Federal Register / Vol. 82, No. 161 / Tuesday, August 22, 2017 / Rules and Regulations 39673 

Subpart LLL—National Emission 

Standards for Hazardous Air Pollutants 

From the Portland Cement 

Manufacturing Industry 

■ 2. Section 63.1349 is amended by 

adding paragraph (b)(6)(v)(H) to read as 

follows: 

§ 63.1349 Performance testing 

requirements. 

* * * * * 

(b) * * * 

(6) * * * 

(v) * * * 

(H) Paragraph (b)(6)(v) of this section 

expires on July 25, 2017 at which time 

the owner or operator must demonstrate 

compliance with paragraphs (b)(6)(i), 

(ii), or (iii). 

* * * * * 

■ 3. Section 63.1350 is amended by 

revising paragraph (l)(4) introductory 

text to read as follows: 

§ 63.1350 Monitoring requirements. 

* * * * * 

(l) * * * 

(4) If you monitor continuous 

performance through the use of an HCl 

CPMS according to paragraphs 

(b)(6)(v)(A) through (H) of § 63.1349, for 

any exceedance of the 30 kiln operating 

day HCl CPMS average value from the 

established operating limit, you must: 

* * * * * 

[FR Doc. 2017–17624 Filed 8–21–17; 8:45 am] 

BILLING CODE 6560–50–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 64 

[CG Docket Nos. 10–51 and 03–123; FCC 

17–86] 

Structure and Practices of the Video 

Relay Services Program 

AGENCY: Federal Communications 

Commission. 

ACTION: Final rule. 

SUMMARY: In this document, the 

Commission adopts a four-year rate plan 

to compensate video relay service (VRS) 

providers, amends its rules to permitserver based routing for VRS and pointto-point calls, authorizes the continued 

use of money from the 

Telecommunications Relay Service 

(TRS) Fund for Commission-supervised 

research and development, eliminates 

rules providing for a neutral video 

communications service platform, and 

reinstates the effectiveness of the rule 

incorporating the VRS Interoperability 

Profile technical standard. 

DATES: Effective September 21, 2017. 

The compliance date for 47 CFR 

64.621(b)(1) is December 20, 2017. The 

incorporation by reference of certain 

publication listed in the rules was 

approved by the Director of the Federal 

Register as of May 30, 2017. 

FOR FURTHER INFORMATION CONTACT: Bob 

Aldrich, Consumer and Governmental 

Affairs Bureau at: (202) 418–0996, email 

Robert.Aldrich@fcc.gov, or Eliot 

Greenwald, Consumer and 

Governmental Affairs Bureau at: (202) 

418–2235, email Eliot.Greenwald@

fcc.gov. 

SUPPLEMENTARY INFORMATION: This is a 

summary of the Commission’s Report 

and Order and Order, FCC 17–86, 

adopted and released on July 6, 2017, in 

CG Docket Nos. 10–51 and 03–123. The 

full text of this document will be 

available for public inspection and 

copying via the Commission’s 

Electronic Comment Filing System 

(ECFS), and during regular business 

hours at the FCC Reference Information 

Center, Portals II, 445 12th Street SW., 

Room CY–A257, Washington, DC 20554. 

To request materials in accessible 

formats for people with disabilities 

(Braille, large print, electronic files, 

audio format), send an email to fcc504@

fcc.gov or call the Consumer and 

Governmental Affairs Bureau at (202) 

418–0530 (voice), (844) 432–2272 

(videophone), or (202) 418–0432 (TTY). 

Congressional Review Act 

The Commission sent a copy of 

document FCC 17–86 to Congress and 

the Government Accountability Office 

pursuant to the Congressional Review 

Act, see 5 U.S.C. 801(a)(1)(A). 

Final Paperwork Reduction Act of 1995 

Analysis 

Document FCC 17–86 does not 

contain any new or modified 

information collection requirements 

subject to the Paperwork Reduction Act 

of 1995, Pub. L. 104–13. In addition, 

therefore, it does not contain any new 

or modified information collection 

burden for small business concerns with 

fewer than 25 employees, pursuant to 

the Small Business Paperwork Relief 

Act of 2002, Pub. L. 107–198, see 44 

U.S.C. 3506(c)(4). 

Synopsis 

VRS Compensation—Allowable Cost 

Categories 

1. In the Further Notice of Proposed 

Rulemaking (FNPRM), FCC 17–26, 

published at 82 FR 17613, April 12, 

2017, the Commission stated its 

intention not to reopen questions 

concerning the categories of expenses 

that should be considered allowable 

costs for VRS compensation. Various 

parties commenting in this proceeding 

nonetheless urge that the Commission 

re-open the matter of allowing costs 

associated with customer premise 

equipment (CPE), numbering, outreach, 

and research and development (R&D). In 

addition, Sorenson Communications, 

LLC (Sorenson) raises new concerns 

about allowing compensation for 

imputed intellectual property. These 

issues are beyond the scope of the 

rulemaking. The Commission has 

previously considered and disallowed 

compensation for each of these 

categories, except intellectual property, 

which is addressed below. 

2. No reason to reopen previously 

settled disallowance issues. No party 

provides a compelling reason to reopen 

the above issues in this proceeding, 

especially in the absence of 

Administrative Procedure Act (APA) 

notice. The Commission does not agree 

that circumstances have changed 

dramatically and sees no material 

difference from prior proceedings where 

these issues were addressed. 

3. Even if the issues were not already 

settled and there was APA notice 

regarding them, the Commission would 

not be persuaded by arguments to 

expand allowable costs. Equalizing all 

VRS-related costs to a voice telephone 

user’s costs is not part of the 

Commission’s mandate under section 

225 of the Act. Congressional intent to 

equalize either network access rates or 

equipment costs for TRS and voice 

service users is not evident in the text 

of this narrowly drawn provision, its 

surrounding context, or its legislative 

history. In 1990, the year of section 

225’s enactment, all TRS calls took 

place between individuals who used 

TTYs and voice users. But the high costs 

of TTY service rates and equipment 

were matters of public awareness and 

were being addressed through state and 

federal action outside the relay 

requirements of section 225 of the Act. 

Regarding service costs, the plain text of 

this section demonstrates that it solely 

was intended to prevent relay users 

from incurring the added costs of 

routing TRS calls through remote relay 

centers that lie outside the geographical 

locations of the parties to a relay call, 

and nothing more. Congress had 

knowledge about, and ample 

opportunity to direct the Commission to 

equalize telephone service costs for TTY 

users at the time of section 225’s 

enactment, yet it specifically chose not 

to do so. Accordingly, the discrepancy 

between the higher service costs for a 

broadband connection needed to 

achieve access to VRS and the costs of 


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telephone service incurred by voice 

users was not a matter intended to be 

addressed by section 225 of the Act. 

4. Similarly, at the time of section 

225’s enactment, it was quite evident 

that the cost of end user equipment 

needed to complete TRS calls would be 

significantly greater than the equipment 

costs incurred by voice telephone users. 

The average cost for a TTY was $600– 

$1000, a prohibitive amount for many 

individuals with low incomes. Again, 

however, there is simply no indication 

in section 225 of the Act or its 

legislative history of an intent by 

Congress to require the Commission to 

use the TRS Fund or any other 

mechanism to equalize such equipment 

costs. Rather, states developed local 

programs to distribute TTYs and other 

specialized customer premises 

equipment to low income and other 

eligible individuals with disabilities. 

5. Further, disallowance of end user 

equipment costs from compensable 

expenses does not discourage the 

development of improved technology. 

Rather, compensation to providers for 

the provision of free equipment runs 

counter to promoting the use of new 

mobile and other technologies that are 

available for use with VRS. The 

Commission has undertaken extensive 

efforts to expand the availability of 

interoperable off-the-shelf Internet 

Protocol (IP) enabled devices for VRS 

use, so that individuals who use these 

services can reduce their dependence on 

VRS equipment specifically designed 

for a particular provider’s network. 

Providers increasingly run their own 

software on off-the-shelf mobile devices, 

tablets, desktop personal computers, 

and laptops, reducing the need for 

specialized, stand-alone VRS 

equipment. Because the Commission’s 

rules require that all providers support 

a common standard for relay user 

equipment (in addition to their own 

proprietary standards), the Commission 

has made it possible for the software 

developed according to such standard to 

work on all provider networks, thus 

making it more attractive for third 

parties to develop VRS software. These 

actions demonstrate a concerted effort 

by the Commission to further section 

225’s mandate to encourage the use of 

new and innovative technology. 

6. By not authorizing recovery of the 

costs of VRS CPE, the Commission 

avoids offering preferential subsidies to 

certain VRS providers (i.e., those who 

rely on the free provision of expensive, 

dedicated videophones and other 

equipment to attract and retain VRS 

consumers for their branded services) to 

the exclusion of others, as well as 

avoids encouraging providers to engage 

in free CPE giveaways as incentives to 

use their services. The Commission 

believes that if VRS providers are to 

compete for customers, it is preferable 

for such competition to take place with 

respect to the quality of their services— 

which was the intended purpose of 

section 225 of the Act—not the 

equipment they can afford to distribute. 

The Commission finds no basis for 

departing from Commission precedent, 

and therefore again declines to allow 

use of TRS funds to support VRS 

providers’ equipment costs. 

