Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | CC Docket No. 98-67          |
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| Telecommunications Services for  | ) |                              |
| Individuals with Hearing and     | * |                              |
| Speech Disabilities              | * |                              |
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| Recommended TRS Cost Recovery    | * |                              |
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| Request by Hamilton Telephone    | * |                              |
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**MEMORANDUM OPINION AND ORDER AND FURTHER NOTICE OF PROPOSED
RULEMAKING**

**Adopted:** December 17, 2001 **Released:** December 21, 2001

By the Commission:

# Introduction

1.  On November 9, 2000, the Interstate TRS Advisory Council and the TRS
    Fund Administrator (Advisory Council and Fund Administrator,
    respectively) proposed guidelines for interstate cost-recovery for
    traditional telecommunications relay service (TRS), speech-to-speech
    relay (STS), and video relay services (VRS).[^1] These
    recommendations were filed in response to the March 6, 2000
    *Improved TRS Order* which required the Advisory Council and the
    Fund Administrator to develop cost recovery guidelines for these
    services.[^2] Based on the record in this proceeding, we agree with
    and implement the recommendations to the extent described below. On
    April 6, 2001, Hamilton Telephone Company (Hamilton) filed a request
    for clarification of the scope of the VRS rules and for a two year
    waiver of certain provisions relating to VRS contained in the
    *Improved TRS Order*.[^3] We address Hamilton's request for
    clarification below.[^4]

# Background

2.  Title IV of the Americans with Disabilities Act of 1990 (ADA)[^5]
    requires the Federal Communications Commission (Commission) to
    ensure that TRS is available to the extent possible and in the most
    efficient manner to persons with hearing or speech disabilities in
    the United States. The Commission first ordered all carriers to
    provide TRS services nationwide on July 26, 1991.[^6] The rules for
    cost recovery were established in the *TRS Third Report and
    Order*.[^7] The Commission's rules require TRS providers to submit
    annually to the TRS Fund Administrator the data necessary to compute
    the TRS Fund requirements and payments.[^8] The administrator uses
    these data to develop formulas that are filed annually with the
    Commission. Payments to relay service providers are distributed
    based on the approved formulas. The compensation formulas are based
    on conversation minutes of use for completed interstate TRS
    calls.[^9] The *TRS Third Report and Order* required that the cost
    of interstate TRS be recovered from all subscribers of every
    interstate service, utilizing a shared funding cost recovery
    mechanism. The *TRS Third Report and Order* further mandated that
    every carrier providing interstate telecommunications services
    contribute to the TRS Fund on the basis of gross interstate and
    international telecommunications revenues.[^10] In its July 1998
    Biennial Review streamlining carrier reporting requirements, the
    Commission changed the contribution base from gross interstate and
    international telecommunications revenues to end user interstate and
    international telecommunications revenues.[^11]

3.  On March 6, 2000, the Commission released the *Improved TRS Order*,
    which amended the rules governing the delivery of TRS by expanding
    the kinds of relay services available to consumers and by improving
    the quality of relay services. The *Improved TRS Order* changed many
    of the definitions and standards for traditional TRS and added STS
    and Spanish relay services as requirements.[^12] It also permitted
    the recovery of VRS costs through the interstate TRS funding
    mechanism.[^13] Finally, the *Improved TRS Order* directed the
    Advisory Council and the Fund Administrator to develop
    recommendations for how the compensation formula for each service
    should be structured.[^14]

4.  On November 9, 2000, the Advisory Council and the Fund Administrator
    submitted recommended guidelines outlining proposed cost recovery
    procedures for traditional TRS, STS, and VRS.[^15] The
    recommendations were originally placed on Public Notice on December
    6, 2000,[^16] with comments due on January 5, 2001 and reply
    comments due on January 19, 2001. Comments were filed by Sprint
    Communications Corporation (Sprint), WorldCom, Inc. (WorldCom),
    Communications Service for the Deaf (CSD); and the American
    Speech-Language-Hearing Association (ASHA).[^17] On July 9, 2001, a
    public notice was placed in the Federal Register, seeking additional
    comment on the recommendations.[^18]

5.  On April 6, 2001, Hamilton filed a request for clarification and
    temporary waiver of certain aspects of the *Improved TRS Order*
    relating to the provision of VRS*.*[^19] Hamilton requests
    clarification and temporary, two-year waivers of portions of section
    64.603 and 64.604 of the Commission's rules.[^20] On July 16, 2001
    the Common Carrier Bureau (Bureau) issued a public notice seeking
    comment on Hamilton's waiver request.[^21]

# MEMORANDUM OPINION AND ORDER

## Cost Recovery for Improved Traditional TRS

6.  Traditional TRS has been available on a uniform, nationwide basis
    since July 26, 1993.[^22] The Advisory Council and the Fund
    Administrator state that the following changes contained in the
    *Improved TRS Order* will affect providers' costs: (a) the
    requirement that providers offer interstate Spanish relay
    service; (b) the requirement that 85% of all calls be answered in
    ten seconds by any method which results in the TRS caller's call
    immediately being made or attempted, not put in a queue or on
    hold; (c) the requirement that providers calculate the percentage of
    calls "blocked," or attempted by TRS users but not answered by the
    TRS center; (d) the requirement that communications assistants (CAs)
    stay with the call for a minimum of 10 minutes; (e) the requirement
    that CAs transcribe words at a minimum speed equivalent to typing 60
    words per minute; (f) the requirement that providers transfer data
    on customers' TRS preferences in usable form at least 60 days prior
    to the provider's last day of service; (g) the requirement that TRS
    users have access to interactive menus, that CAs alert the user to
    the presence of a recorded message through a "hot key" on their
    terminal, and that relay centers record the recorded messages and
    retain them for the length of the call; (h) the requirement that
    relay service providers offer pay-per-call services; and (i) the
    requirement that TRS providers automatically and immediately
    transfer emergency calls to the appropriate 911 operator and that
    CAs pass along the caller's telephone number to the Public Safety
    Answering Point even if the caller disconnects before being
    connected to an emergency service provider.[^23]

7.  *Recommendations*. In developing cost recovery recommendations for
    traditional TRS, the Advisory Council and the Fund Administrator
    relied on several assumptions.[^24] Based on those assumptions, the
    Advisory Council and the Fund Administrator recommended that the
    Commission: (1) continue to use the current national average costing
    and pricing methodology for the annual development of the interstate
    cost recovery reimbursement rate; (2) review the TRS Center Data
    Request to ensure that various sections and categories continue to
    be appropriate and up to date; (3) use the same allocation
    methodology in place today for allocating toll-free and 900 call
    minutes between interstate and intrastate demand; and (4) direct
    that Spanish relay costs be collected separately to test whether
    they are significantly different from English relay costs, and
    continue to reimburse providers on completed conversation minutes at
    a single national average reimbursement rate if there is no
    difference between the Spanish and English relay per-minute
    costs.[^25] As discussed more fully below, we adopt all except the
    fourth of these recommendations.

8.  *Cost Methodology.* We believe that the current average costing
    methodology represents an efficient and reasonable method of
    compensating eligible providers for the cost of furnishing
    interstate TRS.[^26] Under this methodology, TRS providers submit
    certain TRS-related cost and demand data in response to a request by
    the TRS administrator. TRS providers submit historical data as well
    as forecasts of expenses and demand. After reviewing the data for
    unusual disparities and reconciling any problems, the TRS
    administrator develops projections of total nationwide and
    interstate TRS costs, average interstate TRS costs per minute,
    interstate TRS demand, and TRS funding requirements for the
    forthcoming fiscal year.

9.  Because the cost recovery methodology works well, is relatively
    simple to apply, and promotes efficiency of operation, we see no
    need to modify it despite the changes in services required by the
    *Improved TRS Order*. The TRS administrator should continue to apply
    the average costing methodology to develop traditional TRS
    compensation rates. The use of an average compensation rate has
    encouraged TRS providers to find efficient ways of providing high
    quality service.[^27]

10. We agree that some of the new or revised services mandated in the
    *Improved TRS Order* and identified by the Advisory Council and the
    Fund Administrator have the potential to affect costs. We also
    believe that in many cases the cost increases will be small or
    non-existent as illustrated by those providers who have already
    implemented the provisions of the *Improved TRS Order*. Many of the
    new requirements require no new expenditures. Furthermore, those
    requirements that do impose new costs are designed to promote
    efficiency in relay services which should negate any new costs.[^28]
    Several of the requirements may require additional staffing or staff
    time, but with appropriate planning and studies, the cost impacts
    can be mitigated. We further believe that the average costing
    methodology will promote efficiency and that any cost increases
    incurred by providers will be minimal.

