+----------------------------------+----+------------------------------+
| In the Matter of                 | *  | CC Docket No. 98-67          |
|                                  | *) |                              |
| Telecommunications Relay         | ** | CG Docket No. 03-123         |
| Services                         |    |                              |
|                                  | *  |                              |
| and Speech-to-Speech Services    | *) |                              |
| for                              | ** |                              |
|                                  |    |                              |
| Individuals with Hearing and     | *  |                              |
| Speech                           | *) |                              |
|                                  | ** |                              |
| Disabilities                     |    |                              |
|                                  | *  |                              |
|                                  | *) |                              |
|                                  | ** |                              |
|                                  |    |                              |
|                                  | *  |                              |
|                                  | *) |                              |
|                                  | ** |                              |
|                                  |    |                              |
|                                  | *  |                              |
|                                  | *) |                              |
|                                  | ** |                              |
+----------------------------------+----+------------------------------+

**ORDER**

**Adopted: June 28, 2005 Released: June 28, 2005**

By the Commission: Commissioners Copps and Adelstein issuing separate
statements.

# INTRODUCTION

1.  Each year, the Interstate Telecommunications Relay Services (TRS)
    Fund Administrator, the National Exchange Carrier Association, Inc.
    (NECA), collects and reviews projected cost and minutes of use data
    submitted by TRS providers to determine the annual TRS compensation
    rates for the various forms of TRS.[^1] On April 25, 2005, NECA
    filed its annual Interstate Telecommunications Relay Services Fund
    Payment Formula and Fund Size Estimate for the period of July 1,
    2005 through June 30, 2006.[^2] As set forth below, this *Order*
    adopts interstate TRS compensation rates for the July 1, 2005
    through June 30, 2006 TRS Fund year. We adopt separate compensation
    rates for traditional TRS and Internet Protocol (IP) Relay.[^3] We
    adopt per-minute compensation rates as follows for this fund year:
    for Speech-to-

    Speech Service (STS),[^4] \$1.579; for traditional TRS,[^5] \$1.440;
    for IP Relay, \$1.278; and for Video Relay Service (VRS),[^6]
    \$6.644.[^7]

# BACKGROUND 

## NECA's April 25, 2005, Filing

2.  NECA proposes the following TRS provider compensation rates: \$1.312
    per minute for interstate traditional TRS and interstate and
    intrastate IP Relay, \$1.579 per minute for interstate STS, and
    \$5.924 per minute for interstate and intrastate VRS. Based on these
    figures, NECA proposes a total Interstate TRS Fund (Fund) size
    requirement and carrier contribution factor for the July 1, 2005
    through June 30, 2006, Fund year of \$413,737,460 and 0.00528,
    respectively.

### Traditional TRS and IP Relay

3.  As in prior years, NECA determined that the same compensation rate
    would apply to providers of *both* traditional TRS and IP Relay
    services.[^8] This rate is determined by dividing the providers'
    total projected costs of providing these services by the providers'
    total projected minutes of use.[^9] Based on the data provided,
    NECA's calculations resulted in a proposed compensation rate of
    \$1.312 per minute.[^10] There were no cost disallowances with
    respect to these services. This rate reflects a slight decrease from
    the 2004-2005 rate of \$1.398.[^11]

4.  NECA notes that the Interstate TRS Fund Advisory Council (Council),
    at its April 19, 2005, meeting, expressed concern that combining the
    traditional TRS interstate and IP Relay reimbursement rate penalizes
    traditional TRS providers by under-compensating these
    providers.[^12] NECA notes that if the rates were calculated
    separately, the traditional TRS rate would be \$1.440 (up \$0.128)
    and the IP Relay rate would be \$1.278 (down \$0.034).[^13] NECA
    also notes that although in the early stages of IP Relay, providers
    indicated that the costs of providing traditional TRS and IP Relay
    were virtually the same, "the cost data no longer supports that
    early conclusion."[^14] As a result, NECA offers the Council's
    recommendation to consider separate reimbursement rates for
    traditional TRS and IP Relay.[^15]

5.  For purposes of determining the Fund size requirement and carrier
    contribution rate, NECA projected demand for traditional TRS based
    on prior actual usage.[^16] Using a growth rate derived from prior
    usage (an increase of 22,183 minutes per month), NECA forecasts 26.5
    million minutes of use for the period of July 2005 through June 2006
    for traditional TRS.[^17] NECA used the same methodology to
    determine a growth rate for IP Relay to estimate minutes of use for
    the July 2005 through June 2006 Fund year.[^18] Using this growth
    rate (an increase of 210,364 minutes per month), NECA forecasts 99.5
    million minutes of use for the period of July 2005 through June 2006
    for IP Relay.[^19] Taken together, NECA therefore forecasts that
    there will be 126 million minutes of combined use for traditional
    TRS and IP Relay during the 2005-2006 Fund year.[^20] By multiplying
    the proposed compensation rate (\$1.312) by NECA's projected minutes
    of use, NECA projects that the Interstate TRS Fund will need \$165.3
    million to compensate TRS providers for providing these
    services.[^21] NECA notes that if separate rates were adopted for
    traditional TRS and IP Relay, the total TRS Fund requirement would
    increase less than 12 thousand dollars, and the contribution factor
    of 0.00528 would remain the same.[^22]

### Speech-to-Speech (STS)

6.  The compensation rate for providers of interstate STS is determined
    the same way, using the providers' total projected interstate costs
    of providing this service and the providers' total projected minutes
    of use.[^23] As NECA explains, however, although most of the
    providers reflected an average cost between approximately \$1.30 and
    \$2.70 per minute, one STS provider reported costs of more than \$12
    per minute, which NECA characterized as "significantly different
    from the norm and about seven times the average of the other five
    providers."[^24] NECA notes that this provider had an exceptionally
    low occupancy rate for its STS CAs, which resulted in much higher
    labor costs.[^25] As a result, "\[a\]fter several discussions with
    the provider to determine why their STS costs were so high," NECA
    excluded the provider's data from the rate development.[^26] NECA
    notes that after informing the provider of its intent to exclude the
    data, the provider accepted NECA's decision.[^27] Based on the data
    submitted (and considered), NECA calculations resulted in a proposed
    compensation rate for STS of \$1.579 per minute.[^28] This rate
    represents a slight decrease from the 2004-2005 rate of
    \$1.596.[^29]

7.  For purposes of determining the Fund size requirement and carrier
    contribution rate, NECA projected demand based on a growth rate
    derived from the same methodology used for traditional TRS and IP
    Relay, which assessed growth for the period October 2004 through
    January 2005.[^30] Using the average growth rate for this period of
    283 minutes, NECA forecasts 187 thousand minutes of use for the
    period of July 2005 through June 2006 for STS.[^31] By multiplying
    the proposed compensation rate (\$1.579) by NECA's projected minutes
    of use, NECA projects that the Interstate TRS Fund will need
    \$295,409 to compensate TRS providers for providing STS.[^32]

### Video Relay Service (VRS)

8.  The compensation rate for providers of VRS is also determined based
    on the total projected costs of providing this service and the total
    projected minutes of use. NECA, however, did exclude certain costs
    of one provider. As NECA explains, one VRS provider included the
    expenses for keeping on staff Certified Deaf Interpreters, *i.e.,*
    "deaf interpreters who would help hearing interpreters on unusual or
    difficult calls."[^33] NECA notes that no other VRS provider had
    such a position, and that after discussions with the provider the
    provider accepted NECA's decision not to include such costs in the
    rate development.[^34] Based on the data submitted (and considered),
    NECA's calculations resulted in a proposed compensation rate of
    \$5.924 per minute.[^35] This rate represents a 22 percent decrease
    from the 2004-2005 rate of \$7.596. [^36]

