[Federal Register Volume 86, Number 106 (Friday, June 4, 2021)]
[Proposed Rules]
[Pages 29969-29975]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11681]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[CG Docket Nos. 03-123 and 10-51; FCC 21-61; FR ID 29574]


Video Relay Service Compensation

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: In this document, the Federal Communications Commission (FCC 
or Commission) seeks comment on the adoption of compensation rates for 
Telecommunications Relay Services (TRS) Fund support of providers of 
video relay service (VRS). Because the compensation rates now in effect 
will be expiring, the adoption of new compensation rates is necessary 
so that VRS providers can continue to provide service and be 
compensated.

ADDRESSES: You may submit comments, identified by CG Docket Nos. 03-123 
and 10-51, by either of the following methods:
    <bullet> Federal Communications Commission's Website: https://www.fcc.gov/ecfs/filings. Follow the instructions for submitting 
comments.
    <bullet> Paper Filers: Parties who choose to file by paper must 
file an original and

[[Page 29970]]

one copy of each filing. Filings can be sent by hand or messenger 
delivery, by commercial overnight courier, or by first-class or 
overnight U.S. Postal Service mail. Currently, the Commission does not 
accept any hand delivered or messenger delivered filings as a temporary 
measure taken to help protect the health and safety of individuals, and 
to mitigate the transmission of COVID-19. All filings must be addressed 
to the Commission's Secretary, Office of the Secretary, Federal 
Communications Commission.
    For detailed instructions for submitting comments and additional 
information on the rulemaking process, see document FCC 21-61 at 
https://docs.fcc.gov/public/attachments/FCC-21-61A1.pdf.

FOR FURTHER INFORMATION CONTACT: Michael Scott, Consumer and 
Governmental Affairs Bureau, at (202) 418-1264, or email 
<a href="/cdn-cgi/l/email-protection#175a7e747f76727b3944747863635771747439707861"><span class="__cf_email__" data-cfemail="034e6a606b62666f2d50606c7777436560602d646c75">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking (NPRM), document FCC 21-61, adopted on May 20, 
2021, released on May 21, 2021, in CG Docket Nos. 03-123 and 10-51. The 
full text of document FCC 21-61 is available for public inspection and 
copying via the Commission's Electronic Comment Filing System (ECFS).
    To request materials in accessible formats for people with 
disabilities (Braille, large print, electronic files, audio format), 
send an email to <a href="/cdn-cgi/l/email-protection#b7d1d4d4828783f7d1d4d499d0d8c1"><span class="__cf_email__" data-cfemail="74121717414440341217175a131b02">[email protected]</span></a> or call the Consumer and Governmental 
Affairs Bureau at (202) 418-0530.
    This proceeding shall be treated as a ``permit-but-disclose'' 
proceeding in accordance with the Commission's ex parte rules. 47 CFR 
1.1200 et seq. Persons making ex parte presentations must file a copy 
of any written presentation or a memorandum summarizing any oral 
presentation within two business days after the presentation (unless a 
different deadline applicable to the Sunshine period applies). Persons 
making oral ex parte presentations are reminded that memoranda 
summarizing the presentation must (1) list all persons attending or 
otherwise participating in the meeting at which the ex parte 
presentation was made, and (2) summarize all data presented and 
arguments made during the presentation. If the presentation consisted 
in whole or in part of the presentation of data or arguments already 
reflected in the presenter's written comments, memoranda, or other 
filings in the proceeding, the presenter may provide citations to such 
data or arguments in his or her prior comments, memoranda, or other 
filings (specifying the relevant page and/or paragraph numbers where 
such data or arguments can be found) in lieu of summarizing them in the 
memorandum. Documents shown or given to Commission staff during ex 
parte meetings are deemed to be written ex parte presentations and must 
be filed consistent with rule 1.1206(b). In proceedings governed by 
rule 1.49(f) or for which the Commission has made available a method of 
electronic filing, written ex parte presentations and memoranda 
summarizing oral ex parte presentations, and all attachments thereto, 
must be filed through the electronic comment filing system available 
for that proceeding, and must be filed in their native format (e.g., 
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding 
should familiarize themselves with the Commission's ex parte rules.

