[Federal Register: September 13, 2006 (Volume 71, Number 177)]
[Proposed Rules]
[Page 54009-54017]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13se06-25]
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 64
[CG Docket No. 03-123; FCC 06-106]
Telecommunications Relay Services and Speech-to-Speech Services
for Individuals With Hearing and Speech Disabilities
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: In this document, the Commission seeks comment on a broad
range of issues concerning the compensation of providers of
telecommunications relay services (TRS) from the Interstate TRS Fund
(Fund). The Commission seeks comment on: Alternative cost recovery
methodologies for interstate traditional TRS and Speech-to-Speech
(STS), including Hamilton Relay, Inc.'s (Hamilton) proposed ``MARS''
plan (``Multi-state Average Structure''), and also whether traditional
TRS and STS should be compensated at the same rate; the appropriate
cost recovery methodology for Video Relay Service (VRS) and the length
of time the VRS rate should be in effect; issues relating to
``reasonable'' costs compensable under the present cost recovery
methodology, including whether, and to what extent, marketing and
outreach expenses, overhead costs, and executive compensation are
compensable from the Fund, and ways to improve the management and
administration of the Fund, including adopting measures for assessing
the performance and efficiency of the Fund and to deter waste, fraud,
and abuse.
DATES: Comments are due on or before October 30, 2006. Reply comments
are due on or before November 13, 2006. Written Paperwork Reduction Act
(PRA) comments on the proposed information collection requirements
should be submitted on or before November 13, 2006.
ADDRESSES: You may submit comments, identified by [CG Docket number 03-
123 and/or FCC Number 06-106], by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Federal Communications Commission's Web Site: http://www.fcc.gov/cgb/ecfs/.
Follow the instructions for submitting comments.
People with Disabilities: Contact the FCC to request
reasonable accommodations (accessible format documents, sign language
interpreters, CART, etc.) by e-mail: FCC504@fcc.gov or phone (202) 418-
0539 or TTY: (202) 418-0432.
For detailed instructions for submitting comments and additional
information on the rulemaking process, see the SUPPLEMENTARY
INFORMATION section of this document. In addition, you may submit your
PRA comments by e-mail or U.S. postal mail. To submit your comments by
e-mail send them to PRA@fcc.gov, and to Kristy L. LaLonde, OMB Desk
Officer, Room 10234 NEOB, 725 17th Street, NW., Washington, DC 20503,
or via the Internet to Kristy_L._LaLonde@omb.eop.gov, or via fax at
(202) 395-5167. To submit your comments by U.S. postal mail, mark it to
the attention of Leslie F. Smith, Federal Communications Commission,
445 12th Street, SW., Room 1-C216, Washington, DC 20554.
FOR FURTHER INFORMATION CONTACT: Thomas Chandler, Consumer &
Governmental Affairs Bureau, Disability Rights Office at (202) 418-1475
(voice), (202) 418-0597 (TTY), or e-mail at Thomas.Chandler@fcc.gov.
For additional information concerning the PRA information collection
requirements contained in this document, contact Leslie Smith at (202)
418-0217, or via the Internet at PRA@fcc.gov.
SUPPLEMENTARY INFORMATION: The Further Notice of Proposed Rulemaking
Telecommunications Relay Services and Speech-to-Speech Services for
Individuals with Hearing and Speech Disabilities, (2006 Cost Recovery
FNPRM); CG Docket No. 03-123, FCC 06-106, contains proposed information
collection requirements subject to the PRA of 1995, Public Law 104-13.