11. *TRS Center Data Request.* For the average per minute compensation
    methodology to be valid, the cost and demand data used to compute
    per minute costs must explicitly reflect specific activities
    required to provide TRS. Although we believe that the current TRS
    Center Data Request captures all of the changes that were
    established by the *Improved TRS Order*, we want to ensure that all
    providers are fairly compensated. We therefore direct the TRS
    administrator to review the TRS Center Data Request, and report to
    the Chief of the Common Carrier Bureau (CCB), on an ongoing basis,
    any changes necessary to ensure that TRS providers are fairly
    compensated for additional costs imposed by the *Improved TRS
    Order*. CCB will work with the TRS administrator to review the cost
    changes reported by relay service providers as they implement the
    requirements in the *Improved TRS Order*.

12. *Allocation Methodology.* We also agree with the Advisory Council
    and the Fund Administrator's recommendation that the same minutes of
    use allocation methodology in place for toll-free call minutes
    should be used for 900 call minutes.[^29] Although the minutes of
    demand for interstate and intrastate calls made to geographic area
    code numbers can be separated, no direct data are available that
    identifies the jurisdiction of calls placed to non-geographic
    toll-free and 900 numbers. As a result, relay providers must
    estimate the interstate usage associated with calls made to these
    numbers. The Advisory Council proposes estimating the share of
    interstate toll-free minutes based on the relationship of interstate
    and international billed minutes to interstate, international, and
    intrastate toll minutes that were billed to the calling party.
    WorldCom also supports the Advisory Council and the Fund
    Administrator's recommendation to determine the interstate share of
    900 call minutes by using a methodology similar to the method
    currently in use for allocating the interstate share of toll-free
    call minutes because non-geographic area codes, toll-free and 900
    calls operate in a similar manner.[^30] We accordingly adopt the
    toll-free minutes methodology and find that it should be applied to
    900 calls as well.

13. *Spanish Relay Costs*. At this time, we see no need to adopt the
    Advisory Council and the Fund Administrator's recommendation that
    Spanish relay costs initially be collected separately and tested to
    determine whether they are significantly different from English
    relay costs.[^31] Because there is no evidence in the record that
    Spanish relay costs will differ significantly from English relay
    costs, we conclude that providers should be reimbursed on completed
    conversation minutes for both English and Spanish relay costs at a
    single national average reimbursement rate. If, however, TRS
    providers believe that their costs for providing Spanish and English
    relay will differ significantly, they may track these data
    separately to verify that the costs are, in fact, different. If any
    TRS provider can demonstrate that the costs are different and, thus,
    that the services should be reimbursed at different rates, it may
    petition the Commission to establish different reimbursement rates
    for English and Spanish relay.

## Cost Recovery for Speech-to-Speech Relay Service

14. The *Improved TRS Order* required STS to be in place by March
    1, 2001. STS uses CAs who have been specially trained to understand
    different speech patterns, and to repeat the words spoken by the
    person with the speech disability. Although STS does not require new
    or additional equipment, it could necessitate different staffing
    requirements than traditional TRS. Service providers are also
    subject to several, but not all, of the mandatory minimum
    requirements that the Commission established in the *Improved TRS
    Order* for traditional TRS providers. [^32] In addition, the
    following now specifically apply to STS relay providers: a rule that
    requires relay providers to offer users the option of maintaining a
    list of frequently called names and telephone numbers at the relay
    center; a rule that permits CAs to retain information from a call at
    the request of the calling party to facilitate completion of
    subsequent calls; and a rule that requires CAs to stay with a STS
    call for a minimum of 15 minutes.

15. *Recommendations*. The Advisory Council and the Fund Administrator
    base their cost recovery recommendation for STS on several
    assumptions.[^33] Using these assumptions, the Advisory Council and
    the Fund Administrator make the following recommendations for STS
    cost recovery: (1) the same cost recovery methodology used for
    computing the reimbursement rate in place today for traditional TRS
    interstate cost recovery could be used to develop the STS
    reimbursement rate; (2) due to its unique characteristics, a
    separate reimbursement rate based on STS costs and minutes should be
    calculated; (3) the TRS Center Data Request should be expanded to
    include specific STS sections to capture the costs and minutes
    separately from traditional TRS or VRS; and (4) providers should be
    reimbursed for completed conversation minutes at the national
    average reimbursement rate for STS.[^34] As discussed below, we
    adopt each of these recommendations.

16. We favor the national average per minute methodology used for
    traditional TRS and believe it should be applied to STS as well.
    Although we find that STS is a materially different service from
    traditional TRS, we believe that the average national per-minute
    compensation methodology will both fairly compensate STS providers
    and, at the same time, encourage them to provide efficient and high
    quality service. By reimbursing providers at costs similar to those
    of the efficient providers, efficiency is encouraged for all
    providers.

17. We also adopt a separate per-minute national average compensation
    formula for STS and order the TRS administrator to develop annually
    a national average STS reimbursement rate for compensating STS
    providers. STS relies less on technology than traditional TRS and
    more on skilled CAs who may need to be paid more. The reimbursement
    rates for STS, therefore, are significantly higher than for
    traditional TRS. As with traditional TRS, each provider of STS
    services will be compensated at the national average rate for every
    completed conversation minute. WorldCom agrees that STS has
    significantly higher labor and capital costs than other relay
    services.[^35] Accordingly, WorldCom states that a single
    reimbursement rate for all TRS services would result in the
    undercompensation of operators providing STS, and the
    overcompensation of providers not offering STS.[^36]

18. Given that STS service is of a more recent origin, we do not yet
    have sufficient data to conduct an up-front evaluation of its costs.
    Consequently, we adopt the Advisory Council and the Fund
    Administrator's recommendation that the TRS Center Data Request be
    expanded to capture separately STS costs and minutes. We find this
    recommendation consistent with the proposal to establish a separate
    compensation rate for STS. We therefore order the TRS administrator
    to expand the TRS Center Data Request to include specific sections
    to capture STS costs and completed conversation minutes for STS.

## Cost Recovery for Video Relay Services

19. The *Improved TRS Order* did not require VRS, but did allow the
    costs of intrastate and interstate costs for VRS to be reimbursed
    from the interstate TRS Fund while the Commission continues to
    evaluate the service. The Advisory Council and the Fund
    Administrator base their VRS cost recovery recommendation on several
    assumptions.[^37]

20. *Recommendations*. Based on these assumptions, the Advisory Council
    and the Fund Administrator make the following four recommendations
    with respect to VRS cost recovery: (1) the same methodology for rate
    development in place today for traditional TRS interstate cost
    recovery could be used to develop the VRS reimbursement rate; (2)
    providers should be reimbursed based on completed conversation
    minutes at a national average reimbursement rate; (3) the TRS Center
    Data Request should be expanded to include specific VRS sections to
    capture VRS costs and demand separately; and (4) due to its unique
    characteristics, a separate reimbursement rate based on VRS costs
    and demand should be calculated.[^38]

21. Sprint, WorldCom and CSD filed comments in response to the public
    notice seeking comment on the VRS recommendations.[^39] WorldCom
    concurred with the Advisory Council and the Fund Administrator's
    recommendation that the Commission should maintain a separate
    reimbursement rate for VRS.[^40] In addition, Hamilton requested
    temporary waiver of portions of section 64.604 of the Commission's
    rules for the provision of VRS.[^41] Because Sprint, CSD and
    Hamilton raise alternative proposals for VRS reimbursement, the
    Commission is also issuing a Further Notice of Proposed Rulemaking
    (Further Notice) attached to this Memorandum Opinion and Order
    (MO&O) seeking comment on the issues raised in their filings, as
    well as further comment on VRS cost recovery in general.[^42]

22. We agree with the Advisory Council and the Fund Administrator's
    recommendation that due to the unique characteristics of VRS,[^43] a
    separate reimbursement rate for VRS should be calculated. We also
    agree with the Advisory Council and the Fund Administrator's
    recommendation that the TRS Center Data Request should be expanded
    to include specific sections to capture separately VRS costs and
    minutes for this service. The data provided to NECA by VRS providers
    demonstrate that VRS costs and payment requirements are materially
    different from those for traditional TRS. Specifically, VRS
    providers report significantly higher costs for providing VRS.[^44]
    Consequently, the compensation rate calculated and approved for VRS
    is currently \$5.539 per completed conversation minute, while that
    for traditional TRS is \$1.328 per minute and for STS is \$4.623 per
    minute. In light of the differences in technology and the reportedly
    higher cost associated with providing VRS, we will require NECA to
    expand the TRS Data Request to include data that are specific to
    VRS. Doing so will ensure that expenses relevant to VRS are being
    used to compute the VRS compensation rate. Thus, we adopt these two
    aspects of the Advisory Council and the Fund Administrator's
    Recommendation regarding cost recovery for VRS.

23. We decline at this time, however, to adopt permanently the Advisory
    Council and the Fund Administrator's recommendations to use the same
    methodology for rate development in place today for traditional TRS
    interstate cost recovery, and to develop a VRS reimbursement rate
    based on completed conversation minutes of use at a national average
    reimbursement rate. Although the national average compensation
    methodology has all the benefits that we described above, we are not
    convinced that this methodology will provide adequate incentives to
    carriers to provide video relay services. Both Sprint and CSD argue
    that compensation on a per-minute basis may not adequately
    compensate VRS providers for the substantial up-front capital costs
    required to provide the service.[^45] We therefore find that
    additional comments on these recommendations are necessary and seek
    comment in the Further Notice attached to this MO&O.