9.  NECA states that the proposed average rate of \$5.924 "appears to be
    driven by the cost and demand characteristics of a single
    provider."[^37] NECA notes that if the VRS rate was calculated by
    excluding the cost and demand data of the low cost provider, the
    proposed compensation rate would be \$7.061 (an increase of \$1.137
    per minute).[^38] NECA advises the Commission to "explore
    alternatives to the traditional rate calculation" for VRS because of
    several open issues relating to the provision of VRS, including
    "interoperability" and speed of answer.[^39]

10. For purposes of determining the Fund size requirement and carrier
    contribution rate, NECA again projected demand based on a growth
    rate derived from the same four-month period of October 2004 through
    January 2005.[^40] Using the average growth rate for this period of
    120,845 minutes, NECA forecasts 35.5 million minutes of use for the
    period of July 2005 through June 2006, for VRS.[^41] By multiplying
    the proposed compensation rate (\$5.924) by NECA's projected minutes
    of use, NECA projects that the Interstate TRS Fund will need \$210.5
    million to compensate TRS providers for providing VRS.[^42]

### Interstate TRS Fund Size and Carrier Contribution Rate

11. Once NECA has calculated its proposed compensation rates for
    traditional TRS and IP Relay, STS, and VRS, NECA calculates the
    proposed Interstate TRS Fund size and the carrier contribution
    factor.[^43] The total annual Fund requirement is determined by
    adding together the projected payments to TRS providers for the
    various forms of TRS, plus certain administrative expenses as well
    as a 10 percent safety margin. The contribution factor is based on
    the ratio between total expected TRS Fund expenses and interstate
    end-user telecommunications revenues.[^44]

12. Making these calculations, NECA determined that the total Fund size
    requirement -- *i.e*., the amount that would be necessary to
    compensate providers for providing all eligible TRS services for the
    period of July 2005 through June 2006 -- would be
    \$413,337,460.[^45] NECA then divided that number by the total 2004
    common carrier end user revenues (\$78.2 billion) to arrive at a
    contribution factor of 0.00528.[^46] NECA then submitted all of its
    data to the Commission for approval or modification.[^47]

## Commenters

13. On April 28, 2005, the Commission released a Public Notice
    requesting comment on NECA's filing.[^48] Ten comments and six reply
    comments were filed.[^49] In general, comments are directed at the
    proposed VRS rate,[^50] whether IP Relay and traditional TRS should
    be compensated at different rates,[^51] and the size of the
    Interstate TRS Fund and how it is funded.[^52] We address the
    comments below.

# dISCUSSION 

14. We have reviewed the *2005 NECA Filing*, as well as the underlying
    cost data and the comments that were filed. Based on this review, we
    approve NECA's proposed compensation rate of \$1.579 per minute for
    STS. We conclude, however, that the compensation rates for
    traditional TRS and IP Relay should reflect the cost and demand data
    unique to those services, and that, therefore, it is no longer
    appropriate to compensate these services at a single rate that
    reflects the combined projected costs and minutes of use.
    Accordingly, as reflected in NECA's filing, we adopt a compensation
    rate of \$1.440 per minute for traditional TRS, and a compensation
    rate of \$1.278 per minute for IP Relay. With respect to VRS, we
    reject NECA's proposed rate and, as explained below, we adopt a rate
    of \$6.644 per minute, reflecting the median rate of the rates of
    the seven providers that submitted VRS cost and demand data.
    Accordingly, we adopt a total Fund size of \$441,493,869 and a
    carrier contribution factor of 0.00564.[^53]

## Compensation Rate for Speech-to-Speech (STS)

15. We conclude that STS shall be compensated at \$1.579 per minute for
    interstate STS for the 2005-2006 Fund year, as recommended by NECA.
    As we have noted above, this rate was determined by dividing the
    providers' total projected interstate costs of \$309,680 by the
    providers' total projected interstate minutes of 198,860.[^54] We
    have reviewed NECA's proposed rate and its analysis of the relevant
    underlying data. We find that NECA's calculations with respect to
    this service are reasonable. Accordingly, the Interstate TRS Fund
    will pay \$1.579 per minute for eligible interstate STS for the
    period of July 2005 through June 2006.

## Compensation Rate for Traditional TRS and IP Relay

### Separate Rates for Traditional TRS and IP Relay

16. Given the cost disparity between traditional TRS and IP Relay,[^55]
    we conclude that these services should be compensated at separate
    rates based on the cost and demand projections specific to each
    service. We do not believe that it is fair or reasonable to use a
    combined rate (\$1.312) that over-compensates IP Relay providers (by
    \$0.034 per minute) and under-compensates traditional TRS providers
    (by \$0.128 per minute).

17. NECA proposes a compensation rate of \$1.312 applicable to both
    traditional TRS and IP Relay.[^56] The Public Notice seeking comment
    on NECA's filing, however, specifically sought comment on whether
    the Commission should adopt separate compensation rates for
    traditional TRS and IP Relay.[^57] Three parties support a single
    compensation rate for both services; three parties support separate
    compensation rates.

18. We note that the issue of whether separate compensation rates should
    be adopted for traditional TRS and IP Relay was initially raised in
    the FNPRM in the *2004 TRS Report & Order.*[^58] In the FNPRM, the
    Commission observed that although the Interstate TRS Fund
    administrator requests and analyzes separate data for the costs of
    providing IP Relay and traditional TRS, the services are compensated
    at the same per-minute rate.[^59] The Commission also recognized
    that "the cost of providing IP Relay may be less than the cost of
    providing traditional TRS," and therefore "providers of IP Relay may
    be over-compensated, and providers of traditional TRS may be
    under-compensated."[^60] The Commission therefore sought comment on
    whether to adopt separate compensation rates for IP Relay and
    traditional TRS.[^61] Four parties filed comments in response to
    this issue. All commenters to the FNPRM asserted that the cost
    differences for providing these services are not significant, and
    therefore that they should continue to be compensated at the same
    rate.

19. MCI, Nordia, and Hamilton assert that the Commission should continue
    to use the same compensation rate for traditional TRS and IP
    Relay.[^62] MCI and Hamilton assert that the costs of providing
    these services are generally similar.[^63] Sprint, Ultratec and CSD,
    on the other hand, urge the Commission to adopt separate
    compensation rates for these services.[^64] They maintain that
    compensating these services at the same rate is no longer
    warranted.[^65] Sprint notes that the average per-minute cost of
    traditional TRS is significantly more than for IP Relay, and asserts
    that this is because many mandatory minimum standards are waived for
    IP Relay and IP Relay providers avoid access charges.[^66] Sprint
    argues that unless the rates are separate, IP Relay providers "will
    continue to receive a windfall" while traditional TRS providers
    "will continue to lose money on every traditional TRS minute
    carried."[^67] Ultratec similarly asserts that the combined rate
    fails to compensate traditional TRS providers for their reasonable
    costs, and that separate rates should be adopted that reflect the
    average actual costs associated with each of these services.[^68]
    CSD also asserts that so long as the costs for providing each of
    these services differ, "it makes little sense to use a single rate
    for their reimbursement."[^69]

20. We conclude that traditional TRS and IP Relay should be compensated
    at separate rates based on the cost and demand projections specific
    to these services. NECA's filing indicates that IP Relay costs are
    approximately 11 percent less than traditional TRS.[^70] As NECA
    indicates, for the 2005-2006 Fund year, the average per-minute cost
    for IP Relay is \$0.162 less than the average per-minute cost of
    traditional TRS.[^71] We do not believe that it is fair or
    reasonable to use a combined rate (\$1.312) that over-compensates IP
    Relay providers (by \$0.034 per minute) and under-compensates
    traditional TRS providers (by \$0.128 per minute).[^72] As described
    below, we therefore adopt separate rates for traditional TRS and IP
    Relay, and instruct NECA to calculate and propose separate rates for
    these services in the future.[^73]

