Federal Communications Commission FCC 07-186
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of
Telecommunications Relay Services and
Speech-to-Speech Services for
Individuals with Hearing and Speech 
Disabilities
 
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CG Docket No. 03-123
REPORT AND ORDER AND DECLARATORY RULING 
Adopted:  October 26, 2007 Released: November 19, 
2007
By the Commission:  Chairman Martin, Commissioners Copps and Adelstein issuing separate 
statements.
TABLE OF CONTENTS
Heading Paragraph #
I. INTRODUCTION.....................................................................................................................1
II. BACKGROUND.......................................................................................................................3
A. The Provision and Compensation of TRS ...........................................................................3
B. The 2006 TRS Cost Recovery FNPRM................................................................................8
1. Cost Recovery Methodology for Traditional TRS, STS, and IP Relay.........................9
2. Cost Recovery Methodology for VRS.........................................................................11
3. Reasonable Costs Compensable from the Fund.......................................................13
4. Management and Administration of the Fund.............................................................15
III. REPORT AND ORDER..........................................................................................................16
A. TRS Cost Recovery Methodologies ..................................................................................16
1. The Cost Recovery Methodology for Interstate Traditional TRS, Interstate 
STS, Interstate CTS, and IP CTS  the MARS Plan ...................................................16
a. Adoption of the MARS Plan .................................................................................16
b. Calculation of the MARS Plan Rate for Interstate Traditional TRS and 
Interstate STS ........................................................................................................26
c. Calculation of the MARS Plan Rate for Interstate CTS and IP CTS ....................36
2. The Cost Recovery Methodology for IP Relay ...........................................................39
3. The Cost Recovery Methodology for VRS .................................................................47
B. The TRS Compensation Rates for the 2007-2008 Under the New Cost Recovery 
Methodologies ...................................................................................................................57
1. Interstate Traditional TRS and Interstate STS.............................................................57
2. Interstate CTS and Interstate and Intrastate IP CTS....................................................62
3. IP Relay .......................................................................................................................66
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4. VRS .............................................................................................................................67
C. Specific Guidelines on Allowable Costs ...........................................................................73
D. Management and Administration of the Fund...................................................................83
1. The Interstate TRS Fund Advisory Council................................................................83
2. Other Issues .................................................................................................................86
IV. DECLARATORY RULING ...................................................................................................89
V. CONCLUSION .......................................................................................................................97
VI. PROCEDURAL MATTERS...................................................................................................98
A. Final Regulatory Flexibility Analysis ...............................................................................98
B. Paperwork Reduction Act Analysis...................................................................................99
C. Congressional Review Act ..............................................................................................102
D. Materials in Accessible Formats......................................................................................103
VII. ORDERING CLAUSES ......................................................................................................104
APPENDICES:
APPENDIX A - List of Commenters
APPENDIX B - Collection of State Data from State Programs and Providers and Sample 
Analysis
APPENDIX C - Calculating Total Dollars for all States for MARS Calculation and Sample 
Analysis
APPENDIX D - Final MARS Rate Calculation and Sample Analysis
APPENDIX E - TRS and STS Intrastate Rate Data for 2006
APPENDIX F - Captioned Telephone Service Intrastate Rate Data for 2006
APPENDIX G - Final Regulatory Flexibility Analysis
APPENDIX H - Final Rule Changes
I. INTRODUCTION
1. In July 2006, the Commission released a Further Notice of Proposed Rulemaking1
seeking comment on issues concerning the compensation of telecommunications relay services 
(TRS) providers from the Interstate TRS Fund (Fund).2 In this Report and Order and
Declaratory Ruling (Order) we:  (1) adopt a new cost recovery methodology for interstate 
traditional TRS3 and interstate Speech-to-Speech (STS)4 based on the MARS plan (Multi-
  
1 Telecommunications Relay Services and Speech-to-Speech Services for Individuals with Hearing and Speech 
Disabilities, CG Docket No. 03-123, Further Notice of Proposed Rulemaking, 21 FCC Rcd 8379 (July 20, 2006) 
(2006 TRS Cost Recovery FNPRM).
2 TRS, created by Title IV of the Americans with Disabilities Act of 1990 (ADA), enables a person with a hearing or 
speech disability to access the nations telephone system to communicate with voice telephone users through a relay 
provider and a communications assistant (CA).  See 47 U.S.C.  225(a)(3) (defining TRS); 47 C.F.R.  64.601(14).  
As noted below, there are various forms of TRS.  The Fund compensates providers of eligible interstate TRS 
services, and other TRS services not compensated by the states, for their reasonable costs of providing service. See 
generally Telecommunications Relay Services and Speech-to-Speech Services for Individuals with Hearing and 
Speech Disabilities, CC Docket Nos. 90-571 & 98-67, CG Docket No. 03-123, Report and Order, Order on 
Reconsideration, and Further Notice of Proposed Rulemaking, 19 FCC Rcd 12475, 12479-83, paras. 3-8 (June 30, 
2004) (2004 TRS Report & Order).  
3 Traditional TRS is a text-based form of TRS with the text provided via a text telephone (TTY) and the Public 
Switched Telephone Network (PSTN).  See 47 C.F.R.  64.601(14).  This service includes Spanish-to-Spanish relay.  
(continued)
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state Average Rate Structure), proposed by one of the providers5; (2) adopt a new cost recovery 
methodology for interstate captioned telephone service (CTS)6 and interstate and intrastate 
Internet Protocol (IP) captioned telephone service (IP CTS) 7 based on the MARS plan; (3) adopt 
a cost recovery methodology for Internet Protocol (IP) Relay8 based on price caps; (4) adopt a 
cost recovery methodology for Video Relay Service (VRS)9 that adopts tiered rates based on call 
volume; (5) clarify the nature and extent that certain categories of costs are compensable from 
the Fund; and (6) address certain issues concerning the management and oversight of the Fund, 
  
(continued from previous page)
See Telecommunications Relay Services for Individuals with Hearing and Speech Disabilities, CC Docket No. 98-
67, Report and Order and Further Notice of Proposed Rulemaking, 15 FCC Rcd 5140, 5154-55, paras. 28-31 (March 
6, 2000) (2000 TRS Order) (mandating interstate Spanish-to-Spanish traditional TRS). 
4 STS is a form of TRS that allows persons with speech disabilities to communicate with voice telephone users 
through the use of specially trained 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).  STS is a mandatory service, so that all 
common carriers obligated to provide TRS and all states with a certified state TRS program must offer this service.  
2000 TRS Order, 15 FCC Rcd at 5149, para. 15.
5 Hamilton Relay, Inc. (Hamilton) raised this proposal, which would base the compensation rate paid by the Fund on 
the average of the intrastate TRS rates paid by the states, in its petition for reconsideration of the 2004 TRS Report 
& Order.  Hamilton Relay Service, Inc., Petition for Reconsideration (filed Oct. 1, 2004) (Hamilton Petition). 
Hamilton also raised this issue in its application for review of the 2004 Bureau TRS Rate Order, which adopted the 
compensation rates for the various forms of TRS for the 2004-2005 Fund year.  See Telecommunications Relay 
Services and Speech-to-Speech Services for Individuals with Hearing and Speech Disabilities, CC Docket No. 98-
67, Order, 19 FCC Rcd 12224 (June 30, 2004) (2004 Bureau TRS Rate Order), modified by Telecommunications 
Relay Services and Speech-to Speech Services for Individuals with Hearing and Speech Disabilities, CC Docket No. 
98-67, Order, 19 FCC Rcd 24981 (Dec. 30, 2004) (Modified 2004 Bureau TRS Order).  
6 CTS is a form of TRS generally used by someone who can speak and has some residual hearing.  A special 
telephone displays the text of what the other party is saying, so that the user can simultaneously both listen to what 
is said over the telephone (to the extent possible) and read captions of what the other person is saying.  See 
Telecommunications Relay Services, and Speech-to-Speech Services for Individuals with Hearing and Speech 
Disabilities, CC Docket No. 98-67, Declaratory Ruling, 18 FCC Rcd 16121 (Aug. 1, 2003) (2003 Captioned 
Telephone Declaratory Ruling).  CTS is not a mandatory form of TRS, although that issue is subject to a pending 
petition.  See Telecommunications Relay Services and Speech-to-Speech Services for Individuals with Hearing and 
Speech Disabilities; Internet-based Captioned Telephone Service, CG Docket No. 03-123, Declaratory Ruling, 22
FCC Rcd 379, at 379-80, para. 1 n.3 (Jan. 11, 2007) (2007 IP CTS Declaratory Ruling). 
7 IP CTS is a form of captioned telephone service where the connection carrying the captions between the relay 
provider and the user is via the Internet, rather than the PSTN.  See generally 2007 IP CTS Declaratory Ruling. IP 
CTS is not a mandatory form of TRS, and, pursuant to the 2007 IP CTS Declaratory Ruling, is compensated at the 
IP Relay rate.  Id., 22 FCC Rcd at 390, para. 26.
8 IP Relay is a text-based form of TRS that uses the Internet, rather than the PSTN, for the link of the call between 
the relay user and the CA.  See Provision of Improved Telecommunications Relay Services and Speech-to-Speech 
Services for Individuals with Hearing and Speech Disabilities, CC Docket No. 98-67, Declaratory Ruling and 
Second Further Notice of Proposed Rulemaking, 17 FCC Rcd 7779 (April 22, 2002) (IP Relay Declaratory Ruling).  
IP Relay is not a mandatory form of TRS.  See 2004 TRS Report & Order, 19 FCC Rcd at 12564, paras. 231-32 
(raising issue whether IP Relay should be a mandatory service).
9 VRS is a form of TRS that that enables the VRS user and the CA to communicate via a video link in sign language, 
rather than through text.  VRS presently requires a broadband Internet connection.  See 2000 TRS Order,15 FCC 
Rcd at 5152-54, paras. 21-27 (recognizing VRS as a form of TRS); 47 C.F.R.  64.601(17) (defining VRS).  VRS is 
not a mandatory form of TRS.  See 2004 TRS Report & Order, 19 FCC Rcd at 12567-68, paras. 243-45 (raising 
issue whether VRS should be a mandatory service).
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including financial incentives offered to consumers to make relay calls and the role of the 
Interstate TRS Fund Advisory Council.  
2. In addition, we adopt new compensation rates for these services as follows:
 For interstate traditional TRS, we adopt the MARS plan rate of $1.592 per-minute 
based on the states competitively bid compensation rates for intrastate traditional 
TRS and STS.  This  rate shall be effective for the remainder of the 2007-2008 
Fund year on the first day of the month following the effective date of this Order.10  
 For interstate STS, we adopt a rate of $2.723 per-minute.  This rate is based on the 
MARS plan rate of $1.592, but includes an additional $1.131 per minute in 
compensation that shall be directed for outreach, as set forth below.  This rate shall be 
effective for the remainder of the 2007-2008 Fund year on the first day of the month 
following the effective date of this Order.
 For interstate CTS and interstate and intrastate IP CTS, we adopt the MARS plan rate 
of $1.629 per-minute based on the states competitively bid compensation rates for 
intrastate captioned telephone service.  This rate shall be effective for the remainder 
of the 2007-2008 Fund year on the first day of the month following the effective date 
of this Order.
 For interstate and intrastate IP Relay, we adopt the rate of $1.293.  This rate shall be 
effective for the 2007-2008 through 2009-2010 Fund years, subject to annual 
adjustment as set forth below.
 For interstate and intrastate VRS, we adopt the following rates and tiers: (1) for the 
first 50,000 monthly minutes:  $6.77; (2) for monthly minutes between 50,001 and 
500,000: $6.50; and (3) for monthly minutes above 500,000:  $6.30.  The VRS rates 
shall be effective for the 2007-2008 through 2009-2010 Fund years, subject to annual 
adjustment as set forth below.11
  
10 The effective date of this Order with respect to the 2007-2008 rates adopted pursuant to the new cost recovery 
methodologies is 30 days after publication in the Federal Register.  See infra para. 111. 
11 On June 29, 2007, the Consumer & Governmental Affairs Bureau (CGB) released the 2007-2008 TRS rate order, 
extending the 2006-2007 per-minute rates but adopting a new Fund size and carrier contribution factor.  See 
Telecommunications Relay Services and Speech-to-Speech Services for Individuals with Hearing and Speech 
Disabilities, CG Docket No. 03-123, Order, 22 FCC Rcd 11706 (June 29, 2007) (2007 Bureau TRS Rate Order).   
Although we are adopting new rates for certain services, we do not in this Order amend the Fund size or carrier 
contribution factor.  If necessary, we will make an appropriate adjustment later in the Fund year to account for these 
revised rates, or do so in conjunction with the revised carrier billing that will be necessary as a result of the recent 
order requiring interconnected VoIP providers to contribute to the Fund.  See IP-Enabled Services, WC Docket No. 
04-36, Implementation of Sections 255 and 251(a)(2) of The Communications Act of 1934 , as Enacted by The 
Telecommunications Act of 1996:  Access to Telecommunications Service, Telecommunications Equipment and 
Customer Premises Equipment by Persons with Disabilities, WT Docket No. 96-198, Telecommunications Relay 
Services and Speech-to-Speech Services for Individuals with Hearing and Speech Disabilities, CG Docket No. 03-
123, The Use of N11 Codes and Other Abbreviated Dialing Arrangements, CC Docket No. 92-105, Report and 
Order, 22 FCC Rcd 11275 (June 15, 2007) (Sections 225/255 VoIP Order).
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II. BACKGROUND
A. The Provision and Compensation of TRS
3. The 2006 TRS Cost Recovery FNPRM and prior orders have set forth in detail the 
evolution of TRS and the compensation of providers from the Fund for the various forms of 
TRS, and therefore we do not repeat that history here.12 We note, however, that Congress 
mandated that TRS users cannot be required to pay for the service costs of using TRS.  
Specifically, Congress provided that TRS users cannot be required to pay rates greater than the 
rates paid for functionally equivalent voice communication services with respect to such factors 
as the duration of the call, the time of day, and the distance from point of origination to point of 
termination.13 Therefore, the cost of relay facilities, and the relaying of the calls, cannot be 
passed on to consumers of TRS, since doing so would result in TRS users paying rates greater 
than those for similar voice telephone calls.
4. As a result, Section 225 creates a cost recovery regime whereby providers of TRS 
are compensated for their costs of providing TRS.14 Section 225 provides that the costs caused 
by interstate TRS shall be recovered from all subscribers for every interstate service, and the 
costs caused by the provision of intrastate TRS shall be recovered from the intrastate 
jurisdiction.15 With respect to interstate TRS, contributions are collected from the common 
carriers providing interstate telecommunications services to create the Fund from which eligible 
TRS providers may be compensated.16  
  
12 See 2006 TRS Cost Recovery FNPRM, 21 FCC Rcd at 8381-84, paras. 2-6.  Recent TRS compensation rate orders 
include:  2007 Bureau TRS Rate Order; Telecommunications Relay Services and Speech-to-Speech Services for 
Individuals with Hearing and Speech Disabilities, CG Docket No. 03-123, Order, 21 FCC Rcd 7018 (June 29, 2006) 
(2006 Bureau TRS Rate Order); Telecommunications Relay Services and Speech-to-Speech Services for Individuals 
with Hearing and Speech Disabilities, CG Docket No. 03-123, Order, 20 FCC Rcd 12237 (June 28, 2005) (2005 
TRS Rate Order); 2004 Bureau TRS Rate Order; Telecommunications Relay Services and Speech-to-Speech Services 
for Individuals with Hearing and Speech Disabilities, CC Docket No. 98-67, Order, 18 FCC Rcd 12823 (June 30, 
2003) (2003 Bureau TRS Rate Order).
13 See 47 U.S.C.  225(d)(1)(D); 47 C.F.R.  64.604(c)(4).  
14 47 U.S.C.  225(d)(3).  
15 47 U.S.C.  225(d)(3)(B); see also 47 C.F.R.  64.604(c)(5)(ii).  No specific funding method is required for 
intrastate TRS or state TRS programs.  States generally recover the costs of intrastate TRS either through rate 
adjustments or surcharges assessed on all intrastate end users, and reimburse TRS providers directly for their 
intrastate TRS costs.  Most states presently select one provider to offer TRS within the state.  On an interim basis, 
the costs of providing intrastate VRS, IP Relay, and IP CTS are presently compensated from the Interstate TRS 
Fund.  See 2000 TRS Order, 15 FCC Rcd at 5154, para. 26 (addressing VRS); IP Relay Declaratory Ruling, 17 FCC 
Rcd at 7786, para. 20 (addressing IP Relay); IP CTS Declaratory Ruling, 18 FCC Rcd at 16125, para. 10 (addressing 
IP CTS).  The issue of separation of costs relating to the provision of IP Relay and VRS is pending pursuant to the 
FNPRM in the 2004 TRS Report & Order.  See 2004 TRS Report & Order, 19 FCC Rcd at 12561-65, paras. 221-30 
(IP Relay), 12565-67, paras. 234-42 (VRS).
16 The amount of each carriers contribution is the product of the carriers interstate end-user telecommunications 
revenue and a contribution factor determined annually by the Commission.  47 C.F.R.  64.604(c)(5)(iii).  As noted 
above, interconnected VoIP providers are now also required to contribute to the Fund.  See supra note 11; Sections 
225/255 VoIP Order.
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5. Under the present interstate cost recovery methodology, providers are 
compensated on the basis of a per-minute compensation rate.17 This rate is not a price that is 
charged to, and paid by, a service user, but rather is a settlement mechanism to ensure that 
providers are compensated from the Fund for their reasonable actual costs of providing service.  
Presently, compensation rates are determined annually based on the providers' projected cost and 
minutes of use data for a two-year period.18 This data is submitted to the Fund administrator, 
presently the National Exchange Carrier Association (NECA), which then calculates the average 
per-minute compensation rate for the various forms of TRS and submits 
  
17 Compensation is presently based on per-minute rates adopted each year by the Commission for the following July 
1 to June 30 Fund year.  There are currently four different compensation rates for the different forms of TRS:  
traditional TRS, IP Relay, STS, and VRS.  See 2006 Bureau TRS Rate Order, 21 FCC Rcd at 7024-25, paras. 17-18
(adopting separate rates for traditional TRS and IP Relay).  The traditional TRS rate applies to Spanish Relay service 
and captioned telephone service.  Presently, the IP Relay rate applies to IP CTS.  See 2007 IP CTS Declaratory 
Ruling, 22 FCC Rcd at 390, para. 26. 
18 See 47 C.F.R.  64.604(c)(5)(iii)(C).
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the rates to the Commission for approval.19 The Commission (or Bureau)20 issues a rate order 
each year by June 30, either approving or modifying these rates.21  
6. During the first 10 years of the TRS program, the calculation and adoption of the 
interstate TRS compensation rates was largely uneventful, in large part because, until 2000, there 
was only one compensation rate  the rate for traditional TRS.  That has not been the case, 
however, in more recent years, particularly with respect to VRS.  As a result of the 2000 TRS 
Order, in 2000, the first VRS compensation rate was adopted, $5.143.22 The rate subsequently 
rose to $17.04 per-minute,23 and as a result the number of providers offering this service 
increased.  In more recent years, the Commission disallowed some of the providers submitted 
costs (in particular, profits or mark-ups on expenses) and the VRS rate has been in the six or 
seven dollar per-minute range.24  
7. As a result of the increased use of VRS and its relatively high compensation rate 
(compared to those for the other forms of TRS), the Fund has grown from approximately $40 
million in 2000 to over $550 million for the 2007-2008 Fund year.  Over $430 million of this 
$550 million, or nearly 75 percent, is attributable to VRS.25 As we have noted, carriers offering 
interstate telecommunications services contribute to the Fund, and these costs are generally 
passed on to their consumers.
  