7. Intellectual Property. The 

Commission concludes that a provider 

that develops its own intellectual 

property is not entitled to have the 

imputed value of that property included 

in allowable costs. First, the 

Commission has not previously allowed 

compensation for the imputed value of 

TRS providers’ property, whether 

tangible or intangible, and the 

Commission sees no reason to do so 

under a methodology that is based on 

compensating providers for their actual 

expenses. Any attempt to value 

intellectual property would necessarily 

be speculative and highly inexact, 

especially in the absence of evidence 

based on arm’s length marketplace 

transactions involving such property. 

Second, as noted above, to the extent 

that a provider engages in R&D to 

develop VRS technologies whose 

purpose is to meet the Commission’s 

mandatory minimum standards, it is 

already permitted to recover those 

expenses from the TRS Fund. To also 

compensate a provider for the imputed 

value of such technology would be 

duplicative at best. Third, the 

Commission finds unconvincing the 

suggestion of an analogy between costs 

incurred by a TRS provider to license 

technology from third parties and the 

imputation of a licensing fee to be 

‘‘paid’’ by a TRS provider to itself. The 

Commission’s cost-of-service 

methodology appropriately assesses the 

cost of VRS based on provider’s actual 

expenses, not hypothetical expenses 

that a provider might have incurred had 

it chosen to purchase technology from 

third parties. When a VRS provider 

chooses to develop its own VRS 

technologies rather than license them 

from others, it is reasonable to assume 

that the provider decided that such selfprovisioning would enable it to provide 

service more effectively and at lower 

cost. It is likewise reasonable and 

appropriate for the Commission to 

assess a provider’s costs based on its 

actual expenditures rather than 

hypothetical, more costly expenditures 

that it might have made but chose not 

to. 

8. In effect, the argument for recovery 

of the imputed value of a TRS provider’s 

intellectual property appears to be a 

way of arguing that VRS providers 

should be able to gain additional profit 

for what they have invested in R&D. 

Although the Commission allows 

providers to recover their reasonable 

expenses of providing TRS, in prior 

decisions it has disallowed claims for 

‘‘profit’’ in excess of a reasonable 

allowance for the cost of raising capital. 

Although in the section following the 

Commission modifies the method of 

estimating capital costs by adopting an 

‘‘operating margin’’ approach that will 

allow providers greater opportunity to 

recover such costs, the Commission 

does not thereby authorize providers to 

recover additional ‘‘markup’’ or profit 

that goes beyond such reasonable 

allowance. 

Capital Cost Recovery/Operating Margin 

9. Replacing return on investment 

with operating margin. In light of VRS 

providers’ concerns about the adequacy 

of the 11.25% allowed return on plant 

investment for capital cost recovery in 

an industry with very little plant 

investment, the Commission adopts its 

proposal in the FNPRM to replace the 

current rate-of-return approach to 

capital cost recovery with an operating 

margin approach, allowing recovery of a 

specified percentage of allowable 

expenses. 

10. Setting an allowed operating 

margin. There is wide variation among 

average operating margins of different 

industry sectors, as well as between 

operating margins for particular 

companies and time periods. Sorenson 

provides a list of adjusted EBITDA 

margins for 20 ‘‘leading publicly traded 

information technology consulting 

companies,’’ which Sorenson states is 

based on data reported by Bloomberg on 

U.S.-listed public companies with a 

market cap of at least $1 billion and 

with 100% of their revenue derived 

from ‘‘IT Services.’’ Sorenson notes that 

the unweighted average margin for the 

companies on this list is 15.9%. 

11. The Commission concludes that 

consideration of operating margins 

earned in analogous industries may be 

a reasonable approach to setting an 

allowed operating margin for VRS 

providers. However, information 

technology (IT) consulting companies 

are not sufficiently analogous to VRS 

providers for their operating margins to 

serve as a reasonable proxy. Unlike IT 

consulting companies, the bulk of VRS 

costs are labor costs, primarily salaries 

and benefits for interpreters, who need 


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Federal Register / Vol. 82, No. 161 / Tuesday, August 22, 2017 / Rules and Regulations 39675 

not be highly skilled in technology. The 

Census Bureau’s survey of public 

companies’ financial data for North 

American Industry Classification 

System (NAICS) Code 541, defined as 

‘‘Professional, Scientific, and Technical 

Services,’’ but excluding legal, shows 

that average quarterly pre-tax operating 

margins for this industry sector between 

2013 and 2016 ranged from 1.8% (in 

1Q2016) to 7.9% (in 2Q2013), averaging 

4.6% in the 2013–16 period as a whole 

and 3.2% in 2016. For NAICS 5419, a 

subsector that includes translation and 

interpretation services but excludes 

various less analogous industry 

segments such as accounting, 

architectural and engineering, and 

computer systems design services, the 

average operating margin for the public 

firms included in the Census Bureau’s 

survey ranged from 3.9% to 12.2% for 

the 2013–16 period and averaged 7.4% 

in the 2013–16 period as a whole and 

7.6% in 2016. Government contractors 

are another category that may 

reasonably be viewed as analogous to 

VRS providers in that they are paid by 

the government for providing services 

mandated by law or otherwise closely 

supervised by a government entity. In 

five surveys of government contractors 

by Grant Thornton, conducted between 

2009 and 2015, the majority of 

respondents consistently reported profit 

rates before interest and taxes between 

1% and 10%, with the median profit 

rate in the neighborhood of 6%. 

12. Selecting an operating margin 

from among this wealth of data 

regarding arguably analogous industry 

sectors is not subject to precise 

determination. The Commission notes 

that for 2016 (or 2015, in the case of 

government contractors, as that was the 

most recent year surveyed), none of the 

industry sector surveys described above, 

other than the one cited by Sorenson, 

had average operating margins greater 

than 7.6%, and that even the high 

technology firms cited by Sorenson have 

a median operating margin of only 

12.35%. Based on the current record, 

and in light of the Commission’s 

statutory mandate to ensure that VRS is 

made available ‘‘to the extent possible, 

and in the most efficient manner,’’ the 

Commission concludes that the range of 

7.6% to 12.35% represents the ‘‘zone of 

reasonableness’’ of an allowable 

operating margin for VRS providers. 

Compensation Rate Structure 

13. Over the last four years, the 

Commission has observed the results of 

its 2013 structural reform and rate 

initiatives, including the effects on 

provider incentives, to the extent those 

can be discerned. The 2013 plan 

provided for reducing the rate gap 

between highest- and lowest-priced 

tiers, with the ultimate expectation that 

the tiered rate structure eventually 

would be replaced by a unitary 

compensation rate for all minutes, 

which would be set either directly or by 

proxy based on competitive bidding. 

This expectation was, in turn, based on 

the assumption that structural reforms, 

such as effective interoperability and 

portability standards and the 

establishment of a neutral routing 

platform would generate a ‘‘more 

competition-friendly environment’’ for 

small providers. There was also an 

expectation that, pending the 

completion of such structural reforms, 

the temporary continuation of a tiered 

rate structure would both encourage 

improvements in efficiency and ensure 

that smaller providers ‘‘have a 

reasonable opportunity to compete 

effectively during the transition and to 

achieve or maintain the necessary scale 

to compete effectively after structural 

reforms are implemented.’’ Structure 

and Practices of the Video Relay Service 

Program; Telecommunications Relay 

Services and Speech-to-Speech Services 

for Individuals With Hearing and 

Speech Disabilities, Report and Order, 

FCC 13–82, published at 78 FR 40581, 

July 5, 2013 (2013 VRS Reform Order). 

14. The record confirms that most of 

these underlying expectations and 

assumptions have not been borne out by 

experience. First, a number of the 

Commission’s expectations regarding 

the pace and content of structural 

reforms have proven to be overly 

optimistic. Improved interoperability 

standards were not incorporated into 

the Commission’s rules until this year, 

and some aspects of equipment 

portability, which was expected to 

improve the competitiveness of the VRS 

market by facilitating consumers’ use of 

inexpensive, off-the-shelf devices, have 

yet to secure consensus from the VRS 

industry. Further, the neutral video 

communications platform, which the 

2013 VRS Reform Order envisioned as 

a key element in enabling small 

providers to compete effectively, proved 

to be impracticable. These 

developments disprove the 

Commission’s original assumption that 

structural reforms would be far enough 

advanced to enable the elimination of 

tiered rates and the introduction of a 

market-based methodology upon the 

expiration of the 2013 compensation 

plan. 

15. Second, provider cost reports 

overall do not show the major 

improvements in smaller providers’ 

efficiency that the Commission assumed 

were possible. With the ‘‘glide path’’ 

reductions in VRS compensation rates, 

providers have been under pressure to 

improve efficiency, and the record 

indicates that certain providers have 

taken significant measures to do so. The 

weighted average of historical perminute costs reported by VRS providers 

has declined from 2013 to 2016; 

however, the decline has been relatively 

modest, compared to the period from 

2009 to 2012, when average per-minute 

costs declined by more than $1.00 per 

minute. Thus, while it appears that 

providers have achieved some efficiency 

improvements, other factors, such as the 

lack of full interoperability, may have 

limited their success. As a result, the 

Commission’s expectation that smaller 

VRS providers would be able to make 

substantial improvements in efficiency 

within the past four-year period was not 

fulfilled. 