It will be submitted to the Office of Management and Budget (OMB) for
review under section 3507 of the PRA. OMB, the general public, and
other Federal agencies are invited to comment on the proposed
information collection requirements contained in this document. This is
a summary of the Commission's document FCC 06-106, TRS and STS Services
for Individuals with Hearing and Speech Disabilities, 2006 Cost
Recovery FNPRM, CG Docket No. 03-123, adopted July 13, 2006, released
July 20, 2006, seeking comment on issues concerning the compensation of
TRS providers from the Fund. Pursuant to Sec. Sec. 1.415 and 1.419 of
the Commission's rules, 47 CFR 1.415 and 1.419, interested parties may
file comments and reply comments on or before the dates indicated on
the first page of this document. Comments may be filed using: (1) The
Commission's Electronic Comment Filing System (ECFS), (2) the Federal
Government's eRulemaking Portal, or (3) by filing paper copies. See
Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121,
May 1, 1998.
Electronic Filers: Comments may be filed electronically
using the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs/ or the Federal eRulemaking Portal: http://www.regulations.gov. Filers
should follow the instructions provided on the Web site for submitting
comments.
For ECFS filers, if multiple docket or rulemaking numbers
appear in the caption of this proceeding, filers must transmit one
electronic copy of the comments for each docket or rulemaking number
referenced in the caption. In completing the transmittal screen, filers
should include their full name, U.S. Postal Service mailing
[[Page 54010]]
address, and the applicable docket or rulemaking number, which in this
instance is CG Docket No. 03-123. Parties may also submit an electronic
comment by Internet e-mail. To get filing instructions, filers should
send an e-mail to ecfs@fcc.gov, and include the following words in the
body of the message, ``get form .'' A sample form
and directions will be sent in response.
Paper Filers: Parties who choose to file by paper must
file an original and four copies of each filing. If more than one
docket or rulemaking number appears in the caption in this proceeding,
filers must submit two additional copies of each additional docket or
rulemaking number.
Filings can be sent by hand or messenger delivery, by commercial
overnight courier, or by first-class or overnight U.S. Postal Service
mail (although the Commission continues to experience delays in
receiving U.S. Postal Service mail). All filings must be addressed to
the Commission's Secretary, Office of the Secretary, Federal
Communications Commission.
The Commission's contractor will receive hand-delivered or
messenger-delivered paper filings for the Commission's Secretary at 236
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing
hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be
held together with rubber bands or fasteners. Any envelopes must be
disposed of before entering the building.
Commercial mail sent by overnight mail (other than U.S.
Postal Service Express Mail and Priority Mail) must be sent to 9300
East Hampton Drive, Capitol Heights, MD 20743.
U.S. Postal Service first-class, Express, and Priority
mail should be addressed to 445 12th Street, SW., Washington, DC 20554.
Pursuant to Sec. 1.1200 of the Commission's rules, 47 CFR 1.1200,
this matter shall be treated as a ``permit-but-disclose'' proceeding in
which ex parte communications are subject to disclosure. Persons making
oral ex parte presentations are reminded that memoranda summarizing the
presentations must contain summaries of the substance of the
presentation and not merely a listing of the subjects discussed. More
than a one or two sentence description of the views and arguments
presented is generally required. Other requirements pertaining to oral
and written presentations are set forth in Sec. 1.1206 (b) of the
Commission's rules.
People with Disabilities: To request materials in accessible
formats for people with disabilities (Braille, large print, electronic
files, audio format), send an e-mail to fcc504@fcc.gov or call the
Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), (202)
418-0432 (TTY).
Initial Paperwork Reduction Act of 1995 Analysis
The 2006 Cost Recovery FNPRM contains proposed information
collection requirements. The Commission, as part of its continuing
effort to reduce paperwork burdens, invites the general public and the
Office of Management and Budget (OMB) to comment on the information
collection requirements contained in this document, as required by the
PRA of 1995, Public Law 104-13. Public and agency comment are November
13, 2006. Comments should address: (a) Whether the proposed collection
of information is necessary for the proper performance of the functions
of the Commission, including whether the information shall have
practical utility; (b) the accuracy of the Commission's burden
estimates; (c) ways to enhance the quality, utility, and clarity of the
information collected; and (d) ways to minimize the burden of the
collection of information on the respondents, including the use of
automated collection techniques or other forms of information
technology. In addition, pursuant to the Small Business Paperwork
Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506 (c)(4), the
Commission seeks specific comment on how it may ``further reduce the
information collection burden for small business concerns with fewer
than 25 employees.''