Initial Paperwork Reduction Act of 1995 Analysis

    Document FCC 21-61 seeks comment on proposed rule amendments that 
may result in modified information collection requirements. If the 
Commission adopts any modified information collection requirements, the 
Commission will publish another document in the Federal Register 
inviting the public to comment on the requirements, as required by the 
Paperwork Reduction Act. Public Law 104-13; 44 U.S.C. 3501-3520.
    In addition, pursuant to the Small Business Paperwork Relief Act of 
2002, the Commission seeks comment on how it might further reduce the 
information collection burden for small business concerns with fewer 
than 25 employees. Public Law 107-198; 44 U.S.C. 3506(c)(4).

Synopsis

    1. In document FCC 21-61, the Commission seeks comment on the 
adoption of compensation rates for TRS Fund support of providers of 
VRS.
    2. Section 225 of the Communications Act of 1934, as amended (the 
Act), 47 U.S.C. 225, requires the Commission to ensure the availability 
of TRS to persons who are deaf, hard of hearing, deafblind, or have 
speech disabilities, ``to the extent possible and in the most efficient 
manner.'' TRS are defined in section 225 of the Act as ``telephone 
transmission services'' enabling such persons to communicate by wire or 
radio ``in a manner that is functionally equivalent to the ability of 
[a person without hearing or speech disabilities] to communicate using 
voice communication services.'' VRS is a form of TRS that allows people 
with hearing or speech disabilities who use sign language to 
communicate with voice telephone users through video equipment. VRS is 
supported entirely by the Interstate TRS Fund (TRS Fund), and VRS 
providers are paid compensation for the provision of VRS in accordance 
with the Commission's rules and orders.
    3. In 2007, the Commission introduced a tiered rate structure for 
compensating VRS providers, to reflect the per-minute cost 
differentials among VRS providers and to ensure both that, in 
furtherance of promoting competition, the newer providers would cover 
their costs, and the larger and more established providers were not 
overcompensated due to economies of scale. Under a tiered rate 
structure, a VRS provider's monthly compensation payment is calculated 
based on the application of different rates to specified ``tiers'' of 
minutes. The highest rate is applied to an initial tier of minutes up 
to a defined maximum number, a lower rate is applied to the next tier, 
again up to a second defined maximum number of minutes, and a still 
lower rate is applied to any minutes in excess of the second maximum. 
Since 2007, the Commission has periodically modified the tier structure 
and rates to align them more closely with the actual costs incurred by 
providers of varying size and levels of usage.
    4. In 2013, the Commission made numerous regulatory changes 
affecting the VRS program. The Commission directed the Managing 
Director to contract with a neutral third party to build, operate, and 
maintain a video communications service platform, which would enable 
smaller VRS providers to compete more effectively, without having to 
operate their own service platforms. The Commission also expected that 
the development of a standard user-device interface would make it 
easier for smaller providers to compete for customers without having to 
replace the free devices routinely distributed by the largest VRS 
provider. After completing such structural reforms, the Commission 
anticipated being able to transition from the tiered rate structure to 
a single compensation rate for each element of the relay service. The 
Commission sought to align annual TRS Fund expenditures more closely 
with allowable provider costs. The Commission adopted a four-year 
interim compensation plan, whereby all the tiered rates would be 
reduced in stages on a ``glide path'' toward closer

[[Page 29971]]