16. Third, updated VRS demand data 

confirm that the VRS market structure is 

largely unchanged since 2013, when 

‘‘Sorenson provide[d] about 80% of the 

VRS minutes logged every month, and 

its two principal competitors each 

provide[d] another five to ten percent.’’ 

Since then, the two cited competitors of 

Sorenson have merged, but it is too 

early to predict how that merger will 

affect the viability of competition in the 

VRS market (other than reducing the 

total number of competitors from five to 

four). What is clear, however, is that 

competitors have not made significant 

inroads into Sorenson’s market share, 

and no VRS provider has been able to 

grow significantly so as to achieve ‘‘the 

necessary scale to compete effectively.’’ 

17. As a consequence of these 

developments, there remain vast 

differences in the per-minute costs of 

VRS providers, which roughly track the 

vastly different market shares of each 

current provider. As long as such 

lopsided cost structures persist, it seems 

highly unlikely that any of the nondominant VRS providers can compete 

successfully to gain market share vis-a`- 

vis the largest, least-cost provider. 

18. In the face of these unfulfilled 

expectations and assumptions, the 

Commission must choose from a 

number of alternative courses to take. 

One possible course would be to seek to 

maximize efficiency by transitioning to 

a single rate set at the level of the 

allowable costs of the lowest-cost 

provider, or alternatively, at the level of 

the average allowable costs for the VRS 

industry. This approach would reduce 

the cost burden on the TRS Fund, at 

least in the short term, but, given the 

current disparate cost structures in the 

VRS market, also would be likely to 

eliminate all VRS competition. The 

Commission has consistently sought to 


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39676 Federal Register / Vol. 82, No. 161 / Tuesday, August 22, 2017 / Rules and Regulations 

encourage and preserve the availability 

of a competitive choice for VRS users, 

because it ensures a range of service 

offerings analogous to that afforded 

voice service users and because it 

provides a competitive incentive to 

improve VRS offerings. Further, the 

continuing presence of such competitive 

offerings is likely to encourage the 

lowest-cost provider to maintain higher 

standards of service quality than if it 

faced no competition. Thus, if the 

Commission was to allow VRS 

competition to be extinguished, for the 

sake of increasing the efficiency of VRS, 

the Commission would risk depriving 

users of functionally equivalent VRS. 

Because the Commission believes that, 

in the current circumstances, the 

benefits of such a rate reduction, 

through increased efficiency, are not 

worth the risks to functional 

equivalence associated with eliminating 

competitive choice, the Commission did 

not propose this course as an 

alternative, and no party advocates it. 

19. A second alternative would be to 

transition to a single rate set at the cost 

level of some higher-cost provider— 

most likely the next-lowest-cost 

provider. Due to the current imbalance 

among VRS providers’ cost structures, 

however, this method would be likely to 

result in greatly increased TRS Fund 

expenditures, because the most efficient 

provider—with the overwhelming bulk 

of minutes—would be compensated at a 

rate far in excess of its actual costs. 

Such inefficient use of TRS Fund 

resources is not permitted by section 

225 of the Act if there is a more efficient 

method of ensuring the availability of 

functionally equivalent service. In 

addition, by generating an extremely 

uneven set of operating margins—huge 

windfall profits for one provider and 

minimally sufficient margins or actual 

operating losses for the others, taking 

this approach seems likely to doom any 

prospect of the VRS market evolving to 

a more competitive structure. Indeed, 

adopting this approach, as a practical 

matter, would inevitably eliminate two 

of the four existing VRS competitors. A 

single rate could not be set high enough 

to allow a third provider to remain in 

the market without raising TRS Fund 

expenditures and allowing the windfall 

profits for lower-cost providers to 

achieve astronomical levels. 

20. For these reasons, the Commission 

concludes that the alternative proposed 

in the FNPRM—maintaining a tiered 

rate structure for the next four years— 

is the best available alternative at 

present. Compared with any practicable 

single-rate approach, as further 

explained below, a tiered rate approach 

is most likely to ensure that functionally 

equivalent VRS remains available and is 

provided in the most efficient manner 

with respect to TRS Fund resources. 

21. First, the application of tiered 

rates rather than a single rate will help 

ensure that there continue to be 

competitive options for VRS users, an 

objective that takes on special 

importance at this time, in light of the 

recent attrition in the VRS market. 

Although there were six independently 

owned providers at the time of the 2013 

VRS Reform Order, this number has 

since been reduced to four. The 

presence of multiple competitors, even 

if less efficient than the lowest-cost 

provider, may enhance functional 

equivalence by ensuring that VRS users 

have a choice among diverse service 

offerings. Further attrition, which would 

be inevitable if the Commission sets a 

single rate at any realistic level, would 

further limit the ability of consumers to 

select providers based on service quality 

and features, and would make the 

continuing availability of any 

competitive choice less certain, eroding 

the Commission’s ability to ensure the 

availability of functionally equivalent 

service. In these circumstances, to the 

extent that a tiered rate structure is more 

effective than a single rate in preventing 

further erosion of the competitiveness of 

the VRS environment, it may be 

justifiable on that ground alone, even if 

overall efficiency would be somewhat 

reduced. 

22. Moreover, the record indicates 

that, at this time, a tiered rate structure 

is more likely than a single-rate 

structure to improve the efficiency with 

which the TRS Fund supports VRS. 

Given the major disparities in service 

provider size and cost structure, tiered 

rates enable the Commission to reduce 

waste of TRS Fund resources by limiting 

compensation that is excessive in 

relation to a provider’s actual costs. 

Thus, the Commission is not persuaded 

that a tiered rate structure, by allowing 

payment of a higher effective 

compensation rate to less efficient VRS 

providers, necessarily contravenes the 

mandate that VRS be available in the 

most efficient manner. While the 

mandate is for the Commission to 

ensure the availability of VRS in the 

most efficient manner, the Commission 

must measure such efficiency by 

comparing the overall expenditures 

from the TRS Fund the Commission has 

established for that purpose, with the 

overall results achieved by such 

expenditures in terms of TRS 

availability and functional equivalence. 

A single rate structure fails this test of 

efficiency because it would cost the TRS 

Fund more in overall compensation 

than the tiered rate structure the 

Commission adopts. 

23. Further, the Commission must 

consider the value users get for the 

compensation paid to providers, and 

may take into consideration the extent 

to which the participation of less 

efficient providers produces other 

benefits in the way of improved services 

for consumers. In this regard, on 

numerous occasions, the Commission 

has made clear that there are benefits in 

supporting less efficient providers that 

meet the needs of niche populations, 

including people who are deaf-blind or 

speak Spanish, enabling the entrance of 

new companies that can introduce 

technological innovations into the VRS 

program, and ensuring that consumers 

with hearing and speech disabilities can 

select among multiple VRS providers— 

just as voice telephone users do. While 

the Commission is obligated to ensure 

the efficiency of the VRS program, it 

cannot sacrifice functional equivalency 

in doing so. Moreover, it is the 

Commission’s statutory obligation not to 

merely seek a short-term savings in an 

accounting sense; rather the 

Commission must consider the 

consequences of its actions in the long 

run. By supporting the continued 

participation of multiple providers, a 

tiered rate structure can help to prevent 

the VRS marketplace from devolving 

into a monopoly environment, thereby 

providing the Commission with much 

needed flexibility to consider other 

approaches that may improve efficiency. 

For example, one option the 

Commission may want to consider in 

the future is a reverse auction, in which 

multiple providers bid for offering 

service at the most efficient levels; but 

such an approach would not be feasible 

if all providers except one have been 

driven out of the market. A tiered rate 

structure allows the Commission to set 

rates that permit each provider an 

opportunity to recover its reasonable 

costs of providing VRS, without 

overcompensating those providers who 

have lower actual costs because, for 

example, they have reached a more 

efficient scale of operations. 

24. The Commission also does not 

agree that tiered rate structures 

necessarily detract from providers’ 

incentives to grow and increase their 

efficiency. As to growth incentives, 

while there could theoretically be a risk 

that a provider would ‘‘put the brakes 

on’’ its growth as it approached a tier 

boundary, a review of each providers’ 

compensable minutes over the last few 

years does not suggest that providers’ 

growth rates have been affected as their 

minutes approach a tier boundary. 

Moreover, to the extent there is such a 


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Federal Register / Vol. 82, No. 161 / Tuesday, August 22, 2017 / Rules and Regulations 39677 

risk of generating perverse incentives, 

the Commission believes it can be 

effectively addressed by ensuring that 

tier boundaries are wide enough to 

cover a provider’s likely growth during 

the life of the rate plan. As to efficiency 

incentives, because rates are being set 

for a period of several years, providers 

will have an incentive to reduce 

unnecessary costs so they can increase 

profits and minimize losses. 

25. Further, the tiers set under this 

structure are not provider-specific. 

Rather, each tier is equally applicable to 

any provider’s minutes that fall within 

that tier. Accordingly, under the tier 

structure the Commission adopts, the 

provider with both relatively large and 

relatively small volumes of minutes are 

each compensated at the higher (Tier I) 

rate for their first 1 million minutes, at 

a lower (Tier II) rate for additional 

minutes between 1,000,000 and 

2,500,000, and at the lowest (Tier III) 

rate for any minutes over 2,500,000. 