24. In the interim, however, to ensure that providers are able to
    recover their fair costs related to providing VRS, we direct the TRS
    administrator to establish an interim VRS cost recovery rate using
    the average per minute compensation methodology used for traditional
    TRS. The interim rate shall be in effect until such time that the
    Commission is able to collect and assess additional data regarding
    what the permanent VRS compensation methodology should be.

## Petition for Clarification. 

25. Hamilton seeks clarification that section 64.603 of the Commission's
    rules does not require a provider of VRS to provide video-based STS
    or Spanish relay at this time.[^46] Hamilton states that providers
    should be able to provide this service voluntarily, and that cost
    recovery should be provided on the same basis as VRS.[^47]

26. Although section 64.603 of our rules mandates the provision of STS
    generally, we agree that this mandate should not extend to relay
    service providers in their provision of VRS. The nature of VRS is
    very different from STS; STS is a speech-based service that involves
    the use of specially trained CAs who are able to understand and
    repeat the words of individuals who have speech patterns that are
    difficult to understand,[^48] while VRS is a visual service that
    utilizes interpreters to interpret sign language over video
    facilities. Moreover, because the provision of VRS is not mandatory
    at this time, we do not wish to make it more burdensome for the
    providers that wish to provide VRS on a voluntary basis. VRS is in
    its infancy; we therefore decline to make the provision of
    speech-to-speech mandatory for VRS providers at this time. If,
    however, VRS providers choose to offer speech-to-speech service they
    will be eligible for reimbursement from the TRS fund. As VRS is
    deployed and demand for the service increases, the Commission may
    reexamine this issue.

27. We also clarify that, under our current rules, VRS providers are not
    required to provide Spanish relay service at this time. Given the
    fact that VRS is still in its infancy and is not yet required, it is
    not feasible to require that it be provided in languages other than
    American Sign Language (ASL). We concur with Hamilton that until the
    market for VRS increases, it would be difficult to staff VRS with
    CAs that are not only fluent in ASL, but in other sign languages as
    well. Moreover, sign languages vary from one country to another and
    there are multiple sign language "dialects" for the various Spanish
    speaking countries around the world. To provide CAs that are able to
    interpret in all of these various dialects at a time when VRS is in
    its infancy would be unduly burdensome to VRS providers. If VRS
    providers choose to offer Spanish relay service they will be
    eligible for reimbursement from the TRS fund. As Spanish relay
    services are deployed and demand for the service increases, the
    Commission may reexamine this issue.

## Regulatory Flexibility Analysis

28. *See* Appendix A for the Final Regulatory Flexibility Analysis.

## Paperwork Reduction Act Analysis

29. The action contained herein has been analyzed with respect to the
    Paperwork Reduction Act of 1995 and is found to impose new or
    modified reporting and recordkeeping requirements or burdens on the
    public. Implementation of these new or modified reporting and
    recordkeeping requirements will be subject to approval by the Office
    of Management and Budget (OMB) as prescribed by the Act, and will go
    into effect upon announcement in the Federal Register of OMB
    approval. Paperwork Reduction Act of 1995.

# FURTHER NOTICE OF PROposed rulemaKing

## Introduction

30. In this Further Notice of Proposed Rulemaking (Further Notice), the
    Commission solicits additional comment on the recommendations
    submitted by the Advisory Council and the Fund Administrator
    relating to the appropriate cost recovery mechanism for VRS[^49] as
    proposed in comments to the recommendations by Sprint[^50] and
    CSD.[^51]

31. VRS allows a TRS user with a hearing and/or speech disability who
    uses sign language to communicate with a voice telephone user
    through video equipment installed at either the premises of the
    person with the disability or another appropriate location and at
    the relay center. The Commission's rules require that VRS CAs be
    qualified interpreters, defined as being able to interpret
    effectively, accurately, and impartially, both receptively and
    expressively, using any necessary specialized vocabulary.[^52] VRS
    is generally subject to the same mandatory minimum standards as
    TRS.[^53]

32. In the MO&O accompanying this Further Notice, the Commission adopted
    most of the Advisory Council and the Fund Administrator's
    recommendations for the recovery of costs associated with
    traditional TRS and STS, and some of the recommendations for the
    recovery of costs associated with VRS.[^54] In addition, the order
    responds to Hamilton's request for clarification by confirming that
    the existing rules do not require providers of VRS service to
    provide STS or Spanish relay services at this time.[^55]

## Recommendations for VRS

33. The Advisory Council and the Fund Administrator made the following
    recommendations for VRS cost recovery: (1) the TRS Center Data
    Request should be expanded to include specific VRS sections to
    capture the costs and minutes separately; (2) due to its unique
    characteristics, a separate reimbursement rate based on VRS cost and
    demand should be calculated; (3) providers should be reimbursed
    based on completed conversation minutes of use at a national average
    reimbursement rate; and (4) the same methodology for rate
    development in place today for traditional TRS interstate cost
    recovery could be used to develop the VRS reimbursement rate.[^56]

34. In the MO&O accompanying this Further Notice, the Commission adopts
    the Advisory Council and the Fund Administrator's recommendations
    that that the TRS Center Data Request should be expanded to include
    specific sections to capture the costs and minutes for VRS
    separately and that a separate reimbursement rate based on VRS cost
    and demand should be calculated.[^57] The Commission declines to
    adopt the Advisory Council and the Fund Administrator's
    recommendations to use, on a permanent basis, the same methodology
    for rate development in place today for traditional TRS interstate
    cost recovery to develop a VRS reimbursement rate, and the
    recommendation to reimburse providers (based on completed
    conversation minutes of use) at a national average reimbursement
    rate.[^58] The Commission nevertheless directs the TRS administrator
    to ensure that providers are able to recover their fair costs
    related to providing VRS by establishing an interim VRS cost
    recovery rate using the average per minute compensation methodology
    used for traditional TRS. We now seek further comment on what VRS
    cost recovery mechanism should be established on a permanent basis.

35. *Methodology and Reimbursement Rate*. Both Sprint and CSD contend in
    their comments to the recommendations that VRS will require a
    substantially higher initial capital expenditure than traditional
    TRS and that a per minute reimbursement rate may not allow them to
    recover that expenditure.[^59] Sprint and CSD, therefore, suggest
    that the Commission adopt an alternative cost recovery mechanism
    that will encourage the rapid deployment of VRS by making it
    profitable to offer the service.[^60] Sprint and CSD state that if
    VRS is to develop into a viable service, the Commission must ensure
    that relay providers that offer VRS are able to recover their full
    costs in a reasonable and timely manner.[^61] To this end, Sprint
    and CSD propose that, for the present time, VRS compensation be
    based on a flat monthly payment for an assumed number of minutes
    rather than the completed conversation minutes of use at a national
    average reimbursement rate.[^62] The parties state that a
    "guaranteed" monthly payment would allow VRS providers to recover
    their up front costs within a reasonable period of time.[^63] Once
    VRS generates sufficient monthly use, however, the flat monthly
    payment could be abandoned for the completed conversation minutes
    methodology suggested by the Advisory Council and the Fund
    Administrator.[^64]

36. Because the Sprint and CSD proposals are not sufficiently detailed
    for the Commission to act on them, we seek additional comment on
    these proposals, as well as any other proposals relating to VRS cost
    recovery. Specifically, we request comment on Sprint's and CSD's
    proposal that VRS compensation be a monthly flat charge based on a
    fixed number of conversation minutes. If a flat monthly compensation
    plan with an assumed number of minutes were to be utilized, how
    should the flat monthly charge be established and how many fixed
    minutes per-month should be assumed? What data would need to be
    collected from the VRS service providers? Should the flat payment
    plan be a permanent compensation plan or an interim program to
    encourage initial investment in VRS? If interim, how long should the
    flat monthly fee be in place? Parties supporting a flat rate pricing
    methodology should articulate the superiority of such a methodology
    over a usage sensitive approach. We also seek comment on whether it
    would be feasible to combine flat-rate and usage-based methodologies
    to obtain the benefits of both. Parties responding to this public
    notice are also encouraged to propose other compensation plans.

## Procedural Matters

### *Ex Parte* Presentations

37. This is a non-restricted notice and comment rulemaking proceeding.
    *Ex parte* presentations are permitted, except during the Sunshine
    Agenda period, provided that they are disclosed as provided in the
    Commission\'s rules. *See generally* 47 C.F.R. §§ 1.1202, 1.1203,
    and 1.1206(a) (1994). Written submissions, however, will be limited
    as discussed below.

### Regulatory Flexibility Analysis

38. *See* Appendix B for the Initial Regulatory Flexibility Analysis.