alignment with the weighted-average cost of providing VRS.
    5. In 2017, the Commission reassessed its VRS compensation policy 
in light of intervening developments. The neutral VRS platform had 
proved to be impracticable. To the extent that the 2013 reforms had 
been implemented, they had not changed market conditions sufficiently 
to justify adoption of a single compensation rate. Accordingly, the 
Commission chose to defer consideration of major changes in the 
compensation system. Instead, to preserve choice among suppliers for 
VRS users, the Commission decided to maintain tiered compensation rates 
for the next four years. The Commission adopted a 3-tier rate structure 
for the four-year period and added an emergent rate to the tiered rate 
structure applicable to VRS providers with no more than 500,000 total 
monthly minutes.
    6. In setting VRS compensation for Fund Year 2021-22 and beyond, 
the Commission proposes to continue using a tiered rate structure. The 
Commission seeks comment on the costs and benefits of this proposal and 
on the underlying rationale, discussed below.
    7. First, developments over the last four years do not appear to 
warrant reconsideration of the Commission's 2017 assessment that the 
expectations and assumptions underlying the 2013 proposal to transition 
away from tiered compensation rates have not been borne out by 
experience. The reforms introduced in 2013 appear to have run their 
course, and further competitive improvements resulting from their 
implementation do not seem likely.
    8. Second, certain fundamental facts also appear unlikely to 
change. VRS addresses a limited segment of the communications 
marketplace. As a result, there are built-in limitations on total 
demand for VRS, which appears to have stabilized relative to the high 
growth rates that occurred 10-15 years ago. Further, the Commission is 
unaware of any innovations substantial enough to cause a major change 
in the economics of providing VRS in the foreseeable future.
    9. Third, in light of the above, there appears to be little reason 
to expect major changes in most VRS providers' relative per-minute 
costs. Today, there are only four certified VRS providers. No new 
entrants have sought certification to provide VRS since 2011. The 
current providers continue to operate at dramatically different scales, 
and there continues to be vast differences in the per-minute costs of 
VRS providers.
    10. Notwithstanding the foregoing limitations, the Commission sees 
no reason to change the VRS compensation policy objectives the 
Commission has long pursued: (1) To continue bringing total TRS Fund 
payments into closer alignment with allowable costs, and (2) to 
preserve and promote quality-of-service competition among multiple 
providers. By offering VRS users a choice among multiple providers, the 
Commission has found, it can most effectively carry out the statutory 
mandate to ensure that ``functionally equivalent'' VRS is available to 
all eligible individuals, ``to the extent possible and in the most 
efficient manner,'' in accordance with the Commission's minimum TRS 
standards and subject to rules that ``do not discourage or impair the 
development of improved technology.'' Enabling multiple VRS providers 
to compete for customers based on service quality, the Commission has 
found, will best ensure that: (1) Diverse service offerings are 
available, analogous to those afforded voice service users; (2) niche 
services are provided to meet the needs of certain segments of the sign 
language-using population, such as individuals who speak Spanish or are 
deafblind; and (3) VRS providers have incentives to maintain high 
standards of service quality and improve their VRS offerings. It might 
be less costly in the short run to set TRS Fund compensation in such a 
way that only the lowest-cost VRS provider can continue offering 
service. However, the Commission continues to believe that in the long 
run, the removal of competitive choices risks degradation of service 
quality and elimination of diverse offerings, both of which are needed 
for functionally equivalent service to all eligible users. And, because 
``efficient service is not just about cost but also quality,'' Sorenson 
Communications, LLC v. FCC, 897 F.3d 214, 228 (D.C. Cir. 2018), the 
Commission also believes that a policy of maintaining a choice of 
service offerings can be pursued consistently with the mandate that TRS 
be made available ``in the most efficient manner.'' 47 U.S.C. 
225(b)(1). As the D.C. Circuit has explained, ``competition promotes 
efficiency by preventing subpar service from a monopolist who has no 
fear of losing customers; i.e., it promotes compliance with the service 
quality required by the mandatory minimum standards.'' Sorenson at 229. 
The Commission seeks comment on these beliefs.
    11. Accordingly, in setting compensation policy for the next 
period, under the current regulatory structure, the Commission 
tentatively concludes that it will best serve the purposes of section 
225 of the Act if it structures VRS compensation to continue supporting 
an ecosystem in which multiple VRS providers can compete for minutes of 
use based on quality of service. The Commission seeks comment on this 
tentative conclusion and the premises set forth above, as well as any 
relevant data. The Commission also seeks comment on how best to set VRS 
compensation to promote the above benefits of allowing consumers a 
choice of VRS providers. Which past measures have succeeded or failed 
in this regard? What should the Commission's role be, if any, in 
supporting more effective quality-of-service competition?
    12. The Commission invites commenters to suggest alternatives to 
retaining a tiered-rate compensation methodology. The Commission urges 
commenters advocating alternatives to explain their proposals in 
detail, including how such proposals can deliver the benefits that the 
Commission has found are achievable through VRS competition (i.e., 
making functionally equivalent TRS available to all eligible 
individuals in the most efficient manner, in accordance with minimum 
TRS standards, without discouraging or impairing the development of 
improved technology).

