said the compensation system should allow VRS providers to recover “their real costs,” and the FCC should clarify what calls are not reimbursable, including international and employee VRS calls.
AT&T said moving to a competitive bidding system would hurt competition because only one company would be able to receive compensation. Sprint backs competitive bidding to drive VRS rates down to costs, but said it should be “structured in a way that would help ensure that VRS would continue to be available from multiple partners."
Consumer groups for the deaf also want to keep the tiered system, but urged modified price caps and some other edits to the proposal to improve efficiency. Price caps “should be based upon a forward looking cost model and be reevaluated every three to five years as costs are reduced,” said the National Association of the Deaf and four other groups.
Video-relay-service compensation rates chosen by the FCC could have “broader policy implications upon the public and private funding partnership that underlies sectors such as VRS,” warned an ad hoc group of Sorenson bondholders. “The impact of policies adopted by the Commission in this proceeding will extend beyond VRS, the USF, and Sorenson. Any sudden and significant change in the compensation levels for VRS providers that threatens to undermine the capital structure and legitimate expectations of investors in a government-funded single payer industry would likely chill investment interest in VRS and similar communications services."
To reduce fraud, AT&T and Sprint separately urged the FCC to require VRS providers to get certified before they can provide service. AT&T urged the FCC to require companies to prove eligibility for the TRS fund before they can provide service. The consumer groups also backed certification, and recertification every five years.
The consumer groups urged the FCC to work on reducing equipment costs. “VRS equipment that is expensive and not interoperable is not functionally equivalent to telephone equipment,” they said. They suggested providing vouchers to users every two or three years good for buying equipment, requiring equipment interoperability on all networks, and move to server-based from equipment-based routing.
Florida urged the FCC not to shift intrastate VRS costs to states. “The shifting of costs to the states would cause Florida to be responsible for intrastate VRS costs estimated at $32 million annually, causing Florida’s present $0.11 per month TRS surcharge to increase by an estimated $0.25 per month to $0.36 per month per access line,” said the Florida Public Service Commission. Current Florida law caps the surcharge at 25 cents per line, it said.