### Compensation Rate for Traditional TRS

21. We conclude that traditional TRS shall be compensated at \$1.440 per
    minute. This is consistent with NECA's calculation based on the
    providers' projected cost and demand specific to traditional
    TRS.[^74] This rate is determined by dividing the providers' total
    projected interstate costs for traditional TRS of \$68,084,670 by
    the providers' total projected interstate minutes of traditional TRS
    of 47,948,559, and applying the 1.4 percent rate of return for an
    allowance for working capital to the resulting average cost per
    minute.[^75] We have reviewed NECA's rate and its analysis of the
    relevant underlying data particular to traditional TRS. We find that
    NECA's calculations with respect to this service are reasonable.
    Therefore, we adopt a compensation rate for eligible traditional TRS
    calls of \$1.440 per minute for the period of July 2005 through June
    2006.[^76]

### Compensation Rate for IP Relay

22. We conclude that IP Relay shall be compensated at \$1.278 per
    minute. This is consistent with NECA's calculation based on the
    providers' projected cost and demand specific to IP Relay.[^77] This
    rate is determined by dividing the providers' total projected costs
    for IP Relay of \$230,866,685 by the provider's total projected
    minutes of IP Relay of 183,164,118, and applying the 1.4 percent
    rate of return for an allowance for working capital to the resulting
    average cost per minute.[^78] We have reviewed NECA's proposed rate
    and its analysis of the relevant underlying data particular to IP
    Relay. We find that NECA's calculations with respect to this service
    are reasonable. Therefore, we adopt a compensation rate for eligible
    traditional IP Relay calls of \$1.278 per minute for the period of
    July 2005 through June 2006.[^79]

## Compensation Rate for Video Relay Service (VRS)

23. We conclude that VRS shall be compensated at \$6.644 per minute.
    NECA indicates that its proposed rate of \$5.924 per minute appears
    to be driven by the costs and demand data of one provider, and that
    if the data from this provider was excluded the rate would be
    \$7.061.[^80] NECA also notes that the Council expressed concern
    over the proposed rate and the effect one provider had on the rate,
    and that there are several open issues with respect to VRS service
    that might affect the rate.[^81] Accordingly, NECA suggests that the
    Commission may wish to explore alternatives to the traditional rate
    calculation for VRS.[^82] No commenter filed comments in support of
    NECA's proposed rate.

24. In response to NECA's filing, several commenters urge the Commission
    to reject the proposed VRS rate of \$5.924 and adopt a higher
    alternative rate that is more representative of the majority of the
    providers' costs in providing this service. Hands On, CSD, and
    TDI/DHHCAN assert that the proposed rate is skewed artificially low
    because there is currently no speed of answer or interoperability
    requirement, resulting in higher costs to those providers that do
    provide a faster speed of answer and interoperable service.[^83]
    TDI/DHHCAN also asserts that NECA's proposed compensation rate may
    result in a reduction of the availability of the service, which
    would be contrary to the functional equivalency requirements of the
    ADA.[^84] Hands On and CSD further assert that the proposed rate
    would adversely affect service quality.[^85]

25. Hands On proposes several alternative ways to calculate the VRS
    rate. These alternatives include: a weighted average that excludes
    the dominant provider, which results in a rate of \$7.061;[^86] the
    median cost rate of all of the providers that submitted data, which
    results in a rate of \$6.644; a weighted average that excludes the
    data of the high cost and low cost providers, which results in a
    rate of approximately \$7.00; and a non-weighted average that
    includes all providers, which results in a rate of \$7.325.[^87]
    Hands On asserts that "\[a\]ny of these alternative rate
    calculations would be appropriate for the Commission to adopt on an
    interim basis pending action on outstanding \[issues\], including .
    . . answer speed and interoperability."[^88]

26. We conclude that under the present circumstances, given the lack of
    certain standards for VRS, NECA's proposed VRS compensation rate of
    \$5.924 would not be a fair and reasonable compensation rate for VRS
    providers. Therefore, we do not adopt that rate, but instead adopt a
    rate of \$6.644 per minute for the 2005-2006 Fund year. This rate
    reflects the median rate of the individual rates of the seven VRS
    providers that submitted cost and demand data.

27. We conclude that the median rate is the most appropriate rate for
    the 2005-2006 Fund year. This rate is closest to a majority of the
    providers' proposed rates and is a better indicator of reasonable
    costs in this unique situation, where there are several pending
    issues under consideration impacting providers' costs. As we have
    noted, the Commission's rules mandate that providers be compensated
    for the "reasonable" costs of providing service.[^89] The record
    reflects that the "reasonableness" of costs will vary depending on
    the level of service provided.[^90] Because of open quality of
    service issues such as speed of answer and interoperability, the
    record reflects that the providers may not be offering consumers the
    same level of service. In these circumstances, where NECA's proposed
    rate was calculated at a time when certain key VRS rules are in
    flux, and where services are being provided at various levels of
    service quality, we believe that an alternative compensation rate is
    appropriate. We are concerned that both the overall quality and
    availability of the service may suffer under NECA's proposed rate.

28. In these circumstances, we reject NECA's proposed rate. On the
    present record, we find that a compensation rate based on the
    weighted average of the providers' costs would not fairly reflect
    the reasonable costs of providing service. As NECA and commenters
    have noted, NECA's proposed rate is below the rate of all providers
    except the one dominant, low cost provider.[^91] Therefore, under
    NECA's proposed rate, all of the providers except the one dominant,
    low-cost provider will lose money on every minute of call carried.
    We also note that all commenters on this issue assert that NECA's
    proposed rate is too low and unfair,[^92] and that the Interstate
    TRS Fund Advisory Council has expressed similar concerns.[^93]
    Finally, we recognize that the Commission has not yet settled on a
    cost recovery methodology for VRS, and that this issue remains
    open.[^94] We conclude that the median rate of \$6.644 per minute
    represents a just and reasonable rate for compensating providers of
    VRS.[^95] That rate is closest to a majority of the providers'
    proposed rates, and will result (by definition) in the same number
    of providers having costs above the rate as below the rate. That
    rate is also supported by at least one commenter.[^96] We therefore
    adopt a VRS compensation rate of \$6.644 per minute for the period
    of July 2005 through June 2006.[^97]

## Interstate TRS Fund Size and Carrier Contribution Rate

29. We adopt a total Interstate TRS Fund size of \$441,493,869 and a
    carrier contribution factor of 0.00564 for the July 2005 through
    June 2006 Fund year.[^98] That figure reflects the funds necessary
    to compensate providers for projected eligible minutes of use for
    the various forms of TRS, a 10 percent safety margin, and NECA's
    administrative costs, less interest income, and is based on the
    rates adopted in this Order.[^99]

30. AT&T asserts that NECA has overstated the Fund size by inflating
    demand projections.[^100] AT&T notes that NECA applied a growth rate
    based on a four-month period (October 2004 through January 2005),
    and argues that projecting demand based on this "arbitrary"
    four-month period has inflated the Fund size by \$43 million.[^101]
    AT&T asserts that NECA should have developed a growth rate based on
    the prior twelve-month period.[^102] AT&T also argues that NECA's
    inclusion of a 10 percent "safety margin" to cover possible
    shortfalls is unwarranted, excessive, and unnecessary, and that
    instead, NECA should request additional funding if and when there is
    such a shortfall.[^103]

31. CSD, Hands On, and NECA filed reply comments in response to AT&T's
    assertions. First, NECA explains that it used this four-month period
    to establish a growth rate because of changes in the relay service
    marketplace and anomalies in the minutes of use for certain months
    in the prior twelve-month period.[^104] NECA notes, for example,
    that because of the projected increased use of captioned telephone,
    it believes minutes of use of traditional TRS will increase, but
    that reliance on the historic twelve-month period would result in a
    decrease.[^105] NECA further notes that there were two months in
    which the minutes of use for IP Relay and VRS were
    uncharacteristically low, and that therefore use of a twelve-month
    growth period that includes these months results in a growth rate
    that is significantly below the overall historic growth rate.[^106]
    NECA states that the low growth of IP Relay minutes in April and May
    2004 "appears to coincide with implementation of measures to control
    fraudulent calls from international locations."[^107] As a result,
    NECA asserts that its usage projection is "far more reasonable" than
    using an historic twelve-month period as AT&T proposes. CSD and
    Hands On agree that NECA's reliance on the four-month period to
    project minutes of use was appropriate because of the increased use
    of new technologies and the need for adequate funding as demand for
    these new services continues to increase.[^108]