26. The Commission also declines to 

adopt at this time a plan for 

transitioning from tiered rates to a single 

rate structure. The anticipated 

developments that the Commission 

thought would eliminate any need for 

tiered rates have not materialized. Not 

only have structural reforms been 

delayed and reduced in scope, but 

expected gains in individual provider 

efficiency have not occurred, the largest 

VRS provider’s current market share 

remains approximately the same, and 

there continue to be wide disparities 

among providers’ cost structures. Thus, 

the Commission’s experience to date 

does not provide sufficient confidence 

that transitioning to a single rate 

structure would be consistent with 

preserving the benefits of competition 

and ensuring the availability of VRS in 

the most efficient manner. With 

additional time, this situation may 

change. The full implementation of 

competition-promoting interoperability 

and portability standards, as well as the 

introduction of some new reforms in 

other areas, may offer greater 

opportunities for providers to compete 

more effectively with one another. 

Additionally, the Commission is 

currently gathering comment on service 

quality metrics, which, when defined, 

measured, and published, will enhance 

VRS competition by enabling consumers 

to make more informed decisions in 

their selection of their VRS providers. 

At a later time, the Commission can 

revisit the compensation rate structure 

issue as appropriate in light of such 

developments. 

Alternative Approaches 

27. The Commission concludes that 

alternative approaches to setting VRS 

rates proposed in the FNPRM, including 

reliance on price caps, market-price 

benchmarks, a reverse auction, and 

direct provision of VRS by common 

carriers, should not be adopted at this 

time. 

28. Price caps. It is premature, at best, 

to commit to a price cap approach that 

involves setting an initial, single rate 

based on, for example, the costs of a 

‘‘reasonably efficient provider.’’ Setting 

a single rate at any level that permits 

more than one provider to remain in the 

market would provide windfall profits 

to the lowest-cost provider, and the 

wasteful costs that such windfall profits 

would impose on the TRS Fund would 

be extremely high given the disparate 

cost structures of the current providers. 

Such costs will be imposed regardless of 

whether the single rate is set under a 

traditional cost-of-service methodology 

or as the ‘‘initializing’’ rate to kick off 

a price cap plan. Further, the 

Commission does not perceive any way 

in which price caps could significantly 

ameliorate the competition and 

inefficiency disadvantages the 

Commission has identified above that 

lead it to reject a single-rate approach. 

The multi-year, tiered transition plan 

being adopted will provide many of the 

same benefits as a price cap, such as 

predictability in rates and incentives to 

become more efficient. In addition, 

given that the weighted average of 

provider’s historical costs has declined 

measurably over the last four years, the 

Commission does not believe that the 

use of such indices is necessary at this 

time to ensure that VRS providers can 

continue to recover their reasonable 

allowable costs, including a reasonable 

operating margin, over the next four 

years. Towards the end of the 2017–21 

rate plan, there will be another 

opportunity to examine whether a price 

cap approach should be adopted in 

conjunction with whatever rate 

structure approach is selected for the 

next plan to maintain efficiency 

incentives going forward. 

29. Reverse auction. Sorenson 

advocates the use of a reverse auction to 

set VRS rates, citing as models the 

auctions authorized by the Federal 

Energy Regulatory Commission (FERC) 

to set rates for supplying electricity, as 

well as those conducted by this 

Commission to allocate support for 

Mobility Funds and to select recipients 

of support under the Rural Broadband 

Experiments. However, the auction 

proposed by Sorenson differs 

significantly from these examples. The 

FERC and Commission auctions 

involved bidding for both price and 

quantity of the service to be supplied, 

while Sorenson’s VRS proposal would 

require providers to bid a price that is 

not tied to a specific quantity. 

Additionally, the Commission auctions 

sought selection of a single provider for 

each service area, rather than multiple 

providers as in the VRS market. If a 

provider has no guarantee of serving a 

fixed number of minutes, each 

provider’s bid will likely be based on 

current costs associated with the current 

number of minutes they provide at the 

time of bidding. Thus, while Sorenson 

argues that a reverse auction would 

promote competition, encourage greater 

efficiencies, and provide stability, it 

seems equally or more likely to have the 

opposite effect—producing a VRS rate 

that is either well above the average cost 

of providing service, or so low as to 

keep currently higher cost providers 

from continuing or new entrants from 

joining the market. The reverse auction 

proposal thus suffers from the same 

defects as other single-rate proposals— 

it forces a choice between setting a 

single rate so low as to preclude 

effective competition and setting it so 

high as to provide wasteful, windfall 

profits to the lowest-cost provider. In 

light of the absence of analogous models 

for successful implementation, and the 

other issues discussed above, the 

Commission declines to pursue a 

reverse auction approach at this time. 

The Commission does not rule out 

exploring this type of approach in the 

future, however, should new 

developments warrant revisiting it. 

30. Direct provision or procurement of 

VRS by common carriers. The 

Commission also finds little benefit at 

this time in the alternative of 

terminating TRS Fund support for VRS 

and, instead, requiring common carriers 

to provide VRS directly or through 

contracts with TRS providers. Sorenson 

offers no supporting evidence for its 

claim that common carriers and other 

voice service providers could provide 

VRS more efficiently on a direct basis 

than indirectly, through their 

contributions to the TRS Fund. Further, 

no carrier has commented favorably on 

this proposal, while a carrier trade 

association, USTelecom, affirmatively 

opposes it. Accordingly, at the present 

time, the Commission has no basis to 

conclude that direct provision of VRS 

would advance the mandate to provide 

VRS in the most efficient manner or 

reduce the burden on TRS Fund 

contributors. Further, the Commission 

agrees with the non-dominant providers 

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might not survive a transition to a 

direct-provision or direct-procurement 

approach. It may well be that common 

carriers would simply choose to work 

with the dominant, low-cost provider, 

rather than attempt to maintain provider 

choice for consumers. 

31. Market-based pricing generally. 

While in 2013 the Commission 

indicated a strong interest in exploring 

a market-based approach, it did not 

commit to adopting any market-based 

approach, much less one that could 

prove less effective than cost-based 

alternatives for meeting the objectives of 

section 225 of the Act. Moreover, the 

market-based schemes proposed in 

2013, which assumed there would be a 

transition to a single market-based rate, 

no longer appear to be as viable today 

as they did to the Commission at that 

time. Those proposals relied on the 

expected availability of pricing 

benchmarks that would in turn result 

from the establishment of a neutral 

video communications service platform. 

This platform has not been built, and 

based on the unsuccessful initial request 

for proposals for the platform and the 

general lack of interest in it shown by 

most existing providers, the 

Commission has decided not to move 

forward with its original plan to build 

this platform. Similarly, support is also 

lacking for the other market-oriented 

idea proposed by the Commission in 

2013: an auction of calls to certain 

telephone numbers receiving a high 

volume of VRS calls. 

Tier Structure and Rate Levels 

32. Emergent rate. The Commission 

adopts its proposal to add an emergent 

rate to the tiered rate structure, 

applicable solely to providers that have 

no more than 500,000 total monthly 

minutes as of July 1, 2017. The 

Commission concludes that a separate 

rate structure for such providers is 

appropriate for a limited period to take 

into account the generally much higher 

cost of service for very small providers, 

encourage new entry into the program, 

and give such providers and new 

entrants appropriate incentives to grow. 

Rather than view an emergent rate as a 

subsidy for providers that have been 

unable to attract users, the Commission 

believes that this approach recognizes 

the still unbalanced structure of the VRS 

industry, as well as the incompleteness 

of VRS reforms intended to enhance 

competition. In light of the apparently 

fragile current state of VRS competition 

and the per-minute cost differentials, 

the Commission concludes it would be 

unwise at this time to subject two of the 

current four competitors to the dramatic 

rate reductions that would be necessary 

to fit them under the same tiered rate 

structure as the other two, much larger 

providers. Further, smaller providers 

may offer service features that are 

designed for niche VRS market 

segments or that may not be available 

through other providers and that are 

helpful in meeting the specific needs of 

particular VRS consumers. By providing 

an emergent rate, the Commission can 

increase the likelihood that, in the near 

term, even if no new entrants arrive, 

consumers can continue to select a 

service provider from four competitors 

instead of two. 

33. In order to maintain incentives for 

growth and avoid subjecting emergent 

providers to a sudden drop in the rate 

applicable to all their minutes when 

they reach the 500,000-minute ceiling, 

providers who are initially subject to the 

emergent rate and who then generate 

monthly minutes exceeding 500,000 

shall continue to be compensated at the 

otherwise applicable emergent rate 

(rather than the Tier I rate) for their first 

500,000 monthly minutes, until the end 

of the four-year rate plan, i.e., until June 

30, 2021. Such providers shall be 

compensated at the otherwise 

applicable Tier I rate for monthly 

minutes between 500,000 and 1 million. 

34. For emergent providers, the 

Commission adopts a $5.29 per minute 

rate for each year of the four-year plan. 