19 See, e.g., NECA, Interstate Telecommunications Relay Services Fund Payment Formula and Fund Size Estimate, 
CG Docket No. 03-123, filed May 1, 2007 (2007 NECA Filing).  The regulations provide that the Fund 
administrator shall administer the Interstate TRS Fund and oversee both the collection of contributions paid into the 
Fund and the compensation of TRS providers from the Fund.  See 47 C.F.R.  64.604(c)(5)(iii).
20 Some rate orders have been at the Commission level, and some have been at the Bureau level.  See supra note 12
(citing orders).
21 Id.; see, e.g., 2006 Bureau TRS Rate Order (most recent order adopting annual per-minute compensation rates 
based on providers projected costs and minutes of use); 2003 Bureau TRS Rate Order, 18 FCC Rcd at 12836, para. 
37 (disallowing certain costs and adopting a modified rate).
22 See generally 2003 Bureau TRS Rate Order, 18 FCC Rcd at 12830, para. 18 n.52 (setting forth history of VRS 
compensation rates).
23 Id.; see also www.neca.org (Resources, then TRS) (chart of the history of all TRS compensation rates).
24 Id.; 2004 Bureau TRS Order, 19 FCC Rcd at 12237-41 paras. 35-46 (addressing cost disallowances and 
challenges to the adoption of the 2004-2005 compensation rates); 2005 TRS Rate Order, 20 FCC Rcd at 12246-48, 
paras. 23-28 (adopting 2005-2006 VRS rate based on median rate of the providers because record reflected that the 
average rate would unfairly penalize most providers and providers cost projections may have been based on various 
levels of service quality); 2006 Bureau TRS Rate Order, 21 FCC Rcd at 7027, paras 28-29 (freezing the 2005-2006 
VRS rate for the 2006-2007 Fund year because, in part, of the providers difficulty in accurately predicting minutes 
of use); 2007 Bureau TRS Rate Order (extending the 2006-2007 rates); 2004 TRS Report & Order, 19 FCC Rcd at 
12537-52, paras. 163-200 (addressing challenges to the 2003-2004 compensation rates, including disallowances for 
profit, engineering costs, and labor costs); 2006 Order on Reconsideration (addressing challenge to 2003-2004 VRS 
role); Telecommunications Relay Services and Speech-to-Speech Services for Individuals with Hearing and Speech 
Disabilities, CG Docket No. 03-123, Memorandum Opinion and Order, 21 FCC Rcd 8063 (July 12, 2006) (2006 
MO&O) (addressing challenge to 2004-2005 TRS rates).
25 2007 Bureau TRS Rate Order, 22 FCC Rcd at 11714, para 27; 2007 NECA Filing at 21 (estimating 65 million 
minutes of use for VRS for the 2007-2008 Fund year).  
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B. The 2006 TRS Cost Recovery FNPRM
8. Because the annual determination of the TRS compensation rates has presented a 
variety of regulatory and administrative challenges under the present methodology, in the 2006
TRS Cost Recovery FNPRM, the Commission sought comment on a range of issues concerning 
the compensation of relay providers from the Fund.26 More particularly, the Commission sought 
comment on four issues:  (1) the adoption of an alternative cost recovery methodology for 
traditional TRS, STS, and IP Relay based, in some fashion, on Hamiltons MARS plan27; (2) the 
adoption of an alternative cost recovery methodology for VRS; (3) whether certain types of costs 
are appropriately compensable from the Fund, and if so, the nature and extent of such costs; and 
(4) the management and administration of the Fund, including ways to combat waste, fraud, and 
abuse.
1. Cost Recovery Methodology for Traditional TRS, STS, and IP Relay
9. The Commission first sought comment on adoption of the MARS plan for 
determining the compensation rate for traditional TRS, as well as for STS and IP Relay.28 As the 
  
26 We note that some comments filed in response to NECAs 2006 and 2007 filings of proposed compensation rates 
for the 2006-2007 Fund year by providers reflect dissatisfaction with the rate setting process, as well as with the 
proposed rates.  See NECA, Interstate Telecommunications Relay Services Fund Payment Formula and Fund Size 
Estimate, CG Docket No. 03-123, filed May 1, 2006 (2006 NECA Filing); 2007 NECA Filing; Sprint Nextel 
Corporation (Sprint Nextel) Comments (May 17, 2006) at 1-2; Communication Services for the Deaf, Inc. (CSD) 
Comments (May 17, 2006) at 6-8; Hamilton Comments (May 17, 2006) at 8-9; Hands On Video Relay Services, 
Inc. (Hands On) Reply Comments (May 24, 2006) at 17; CSD Reply Comments (May 24, 2006); see also 
Telecommunications for the Deaf, Inc., National Association of the Deaf, Deaf and Hard of Hearing Consumer 
Advocacy Network, and California Coalition of Agencies Serving the Deaf and Hard of Hearing (collectively, 
Consumer Groups) Reply Comments (May 24, 2006); TRS Advisory Council Ex Parte comments (July 21, 2006).  
Further, ex parte letters were filed by KPS Consulting on behalf of Ultratec (May 9, 2007); Ruth Milkman on behalf 
of Sorenson (May 11, 2007); Francis Buono on behalf of Sprint Nextel, Sorenson, and Snap!VRS (May 11, 2007); 
KPS Consulting on behalf of Ultratec (May 16, 2007); Ruth Milkman on behalf of Sorenson, Sprint Nextel, and 
Snap! VRS (May 23, 2007); Toni R. Acton on behalf of AT&T (May 23, 2007); Bob Segalman and Rebecca Ladew 
(May 24, 2007); Ruth Milkman on behalf of Sprint Nextel, Sorenson, and Snap!VRS (May 31, 2007); Ruth 
Milkman on behalf of Sprint Nextel, Sorenson, and Snap!VRS (June 1, 2007); Ruth Milkman on behalf of Sprint 
Nextel, Sorenson, and Snap!VRS (June 1, 2007); George L. Lyon, Jr. on behalf of HOVRS (June 5, 2007); KPS 
Consulting on behalf of Ultratec (June 6, 2007); (KPS Consulting on behalf of CSDVRS, HOVRS, GoAmerica, and 
CACDHH-VRS (June 12, 2007); Eliot J. Greenwald on behalf of TDI (June 15, 2007); David A. OConner on 
behalf of Hamilton (June 15, 2007); David A. OConner on behalf of Hamilton (June 15, 2007); Ruth Milkman on 
behalf of Sprint Nextel, Sorenson, and Snap!VRS (June 15, 2007); KPS Consulting on behalf of CSDVRS (June 16, 
2007); Eliot J. Greenwald on behalf of TDI (June 20, 2007); Aileen A. Pisciotta on behalf of Speech 
Communication Assistance by Telephone, Inc. (SCT) (June 22, 2007);  George Lyon, Jr. on behalf of HOVRS (June 
26, 2007); Michael B. Fingerhut filed by Ruth Milkman on behalf of Sprint Nextel, Snap, and Sorenson (June 27, 
2007) (corrected version); George Lyon, Jr. on behalf of HOVRS (July 5, 2007); George Lyon, Jr. Ex Parte on 
behalf of HOVRS (July 11, 2007); Bob Segalman (July 17, 2007); KPS Consulting on behalf of CSDVRS (July 19, 
2007); David A. OConner on behalf of Hamilton (August 10, 2007); Ruth Milkman on behalf of Sprint Nextel, 
Snap, and Sorenson (August 10, 2007).
27 The Commission noted that the compensation rate for traditional TRS applied to captioned telephone service.  
2006 TRS Cost Recovery FNPRM, 21 FCC Rcd at 8387, para. 17 & n.59.  Therefore, the 2006 TRS Cost Recovery 
FNPRM did not expressly address the cost recovery methodology for captioned telephone service.  But see id., 21 
FCC Rcd at 8386, para. 13 (seeking comment on whether the MARS plan should apply to traditional TRS and 
possibly other forms of TRS, such as STS).  Further, at this time, IP CTS had not yet been recognized as a form of 
TRS.
28 Id., 21 FCC Rcd at 8385-88, paras. 9-19. 
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Commission explained, under the MARS plan, the interstate traditional TRS rate would be 
calculated based on a weighted average of the intrastate TRS rates paid by the states.29 The 
Commission sought comment on whether the MARS plan, because it is based on competitively 
bid state rates, would provide for a more efficient provision of service and result in a fairer, more 
reasonable compensation rate.  The Commission also sought comment on various details of how 
the MARS plan might be implemented, including reconciling state compensation rates based on 
session minutes rather than conversation minutes,30 whether any factors might warrant excluding 
a particular states rate from the calculation,31 and whether the individual state rates should be 
weighted by a states total minutes of use, so that states with relatively high rates and low 
minutes of use do not skew the average.32  
10. The Commission also sought comment on the application of the MARS plan to 
STS.33 Because many states compensate intrastate traditional TRS and intrastate STS at the same
rate,34 and NECA recommended that the Commission consider adopting one rate that would 
apply to both STS and traditional TRS,35 the Commission sought comment on whether the same 
rate should apply to both traditional TRS and STS.36 Finally, the Commission sought comment 
on whether the traditional TRS, STS, and IP Relay rate(s) should continue to be set for a one-
year period or whether a longer rate period might be appropriate.37  
2. Cost Recovery Methodology for VRS
11. Although the Commission has sought comment several times on the appropriate 
VRS cost recovery methodology,38 it concluded that because of the continued sharp growth in the 
  
29 Id., 21 FCC Rcd at 8385, para. 9.  In contrast, the present methodology is based on projected cost and demand 
data submitted by the providers.  
30 Id., 21 FCC Rcd at 8387, para. 14.  As the Commission noted, presently the Fund compensates providers for 
conversation minutes (or completed minutes), which are measured by conversation time between the calling and 
called party.  Conversation minutes do not include time for call set-up, ringing, waiting for the called party to 
answer, or call wrap-up, and do not encompass calls that reach a busy signal or are not answered.  Session minutes 
include all the time the CA spends on a call to the relay center, i.e., from the time the call is connected to the CA, 
regardless of whether the called party answers the call.  Id., 21 FCC Rcd at 8385, para. 9 n.41.
31 For example, if a state rate is based on the interstate rate, inclusion of that states rate into the MARS plan would 
be circular.  See id., 21 FCC Rcd at 8387, para. 15.
32 Id., 21 FCC Rcd at 8387, para. 16.
33 Id., 21 FCC Rcd at 8387-88, para. 17 (also noting that STS is a mandatory form of TRS and states compensate 
providers for intrastate STS calls).  The compensation rate for traditional TRS presently also applies to Spanish relay 
and captioned telephone service.
34 See generally 2006 NECA TRS Rate Filing at 17.  
35 Id.
36 2006 TRS Cost Recovery FNPRM, 21 FCC Rcd at 8388, para. 18.
37 Id., 21 FCC Rcd at 8389, para. 23.
38 Id., 21 FCC Rcd at 8389-90, para. 24; see generally 2000 TRS Order, 15 FCC Rcd at 5152-56, paras. 22, 26-27, 
32-33 (directing the TRS Advisory Council to develop cost recovery guidelines for VRS; the Council recommended 
using the same methodology for VRS as used for traditional TRS); Telecommunications Services for Individuals 
with Hearing and Speech Disabilities, Recommended TRS Cost Recovery Guidelines, Request by Hamilton 
Telephone Company for Clarification and Temporary Waivers, CC Docket No. 98-67, Memorandum Opinion and 
Order and Further Notice of Proposed Rulemaking, 16 FCC Rcd 22948, 22958-60, paras. 30-36 (Dec. 21, 2001) 
(continued)
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use of VRS, open issues concerning what costs may appropriately be included in determining the 
compensation rate under the current methodology, and the providers difficulty in accurately 
forecasting demand,39 it was appropriate to seek additional comment on this issue.40 The 
Commission emphasized that it was particularly interested in adopting a methodology that would 
result in more predictability for the providers, and be consistent with the principle that providers 
are entitled to their reasonable actual costs of providing service.41 The Commission therefore 
sought comment on whether modifications should be made to the current methodology, or 
whether a new methodology should be adopted.  The Commission proposed various new 
methodologies, including compensating each provider based on the providers actual, reasonable 
costs, seeking competitive bids,42 or using a true-up based on each providers reasonable actual 
costs.   
12. With respect to use of a true-up, the Commission sought comment on whether 
providers should be required to reimburse the Fund for any amount by which their payments 
exceed reasonable actual costs.43 The Commission also sought comment on whether the VRS 
compensation rate should be set for a two-year period, rather than a one-year period.44
  
(continued from previous page)
(declining to adopt a permanent cost recovery methodology for VRS and seeking additional comment on this issue); 
2004 TRS Report & Order, 19 FCC Rcd at 12487-90, paras. 17-24 (declining to adopt a permanent cost recovery 
methodology for VRS), at 12565-67, paras. 234-40 (FNPRM seeking additional comments and noting that although 
the Commission had previously sought comment on this issue, the relative infancy and unique characteristics of 
VRS made it difficult to determine what the appropriate cost recovery methodology should be).  In response to the 
2004 TRS Report and Orders FNPRM, six VRS providers filed comments.  CSD Comments (Oct. 18, 2004); 
Hamilton Comments (Oct. 18, 2004); Hands On Comments (Oct. 15, 2004); MCI Comments (Oct. 18, 2004); 
Sorenson Comments (Oct. 18, 2004); Sprint Comments (Oct. 18, 2004).  Four providers supported the use of the 
compensation methodology currently in use for VRS and all other forms of TRS.  Commenters generally opposed 
NECAs method of reviewing the providers projected cost and demand data, including the disallowance of certain 
expenses.  See generally 2006 TRS Cost Recovery FNPRM, 21 FCC Rcd at 8390-91, para. 26.
39 Based on its review of the providers filings for the 2006-2007 Fund year, the Commission expressed concern that 
the providers data reflected virtually no growth in the projected use of VRS in 2006 and 2007.  See 2006 Bureau 
TRS Rate Order, 21 FCC Rcd at 7022, para. 11 (citing 2006 NECA Filing at Ex. 1D).  In fact, the use of VRS has 
continued to rapidly rise in the 2006-2007 Fund year:  from 3.2 million minutes in January, to 3.6 million minutes in 
July, to over 4.2 million minutes in December, and to nearly 5.3 million minutes in May 2007.  See 2007 NECA 
Filing; www.neca.org (Resources, then TRS) (monthly reports of minutes of use).   
40 See 2006 TRS Cost Recovery FNPRM, 21 FCC Rcd at 8391, para. 27.  The Commission also noted that since 2004 
the Commission has adopted VRS speed of answer and interoperability requirements, which may affect cost 
recovery issues.  In addition, the Commission noted that it recently permitted entities desiring to offer VRS to be 
certified by the Commission, which it expected would result in new VRS providers offering service, many of which 
will not be traditional telephone companies and therefore may present unique cost issues.  Id.
41 Id., 21 FCC Rcd at 8391, para. 28.
42 Id., 21 FCC Rcd at 8389-92, paras. 24-29.  The Commission noted that many states award contracts for the 
provision of intrastate TRS to a single provider through a competitive bidding process, which, as noted above, is the 
basis for the MARS plan.  Id., 21 FCC Rcd at 8391, para. 28 n.82.
43 The Commission noted that the providers demand forecasts for VRS have generally been significantly lower than 
actual demand, and under the current cost recovery methodology, when demand is underestimated, the 
compensation rate will be higher, resulting in potential overcompensation for actual minutes.  Id., 21 FCC Rcd at 
8392, para. 29.  The Commission also noted that it previously sought comment in 2004 on whether the VRS cost 
recovery methodology should include a true-up.  Id., 21 FCC Rcd at 8392, para. 29 n.83 (seeking comment on 
(continued)
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3. Reasonable Costs Compensable from the Fund
13. The Commission noted that NECAs Data Collection Form sets forth categories 
of costs related to the provision of TRS for which providers may seek compensation.45 The 
Commission sought comment on the nature and extent to which certain types of costs may be 
compensated from the Fund consistent with Section 225, including marketing and outreach 
expenses,46 overhead costs, legal and lobbying expenses, start-up expenses, and executive 
compensation.47
14. The Commission also sought comment on whether provider cost and demand data 
should be made public to make it easier for providers and the public to comment on the 
reasonableness of the rates.48 The Commission noted that it has honored requests by providers 
submitting projected cost and demand data to treat that information as confidential and, as a 
result, the Commission addresses such data only in the aggregate or in some other way that does 
not reveal the individual data of a particular provider.49 The Commission also recognized that 
this approach makes it is difficult for providers and the public (including carriers providing 
interstate telecommunications services that pay into the Fund) to comment on the reasonableness 
of the rates.50 As a result, the Commission sought comment on whether the providers projected 
(and/or actual) cost and demand data, or particular categories of the cost and demand data, 
should be made public, and on other ways to make the rate setting process more transparent.51  
4. Management and Administration of the Fund
15. Finally, the Commission sought comment on the steps it might take to ensure the 
integrity of the Fund and that compensation is paid consistent with the statute.  Specifically, the 
Commission sought comment on the oversight of the Fund administrator, the oversight of the 
providers, and ways to deter waste, fraud, and abuse.52 The Commission emphasized that it 
  
(continued from previous page)
whether VRS might be compensated by a lump sum payment or periodic payments of estimated actual costs with a 
true-up at the end of the fund year (quoting 2004 TRS Report & Order, 19 FCC Rcd at 12565-66, para. 236)).
44 The Commission also sought comment on whether the VRS compensation rate should be set for a two-year or 
longer period, rather than a one-year period.  Id., 21 FCC Rcd at 8392, paras. 30.
45 See 2006 NECA Filing at Appendix A.
46 In the 2006 NECA Filing, marketing/advertising was described as [e]xpenses associated with promoting TRS 
services within the community.  Outreach was described as [e]xpenses of programs to educate the public on 
TRS. See id.
47 See 2006 TRS Cost Recovery FNPRM, 21 FCC Rcd at 8393-97, paras. 33-42.  The Data Collection Form 
explicitly includes some of these cost categories, and implicitly includes others.  See generally 2006 NECA Filing at 
Appendix A.
48 2006 TRS Cost Recovery FNPRM, 21 FCC Rcd. at 8397, paras. 43-44.
49 Id., 21 FCC Rcd at 8397, para. 43 (citing 2004 Bureau TRS Order, 19 FCC Rcd at 12232, para. 18 n.57); see also 
47 C.F.R.  64.604(c)(5)(iii)(I) (generally providing that Fund administrator shall keep all data confidential).  
50 2006 TRS Cost Recovery FNPRM, 21 FCC Rcd at 8397, para. 43.
51 Id., 21 FCC Rcd at 8397, para. 44.
52 Id., 21 FCC Rcd at 8398-99, paras. 45-49.
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sought to ensure that with the number of providers and number of minutes of use continuing to 
increase, particularly with respect to VRS and IP Relay, the Fund compensates providers only for 
legitimate minutes of use provided in compliance with the mandatory minimum standards, and 
that the compensation rates are based on accurate demand and cost data.53
III. REPORT AND ORDER
A. TRS Cost Recovery Methodologies 
1. The Cost Recovery Methodology for Interstate Traditional TRS, 
Interstate STS, Interstate CTS, and IP CTS  the MARS Plan
a. Adoption of the MARS Plan 
16. As discussed more fully below, we adopt a cost recovery methodology for 
interstate traditional TRS, interstate STS, interstate CTS, and interstate and intrastate IP CTS 
based on the MARS plan  i.e., a weighted average of competitively bid state rates.  We believe 
that this approach will simplify the rate setting process and result in more predictable, fair, and 
reasonable rates.  We will calculate one MARS rate applicable to both interstate traditional TRS 
and interstate STS based on state rates for intrastate TRS and STS (which are generally the 
same); we will adopt a separate MARS rate for interstate captioned telephone service and IP 
CTS based on state rates for intrastate captioned telephone service.     
17. Presently, the compensation rates are based on a weighted average of the 
providers projected minutes of use of the service, and their projected costs of providing these 
minutes, for a future two-year period.54 This methodology has several inherent drawbacks.  First, 
the resulting rate is only as accurate as the providers projected minutes of use and costs.  
Providers have an inherent incentive to submit higher, rather than lower, costs to ensure the 
compensation rate is as high as possible to cover their costs and presumably make a profit.55 For 
the same reason, they have an incentive to underestimate minutes of use.56 We also recognize 
that, under the present cost recovery methodology, the resulting rates do not correlate precisely 
to any of the providers actual costs.  
18. We believe the MARS plan, because it is based on competitively bid state rates, 
produces a rate that better approximates providers reasonable costs, and therefore promotes the 
efficient recovery of all costs.  Further, the MARS plan eliminates the costs, burdens, and 
uncertainties associated with evaluating, correcting, and re-evaluating provider data.57
  