32. Second, NECA explains that it has used a 10 percent safety margin
    every year since its first filing in 1994, "to insure smooth,
    efficient operation of the fund and to minimize the need for
    subsequent fund size revisions."[^109] NECA also notes that
    unanticipated growth in the minutes of use required an additional
    assessment during the 2003-2004 Fund year, that in December 2004 the
    Commission increased the compensation rates retroactively to the
    beginning of the Fund year, and that minutes of use continue to
    grow.[^110] In these circumstances, NECA suggests that a 10 percent
    safety margin is prudent, and will mitigate the possibility that
    NECA will have to bill and collect additional funds from over 4,300
    contributors.[^111]

33. Under these circumstances, we find that NECA's use of a four-month
    period to project demand and the inclusion of a 10 percent safety
    margin are reasonable. As NECA explains in its filing and reply
    comments, it used a four-month period to determine the growth rate
    for traditional TRS because that period reflected a steady growth in
    minutes of use, whereas in prior months traditional TRS minutes
    fluctuated up and down from month to month.[^112] It also reasonably
    believes that traditional TRS minutes will increase in the 2005-2006
    Fund year, because of the growth in the use of captioned telephone
    service.[^113] NECA also explains that it used this same four-month
    growth period for STS because "a clear growth rate has not been
    discernable either annually or monthly," and for IP Relay and VRS
    because there is limited historical data for those services.[^114]
    In addition, NECA explains that for IP Relay, there was steady
    growth in that period compared to fluctuations in prior
    months.[^115] We find NECA's approach to be reasonable, particularly
    in view of the overall steady growth in the use of the two
    Internet-based forms of TRS, IP Relay and VRS.[^116]

34. We also conclude that NECA's inclusion of the 10 percent safety
    margin is reasonable and appropriate given the continued growth in
    the overall minutes of use and the desire to avoid, if possible,
    having to increase the Fund size and seek additional contributions
    in the middle of a Fund year.

## Other Issues

35. Commenters raise two other issues relating the funding mechanism for
    TRS. First, AT&T argues that the Commission should eliminate the
    ability of local exchange carriers (LECs) to recover their
    Interstate TRS Fund contributions through carrier access
    charges.[^117] AT&T notes that it raised this issue in 2003, but
    that in the *2003 Bureau TRS Order* the Bureau stated that the rate
    order was not the appropriate proceeding in which to address this
    issue.[^118] AT&T now asserts that this charge should be eliminated
    "either in a separate proceeding or as part of the Commission's
    comprehensive reform of intercarrier compensation."[^119] In reply
    comments, NECA and Verizon assert that AT&T's argument is not
    germane to this proceeding.[^120] Verizon also asserts that, in any
    event, it is neither unlawful nor inappropriate to require access
    customers to pay a portion of a LEC's Interstate TRS Fund
    contribution.[^121] We again conclude, as the Bureau did in the
    *2003 Bureau TRS Order,*[^122] that this issue falls outside the
    scope of this proceeding.

36. Second, Telco Group asserts that international revenues should be
    excluded from the revenue base used to calculate payments due the
    Interstate TRS Fund, "at least for those carriers whose
    international revenues comprise a significant proportion of their
    total interstate and international revenues."[^123] As it notes,
    Telco Group filed a petition for a declaratory ruling on this issue,
    on which the Commission sought comment by public notice.[^124]
    Accordingly, this issue will be addressed by the Commission in that
    proceeding.

# procedural matters

## Regulatory Flexibility Act

37. The Regulatory Flexibility Act of 1980, as amended (RFA),[^125]
    requires that a regulatory flexibility analysis be prepared for
    rulemaking proceedings, unless the agency certifies that "the rule
    will not have a significant economic impact on a substantial number
    of small entities."[^126] The RFA generally defines "small entity"
    as having the same meaning as the terms "small business," "small
    organization," and "small governmental jurisdiction."[^127] In
    addition, the term "small business" has the same meaning as the term
    "small business concern" under the Small Business Act.[^128] 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.

38. The Commission concludes in this item that the public interest is
    best served by requiring and adopting separate compensation rates
    for traditional TRS and IP Relay based on the cost and demand data
    submitted by providers unique to those services. The Commission
    believes that it is no longer appropriate to use a combined rate to
    compensate providers of traditional TRS and IP Relay when doing so
    will result in IP Relay providers being over-compensated, and
    traditional TRS providers being under-compensated. Going forward,
    our action will result in both categories of providers receiving the
    amount of compensation commensurate with their costs and demand for
    their services. Although this action eliminates a future windfall
    for IP Relay providers, we do not view this result as an additional
    significant economic impact under the RFA. Rather, we believe that
    both types of providers have been receiving appropriate levels of
    compensation up to this time, and that our annual review with NECA
    has shown that the use of separate compensation rates is necessary
    to continue that state of affairs. Therefore, given the lack of a
    significant economic impact, we certify that the requirements of the
    Order will not have a significant economic impact on a substantial
    number of small entities.

39. We also note that, arguably, there are not a substantial number of
    small entities that will be affected by our action. The SBA has
    developed a small business size standard for Wired
    Telecommunications Carriers, which consists of all such firms having
    1,500 or fewer employees.[^129] Currently, only seven providers are
    providing traditional TRS and being compensated from the Interstate
    TRS Fund: Ameritech, AT&T, Hamilton, Kansas Relay Service, Inc.,
    MCI, Nordia, and Sprint. Currently, only six entities are providing
    IP Relay and being compensated from the Interstate TRS Fund: AT&T,
    Hamilton, MCI, Sprint, Nordia, and Sorenson**.** We expect that only
    one of the providers noted above is a small entity under the SBA's
    small business size standard.

## Paperwork Reduction Act

40. This document does not contain new or modified information
    collection requirements subject to the Paperwork Reduction Act of
    1995 (PRA), Public Law 104-13.  In addition, it does not contain any
    new or modified \"information collection burden for small business
    concerns with fewer than 25 employees,\" pursuant to the Small
    Business Paperwork Relief Act of 2002, Public Law 107-198.[^130]

## Congressional Review Act

41. The Commission will not send a copy of this *Order* to Congress and
    the Government Accountability Office pursuant to the Congressional
    Review Act of 1996[^131] because the adopted rules are rules of
    particular applicability adopting the TRS provider compensation
    rates.

## Materials in Accessible Formats

42. To request materials in accessible formats (such as braille, large
    print, electronic files, or audio format), send an e-mail to
    <fcc504@fcc.gov> or call the Consumer & Governmental Affairs Bureau
    at (202) 418-0530 (voice) or (202) 418-0432 (TTY). This *Order* can
    also be downloaded in Word and Portable Document Formats (PDF) at
    [http://www.fcc.gov/cgb/dro](http://www.fcc.gov/cgb.dro).

# ORDERING CLAUSES

43. Accordingly, IT IS ORDERED, pursuant to the authority contained in
    Sections 1, 2, and 225 of the Communications Act of 1934, as
    amended, 47 U.S.C. §§ 151, 152, and 225, that this ORDER IS hereby
    ADOPTED.

44. IT IS FURTHER ORDERED that NECA shall compensate providers of
    Speech-to-Speech relay service (STS) and Video Relay Service (VRS)
    for the July 1, 2005 through June 30, 2006 Fund year at the
    following rates: STS providers - \$1.579 per completed interstate
    conversation minute; and VRS providers - \$6.644 per completed
    interstate and intrastate conversation minute.