To the extent that these providers have 

demonstrated the ability to show 

consistent, substantial growth over the 

past years, provider cost projections 

indicate that this rate will afford such 

providers a reasonable opportunity to 

meet their expenses and earn some 

profit. The Commission expects that this 

opportunity should be enhanced with 

the implementation of provider 

interoperability and other competitionpromoting measures, such as the 

development and publication of service 

quality metrics. 

35. However, the Commission does 

not intend that this rate structure 

continue to apply to any currently 

operating providers after the end of the 

four-year rate plan adopted in document 

FCC 17–86. During the next four years, 

the provision of a special rate for 

emergent providers may not impose 

major costs on Fund contributors, but 

the likely benefits to consumers will 

also remain very limited unless these 

emergent companies manage to use this 

four-year window of opportunity to 

expand their market share. Therefore, 

after four years, the Commission intends 

that all existing providers, regardless of 

size, will be subject to the same rate 

structure (whether tiered or unitary) 

under the compensation scheme that 

then takes effect. 

36. Tiers I–III. The Commission also 

adopts the proposed tier structure, in 

which a provider’s monthly minutes up 

to 1,000,000 will be included in Tier I, 

monthly minutes between 1,000,001 

and 2,500,000 in Tier II, and all monthly 

minutes above 2,500,000 in Tier III, 

with the highest rate applicable to Tier 

I minutes and the lowest rate applicable 

to Tier III minutes. Based on real-world 

evidence, which consistently shows the 

existence of substantial disparities 

among the per-minute costs incurred by 

VRS providers, which are broadly inline with the similarly wide disparities 

in their volumes of minutes, the 

Commission concludes that there are 

likely to be substantial economies of 

scale in administrative costs, marketing, 

and other areas. 

37. Further, the existence of persistent 

cost differences between the largest and 

lowest-cost VRS provider and its 

smaller competitors is undisputed. To 

maintain a competitive environment for 

the near term, the Commission’s most 

realistic option is to set compensation 

rates that allow the few remaining VRS 

competitors an additional period of time 

to offer a competitive alternative to the 

lowest-cost provider, while reforms 

continue to be implemented. In this 

context, the Commission’s primary 

concern is not to identify the exact 

extent of scale economies but to ensure 

that tiers reflect the disparate sizes and 

cost structures of current competitors. 

Further, as the Commission also 

recognized in 2013, significant potential 

harm to competition could result if the 

rate tier boundaries are too low and 

prevent smaller competitors from 

remaining in the market, while if the 

Commission sets the boundaries too 

high the only consequence will be that 

smaller, less efficient competitors may 

remain in the market longer than would 

otherwise be the case, resulting in 

somewhat higher expenditures from the 

Fund. With the intervening attrition in 

the number of VRS competitors, the 

Commission’s preference is even greater 

today for striking a balance that 

emphasizes preserving competition. 

38. The Commission expands the Tier 

I boundary to 1,000,000 minutes, in 

order to ensure that the ‘‘emergent’’ 

providers, as well as any new entrants, 

as they grow large enough to leave the 

‘‘emergent’’ category, will be subject to 

a rate that reflects their size and likely 

cost structure and that is appropriately 

higher than the marginal rate applicable 

to larger and more efficient providers. 

Tier I, which also applies to the first 

1,000,000 minutes of each larger 

provider, allows the Commission to set 

a rate that is high enough to ensure that 

each provider is able to cover its 


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relatively fixed, less variable costs. The 

Commission expands the Tier II 

boundary, as well, to 2,500,000 minutes, 

for similar reasons. Expanding the Tier 

II boundaries, which applies to the 

minutes of all providers in excess of the 

1,000,000-minutes threshold and up to 

the 2,500,000-minutes ceiling, enables 

the Commission to set a rate that is 

appropriately lower than the Tier I rate, 

but higher than the rate for Tier III, 

which will currently apply only to the 

largest provider, whose per-minute costs 

are far lower than any other provider’s. 

The Tier II rate can thus be set low 

enough to ensure that providers with 

more than 1,000,000 minutes are not 

compensated far in excess of their 

allowable costs, but high enough to 

ensure that such providers have an 

incentive to continue providing 

additional minutes of service. By 

increasing the upper boundary of this 

tier, as well as Tier I, the Commission 

also limits any risk of eroding a 

provider’s incentive to continue 

growing as its monthly minutes 

approach a tier boundary. The lower 

Tier III rate, in turn, will appropriately 

be the marginal rate for the largest, 

lowest-cost provider. 

39. Application of rate tiers to 

commonly owned providers. Regarding 

the recent merger of two VRS providers, 

Purple Communications, Inc. (Purple), 

and CSDVRS, LLC d/b/a ZVRS (ZVRS), 

there is disagreement among the 

commenters as to whether the 

compensation rate tiers should apply to 

these now-affiliated companies 

separately or on a consolidated basis, 

prior to their full consolidation. The 

VRS compensation system should be 

designed, as far as possible, to avoid 

creating undesirable incentives to 

exploit the tier structure by creating 

multiple subsidiaries for the provision 

of VRS. However, the consent decree 

that authorized the merger between 

ZVRS and Purple specifically includes 

language providing that the two entities 

will continue to operate and submit 

requests for compensation payments as 

separate VRS providers, and will be 

treated as separate entities for 

compliance purposes, for up to 36 

months after the effective date (i.e., until 

February 15, 2020), after which they 

will consolidate the operations of the 

two VRS providers. As applied here, 

that determination means that the two 

companies will be treated as separate 

entities for purposes of the tiered rate 

structure until February 14, 2020, or 

until such time that these companies 

consolidate their operations. After 

February 14, 2020, or from the date of 

consolidation if it takes place earlier, 

these companies will be treated as a 

single provider for purposes of the 

tiered rate compensation structure. To 

ensure compliance with this outcome, 

the Commission directs ZVRS to 

provide the Commission with 60 days 

notice prior to such consolidation. 

40. Rate period and adjustments. As 

with the prior rate plan, the new rate 

plan will be four years in duration. A 

four-year period is long enough to offer 

a substantial degree of rate stability, 

thereby (1) giving providers certainty 

regarding the future applicable rate; (2) 

providing a significant incentive for 

providers to become more efficient 

without incurring a penalty; and (3) 

mitigating any risk of creating the 

‘‘rolling average’’ problem previously 

identified by the Commission regarding 

TRS, in which the use of rates based on 

averaged provider costs, if recalculated 

every year, could leave some providers 

without adequate compensation, even if 

they are reasonably efficient. On the 

other hand, a four-year period is short 

enough to allow an opportunity for the 

Commission to reset the rates in 

response to substantial cost changes or 

other significant developments that may 

occur over time. Given the lack of 

support for continuing six-month 

adjustments, the Commission adopts the 

administratively simpler approach of 

having rate adjustments occur annually 

over the next four-year rate period. 

41. Rate Levels. In setting rate levels, 

the Commission seeks 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. Further, the Commission seeks 

to avoid any risk of setting a rate for any 

tier that is either below the marginal 

cost of a provider subject to that tier or 

excessively above such marginal cost. 

42. Tier I Rate Level. For this tier, the 

FNPRM sought comment on a range of 

possible rates—from $4.06 to $4.82 for 

the first year and from $3.74 to $4.82 for 

the fourth year. The current rate level of 

$4.06 per minute (in conjunction with 

the $3.49 rate currently applicable to a 

provider’s minutes in excess of 1 

million)—is too low to permit all 

providers to meet their allowable 

expenses and earn a reasonable 

operating margin. Instead, the 

Commission adopts the rate of $4.82 per 

minute recommended by the nondominant providers, which will apply 

to all four years of the rate period. A 

Tier I rate at this level will allow all 

providers subject to it to recover their 

allowable expenses and earn an 

operating margin within the zone of 

reasonableness. This Tier I rate level 

also provides an appropriate incentive 

for emergent providers to grow their 

businesses beyond 500,000 minutes. 

43. Tier II. The Commission adopts a 

Tier II rate of $3.97 per minute for all 

four years of the rate period. For this 

tier, the FNPRM sought comment on a 

range of possible rates—from $3.49 to 

$4.35 for the first year and from $3.08 

to $4.35 for the fourth year. The $3.97 

rate the Commission adopts is roughly 

in the middle of the range of Tier II 

options for the first year. The $4.35 per 

minute rate advocated by the nondominant providers is higher than is 

necessary to allow providers to recover 

their allowable costs and earn a 

reasonable operating margin. On the 

other hand, the current rate level of 

$3.49, combined with the current Tier I 

level, is too low to permit all providers 

to earn a reasonable operating margin. 

Based on the data reported by providers, 

applying the $3.97 rate for all four years 

of the rate period, in conjunction with 

other applicable rates, will allow all 

providers subject to this rate to recover 

their allowable expenses and earn an 

operating margin within the zone of 

reasonableness the Commission has 

adopted. At $3.97, this rate is also above 

the allowable expenses per minute of 

any provider subject to the Tier II rate, 

thus minimizing the risk of deterring 

such a provider from increasing its VRS 

minutes. At the same time, the Tier II 

rate is at a level that, in conjunction 

with other applicable rates, limits any 

overcompensation of providers subject 

to it. 