### Further Notice Initial Paperwork Reduction Act Analysis

39. This *Further Notice* contains either a proposed or modified
    information collection. As part of its continuing effort to reduce
    paperwork burdens, we invite the general public and the Office of
    Management and Budget (OMB) to take this opportunity to comment on
    the information collections contained in this *Second Further
    Notice*, as required by the Paperwork Reduction Act of 1995, Public
    Law 104-13. Public and agency comments are due at the same time as
    other comments on this *Further Notice*; OMB comments are due 60
    days after publication of this *Further Notice* in the Federal
    Register. Comments should address: (a) whether the proposed
    collection of information is necessary for the proper performance of
    the functions of the Commission, including whether the information
    shall enhance the quality, utility and clarity of the information
    collected; (b) the accuracy of the Commission's burden
    estimates; (c) ways to enhance the quality, utility, and clarity of
    the information collected; and (d) ways to minimize the burden of
    the collection of information on the respondents, including the use
    of automated collection techniques or other forms of information
    technology.

##  Comment Filing Procedures

40. Interested parties may file comments concerning this matter on or
    before thirty days after publication in the Federal Register and
    reply comments on or before forty-five days after publication in the
    Federal Register. All filings must reference Docket No. 98-67. Send
    an original and four copies to the Commission's Secretary, Magalie
    Roman Salas, Portals II, 445 12th Street, SW, Suite TW-A325,
    Washington, DC 20554 and two copies to Pam Slipakoff, Common Carrier
    Bureau, Network Services Division, 445 12th Street, S.W.,
    Washington, DC, 20554.

41. Written comments by the public on the proposed and/or modified
    information collections are due on or before thirty days after
    publication in the Federal Register and reply comments on or before
    forty-five days after publication in the Federal Register. Written
    comments must be submitted by the Office of Management and Budget
    (OMB) on the proposed and/or modified information collections on or
    before 60 days after date of publication in the Federal Register. In
    addition to filing comments with the Secretary, a copy of any
    comments on the information collection(s) contained herein should be
    submitted to Judy Boley, Federal Communications Commission, Room
    1-C804, 445 12th Street, SW, Washington, DC 20554, or via the
    Internet to jboley@fcc.gov and to Edward C. Springer, OMB Desk
    Officer, 10236 NEOB, 725 - 17th Street, N.W., Washington, DC 20503
    or via the Internet to Edward.Springer@omb.eop.gov.

42. Comments may be filed using the Commission's Electronic Comment
    Filing System (ECFS) or by filing paper copies. *See* Electronic
    Filing of Documents in Rulemaking Proceedings, 13 FCC Rcd 11322,
    11326 (1998). Comments filed through the ECFS can be sent as an
    electronic file via the Internet to
    \<http://www.fcc.gov/e-file/ecfs.html\>. Generally, only one copy of
    an electronic submission must be filed. If multiple docket or
    rulemaking numbers appear in the caption of this proceeding,
    however, commenters must transmit one electronic copy of the
    comments to each docket or rulemaking number referenced in the
    caption. In completing the transmittal screen, commenters should
    include their full name, Postal Service mailing address, and the
    applicable docket or rulemaking number. Parties may also submit
    electronic comments by Internet e-mail. To receive filing
    instructions for e-mail comments, commenters should send an e-mail
    to ecfs@fcc.gov, and should include the following words in the body
    of the message, "get form \<your e-mail address\>." A sample form
    and directions will be sent in reply. Or you may obtain a copy of
    the ASCII Electronic Transmittal Form (FORM-ET) at
    http://www.fcc.gov/efile/email.html.

43. The Advisory Council and the Fund Administrator's Recommended TRS
    Cost Recovery Guidelines, as well as Sprint's, WorldCom's, and CSD's
    comments; CSD's petition; Hamilton's request and any comments filed
    in response to this public notice will be available for review and
    copying during regular business hours at the FCC Reference
    Information Center, Portals II, 445 12th Street, SW, Room CY-A257,
    Washington, DC, 20554. This document may also be purchased from the
    Commission\'s duplicating contractor, Qualex International, Portals
    II, 445 12th Street, SW, Room CY-B402, Washington, DC, 20554,
    telephone 202-863-2893, facsimile 202-863-2898, or via e-mail
    qualexint@aol.com. Copies of the Advisory Council and the Fund
    Administrator's Recommended TRS Cost Recovery Guidelines and the
    comments filed in response to that document may also be obtained
    from the Internet via the FCC's Electronic Comment Filing System
    (ECFS) http://izzy.fcc.gov/prod/ecfs/s_a/. Parties interested in
    obtaining comments from the ECFS should use the docket number
    "98-67" or "90-571" as the search term.

44. For further information contact Pam Slipakoff of the Common Carrier
    Bureau, Network Services Division at (202)418-7705 (voice),
    (202)418-0484 (TTY) or pslipako@fcc.gov.

# ordering clauseS

45. Accordingly, IT IS ORDERED, pursuant to the authority contained in
    section 64.604 of the Commission's Rules, 47 C.F.R. § 64.604, and in
    sections 1, 2, 4, 225, 255 and 303(r) of the Communications Act of
    1934, as amended, 47 U.S.C. §§ 151, 152, 154, 225, 255, 303(r) that
    the recommendations of the Advisory Council and the Fund
    Administrator relating to traditional TRS and STS ARE ADOPTED to the
    extent described herein.

46. IT IS FURTHER ORDERED, pursuant to the authority contained in
    section 64.604 of the Commission's Rules, 47 C.F.R. § 64.604, and in
    sections 1, 2, 4, 225, 255 and 303(r) of the Communications Act of
    1934, as amended, 47 U.S.C. §§ 151, 152, 154, 225, 255, 303(r) that
    the recommendations of the Advisory Council and the Fund
    Administrator relating to the need for a separate reimbursement rate
    for VRS and expansion of the TRS Data Center Request to include
    specific sections for VRS reporting ARE ADOPTED as described herein.

47. IT IS FURTHER ORDERED, pursuant to the authority contained in
    section 64.604 of the Commission's Rules, 47 C.F.R. § 64.604, and in
    sections 1, 2, 4, 225, 255 and 303(r) of the Communications Act of
    1934, as amended, 47 U.S.C. §§ 151, 152, 154, 225, 255, 303(r) that
    the TRS administrator SHALL USE the TRS reimbursement rate
    methodology, on an interim basis, to develop the VRS reimbursement
    rate, pending further action by the Commission.

48. IT IS FURTHER ORDERED, pursuant to the authority contained in
    section 64.603 of the Commission's Rules, 47 C.F.R. § 64.603, and in
    sections 1, 2, 4, 225, 255 and 303(r) of the Communications Act of
    1934, as amended, 47 U.S.C. §§ 151, 152, 154, 225, 255, 303(r) that
    section 64.603 of the Commission's rules does not require VRS
    providers to offer Speech-to-Speech services or Spanish relay
    services at this time.

49. The collections of information contained herein are contingent upon
    approval by the Office of Management and Budget and will go into
    effect upon announcement in the Federal Register.

50. IT IS FURTHER ORDERED that the Commission\'s Consumer Information
    Bureau, Reference Information Center, SHALL SEND a copy of this
    *Memorandum Opinion and Order*, including the Final Regulatory
    Flexibility Analysis, to the Chief Counsel for Advocacy of Small
    Business Administration.

51. IT IS FURTHER ORDERED that the Commission\'s Consumer Information
    Bureau, Reference Information Center, SHALL SEND a copy of this
    *Further Notice of Proposed Rulemaking*, including the Initial
    Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy
    of Small Business Administration.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

> Secretary

# appendix a: final regulatory flexibility analysis {#appendix-a-final-regulatory-flexibility-analysis .unnumbered}

1\. As required by the Regulatory Flexibility Act of 1980, as amended,
(RFA),[^65] an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the Federal Register summary for the Interstate Fund
Advisory Council and the TRS Fund Administrator's Recommended TRS Cost
Recovery Guidelines.[^66] The Commission sought written public comment
on the proposals in the cost recovery guidelines, including comment on
the IRFA. The comments received addressed only the general
recommendations, not the IRFA. This present Final Regulatory Flexibility
Analysis (FRFA) conforms to the RFA.[^67]

## Need for, and Objective of this [Memorandum Opinion and Order]{.underline} 

2\. This proceeding was initiated to formulate an appropriate method of
cost recovery for telecommunications relay services (TRS), video relay
services (VRS) and speech-to-speech (STS) relay service providers.[^68]
These cost recovery methods take into account changes in the TRS market
and technology as well as the development of the new VRS and STS
services. The new cost recovery guidelines will allow all relay
providers to efficiently and effectively recover their reimbursable
costs. Such reimbursement will also encourage the development of new
technologies to aid individuals with speech and hearing disabilities.