Alternative Approaches for Setting Tiered Compensation Rates

    13. The Commission seeks comment on two overarching issues. First, 
should it adopt modified VRS compensation rates at this time, or 
``freeze'' the current rates until a reliable, post-COVID-19 pandemic 
baseline for cost and demand has been established? Second, if the 
Commission decides to move forward with rate-setting at this time, 
should the Commission retain the current setup, with an emergent rate 
and the current tier structure, or should it eliminate the emergent 
rate and adopt a modified tier structure, to improve provider 
incentives and move expenditures closer to costs?

Deferring Rate Changes to After the Pandemic

    14. In light of the protracted duration of the COVID-19 pandemic, 
the significant demand changes associated with it, and the consequent 
increase in uncertainty as to future costs and demand, the Commission 
seeks comment about the feasibility of setting new VRS compensation 
rates at this time. In 2020, following the outbreak of the COVID-19 
pandemic and efforts to reduce its spread, VRS providers

[[Page 29972]]

experienced an unanticipated increase in VRS traffic levels. Providers 
incurred some additional costs resulting from the need for operational 
adjustments, such as migrating communications assistants from call 
centers to working at home, and hiring additional staff to cope with 
increased demand.
    15. The TRS Fund administrator reports that the increased expenses 
incurred by VRS providers during the pandemic were more than offset by 
increased call volumes, resulting in a significant reduction in 
providers' average cost per minute from 2019 to 2020. Specifically, 
average demand has risen during the pandemic period by approximately 
25%, and average per-minute provider costs declined from 2019 to 2020 
by approximately 5.3%. At this time, the effects of the pandemic 
continue to be felt across the VRS industry, and it is unclear whether 
VRS traffic levels will return to a lower, pre-pandemic level. For many 
years, the Commission has found that the most reliable reference points 
in setting VRS compensation rates are the actual costs reported for the 
previous calendar year (in this case 2020) and the projected costs for 
the current calendar year (in this case 2021). Parties have raised the 
concern that, if the Commission relies on 2020 and 2021 data (as it 
would under the current practice), its estimate of per-minute costs 
could turn out to be understated in relation to actual post-pandemic 
costs, and rates set in reliance on 2020-21 data might not reasonably 
compensate VRS providers for the costs they will incur in the next rate 
period.
    16. In light of these uncertainties regarding future VRS costs and 
demand, should the Commission maintain the existing VRS compensation 
tiers and rates for the next two TRS Fund rate periods, i.e., until 
June 30, 2023, to allow the effects of the COVID-19 pandemic to 
resolve, so that future rates can be set based on cost and demand data 
that more reliably reflect post-pandemic conditions? Under a rate 
freeze approach, providers receiving compensation at the emergent rate 
on June 30, 2021, as well as any new entrants, would continue to be 
compensated at the emergent rate. Or should the Commission move forward 
with adopting modified compensation rates based on current cost and 
demand estimates, which could be adjusted to address the likelihood of 
a reversion to pre-pandemic demand levels?
    17. What are the likely costs and benefits of freezing current 
compensation rates for two years? The Commission invites advocates of 
this approach to explain and document the dimensions of any risk of 
further demand fluctuations they perceive. The Commission also seeks 
comment on whether such risks could or could not be mitigated by 
adopting a more conservative approach to ratemaking, such as by relying 
on 2019 costs as an additional benchmark for rate-setting. According to 
the TRS Fund administrator's estimate, the current rates allowed 
providers, on average, to recover 31.4% above allowable expenses in TRS 
Fund Year 2020-21--operating margins that are substantially above the 
zone of reasonableness (7.75%-12.35%) the Commission set in 2017. Is 
the risk of future changes in costs and demand so substantial that it 
warrants maintaining what appear to be over-compensatory compensation 
rates? Are there other effects that changing the compensation rate 
during this period could have on the provision of VRS?
    18. In addition, it has been suggested that increased VRS demand, 
as well as limitations on in-person education during the pandemic, has 
constricted the current supply of VRS communications assistants as well 
as the number of American Sign Language (ASL) interpreters entering the 
training ``pipeline'' for future availability for VRS employment. The 
Commission invites commenters to submit any evidence that would support 
a prediction of additional increases in such labor costs, the likely 
extent of such increases, and whether such increases are likely to be 
temporary or permanent.
    19. If the Commission decides to move forward and set revised 
compensation rates for 2022 and beyond, it invites parties to comment 
on how cost and demand estimates should be adjusted, if at all, to 
account for possible post-COVID costs and demand. Are 2020 and 
projected 2021 cost and demand data sufficiently reliable to serve as a 
reasonable basis to set rates for a new multi-year rate cycle? Should 
the Commission look only at provider-projected costs, e.g., for 2021 
and 2022, without considering historical costs? Alternatively, should 
the Commission substitute 2019 cost and demand data, in anticipation 
that VRS costs and demand may decrease to pre-pandemic levels once the 
pandemic subsides? Or should the Commission assume that demand will 
remain higher than 2019 levels, and if so, how much higher? What labor 
cost adjustments, if any, should be applied?