45. IT IS FURTHER ORDERED that NECA shall compensate providers of
    traditional telecommunications relay service (TRS) and IP Relay,
    effective upon publication of this *Order* in the Federal Register
    through June 30, 2006, at the following rates: traditional TRS
    providers - \$1.440 per completed interstate conversation minute; IP
    Relay providers - \$1.278 per completed interstate and intrastate
    conversation minute. Prior to publication of this *Order* in the
    Federal Register, NECA shall compensate providers of traditional TRS
    and IP Relay at the 2004-2005 fund year rate.

46. IT IS FURTHER ORDERED that the Interstate TRS Fund size shall be
    \$441,493,869 and the carrier contribution factor shall be 0.00564,
    for the July 1, 2005, through June 30, 2006, Fund year.

47. IT IS FURTHER ORDERED that this *Order* is effective upon
    publication in the Federal Register, except for the compensation
    rates for STS and VRS, and the Fund size and carrier contribution
    factor, which are effective upon release of this *Order*.[^132]

48. IT IS FURTHER ORDERED that the Commission's Consumer & Governmental
    Affairs Bureau, Reference Information Center, SHALL SEND a copy of
    this *Order*, including the Regulatory Flexibility Certification, to
    the Chief Counsel for Advocacy of the U.S. Small Business
    Administration.

    FEDERAL COMMUNICATIONS COMMISSION

    Marlene H. Dortch Secretary

**STATEMENT OF\
COMMISSIONER MICHAEL J. COPPS**

Re: *Telecommunications Relay and Speech-to-Speech Services for
Individuals with*

*Hearing and Speech Disabilities*, Order (CC Docket No. 98-67, CG Docket

No. 03-123)

The concept of "functional equivalency" is at the heart of the Americans
with Disabilities Act. "Functional equivalency" means that 54 million
Americans have a right to equal access to communications technologies
and an equal opportunity to succeed.

Today's decision delves deep into the mechanics of "functional
equivalency" by determining appropriate compensation rates. To this end,
our Order separately accounts for IP Relay and traditional TRS. This
approach allows service provider compensation to more accurately reflect
cost.

This Order also adopts a compensation rate for VRS based on a median of
the individual rates of providers submitting cost and demand data. I
support this outcome, but remain concerned that our calculation of VRS
rates has an ad hoc and last minute quality. This is not fair to VRS
consumers or providers. We need to work harder to bring consistency and
transparency to the calculation process. We also must provide an
expeditious and thoughtful response to speed of answer and
interoperability concerns raised by the deaf and hard-of-hearing
community. With the "functional equivalency" standard as our guide, I
look forward to working with my colleagues to do so.

**STATEMENT OF**

**COMMISSIONER JONATHAN S. ADELSTEIN**

*Re: Telecommunications Relay Services and Speech-to-Speech Services for
Individuals with Hearing and Speech Disabilities, Order (CC Docket No.
98-67, CG Docket No. 03-123).*

Through this Order, the Commission adopts compensation rates for the
critical services supported through the Telecommunications Relay Service
(TRS) Fund. These relay services serve as vital connections for and to
millions of hearing-impaired and speech-impaired Americans. Without
federal and state TRS services, these citizens would be left out of the
vital communications networks that link our economy and society.

I support this Order because it adopts reasonable compensation rates for
the traditional TRS, IP Relay Services, and Video Relay Services (VRS).
Calculating the compensation rate for VRS, which is an increasingly
important tool, proved particularly difficult this year because certain
key VRS rules are in flux. I am pleased that the Commission was able to
take into account these open questions and find a flexible approach to
address the compensation of these services. The challenges presented
here do underscore, however, the importance of moving forward to address
open quality of service issues, such as the speed of answer and
interoperability, and our open proceeding on improving our rules and
process for setting the VRS compensation rate. I look forward to working
closely with my colleagues to resolve these issues quickly.

[^1]: TRS, created by Title IV of the Americans with Disabilities Act of
    1990 (ADA), enables an individual with a hearing or speech
    disability to communicate by telephone or other device through the
    telephone system with a person without such a disability. *See* 47
    U.S.C. § 225(a)(3) (defining TRS). As noted below, TRS is provided
    in a variety of ways.

[^2]: NECA, *Interstate Telecommunications Relay Services Fund Payment
    Formula and Fund Size Estimate*, CC Docket No. 98-67, filed April
    25, 2005 (*2005 NECA Filing*). As NECA explains in its filing, it
    performs a detailed analysis of the providers' data to determine,
    among other things, whether all of the costs submitted may be
    properly included in the rate calculations. *See id.* at 6-7. NECA
    notes that in determining rates for the 2005-2006 Fund year it
    disallowed costs in only two instances, and in each case the
    provider accepted NECA's decision. *See id.* at 6-7, 14-15 & n.27
    (STS rate), 16 (VRS rate).

[^3]: *See Telecommunications Relay Services and Speech-to-Speech
    Services for Individuals with Hearing and Speech Disabilities,*
    Report and Order, Order on Reconsideration, and Further Notice of
    Proposed Rulemaking, CC Docket Nos. 90-571 & 98-67, CG Docket No.
    03-123, 19 FCC Rcd 12475, 12564-12565, para. 233 (June 30, 2004)
    (*2004 TRS Report & Order*) (asking whether the Commission should
    adopt separate rates for traditional TRS and IP Relay).

[^4]: Speech-to-Speech (STS) is a form of TRS that allows persons with
    speech disabilities to communicate with voice telephone users
    through the use of specially trained communications assistants (CAs)
    who understand the speech patterns of persons with disabilities and
    can repeat the words spoken by that person. *See* 47 C.F.R. §
    64.601(12).

[^5]: Traditional TRS is accomplished via text-to-voice or
    voice-to-text, with the text provided via a text telephone (TTY).
    *See* 46 C.F.R. § 64.601(14). IP Relay functions similarly with the
    text provided to, and received from, the CA via the TRS consumer's
    computer or other web-enabled device.

[^6]: Video Relay Service (VRS) is a form of TRS that allows persons
    with hearing disabilities to communicate with the CA in sign
    language via a video link. *See* 47 C.F.R. § 64.601(17).

[^7]: The resulting total Interstate TRS Fund size is \$441,493,869, and
    the carrier contribution factor is 0.00564.

[^8]: When the Commission recognized IP Relay as a form of TRS, it
    directed that IP Relay providers would be compensated at the same
    rate as providers of traditional TRS. *See Provision of Improved
    Telecommunications Relay Services and Speech-to-Speech Services for
    Individuals with Hearing and Speech Disabilities,* Declaratory
    Ruling and Second Further Notice of Proposed Rulemaking, CC Docket
    No. 98-67, 17 FCC Rcd 7779, at 7786, para. 22 (April 22, 2002) (*IP
    Relay Declaratory Ruling & FNPRM*).

[^9]: *See 2005 NECA Filing* at 9-13 & Exs. 1A-1C. For traditional TRS,
    only the costs of providing interstate service are considered. *Id.*
    at 7-8.

[^10]: This figure was arrived at by dividing the 2005-2006 annualized
    average projected costs of \$298,971,355 by the annualized average
    projected minutes of 213,112,677, and applying the 1.4 percent rate
    of return to an allowance for working capital to the resulting cost
    per minute. *Id.* at Ex. 1C*. See also Telecommunications Relay
    Services and Speech-to-Speech Services for Individuals with Hearing
    and Speech Disabilities*, Order, CC Docket No. 98-67, 19 FCC Rcd
    12224, at 12230, para. 16 & n.53 (June 30, 2004) (*2004 Bureau TRS
    Order*) (explaining allowance for working capital and derivation of
    the 1.4 percent figure).

[^11]: Since its inception, the compensation rate for traditional TRS
    has ranged from \$1.168 to \$1.705 per minute. A history of
    traditional TRS payment rates is set forth in the *2004 Bureau TRS
    Order. See 2004 Bureau TRS Order,* 19 FCC Rcd at 12231, para. 17
    n.56.

[^12]: *2005 NECA Filing* at 20.