44. Tier III. For this tier, the FNPRM 

sought comment on a range of possible 

rates—from $2.83 to $3.49 for the first 

year and from $2.63 to $3.49 for the 

fourth year. The Commission concludes 

that the rate level for Tier III should be 

$3.21 in the first year and $2.63 per 

minute in the final year. The $2.63 rate 

is higher than the average allowable 

expenses per minute for the current 

provider subject to this tier, and, in 

conjunction with other applicable rates, 

will allow providers that fall into this 

tier to earn an operating margin over 

allowable expenses that is within the 

zone of reasonableness the Commission 

has adopted. However, because this rate 

is a substantial reduction from the 

current Tier III rate, a gradual transition 

to reach this rate level is appropriate. 

Accordingly, the Commission adopts a 

rate of $3.21 per minute for Fund Year 

2017–18, the first year of the rate plan 

period. This continues the ongoing 

adjustment of the Tier III rate, under the 

previous rate plan, under which it 

dropped by $.38 per minute per year, as 


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the initial rate of $3.21 is $.38 below the 

approximate average ($3.59) of the $3.68 

and $3.49 Tier III rates applicable 

during the 2016–17 Fund Year. The Tier 

III rate will be reduced by another $0.38 

in Fund Year 2018–19, to a rate of $2.83 

per minute. For the final two years, the 

Tier III rate will be $2.63 per minute. 

45. Although Sorenson asserts that a 

proper analysis of VRS costs indicates 

the Tier III rate should be higher, the 

Commission does not rely on Sorenson’s 

analysis for several reasons. First, 

projections for the second year out (in 

this case, 2018), which are included in 

Sorenson’s analysis, historically have 

had a poor record of accuracy. Second, 

Sorenson’s cost calculation includes 

costs that are not allowable, as well as 

a 15.9% operating margin, which is 

outside the zone of reasonableness the 

Commission has adopted. 

46. Aggregate effect of the rate levels 

adopted. The approach adopted here 

effectively balances the Commission’s 

overarching goal of maintaining 

competition and consumer choice with 

its obligation to administer the Fund in 

an efficient manner. When aggregated, if 

the tiered compensation rates currently 

in effect were to be extended for four 

more years, assuming the present 

growth of this service, compensation 

payments from the TRS Fund to VRS 

providers would be expected to total 

(over these four years) approximately 

$1,887,000,000. This figure would swell 

to approximately $1,925,000,000, were 

the Commission to adopt the single-rate 

approach proposed by Sorenson at the 

lowest rate that Sorenson deems 

acceptable—$3.73 per minute. This 

would not only result in an increase of 

about $38 million over extending the 

current rates, but also would stifle 

competition in the VRS market by likely 

eliminating all but one provider. By 

contrast, under the tiered rate plan 

adopted today, the Commission expects 

that the total cost to the TRS Fund will 

be approximately $1,835,000,000, which 

will produce a cost savings of 

approximately $52 million compared to 

current rates and preserve the 

competitive VRS environment that 

consumers now enjoy. 

Other Compensation Matters 

47. Audits for providers receiving the 

emergent rate. The existing, more 

generally applicable rules regarding 

audits are sufficient to address any 

accuracy issues regarding emergent 

providers’ costs. Therefore, the 

Commission declines to adopt a 

separate, mandatory audit requirement 

for providers receiving the emergent 

rate. However, the Commission reminds 

all current and potential VRS providers 

that their costs may be subject to audit 

at any time to assure the accuracy and 

integrity of TRS Fund compensation 

rates and payments. 

48. Exogenous costs. In general, the 

2007 model for exogenous cost recovery 

is procedurally sufficient for addressing 

provider requests for compensation for 

exogenous costs. Substantively, given 

that the tiered rates set in document 

FCC 17–86 are intended to reduce VRS 

compensation rates in the direction of 

cost-based levels that have yet to be 

reached, the Commission adopts the 

following conditions to ensure that 

exogenous cost recovery does not result 

in increasing the disparity between 

Fund expenditures and actual provider 

costs. Providers may seek compensation 

for well-documented exogenous costs 

that (1) belong to a category of costs that 

the Commission has deemed allowable, 

(2) result from new TRS service 

requirements or other causes beyond the 

provider’s control, (3) are new costs that 

were not factored into the applicable 

compensation rates, and (4) if 

unrecovered, would cause a provider’s 

current allowable-expenses-plusoperating margin to exceed its VRS 

revenues. 

49. Effective date. VRS compensation 

rates historically have been set 

prospectively and are normally not 

adjusted retrospectively unless an error 

has been made. In establishing the rates 

applicable to the current period, the 

Commission acted appropriately based 

on the record, and the Commission is 

not aware of any compelling reason to 

reconsider those ratemaking decisions. 

Further, while the Commission found it 

necessary in 2016 to retrospectively 

apply an emergency rate freeze with 

respect to the smallest VRS providers, 

the Commission does not find that a 

comparable emergency exists now 

necessitating further adjustment of rates 

for the same period for which they were 

already adjusted once on an emergency 

basis. Accordingly, the Commission 

declines to give the new rates 

retrospective effect back to January 1, 

2017; rather, the rates the Commission 

adopts are effective as of July 1, 2017. 

50. The Commission finds good cause 

to make the rule changes adopting a 

new four-year rate plan in document 

FCC 17–86 effective as of July 1, 2017. 

The current rate plan was scheduled to 

expire on June 30, 2017. Providers have 

been aware of this pending expiration 

since 2013, and have further been aware 

of the Commission’s proposal to 

establish a new rate plan going forward. 

To avoid unnecessary disruption to VRS 

providers’ operations and to ensure the 

ability of consumers to continue to 

place and receive VRS calls, the 

Consumer and Governmental Affairs 

Bureau (Bureau) recently acted to waive 

the June 30, 2017 expiration of the 

existing rates and directed Rolka Loube 

to continue compensating VRS 

providers at the prevailing rates, 

pending further action by the 

Commission. 

51. As the Commission now takes 

action to establish a new four-year rate 

regime, the Commission directs Rolka 

Loube to compensate VRS providers at 

the applicable rates adopted herein for 

all compensable minutes of use incurred 

beginning July 1, 2017, except that, to 

ensure that the release of document FCC 

17–86 after July 1 does not adversely 

affect any VRS provider, the 

Commission will not apply the 

reduction in Tier III rates to any 

compensable minutes of use incurred 

between July 1 and the release date of 

document FCC 17–86. To implement 

this provision (given that minutes of use 

are compensated on a monthly basis), 

the Commission directs Rolka Loube to 

compensate any provider with Tier III 

minutes in July 2017 at a rate of $3.49 

per minute for the first X Tier III 

minutes, where X equals the number of 

compensable minutes of use incurred 

between July 1 and the release of 

document FCC 17–86. So if a VRS 

provider has no Tier III minutes in July 

2017, this provision will not affect it; if 

a provider has X or fewer Tier III 

minutes, then all such minutes will be 

compensated at the higher $3.49 rate; 

and if a provider has more than X Tier 

III minutes, then it will receive $3.49 

per minute for the first X Tier III 

minutes and $3.21 for all remaining Tier 

III minutes. The Commission also 

directs the Bureau to provide actual 

notice to known VRS providers by 

sending them a copy of document FCC 

17–86. 

52. Historical Cost vs. Projected Costs. 

For purposes of document FCC 17–86, 

a review of the past relationships 

between projected and actual costs 

indicates that the most reliable reference 

points for cost calculations when rates 

are set are the actual costs reported for 

the previous calendar year and the 

projected costs for the current calendar 

year. The least reliable reference point 

is the projected costs for the year after 

the current year. Accordingly, as a 

reference point for cost calculations for 

purposes of document FCC 17–86, the 

Commission uses the weighted average 

of each provider’s actual costs and 

demand for 2016 and projected costs 

and demand for 2017. 

Other Matters—Server-Based Routing 

53. Under the TRS numbering rules, 

calls that involve multiple VRS 


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providers are routed based on the 

information provided in the TRS 

Numbering Directory. Section 64.613(a) 

of the Commission’s rules currently 

requires that the Uniform Resource 

Identifier (URI) for a VRS user’s 

telephone number contain the IP 

address of the user’s device. However, 

the VRS Provider Interoperability 

Profile technical standard provides for 

the routing of inter-provider VRS and 

point-to-point video calls to a server of 

the terminating VRS provider rather 

than directly to a specific device. The 

technical standard thus specifies the use 

of call routing information that contains 

provider domain names, rather than 

user-specific IP addresses. To permit the 

implementation of the VRS Provider 

Interoperability Profile, which has been 

incorporated by reference into the 

Commission’s rules, it is necessary to 

amend the TRS Numbering Directory 

rule. This change will foster the 

implementation of interoperability, 

thereby enhancing functional 

equivalence. In addition, allowing 

routing based on domain names will 

promote TRS regulation that 

‘‘encourage[s] . . . the use of existing 

technology and do[es] not discourage or 

impair the development of improved 

technology,’’ as required by 47 U.S.C. 

225(c)(2), and will improve the 

efficiency, reliability, and security of 

VRS and point-to-point video 

communications, thus advancing these 

important Commission objectives as 

well. The Commission also finds that 

server-based routing will not impair the 

Commission’s ability to prevent waste, 

fraud, and abuse in the VRS program. 