Retaining or Modifying the Current Rate Structure

    20. If the Commission decides to move forward and adopt a modified 
VRS compensation plan, what, if any, changes to the current rate 
structure would be warranted?
    21. Emergent rate. The Commission seeks comment on whether to 
retain or eliminate the emergent rate for VRS providers with no more 
than 500,000 monthly minutes. Has there been any change in 
circumstances since 2017 that would justify retaining the emergent 
rate, notwithstanding the Commission's previously stated intention to 
terminate the emergent rate after June 2021? The Commission notes that 
no new applicants have requested certification to provide VRS since 
2011. Are any firms currently planning or considering whether to apply 
for VRS certification? Have relevant circumstances changed for current 
beneficiaries of the emergent rate? For example, has any provider 
subject to the emergent rate managed to expand its market share, and if 
so, to what extent is continued application of the emergent rate still 
necessary? The Commission also notes that in 2017 it did not purport to 
assure cost recovery for every emergent VRS provider, but only to 
provide a reasonable opportunity for cost recovery, on a temporary 
basis, for those that have demonstrated an ability to grow 
substantially. Alternatively, are there other benefits from continuing 
to support very high-cost providers, even if they fail to reduce their 
per-minute costs substantially? Among the advantages of the tiered-rate 
system is that it allows support for smaller providers offering 
``niche'' services to meet the needs of subsets of the signing 
population. Should the Commission make the continued application of the 
emergent rate conditional on a provider's success in providing specific 
niche services not offered by others? To assist its determinations 
regarding tier structure, the Commission seeks comment on the specific 
services and features offered by each VRS provider. To what extent do 
providers offer niche services or features targeted to specific user 
populations, to provide functionally equivalent communication for such 
users? For example, GlobalVRS states that in addition to providing ASL-
to-English VRS, it provides ASL-to-Spanish VRS. Do other providers 
currently offer ASL-to-Spanish VRS, and to how many customers? Are 
there significant qualitative differences among such offerings? Which 
providers, if any, offer a service to deafblind users--and to how many 
users--that permits the deafblind user to speak using ASL, while the CA 
communicates to the deafblind user in English or Spanish text that can 
be read by a refreshable Braille reader? Do other providers offer

[[Page 29973]]