[^13]: *Id.* at 20-21 & n.40. NECA analyzes the cost and demand data
    separately for traditional TRS and IP Relay. *See id.* at Exs.
    1A-1C.

[^14]: *Id.* at 21.

[^15]: *Id.*

[^16]: *Id.* at 10. NECA explains that although in calculating the
    compensation rates it uses the providers' own *projections* of
    minutes of use, in calculating the Fund size it uses *actual* growth
    rates to estimate minutes of use that will be paid by the Fund. NECA
    states that, in this case, it calculated a growth rate from the
    four-month period of October 2004 through January 2005, and applied
    this growth rate to the actual minutes of March 2005 to determine
    projected minutes for the twelve-month period of the July 2005 to
    June 2006 Fund year. *Id.* at 10-11 (explaining calculation).

[^17]: *Id.* at 10-11 & Ex. 2 (2A of 6).

[^18]: *Id.* at 12.

[^19]: *Id.* at 12 & Ex. 2 (2B of 6).

[^20]: *Id.* at Ex. 4.

[^21]: *Id.* at 13 & Ex. 4. The \$165.3 million, added to the funding
    requirements for the projected use of STS and VRS, as noted below,
    plus certain administrative costs, determines the total projected
    Interstate TRS Fund size estimate. *See id*.

[^22]: *Id.* at 21 n.40.

[^23]: *Id.* at 14.

[^24]: *Id.* at 14-15.

[^25]: *Id.* at 15 n.26.

[^26]: *Id.* at 15.

[^27]: *Id.* at 15 n.27.

[^28]: *See id.* at 15 & Ex.1D. This figure was calculated by dividing
    the 2005-2006 annualized average projected costs of \$309,680 by the
    providers' 2005-2006 projected minutes of 198,860, and applying the
    1.4 percent rate of return for an allowance for working capital to
    the resulting average cost per minute.

[^29]: Since its inception, the compensation rate for STS has ranged
    from \$1.596 to \$4.263 per minute. A history of STS payment rates
    is set forth in the *2004 Bureau TRS Order. See 2004 Bureau TRS
    Order,* 19 FCC Rcd at 12233, para. 21 n.63.

[^30]: *2005 NECA Filing* at 15.

[^31]: *Id.* at Ex. 2 (2C of 6).

[^32]: *Id.* at 15 & Ex. 4.

[^33]: *Id.* at 16.

[^34]: *Id.*

[^35]: *See id.* at 17 & Ex. 1E. This figure was calculated by dividing
    the 2005-2006 annualized average projected costs of \$321,049,465 by
    providers' 2005-2006 annualized average projected minutes of
    54,948,999, and applying the 1.4 percent rate of return for an
    allowance for working capital to the resulting average cost per
    minute.

[^36]: Since its inception (March 2000) the compensation rate for VRS
    has ranged from \$5.143 to \$17.044 per minute. A history of VRS
    payment rates is set forth in the *2004 Bureau TRS Order. See 2004
    Bureau TRS Order,* 19 FCC Rcd at 12234, para. 24 n.68.

[^37]: NECA states the "\[t\]he average produced by the traditional rate
    development methodology using all providers' data indicates that
    only one provider's cost per minute is below the average, while all
    other providers' costs are above the average." *2005 NECA Filing* at
    17 n.32.

[^38]: *Id.* An increase of \$1.137 per minute to the VRS rate would
    increase the required Fund size by over \$40 million (\$1.137
    multiplied by the projected minutes of use of 35.5 million).

[^39]: *Id.* "Interoperability" refers to whether a consumer can use TRS
    equipment with any of the providers' relay service and not be
    limited to using only one provider (*e.g.,* the provider that gave
    the consumer the equipment). *See Petition for Declaratory Ruling
    Filed by the California Coalition of Agencies Serving the Deaf and
    Hard of Hearing (CCASDHH) Concerning Video Relay Service (VRS)
    Interoperability,* Public Notice, CC Docket No. 98-67, CG Docket No.
    03-123, DA 05-509 (March 1, 2005) (seeking comment on
    interoperability issue). The Commission has presently waived the TRS
    speed of answer rule for VRS. That rule requires that 85 percent of
    all calls must be answered within 10 seconds. The waiver expires on
    January 1, 2006. *See 2004 TRS Report & Order,* 19 FCC Rcd at
    12522-12524, 12568-12569, paras. 119-123 (speed of answer waiver),
    246 (raising issue of appropriate VRS speed of answer in FNPRM).
    NECA also notes that the Interstate TRS Fund Advisory Council, at
    its April 19, 2005, meeting, expressed concern that decreasing the
    VRS rate from \$7.596 to the proposed rate of \$5.924 would
    under-compensate many VRS providers, threatening their continued
    provision of the service. *2005 NECA Filing* at 21. The Council
    recommended that the Commission leave open the opportunity to
    re-examine the VRS rate when decisions on VRS speed of answer and
    interoperability are reached. *Id.*

[^40]: *2005 NECA Filing* at 17 & Ex. 2 (2D of 6).

[^41]: *Id.* at 17-18 & Ex. 2 (2D of 6).

[^42]: *Id.* at 18 & Ex. 4.

[^43]: *Id.* at 18-19 & Ex. 4. Under the Commission's rules, "\[e\]very
    carrier providing interstate telecommunications services shall
    contribute to the TRS Fund on the basis of interstate end-user
    telecommunications revenues." 47 C.F.R. § 64.604(c)(5)(iii)(A).

[^44]: *2005 NECA Filing* at Ex. 4.

[^45]: *Id.* This amount includes the actual costs of providing TRS,
    NECA's administrative costs, and a 10 percent safety margin, less
    interest income on retained funds. *See id.*

[^46]: *Id*.

[^47]: *See* 47 C.F.R. §§ 64.604(c)(5)(iii)(E), (H). As we have noted,
    NECA states that if the Commission adopts separate compensation
    rates for traditional TRS and IP Relay, the effect on the total Fund
    size requirement would be negligible and the carrier contribution
    factor of 0.00528 would be the same. *2005 NECA Filing* at 21 n.40.

[^48]: *National Exchange Carrier Association (NECA) Submits the Payment
    Formula and Fund Size Estimate for Interstate Telecommunications
    Relay Services (TRS) Fund for July 2005 through June 2006*, Public
    Notice, CC Docket No. 98-67, DA 05-1175 (April 28, 2005) (*2005 TRS
    Rate PN)*.

[^49]: Comments were filed by Hands On Video Relay Services, Inc. (Hands
    On) (May 12, 2005); MCI, Inc. (MCI) (May 13, 2005); Nordia, Inc.
    (Nordia) (May 13, 2005); Sprint Corporation (Sprint) (May 13, 2005);
    Telco Group, Inc. (Telco Group) (May 13, 2005); Telecommunications
    for the Deaf, Inc. and Deaf and Hard of Hearing Consumer Advocacy
    Network (TDI/DHHCAN) (May 13, 2005); Ultratec, Inc. (Ultratec) (May
    13, 2005); Communication Services for the Deaf, Inc. (CSD) (May 13,
    2005); AT&T Corp. (AT&T) (May 13, 12005); and Hamilton Relay, Inc.
    (Hamilton) (May 13, 2005). Reply comments were filed by Hands On
    (May 25, 2005); MCI (May 25, 2005); CSD (May 25, 2005); Sorenson
    Communications, Inc. (Sorenson) (May 25, 2005); Verizon (May 25,
    2005); and NECA (May 25, 2005).

[^50]: *See generally* Hands On Comments, CSD Comments, TDI/DHHCAN
    Comments, Hands On Reply Comments, CSD Reply Comments (proposed VRS
    rate is unfairly low); *see also* Sorenson Reply Comments.

[^51]: *Compare* MCI Comments, Nordia Comments, Hamilton Comments, and
    MCI Reply Comments (rates for IP Relay and traditional TRS should
    remain the same), *with* Sprint Comments, Ultratec Comments, and CSD
    Reply Comments (Commission should adopt separate rates).

