DC Circuit Panel Presses FCC, Sorenson, Others in VRS Compensation Rate Case

Judges Patricia Millett and Thomas Griffith voiced concerns about FCC arguments and judgments, but Millett, joined by Judge Cornelia Pillard, also questioned whether Sorenson's proposal for a single VRS compensation rate would effectively squeeze out smaller competitors with higher costs. None of the judges asked the FCC about its argument Sorenson was precluded from pursuing its case because it allegedly didn't raise the same objection in previous challenges to earlier orders.

The FCC "conceded" its 2017-2021 tiered rates were highly inefficient, despite Section 225 of the Communications Act requiring it to ensure VRS provides "functionally equivalent" service for deaf and hard-of-hearing users in the most efficient manner, said Sorenson Counsel Donald Verrilli of Munger Tolles and an ex-DOJ solicitor general. The commission tried to "redefine" the mandate by saying consumers need competitive choice, but "it's about communications ability not consumer choice," he said. The tiered rates unjustifiably penalize Sorenson, "the most efficient" provider, with lower compensation and give "inefficient" smaller VRS providers higher compensation, he said.

Millett and Pillard repeatedly questioned Verrilli about FCC arguments that it was concerned Sorenson, which reportedly has about 80 percent of the market, would become a monopoly without the rate tiers, and that would be less efficient in the long run than a competitive market. Millett asked if it's unreasonable for the FCC to argue its rate tiers are needed to give separate structural "reforms" more time to boost competition. Verrilli said it's unreasonable because two key initiatives had been abandoned or didn't work out, and the third, interoperability, has largely been implemented to little competitive effect.

Verrilli said Sorenson's proposed uniform $3.73 per-minute rate and "price cap" mechanism would give it and other VRS providers true incentives to become more efficient, because they could increase profit by cutting costs. The FCC rejected it and said research and development costs can't be included, he said. When Pillard asked if any other competitors would survive under Sorenson's proposal, Verrilli said the company believes so, though the two smallest might not. The regulator is keeping them alive at the cost of "draining" the telecom relay service fund and ignoring efficiency, he said.

Millett pressed FCC attorney Grey Pash on what she saw as a change in the agency's argument from a 2013 rate-tier order, when it said functional equivalency means compliance with minimum standards. Now, the FCC is saying competitive choice for consumers is needed, which she said is an "inconsistency" in the agency's position. Pash and Millett went back and forth, with Millett seemingly unconvinced.

Pillard called it "very helpful" when Pash cited FCC efforts to require providers to answer VRS callers more quickly and to publish data on their performance, in answer to her query for examples of service improvements to achieve functional equivalency. But Griffin objected to giving deference to the predictive judgment of the expert agency. He asked Pash why the panel should defer to the FCC "when you got this so wrong in 2013" on expected improvements in the market. Pash said the VRS market is relatively new.

Court agreement with Sorenson would lead to monopoly, said Jeff Rosen, general counsel of Convo Communications, one of the two smallest providers, who was also representing ASL Services, CSDVRS and Purple Communications (the latter two are in the process of combining). Under a 2013 rate glide path, Convo struggled because there wasn't adequate compensation, but under the 2017 rate tiers, Convo is able to invest and grow, he said. The judges listened intently to Rosen, who spoke through a sign-language interpreter, but also asked him many questions.

The judges heavily questioned whether the Video Relay Services Consumer Association, a petitioner, had standing to challenge the FCC order.