this type of service, or others, to deafblind users, and if so, what 
kind of service is offered to how many users?
    22. As for costs, in addition to the greater TRS Fund expenditures 
needed to support very high-cost providers, would the costs of 
perpetuating a special rate for such providers include lessened 
incentives to innovate, reduce costs, and grow market share? What other 
costs result from the emergent rate? Are the benefits of retaining the 
emergent rate sufficient to justify the costs? If retained, should the 
Commission alter the maximum-minutes criterion for applying the 
emergent rate?
    23. Tier Structures. The Commission also seeks comment on whether 
to retain or modify the current tier structures, whereby Tier I 
includes a provider's first 1 million monthly minutes, Tier II includes 
additional minutes up to 2.5 million, and Tier III includes all minutes 
above 2.5 million. The Tier I limit of 1 million minutes was adopted to 
ensure that as providers grew large enough to leave the emergent 
category, they would be subject to a rate that reflects their size and 
likely cost structure and that is appropriately lower than the marginal 
rate applicable to larger providers. Does this tier boundary continue 
to be appropriate? For example, has the ZVRS-Purple merger resulted in 
increased efficiencies? If so, what is the scale of such efficiencies, 
and does the existence of such efficiencies support the conclusion that 
substantial economies of scale can be achieved by growing above the 
benchmark of 1 million monthly minutes? Alternatively, if the emergent 
rate is eliminated, should Tier I be subdivided, so as to apply 
different rates, for example, to a provider's first 500,000 and second 
500,000 minutes, or to a provider's first 300,000 minutes and its next 
700,000 minutes? Are such changes warranted by relevant scale economies 
in the provision of VRS or a need to support niche services, as 
discussed above? Would these alternatives unduly limit a provider's 
incentive to increase its monthly minutes beyond 300,000 or 500,000?
    24. The Commission also seeks comment on whether to retain or 
modify the structures of Tiers II and III. To what extent has the gap 
in per-minute costs between Sorenson and ZP Better Together, LLC (ZP), 
narrowed? The Commission seeks comment on whether the retention of a 
tier boundary at 2.5 million minutes is supported by experience over 
the past four years. Is the Commission's 2017 finding--that substantial 
scale economies are likely to be present even at the 2.5 million 
minutes level--still supportable or are scale economies exhausted below 
that level? Alternatively, does experience show that substantial 
economies are likely present above the current boundary? If the current 
Tier II upper boundary is no longer appropriate, should the boundary be 
increased or decreased, and to what level? Alternatively, should the 
Commission create a fourth tier, and with what boundaries? Should the 
current Tiers II and III be merged? More broadly, how should the 
Commission account for increasing economies of scale in setting VRS 
rates, and at what scale do such economies stop increasing? The 
Commission encourages providers to submit recent real-world data 
relevant to whether the provision of VRS continues to be characterized 
by substantial scale economies and the appropriate boundaries for 
setting tiered rates that reasonably reflect those economies.
    25. With respect to all three tiers, what marketplace distortions, 
if any, may be created by retaining tier boundaries--or drawing new 
ones--that are not closely correlated to scale economies? What other 
costs and benefits are relevant to retaining or adjusting the number of 
tiers or the tier boundaries?
    26. Additional Compensation for Specialized Services. The 
Commission also seeks comment on whether it would serve the objectives 
of section 225 of the Act for a VRS provider to receive additional per-
minute compensation from the TRS Fund (in addition to the amount 
payable under the tiered formula) for the provision of certain 
specialized services, such as, for example, service to deafblind 
consumers, Spanish-ASL interpreting, or responding to requests that 
Certified Deaf interpreters be added to a call. What criteria should 
the Commission use to decide which, if any, specialized services should 
be supported by additional compensation and how to define the 
circumstances in which such services will be compensated? How should 
the additional reasonable costs of such services be determined for the 
purpose of setting an appropriate amount of additional compensation? 
What measures should the Commission take to prevent waste, fraud, and 
abuse in the provision of, or requests for, such specialized services?

Setting Tiered Rate Levels

    27. Assuming that the Commission adopts adjusted compensation rates 
at this time, it seeks comment on the appropriate rate level for each 
tier. In 2017, the Commission sought to set the rates for each tier to 
limit the likelihood that any provider's total compensation will be 
insufficient to provide a reasonable margin over its allowable 
expenses, and to limit the extent of any overcompensation of a provider 
in relation to its allowable expenses and reasonable operating margin. 
The Commission believes it should maintain this goal in setting tiered 
rates, although by setting rates for providers in discrete size classes 
based on general cost differentials between large, medium-sized, and 
small providers, the Commission does not seek or purport to guarantee 
all providers recovery of their individual costs. The Commission seeks 
comment on this belief.
    28. Operating Margin. The Commission proposes that VRS compensation 
rates for the next cycle should aim to ensure that the total 
compensation paid to all providers allows an average recovery of an 
operating margin above allowable expenses that is within the zone of 
reasonableness (7.75%-12.35%). The Commission is unaware of relevant 
changes in financial markets or other conditions affecting the VRS 
industry that would warrant reassessment of the zone of reasonableness. 
The Commission seeks comment on this proposal, including any changes 
that would justify setting a higher or lower range of reasonable 
operating margins. Is the current allowable operating margin sufficient 
to attract capital, new entry, and promote functionally equivalent VRS 
services? What has been providers' experience since 2017? Further, 
should the Commission set a specific allowed operating margin within 
this range, and if so, at what percentage?
    29. Allowable Costs. To the extent that, notwithstanding the 
Commission's history of comprehensive consideration of allowable cost 
issues, parties believe it is important to revisit allowable cost 
issues, the Commission urges commenters to state specifically in what 
respects the Commission's prior determinations on allowable costs are 
no longer valid, describe in detail any respects in which relevant 
circumstances have changed in the intervening period, and explain how 
the outcome they seek is consistent with, and furthers the purposes of, 
section 225 of the Act.
    30. Marginal Cost Benchmarks. The Commission continues to believe 
that marginal cost for a provider of relevant size would be an 
appropriate benchmark for Tier II or Tier III rates if it can be 
reasonably estimated. Of particular concern, some VRS providers 
distribute substantial amounts of free