Other Matters—Research and 

Development 

54. The Commission adopts its 

proposal in the FNPRM to direct the 

TRS Fund administrator, as part of 

annual ratemaking proceedings, to 

include in the proposed TRS Fund 

administrative budget an appropriate 

amount for Commission-directed 

research and development R&D. These 

funds will enable the Commission to 

ensure that TRS evolves with 

improvements in technology. Because 

the TRS Fund administrator previously 

submitted its recommended budget for 

the 2017–18 Fund Year without 

recommending a specific amount for 

R&D, the Commission also allocates $6.1 

million from the TRS Fund to be used 

for R&D projects to be overseen by the 

Commission in the 2017–18 TRS Fund 

Year. 

Other Matters—Repeal of the Neutral 

Video Communications Service 

Platform 

55. The Commission adopts its 

proposal to delete the rule provisions 

relating to the neutral video 

communications service platform 

(Neutral VRS Platform). Although the 

Commission requested bids to build the 

Neutral VRS Platform, no acceptable 

bids were received, and the Commission 

canceled that procurement. Because no 

party has made any showing that the 

Commission should request new bids 

for the Neutral VRS Platform or 

otherwise expressed any interest in 

utilizing it, the Commission (i) removes 

§§ 64.601(a)(20) and (45), 64.611(h), and 

64.617 and (ii) modifies 

§§ 64.604(b)(2)(iii), (b)(4)(iv), and 

(c)(5)(iii)(N)(1)(iii) and 64.606(a)(4) of 

the Commission’s rules to eliminate 

references to the Neutral VRS Platform 

and VRS communications assistant (CA) 

service providers (the entities that 

would have made use of the platform). 

Other Matters—Technical Correction to 

the VRS Speed-of-Answer Rule 

56. In the 2013 VRS Reform Order, the 

Commission modified § 64.604(b)(2)(iii) 

of the Commission’s rules, the speed-ofanswer rule, changing it from (a) a 

requirement to answer 80% of all VRS 

calls within 120 seconds, measured on 

a monthly basis, to (b) a requirement to 

answer 85% of all VRS calls (i) within 

60 seconds, measured on a daily basis, 

by January 1, 2014, and (ii) within 30 

seconds, measured on a daily basis, by 

July 1, 2014. The United States Court of 

Appeals for the District of Columbia 

Circuit (D.C. Circuit) vacated this aspect 

of the 2013 VRS Reform Order. The 

court ruled that, pending further action 

by the Commission, its decision ‘‘will 

have the effect of reinstating the 

requirement that 80% of VRS calls be 

answered within 120 seconds, measured 

on a monthly basis.’’ The Commission 

therefore amends § 64.604(b)(2)(iii) of its 

rules to comply with the mandate of the 

D.C. Circuit and provide for a speed-ofanswer requirement to answer 80% of 

all VRS calls within 120 seconds, 

measured on a monthly basis. 

Order 

57. In the Order (2017 VRS 

Improvements Order), FCC 17–26, 

published at 82 FR 28566, June 23, 

2017, the Commission set aside the 

effectiveness of the VRS Provider 

Interoperability Profile technical 

standard until the Commission resolved 

the apparent conflict between the VRS 

Provider Interoperability Profile 

technical standard, under which VRS 

providers employ server-based routing, 

and the existing Commission rule, 

under which they must route calls based 

on the IP address of the user’s device. 

Now that the Commission, in document 

FCC 17–86, has amended 47 CFR 

64.613(a)(2) to permit server-based 

routing, the Commission reestablishes 

the effectiveness of the rule amendment 

incorporating the VRS Provider 

Interoperability Profile, adopted in the 

Report and Order (2017 VRS 

Interoperability Order), DA 17–76, 

published at 82 FR 19322, April 27, 

2017. 

Final Regulatory Flexibility Analysis 

58. As required by the Regulatory 

Flexibility Act of 1980 (RFA), as 

amended, the Commission incorporated 

an Initial Regulatory Flexibility 

Analysis (IRFA) into the FNPRM. The 

Commission sought written public 

comment on its proposals in the 

FNPRM, including comment on the 

IRFA. No comments were received on 

the IRFA. This Final Regulatory 

Flexibility Analysis (FRFA) conforms to 

the RFA. 

Need for, and Objectives of, the 

Proposed Rules 

59. Document FCC 17–86 addresses 

server-based routing of VRS calls, and 

funding for Commission-directed R&D. 

60. First, by amending TRS rules to 

permit server-based routing, document 

FCC 17–86 expands the ways that VRS 

calls can be routed. Under a new 

interoperability standard, calls may be 

routed to a server of the terminating 

VRS provider that serves multiple VRS 

users and devices, rather than directly 

to a specific device. This new routing 

method uses the providers’ domain 

names, rather than user-specific IP 

addresses, as is currently required. 

61. Second, the Commission directs 

the TRS Fund administrator, as part of 

future annual ratemaking proceedings, 

to include for Commission approval 

proposed funding for Commissiondirected R&D. Such funding is necessary 

to continue to meet the Commission’s 

charge of furthering the goals of 

functional equivalence and efficient 

availability of TRS. 

Summary of Significant Issues Raised by 

Public Comments in Response to the 

IRFA 

62. No comments were filed in 

response to the IRFA. 

Small Entities Impacted 

63. The server-based routing rule 

amendment adopted in document FCC 

17–86 will affect obligations of VRS 

Providers. These services can be 


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39682 Federal Register / Vol. 82, No. 161 / Tuesday, August 22, 2017 / Rules and Regulations 

included within the broad economic 

category of All Other 

Telecommunications. Five providers 

currently receive compensation from the 

TRS Fund for providing VRS: ASL 

Services Holdings, LLC; CSDVRS, LLC; 

Convo Communications, LLC; Purple 

Communications, Inc.; and Sorenson 

Communications, Inc. The R&D funding 

will have no impact on VRS providers. 

Description of Projected Reporting, 

Recordkeeping, and Other Compliance 

Requirements 

64. Server-based call routing involves 

the use of domain names, and VRS 

providers using this method will need 

to keep records of such domain names. 

The domain names will then be 

processed as call routing information, 

just as other call routing information is 

processed currently. The funding for 

R&D will have no reporting, 

recordkeeping, or other compliance 

requirements. 

Steps Taken To Minimize Significant 

Impact on Small Entities, and 

Significant Alternatives Considered 

65. Server-based call routing using 

domain names will be available to all 

VRS providers, will not be burdensome, 

and will advance interoperability. 

Greater interoperability will foster 

competition, thereby benefitting the 

smaller providers. To the extent there 

are differences in operating costs 

resulting from economies of scale, those 

costs are reflected in the different 

compensation rate structures applicable 

to large and small VRS providers. 

66. The funding for R&D does not 

have any compliance or reporting 

requirements impacting small entities. 

Indeed, small entities are not covered by 

the rule. 

67. No commenters raised other 

alternatives that would lessen the 

impact of any of these requirements on 

small entities vis-a`-vis larger entities. 

Federal Rules Which Duplicate, 

Overlap, or Conflict With, the 

Commission’s Proposals 

68. None. 

Ordering Clauses 

69. Pursuant to sections 1, 2, and 225 

of the Communications Act of 1934, as 

amended, 47 U.S.C. 151, 152, and 225, 

document FCC 17–86 is adopted, and 

part 64 of Title 47 is amended. 

70. Pursuant to section 553(d)(3) of 

the Administrative Procedure Act, 5 

U.S.C. 553(d)(3), and §§ 1.4(b)(1) and 

1.427(b) of the Commission’s rules, 47 

CFR 1.4(b)(1), 1.427(b), the VRS 

compensation rates became effective on 

July 1, 2017. 

71. A copy of document FCC 17–86 

shall be sent by overnight mail, first 

class mail and certified mail, return 

receipt requested, to all known VRS 

providers. 

72. The Commission’s Consumer and 

Governmental Affairs Bureau, Reference 

Information Center, shall send a copy of 

document FCC 17–86, including the 

Final Regulatory Flexibility Analysis, to 

the Chief Counsel for Advocacy of the 

Small Business Administration. 

List of Subjects in 47 CFR Part 64 

Incorporation by reference, 

Individuals with disabilities, 

Telecommunications relay services, 

Video relay services. 

Federal Communications Commission. 

Marlene H. Dortch, 

Secretary. 

Final Rules 

For the reasons discussed in the 

preamble, the Federal Communications 

Commission amends 47 CFR part 64 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, 225, 254(k), 

403(b)(2)(B), (c), 715, Pub. L. 104–104, 110 

Stat. 56. Interpret or apply 47 U.S.C. 201, 

218, 222, 225, 226, 227, 228, 254(k), 616, 620, 

and the Middle Class Tax Relief and Job 

Creation Act of 2012, Pub. L. 112–96, unless 

otherwise noted. 

■ 2. Amend § 64.601 by: 

■ a. Revising paragraph (a)(12); 

■ b. Removing paragraph (a)(20); 

■ c. Redesignating paragraphs (a)(14) 

through (19) as paragraphs (a)(15) 

through (20) and adding new paragraph 

(a)(14); 

■ d. Revising paragraph (a)(26); 

■ e. Removing paragraphs (a)(45) 

through (49); 

■ f. Redesignating paragraphs (a)(27) 

through (44) as paragraphs (a)(30) 

through (47) and adding new paragraphs 

(a)(27) through (29); and 

■ g. Revising newly redesignated 

paragraph (a)(30). 