[^52]: *See generally* Telco Group Comments (addressing payments into
    fund based on international revenues); AT&T Comments (asserting that
    projected size of Fund is too large and addressing related issues);
    Hands On Reply Comments; CSD Reply Comments; Verizon Reply Comments;
    NECA Reply Comments.

[^53]: The compensation rates for STS and VRS, and the fund size and
    carrier contribution factor, shall be effective upon the release of
    this *Order.* Because this *Order* adopts a new rule that requires
    separate compensation rates for traditional TRS and IP Relay, the
    compensation rates for traditional TRS and IP Relay shall be
    effective upon publication of this *Order* in the Federal Register,
    rather than simply upon release of this *Order*. Until such time,
    providers of traditional TRS and IP Relay shall be compensated at
    the 2004-2005 rate of \$1.398.

[^54]: *Id.* at Ex. 1D.

[^55]: *See 2005 NECA Filing* at 13 n.21 (reflecting an 11 percent
    disparity between the average cost of providing traditional TRS and
    IP Relay).

[^56]: *See* para. 3, *supra*.

[^57]: *See* *2005 TRS Rate PN* at 1.

[^58]: *2004 TRS Report & Order*, 19 FCC Rcd at 12564-12565, para. 233.

[^59]: *Id.*

[^60]: *Id.*

[^61]: *Id.*

[^62]: MCI Comments at 2-5; Nordia Comments at 1-3; Hamilton Comments at
    4.

[^63]: *See* MCI Comments at 3-5; Hamilton Comments at 4; MCI Reply
    Comments at 4. MCI suggests that to the extent the costs of
    providing traditional TRS may be higher, it is likely because of
    inefficiencies, and the Commission should not reward inefficient
    providers. MCI Reply Comments at 7.

[^64]: Sprint Comments at 2-3; Ultratec Comments at 1-4; CSD Reply
    Comments at 4-5.

[^65]: Although in its comments to the *2004 TRS Report & Order's* FNPRM
    Sprint stated that the two services should be compensated at the
    same rate, in its subsequent comments in response to the Public
    Notice Sprint asserts that "given the cost differentials in
    providing traditional TRS and \[IP Relay\] service, a merged rate
    can no longer be justified." Sprint Comments at 1.

[^66]: Sprint Comments at 2-3.

[^67]: Sprint Comment at 3.

[^68]: Ultratec Comments at 3-4.

[^69]: CSD Reply Comments at 4.

[^70]: *See 2005 NECA Filing* at 13 n.21.

[^71]: *Id.* (noting that the average rate for IP Relay (\$1.278) is
    \$0.162 (which is approximately 11 percent) less than the average
    cost of traditional TRS (\$1.440)).

[^72]: We also agree with CSD that the dispositive consideration is not
    whether adopting separate rates would reduce the size of the
    Interstate TRS Fund, but rather whether a particular rate
    compensates providers for the reasonable costs of providing the
    service. *See* CSD Reply Comments at 4-5. As an immediate matter,
    NECA indicates that the adoption of the separate rates for
    traditional TRS and IP Relay would have no material effect on the
    size of the fund. *See* para. 5, *supra*. However, because the
    growth of IP Relay will likely outpace the growth of traditional
    TRS, *see 2005 NECA Filing* at Exs. 2 (2A of 6) & 2 (2B of 6), over
    the long term adopting separate rates will likely lead to a decrease
    in the size of the Fund.

[^73]: In its comments, Hamilton urges the Commission to reject a "rate
    of return" cost recovery methodology for traditional TRS and IP
    Relay and instead adopt its "MARS" plan, which it proposed in its
    petition for reconsideration of the *2004 TRS Report & Order*.
    Hamilton Comments at 2-3. Under the MARS plan, the interstate TRS
    rate would be calculated based on an average of the *intrastate* TRS
    rates paid by the states. Hamilton requests that the Commission seek
    comment on the MARS plan when it adopts the 2005-2006 TRS rates.
    Hamilton Comments at 2. MCI also states that the Commission should
    adopt the MARS plan. MCI Comments at 5-6; MCI Reply Comments at 7-8.
    AT&T also urges the Commission to consider adopting this plan. AT&T
    Comments at 7 n.10. We will raise the issue of adopting the MARS
    plan in a future notice of proposed rulemaking. *See also* NECA
    Reply Comments at 9 (although the Commission may determine that such
    an approach is warranted in the future, it is outside the scope of
    this proceeding).

[^74]: *2005 NECA Filing* at 13 n.21, Exs. 1A & 1C.

[^75]: *Id.* at Ex. 1C.

[^76]: The compensation rate for traditional TRS shall be effective upon
    publication of this *Order* in the Federal Register. Until such
    time, providers of traditional TRS shall be compensated at the
    2004-2005 rate of \$1.398.

[^77]: *Id.* at 13 n.21, Exs. 1B & 1C.

[^78]: *Id.* at Ex. 1C.

[^79]: The compensation rate for IP Relay shall be effective upon
    publication of this *Order* in the Federal Register. Until such
    time, providers of IP Relay shall be compensated at the 2004-2005
    rate of \$1.398.

[^80]: *Id.* at 17 n.32; *see* para. 9, *supra.*

[^81]: *Id.* at 17 n.32, 21. These issues are speed of answer and
    interoperability. *See* note 39, *supra.*

[^82]: *Id.* at 17 n.32.

[^83]: Hands On Comments at ii-iii, 2-8; CSD Comments at 1-6; TDI/DHHCAN
    Comments at 2-4; Hands On Reply Comments at 1-4; CSD Reply Comments
    at 1-4.

[^84]: TDI/DHHCAN Comments at 3.

[^85]: Hands On Reply Comments at 1-4; CSD Reply Comments at 1-4. CSD
    also asserts that the proposed rate will reduce competition because
    the non-dominant providers will be forced to reduce the quality of
    their service and therefore will be even less able to compete with
    the dominant provider. CSD Reply Comments at 2-3.

[^86]: This is the alternative rate proposed in NECA's filing. *See 2005
    NECA Filing* at 17 n.32.

[^87]: Hands On Comments at 10-13. In Hands On's view, the "most
    appropriate methodology is the use the weighted average method, but
    with the elimination of the low and high cost providers' estimates.
    *Id.* at 13. CSD also proposes alternative VRS rate calculations
    that exclude the dominant provider's data, use a non-weighted
    average of all providers' data, or tie the VRS compensation rate to
    service levels. CSD Comments at 6-8; *see also* CSD Reply Comments
    at 1-4. CSD suggests that one of these alternatives could be
    implemented on an interim basis until the Commission adopts service
    level standards (*e.g.,* speed of answer). CSD Comments at 6; *see
    also* CSD Reply Comments at 3. TDI/DHHCAN proposes that the
    Commission adopt the rate of \$7.061 that is derived by excluding
    the data of the largest provider. TDI/DHHCAN Comments at 6.

[^88]: Hands On Comments at 13. Hands On also suggests that the
    Commission could adopt VRS rates that vary depending on the
    provider's speed of answer. Hands On asserts that such an approach
    would ensure that providers with lower costs (presumably because
    they employ fewer VRS CAs and therefore and have longer speed of
    answer times) will not be overcompensated. *See* Hands On Comments
    at 13-17. Sorenson, in its reply comments, asserts that adoption of
    Hands On's proposed plan would be premature until the Commission
    establishes a speed of answer requirement for VRS. Sorenson Reply
    Comments at 1-3. Because the speed of answer requirement for VRS is
    presently waived, and the issue of a speed of answer requirement for
    VRS is pending before the Commission, we decline to adopt this
    proposal at this time.

[^89]: *See* 47 C.F.R. § 64.604(c)(5)(iii)(E).

[^90]: *See* CSD Comments at 4-6; DHHCAN Comments at 2-5; Hands On
    Comments at 3-7.