OMB Control Number: 3060-0463.
Title: Telecommunications Relay Services and Speech-to-Speech
Services for Individuals with Hearing and Speech Disabilities, 2006
Cost Recovery Further Notice of Proposed Rulemaking, CG Docket No. 03-
123, FCC 06-106.
Form No.: N/A.
Type of Review: Revision of currently approved collection.
Number of Respondents: 5,060.
Number of Responses: 5,066.
Respondents: Business and other for-profit entities; State, Local
or Tribal Government.
Estimated Time per response: 10 hours.
Frequency of Response: Annual and on occasion reporting
requirement; Recordkeeping; Third party disclosure.
Total Annual Hourly Burden: $11,148.
Total Annual Costs: $0.
Privacy Act Impact Assessment: No impact(s).
Needs and Uses: On December 21, 2001, the Commission released the
2001 TRS Cost Recovery MO&O & FNPRM, In the Matter of
Telecommunications Relay Services for Individuals with Hearing and
Speech Disabilities, Recommended TRS Cost Recovery Guideline, CC Docket
No. 98-67, FCC 01-371. In the 2001 TRS Cost Recovery MO&O &FNPRM, the
Commission directed the TRS administrator to continue applying the
average per minute compensation methodology to develop traditional TRS
compensation rates; required TRS providers to submit certain TRS-
related costs and demand data to TRS Fund administrator; and directed
the TRS administrator to expand the TRS Center Data Request, a form for
providers to itemize their actual and projected cost and demand data,
to include specific sections to capture STS costs and completed
conversation minutes for STS and VRS.
On July 20, 2006, the Commission released a 2006 Cost Recovery
FNPRM, In the Matter of Telecommunications Relay Services and Speech-
to-Speech Services for Individuals with Hearing and Speech
Disabilities, CG Docket No. 03-123, FCC 06-106. The Commission seeks
comment on a broad range of issues concerning the compensation of
providers of TRS from the Interstate TRS Fund (Fund). In the 2006 Cost
Recovery FNPRM, the Commission seeks comment on: (1) Hamilton's
proposed ``MARS'' plan and alternative cost recovery methodologies for
traditional TRS, STS and Internet Protocol (IP) Relay, including any
possible changes to the existing TRS Center Data Request form; (2)
appropriate cost recovery methodology for VRS, including possible
changes to the existing TRS Center Data Request form; and (3) the basis
of ``reasonable'' costs of providing all forms of TRS that should be
compensable under present cost recovery methodology, including
marketing and outreach expenses, overhead costs and executive
compensation. Also, in the 2006 Cost Recovery FNPRM, the Commission
proposes to improve the efficiency of the rate setting process, and to
ensure the reasonableness of the compensation rates for all forms of
TRS. The 2006 Cost Recovery FNPRM proposes a mandatory reporting
requirement that TRS providers compensated from the Interstate TRS Fund
would be required to submit rate data to the Commission, either
annually or for a multi-year period, for the states in which they
provide service.
[[Page 54011]]
Synopsis
Background
TRS Cost Recovery Framework
TRS. When section 225 of the Communications Act was enacted and
implemented, TRS calls were placed using a TTY connected to the Public
Switched Telephone Network (PSTN) (traditional TRS). In March 2000, the
Commission recognized several new forms of TRS, including STS and VRS.
STS is used by persons with a speech disability. Specially trained
Communications Assistants (CAs) who understand the speech patterns of
persons with speech disabilities repeat the words spoken to the other
party to the call. The Commission made STS a mandatory service, so that
all states with a certified state TRS program must offer this service.