53 Id., 21 FCC Rcd at 8399, para. 49.
54 In other words, the determination of the rate for the July 1, 2007, to June 30, 2008, Fund year is based on the 
providers projected minutes of use and costs for calendar years 2007 and 2008.
55 This is true even though, when actually offering service, providers have an incentive to minimize their costs, since 
presently they are compensated at the weighted average national rate regardless of their actual costs and therefore, in 
effect, earn profit on the difference between their actual costs and the compensation rate.
56 See supra note 39 (noting that the providers filings for the 2006-2007 Fund year reflected virtually no growth in 
the projected minutes of use of VRS, but in fact VRS minutes have continued to grow rapidly).
57 See Hamilton Comments at 6-7.  In this regard, we will no longer require traditional TRS, STS, CTS, and IP 
CTS providers to file the annual cost and demand data reports with the Fund administrator, as they have in the past.  
They will, however, have to file data related to state traditional TRS and STS rates, as discussed below.  
Federal Communications Commission FCC 07-186
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19. Most commenting providers support using the MARS plan as the cost recovery 
methodology for at least some forms of TRS.58 Hamilton, the proponent of the plan, states that 
the MARS plan is easy to implement, offers regulatory certainty, and more closely approximates 
providers reasonable costs than the current rate methodology or any other methodology 
suggested in the 2006 TRS Cost Recovery FNPRM.59 Hamilton further asserts that detailed cost 
calculations for categories such as marketing, outreach, legal costs, lobbying costs, executive 
compensation, and overhead costs would be unnecessary under the MARS plan, because the plan 
relies on competitively based state rates.60 Hamilton explains that because the Commission 
certifies each state's TRS program, the individual state TRS programs costs are presumptively 
reasonable and should be deemed not to include extraneous costs.61 Hamilton also notes that 
the MARS plan accounts for states with low TRS rates as well as those with high TRS rates, and 
that an average of those competitive rates will result in a reasonable, competitively-based 
interstate TRS rate.62 Hamilton further asserts that the MARS plan can be used for traditional 
TRS, STS, IP Relay and possibly captioned telephone service.63  
20. Verizon and AT&T support the MARS plan for traditional TRS, but not for STS, 
IP Relay, or VRS because there are no market-based rates for these services.64 Verizon asserts 
that, for traditional TRS, setting an interstate rate based on a weighted average of intrastate rates 
will yield an accurate, market-driven rate sufficient to cover provider costs while encouraging 
efficiency.65 AT&T asserts that [t]he competitive bidding process necessarily encourages 
providers to minimize costs and increase productivity.66 Ultratec supports the MARS plan for 
captioned telephone service, but states that the rate should be based on state captioned telephone 
rates rather than state traditional TRS rates.67
  
58 In addition to Hamilton, commenters supporting the MARS plan include Hands On, Verizon, AT&T, and 
Ultratec.  See, e.g., Hands On Comments at 4-9 (supporting MARS plan for traditional TRS, STS, and IP Relay, but 
not VRS); Verizon Comments at 7 (supporting MARS plan only for traditional TRS); AT&T Reply Comments at 2 
(supporting MARS plan only for traditional TRS); Ultratec Reply Comments at 1-2 (supporting MARS plan for 
captioned telephone service).  
59 Hamilton Comments at 2.  Verizon notes that the relatively large number of competitors and the considerable 
number of bidding opportunities provide the Commission with a wealth of information about the appropriate 
competitive rates for providing traditional TRS in specific, competitive state markets.  Verizon Comments at 3; see 
also Hamilton Reply Comments at 2 (noting Verizons comments).
60 Hamilton Comments at 7.  
61 Hamilton Ex Parte (Feb. 12, 2007) at 1.
62 Id.
63 See generally Hamilton Comments at 2-8; see also Hamilton Reply Comments at 4-9.
64 See Verizon Comments at 1-8; see also AT&T Reply Comments at 3 (stating that it supports Verizons approach, 
but also that it could support the MARS plan for IP Relay).  Hamilton asserts, however, that the MARS rate can 
apply to IP Relay and STS because the costs are virtually the same as traditional TRS.  See Hamilton Reply 
Comments at 2.
65 Verizon Comments at i.
66 AT&T Reply Comments at 2.
67 Ultratec Reply Comments at 2 (noting that [t]he market-driven, competitively based rate that would come out of 
this process would be both reasonable and meet the telecommunications needs of consumers, because it will draw on 
the expertise and analyses of all the states providing [captioned telephone service]); see also Hamilton Reply 
(continued)
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21. We disagree with Sprint Nextels opposition to the MARS plan for traditional 
TRS and STS.68 Sprint Nextel asserts that the MARS plan would create new burdens and 
uncertainties, including developing and applying appropriate weighting factors and ensuring that 
call minutes are treated consistently.69 As outlined below, we do not believe that this will be the 
case; in any event, particular facets of the MARS can be adjusted in future years if necessary.  
Sprint Nextel also argues that rates based on state rates  even competitively bid state rates 
may not be based on efficient costs.70 Although it is possible that some individual state rates 
may be relatively high because of inefficiencies or specific state requirements, we anticipate that 
the overall effect of any such rates on the final MARS rate will be minimal because of the large 
number of state rates (some relatively high, some relatively low) that will be averaged together.71  
Sprint Nextel further argues that there is no certainty that the MARS plan will lead to lower 
rates.72 Our mandate, however, is not to achieve any particular rate level, but to ensure that the 
rates correlate to actual reasonable costs and that the process of determining the rates is fair, 
efficient, and predictable.73
22. Sprint Nextel also asserts that the Commission does not have the authority to 
implement the MARS plan because it constitutes a delegation of the Commissions 
responsibilities under Section 225 to the states.74 Sprint Nextel asserts that if the MARS plan is 
viewed as a delegation to the states of the Commissions responsibility under Section 225 to set 
interstate TRS compensation rates, it would be beyond the Commissions authority to adopt, 
citing USTA v. FCC .75 Hamilton disagrees, asserting that the adoption of the MARS plan would 
not be a delegation of authority to the states.  Hamilton argues that under the MARS plan, the 
Commission would gather information about competitively-bid rates at the state level.  The 
Commission would then use that information to calculate the interstate TRS rate.76
  
(continued from previous page)
Comments at 7 (a separate MARS rate can be calculated for captioned telephone service because states generally 
contract separately for that service); Sprint Nextel Mar. 13, 2007 Ex Parte (although opposing the MARS plan, 
arguing that if it is adopted, a separate MARS rate for captioned telephone service should be adopted).
68 See Sprint Nextel Comments at 7-8.  See generally Sorenson Comments at 58-59 (opposing MARS plan for VRS 
and IP Relay because there is no state data for these services upon which to base a rate).  CSD, the Joint Consumers, 
the Joint Providers, and the FL PSC do not address the MARS plan.   
69 Sprint Nextel Comments at 8; see also Sprint Nextel Mar. 13, 2007 Ex Parte.    
70 Sprint Nextel Comments at 8 (asserting, for example, that if a state insists that the provider open a relay center in 
the state so as to create jobs for its citizens rather than allow the provider to handle the states TRS traffic at a 
regional center located outside of the state, costs may be higher).
71 See Verizon Comments at 5.
72 Sprint Nextel Comments at 8.  Hamilton states that the Commissions obligation is to ensure that providers are 
compensated for their reasonable costs, not to guarantee that relay rates are lowered over the long run.  Hamilton 
Reply Comments at 3.  Hamilton also asserts that if a providers price submission is not based on efficient cost data, 
that provider likely will not be the successful bidder.  Id. at 4.  
73 See Hamilton Reply Comments at 3-4.
74 Sprint Nextel Comments at 7 n.7.      
75 Id. (citing USTA v. FCC, 359 F.3d 554 (D.C. Cir.), cert. denied, 125 S. Ct. 316 (2004)).
76 Hamilton Reply Comments at 3.    
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23. We agree with Hamilton and do not believe that using the MARS plan to 
determine TRS compensation rates paid by the Fund delegates to the states the Commissions 
responsibility to set TRS rates.  Under the MARS plan, the Commission simply gathers existing 
data from the states, and uses that data, along with other data, to determine the interstate 
compensation rate under its own rate methodology.77 This action is therefore distinguishable 
from that in USTA v. FCC cited by Sprint Nextel, where the court found that the Commission 
delegated to an outside party (a state) a responsibility given the Commission by statute.  When 
the Commission uses the MARS plan to determine TRS compensation rates, the Commission has 
retained, and is exercising, its responsibility to adopt TRS compensation rates.78
24. Finally, Sprint Nextel asserts that a price-cap plan should be implemented for 
all forms of TRS, while the Joint Providers assert that price-cap plan should be implemented for 
VRS and IP Relay.79 Under this approach, a fixed compensation rate would apply for a specified 
period of time for each form of TRS compensated by the Fund.  This rate would then be 
adjusted, upward based on the Gross Domestic Product  Price Index (GDP-PI) and 
downward by a productivity factor.80 Sprint Nextel argues that this approach eliminate[s] the 
discretion afforded NECA and the Commission to 
  
77 See id.; see also infra paras. 26-38, addressing the implementation of the MARS plan.
78 Indeed, the court in USTA v. FCC, addressing the Commissions delegation to the states of the determination of 
which network elements shall be available to competitive local exchange companies on an unbundled basis, 
reasoned that when authority is delegated to an outside party, lines of accountability may blur, undermining an 
important democratic check on government decision-making.  USTA v. FCC, 359 F.3d at 565.  Under the MARS 
plan, the Commission remains fully responsible for the adoption of the rates.
79 See Joint Provider Comments at 3-13, Sprint Nextel Comments at 5-7.  We also address price caps below.  See 
infra paras. 42-43, 50-52. 
80 Sprint Nextel Comments at 6.  Sprint asserts that such a formula would assure that the cap would be reduced 
each year during the initial three year period.  Id. at 7. 
Federal Communications Commission FCC 07-186
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disallow costs reported by providers without conducting the necessary cost studies to determine 
whether such costs were reasonably incurred.81  
25. For forms of TRS for which state rates are available, we believe the MARS plan 
is a better approach for determining the interstate compensation rate for the same service.  As we 
have noted, under the TRS regime the compensation rate is not a price that is charged to, and 
paid by, a service user, but rather is a settlement mechanism to ensure that providers are 
compensated from the Fund for their actual reasonable costs of providing service.  The MARS 
plan uses an average of competitively bid state rates as a measure of those reasonable costs.  It 
also eliminates the need to review and possibly disallow costs reported by providers.  Under 
price caps, we would have to determine an initial rate that accurately reflects providers 
historical, actual, reasonable costs.  The best measure of these costs, where available, is the 
compensation rates by states for the same, albeit intrastate, service. 82  Therefore, for those 
services for which there are competitively bid state rates, we believe the MARS plan is superior 
to price caps.
b. Calculation of the MARS Plan Rate for Interstate Traditional 
TRS and Interstate STS
26. We set forth below how the MARS plan rate for interstate traditional TRS and 
interstate STS will be calculated.  First, the MARS plan rate will be calculated annually by the 
Fund administrator,83 and filed with the Commission by May 1st of each year.  Although we 
sought comment on whether the rate period should be longer than one year to create more 
predictability for the providers,84 we will continue to adopt new rates on an annual basis, as 
under the MARS plan there should be less variation in the rates from year to year.  If that proves 
not to be the case, we will revisit whether the rate should be set for a longer period of time.  
Second, the rate will be based on intrastate traditional TRS and STS data for each state for the 
prior calendar year.  In addition, because some states compensate a much larger number of 
minutes than others, we will calculate a weighted average rate by dividing total state dollars paid 
by total conversation minutes.  Further, in calculating total state dollars (the numerator), we will 
make adjustments that reflect that fact that some state rates are based on session minutes, and 
some state rates are based on conversation minutes.  The calculations will also take into 
consideration the fact that some states may compensate intrastate traditional TRS and intrastate 
STS at different rates, and that for some states the contractual per-minute compensation rate does 
not include all of the costs paid by the state to the provider for the relay service.85 Finally, we 
  
81 Id. at 5-6.  Sprint Nextel also argues that customers and carriers that pay into the Fund would benefit from the 
realized efficiencies of the price-caps through the application of a formula to determine prices for a three-year 
period. Id. at 5-7.
82 See infra paras. 50-52 for a more extensive discussion of price cap proposals in the context of a VRS cost 
recovery methodology.
83 For the Fund year that begins July 1, 2007, the MARS plan rate may be calculated by the Commission in 
conjunction with the Fund administrator upon the effective date of this Order.  
84 See generally 2006 TRS Cost Recovery FNPRM, 21 FCC Rcd at 8389, para. 23.
85 See Sprint Nextel Ex Parte (March 13, 2007) (asserting that if the Commission adopts the MARS plan, the 
calculation should include all of the rate elements paid by a state for TRS service, including any monthly recurring 
charges [MRCs] paid by a state to cover non-traffic sensitive rates incurred by the TRS provider).
Federal Communications Commission FCC 07-186
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will monitor implementation of the MARS plan and, if necessary, take further steps to ensure 
that the MARS rate compensates providers for their reasonable costs of providing service.86
27. As described more fully below, the determination of the rate by the Fund 
administrator will include the following steps:  (1) the collection of intrastate traditional TRS and 
STS compensation rate data from the states and the providers for the prior calendar year, and the 
determination of whether any states data will be excluded from the calculation; (2) the 
calculation of each states total dollars paid for intrastate traditional TRS and STS services 
during the applicable period; and (3) the calculation of the final rate by dividing the total dollars 
paid by all states by the total conversation minutes of all states.87 The proposed MARS rate and 
a description of how it was calculated will be placed on public notice.  By June 30th, the 
Commission will release an order adopting the compensation rate for the following July 1st to 
June 30th Fund year.  
28. Collection of State Data.  Each January,88 the Fund administrator will request that 
each state TRS administrator file with the Commission the following information related to the 
provision and compensation of intrastate traditional TRS and STS in the state for the previous 
calendar year:  (1) the per-minute compensation rate(s) for intrastate traditional TRS and STS; 
(2) whether the rate applies to session minutes or conversation minutes89; (3) the number of 
intrastate session minutes for traditional TRS90 and STS; and (4) the number of intrastate 
conversation minutes for traditional TRS and STS.91 If the contractual per-minute compensation 
rate does not include all of the costs paid by the state to the provider for the relay service, the 
state should also list other amounts paid to the provider during the relevant calendar year.  
Because some states that compensate intrastate minutes based on session time may not have data 
indicating the number of intrastate conversation minutes, the Fund administrator will also request 
that each provider of interstate traditional TRS and STS file with the Commission the same data
noted above.92 The Commission or Fund administrator will also ask each state and provider to 
  
86 Sprint Nextel has also stated that if the MARS plan is adopted, it should provide for adjustment mid Fund year to 
reflect changes in state rates.  Ex Parte letter filed by Francis M. Buono on behalf of Sprint Nextel, Sorenson, and 
Snap!VRS (May 11, 2007).  We decline to adopt this approach but, as noted, will monitor the MARS rate as well as 
changes to state rates to determine if such an adjustment procedure should be adopted in the future.
87 We note that an allowance for working capital to the rate is unnecessary because, as Hamilton notes, working 
capital is already built into the various state rates that underlie the MARS rate.  Hamilton Ex Parte (Feb. 12, 2007)
at 1.
88 We intend to use the January timeframe beginning in January 2008 with respect to the 2008-2009 Fund year (and 
the collection of calendar 2007 data).  We have already collected the relevant data from the states and providers for 
the 2007-2008 Fund year.  
89 See supra note 30, addressing session and conversation minutes.  Conversation minutes are a subset of 
session minutes.
90 References to traditional TRS include Spanish-to-Spanish traditional TRS.
91 If a state compensates intrastate traditional TRS and STS at the same rate, total session and conversation for 
minutes for these services may be reported together.  If STS is compensated at a different rate, the state should set 
forth the number of session and conversation minutes for traditional TRS and the number of session and 
conversation minutes for STS.
92 See 47 C.F.R.  64.604(c)(5)(iii)(C) (requiring providers to submit to the Fund administrator true and adequate 
data necessary to determine TRS Fund revenue requirements and payments, including total TRS minutes of use, 
(continued)
Federal Communications Commission FCC 07-186
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indicate what information should be considered confidential; as discussed below, the specifics of 
such information will not be publicly released.93  
29. We understand that some states enter into multi-year contracts for the provision of 
intrastate traditional TRS and/or STS that may or may not conform to calendar years.94  
Therefore, if the intrastate compensation rate(s) paid by a state for these services changed during 
the calendar year, or the provider changed, the state and the providers should list each rate 
separately and indicate the time period in which each rate was effective, whether the rate applied 
to session or conversation minutes, and the amount of conversation and session minutes 
associated with each period.  In this way, each rate will be proportionally factored into the 
ultimate MARS rate.  In addition, we recognize that some states data may have to be excluded 
for the MARS rate calculation.  For example, if a states intrastate rate is based on the interstate 
rate, that rate will not be used in the MARS calculation.95 Although there may be other reasons 
to exclude a particular states data, which we will address on a case by case basis, we agree that 
we should not generally exclude a states data simply because it may be based on additional 
requirements in the state contract.  Our rules contemplate that state programs may include 
standards that exceed the TRS mandatory minimum standards, and require that in such cases the 
state show that its program is nevertheless consistent with Section 225 and the regulations.96  
Moreover, as noted above, averaging nearly 50 state rates will necessarily include some that are 
relatively low and some that are relatively high.97
30. Calculating Total State Costs.  Using the above-listed data collected from the 
states and the providers, the Fund administrator will multiply each states TRS rate by the 
number of either intrastate session minutes or intrastate conversation minutes, whichever the 
  
(continued from previous page)
total interstate TRS minutes, total TRS operating expenses, ... total TRS investment, ... and other historical or 
projected information reasonably requested by the administrator for purposes of computing payments and revenue 
requirements); Hamilton Ex Parte (Feb. 12, 2007) at 2 (noting that the Commission can obtain this information 
from both the states and the providers).   
93 See Appendix B for sample template for this data to be obtained from the states.  
94 See Hamilton Comments at 6 (Hamilton is aware of about seven states that change per-minute rates annually).
95 See id. at 4; Hamilton Reply Comments at 2-3.  Presently we are aware of only one state (California) that may fall 
into this category.
96 See 47 C.F.R.  64.605(b).  We expect that the number of states whose data is excluded from the MARS 
calculation will be very small.
97 See Hamilton Ex Parte (Feb. 12, 2007) at 1 (asserting that state TRS rates are presumptively reasonable, and that 
the MARS plan is beneficial in that it accounts for states with low TRS rates as well as those with high TRS rates, 
and that an average of those competitive rates will result in a reasonable, competitively-based interstate TRS rate).  
Federal Communications Commission FCC 07-186
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state rate is based upon.98 The total dollar amount for each state will then be totaled.  This 
number becomes the numerator in the final calculation that determines the rate.99  
31. Final Calculation of the Rate.  To determine the final MARS rate to be applied to 
interstate conversation minutes, the total dollar amount for all the states (including costs not 
reflected in the rate) is divided by the total intrastate traditional TRS and STS conversation 
minutes for all the states (even if some states do not base their rate on conversation minutes).100  
This proposed MARS rate, and a description of how it was calculated, will be placed on public 
notice.  By June 30th, the Commission (or Bureau) will adopt the final compensation rate for the 
Fund year.
32. Under this approach, we do not need to calculate a conversation factor to 
conform session minutes to conversation minutes.  Because we are calculating an interstate rate 
that will be applied to conversation minutes, for states that compensate conversation minutes we 
simply multiply the number of conversation minutes by the state rate, and include that amount in 
the numerator.101 For states that compensate session minutes, however, because the session time 
for a relay call will be longer than the conversation time, rates paid for session minutes are 
generally lower than rates paid for conversation minutes.  Therefore, to avoid artificially 
reducing the MARS rate, for such states the state rate is multiplied by the larger number of 
session minutes, and that total is included in the numerator.102 In short, because each states 
dollar amount that is reflected in the numerator (i.e., total dollars of all states) is based on each 
states compensation rate multiplied by either total session or conversation minutes, depending 
on the basis for the state rate, under this approach the resulting MARS rate takes into account the 
inherent difference between state rates based on session minutes and state rates based on 
conversation minutes.103  
33. Similarly, the weighting of each states rate in comparison to the other states 
rates is built into the calculation.  States with a larger number of minutes will constitute a 
proportionately larger amount of both the numerator (total state dollars paid) and the 
denominator (total conversation minutes) in calculating the MARS rate.  Further, each states 
practice with regard to the rounding of call minutes  e.g., to the nearest second or to the 
  
98 In other words, if the state pays the provider based on session minutes, then the state rate is multiplied by session 
minutes; if the state pays the provider based on conversation minutes, then the state rate is multiplied by 
conversation minutes.  As a practical matter, the TRS rates paid for session minutes are lower than that rates paid for 
conversation minutes because, for any particular call, the session minute time is greater than the conversation minute 
time.  If the state has a separate rate for intrastate STS, the STS minutes will not be included with the traditional 
TRS minutes, but will separately be multiplied by the STS rate.  See Appendix B.
99 See Appendix C for sample calculation of this data.
100 See Appendix D for sample calculation of the final rate.
101 See Hamilton Reply Comments at 5-6; Hamilton Ex Parte (Feb. 12, 2007) at 2-3.
102 See Hamilton Reply Comments at 5-6; Hamilton Ex Parte (Feb. 12, 2007) at 2-3.
103 In its initial comments, Hamilton proposed using a conversation factor to conform state rates that are based on 
session minutes to rates based on conversation minutes.  Hamilton Comments at 3-4.  In its Reply Comments, 
however, Hamilton explained that this would not be necessary if each states total number of intrastate minutes is 
multiplied by that states intrastate rate.  Hamilton Reply Comments at 5-6; see also Hamilton Ex Parte (Feb. 12, 
2007) at 2-3 (explaining that a conversion factor is unnecessary).
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nearest minute  is not relevant because we can reasonably assume that bidders will adjust their 
proposed compensation rate to the states rounding practice.104  
34. Finally, although historically we have calculated a separate compensation rate for 
interstate STS calls based on the providers projected costs and minutes of use for that service,105
as noted above we adopt a single MARS rate that will apply to both traditional TRS and STS 
based on the state intrastate rates and minutes of use for both services.  Because the states 
generally compensate intrastate traditional TRS and STS calls at the same rate, and generally the 
same providers offer these services, we believe that, absent some unusual circumstances or 
specific needs of providers or consumers of one of the services, the Fund should be 
compensating interstate STS calls at the same rate.106
35. In sum, we believe that the MARS plan will simplify the determination of the 
annual compensation rate for interstate traditional TRS and interstate STS and result in a rate that 
reflects the reasonable costs of providing service based on the rates states pay through 
competitive bidding for the same, albeit intrastate, service.107  In addition, for those services to 
which it applies, the MARS plan also avoids the necessity of detailed analysis (and possible 
disallowance) of the projected cost and demand data for each provider, as such data will no 
  