## Summary of Significant Issues Raised by Public Comments in Response to IRFA.

3\. No comments were filed in response to the IRFA in this proceeding.
The Commission has nonetheless considered any potential significant
economic impact of the rules on small entities. The comments filed in
this proceeding address the recommendations of the Interstate Fund
Advisory council and the TRS Fund Administrator and do not specifically
address small entities.[^69]

## Description and Estimate of the Number of Small Entities to Which the Actions Taken Will Apply

4\. The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of small entities that may be
affected by the proposed rules, if adopted.[^70] The RFA defines the
term \"small entity\" as having the same meaning as the terms \"small
business,\" \"small organization,\" and \"small governmental
jurisdiction.\"[^71] In addition, the term \"small business\" has the
same meaning as the term \"small business concern\" under the Small
Business Act.[^72] A small business concern is one which: (1) is
independently owned and operated; (2) is not dominant in its field of
operation; and (3) satisfies any additional criteria established by the
Small Business Administration (SBA).[^73] We note that any small
entities affected by action taken herein, should not be adversely
affected. Furthermore, like all other entities affected, this action
aids small businesses by allowing them to recover costs for providing
relay services. Below, we further describe and estimate the number of
small entity licensees and regulatees that may be affected by these
rules. The most reliable source of information regarding the total
numbers of certain common carrier and related providers nationwide, as
well as the numbers of commercial wireless entities, appears to be data
the Commission publishes annually in its Telecommunications Industry
Revenue report, regarding TRS.

5\. [TRS Providers]{.underline}. Neither the Commission nor the SBA has
developed a definition of "small entity" specifically applicable to
providers of telecommunications relay services (TRS). The closest
applicable definition under the SBA rules is for telephone
communications companies other than radiotelephone (wireless) companies.
The SBA defines such establishments to be small businesses when they
have no more than 1,500 employees. According to the FCC's most recent
data, there are approximately 12 interstate TRS providers, which consist
of interexchange carriers, local exchange carriers, state-managed
entities, and non-profit organizations. Approximately five or fewer of
these entities are small businesses. [^74] The FCC notes that these
providers include several large interexchange carriers and incumbent
local exchange carriers.[^75] Some of these large carriers may only
provide TRS service in a small area but they nevertheless are not small
business entities.[^76] Consequently, the FCC estimates that there are
fewer than 5 small TRS providers that may be affected by the proposed
rules, if adopted.

6\. [Wireline Carriers and Service Providers]{.underline}. The SBA has
developed a definition of small entities for telephone communications
companies except radiotelephone (wireless) companies. The Census Bureau
reports that there were 2,321 such telephone companies in operation for
at least one year at the end of 1992.[^77] According to the SBA\'s
definition, a small business telephone company other than a
radiotelephone company is one employing no more than 1,500 persons. All
but 26 of the 2,321 non-radiotelephone companies listed by the Census
Bureau were reported to have fewer than 1,000 employees. Thus, even if
all 26 of those companies had more than 1,500 employees, there would
still be 2,295 non‑radiotelephone companies that might qualify as small
entities or small incumbent local exchange carriers (LECs). The FCC does
not have data specifying the number of these carriers tha[t]{.underline}
are not independently owned and operated, and thus are unable at this
time to estimate with greater precision the number of wireline carriers
and service providers that would qualify as small business concerns
under the SBA\'s definition. Consequently, the FCC estimates that fewer
than 2,295 small telephone communications companies other than
radiotelephone companies are small entities or small incumbent LECs.
[^78]

7\. We have included small incumbent LECs in this present RFA analysis.
As noted above, a \"small business\" under the RFA is one that, *inter
alia*, meets the pertinent small business size standard (*e.g.*, a
telephone communications business having 1,500 or fewer employees), and
\"is not dominant in its field of operation.\"[^79] The SBA\'s Office of
Advocacy contends that, for RFA purposes, small incumbent LECs are not
dominant in their field of operation because any such dominance is not
\"national\" in scope.[^80] We have therefore included small incumbent
LECs in this RFA analysis, although we emphasize that this RFA action
has no effect on FCC analyses and determinations in other, non-RFA
contexts.[^81]

## Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements

8\. The cost recovery requirements adopted herein should not require
additional recordkeeping requirements for relay service providers.
Providers have already been using similar methods to recover costs for
traditional TRS and these methods are also similar to the new STS and
VRS cost recovery guidelines. Furthermore, we are not mandating specific
recordkeeping and compliance requirements. Rather, we are informing
carriers that if they are seeking reimbursement there are guidelines to
follow. How they record their data, however, is the carriers' choice. If
any additional costs are imposed, they should be minimal because the
tracking procedures are similar to those already in place for
traditional TRS. Furthermore, these costs will impose no greater burden
on small entities because all carriers must provide the same data for
cost recovery. In addition, these measures will promote more efficient
service and allow the TRS providers to be reimbursed more accurately for
their costs, thus negating any minimal costs imposed by these
requirements. Furthermore, the money received by small entities will
enable them to more effectively compete in other areas such as the
development of new technologies.

## Steps Taken to Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered

9\. The RFA requires an agency to describe any significant alternatives
that it has considered in reaching its proposed approach, which may
include the following four alternatives (among others): (1) the
establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(3) the use of performance, rather than design, standards; and (4) an
exemption from coverage of the rule, or any part thereof, for small
entities.[^82]

10\. The Commission concludes that the cost recovery guidelines adopted
herein will have no adverse economic impact on small entities because
these rules are designed to allow all providers, including all small
entities to be accurately reimbursed. Furthermore, the Advisory Council,
which proposed guidelines for the rules proposed herein, consists of
members of state regulatory bodies, relay users, members of the
disabilities community, large and small TRS providers, and large and
small TRS contributors. As a result, the cost recovery measures adopted
herein are the result of input from the industry, including small
business entities.

11\. The Commission considered certain alternatives and found the
measures adopted herein to be the most appropriate. For example, for
Spanish language relay, we considered the alternative of requiring these
costs to collected be separately and tested to determine whether the are
significantly different from English relay costs. After careful
analysis, however, we concluded that Spanish and English relay costs
were sufficiently similar to calculate reimbursement based on completed
conversation minutes for both Spanish and English relay.

12\. In addition, because of the unique characteristic of the developing
VRS market, we declined to adopt permanently the alternatives suggested
by the Advisory Council and the Fund Administrator, i.e. the
recommendation to use the same methodology for rate development in place
today for traditional TRS interstate cost recovery for the development
of a VRS reimbursement rate. We also declined to develop, as an
alternative, a VRS reimbursement rate based on completed conversation
minutes of use at a national average reimbursement rate. Although the
national average compensation methodology has all the benefits that we
described above, we are not convinced that this methodology will provide
adequate incentives to carriers to provide video relay services.
Instead, we found that additional comments on these recommendations are
necessary and seek comment in the Further Notice attached to this
Memorandum Opinion and Order.

13\. Accordingly, this Memorandum Opinion and Order directs the TRS
administrator to adopt an interim VRS cost recovery rate using the
average per minute compensation methodology used for traditional TRS.
Such an interim methodology will allow the Commission time to further
consider VRS cost recovery and evaluate the comments on these
recommendations that will be received in response to the Further Notice
attached to this MO&O.

14\. Thus, while significant alternatives have been considered, we
believe that the actions taken herein are in the best interests of all
entities, including small businesses.

## Report to Congress

15\. The Commission will send a copy of the *Memorandum Opinion and
Order*, including this FRFA, in a report to be sent to Congress pursuant
to the Congressional Review Act.[^83] In addition, the Commission will
send a copy of the *Memorandum Opinion and Order* including FRFA, to the
Chief Counsel for Advocacy of the Small Business Administration. A copy
of the *Memorandum Opinion and Order* and FRFA (or summaries thereof)
will also be published in the Federal Register.[^84]

#   {#section .unnumbered}

# appendix B: INITIAL regulatory flexibility analysis {#appendix-b-initial-regulatory-flexibility-analysis .unnumbered}

**Further Notice of Proposed Rulemaking**

1\. As required by the Regulatory Flexibility Act of 1980, as amended,
(RFA),[^85] the Commission has prepared this present Initial Regulatory
Flexibility Analysis (IRFA) of the possible significant economic impact
on a substantial number of small entities by the policies and rules
proposed in this *Further Notice of Proposed Rulemaking* (*Further*
*Notice*). Written public comments are requested on this IRFA. Comments
must be identified as responses to the IRFA and must be filed by the
deadlines for comments on the *Further Notice* provided above in
paragraphs 40-44 of the *Further Notice*. The Commission will send a
copy of the *Further Notice*, including this IRFA, to the Chief Counsel
for Advocacy of the Small Business Administration.[^86] In addition, the
*Further Notice* and IRFA (or summaries thereof) will be published in
the Federal Register.[^87]

A.  **Need for, and Objectives of, the Proposed Rules**

    2\. The Commission is issuing this document to seek further comment
    on the recommended cost recovery guidelines for Video Relay Services
    (VRS) filed by the Advisory Council and the Fund Administrator on
    November 9, 2000. The Advisory Council and the Fund Administrator
    make the following four recommendations with respect to VRS cost
    recovery: (1) the same methodology for rate development in place
    today for traditional TRS interstate cost recovery could be used to
    develop the VRS reimbursement rate; (2) providers should be
    reimbursed based on completed conversation minutes at a national
    average reimbursement rate; (3) the TRS Center Data Request should
    be expanded to include specific VRS sections to capture VRS costs
    and demand separately; and (4) due to its unique characteristics, a
    separate reimbursement rate based on VRS costs and demand should be
    calculated.