[^91]: To determine a per-minute compensation rate that reflects
    reasonable costs, the Commission has used providers' projected costs
    and minutes of use data to determine a weighted average. As a
    result, the rate does not correlate with any provider's actual costs
    -- it simply represents one estimate of what a reasonable
    compensation should be to fairly compensate all providers. The rate
    will, necessarily, result in some providers being over-compensated
    and some providers being under-compensated. In the past, the
    relative level of compensation as it affects each of the providers
    has not been an issue, likely because market share was more evenly
    divided and providers' level of service was similar.

[^92]: *See* para. 24, *supra.*

[^93]: *See 2005 NECA Filing* at 21.

[^94]: In the FNPRM in the *2004 TRS Report & Order,* the Commission
    sought comment on possible cost recovery approaches for VRS. *See
    2004 TRS Report & Order*, 19 FCC Rcd at 12565-12567, paras. 234-240.
    Nothing in this order prejudges the outcome of that proceeding.

[^95]: Although in calculating the STS rate we excluded the costs of a
    provider that were substantially higher than the costs of the other
    providers, we see no need to exclude the costs of the low-cost
    provider in calculating the VRS rate. First, we note that in
    calculating the STS rate NECA made the decision to exclude the
    high-cost provider, and that decision was accepted by the provider.
    Second, the submitted costs of the high-cost STS outlier are
    approximately seven times the average of the costs of the other STS
    providers, whereas the low-cost VRS provider\'s costs are only
    approximately 25 percent less than the average costs of the other
    VRS providers. As NECA noted, the STS high-cost provider had an
    exceptionally low occupancy rate, which drove up its labor costs.
    *2005 NECA Filing* at 15 n.26. In addition, we excluded the STS
    providers\' costs in calculating the 2004-2005 STS rate for the same
    reason. See *2004 Bureau TRS Order*, 19 FCC Rcd at 12233, para. 22.
    Further, because the providers\' cost data determines the rate at
    which they will be compensated for providing service, we are less
    concerned about submitted costs that seem atypically low than we are
    about submitted costs that seem unusually high.

[^96]: *See* Hands On Comments at 12; *see also* CSD Reply Comments at 3
    (noting that other proposed rates are more equitable than NECA's
    proposed rate).

[^97]: Because of the open "quality of service" issues regarding VRS,
    including speed of answer, interoperability, and whether the service
    should be required to be offered 24 hours a day, 7 days a week (*see
    2004 TRS Report & Order,* 19 FCC Rcd at 12567-12569, paras.
    243-246), the Commission may revisit the VRS compensation rate for
    the 2005-2006 Fund year, if new rules are adopted in these areas
    that would affect the cost of providing service. Moreover, we
    emphasize that the Commission's conclusion with respect to the VRS
    rate in this Order is based on the unique circumstances of the
    present record.

[^98]: We recognize that adopting a VRS rate of \$6.644, rather than
    \$5.924, increases the size of the Fund proposed by NECA by
    approximately \$28 million (or nearly 7 percent). Although we remain
    concerned about the rapid growth in the size of the Fund, we are
    obligated to ensure that providers are compensated for their
    reasonable costs. We also note that the rate of \$6.644 is
    significantly less than the previous rate of \$7.596. Moreover, the
    size of the Fund is largely driven by the steadily increasing demand
    for IP Relay and VRS, all of which calls are currently compensated
    from the Fund.

[^99]: *See generally 2005 NECA Filing* at Ex. 4.

[^100]: AT&T Comments at 2-5.

[^101]: AT&T Comments at 3-4.

[^102]: AT&T Comments at 4.

[^103]: AT&T Comments at 5-6.

[^104]: NECA Reply Comments at 5-8.

[^105]: NECA Reply Comments at 5.

[^106]: NECA Reply Comments at 5-7.

[^107]: NECA Reply Comments at 6 n.15.

[^108]: CSD Reply Comments at 6; Hands on Reply Comments at 4-5. In its
    comments, Hamilton asserts that the significant increase in demand
    for IP Relay and VRS merit an increase in the overall fund size.
    Hamilton Comments at 3.

[^109]: NECA Reply Comments at 8. We note that NECA has not always
    referred to this margin as a "safety margin," but as, *e.g.,* an
    "uncollectable allowance."

[^110]: NECA Reply Comments at 8. In February 2004, the Commission
    increased the Fund size and carrier contribution factor because of
    the growth of IP Relay and VRS. *See Telecommunications Relay
    Services and Speech-to-Speech Services for Individuals with Hearing
    and Speech Disabilities*, Order, CC Docket No. 98-67, DA 04-465
    (Feb. 24, 2004).

[^111]: NECA Reply Comments at 8.

[^112]: *2005 NECA Filing* at 10-11; NECA Reply Comments at 5-8.

[^113]: *2005 NECA Filing* at 10 (explaining calculation); NECA Reply
    Comments at 5.

[^114]: *2005 NECA Filing* at 15; *id.* at 12, 17.

[^115]: *Id.* at 12.

[^116]: *See id.* at Exs. 2 (page 2B of 6), 2 (page 2D of 6) (setting
    forth historical and projected minutes of use for IP Relay and VRS);
    *see also id.* at 19 (NECA notes the "continued strong growth of
    Internet and video relay services, and the anticipated growth of
    captioned telephone VCO minutes").

[^117]: AT&T Comments at 6-7.

[^118]: AT&T Comments at 7. *See* *Telecommunications Relay Services and
    Speech-to-Speech Services for Individuals with Hearing and Speech
    Disabilities*, Order, CC Docket No. 98-67, 18 FCC Rcd 12823, at
    12837, para. 43 (June 30, 2003) (*2003 Bureau TRS Order*).

[^119]: AT&T Comments at 7.

[^120]: NECA Reply Comments at 9; Verizon Reply Comments at 1-3.

[^121]: Verizon Reply Comments at 2-3.

[^122]: *See* note 118, *supra.*

[^123]: Telco Group Comments at 1.

[^124]: *See Telco Group, Inc. Files Petition for Declaratory Ruling or
    Waiver to Exclude International Revenues from the Revenue Base Used
    to Calculate Payment to the Interstate TRS Fund,* Public Notice, CC
    Docket No. 98-67, DA 04-3352 (Oct. 25, 2004).

[^125]: The RFA, *see* 5 U.S.C. §§ 601-612, has been amended by the
    Contract with America Advancement Act of 1996, Pub. L. No. 104-121,
    110 Stat. 847 (1996) (CWAAA). Title II of the CWAAA is the Small
    Business Regulatory Enforcement Act of 1996 (SBREFA).

[^126]: 5 U.S.C. § 605(b).

[^127]: *Id.*

[^128]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in the Small Business Act, 15 U.S.C. §
    632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a
    small business applies "unless and 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*."

[^129]: 13 C.F.R. § 121.201, NAICS code 517110 (changed from 513310 in
    October 2002). According to Census Bureau data for 1997, there were
    2,225 firms in this category which operated for the entire year.
    U.S. Census Bureau, 1997 Economic Census, Subject Series:
    Information, "Establishment and Firm Size (Including Legal Form of
    Organization)," Table 5, NAICS code 513310 (issued Oct. 2000). Of
    this total, 2,201 firms had employment of 999 or fewer employees,
    and an additional 24 firms had employment of 1,000 employees or
    more. Thus, under this size standard, the majority of firms can be
    considered small. (The census data do not provide a more precise
    estimate of the number of firms that have employment of 1,500 or
    fewer employees; the largest category provided is "Firms with 1,000
    employees or more.")

[^130]: *See* 44 U.S.C. § 3506(c)(4).

[^131]: *See* 5 U.S.C. §§ 801(a)(1)(A), 804(3)(A).

[^132]: Because TRS payment formulas are to be effective for a one-year
    period beginning July 1 under 47 C.F.R. § 64.604(c)(5)(iii)(H), we
    find good cause, pursuant to 5 U.S.C.§ 553(d), to make this Order
    effective on less than thirty days notice.