VRS is an Internet-based form of TRS that allows the TRS user whose
primary language is American Sign Language (ASL) to communicate with
the CA in ASL, rather than text, through a video link. In April 2002,
the Commission recognized a second Internet-based form of TRS--IP
Relay. Like traditional TRS, IP Relay uses text, but the user connects
to the CA via the Internet and a personal computer or other web-enabled
device. Most recently, in August 2003, the Commission recognized
captioned telephone service as a form of TRS.
Compensation of TRS Providers. Section 225 of the Communications
Act creates a cost recovery regime whereby providers of TRS are
compensated for the reasonable costs caused by TRS. This regime is
based on the ``jurisdictional separation of costs.'' Section 225 of the
Communications Act provides that the costs caused by interstate TRS
``shall be recovered from all subscribers for every interstate
service,'' and the costs caused by the provision of intrastate TRS
``shall be recovered from the intrastate jurisdiction.'' As a general
matter, the costs caused by intrastate TRS are recovered by each state.
No specific funding method is required for intrastate TRS or state TRS
programs. States generally recover the costs of intrastate TRS either
through rate adjustments or surcharges assessed on all intrastate end
users, and reimburse TRS providers directly for their intrastate TRS
costs. Most states presently select one provider to offer TRS within
the state.
With respect to interstate TRS, there are two aspects to the cost
recovery framework set forth in the regulations: (1) Collecting
contributions from common carriers providing interstate
telecommunications services to create a fund from which eligible TRS
providers may be compensated; and (2) compensating eligible TRS
providers from the Fund for the costs of providing eligible TRS
services. In creating the Interstate TRS Fund, the Commission enacted a
shared funding mechanism based on contributions from all carriers who
provide interstate telecommunications services. All contributions are
placed in the Fund, which is administered by the TRS Fund
administrator, currently the National Exchange Carrier Association,
Inc. (NECA). The Fund administrator uses these funds to compensate
``eligible'' TRS providers for the costs of providing TRS. Compensation
is based on per-minute rates adopted each year by the Commission. There
are currently four different compensation rates for the different forms
of TRS: traditional TRS, IP Relay, STS, and VRS.
To determine the annual per-minute compensation rates under the
present cost recovery methodology, TRS providers are required to submit
to the Fund administrator projected cost and minutes of use data for a
two-year period. Specifically, TRS providers must supply the
administrator with ``total TRS minutes of use, total interstate TRS
minutes of use, total TRS operating expenses and total TRS
investment,'' as well as ``other historical or projected information
reasonably requested by the administrator for purposes of computing
payments and revenue requirements.'' Using this data, the Fund
administrator determines the average per-minute compensation rate for
the various forms of TRS, and submits the rates to the Commission for
approval. The Commission issues a rate order each year by June 30,
either approving or modifying these rates.
Discussion
In recent years, the annual determination of the TRS compensation
rates--and particularly the VRS rate--under the present methodology has
presented a variety of regulatory and administrative challenges.
Further, comments filed in response to NECA's filing of proposed
compensation rates for the 2006-2007 Fund year reflect dissatisfaction
with the rate setting process, as well as with the proposed rates.
Thus, the Commission seeks comment on numerous issues relating to the
cost recovery methodology used for determining the TRS compensation
rates paid by the Fund, as well as the scope of the costs properly
compensable under section 225 of the Communications Act and the TRS
regime as intended by Congress.