## Legal Basis

3\. The authority for actions proposed in this Further Notice may be
found in §§ 64.603, and 64.604 of the Commission's Rules, 47 CFR §§
64.603, 64.604, and in sections 1, 2, 4, 225, 255, and 303(r) of the
Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 152, 154, 225,
255, 303(r).

## Description and Estimate of the Number of Small Entities To Which the Proposed Rules Will Apply

4\. The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of small entities that may be
affected by the proposed rules, if adopted.[^88] The RFA defines the
term \"small entity\" as having the same meaning as the terms \"small
business,\" \"small organization,\" and \"small governmental
jurisdiction.\"[^89] In addition, the term \"small business\" has the
same meaning as the term \"small business concern\" under the Small
Business Act.[^90] A small business concern is one which: (1) is
independently owned and operated; (2) is not dominant in its field of
operation; and (3) satisfies any additional criteria established by the
Small Business Administration (SBA).[^91] A small organization is
generally \"any not-for-profit enterprise which is independently owned
and operated and is not dominant in its field.\"[^92] We note that any
small entities affected by any action proposed herein, should not be
adversely affected. Furthermore, like all other entities affected, this
action will aid small businesses by allowing them to recover costs for
providing relay services. Below, we further describe and estimate the
number of small entity licensees and regulatees that may be affected by
these proposals.

5\. The most reliable source of information regarding the total numbers
of certain common carrier and related providers nationwide, as well as
the numbers of commercial wireless entities, appears to be data the
Commission publishes annually in its Telecommunications Industry Revenue
report, regarding TRS.

6\. [TRS Providers]{.underline}. Neither the Commission nor the SBA has
developed a definition of "small entity" specifically applicable to
providers of telecommunications relay services (TRS). The closest
applicable definition under the SBA rules is for telephone
communications companies other than radiotelephone (wireless) companies.
The SBA defines such establishments to be small businesses when they
have no more than 1,500 employees. According to the FCC's most recent
data, there are approximately 12 interstate TRS providers, which consist
of interexchange carriers, local exchange carriers, state-managed
entities, and non-profit organizations. Approximately five or fewer of
these entities are small businesses. [^93] The FCC notes that these
providers include several large interexchange carriers and incumbent
local exchange carriers.[^94] Some of these large carriers may only
provide TRS service in a small area but they nevertheless are not small
business entities.[^95] Consequently, the FCC estimates that there are
fewer than 5 small TRS providers that may be affected by the proposed
rules, if adopted.

7\. [Wireline Carriers and Service Providers]{.underline}. The SBA has
developed a definition of small entities for telephone communications
companies except radiotelephone (wireless) companies. The Census Bureau
reports that there were 2,321 such telephone companies in operation for
at least one year at the end of 1992. According to the SBA\'s
definition, a small business telephone company other than a
radiotelephone company is one employing no more than 1,500 persons. All
but 26 of the 2,321 non-radiotelephone companies listed by the Census
Bureau were reported to have fewer than 1,000 employees. Thus, even if
all 26 of those companies had more than 1,500 employees, there would
still be 2,295 non‑radiotelephone companies that might qualify as small
entities or small incumbent local exchange carriers (LECs). The FCC does
not have data specifying the number of these carriers tha[t]{.underline}
are not independently owned and operated, and thus are unable at this
time to estimate with greater precision the number of wireline carriers
and service providers that would qualify as small business concerns
under the SBA\'s definition. Consequently, the FCC estimates that fewer
than 2,295 small telephone communications companies other than
radiotelephone companies are small entities or small incumbent LECs.

8\. We have included small incumbent LECs in this present RFA analysis.
As noted above, a \"small business\" under the RFA is one that, *inter
alia*, meets the pertinent small business size standard (*e.g.*, a
telephone communications business having 1,500 or fewer employees), and
\"is not dominant in its field of operation.\"[^96] The SBA\'s Office of
Advocacy contends that, for RFA purposes, small incumbent LECs are not
dominant in their field of operation because any such dominance is not
\"national\" in scope.[^97] We have therefore included small incumbent
LECs in this RFA analysis, although we emphasize that this RFA action
has no effect on FCC analyses and determinations in other, non-RFA
contexts.

## Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements

9\. The proposed cost recovery measures may require additional
recordkeeping requirements imposed for VRS. These costs, however, should
be minimal because the tracking procedures are similar to those already
in place for traditional TRS. In addition, these recordkeeping measures
will promote more efficient service and allow the TRS providers to be
reimbursed more accurately for their costs, thus negating any minimal
costs imposed by these requirements. In addition, we do not expect these
costs to burden small entities any more than large entities because the
costs are part of the reimbursement process and will allow all providers
to be accurately reimbursed and develop effective methods of providing
VRS. Furthermore, the FCC tentatively concludes that the proposals in
this document would impose minimum burdens on small entities. The FCC
seeks comment on these tentative conclusions.

## Steps Taken to Minimize Significant Impact on Small Entities, and Significant Alternatives Considered

10\. The RFA requires an agency to describe any significant alternatives
that it has considered in reaching its proposed approach, which may
include the following four alternatives (among others): (1) the
establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(3) the use of performance, rather than design, standards; and (4) an
exemption from coverage of the rule, or any part thereof, for small
entities.[^98] The Commission has tentatively concluded that the
proposed guidelines will have minimal, if any, adverse economic impact
on small entities because they are designed to allow all providers to be
accurately reimbursed.

11\. The Commission is issuing this *Further Notice* to seek additional
comment on the cost recovery methodology for VRS, which is a relatively
new service offering. Both Sprint and CSD contend in their comments to
the recommendations that VRS will require a substantially higher initial
capital expenditure than traditional TRS and that a per minute
reimbursement rate may not allow them to recover that expenditure.[^99]
To this end, Sprint and CSD propose that, for the present time, VRS
compensation be based on a flat monthly payment for an assumed number of
minutes rather than the completed conversation minutes of use at a
national average reimbursement rate.[^100] Once VRS generates sufficient
monthly use, however, the flat monthly payment could be abandoned for
the completed conversation minutes methodology suggested by the Advisory
Council and the Fund Administrator.[^101] The proposals provided by
Sprint and CSD, however, are not sufficiently detailed for the
Commission implement a cost recovery scheme. Thus, the Commission now
seeks further comment on what VRS cost recovery mechanism should be
established on a permanent basis.

12\. The Commission has set forth the proposed rule primarily for the
purpose of generating comment. At this time, the Commission has not
tentatively concluded that any of the proposals provided should be
adopted. To the contrary, the purpose of this further notice is to seek
comments and proposals to develop the most effective method of cost
recovery for VRS. Thus, the Commission is receptive of comments
proposing alternatives to the ones provided by the Advisory Council and
Fund Administrator, Sprint, and CSD. If comments received indicate that
smaller entities may be impacted differently or adversely affected by
the proposed rules or any alternative proposals, we will seek
alternative that will prevent such an impact.

## Federal Rules that May Duplicate, or Conflict With the Proposed Rules: 

13\. None.

##   {#section-1 .unnumbered}

##  {#section-2 .unnumbered}

[^1]: *Recommended TRS Cost Recovery Guidelines*, CC Docket No. 98-67
    (rel. November 9, 2000) (*Recommendations*).

[^2]: Telecommunications Relay Services for Individuals with Hearing and
    Speech Disabilities, *Report and Order an*d *Further Notice of
    Proposed Rulemaking*, CC Docket No 98-67, 15 FCC Rcd 5140 (2000)
    (*Improved TRS Order*); *Order on* *Reconsideration*, FCC 00-200, CC
    Docket No. 98-67 (rel. June 5, 2000).

[^3]: Hamilton Telephone Company, *Request for Clarification and
    Temporary Waivers* (filed Apr. 6, 2001) (*Hamilton Request*).

[^4]: The Common Carrier Bureau (Bureau) sought comment on Hamilton's
    waiver request in a separate public notice. *See* Common Carrier
    Bureau Seeks Comment on Request for Temporary Waiver of Video Relay
    Service Requirements, *Public Notice*, DA 01-1706, CC Docket No.
    98-67 (rel. July 16, 2001) (*VRS Public Notice*). The Bureau also
    sought comment on a similar waiver request by Sprint in that public
    notice.