[[Page 29974]]

user equipment as a marketing device to add or retain customers. In 
light of the waste and market disruption that can result from the use 
of device giveaways to recruit customers, the Commission seeks comment 
on whether to limit the compensation rates for tiers above Tier I to 
levels that do not exceed a reasonable percentage above a relevant 
provider's marginal allowable cost of providing an additional minute of 
service. The Commission also believes this approach to setting rates 
will help ensure that the TRS Fund is not providing de facto support 
for the costs of user devices, contrary to section 225 of the Act and 
the Commission's longstanding rule precluding the use of the TRS Fund 
to support such distribution of user devices. The Commission seeks 
comment on the above-stated beliefs, and on how the Commission should 
estimate marginal allowable cost for purposes of applying a marginal-
cost benchmark. For example, what expense categories should be included 
or excluded when calculating the marginal cost of providing an 
additional minute of VRS? Would a per-minute average of the operating 
expenses reported in Part B of the TRS Fund administrator's annual 
expense reporting form for VRS providers--which includes salaries and 
benefits for relay center staff, including communications assistants, 
telecommunications expenses, billing expenses, and relay center 
expenses--serve as a reasonable proxy for the marginal expense of 
providing an additional VRS minute? Should the marginal cost benchmark 
for a given tier be calculated as a weighted average of the marginal 
cost for those VRS providers for which that tier currently defines (or 
is projected to define) the highest applicable rate? The Commission 
seeks comment on whether marginal cost is an appropriate metric, or 
whether the Commission should consider alternative metrics. Would 
marginal-cost benchmarks for Tiers II and III deter continued 
investment in the service? Would they cause providers to ``put on the 
brakes'' and stop competing as the Commission feared in 2017? Or would 
they appropriately discourage providers from incurring wasteful 
marketing and other costs? What increment over marginal cost would be 
needed to ensure that beneficial effects are achieved, and detrimental 
effects are avoided?
    31. Rate Levels. The Commission also seeks comment on where to set 
rates for the emergent rate (if retained) and Tiers I-III. If the 
emergent rate is retained, should the Commission increase it, e.g., to 
the weighted average 2019 cost per minute for the current emergent 
providers, plus a 10% operating margin, maintain it at the current 
level of $5.29, or decrease it, e.g., to the weighted average of the 
emergent providers' projected cost per minute for 2022, plus a 10% 
operating margin? For Tier I, the Commission seeks comment on whether 
to increase the rate, e.g., to $5.29 (the current emergent rate), 
maintain the current $4.82 rate, or reduce it, e.g., to the weighted 
average of the emergent providers' projected cost per minute for 2022, 
plus a 10% operating margin. For Tier II, the Commission seeks comment 
on whether to maintain the rate at $3.97, or decrease it, e.g., to the 
level of the weighted-average marginal allowable expense per minute 
(plus a reasonable operating margin) of those providers for which the 
Tier II rate is the lowest applicable rate. For Tier III, the 
Commission seeks comment on whether to maintain the current $2.63 rate 
or decrease it, e.g., to the level of the weighted-average marginal 
allowable expense per-minute (plus a reasonable operating margin) of 
those providers for which the Tier III rate is the lowest applicable 
rate. The Commission also invites parties to submit other suggested 
rate levels for each tier, with justification and supporting data.
    32. To the extent the current tier structure is modified, as 
discussed above, the Commission seeks comment on appropriate rates for 
the modified tiers. Are there other factors the Commission should 
consider in determining appropriate rates of compensation for each 
tier? As an alternative, should the Commission consider Sorenson's 
suggestion to establish a unitary compensation rate for non-emergent 
providers at or about $3.33, the current average per-minute 
compensation paid across all VRS providers? Should the Commission also 
consider ZP's proposal that the Commission keep the existing rates but 
increase the benchmark for Tier II from 2.5 million to 5 million 
minutes, under the theory, in ZP's view, that doing so would allow 
continued competition and increased investment in the community? The 
Commission seeks comment on these proposals.