104 For example, if the state rounds all calls to the nearest minute, a provider can expect to be compensated for a 
larger number of minutes, and therefore will adjust its bid accordingly.  In other words, projected volume will affect 
the proposed rate.
105 See www.neca.org (Resources, then TRS) (chart of the history of all TRS compensation rates).  We note that 
average monthly interstate STS minutes have recently ranged between 14,000 and 17,000, compared to over one 
million for traditional TRS.  See NECA TRS Fund Performance Status Report, Funding Year July 2006  June 
2007, available at www.neca.org (Resources, then TRS).
106 Between 2001 and 2004, the compensation rate for STS was significantly higher than the traditional TRS 
compensation rate.  See 2006 Bureau TRS Rate Order, 21 FCC Rcd at 7021, para. 7 n.32 ([s]ince its inception, the 
compensation rate for STS has ranged from $1.596 to $4.263 per-minute); see also 2004 Bureau TRS Order, 19 
FCC Rcd at 12232-12233, para. 21 n.63 (history of STS compensation rates).  More recently, the rates have become 
much closer.  For the 2006-2007 Fund year, the STS rate was $1.409 and the traditional TRS rate was $1.291.  See 
also 2007 Bureau TRS Rate Order (extending the 2006-2007 rates to the 2007-2008 Fund year).  However, NECA 
reports that based on the providers projected cost and demand data, with disallowances, the 2007-2008 STS rate 
would be $3.26 (compared to a similarly calculated traditional TRS rate of $1.69).  2007 NECA Filing at 12, 18.  
Notwithstanding this recent data suggesting a greater disparity between the providers traditional TRS and STS 
costs, we believe that, as a general matter, because states compensate these services at the same rate, use of the 
MARS plan requires that the same interstate rate apply to these services.  See generally Hamilton Comments at 4 
(Most states compensate traditional TRS and STS services at the same rate.); Hamilton Ex Parte (Feb. 12, 2007) 
at 3 (noting 18 state RFPs of which it is aware that apply the same rate to traditional TRS and IP Relay).  Also, the 
Fund administrator and the Interstate TRS Advisory Council have supported compensating these services at the 
same rate.  See 2006 NECA Filing at 17 & n.32; Hamilton Ex Parte (Feb. 12, 2007) at 3.  As we have noted, the 
calculation of the MARS rate will take into consideration the fact that a particular state has separate rates for 
traditional TRS and STS.  At the same time, in a particular Fund year unusual circumstances may require the 
Commission to make adjustments to the MARS rate of the one of these services.
107 We recognize that the number of bidders for a particular state contract may affect the ultimate state rate, and that 
if there are only a few bidders for a contract the resulting state rate may be higher than it would be if there were 
more bidders.  We believe that this issue will be self-correcting over time.   In any event, we will revisit this issue in 
the future to determine whether there are a sufficient number of bidders for state TRS contracts to ensure that 
particular state rates are not artificially high and that application of the MARS plan to interstate services results in 
reasonable rates.
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longer be required to be filed by the providers of these services. 108 To the extent future or 
unforeseen circumstances suggest that the MARS rate is not fair and reasonable, we can make 
adjustments as appropriate.  Our objective is to ensure that services are provided efficiently and 
that providers are compensated for their reasonable actual costs of doing so.  We believe that the 
MARS plan fulfills that goal.109
c. Calculation of the MARS Plan Rate for Interstate CTS and IP 
CTS
36. We also will use the MARS plan to calculate a separate compensation rate for 
interstate CTS and interstate and intrastate IP CTS.  In the 2003 Captioned Telephone 
Declaratory Ruling, the Commission concluded that interstate CTS calls would be compensated 
at the same rate as traditional TRS calls.110 Hamilton asserts, however, that a separate 
compensation rate for CTS calls can be calculated under the MARS analysis because those states 
that have contracted for this service pay a separate rate.111 Although Sprint Nextel generally 
opposes the MARS plan, it maintains that if the MARS plan is adopted, a separate MARS rate 
should be calculated for CTS.112 Ultratec, which addresses only 
  
108 See supra note 57.
109 As noted above, states may request that their data be treated as confidential.  At the same time, we recognize that 
there is a strong public interest in making the basis for the compensation rate as transparent as possible.  For this 
reason, as Hamilton suggests, we will disclose the total intrastate conversation minutes and the total intrastate TRS 
dollars (the numerator and denominator in the MARS calculation, respectively) and the rate derived thereby.  See 
Hamilton Ex Parte (Feb. 12, 2007) at 2.  We will also disclose all of the state rates, and whether they are based on 
session or conversation minutes, in a random order and without identifying the particular states.  In this way, the 
public will be advised of critical aspects of the rate calculation, but the confidentiality of individual state rates and 
minutes of use will be maintained.  See id.
110 See 2003 Captioned Telephone Declaratory Ruling, 18 FCC Rcd at 16128, para. 22.
111 Hamilton Reply Comments at 7-8.
112 Sprint Nextel Mar. 13, 2007 Ex Parte; Ex Parte filed by Francis Buono (May 11, 2007) at 3.
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CTS, supports the MARS plan for this service, and asserts that the rate should be based on state 
CTS rates rather than state traditional TRS rates.113  
37. We agree that because we are adopting the MARS plan for traditional TRS and 
STS, and there are separate state rates for intrastate CTS, a separate MARS rate should be 
calculated for this service.  Accordingly, we will also request that state administrators and 
interstate CTS providers file with Commission the information set forth in paragraph 28 above as 
applied to the provision of intrastate CTS, as requested by the Fund administrator.  The 
calculation of the CTS MARS rate will be consistent with the analysis set forth above and in the 
examples set forth in Appendices B, C, and D.
38. With respect to IP CTS, although the 2007 IP CTS Declaratory Ruling concluded 
that IP CTS calls would be compensated at the same rate as IP Relay calls,114 we now conclude 
that IP CTS should be compensated at the same rate as CTS.115 IP CTS is a new service without 
cost history and, upon further examination, we believe that the cost recovery rate for CTS will 
more accurately reflect the reasonable actual costs of providing IP CTS.  As a result, we will 
compensate IP CTS at the CTS MARS rate.116
2. The Cost Recovery Methodology for IP Relay
39. From its inception in 2002 through the 2004-2005 Fund year, IP Relay was 
compensated at the same rate as interstate traditional TRS.117 In the 2005 TRS Rate Order, the 
Commission, for the first time, adopted a separate rate for IP Relay.118 The Commission 
explained that because the providers cost and demand data indicated that IP Relay costs were 
approximately 11 percent less that traditional TRS costs, it was not appropriate to use the same 
rate for both services.119 The Commission adopted a rate of $1.278 for IP Relay, and $1.440 for 
traditional TRS, for the 2005-2006 Fund year.120 The following year, the Commission also 
adopted separate rates, but the difference in the rates was two-tenths of one cent ($1.291 for 
traditional TRS and $1.293 for IP Relay).121
  
113 Ultratec Reply Comments at 2  (noting that [t]he market-driven, competitively based rate that would come out 
of this process would be both reasonable and meet the telecommunications needs of consumers, because it will draw 
on the expertise and analyses of all the states providing [captioned telephone service]).
114 See 2007 IP CTS Declaratory Ruling, 22 FCC Rcd at 390, para. 26.
115 See generally Comments of Ultratec, Inc. on NECA proposed Compensation Rates for July 2007 Through June 
2008, CC Docket No. 03-123 (May 9, 2007) (asserting that IP CTS should not be compensated at the IP Relay rate).  
116 Because we are adopting the MARS plan for CTS and IP CTS, providers of these services will no longer be 
required to file annual cost and demand data submissions with the Fund administrator, although they will have to file 
other MARS-related data as requested by the Fund administrator.  See supra note 57.
117 See 2004 Bureau TRS Rate Order, 19 FCC Rcd at 12230-31, para. 17 n.54; IP Relay Declaratory Ruling, 17 FCC 
Rcd at 7786, para. 22 (noting that the record reflected that IP Relay and traditional TRS calls exhibited very similar 
cost and demand characteristics).
118 2005 TRS Rate Order, 20 FCC Rcd at 12243-45, paras. 16-20.
119 Id., 20 FCC Rcd at 12244, para. 20 (nothing that, as a result of the cost differential, if a combined rate was 
applied IP Relay providers would be overcompensated, and traditional TRS providers would be undercompensated).
120 See id., 20 FCC Rcd at 12237, para 1.
121 2006 Bureau TRS Rate Order, 21 FCC Rcd at 7018-19, para. 1.
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40. Because all IP Relay calls are presently compensated from the Fund, there are no 
state IP Relay rates to which the MARS analysis can be applied directly.  Hamilton asserts, 
however, that because the costs associated with providing IP Relay and traditional TRS are 
essentially the same, the traditional TRS MARS rate should also be applied to IP Relay.122  
Verizon does not support the MARS plan for IP Relay, because they argue, there are no market-
based rates for that service.123 AT&T, however, states that it could support the MARS plan for 
IP Relay because it uses the same CAs and equipment to provide IP Relay and traditional TRS, 
and therefore its cost in providing these two services is not materially different.124  
41. We conclude that the MARS methodology, as proposed, is not appropriate for IP 
Relay because there are no state rates for this service.  Although we believe that the costs of 
providing traditional TRS and IP Relay are generally similar  in many instances, for example, 
the same CAs, sitting at the same offices, handle both traditional TRS and IP Relay calls  we 
are also concerned that that use of the MARS rate for IP Relay may result in the 
overcompensation of IP Relay providers.125 As a result, we conclude that we will continue to 
calculate a separate compensation rate for IP Relay.
42. In their comments, the Joint Providers suggest implementing a price cap plan for 
regulating IP Relay rates.126 The plan is based on the price cap plan implemented for incumbent 
LECs.127  Under the plan, the compensation rate be set for a period of three years, during which 
time the rates would be adjusted upward annually for inflation (according to a pre-defined 
inflation factor) and downward to account for efficiency gains (according to a factor also set at 
the outset of price caps).128  The Joint Providers assert that this approach would have at least 
three benefits:  (1) it would create incentives for providers to lower costs; (3) the three year time 
frame gives providers predictability about revenue to allocate money to programs that will 
reduce costs in the future; and (3) it simplifies the rate setting process, saving time and 
money.129 Sprint Nextel also emphasizes that under price caps, providers would focus on 
increasing efficiencies to accommodate decreasing rates.130
  
122 Hamilton Comments at 4-5; Hamilton Reply Comments at 7.  Hamilton also views the 2005-2006 Fund year 
differential as an aberration.  Hamilton Comments at 5.
123 See Verizon Comments at 1.
124 AT&T Reply Comments at 3.
125 The 2007 NECA Filing indicates a widening gap between the costs of service for traditional TRS and IP Relay.  
For 2007-2008, the providers projected costs and minutes of use for traditional TRS, after disallowances, result in a 
per-minute rate of $1.69.  For IP Relay, the same calculation results in a rate of $1.16.  2007 NECA Filing at 12, 16.  
In addition, there may be some inherent cost differentials between the provision of traditional TRS and the provision 
of IP Relay, e.g., IP Relay providers likely save on interconnection fees.  
126 See Joint Provider Comments at 3-13.  Joint Providers proposed this methodology for both VRS and IP Relay.  
As discussed below, we decline to adopt this methodology for VRS.
127 See Joint Provider Comments at 2.
128 See id.
129 Id. at 2-3.
130 Sprint Comments at 6.
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43. We adopt a price cap plan for IP Relay based on the Joint Providers proposal.131  
As a general matter, the price cap plan applies three factors to a base rate  an Inflation Factor, 
an Efficiency (or X) Factor, and Exogenous Costs.132 The basic formula takes a base rate and 
multiplies it a factor that reflects an increase due to inflation, offset by a decrease due to 
efficiencies.  The Inflation Factor will be the Gross Domestic Product  Price Index (GDP-
PI)).133 The Efficiency Factor will be set as a figure equal to the Inflation Factor, less 0.5 percent 
(or 0.005) to account for productivity gains.134 As a result the rate for a particular year will equal 
the rate for the previous year, reduced by 0.5 percent (i.e., RateYear Y = RateYear Y-1 (1  0.005)).135  
Reducing the rate by this amount will encourage IP Relay providers to become more efficient in 
providing the service.136
44. We will also adjust the rate, as necessary, due to exogenous costs, i.e., those costs 
beyond the control of the IP Relay providers that are not reflected in the inflation adjustment.137  
Therefore, to the extend the Commission adopts new service requirements, we will determine 
whether the costs of meeting the new requirements warrant an upward exogenous adjustment.  
45. In addition, we believe that the three-year rate period for IP Relay, as set forth in 
the Joint Providers Comments, is a reasonable approach.138  The first rate period will be the 
2007-2008 Fund year, and the rates will continue, with the annual adjustment for productivity 
gains, through the 2009-2010 Fund Year.  After that time, we will reassess what the base rate 
should be for the next three year period.  We note that commenters assert that a multi-year rate 
provides consistency that is necessary for planning and budgeting purposes, and avoids having to 
possibly adjust on short notice to a lower rate.139 We conclude that the IP Relay rates should be 
adopted for a three-year period.140  
46. Finally, we do not believe it is necessary to adopt tiered rates for IP Relay, as we 
do below for VRS.  First, there is not the same size disparity among IP Relay providers as there 
is with the VRS providers.  Second, the IP Relay rates have been much lower than the VRS rates, 
  
131 See Joint Provider Comments at 3-13.
132 Id. at 6-11.
133 Id. at 6-7.
134 Id. at 7-10.
135 Id. at 10.
136 Id. at 7.
137 Id. at 10-11.
138 Id. at 4.  
139 See id. at 4; Sprint Comments at 4.
140 We do not believe it is necessary to amend our rules in this regard.  The current regulations provide that the 
payment formulas and revenue requirements shall be filed with the Commission on May 1 of each year, to be 
effective the following July 1.  47 C.F.R.  64.604(c)(5)(iii)(H).  The Fund administrators annual May 1st filing 
must still address all the payment formulas (i.e., cost recovery methodologies) mandated by the Commission, the 
resulting rates that they have calculated for each form of TRS under those methodologies that will be effective in the 
upcoming Fund year, and the Fund size and carrier contribution factor that results from those rates and the Fund 
administrators projected demand for each service.    
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and have not varied significantly over time.  Therefore, we believe that a single IP Relay rate, 
subject to price caps, is appropriate for IP Relay.141  
3. The Cost Recovery Methodology for VRS
47. We conclude that we will continue to base the VRS rate on the providers 
projected costs and minutes of use, and other data submitted to the Fund administrator by the 
providers, subject to appropriate review and, where necessary, disallowances.  However, we will 
no longer apply a single weighted average rate to all providers.  Instead, we will adopt tiered 
rates based on the monthly minutes 
  
141 Providers of IP Relay will still be required to file annual cost and demand data with the Fund administrator, as 
they have in the past.  We believe that this information, which includes actual costs for prior years, will be helpful in 
reviewing the compensation rates resulting from price caps and whether they reasonable correlate with projected 
costs and prior actual costs.  We will also need this information to evaluate the new base rate every three years.
Federal Communications Commission FCC 07-186
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of use provided.  These rates will be set for a three-year period, and be reduced annually by 0.05 
percent to reflect productivity gains.  They may also be subject to other adjustment as provided 
below.142  
48. In the 2006 TRS Cost Recovery FNPRM, the Commission sought comment on 
whether modifications should be made to the current cost recovery methodology for VRS, or 
whether there is a methodology other than the current compensation scheme that is more 
appropriate.  The Commission expressed concern, based on comparisons of VRS providers cost 
and demand projections with their actual historical data, that some VRS providers have received 
compensation significantly in excess of their actual costs.143 The Commission also observed that 
providers demand forecasts for VRS generally have been lower than actual demand, resulting in 
overcompensation to providers for completed minutes under the current per-minute cost recovery 
scheme.144  
49. In addition, the provision of TRS under the ADA is intended to give persons with 
hearing and speech disabilities access to nations telephone network so that they can call voice 
telephone users, and vice versa.145 We have also explained that because Title IV places the 
obligation on carriers providing voice telephone service to also offer TRS to, in effect, remedy 
the discriminatory effects of a telephone system inaccessible to persons with disabilities, the 
costs of providing TRS are really just another cost of doing business generally, i.e.,of providing 
voice telephone service.146 As a result, the Commission concluded that the reasonable costs 
of providing service for which providers are entitled to compensation do not include profit or a 
mark-up on expenses.147 Providers are entitled to their reasonable costs of providing service
consistent with the mandatory minimum standards, as well as an 11.25% rate of return on capital 
investment so that they are not left to finance reasonable capital investments out of pocket.148
  
142 See generally Joint Provider Comments at 2-13; Sorenson Comments at 27-40; Hands On Comments at 36-37; 
Sprint Nextel Comments at 5-7 (supporting price caps for all forms of TRS, including VRS and IP Relay).  Aside 
from Sorenson, Hands On, and Sprint Nextel, the Joint Providers also include CAC, CSD, GoAmerica, and SNAP.  
143 2006 TRS Cost Recovery FNPRM, 21 FCC Rcd at 8392, para. 29.  This concern is confirmed by a review of the 
providers more recently filed actual (or annualized actual) costs and minutes of use contained in their cost data 
submission for the 2007-2008 Fund year.  Because of our confidentiality rules, we address matters relevant to the 
providers cost and demand only in the aggregate.  See 47 C.F.R.  64.604(c)(5)(iii)(I).
144 2006 TRS Cost Recovery FNPRM, 21 FCC Rcd at 8392, para. 29.  The fact that at least some VRS providers 
have been overcompensated is reflected in the 2007 NECA Filing, which indicates that in 2006 VRS providers 
actual cost of providing service (based on providers actual costs, without any disallowances, and actual minutes 
billed) was $4.5568 per-minute  almost one-third less than the rate paid of $6.644 per-minute.  2007 NECA Filing 
at Ex. 1-4b.
145 See, e.g., 2004 TRS Report & Order, 19 FCC Rcd at 12479-80, para. 3.
146 Id., 19 FCC Rcd at 12543, para. 179.  
147 Id., 19 FCC Rcd at 12542-45, paras. 177-82.  The Commission found that the providers average mark-up of 
27.2% was inconsistent with the intent of the statutorily mandated TRS cost recovery scheme and plainly not 
cost-based.  Id., 19 FCC Rcd at 12545, para. 182.
148 Id., 19 FCC Rcd at 12544-45, para. 182.
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50. Many commenters support a cost recovery methodology for VRS that is based on 
price caps, with an initial rate of the present $6.644.149 The Joint Providers, for example, assert 
that the initial rate should be the present rate of $6.644, and that the price cap methodology 
would include a price indexing formula to account for inflation, productivity gains, and 
additional costs, as described above.150 They further assert that the productivity factor (or X-
factor) should be established in a manner that takes advantage of incentives to become more 
efficient and also ensures that cost savings from efficiency gains are shared with contributors to 
the fund; Sorenson specifically suggests following the price cap indices used for the local 
exchange companies (LECs).151 Sorenson asserts that a price cap approach is appropriate 
because providers do not compete on price, and therefore it would create incentives to innovate 
and lower costs.152 Hands On asserts that the use of price caps will provide a simple and stable 
means to calculate rates.153
51. Commenters suggest that price caps should remain in effect for a minimum of 
three years.154 Commenters argue that stable pricing will give providers the opportunity to 
budget their costs more effectively, and provide enough stability to make long-term investments 
and allocate money to programs that will reduce costs in the future.155 Joint Providers suggest 
that the price cap must be adjusted to account for the capital-intensive nature of the telephone 
industry as opposed to the labor-intensive nature of VRS and IP Relay.156  
  