[^5]: Pub.L. No. 101-336, § 401, 104 Stat. 327, 336-69; 47 U.S.C § 225.
    TRS enables people with hearing or speech disabilities to
    communicate by telephone with persons who may or may not have such
    disabilities. This is accomplished through TRS facilities that
    deploy special technology and are staffed by communications
    assistants (CAs) who relay conversations between persons using
    either text or voice telecommunications devices. To access TRS, a
    text telephone (TTY) user dials the telephone number of the local
    TRS center. For the TTY user, this first step - the outbound call to
    the TRS center - is functionally equivalent to receiving a \"dial
    tone.\" The caller then gives the number of the party she desires to
    call to the CA. The CA, in turn, places an outbound voice call to
    the called party. The CA serves as the \"link\" in the conversation,
    converting all TTY messages from the caller into voice messages, and
    all voice messages from the called party into typed messages for the
    TTY user. The process is performed in reverse when a voice telephone
    user initiates the call to a TTY user. *See* 47 C.F.R. §§ 64.601(5),
    (7). Other types of relay services use the CA to interpret the
    signed communication of one of the parties (video relay services) or
    to facilitate communications for individuals with speech
    disabilities (speech-to-speech relay services).

[^6]: Telecommunications Services for Individuals with Hearing and
    Speech Disabilities and the Americans With Disabilities Act of 1990,
    *Report and Order and Request for Comments*, CC Docket No. 90-571, 6
    FCC Rcd 4657 (1991) (*1991 Report and Order*).

[^7]: *See* Telecommunications Relay Service, and the Americans with
    Disabilities Act of 1990, *Third Report and Order*, CC Docket No.
    90-571, 8 FCC Rcd 5300 (1993) (*TRS* *Third Report and Order*); 47
    C.F.R. § 64.604(c)(5)(iii)(E).

[^8]: *Id*. at para. 30.

[^9]: *Id*. at para. 29.

[^10]: *Id*. at para. 16.

[^11]: 1998 Biennial Regulatory Review -- Streamlined Contributor
    Reporting Requirements Associated with Administration of
    Telecommunications Relay Service, North American Numbering Plan,
    Local Number Portability, and Universal Service Support Mechanisms,
    *Report and Order*, FCC 99-175, CC Docket 98-171 (rel. July 14,
    1999).

[^12]: *Improved TRS Order*, 15 FCC Rcd at 5148-51, 5154-55 at paras.
    14-20 and 28-31.

[^13]: *Id.* at para. 24.

[^14]: *Id*. at para. 33.

[^15]: *Recommendations* at 7-8.

[^16]: Interstate TRS Fund Advisory Council and TRS Fund Administrator's
    Recommended TRS Cost Recovery Guidelines, *Public Notice*, 15 FCC
    Rcd 23987 (CCB, 2000).

[^17]: Comments of Sprint Corporation (filed Jan. 5, 2001) (Sprint
    Comments), Comments of WorldCom, Inc. (filed Jan. 5, 2001) (WorldCom
    Comments); Comments of Communication Service for the Deaf (filed
    Jan. 17, 2001) (CSD Comments); Reply Comments of the American
    Speech-Language-Hearing Association (filed January 19, 2001) (ASHA
    Reply Comments); Reply Comments of WorldCom, Inc. (filed Jan. 19,
    2001) (WorldCom Reply Comments).

[^18]: *See* 66 Fed. Reg. 35765 (July 7, 2001). Comments were due on
    July 30, 2001 and reply comments were due on August 6, 2001. The
    United States Telecom Association filed comments on July 30, 2001.
    These comments addressed procedural matters. *See* Comments of the
    United States Telecom Association (filed July 30, 2001).

[^19]: *Hamilton Request*. *See supra* note 3.

[^20]: *Id*. at 1. *See infra* at paras. 21 and 25-27.

[^21]: *See* *VRS Public Notice*. *See also supra* note 4.

[^22]: *See* *1991 Report and Order* at 4657, para. 1 (requiring common
    carriers providing telephone voice transmission services to provide
    TRS no later than July 26, 1993). Traditional telecommunications
    relay services are those which facilitate telecommunications between
    an individual with a hearing or speech impairment and a hearing
    individual.

[^23]: *Recommendations* at 2-3.

[^24]: The assumptions are: (a) none of the relay provider requirements
    require a cost recovery model or expense categorizations different
    from what is currently in place; (b) most of the cost-causers are
    modifications to standards already in place and some providers
    already offer some of the newly required features; (c) calls to 900
    numbers, like toll-free numbers, cannot be identified as intrastate
    or interstate and a billing methodology comparable to that used for
    toll-free minutes could be used to allocate 900 calls between
    jurisdictions; (d) costs associated with the improvements could be
    reported as part of the annual TRS Provider Data Request; (e)
    providers appear satisfied with the national average reimbursement
    methodology and the process of rate development; (f) for the July
    2000 -- June 2001 fund year, providers' costs could increase in
    December 2000 because of the implementation date associated with the
    new requirements; and (g) FCC staff comments concerning TRS cost
    recovery suggest that the fund stay within the current rules to the
    extent possible. *Recommendations* at 4.

[^25]: *Id*. at 5.

[^26]: The Commission adopted the average costing methodology as the
    method for interstate cost recovery in Telecommunications Relay
    Services and the Americans with Disabilities Act of 1990, *Second
    Report and Order, and Further Notice of* *Proposed Rulemaking*, CC
    Docket No. 90-571, 8 FCC Rcd 1802 (1993). Eligible providers are
    defined as (1) TRS facilities operated under contract with and/or by
    certified state TRS programs pursuant to Section 64.605; or (2) TRS
    facilities owned by or operated under contract with a common carrier
    providing interstate services pursuant to Section 64.604; or (3)
    interstate common carriers offering TRS pursuant to Section 64.604.
    47 C.F.R. §§ 64.604(f), 64.605.

[^27]: Although cost and demand data are collected on a
    carrier-by-carrier basis, the methodology does not rely on an
    individual provider's costs alone, but on the average cost of all
    providers. In this way, the compensation methodology rewards
    efficient providers while it creates incentives for providers with
    above average costs to reduce their costs.

[^28]: For example, the increased typing speed requirement may require
    additional training and higher salaries for CAs. This requirement,
    however, will reduce call times and promote efficiency.

[^29]: *See* 47 C.F.R. § 64.604(c)(iii)(E).

[^30]: WorldCom Comments at 2.

[^31]: *See Recommendations* at 5. WorldCom also agrees with the
    Advisory Council and the Fund Administrator's recommendation. *See*
    WorldCom Comments at 2.

[^32]: STS services are excluded from the typing and spelling
    requirements, the ASCII and Baudot format competency requirement,
    and the capability to transmit conversations between TTY and voice
    callers in real time.

[^33]: These assumptions are (a) STS is a relatively new service; (b)
    STS is significantly different from traditional TRS due to the lack
    of technology involved and its primary reliance on the CA's
    listening and verbal skills; (c) historical data on STS are minimal
    and what data there are could be misleading because of the newness
    of the service and the lack of awareness in the community; (d) most
    providers did not estimate STS costs or minute volumes in their data
    submissions due to their lack of experience with the service; (e)
    providers' estimates of costs and minutes for 2000 and 2001 varied
    widely; (f) up-front technology costs to the TRS providers to
    establish STS service are not significant; labor is expected to be
    the major expense; (g) a limited number of regional centers will
    handle STS traffic, theoretically controlling costs better because
    of economies of scale; (h) STS calls reimbursed from the interstate
    fund will be made in English or Spanish and fall into the categories
    of interstate/international, toll-free and 900 minutes; (i) over
    time, set-up and conversation time for traditional TRS calls has
    decreased, however, there is not enough historical data to determine
    whether this will occur with STS; (j) costs associated with STS
    could be reported within the framework of the existing annual TRS
    Center Data Request, as traditional TRS costs are reported today;
    and (k) nothing inherent to the service would appear to require a
    model for provider cost recovery different from what is in place
    today for traditional TRS. *Recommendations* at 6.

[^34]: *Recommendations* at 6-7.

[^35]: WorldCom Comments at 1.

[^36]: *Id*. *See also* ASHA Reply Comments.

[^37]: These assumptions are: (a) VRS trials have occurred or are
    occurring in several states but the service has only been
    implemented in North Carolina and Texas; (b) VRS is significantly
    different from traditional TRS due to the video technology involved
    and the need for qualified VRS interpreters as CAs; (c) up-front
    technology costs to providers to establish VRS could be substantial,
    and ongoing labor expenses will be significant due to the difference
    in labor rates between traditional CAs and qualified VRS
    interpreters; (d) early RFPs for TRS initially focused on
    reimbursing providers for large, nonrecurring expenses up front but
    the bidding process quickly migrated to a price per minute
    methodology for all expenses; (e) historical data on VRS are
    extremely limited, coming primarily from trial situations; (f) most
    VRS providers did not estimate VRS costs or demand in their data
    submissions due to their lack of experience with the service; (g)
    the estimates of VRS providers who did project costs and minutes for
    years 2000 and 2001 varied widely; (h) a limited number of centers
    will handle VRS traffic, theoretically controlling costs better
    because of economies of scale; (i) VRS calls reimbursed from the
    interstate fund will be made in English or Spanish and fall into the
    categories of intrastate, interstate/international, toll-free, and
    900 minutes; (j) costs associated with VRS could be reported within
    the framework of the existing annual TRS Center Data Request, as
    traditional TRS costs are reported today; and (k) nothing inherent
    to the service would appear to require a model for provider cost
    recovery different from what is in place today for traditional TRS.
    *Recommendations* at 7-8.