Rate Period and Adjustments

    33. Rate Period. The Commission seeks comment on the duration of 
the next rate period. In the current circumstances, what rate period 
will appropriately balance the needs for administrative efficiency, 
rate certainty, and cost-reduction incentives with the need for a 
timely review of how VRS costs may change in the future?
    34. Glide Path. If the Commission makes substantial reductions in 
any tiered rate, should it transition to that level in stages to avoid 
disruption of service to VRS consumers? What would be a reasonable 
annual percentage rate reduction for this purpose? For IP CTS, the 
Commission recently adopted a ``glide path'' for the IP CTS 
compensation rate, with a 10% annual reduction towards cost-based 
rates. Would a 10% annual reduction be appropriate for VRS?
    35. Price Indexing Adjustments. The Commission seeks comment on 
whether a price indexing formula, analogous to price-cap factors, 
should be applied to tiered rates during a multi-year rate period, and 
on the appropriate indices to use to reflect inflation and 
productivity. Is the application of price indexing factors needed to 
ensure that VRS providers have a reasonable opportunity to recover 
costs, to provide a sufficient incentive to reduce costs, or to prevent 
overcompensation of providers due to predictable future productivity-
related cost declines? If adopted, how should a price-indexing approach 
be structured in the context of tiered rates, e.g., to account for any 
disparities in expected productivity gains between small and large 
providers?

Initial Regulatory Flexibility Analysis

    36. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared this Initial Regulatory 
Flexibility Analysis (IRFA) of the possible significant economic impact 
on a substantial number of small entities by the policies and rules 
proposed in the NPRM. Written public comments are requested on this 
IRFA. Comments must be identified as responses to the IRFA and must be 
filed by the deadline for comments specified in the DATES section. The 
Commission will send a copy of document FCC 21-61 to the Chief Counsel 
for Advocacy of the Small Business Administration (SBA).

Need For, and Objectives of, the Proposed Rules

    37. The Commission intends to develop a multi-year cost-based 
compensation rate methodology for VRS. To develop a complete record the 
Commission seeks comment on maintaining a tiered rate structure, 
including the specifics for the tiered structure and for setting such 
rates, and in the alternative, freezing the current rates. The 
Commission is making these proposals for the purpose of allowing 
recovery of reasonable provider costs and ensuring that functionally

[[Page 29975]]

equivalent VRS is provided in the most efficient manner. The Commission 
seeks comment on these proposals, which include a number of various 
policy questions and alternatives for consideration.

Legal Basis

    38. The authority for this proposed rulemaking is contained in 
sections 1, 2, and 225 of the Communications Act of 1934, as amended, 
47 U.S.C. 151, 152, 225.

Small Entities Impacted

    39. The proposals in the NPRM will affect obligations of VRS 
providers. These services can be included within the broad economic 
category of All Other Telecommunications.

Description of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements

    40. The proposed compensation methodologies will not create 
reporting, recordkeeping, or other compliance requirements.

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

    41. The Commission is taking steps to minimize the impact on small 
entities and considering significant alternatives by identifying 
multiple methodologies for compensating VRS providers for the provision 
of VRS. The Commission seeks comment on maintaining tiered rates, 
including the specifics for the tiered structure and for setting such 
rates, and in the alternative, freezing the current rates. The 
Commission will consider these proposals to determine the best 
compensation methodology for ensuring choice among suppliers for VRS 
users and to help maintain functionally equivalent service and maintain 
an efficient VRS market over the long term in accordance with the 
Commission statutory obligations. The Commission seeks comment on the 
effect these proposals will have on all entities that provide VRS, 
including small entities.
    42. The Commission also seeks comment from all interested parties. 
Small entities are encouraged to bring to the Commission's attention 
any specific concerns they may have with the proposals outlined in the 
NPRM. The Commission expects to consider the economic impact on small 
entities, as identified in comments filed in response to the NPRM, in 
reaching its final conclusions and acting in this proceeding.

Federal Rules Which Duplicate, Overlap, or Conflict With, the 
Commission's Proposals

    43. None.

Federal Communications Commission.
Marlene Dortch,
Secretary, Office of the Secretary.
[FR Doc. 2021-11681 Filed 6-3-21; 8:45 am]
BILLING CODE 6712-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>