149 See generally Joint Provider Comments at 2-13; Sorenson Comments at 27-40; Hands On Comments at 36-37; 
Sprint Nextel Comments at 5-7 (supporting price caps for all forms of TRS, including VRS and IP Relay).  Aside 
from Sorenson, Hands On, and Sprint Nextel, the Joint Providers also include CAC, CSD, GoAmerica, and SNAP.  
See supra note 82.  Verizon proposes a similar plan that would set a base rate for three years, subject to annual 
adjustment to account for inflation and exogenous costs.  Verizon Comments at 7-8; see also Verizon Reply 
Comments at 2.  AT&T opposes the Joint Providers proposal, but views Verizons proposal as a more reasoned 
approach.  AT&T Reply Comments at 5.  As noted below, in subsequent ex parte meetings some providers favored 
a tiered rate approach.  In addition, Sprint Nextel, Snap, and Sorenson jointly submitted a proposal they would be 
willing to support if a tiered rate methodology were adopted.  See Michael B. Fingerhut Ex Parte (June 27, 2007).
150 See paras. 42-43, supra; Joint Providers Comments at 11; see also Sorenson Comments at 27-29, 38.  Verizon 
suggests that the initial rate should be $7.01.  Verizon Comments at 9 n.19.  
151 See Joint Providers Comments at 3-5.  According to Sorenson, the price cap indices used for the LECs have three 
main components:  (1) a measure of the previous years inflation; (2) a measure that reflects the extent to which the 
annual productivity gains of the telephone industry are expected to exceed the annual productivity gains of the 
economy as a whole; and (3) a provision for exogenous cost changes- principally changes in costs that are beyond 
the telephone companys control, such as a cost increase caused by a change in FCC regulations.  Sorenson 
Comments at 30.  Hamilton argues, however, that the X-factor proposed may not reflect actual cost trends in the 
industry.  Hamilton Reply Comments at 9.  Hamilton urges the Commission to further consider the reasonableness 
of all VRS costs.  Id. at 11.
152 Sorenson Comments at 27.
153 See, e.g., Hands On Comments at 36.  Hands On also asserts that, the primary merit in that methodology is that 
it encourages providers to limit costs and to improve efficiency while avoiding excessive expenditure of public and 
private resources in making rate determinations.  Id. at 36-37.
154 See Sorenson Comments at 27-28; Joint Providers Comments at 2.
155 See Hands On Comments at 36; Sorenson Comments at 27.
156 See Joint Providers Comments at 5-6.  Joint Providers also suggest that the Commission should conduct a review 
every three years addressing:  (1) whether the price cap plan is promoting the achievement of statutory goals for 
each service; (2) whether there has been an increase in the number of VRS minutes provided, the number of 
(continued)
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52. We decline to adopt the price cap methodology as proposed.  Instead, in order to 
compensate VRS providers in a manner that best reflects the financial situation of all providers, 
we will adopt tiered rates for VRS based on the providers projected costs and minutes of use, 
and other data submitted to the Fund administrator by the providers, subject to appropriate 
review and, where necessary, disallowances.  The tiers will be based on the monthly minutes of 
use provided.  We believe that doing so may more appropriately reflect the financial situation of 
all providers.  Presently there are eleven VRS providers, and these providers are not similarly 
situated with respect to their market share and their costs of providing service.157 For several 
years now, one provider has a dominant market share, and thus this individual providers 
projected minutes and costs largely determine the rate.158 The record reflects, however, that 
providers with a relatively small number of minutes generally have higher per-minute costs.159  
53. In light of these different per-minute costs, we conclude that we will adopt tiered 
VRS compensation rates based upon call volume, measured by monthly minutes of use 
submitted to the Fund administrator for payment.  We further conclude that, at least initially, 
there will be three compensation rate tiers.  These tiers are intended to reflect likely cost 
differentials between small providers (including new entrants); mid-level providers who are 
established but who do not hold a dominant market share; and large, dominant providers who are 
in the best position to achieve cost synergies.  As a general matter, the three-tiered approach is 
based on market data reflecting the number of monthly minutes submitted to NECA by the 
various providers.  The data reflects that the newer providers generally provide less than 100,000 
minutes per month; that other, more established providers (with the exception of the dominant 
provider) generally provide monthly minutes ranging in the low hundreds of thousands; and that 
the dominant provider provides minutes ranging in the millions.  We therefore believe that using 
three tiers is appropriate to ensure both that, in furtherance of promoting competition, the newer 
providers will cover their costs, and the larger and more established providers are not 
overcompensated due to economies of scale.       
54. By adopting a tiered approach, providers that handle a relatively small amount of 
minutes and therefore have relatively higher per-minute costs will receive compensation on a 
monthly basis that likely more accurately correlates to their actual costs.  Conversely, providers 
that handle a larger number of minutes, and therefore have lower per-minute costs, will also 
receive compensation on a monthly basis that likely more accurately correlates to their actual 
  
(continued from previous page)
interpreters, and the impact of these factors on interpreter training; (3) the net entry or exit of providers; (4) and 
changes in quality levels.  Id. at 12-13.
157 See www.neca.org (Resources, then TRS, then).  Some of these providers were companies that offer voice 
telephone service and offered TRS, and VRS, since their inception (e.g., Sprint, Hamilton).  Others are not 
traditional telephone companies, but have now been offering VRS service for some time (e.g., Hands On, Sorenson).  
Finally, there are a number of VRS providers certified under the Commissions 2005 certification rules, some of 
which are have either only recently begun to offer service or only provide a relatively small number of minutes.  
158 Cf. 2005 TRS Rate Order, 20 FCC Rcd at 12246, para. 23 (noting that the proposed VRS rate appeared to be 
driven by the cost and demand data of one provider). 
159 See CSDVRS Ex Parte (Apr. 5, 2007) (as a VRS provider gets larger, it can operate its service more efficiently 
by taking advantage of operating efficiencies[, which] allows larger VRS providers to have a lower cost per-minute 
cost than smaller VRS providers).  
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costs.  Furthermore, we conclude that under the tiered approach, all providers would be 
compensated on a cascading basis, such that providers would be compensated at the same rate 
for the minutes falling within a specific tier.  In other words, all providers will be compensated at 
the highest rate for those minutes falling within the first tier; at the middle rate for those minutes 
falling within the middle tier, and at the lower rate for all additional minutes.160
55. The record reflects support for the adoption of tiered rates.  Several providers 
support the following proposal (for ease of reference, we refer to this proposal as the VRS Tiered 
Proposal)161:
 For the first 50,000 monthly minutes of use, which would generally encompass newer 
providers offering a relatively small number of minutes, the rate would be based on 
the providers projected costs and minutes of use: $6.77.162  
 For monthly minutes of us between 50,001 and 500,000, which would generally 
encompass established but non-dominant providers, the rate would be based on the 
$6.77 rate noted above, less marketing (as reflected in the 2007 NECA Filing163) and 
certain undisputed cost disallowances164:  the resulting rate is $6.50.  
 For monthly minutes of use above 500,000, which would generally encompass 
providers with a large number of minutes, the rate would be $6.30.165  
The VRS Tiered Proposal also provides that each of the rates would be reduced annually by 0.05 
percent, and that the providers would have the ability to seek exogenous cost adjustments if new 
costs were imposed that are beyond the providers control.166  
  
160 We note that several VRS providers have filed comments addressing the use of tiered rates for VRS.  See 
CSDVRS Ex Parte (April 4, 2007); CSDVRS Ex Parte (April 5, 2007) (attaching  Proposal for a 3-Year Variable 
Tiered Rate Methodology); Hands On Comments to NECAs May 1, 2007 TRS rate filing, CG Docket No. 03-123 
(May 15, 2007); CSDVRS Comments to NECAs May 1, 2007 TRS rate filing, CG Docket No. 03-123 (May 16, 
2007); CSDVRS, Hands On, CAC, and GoAmerica Ex Parte (May 16, 2007); Hands On Reply Comments to 
NECAs May 1, 2007 TRS rate filing, CG Docket No. 03-123 at 5-6; Healinc Reply Comments to NECAs May 1, 
2007 TRS rate filing, CG Docket No. 03-123 at 3-4; CSDVRS, Hands On, CAC, and GoAmerica Ex Parte (June 12, 
2007); George Lyon, Jr. Ex Parte on behalf of HOVRS (June 26, 2007); Michael B. Fingerhut Ex Parte filed by 
Ruth Milkman on behalf of Sprint Nextel, Snap, and Sorenson (June 27, 2007) (corrected version); George Lyon, Jr. 
Ex Parte on behalf of HOVRS (July 5, 2007); George Lyon, Jr. Ex Parte on behalf of HOVRS (July 11, 2007); KPS 
Consulting Ex Parte on behalf of CSDVRS (July 19, 2007); David OConner Ex Parte on behalf of Hamilton 
(August 10, 2007); Ruth Milkman Ex Parte on behalf of Sprint Nextel, Snap, and Sorenson (August 10, 2007); TRS 
Advisory Council Ex Parte Comments (September 6, 2007); Karen Peltz Strauss Ex Parte (September 21, 2007); 
George Lyon, Jr. Ex Parte on behalf of HOVRS (September 25, 2007); Ruth Milkman Ex Parte on behalf of Sprint 
Nextel, Snap, and Sorenson (October 2, 2007); George Lyon, Jr. Ex Parte on behalf of HOVRS (October 9, 2007); 
Francis Buono Ex Parte on behalf of Sprint Nextel, Snap, and Sorenson (October 15, 2007); Ruth Milkman Ex Parte
on behalf of Sprint Nextel, Snap, and Sorenson (October 23, 2007).
161 See Michael B. Fingerhut Ex Parte (June 27, 2007).
162 See 2007 NECA Filing at Ex. 1-4b.  
163 Id.
164 See Michael B. Fingerhut Ex Parte (June 27, 2007).
165 Id. 
166 Id. 
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56. We conclude that we will adopt tiered VRS rates based on monthly minutes of 
use, and that initially there will be three tiers.  We also conclude that we will set the tiers, and the 
rate for each tier, for a three year period.  We note that in the 2006 TRS Cost Recovery FNPRM, 
the Commission sought comment of whether the VRS rate should be set for a two-year, rather 
than a one-year, period.167 As noted above, however, the providers price cap proposal and 
related comments propose a three-year rate period for VRS.168 Commenters assert that a multi-
year rate provides consistency that is necessary for planning and budgeting purposes, and avoids 
having to possibly adjust on short notice to a lower rate.169 We agree, and therefore conclude 
that the VRS tiers and rates will be adopted for a three-year period.  We also will reduce the rates 
annually by 0.05 percent, and permit the providers to seek exogenous cost adjustments if new 
costs are imposed that are beyond the providers control.  The annual downward 
  
167 2006 TRS Cost Recovery FNPRM, 21 FCC Rcd at 8392, para. 30.  
168 See para. 51, supra; see also See Michael B. Fingerhut Ex Parte (June 27, 2007) (proposing setting rates for 
three-year period).
169 See, e.g., Hands On Comments at 37.
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adjustment for productivity gains will reduce Fund expenditures and encourage VRS providers to 
gain efficiencies in providing service.170  
B. The TRS Compensation Rates for the 2007-2008 Under the New Cost 
Recovery Methodologies 
1. Interstate Traditional TRS and Interstate STS
57. The 2007-2008 compensation rate for interstate traditional TRS and interstate 
STS calculated under the MARS plan is $1.592 per-minute.  This rate of $1.592 shall apply to 
traditional TRS beginning on the first day of the month following the effective date of this
Order. 171 With respect to STS, however, because we are concerned that outreach efforts directed 
at the STS community have not been effective, for the 2007-2008 Fund year we will add an 
additional amount of $1.131 per minute to the MARS-based STS compensation rate.  The 
resulting rate is $2.723.  This additional sum paid to each provider must be directed toward 
outreach efforts directed at the STS community, as set forth below. 
58. As discussed above, the MARS rate is based on calendar 2006 intrastate TRS and 
STS data from 49 states and Puerto Rico; Michigan was excluded because they do not 
compensate the providers based on a per-minute rate.  The rate from each state, and whether it is 
based on conversation minutes or session minutes, is set forth in Appendix E (rates are listed 
from lowest to highest).  All states compensated traditional TRS and STS at the same rate. To 
determine the MARS rate, total dollars (calculated by multiplying each states per-minute rate by 
either session or conversation minutes, whichever the rate is based on) are divided by the total 
number of intrastate TRS and STS conversation minutes.   That calculation is:  $100,738,030 
divided by 63,275,205, which equals $1.592.172
59. We note that the MARS rate of $1.592 represents an increase of $0.301 
(approximately 23 percent) from the 2006-2007 rate ($1.291) for traditional TRS.  Although this 
rate is less than the proposed rates set forth in the 2007 NECA Filing, which range from $1.687 
to $1.735 (including both marketing and outreach),173 we recognize that there is upward pressure 
on the traditional TRS rate because of declining demand, and expect that in future years the 
MARS rate may be higher to reflect higher rates paid under more recently adopted state 
contracts.  In any event, because, as discussed above, the MARS rate is based on competitively 
bid state rates, we believe that it is reasonable.  
  
170 Providers of VRS and, as noted above, IP Relay, will still be required to file annual cost data with the Fund 
administrator, as they have in the past.  We believe that this information, which includes actual costs for prior years, 
will be helpful in reviewing the reasonableness of rates adopted for each tier, and whether they reasonable correlate 
with projected costs and prior actual costs.  We will also need this information to evaluate rates every three years.
171 As noted below, the effective date of this Order with respect to the 2007-2008 rates adopted pursuant to the new 
cost recovery methodologies is 30 days after publication in the Federal Register.  See infra para. 111.
172 As noted above, we do not include an allowance for working capital because that factor is built into the state 
rates. See supra note 87.
173 See 2007 NECA Filing at Ex. 1-1b.  We note, however, that the MARS rate of $1.592 is close to the rate 
submitted by NECA that is based on adjusted provider costs, less marketing (but including outreach), a rate of 
$1.635.  Id.  
Federal Communications Commission FCC 07-186
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60. We also note that the MARS rate of $1.592 (unadjusted for outreach) would 
represent an increase in the STS rate of $0.183 (approximately 13 percent).  We recognized that
this rate is less than the proposed rates in the 2007 NECA Filing, which range from $2.605 to 
$3.455 (including both marketing and outreach).174 Because of the relatively small volume of 
STS calls (less than 20,000 minutes were month), historically there has been a greater range in 
the providers projections of the STS rate.175 Again, we anticipate that the MARS rate will 
increase when it is recalculated in future years.  In any event, because for the present Fund year
we are increasing the MARS rate for STS by including additional sums for outreach, the 
resulting 2007-2008 rate falls within the range of rates proposed in the NECA filing.  
61. For STS, in addition to the MARS rate, we will also provide an additional 
amount, on a per-minute basis, for the STS providers to conduct outreach.  Consumers have 
expressed concern that present outreach efforts have not been sufficient to reach the potential 
pool of STS users.176 STS consumers assert, for example, that only a few thousand persons seem 
to be aware of, and use, STS, out of a much larger pool of potential users.177  Also, NECA 
monthly reports reflect that there has been virtually no growth in the use of STS over past year 
and a half.178  We agree that potential STS users are not being made aware of this important 
service.  For this reason, for the 2007-2008 Fund year will add an additional amount of $1.131
per minute to the STS compensation rate calculated under the MARS plan.179  This amount 
represents the difference between the STS MARS rate and the STS rate based on 2006 actual 
costs, adjusted for inflation ($2.723), as reflected in the Fund administrators May 2007 filing.180  
We require that this additional sum be used by the providers specifically for outreach. We also 
require that STS providers file a report annually with NECA and the Commission on their 
specific outreach efforts directly attributable to the additional support for STS outreach. We will 
revisit this issue in future Fund years to determine if, again, additional amounts may be 
necessary for STS outreach.  
2. Interstate CTS and Interstate and Intrastate IP CTS
62. The 2007-2008 compensation rate for interstate CTS and IP CTS, as calculated 
under the MARS plan, is $1.629 per minute.  This rate shall apply beginning on the first day of 
the month following the effective date of this Order.  
  
174 See 2007 NECA Filing at Ex. 1-3b.    
175 See, e.g., 2004 Bureau TRS Order, 19 FCC Rcd at 12233, para. 22; 2005 TRS Rate Order, 20 FCC Rcd at 12239-
40, para. 6.
176 See Bob Segalman Ex Parte (July 5, 2007); Bob Segalman Ex Parte (July 17, 2007); Bob Segalman Ex Parte 
(July 30, 2007).
177 See supra note 176.  In this regard, we note that monthly minutes of STS use recently average approximately 
15,000 minutes.  See www.neca.org (Resources, then TRS).
178 See www.neca.org (Resources, then TRS) (for example, in January 2006 monthly minutes of STS use totaled 
14,349; in December 2006 there were 16,430 minutes of use; and in June 2007 there were 16,000 minutes of use).
179 Because interstate STS minutes average approximately 15,000 minutes per month, the additional sum of $1.131 
per minutes will result in an additional cost to the Fund of approximately $100,000 for the 2007-2008 Fund year 
(based on the effective date of the new rates).  
180 See 2007 NECA Filing at Ex. 1-3b.     
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63. This rate is based on calendar 2006 intrastate captioned telephone service data 
from the 39 states that provided this service in 2006.  The rate from each state, and whether it is 
based on conversation minutes or session minutes, is set forth in Appendix F (rates are listed 
from lowest to highest).  
64. As set forth above, to determine the MARS rate, total dollars (calculated by 
multiplying each states per-minute captioned telephone service rate by either session or 
conversation minutes, whichever the rate is based on) are divided by the total number of 
intrastate captioned telephone service conversation minutes.  That calculation is:  $15,867,338 
divided by 9,739,138, which equals $1.629.  
Federal Communications Commission FCC 07-186
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Again, we do not include an allowance for working capital because that factor is built into the 
state rates.181
65. We note that previously interstate captioned telephone service was compensated 
at the same rate as interstate traditional TRS, and that the IP CTS rate was the same as the IP 
Relay rate.182 The MARS rate of $1.629 represents an increase of $0.338 (approximately 26
percent) from the 2006-2007 traditional TRS rate ($1.291) applied to captioned telephone 
service, and an increase of $0.336 (approximately 26 percent) from the 2006-2007 IP Relay rate 
($1.293) applied to IP CTS.  
3. IP Relay
66. We conclude that the initial rate for intrastate and interstate IP Relay under the 
price caps methodology described above shall be the present compensation rate of $1.293 per 
minute.183 This will be the base compensation rate that applies for the 2007-2008 through the 
2009-2010 Fund years. As noted above, we will adjust this rate downward in future years by 0.5 
percent to reflect efficiencies.  NECA presented IP Relay rates ranging between $1.16 and $1.28, 
the latter reflecting both 2006 actual costs adjusted for inflation and a rate based on providers 
projected minutes of use and costs, unadjusted.184  We believe that the current rate reasonably 
compensates providers based on the cost data and the rates proposed by NECA.  Further, 
because, for the first time, we are adopting a rate for a three-year period, we believe that this 
approach will add additional stability and predictability to the IP Relay rates.  In sum, we will 
continue the current rate of $1.293 for the remainder of the 2007-2008 Fund year, and use it as 
the base rate for the price caps methodology over the first three year period.  
4. VRS
67. As noted above, we adopt a tiered rate methodology for the compensation rates 
for interstate and intrastate VRS.  After reviewing the comments in the record, as well as cost 
and market data received from NECA, we agree with the VRS Tiered Proposal.  Therefore, for 
the 2007-2008 Fund year, effective on the first day of the month following the effective date of 
this Order, we adopt three tiers and respective rates, as follows:  (1) for the first 50,000 monthly 
minutes:  $6.77; (2) for monthly minutes between 50,001 and 500,000185:  $6.50; and (3) for 
monthly minutes above 500,000:  $6.30.  Under this approach, all providers are compensated at 
  