The additions and revisions read as 

follows: 

§ 64.601 Definitions and provisions of 

general applicability. 

(a) * * * 

(12) Default provider change order. A 

request by an iTRS user to an iTRS 

provider to change the user’s default 

provider. 

* * * * * 

(14) Hearing point-to-point video user. 

A hearing individual who has been 

assigned a ten-digit NANP number that 

is entered in the TRS Numbering 

Directory to access point-to-point 

service. 

* * * * * 

(26) Point-to-point video call. A call 

placed via a point-to-point video 

service. 

(27) Point-to-point video service. A 

service that enables a user to place and 

receive non-relay video calls without 

the assistance of a CA. 

(28) Qualified interpreter. An 

interpreter who is able to interpret 

effectively, accurately, and impartially, 

both receptively and expressively, using 

any necessary specialized vocabulary. 

(29) Real-Time Text (RTT). The term 

real-time text shall have the meaning set 

forth in § 67.1 of this chapter. 

(30) Registered Internet-based TRS 

user. An individual that has registered 

with a VRS or IP Relay provider as 

described in § 64.611. 

* * * * * 

■ 3. Amend § 64.604 by revising 

paragraphs (b)(2)(iii), (b)(4)(iv), and 

(c)(5)(iii)(N)(1)(iii) to read as follows: 

§ 64.604 Mandatory minimum standards. 

* * * * * 

(b) * * * 

(2) * * * 

(iii) Speed of answer requirements for 

VRS providers. VRS providers must 

answer 80% of all VRS calls within 120 

seconds, measured on a monthly basis. 

VRS providers must meet the speed of 

answer requirements for VRS providers 

as measured from the time a VRS call 

reaches facilities operated by the VRS 

provider to the time when the call is 

answered by a CA—i.e., not when the 

call is put on hold, placed in a queue, 

or connected to an IVR system. 

Abandoned calls shall be included in 

the VRS speed of answer calculation. 

* * * * * 

(4) * * * 

(iv) A VRS provider leasing or 

licensing an automatic call distribution 

(ACD) platform must have a written 

lease or license agreement. Such lease or 

license agreement may not include any 

revenue sharing agreement or 

compensation based upon minutes of 

use. In addition, if any such lease is 

between two eligible VRS providers, the 

lessee or licensee must locate the ACD 

platform on its own premises and must 

utilize its own employees to manage the 

ACD platform. 

* * * * * 

(c) * * * 

(5) * * * 

(iii) * * * 

(N) * * * 

(1) * * * 


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Federal Register / Vol. 82, No. 161 / Tuesday, August 22, 2017 / Rules and Regulations 39683 

(iii) An eligible VRS provider may not 

contract with or otherwise authorize any 

third party to provide interpretation 

services or call center functions 

(including call distribution, call routing, 

call setup, mapping, call features, 

billing, and registration) on its behalf, 

unless that authorized third party also is 

an eligible provider. 

* * * * * 

§ 64.606 [Amended] 

■ 4. Amend § 64.606 by removing 

paragraph (a)(4). 

§ 64.611 [Amended] 

■ 5. Amend § 64.611 by removing 

paragraph (h). 

■ 6. Amend § 64.613 by revising 

paragraph (a)(2) to read as follows: 

§ 64.613 Numbering directory for Internetbased TRS users. 

(a) * * * 

(2) For each record associated with a 

VRS user’s geographically appropriate 

NANP telephone number, the URI shall 

contain a server domain name or the IP 

address of the user’s device. For each 

record associated with an IP Relay 

user’s geographically appropriate NANP 

telephone number, the URI shall contain 

the user’s user name and domain name 

that can be subsequently resolved to 

reach the user. 

* * * * * 

§ 64.617 [Removed] 

■ 7. Remove § 64.617. 

■ 8. Amend § 64.621 by revising 

paragraph (b)(1) to read as follows: 

§ 64.621 Interoperability and portability. 

* * * * * 

(b) * * * 

(1) Beginning no later than December 

20, 2017, VRS providers shall ensure 

that their provision of VRS and video 

communications, including their access 

technology, meets the requirements of 

the VRS Provider Interoperability 

Profile. 

* * * * * 

[FR Doc. 2017–17225 Filed 8–21–17; 8:45 am] 

BILLING CODE 6712–01–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 96 

[GN Docket No. 12–354; FCC 15–47] 

Amendment of the Commission’s 

Rules With Regard to Commercial 

Operations in the 3550–3650 MHz Band 

AGENCY: Federal Communications 

Commission. 

ACTION: Final rule; announcement of 

effective date. 

SUMMARY: In this document, the Federal 

Communications Commission 

(Commission) announces that the Office 

of Management and Budget (OMB) has 

approved, via a non-substantive change 

request, the information collection 

requirements associated with 

Commercial Operations in the 3550– 

3650 MHz Band adopted in the 

Commission’s First Report and Order, 

GN Docket No. 12–354, FCC 15–47. This 

document is consistent with the First 

Report and Order, which stated that the 

Commission would publish a document 

in the Federal Register announcing 

OMB approval and the effective date of 

the requirements. 

DATES: 47 CFR 96.49, published at 80 FR 

36163, June 23, 2015, is effective on 

August 22, 2017. 

FOR FURTHER INFORMATION CONTACT: For 

additional information, contact Cathy 

Williams, Cathy.Williams@fcc.gov, (202) 

418–2918. 

SUPPLEMENTARY INFORMATION: This 

document announces that, on August 7, 

2015, OMB approved, via a nonsubstantive change request, the 

information collection requirements 

associated with two technical rules (47 

CFR 96.49 and 96.51) adopted in the 

Commission’s First Report and Order, 

FCC 15–47, published at 80 FR 36163, 

June 23, 2015. The OMB Control 

Number is 3060–0057. The Commission 

publishes this document as an 

announcement of the effective date of 

the requirements. If you have any 

comments on the burden estimates 

listed below, or how the Commission 

can improve the collections and reduce 

any burdens caused thereby, please 

contact Cathy Williams, Federal 

Communications Commission, Room 1– 

C823, 445 12th Street SW., Washington, 

DC 20554. Please include the OMB 

Control Number 3060–0057 in your 

correspondence. The Commission will 

also accept your comments via email at 

PRA@fcc.gov. 

To request materials in accessible 

formats for people with disabilities 

(Braille, large print, electronic files, 

audio format), send an email to fcc504@

fcc.gov or call the Consumer and 

Governmental Affairs Bureau at (202) 

418–0530 (voice), (202) 418–0432 

(TTY). 

Synopsis 

As required by the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3507), 

the FCC is notifying the public that it 

received OMB approval on August 7, 

2015, for the non-substantive change to 

information collection requirements 

contained in the Commission’s rules at 

47 CFR 96.49 and 96.51. Under 5 CFR 

part 1320, an agency may not conduct 

or sponsor a collection of information 

unless it displays a current, valid OMB 

Control Number. 

No person shall be subject to any 

penalty for failing to comply with a 

collection of information subject to the 

Paperwork Reduction Act that does not 

display a current, valid OMB Control 

Number. The OMB Control Numbers is 

3060–0057. 

The foregoing notice is required by 

the Paperwork Reduction Act of 1995, 

Public Law 104–13, October 1, 1995, 

and 44 U.S.C. 3507. 

The total annual reporting burdens 

and costs for the respondents are as 

follows: 

OMB Control Number: 3060–0057. 

OMB Approval Date: August 7, 2015. 

OMB Expiration Date: May 31, 2020. 

Title: Application for Equipment 

Authorization, FCC Form 731. 

Form Number: FCC Form 731. 

Respondents: Business or other forprofit entities and state, local or tribal 

government. 

Number of Respondents and 

Responses: 3,740 respondents and 

22,250. 

Estimated Time per Response: 35 

hours. 

Frequency of Response: On occasion 

reporting requirement and third party 

disclosure requirement. 

Obligation to Respond: Required to 

obtain or retain benefits. The statutory 

authority for this collection is contained 

in 47 U.S.C. 154(i), 301, 302, 303(e), 

303(f) and 303(r). 

Total Annual Burden: 778,750. 

Annual Cost Burden: No cost. 

Privacy Act Impact Assessment: No 

impact(s). 

Nature and Extent of Confidentiality: 

There is no need for confidentiality with 

this collection of information. 

Needs and Uses: The FCC adopted a 

First Report and Order, FCC 15–47, for 

commercial use of 150 megahertz in the 

3550–3700 MHz (3.5 GHz) band and a 

new Citizens Broadband Radio Service, 

published at 80 FR 36163, June 23, 

2015. 3.5 GHz Band users will use 

Citizens Broadband Radio Service 

Devices (CBSDs) to operate, which are 

fixed stations, or networks of such 

stations that fall under two categories, 

Category A CBSDs, which operate at 

lower power, or Category B that operate 

at a higher power. The rules require 

compliance with information 

requirements contained in the First 

Report and Order already accounted for 

and approved under this Office of 

Management and Budget (OMB) control 


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