[^38]: *Recommendations* at 8.

[^39]: Sprint Comments, WorldCom Comments, CSD Comments, WorldCom Reply
    Comments.

[^40]: WorldCom Comments at 1.

[^41]: *Hamilton Request* at 1. Specifically, Hamilton requests
    temporary waiver of the following requirements: (1) to provide
    operator assisted calls and to bill certain types of long distance
    calls to end users; (2) to provide a system for incoming emergency
    calls that automatically and immediately transfers the caller to the
    nearest Public Safety Answering Point; (3) the new speed of answer
    requirement; (4) to provide equal access to interexchange carriers;
    and (5) to be capable of handling 900 number calls. The Bureau
    sought comment on these issues in a separate public notice and will
    address them in a separate proceeding. *See supra* note 4.

[^42]: *See* *infra* at paras. 30-36.

[^43]: VRS is a new service which uses video technology and VRS
    interpreters as CAs.

[^44]: *See TRS Fund Payment Formula and Fund Size Estimate*;
    *Supplemental Submission Concerning the Payment Formula and Fund
    Size Estimate for the Interstate Telecommunications Relay Services
    Fund for July 2000 through June 2001*, prepared by NECA (filed
    November 2, 2000).

[^45]: Sprint Comments at 1, CSD Comments at 1.

[^46]: *Hamilton Request* at 3-4.

[^47]: *Id*. at 4.

[^48]: *Improved TRS Order*, 15 FCC Rcd at 5148 para. 14.

[^49]: *Recommended TRS Cost Recovery Guidelines*, CC Docket No. 98-67
    (rel. Nov. 9, 2000) (*Recommendations*).

[^50]: Comments of Sprint Corporation (filed Jan. 5, 2001) (Sprint
    Comments).

[^51]: Comments of Communication Service for the Deaf (filed Jan. 17,
    2001) (CSD Comments).

[^52]: 47 C.F.R. § 64.604(a)(1).

[^53]: The following minimum standards do not apply to VRS: competent
    skills in typing and spelling for CAs; the capability to communicate
    with ASCII and Baudot format, at any speed generally in use;
    transmission of conversations between TTY and voice callers in real
    time; and the provision of services 24 hours a day.

[^54]: *See supra* at paras. 8-13, 16-18, 21-24.

[^55]: *Id*. at paras. 25-27. *See also* Hamilton Telephone Company,
    *Request for Clarification and Temporary Waivers* (filed Apr. 6,
    2001).

[^56]: *Recommendations* at 8.

[^57]: *See supra* at paras. 25-27.

[^58]: *See supra* at para. 23.

[^59]: Sprint Comments at 1, CSD Comments at 1.

[^60]: Sprint Comments at 4, CSD Comments at 3.

[^61]: Sprint Comments at 1-2, CSD Comments at 1.

[^62]: Sprint Comments at 3-4, CSD Comments at 2-3.

[^63]: CSD Comments at 3, Sprint Comments at 4.

[^64]: Sprint Comments at 4.

[^65]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601-612, has been
    amended by the Small Business Regulatory Enforcement Fairness Act of
    1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996).

[^66]: *See* Interstate TRS Fund Advisory Council and TRS Fund
    Administrator's Recommended TRS Cost Recovery Guidelines, *Public
    Notice*, 15 FCC Rcd 23987 (CCB, 2000); *see also* 66 Fed. Reg.
    35765, para. 1 (July 7, 2001).

[^67]: *See* 5 U.S.C. § 604.

[^68]: *See* Memorandum Opinion and Order at para 1.

[^69]: Comments of Sprint Corporation (filed Jan. 5, 2001); Comments of
    WorldCom, Inc. (filed Jan. 5, 2001); Comments of Communication
    Service for the Deaf (filed Jan. 17, 2001); Reply Comments of the
    American Speech-Language-Hearing Association (filed January 19,
    2001); Reply Comments of WorldCom, Inc. (filed Jan. 19, 2001).

[^70]: 5 U.S.C. § 604(a)(3).

[^71]: 5 U.S.C. § 601(6).

[^72]: 5 U.S.C. 601(3) (incorporating by reference the definition of
    \"small business concern\" in 15 U.S.C. 632). Pursuant to the RFA,
    the statutory definition of a small business applies \"unless an
    agency, after consultation with the Office of Advocacy of the Small
    Business Administration and after opportunity for public comment,
    establishes one or more definitions of such term which are
    appropriate to the activities of the agency and publishes such
    definition(s) in the Federal Register.\" 5 U.S.C. § 601(3).

[^73]: 15 U.S.C. § 632.

[^74]: *See* National Association for State Relay Administration (NASRA)
    Statistics. These numbers are estimates because of recent and
    pending mergers and partnerships in the telecommunications industry,

[^75]: North American Industry Classification System (NAICS) code
    513310.

[^76]: MCI, for example, provides relay service in approximately only 3
    states but is not a small business.

[^77]: *1992 Census*.

[^78]: NAICS code 513310.

[^79]: 15 U.S.C. § 632.

[^80]: Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA, *to*
    William E. Kennard, Chairman, FCC (May 27, 1999). The Small Business
    Act contains a definition of \"small business concern,\" which the
    RFA incorporates into its own definition of \"small business.\"
    *See* 15 U.S.C. 632(a) (Small Business Act); 5 U.S.C. 601(3) (RFA).
    SBA regulations interpret \"small business concern\" to include the
    concept of dominance on a national basis. 13 CFR 121.102(b). Since
    1996, out of an abundance of caution, the Commission has included
    small incumbent LECs in its regulatory flexibility analyses. *See,
    e.g., Implementation of the Local Competition Provisions of the
    Telecommunications Act of 1996*, CC Docket, 96-98, First Report and
    Order, 11 FCC Rcd 15499, 16144‑45 (1996).

[^81]: NAICS code 513310.

[^82]: 5 U.S.C.§ 603(c).

[^83]: *See* 5 U.S.C. § 801(a)(1)(A).

[^84]: *See* 5 U.S.C. § 604(b).

[^85]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601*-*612, has
    been amended by the Small Business Regulatory Enforcement Fairness
    Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857
    (1996).

[^86]: *See* 5 U.S.C. § 603(a).

[^87]: *See* *id*.

[^88]: *See* 5 U.S.C. § 603(a)(3).

[^89]: *See* 5 U.S.C. § 601(6).

[^90]: *See* 5 U.S.C. 601(3) (incorporating by reference the definition
    of \"small business concern\" in 15 U.S.C. 632). Pursuant to the
    RFA, the statutory definition of a small business applies \"unless
    an agency, after consultation with the Office of Advocacy of the
    Small Business Administration and after opportunity for public
    comment, establishes one or more definitions of such term which are
    appropriate to the activities of the agency and publishes such
    definition(s) in the Federal Register.\" 5 U.S.C. § 601(3).

[^91]: 15 U.S.C. § 632.

[^92]: *See* 5 U.S.C. § 601(4).

[^93]: *See* National Association for State Relay Administration (NASRA)
    Statistics. These numbers are estimates because of recent and
    pending mergers and partnerships in the telecommunications industry,

[^94]: North American Industry Classification System (NAICS) code
    513310.

[^95]: MCI, for example, provides relay service in approximately only 3
    states but is not a small business.

[^96]: 15 U.S.C. § 632.

[^97]: Letter *from* Jere W. Glover, Chief Counsel for Advocacy, SBA,
    *to* William E. Kennard, Chairman, FCC (May 27, 1999). The Small
    Business Act contains a definition of \"small business concern,\"
    which the RFA incorporates into its own definition of \"small
    business.\" *See* 15 U.S.C. 632(a) (Small Business Act); 5 U.S.C.
    601(3) (RFA). SBA regulations interpret \"small business concern\"
    to include the concept of dominance on a national basis. 13 CFR
    121.102(b). Since 1996, out of an abundance of caution, the
    Commission has included small incumbent LECs in its regulatory
    flexibility analyses. *See, e.g., Implementation of the Local
    Competition Provisions of the Telecommunications Act of 1996*, CC
    Docket, 96-98, First Report and Order, 11 FCC Rcd 15499, 16144‑45
    (1996).

[^98]: 5 U.S.C. § 603(c).

[^99]: Sprint Comments at 1, CSD Comments at 1.

[^100]: Sprint Comments at 3-4, CSD Comments at 2-3.

[^101]: Sprint Comments at 4.