181 See supra note 87.
182 See supra note 17.
183 We note that this rate includes the 1.4 percent rate of return for an allowance for working capital, and therefore 
we do not further adjust this rate in this regard.  In addition, although NECA has suggested increasing this rate to 1.6 
percent, we need not address this issue because, we conclude, the rates adopted in this Order include this allowance.  
See 2007 Bureau TRS Rate Order, 22 FCC Rcd at 11708, para. 5 n.12.
184 See 2007 NECA Filing at Ex. 1-2b.  
185 We note that, subsequent to the filing of the VRS Tiered Proposal, other providers suggested modifications to 
this proposal, including having the second tier extend to 1,000,000 minutes. See George Lyon, Jr. on behalf of 
HOVRS (July 11, 2007) (suggesting that the second tier run from 50,001 to 1,000,000 (rather than to 500,000), and 
noting that other providers concur with the proposed modification).  Given that available market data shows that 
more established providers have monthly minutes in the low hundreds of thousands, a middle tier that is capped at 
500,000 minutes is reasonable.  
Federal Communications Commission FCC 07-186
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the highest rate for their first 50,000 minutes, at the middle rate for their minutes between 50,001 
and 1,000,000, and at the lower rate for all minutes above 1,000,000.  In this way, all providers 
are compensated at the same rate for the same number of minutes.186 These tiers and rates shall 
apply through the 2009-2010 Fund year, as addressed below.
68. We base these tiers on market data reflecting the number of monthly minutes 
submitted to NECA by the various providers.  The data reflects that the newer providers 
generally provide less than 50,000 minutes of month; that other, more established providers 
(with the exception of the dominant provider) provide monthly minutes ranging in the low 
hundreds of thousands; and that the dominant provider provides minutes ranging in the millions.  
We believe that these tiers are appropriate to ensure that, in furtherance of promoting 
competition, the newer providers will cover their costs, and the larger and more established 
providers will not be overcompensated.  The number and size of the tiers will be reevaluated 
every three years.   
69. For the 2007-2008 Fund year, we base the rates for each tier on the following 
factors.  First, for newer providers offering a relatively small number of minutes, we believe that 
it is appropriate to base the rate on the providers projected costs and minutes of use.  As 
NECAs filing reflects, the rate based on the providers projected demand and cost data, without 
any disallowances, is $6.77.187 We believe that this rate fairly reflects the actual reasonable costs 
of the newer or smaller providers offering VRS in compliance with all non-waived mandatory 
minimum standards.  
70. Second, for the middle tier, which would generally apply to established but non-
dominant providers, we believe it is appropriate to base the rate on the $6.77 rate noted above, 
less marketing (as reflected in the 2007 NECA Filing188) and certain undisputed cost 
disallowances.189 The resulting rate is $6.50.  
71. Finally, for providers with a large number of minutes have generally been 
providing service for a number of years and, as noted above, have economies of scale that result 
in lower per-minute costs,190 we adopt a rate of $6.30.  We believe this rate will encourage 
providers with large numbers of minutes to become more efficient.  
72. These VRS tiers and rates will apply for a three year period (the 2007-2008 
through 2009-2010 Fund years).  At the end of each fund year, the compensation rates will be 
adjusted downward to reflect a consumer productivity dividend of 0.5 percent (0.005).191  
Annually, VRS providers will be allowed to request exogenous treatment for costs they incurred 
  
186 This approach is supported by some of the VRS providers. See Michael B. Fingerhut Ex Parte (June 27, 2007).
187 See 2007 NECA Filing at Ex. 1-4b.  
188 Id.  
189 See Michael B. Fingerhut Ex Parte (June 27, 2007).
190 See supra paras. 53-54.
191 Because we are adopting tiered rates based on minutes of use provided, we no longer believe it is necessary to 
treat an allowance for working capital as a cost that must be compensated separately.  We believe compensation for 
such costs is subsumed in the rates we have adopted herein.  
Federal Communications Commission FCC 07-186
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during the three-year period that are the result of new regulations or otherwise beyond their
control. At the end of the three-year period, we will reassess what the tiers and rates shall be for 
the ensuing three-year period.
C. Specific Guidelines on Allowable Costs
73. In the 2006 TRS Cost Recovery FNPRM, the Commission sought comment on 
cost categories including:  (1) overhead costs; (2) start-up expenses; and (3) executive 
compensation.192 We address these cost categories, and others, below. 
74. Overhead.  The Commission sought comment on whether any general overhead 
costs  i.e., those indirect costs that are neither cost-causative nor definable  should be 
compensable by the Fund.193 Specifically, the Commission sought comment on whether 
providers reasonable costs should be limited to their marginal costs of providing TRS, which 
would not include an allocation of general overhead costs.  The Commission noted that in the 
2004 TRS Report & Order, the Commission stated that providers may recover reasonable 
overhead costs directly attributable to the provision of TRS.194  
75. Although commenters assert that there must be adequate funding of overhead 
costs,195 the issue is whether there are limits on the types of overhead costs that may be included 
as reasonable costs attributable to the provision of TRS.  We conclude that indirect overhead 
costs are not reasonable costs of providing TRS.  In other words, appropriate overhead costs are 
those costs that are directly related to, and directly support, the provision of relay service.  
Therefore, indirect overhead costs may not be allocated to TRS by an entity that provides 
services other than TRS based on the percentage of the entitys revenues that are derived from 
the provision of TRS.  All costs submitted to the Fund administrator must directly support the 
provision of relay service.  For example, executive salaries, or a portion thereof, may be 
attributed to the provision of TRS to the extent that it can be shown that a particular executive 
actually supported the provision of TRS.196 Our conclusion is consistent with Congress placing 
the obligation to provide TRS on carriers that were already offering voice telephone service.197
76. Start-up Expenses.  The Commission sought comment on whether it is appropriate 
and consistent with Section 225 to reimburse the start-up expenses of new entities seeking to 
  
192 2006 TRS Cost Recovery FNPRM, 21 FCC Rcd at 8393-97, paras. 32-42.
193 2006 TRS Cost Recovery FNPRM, 21 FCC Rcd at 8395-96, paras. 38-39.
194 Id., 21 FCC Rcd at 8396, para. 38 (citing 2004 TRS Report & Order, 19 FCC Rcd at 12544, para. 182 & n.520).
195 E.g., Joint Consumers Comments at 3-7 (arguing that insufficient funding for overhead costs would adversely 
affect deaf people as well as hearing people who rely on relay services, and that all reasonable operational costs 
directly and indirectly linked to the provision of TRS services  should be compensated).
196 For example, if executives of a company that provides a variety of services in addition to TRS do not personally 
work on TRS issues, no part of their salaries can be included in the companys TRS cost submission.  If such 
executives devote 25 percent of their time to TRS matters, then 25 percent of their salaries can be included in the 
TRS cost submission.
197 See 47 U.S.C.  225(c).  This issue will not arise for entities that only offer relay services.  In those 
circumstances, the issue is whether the particular costs are reasonable and necessary to the provision of relay 
service.
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offer VRS or the other forms of TRS.198 The Commission asked, for example, whether the Fund 
should reimburse the legal and related organizational expenses of multiple new companies that 
desire to offer TRS, particularly when there are already numerous providers offering service.  No 
comments were filed addressing this issue.
77. We recognize that the Commission has recently encouraged competition in the 
provision of VRS,199 and that as a practical matter new competitors must bear start-up expenses 
to become viable VRS providers.  Therefore, we conclude that start-up costs are compensable, 
but must be amortized.  We will require these costs to be amortized in accordance with generally 
accepted accounting rules.  In this way, these costs will not skew the rate in a particular year, but 
will be recoverable over time. 
78. Executive Compensation.  The Commission sought comment concerning the 
appropriate amount of TRS providers executive compensation that may be included in the 
providers cost data, and on whether the number of executives for whom compensation is 
sought should be tied to, or limited by, the overall size of certain providers.200 The Commission 
sought to clarify the scope and nature of such costs that should be considered reasonable costs 
compensable by the Fund, and whether they should be limited to some percentage of other costs 
or in some other way.  Hands On asserts that this is a necessary rate element in providing relay, 
although the executive structure will vary depending on the size of the provider.201 Joint 
Consumers similarly assert that reasonable executive compensation is necessary to providing 
TRS, and therefore should be reimbursable from the Fund.202
79. Reasonable executive compensation for persons who directly support the 
provision of TRS is compensable from the Fund.  As noted above, these costs must be 
apportioned for persons who do not spend all of their time supporting the provision of relay.203
As a general matter, we will consider bonuses, stock options, and other indirect compensation in 
an assessment of what is reasonable compensation.
80. Other Costs.  Financial transaction costs or fees unrelated to the provision of relay 
service are not compensable as reasonable costs of providing service.  Such costs include costs 
and fees relating to a change in ownership of the entity providing relay service, the sale of the 
  
198 2006 TRS Cost Recovery FNPRM, 21 FCC Rcd at 8397, para. 41; see also 47 U.S.C.  225(d)(3)(B) (providing 
for the recovery of costs caused by the provision of TRS).
199 See Telecommunications Relay Services and Speech-to-Speech Services for Individuals with Hearing and Speech 
Disabilities, CG Docket 03-123, Report and Order and Order on Reconsideration, 20 FCC Rcd 20577 (Dec. 12, 
2005) (2005 TRS Certification Order) (adopting Commission certification procedures for entities desiring to offer IP 
Relay and VRS and receive compensation from the Fund).
200 2006 TRS Cost Recovery FNPRM, 21 FCC Rcd at 8397, para. 42 (also noting that the Commission expressed 
concern about this issue in the 2004 TRS Report & Order).   
201 Hands On Comments at 50-51.
202 Joint Consumer Comments at 7.  The Joint Consumers further suggest that the TRS Advisory Council, the Fund 
Administrator, and the Commission should look carefully at executive compensation and other general overhead 
costs to make sure that the level of such compensation is reasonable and that the allocation to TRS services is also 
fair and reasonable. 
203 See generally 2004 TRS Report & Order, 19 FCC Rcd at 12544, para. 182 n.520; see also supra para. 57.
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entity, the spin off of part of the entity, or any other transaction directed at the ownership, 
control, or structure of the relay provider.  
81. Further, Hands On asserts that the Fund should compensate certified deaf 
interpreters (CDI), i.e., interpreters who are deaf and for whom ASL is their native language.204  
Although Hands On acknowledges that the rules require that VRS providers use qualified 
interpreters,205 Hands On maintains that CDIs possess a skill set that is not available to hearing 
interpreters, and therefore they may be needed in certain circumstances to ensure that effective 
and accurate communication is taking place between the VRS user and the CA.206 We need not 
address whether, as a general matter, CDI costs should be compensable from the Fund.  Rather, 
we will apply the reasonableness standard to providers staffing and compensation of CAs.    
82. Because some providers appear to continue the practice of giving video 
equipment to consumers and installing it at no cost to the consumer,207 we also reiterate that costs 
attributable to relay hardware and software used by the consumer, including installation,
maintenance costs, and testing are not compensable from the Fund.208 As the Commission has 
explained, compensable expenses must be the providers expenses in making the service 
available and not the customers costs of receiving the equipment.  Compensable expenses, 
therefore, do not include expenses for customer premises equipment  whether for the equipment 
itself, equipment distribution, or installation of the equipment or necessary software.209 We will 
closely scrutinize the providers submitted costs to ensure that such costs are neither directly nor 
indirectly included in the costs submitted by the providers.
D. Management and Administration of the Fund
1. The Interstate TRS Fund Advisory Council
83. In the Third TRS Report & Order, the Commission adopted the TRS cost recovery 
rules and appointed NECA as the interim Fund administrator.210 At the same time, the 
Commission created an advisory committee to monitor TRS cost recovery issues.211 The 
Commission stated that this committee would be a safeguard in view of comments noting that 
  
204 Hands On Comments at 58-62; see also CSD Reply Comments at 13-16 (arguing that the costs of Certified Deaf 
Interpreters (CDIs) should be compensable in order to facilitate communication of deaf consumers with limited ASL 
skills); Joint Consumers Comments at 3 (addressing the need for CDIs),
205 Hands On Comments at 59 (citing 47 C.F.R.  64.604(a)(iv)).
206 Id. at 60-61.
207 See VRS Interoperability Declaratory Ruling and FNPRM, 21 FCC Rcd at 5448, paras. 15-16 (noting practice of 
providers of distributing and installing VRS equipment at no cost to the consumer).
208 See 2006 MO&O, 21 FCC Rcd at 8071, para. 17.
209 Id.  We note that the Fund administrators cost data form explicitly states that the cost of equipment given to, 
sold to, or used by relay callers is not compensable from the Fund.  See Relay Services Data Request Instructions at 
4 (included in the 2006 NECA Filing).
210 Telecommunications Relay Services and the Americans with Disabilities Act of 1990, Third Report and Order, 
CC Docket No. 90-571, 8 FCC Rcd 5300 (July 20, 1993) (Third TRS Report & Order).
211 Id., 8 FCC Rcd at 5301, para. 8.
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NECA was associated with one specific industry group  local exchange carriers (LECs).212  
Specifically, the Commission directed NECA to establish a non-paid, voluntary advisory 
committee of persons from the hearing and speech disability community, TRS users (voice and 
text telephone), interstate service providers, state representatives, and TRS providers. 213 The 
Commission further directed that each group select its own representative to the committee, and 
that the committee meet at reasonable intervals (at least semi-annually) in order to monitor TRS 
cost recovery matters.214 The Commission concluded that with these additional safeguards in 
place, NECA is uniquely placed to effectuate timely and efficient implementation of the TRS 
Fund.215 The Commissions creation of this advisory committee  the TRS Advisory Council 
is reflected in the TRS regulations.216  
84. In June 2004, the Commission sought comment on several issues concerning the 
Advisory Council, including whether the Council was still necessary.217 The Commission also 
sought comment on ways in which the Council might play a more productive role in connection 
with the interstate TRS cost recovery scheme.218 In addition, the Commission sought comment 
on whether the composition of the Advisory Council should be changed or expanded to include 
parties that represent the TRS Fund or any other relevant interests not currently represented on 
the Council.219 In response to the FNRPM, nine comments and three reply comments were filed 
addressing this issue.220 Commenters generally support the role of the Advisory Council.221  
85. We believe that the Advisory Council can continue to play an important role in 
the oversight of TRS.   We recognize that, in the past, the Commission has directed the Council, 
along with the Fund administrator, to develop cost recovery guidelines for various forms of 
TRS.222 The Council has also played a role in the TRS Fund administrators annual proposal for 
  
212 Id., 8 FCC Rcd at 5300-01, para. 5.
213 Id., 8 FCC Rcd at 5301, para. 8.
214 Id.
215 Id.
216 See 47 C.F.R.  64.604(c)(5)(iii)(H).  Consistent with the regulations, the Council has met twice a year to address 
matters concerning cost recovery and the Interstate TRS Fund.  
217 2004 TRS Report and Order, 19 FCC Rcd at 12570-71, paras. 251-54.
218 Id., 19 FCC Rcd at 12571, para. 254.
219 Id., 19 FCC Rcd at 12571, para. 253.
220 Comments were filed by the California Public Utilities Commission (CPUC) (Oct. 18, 2004); CSD (Oct. 18, 
2004); Hands On (Oct. 15, 2004); National Video Relay Service Coalition (VRS Coalition) (Oct. 18, 2004); Sprint 
(Oct. 18, 2004); Hamilton (Oct. 18, 2004); Interstate TRS Fund Advisory Council (Advisory Council) (Oct. 18, 
2004); Verizon Telephone Companies (Verizon) (Oct. 18, 2004); Sorenson (Oct. 18, 2004).  Reply comments were 
filed by CSD (Nov. 15, 2004), Hamilton (Nov. 16, 2004), and Hands On (Nov. 15, 2004).  
221 See, e.g., CSD Comments at 37-38; Hands On Comments at 41; VRS Coalition Comments at 17; Sprint 
Comments at 15, 18.  In its comments to the 2006 TRS Cost Recovery FNPRM, Hamilton notes that the TRS 
Advisory Council is currently underutilized as an oversight mechanism.  Hamilton Comments at 12.
222 See, e.g., 2000 TRS Order, 15 FCC Rcd at 5155-56, paras. 32-33; Interstate TRS Fund Advisory Council, TRS 
Cost Recovery Recommendations, filed November 9, 2000; Interstate TRS Fund Advisory Council, IP Relay Cost 
Recovery Recommendations, filed October 9, 2002; Telecommunications Relay Services and Speech-to-Speech 
(continued)
Federal Communications Commission FCC 07-186
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compensation rates for the various forms of TRS.223 In view of the adoption of the new MARS 
plan, we believe the Council can play a role in monitoring and reviewing the implementation of 
that methodology, and raising unforeseen issues that may arise.  We also believe that, with the 
respect to VRS, the Council can play a role in identifying cost categories that may need to be 
more specifically defined to ensure that providers are compensated for their reasonable actual 
costs, and in the future address whether there is still a better cost recovery methodology for VRS.  
Finally, we believe the Council can address other matters as assigned by the Commission, 
including, for example, cost recovery issues related to the possible adoption of a numbering 
regime for VRS and implementation of a way in which VRS users can access emergency 
services.   
2. Other Issues
86. As part of our oversight of the Fund, we anticipate additional and more 
comprehensive auditing of the providers.  Sorenson suggests the implementation of better 
record-keeping practices, including automated electronic counting of minutes.224  The TRS 
regulations expressly contemplate that the Commission and the Fund administrator may audit 
recipients of support from the Interstate TRS Fund,225 and we intend to do so, including the 
review of underlying documentation supporting submitted cost and demand data, as well as 
minutes submitted for compensation.  Only in this way can we ensure the integrity of Fund.
87. The 2006 TRS Cost Recovery FNPRM also sought comment on whether the 
providers cost and demand data should be made public.226 The Commission noted that some 
providers urge the Commission to provide greater transparency in the rate setting process.227 In 
response to this FNPRM, Verizon and Sorenson assert that making provider cost and demand 
data public would result in competitive harm.228 Hands On disagrees, asserting that Verizon and 
Sorenson have not offered any examples on how they would suffer harm from an open, 
transparent process where cost and demand projections are available for public review and 
comment.229  
88. We agree that there should be more transparency to the rate setting process.  We 
also realize, however, that the interest in transparency must be balanced against the providers 
  
(continued from previous page)
Services for Individuals with Hearing and Speech Disabilities, CC Docket No. 98-67, CG Docket No. 03-123, 
Order, 20 FCC Rcd 13195, at 13198, para. 9 (July 19, 2005) (proposing jurisdictional allocation methodology for 
inbound two-line captioned telephone calls). 
223 At the same time, we note that the Council did not file comments in response to the 2006 TRS Cost Recovery 
FNPRM, which, as this Order reflects, raised the fundamental and comprehensive cost recovery issues.
224 See Sorenson Comments at 60.
225 47 C.F.R.  64.604(c)(5)(iii)(H).
226 2006 TRS Cost Recovery NPRM, 21 FCC Rcd at 8397, paras. 43-44.
227 Id. (citing comments of Hamilton and Hands On).
228 See Verizon Comments at 14; Verizon Reply Comments at 10; Sorenson Comments at 62-65 (but supporting 
making data available in an aggregated form that would protect commercially sensitive information).
229 Hands On Reply Comments at 6.
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interest in the confidentiality of their cost and demand data, an interest reflected in our rules.230  
We believe that the use of MARS plan will add transparency for the determination of the 
traditional TRS, STS, captioned telephone service, and IP CTS rates.  As noted above, we 
anticipate listing the state rates used in calculating the MARS rates (without identifying the states 
involved), and also setting forth the final calculation that divides total costs by total minutes to 
determine the rate.231 Moreover, because there are no cost adjustments to provider specific data 
in the determination of these rates, transparency concerns cannot be significant.  With respect to 
VRS, we believe that the adoption of tiered rates, as raised below in the FNPRM, will also 
largely eliminate these concerns.  To the extent we adopt a different cost recovery methodology, 
however, we will continue to keep providers submitted cost and demand data confidential, as 
provided in our rules, except when appropriate in the aggregate or in a way that does not disclose 
provider specific data.    
IV. DECLARATORY RULING
89. In this Declaratory Ruling, we clarify that providers may not offer consumers 
financial or other incentives, directly or indirectly, to make TRS calls.  We set forth in greater 
detail the kinds of incentives that are impermissible under our rules, and also address the 
improper use of customer call records or databases. 
90. In January 2005, the Consumer & Governmental Affairs Bureau (CGB) released 
the 2005 Financial Incentives Declaratory Ruling, which addressed a VRS providers consumer 
reward program that was based on call minutes.232 The item concluded that any program that 
involves the use of any type of financial incentives to encourage or reward a consumer for 
placing a TRS call violates Section 225.233 The item reasoned that [t]he fact that any TRS 
reward or incentive program has the effect of enticing TRS consumers to make TRS calls that 
they would not otherwise make, which allows the provider to receive additional payments from 
the Fund, and results in payments to consumers for using the service, puts such programs in 
violation of Section 225.234 The item explained that the obligation placed on TRS providers is 
to be available to handle calls consumers choose to make, when they choose to make them, and 
that [b]ecause the Fund, and not the consumer, pays for the cost of the TRS call, such financial 
incentives are tantamount to enticing consumers to make calls that they might not ordinarily 
make.235 The item concluded that, effective March 1, 2005, any TRS provider offering such 
  
230 See 47 C.F.R.  64.604(c)(iii)(5)(I) (addressing confidential treatment of providers cost and demand data).  We 
recognize that there is some tension between the notion that because VRS (and other forms of TRS) are presently 
entirely compensated from the Fund, the providers financial data should be public, and the notion that because this 
has become a competitive business, by for-profit entrepreneurial companies, such companies should be entitled to 
keep their financial data confidential.  
231 See supra note 109.
232 Telecommunications Relay Services and Speech-to-Speech Services for Individuals with Hearing and Speech 
Disabilities, CC Docket No. 98-67, CG Docket No. 03-123, Declaratory Ruling, 20 FCC Rcd 1466 (Jan. 26, 2005) 
(2005 Financial Incentives Declaratory Ruling).  
233 2005 Financial Incentives Declaratory Ruling, 20 FCC Rcd at 1466, para 1.
234 Id., 20 FCC Rcd at 1469, para. 8.
235 Id. The item added that in these circumstances, TRS is no longer simply ... [a means] for persons with certain 
disabilities [to access the telephone system], but an opportunity for their financial gain.  Id.  
Federal Communications Commission FCC 07-186
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incentives for the use of any of the forms of TRS will be ineligible for compensation from the 
Interstate TRS Fund.236
91. Also in January 2005, CGB released a Public Notice addressing impermissible 
VRS marketing practices.237 This item stated, among other things, that [t]he TRS rules do not 
require a consumer to choose or use only one VRS (or TRS) provider, and that a consumer 
may use one of several VRS providers available on the Internet or through VRS service 
hardware that attaches to a television.238 In addition, it noted that apparently some providers 
use their customer database to contact prior users of their service and suggest, urge, or tell them 
to make more VRS calls.239 The item concluded that:
[t]his marketing practice constitutes an improper use of information obtained from 
consumers using the service, is inconsistent with the notion of functional 
equivalency, and may constitute a fraud on the Interstate TRS Fund because the 
Fund, and not the consumer, pays for the cost of the VRS call.  As we have noted, 
the purpose of TRS is to allow persons with certain disabilities to use the 
telephone system.  Entities electing to offer VRS (or other forms of TRS) should 
not be contacting users of their service and asking or telling them to make TRS 
calls.  Rather, the provider must be available to handle the calls that consumers 
choose to make.  For this reason as well, VRS providers may not require
consumers to make TRS calls, impose on consumers minimum usage 
requirements, or offer any type of financial incentive for consumers to place TRS 
calls.240
  
236 Id., 20 FCC Rcd at 1469-70, para. 9; see also Telecommunications Relay Services and Speech-to-Speech Services 
for Individuals with Hearing and Speech Disabilities, CG Docket No. 03-123, Order, 20 FCC Rcd 12503 (July 28, 
2005) (concluding that offering free or discount long distance service to TRS consumers constitutes an 
impermissible financial incentive, and that programs directed at giving the consumer an incentive to make a TRS 
call in the first place ... are prohibited).
237 Federal Communications Commission Clarifies that Certain Telecommunications Relay Services (TRS) 
Marketing and Call Handling Practices are Improper and Reminds that Video Relay Service (VRS) May Not be 
Used as a Video Remote Interpreting Service, CC Docket No. 98-67, CG Docket No. 03-123, Public Notice, 20 FCC 
Rcd 1471 (Jan. 26, 2005) (2005 TRS Marketing Practices PN).
238 Id., 20 FCC Rcd at 1473.  Further, in the VRS Interoperability Declaratory Ruling and FNPRM, the Commission 
concluded that consistent with functional equivalency, all VRS consumers must be able to place a VRS call 
through any of the VRS providers service, and all VRS providers must be able to receive calls from, and make calls 
to, any VRS consumer.  Therefore, a provider may not block calls so that VRS equipment cannot be used with other 
providers service.  In addition, a provider may not take other steps that restrict a consumers unfettered access to 
other providers service.  This includes the practice of providing degraded service quality to consumers using VRS 
equipment or service with another providers service.  VRS Interoperability Declaratory Ruling and FNPRM, 21 
FCC Rcd at 5456, para. 34.
239 2005 TRS Marketing Practices PN, 20 FCC Rcd at 1473.
240 Id. (internal footnotes omitted).  The item also question[ed] whether there are any circumstances in which it is 
appropriate for a TRS provider to contact or call a prior user of their service, given that the role of the provider is 
to make available a service to consumers ... under the ADA when a consumer may choose to use that service.  Id.
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92. Notwithstanding the 2005 Financial Incentives Declaratory Ruling and the 2005 
TRS Marketing Practices PN, we continue to discover that TRS providers  particularly VRS 
and IP Relay providers  offer financial and other incentives for consumers to use their service to 
make relay calls.241 We therefore reaffirm the 2005 Financial Incentives Declaratory Ruling and 
the 2005 TRS Marketing Practices PN, and reiterate that providers seeking compensation from 
the Fund may not offer consumers financial or other tangible incentives, either directly or 
indirectly, to make relay calls.  Such incentives include sweepstake giveaways (e.g., the relay 
user earns chances to win a prize with each call made), sponsorships tied to service usage, 
charitable contributions by a provider based on calls made,242 charitable contributions or other 
gifts or payments by a provider based on failure to meet specific performance standards (e.g., if a 
call is not answered within a specific period of time, a contribution will be made to a third party 
organization), and offering financial incentives or rewards to register with the provider, add the 
provider to the consumers speed dial list, or to become a providers VIP customer.
93. We emphasize that a financial incentive program is not permissible even in 
circumstances where the benefit goes to a third party, rather than the consumer making the call, 
or the program is tied to the consumer giving the provider feedback about the quality of the call.  
Even when the benefit goes to a third party, the program has the intent and the effect of 
rewarding consumers for making relay calls, as well as giving consumers an incentive to make 
relay calls that they might not otherwise make.  Likewise, tying a reward to making calls and 
responding with feedback about the call does not change the fact that consumers are given an 
incentive to make calls they might not otherwise make.  Providers seeking feedback on the 
quality of their service can readily do so without offering call incentives.
94. Further, impermissible marketing and incentive practices include calling a 
consumer and requiring, requesting, or suggesting that the consumer make VRS calls.243 This 
rule also applies in the context of providers that choose to give VRS (or TRS) equipment to 
consumers.  Providers that give consumers relay equipment cannot condition the ongoing use or 
possession of the equipment, or the receipt of different or upgraded equipment, on the consumer 
making relay calls through its service or the service of any other provider.  In other words, 
providers cannot give consumers equipment as part of outreach efforts or for other purposes, and 
then require that the equipment be relinquished if the consumer fails to maintain a certain call 
volume.  Not only do such practices likely require the impermissible use of the providers call 
database, and the impermissible monitoring of consumers calls, they also constitute 
impermissible financial incentives.  In these circumstances, the consumers ongoing receipt of a 
financial benefit  free equipment  is conditioned on the use of the equipment to make relay 
calls, calls that the Fund, and not the consumer, pays for.  Therefore, the consumer may be 
  
241 These programs are generally set forth on the providers websites.
242 For example, a promotion where a provider will make a donation to a specific deaf organization each time a 
consumer makes a call through its service.  Such a promotion also suggests that the provider is being 
overcompensated, since the provider is willing to give away some of the money it earns with each call.
243 2005 TRS Marketing Practices PN at 3.  We continue to receive anecdotal evidence of VRS providers calling 
VRS consumes and noting, e.g., that the consumer has not made many calls and urging the consumer to make more 
calls.
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placed in the position of having to return the equipment, or foregoing receiving upgraded 
equipment, because the consumer has not made a sufficient number of relay calls.244  
95. Finally, apart from attempting to generate additional calls that can be billed to the 
Fund, providers also may not use a consumer or call database to contact TRS users for lobbying 
or any other purpose.  The Commission has made clear not only in the 2005 TRS Marketing 
Practices PN, but also in the 2000 TRS Order, that TRS customer profile information cannot be 
used for any purpose other than handling relay calls.245 Therefore, for example, a provider may 
not contact its customers, by an automated message, postcards, or otherwise, to inform them 
about pending TRS compensation issues and urge them to contact the Commission about the 
compensation rates.  Similarly, as noted above, a provider may not use call data to monitor the 
TRS use by its customers (or the customers of other providers) and to determine whether they are 
making a sufficient number of calls to warrant further benefits from the provider.
96. In sum, because the obligation placed on TRS providers is to be available to 
handle calls consumers choose to make, when they choose to make them, i.e., to be the dial 
tone for a consumer that uses relay to call to a voice telephone user, and because consumers do 
not pay for this service but rather providers are compensated pursuant to Title IV of the ADA, 
providers may not offer relay users financial and similar incentives, directly or indirectly, to use 
their service.  Likewise, they may not use consumer or call data to contact TRS users or to in any 
way attempt to affect or influence, directly or indirectly, their use of relay service.  Because, as 
suggested above, we recognize that incentive programs can be structured in limitless ways, we 
will continue to carefully monitor the provision of service and equipment in this regard.  
Providers offering such programs or otherwise taking action that has the effect of providing 
consumers incentives to make relay calls, or misusing customer information, will be ineligible 
for compensation from the Fund.246 Further, such providers may also be subject to other actions 
for violations of our rules. 
  
244 We recognize that the effect of this rule, coupled with the interoperability rule, is that if a provider chooses to 
give consumers equipment, once the equipment is given the provider does not have control over the extent to which 
it is used to make relay calls, or even if it used at all.  Again, this conclusion is compelled by the very nature of TRS 
and the role of relay providers offering the dial tone for consumers to make telephone calls if and when they 
choose to make them.  Moreover, consumer handsets, and certainly personal computer-like devices, have never been 
included as part of TRS support funded pursuant to Section 225.  Of course, providers might require the return of 
their equipment if they decide to no longer offer relay service (or to no longer seek compensation for it from the 
Fund), seek the return of all equipment given to consumers, or seek the return of the equipment for reasons not 
related to number or nature of relay calls made.
245 2000 TRS Order, 15 FCC Rcd at 5175, para. 83.
246 Section 225 defines TRS as telephone transmission services provided to an individual who has a hearing or 
speech disability in a manner that is functionally equivalent to those services offered to persons without such 
disabilities.  47 U.S.C.  225(a)(3).  Because we have determined that financial incentive programs violate the 
functional equivalency requirement, providers engaging in these programs are no longer providing TRS within the 
meaning of the statute.  Therefore, because it would be technically impossible to separate a providers legitimate 
relay calls from those made merely as the result of an impermissible incentive, we conclude that providers offering 
such programs will be ineligible for any compensation from the Fund.
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V. CONCLUSION
97. In this Order, we adopt new cost recovery methodologies for the various forms of 
TRS.  First, for interstate traditional TRS, interstate STS, interstate CTS, and interstate and 
intrastate IP CTS we adopt a cost recovery methodology based on the MARS plan, which 
averages state intrastate compensation rates.  Second, for IP Relay we adopt a cost recovery 
methodology based on price caps.  Finally, with respect to VRS, we adopt a cost recovery 
methodology based on tiered rates corresponding to monthly minutes of use.  The VRS and IP 
Relay rates shall be set for three years, subject to certain annual adjustments.  We also adopt new 
compensation rates for the various forms of TRS pursuant to the new cost recovery 
methodologies. The Commission is taking these actions to ensure that providers of these 
services receive compensation that more accurately reflects their reasonable actual costs.  
Finally, the Declaratory Ruling clarifies that TRS providers seeking compensation from the Fund 
may not offer consumers financial or other tangible incentives, either directly or indirectly, to 
make relay calls.  
VI. PROCEDURAL MATTERS
A. Final Regulatory Flexibility Analysis 
98. As required by the Regulatory Flexibility Act of 1980, as amended (RFA),247 the 
Commission as prepared a Final Regulatory Flexibility Analysis (FRFA) of the possible 
significant economic impact on small entities of the policies and rules addressed in this item.  
The FRFA is set forth in Appendix G.
B. Paperwork Reduction Act Analysis
99. This document contains new information collection requirements subject to the 
Paperwork Reduction Act of 1995 (PRA), Public Law 104-13.  It will be submitted to the Office 
of Management and Budget (OMB) for review under Section 3507(d) of the PRA.  OMB, the 
general public, and other Federal agencies are invited to comment on the new information 
collection requirements contained in this proceeding.  
100. In addition, we note that pursuant to the Small Business Paperwork Relief Act of 
2002, Public Law 107-198,248 we previously sought specific comment on how we might further 
reduce the information collection burden for small business concerns with fewer than 25 
employees.
101. In this present document, we have assessed the effects of imposing the provision 
of rate data on the states and the providers of interstate traditional TRS, interstate STS, and 
interstate captioned telephone service, and find that there is no increased administrative burden 
on businesses with fewer than 25 employees.  We recognize that the required rate data is 
presently available with the states and the providers of interstate traditional TRS, interstate STS, 
and interstate captioned telephone service, thereby no additional step is required to produce such 
  
247 The RFA, see  5 U.S.C. S 601 et. seq., 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 Fairness Act of 1996 (SBREFA).
248 See 44 U.S.C.  3506(c)(4).
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data.  We therefore believe that the provision of the rate data does not increase an administrative 
burden on businesses.
C. Congressional Review Act
102. The Commission will send a copy of this Report and Order in a report to be sent 
to Congress and the Government Accountability Office pursuant to the Congressional Review 
Act.249
D. Materials in Accessible Formats
103. 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 Report and Order can 
also be downloaded in Word and Portable Document Formats (PDF) at 
http://www.fcc.gov/cgb.dro.
VII. ORDERING CLAUSES
104. Accordingly, IT IS ORDERED that, pursuant to Sections 1, 2, and 225 of the 
Communications Act of 1934, as amended, 47 U.S.C.  151, 152, and 225, this Order IS 
ADOPTED.
  
249 See 5 U.S.C.  801(a)(1)(A).
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105. IT IS FURTHER ORDERED that an annual compensation rate shall apply to 
interstate traditional TRS and interstate STS based on the MARS plan and the intrastate 
traditional TRS and STS rate(s) paid by the states, as provided herein.
106. IT IS FURTHER ORDERED that an annual compensation rate shall apply to 
interstate CTS and interstate and intrastate IP CTS based on the MARS plan and the intrastate 
CTS rate paid by the states, as provided herein.
107. IT IS FURTHER ORDERED that a compensation rate shall apply to interstate 
and intrastate IP Relay based on price caps, and that the rate shall be set for three-year periods, 
subject to adjustment, beginning with the 2007-2008 Fund year, as provided herein.
108. IT IS FURTHER ORDERED that tiered compensation rates shall apply to 
interstate and intrastate VRS based on minutes of use, and that the rates shall be set for three-
year periods, subject to adjustment, beginning with the 2007-2008 Fund year, as provided herein.
109. IT IS FURTHER ORDERED that, effective on the first day of the month 
following the effective date of this Order, the following per-minute compensation rates shall 
apply, as provided herein:  for interstate traditional TRS:  $1.592; for interstate STS:  $2.723; for 
interstate CTS and interstate and intrastate IP CTS:  $1.629; for interstate and intrastate IP Relay:  
$1.293; and for interstate and intrastate VRS:  (1) for the first 50,000 monthly minutes:  $6.77; 
(2) for monthly minutes between 50,001 and 500,000: $6.50; and (3) for monthly minutes above 
500,000:  $6.30.
110. IT IS FURTHER ORDERED that the amendment to section 64.604 of the 
Commission's rules, as set forth in Appendix H, IS ADOPTED, effective upon approval by OMB
approval of such requirements. The Commission will publish a document in the Federal Register 
announcing the effective date of the amended rule.
111. IT IS FURTHER ORDERED that this Order SHALL BE EFFECTIVE 30 days 
after publication in the Federal Register, except information collection requirements subject to 
the Paperwork Reduction Act SHALL BECOME EFFECTIVE upon OMB approval of such 
requirements. The Commission will publish a document in the Federal Register announcing the 
effective date of these requirements.
112. IT IS FURTHER ORDERED that the Commission's Consumer and Governmental 
Affairs Bureau, Reference Information Center, SHALL SEND a copy of this Order, including 
the Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business 
Administration. 
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch  
Secretary
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APPENDIX A
List of Commenters
Comments:
Bob Segalman
Communication Access Center for the Deaf and Hard of Hearing, Communication Service for 
the Deaf, Inc., GoAmerica, Inc., Hands On Video Relay Services, Inc., Snap 
Telecommunications, Inc., Sorenson Communications, Inc., and Sprint Nextel Corporation (Joint 
Providers)
Hamilton Relay, Inc.
Hands On Video Relay Services, Inc.
Florida Pubic Service Commission
Sorenson Communications, Inc.
Sprint Nextel Corporation
Telecommunications for the Deaf and Hard of Hearing, Inc., Association of Late-Deafened 
Adults, Inc., National Association of the Deaf, Deaf and Hard of Hearing Consumer Advocacy 
Network, California Coalition of Agencies Serving the Deaf and Hard of Hearing, and Hearing 
Loss Association of America (Joint Consumers)
Verizon
Individual Comments:
Individual comments can be found in CG Docket No. 03-123 at: 
http://fccweb01w/prod/ecfs/s_a/.  Individual comments were filed through identical postcards on 
July 20, 2006.
Reply Comments:
AT&T Inc.
Communication Service for the Deaf, Inc.
Hands On Video Relay Services, Inc.
Hamilton Relay, Inc.
Sorenson Communications, Inc.
Telecommunications for the Deaf and Hard of Hearing, Inc., Association of Late-Deafened 
Adults, Inc., National Association of the Deaf, Deaf and Hard of Hearing Consumer Advocacy 
Network, California Association of Agencies Serving the Deaf and Hard of Hearing, and 
Hearing Loss Association of America (Joint Consumers)
Ultratec, Inc.
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Verizon
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APPENDIX B
Collection of State Data from Certified State Programs and Providers
Traditional TRS and STS Data
For the particular calendar year as indicated in the request for data, states and traditional TRS 
providers shall provide the information set forth below (data below provided as an example).  
The total session and conversation minutes should include the total intrastate minutes for 
traditional TRS (including Spanish traditional TRS) and STS.  If STS is compensated at a 
different rate, so indicate and include the session and conversation minutes for STS separately, as 
indicated below.
If the state rate does not include other costs paid to the provider in connection with the provision 
of intrastate traditional TRS, the state and/or provider shall so indicate and set forth the total 
amount of such additional costs paid during the calendar year and the nature of the cost, as 
indicated below.
SAMPLE ANALYSIS
State Per-Minute Based on Session (SM)  Total Intrastate Total 
Intrastate
Compensation or Conversation  Conversation Session
Rate Minutes (CM)  Minutes Minutes
[W] $1.20 CM 300,000 420,000
[X]   $0.90 SM 500,000 700,000
[Y]    $1.15 (trad. TRS) CM 400,000 540,000
$1.25 (STS) CM 25,000 35,000
[Z] $1.10 CM 800,000 1,100,000
[$100,000 additional costs not included in the rate for the calendar year for traditional 
TRS and STS  explain nature of costs]
Notes:   
1.  If a particular state does not maintain conversation minutes (e.g., because is compensates the 
provider on the basis of session minutes), the state shall so indicate.
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2.  States and providers should indicate the extent to which the submitted information should be 
considered confidential.
3.  States and providers of captioned telephone service shall separately submit this data for 
intrastate captioned telephone service, as set forth in the Order.
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APPENDIX C
Calculating Total Dollars for All States for MARS Calculation
Using the data collected pursuant to Appendix B from the states and the providers, the Fund 
administrator or Commission will multiply each states traditional TRS rate by the number of 
either intrastate session minutes or intrastate conversation minutes, whichever the state rate is 
based upon (as indicated in bold below).  The total amount for each state will then be totaled, 
including other costs not reflected in the rate.  This number becomes the numerator in the final 
calculation that determines the rate.
SAMPLE ANALYSIS
State Per-Minute SM  Total Intrastate Total Intrastate  Total
Compensation or CM  CM SM  
Dollars
Rate  
[W] $1.20 CM  300,000 420,000 $360,000
[X] $0.90 SM 500,000 700,000 $630,000
[Y]    $1.15 (trad. TRS) CM  400,000 540,000  $460,000
$1.25 (STS) CM 25,000 35,000 $31,250
[Z]    $1.10 CM  800,000 1,100,000 $880,000
 Other costs not reflected in rate: $100,000
$2,461,250
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Notes:  
1.  List includes all states for which data will be included in rate calculation.
2.  A separate calculation will be made for captioned telephone service.
APPENDIX D
Final MARS Rate Calculation
To determine the final MARS rate to be applied to interstate conversation minutes, the total 
dollar amount for all the states (total of last column of Appendix B) is divided by the total 
intrastate conversation minutes for all the states (even if some states do not base their rate on 
conversation minutes).
SAMPLE ANALYSIS
State   Total Intrastate  Total Dollars
 CM  (from Appendix B)
 
[W] 300,000 $360,000
[X"] 500,000 $630,000
[Y] 400,000 $460,000
25,000 $31,250
[Z]     800,000 $880,000
 $100,000
 2,025,000  $2,461,250
Final Rate Calculation:            $2,461,250 divided by 2,025,000 = $1.215
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Notes:  
1. List includes all states whose data is going to be included in the calculation.
2.  A separate calculation will be made for captioned telephone service.
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APPENDIX E
TRS and STS Intrastate Rate Data for 2006
Per-Minute Conversation or 
Rate Session Minutes
State X $                             0.270 Session
State X $                             0.730 Session
State X $                             0.740 Session
State X $                             0.740 Session
State X $            0.750 Session
State X $                             0.750 Session
State X $                             0.760 Session
State X $                             0.800 Session
State X $                             0.820 Session
State X $                             0.850 Session
State X $                             0.850 Session
State X $                             0.860 Session
State X $                             0.875 Session
State X $                             0.890 Session
State X $                             0.890 Session
State X $                             0.890 Session
State X $                             0.895 Session
State X $                             0.900 Session
State X $          0.915 Session
State X $                             0.918 Session
State X $                             0.930 Session
State X $                             0.930 Session
State X $                             0.940 Session
State X $                             0.940 Session
State X $                             0.960 Session
State X $                             1.040 Session
State X $                             1.070 Session
State X $                           1.085 Session
State X $                             1.130 Session
State X $                             1.241 Session
State X $                             1.340 Session
State X $                             1.450 Session
State X $        1.900 Session
State X $                             2.250 Session
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State X $                             2.500 Session 
State X $                             1.060 Conversation
State X $                             1.090 Conversation
State X $                             1.100 Conversation
State X $                             1.170 Conversation
State X $                             1.210 Conversation
State X $                             1.240 Conversation
State X $                             1.240 Conversation
State X $                             1.260 Conversation
State X $                             1.295 Conversation
State X $                             1.310 Conversation
State X $         1.350 Conversation
State X $                             1.390 Conversation
State X $                             1.400 Conversation
State X $                             1.406 Conversation
State X $                         1.420 Conversation
State X $                             1.720 Conversation
State X $                             1.890 Conversation
* There are 52 entities listed, because one state changed providers and 
therefore rates, mid-year, and Puerto Rico is included.
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APPENDIX F
Captioned Telephone Service Intrastate Rate Data for 2006
Per-Minute Conversation
Rate or Session Minutes
State X $  1.320 Session
State X $                             1.320 Session
State X $                             1.350 Session
State X $                             1.370 Session
State X $                             1.400 Session
State X $                             1.400 Session
State X $                             1.400 Session
State X $                             1.400 Session
State X $                             1.400 Session
State X $                   1.430 Session
State X $                             1.440 Session
State X $                             1.440 Session
State X $                             1.450 Session
State X $                             1.450 Session
State X $ 1.450 Session
State X $                             1.450 Session
State X $                             1.450 Session
State X $                             1.450 Session
State X $                             1.450 Session
State X $                             1.520 Session
State X $                             1.650 Session
State X $                             1.700 Session
State X $                             1.820 Session
State X $                 1.900 Session
State X $                             1.290 Conversation
State X $                             1.390 Conversation
State X $                             1.400 Conversation
State X $                             1.400 Conversation
State X $                             1.430 Conversation
State X $                             1.450 Conversation
State X $                             1.450 Conversation
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State X $                             1.450 Conversation
State X $                             1.450 Conversation
State X $                             1.500 Conversation
State X $                             1.500 Conversation
State X $                             1.560 Conversation
State X $          1.610 Conversation
State X $                             1.640 Conversation
State X $                             1.650 Conversation
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APPENDIX G
Final Regulatory Flexibility Certification
113. The Regulatory Flexibility Act of 1980, as amended (RFA),250 requires that a 
regulatory flexibility analysis be prepared for rulemaking proceedings, unless the agency 
certifies that "the rule will not, if promulgated, have a significant economic impact on a 
substantial number of small entities."251 The RFA generally defines "small entity" as having the 
same meaning as the terms "small business," "small organization," and "small governmental 
jurisdiction."252 In addition, the term "small business" has the same meaning as the term "small 
business concern" under the Small Business Act.253 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).254
114. This Report and Order addresses issues related to cost recovery methodologies 
for various forms of TRS.  This Report and Order adopts a single cost recovery methodology 
based on the MARS plan for interstate traditional TRS, interstate STS, interstate captioned 
telephone service and interstate and intrastate IP captioned telephone service (IP CTS).255  
Beginning with the 2007-2008 Fund year, a single MARS rate will be calculated and will apply 
to interstate traditional TRS and interstate STS, interstate captioned telephone service, and IP 
CTS.  Because states generally negotiate and pay separate rates for captioned telephone service, 
a separate MARS rate will be calculated and will apply to interstate captioned telephone service.  
  
250 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).
251 5 U.S.C.  605(b).
252 5 U.S.C.  601(6).
253 5 U.S.C.  601(3) (incorporating by reference the definition of "small business concern" in Small Business Act, 
15 U.S.C. S  632).  Pursuant to 5 U.S.C.  601(3), 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."
254 Small Business Act,  15 U.S.C. S 632. 
255 Hamilton Relay, Inc (Hamilton) raised this proposal, which would base the compensation rate paid by the Fund 
on the average of the intrastate TRS rates paid by the states, in its petition for reconsideration of the 2004 TRS 
Report & Order.  Hamilton Relay Service, Inc., Petition for Reconsideration (filed Oct. 1, 2004) (Hamilton 
Petition); see also Hamilton Reply to comments filed in response to its petition for reconsideration (filed Nov. 30, 
2004).  Hamilton also raised this issue in its application for review of the 2004 Bureau TRS Rate Order, which 
adopted the compensation rates for the various forms of TRS for the 2004-2005 Fund year.  See 
Telecommunications Relay Services and Speech-to-Speech Services for Individuals with Hearing and Speech 
Disabilities, CC Docket No. 98-67, Order, 19 FCC Rcd 12224 (June 30, 2004) (2004 Bureau TRS Rate Order), 
modified by Telecommunications Relay Services and Speech-to Speech Services for Individuals with Hearing and 
Speech Disabilities, CC Docket No. 98-67, Order, 19 FCC Rcd 24981 (Dec. 30, 2004) (Modified 2004 Bureau TRS 
Order).  
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As noted below, the MARS plan methodology will not apply to IP Relay, and thus the 
Commission will adopt a separate cost recovery methodology for that service.256
115. The Commission concludes that the MARS methodology, 257 as proposed, cannot 
be applied to IP Relay because there are no state rates for these services.  The Commission, 
therefore, continues to use a cost recovery methodology for IP Relay based on the providers 
projected demand and cost data that reasonably compensates the providers for the provision of IP 
Relay service.  The Commission also concludes that adopting the proposed price cap plan for IP 
Relay that will encourage IP Relay providers to become more efficient in providing the service.  
The Commission believes that the price cap plan for IP Relay will not have a significant 
economic impact on a substantial number of small businesses. 
116. The Commission concludes that adoption of the MARS plan for Interstate 
Traditional TRS, Interstate STS, Interstate CTS, and IP CTS for setting the rate eliminates the 
need to file the much more voluminous cost and demand data that providers presently must 
submit under the current cost recovery methodology to the Fund administrator.  The 
Commission, therefore, concludes that the effect of the adoption of the MARS plan would be to 
lessen the reporting burden on small businesses. Accordingly, the Commission does not believe 
that these actions will have a significant economic impact on a substantial number of small 
businesses.  
117. The Commission further believes that the decision to set a standard for how 
reasonable costs should be compensable under the present cost recovery methodology for all 
forms of TRS, as well as a standard for what reasonable costs should include, will provide 
guidance for the providers, and therefore, benefits small businesses in two ways.  This includes 
setting a standard for whether, and to what extent, marketing and outreach expenses, overhead 
costs, and executive compensation are compensable from the Fund,.  First, it provides 
predictability, and secondly, it eliminates uncertainties with whether the costs submitted would 
be compensable or not.  Eliminating uncertainties will lessen the reporting burden on small 
businesses. The Commission therefore concludes that the requirements of the Report and Order 
will not have a significant economic impact on a substantial number of small entities.
118. The Commission expressed concern, based on comparisons of VRS providers 
cost and demand projections with their actual historical data, that some VRS providers have 
received compensation significantly in excess of their actual costs.258 The Commission has also 
  
256 See supra paras. 39-46.
257 Hamilton Relay, Inc. (Hamilton) raised this proposal, which would base the compensation rate paid by the Fund 
on the average of the intrastate TRS rates paid by the states, in its petition for reconsideration of the 2004 TRS 
Report & Order.  Hamilton Relay Service, Inc., Petition for Reconsideration (filed Oct. 1, 2004) (Hamilton 
Petition); see also Hamilton Reply to comments filed in response to its petition for reconsideration (filed Nov. 30, 
2004).  Hamilton also raised this issue in its application for review of the 2004 Bureau TRS Rate Order, which 
adopted the compensation rates for the various forms of TRS for the 2004-2005 Fund year.  See 
Telecommunications Relay Services and Speech-to-Speech Services for Individuals with Hearing and Speech 
Disabilities, CC Docket No. 98-67, Order, 19 FCC Rcd 12224 (June 30, 2004) (2004 Bureau TRS Rate Order), 
modified by Telecommunications Relay Services and Speech-to Speech Services for Individuals with Hearing and 
Speech Disabilities, CC Docket No. 98-67, Order, 19 FCC Rcd 24981 (Dec. 30, 2004) (Modified 2004 Bureau TRS 
Order).  
258 See supra para. 48.
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observed that providers demand forecasts for VRS generally have been lower than actual 
demand, resulting in overcompensation to providers for completed minutes under the current 
per-minute cost recovery scheme.259  
119. The Commission, therefore, adopts three compensation rate tiers for VRS.  These 
tiers are intended to reflect likely cost differentials between small providers; mid-level providers 
who are established but who do not hold a dominant market share; and large, dominant providers 
who are in the best position to achieve cost synergies.  As a general matter, the three-tiered 
approach is based on market data reflecting the number of monthly minutes submitted to NECA 
by the various providers.  The data reflects that the newer providers generally provide less than 
100,000 minutes per month; that other, more established providers (with the exception of the 
dominant provider) generally provide monthly minutes ranging in the low hundreds of 
thousands; and that the dominant provider provides minutes ranging in the millions.  The 
Commission, therefore, believes that using three tiers is appropriate to ensure both that, in 
furtherance of promoting competition, the newer providers will cover their costs, and the larger 
and more established providers are not overcompensated due to economies of scale.  
120. By adopting a tiered approach, as set forth above, providers that handle a 
relatively small number of minutes and therefore have relatively higher per-minute costs will 
receive compensation on a monthly basis that will likely more accurately correlate to their actual 
costs.  Conversely, providers that handle a larger number of minutes, and that therefore have 
lower per-minute costs, will also receive compensation on a monthly basis that likely more 
accurately correlates to their actual costs.  Furthermore, the Commission concludes that under 
such a tiered approach, all providers will be compensated on a cascading basis, such that 
providers will be compensated at the same rate for the minutes falling within a specific tier.  In 
other words, all providers will be compensated at the highest rate for those minutes falling within 
the first tier; at the middle rate for those minutes falling within the middle tier, and at the lower 
rate for all additional minutes. The Commission believes that using tiered rates, rather than a 
single, weighted average rate, will more fairly compensate all providers for their reasonable 
actual costs of providing service.  Since fair compensation will benefit all provides equally, 
imposing no separate and adverse impact on smaller entities, the Commission further concludes 
that its tiered rates will not have a significant economic impact on a substantial number of small 
entities.
121. Because the Commission recognizes that potential STS users are not being made
aware of the availability of STS, the Commission adds an additional amount to the STS 
compensation rate for outreach efforts.  The Commission also requires that STS providers file a 
report annually with NECA and the Commission on their specific outreach efforts directly 
attributable to the additional support for STS outreach.  Since STS providers will be 
compensated an additional amount for outreach, the Commission concludes that requiring STS 
providers to file an annual report will not have a significant economic impact on a substantial 
number of small entities.
122. Finally, in order to be compensated for the costs of providing TRS, the providers 
are required to meet the applicable TRS mandatory minimum standards as required in Section 
  
259 Id.
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64.604.260 Reasonable costs of compliance with this Report and Order are compensable from the 
Fund.  Thus, because the providers will recoup the costs of compliance within a reasonable 
period, the Commission asserts that the providers will not be detrimentally burdened.  Therefore, 
the Commission certifies that the requirements of the Report and Order will not have a 
significant economic impact on a substantial number of small entities.
123. The Commission also notes that, with specific regard to the issue of whether a 
substantial number of small entities will be affected, of the 13 providers affected by the ruling 
adopted herein, there are only three 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.261 Currently, thirteen providers are 
providing various forms of TRS and being compensated from the Interstate TRS Fund:  
Ameritech; AT&T Corp.; CapTel, Inc.; Communication Access Center for the Deaf and Hard of 
Hearing, Inc.; GoAmerica; Hamilton Relay, Inc.; Hands On; Healinc; Nordia Inc.; Snap 
Telecommunications, Inc; Sorenson; Sprint and Verizon.  The Commission notes that 3 of 13 
providers noted above are small entities under the SBAs small business size standard.  Because 
three of the affected providers will be promptly compensated within a reasonable period for 
complying with this Report and Order, the Commission concludes that the number of small 
entities affected by our decision in this Order is not substantial.  
124. Therefore, for all of the reasons stated above, the Commission certifies that the 
requirements of this Report and Order will not have a significant economic impact on these 
small entities.
125. The Commission will send a copy of the Report and Order, including a copy of 
this Final Regulatory Flexibility Certification, in a report to Congress pursuant to the 
  
260See generally 47 C.F.R.  64.604(c)(5)(iii)(E). 
261 13 C.F.R.  121.201, NAICS code 517110.  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.)
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Congressional Review Act.262 In addition, the Report and Order and this final certification will 
be sent to the Chief Counsel for Advocacy of the SBA, and will be published in the Federal 
Register.263
  
262 See 5 U.S.C.  801(a)(1)(A). 
263 See 5 U.S.C.  605(b).
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APPENDIX H
Final Rule Changes
The Commission amends 47 C.F.R. Part 64 subpart F as follows:
PART 64  MISCELLANEOUS RULES RELATING TO COMMON CARRIERS
1.  The authority citation for part 64 continues to read as follows:
Authority:  47 U.S.C. 154, 254 (k); secs. 403 (b)(2)(B), (c), Public Law 104-104, 110 Stat. 56. 
Interpret or apply 47 U.S.C. 201, 218, 222, 225, 226, 228, and 254 (k) unless otherwise noted.
2.  Section 64.604 is amended by amending paragraph (c)(5)(iii)(C) to read as follows:
 64.604 Mandatory minimum standards. 
*****
(c) 
***
(5) 
***
(iii)
***
(C) Data Collection from TRS Providers. TRS Providers shall provide the administrator with true 
and adequate data and other historical, projected and state rate related information reasonably 
requested by the administrator necessary to determine TRS fund revenue requirements and 
payments. TRS providers shall provide the administrator with the following: total TRS minutes 
of use, total interstate TRS minutes of use, total TRS operating expenses and total TRS 
investment in general accordance with part 32 of the Communications Act, and other historical 
or projected information reasonably requested by the administrator for purposes of computing 
payments and revenue requirements. The administrator and the Commission shall have the 
authority to examine, verify and audit data received from TRS providers as necessary to assure 
the accuracy and integrity of fund payments.
*****
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STATEMENT OF 
CHAIRMAN KEVIN J. MARTIN
Re:  Telecommunications Relay Services and Speech-to-Speech Services for Individuals with 
Hearing and Speech Disabilities, CG Docket No. 03-123
The Commission has taken a number of important actions relating to 
Telecommunications Relay Services (TRS), all of which have been aimed at fulfilling our 
statutory goal of ensuring that every person has equal access to this nations communications 
services.  The Order we adopt will help to achieve the goals of the Americans with Disabilities 
Act.
We are well aware that there are many Americans with hearing or speech disabilities that 
depend on TRS services for their daily communication needs.  The Fund has seen dramatic 
growth over the past few years as more and more individuals with disabilities tap into all the 
benefits that these services offer.  The Commission remains committed to improving the quality 
of life for individuals with disabilities by ensuring that they have the same access to 
communication technologies as people without such disabilities.  To this end we will continue to 
take all necessary actions to ensure that the TRS program, upon which they rely, is operated as 
efficiently and effectively as possible. 
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STATEMENT OF
COMMISSIONER MICHAEL J. COPPS
Re: Telecommunications Relay Services and Speech-to-Speech Services for Individuals with 
Hearing and Speech Disabilities, CG Docket No. 03-123.
A cornerstone of the Americans with Disabilities Act is to ensure that persons with 
disabilities can access the tools they need to lead prosperous, productive and fulfilling lives.  
With this as a guiding principle, it continues to be essential that the Commission ensure that the 
deaf, hard of hearing and those with speech disabilities receive the communications services they 
are entitled to, that providers are fairly compensated for their services, and that the Commission 
be able to effectively administer the program. 
In July of last year we sought comment from consumers and providers on how best to build a 
rate reimbursement system that serves consumers well and fairly compensates providers. At the 
time I said we must not find ourselves unable to meet the challenge upon the completion of the 
rulemaking.  I am pleased to say that after essential input from members of the disabilities 
community and service providers, along with the hard work of Commission staff, we are 
hopefully putting the Telecommunications Relay Services rate reimbursement system on a solid 
footing for the future to best serve the deaf, hard of hearing and speech impaired consumers.  
 
In particular, the Commission adopts new rate recovery methodologies for the variety of 
services available to the disabilities community.  The adoption of the Multi-state Average Rate 
Structure Plan for a number of services is expected to simplify the rate process while setting 
more predictable, fair, and reasonable rates.  For Video Relay Services, the Commission adopts 
tiered compensation rates based on call volume.  In doing so the Commission encourages 
competition for services while recognizing that there are efficiencies when larger providers have 
achieved economies of scale.  In the case of Speech-to-Speech services, I am particularly pleased 
that the Commission directs additional funding be used for outreach to this underserved 
community.  Further, the Commission remains committed to doing ongoing audits and oversight 
and therefore requires providers to submit detailed information to allow for ongoing reviews of 
the integrity of these reimbursement programs. 
The benefits of the new reimbursement system are certainly promising but the Commission 
will need to monitor it closely to ensure that it is working as intended.  It remains essential that 
going forward all of the stakeholders affected by these new rules, particularly members of the 
disabilities community, provide us with their input on where it is working well and where any 
adjustments are needed. We stand ready to address any unforeseen consequences as these rules 
are implemented.
I want to thank Chairman Martin for his willingness to work closely with us to reach such a
favorable outcome.  My thanks also go out to the Bureau, particularly Cathy Seidel and the 
Disability Rights Office, for working tirelessly not only on this item but also on the 
Commissions obligations to the disabilities community.
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STATEMENT OF
COMMISSIONER JONATHAN S. ADELSTEIN
Re: Telecommunications Relay Services and Speech-to-Speech Services for Individuals with 
Hearing and Speech Disabilities, CG Docket No. 03-123.
The services supported by the Telecommunications Relay Service (TRS) Fund provide vital 
connections for millions of Americans with hearing and speech disabilities.  As communications 
technologies continue to play a greater role in all of our lives, relay services are an increasingly 
important tool.  They help the disability community harness the power of our rapidly-evolving 
communications networks and, more broadly, they help us as a nation to take advantage of our 
collective strength.  
Even as use of revolutionary technologies like Video Relay Service (VRS), Internet Protocol 
(IP) Relay, and IP Captioned Telephone Service has surged, the Commissions compensation 
rate-setting process for our relay services has presented a variety of open questions and 
controversy among providers and consumers.  The message was clear from providers and 
consumers alike that the Commission needed to improve its administration of the Fund and to 
increase awareness of these critical services, so I am pleased that we tackle these issues in 
earnest here.
I commend the Chairman, my colleagues, and the Consumer and Governmental Affairs 
Bureau for their collective efforts to improve our management of the fund through this Order.  
The changes adopted here are supported by both consumers and providers, and should provide a 
more reasonable, transparent, and predictable process in future years.  I am also pleased that we 
provide specific compensation for outreach regarding emerging services, like Speech-to-Speech 
relay services, in this Order.  Finally, I am also pleased that we affirm our commitment to the 
TRS Advisory Council, and that we enlist the Councils assistance in monitoring and reviewing 
the new methodologies implemented here.
We must always be mindful of the Americans with Disabilities Acts (ADA) requirement 
that telecommunications services for those with hearing and speech disabilities be functionally 
equivalent to those services provided to hearing individuals, which serves as a continuing 
challenge for us to improve the program.  I look forward to working with my colleagues, our 
CGB staff, members of the TRS Advisory Council, and the many members of the disabilities 
community on these issues as we move forward.