In so doing, the Commission is mindful of the role of TRS as an
accommodation under the ADA for persons with disabilities. As the
Commission has stated, ``because Title IV places the obligation on
carriers providing voice telephone services to also offer TRS to, in
effect, remedy the discriminatory effects of a telephone system
inaccessible to persons with disabilities, the costs of providing TRS
are really just another cost of doing business generally, i.e., of
providing voice telephone service.'' For this reason, ``the annual
determination of the TRS compensation rates is not akin to a rate-
making process that determines the charges a regulated entity may
charge its customers,'' but rather ``it is a determination of a per-
minute compensation rate that will cover the reasonable costs incurred
in providing the TRS services mandated by Congress and our
regulations.'' As the Commission has stated in the context of
disallowing research and development expenses, the Fund is not intended
to be ``an unbounded source of funding for enhancements that go beyond
[the mandatory minimum] standards.'' It follows that the use of TRS
cost recovery methodologies and procedures that fairly and predictably
compensate providers for the reasonable costs of providing service will
not only be faithful to the intent of the ADA, but will also benefit
all consumers.
Cost Recovery Methodology for Traditional TRS, STS, and IP Relay
Hamilton's MARS Plan
Hamilton requests that the Commission initiate a proceeding to
adopt a proposed alternative cost recovery methodology--the ``MARS''
Plan--for determining the per-minute compensation rate for traditional
TRS. Under the proposed MARS plan, the interstate traditional TRS rate
would be calculated based on a weighted average of the intrastate TRS
rates paid by the states. In addition, because some states base their
TRS rate on ``session minutes,'' rather than ``conversation minutes,''
Hamilton proposes using a factor to convert session minutes to
conversation minutes. Hamilton bases its proposal on the intrastate TRS
data from twenty-three states for which information was readily
available.
According to Hamilton, the MARS plan is a superior approach to the
current cost recovery methodology for traditional interstate TRS
because it is grounded in competition, as most states select an
intrastate TRS provider through a competitive bidding process. Hamilton
also asserts that this approach
[[Page 54012]]
would be easier and less costly to administer and will benefit
consumers ``by lowering interstate TRS rates to the competitively-based
market value.''
Hamilton also notes that under the present cost recovery
methodology--what it calls ``rate of return regulation''--the Fund
administrator and the Commission have ``to examine the minutiae of each
TRS providers'' costs and capital investments,'' and review all costs
submitted by each provider to determine whether to allow or disallow
each individual cost. Hamilton adds that this ``complicated rate-making
process * * * will only get more complicated as providers seek to
include ever more of their costs in the rate base.'' Hamilton also
asserts that the present methodology ``fails to replicate the
competitive market and instead discourages efficiency and encourages
the `padding' of investment.''
Hamilton asserts that, by contrast, the MARS plan would eliminate
the need to examine any carrier data. Under the plan, the Fund
administrator would simply collect the per-minute rate and minutes of
use for each state, which are ``presumptively competitive rates * * *
because they have been subject to a state contract competitive bidding
process,'' and determine the interstate rate by averaging those rates,
adjusted for minutes of use. Hamilton notes that this plan would avoid
the costs associated with collecting, evaluating, correcting, and re-
evaluating TRS provider data.''
Use of the MARS Plan. The Commission seeks comment on whether the
it should adopt the MARS plan, in whole or in part (such as in a hybrid
approach in which the MARS plan is used to set a rate cap), as the cost
recovery methodology for traditional interstate TRS and possibly, other
forms of TRS, such as STS. Under the MARS Plan the compensation rate
for traditional interstate TRS is based on an average of state rates
for intrastate traditional TRS. In contrast, the present methodology is
based on projected cost and demand data submitted by the providers. The
Commission seeks comment generally on whether the MARS plan, because it
is based on competitively bid state rates, will result in a fairer,
more reasonable compensation rate. The Commission urges commenters to
address the advantages and disadvantages of the present methodology,
the MARS plan, and any alternative approach based, in whole or in part,
on either.
The Commission also seeks comment on the fact that some states
compensate for session minutes, rather than conversation minutes. The
Fund presently compensates providers for conversation minutes (i.e.,
actual conversation time between the calling and called party), not
session minutes (i.e., time the CA spends on a call). Because some
state rates are based on session minutes, Hamilton proposed calculating
a conversion factor to convert the session minute rates to conversation
minute rates. The Commission seeks comment on the appropriateness of
converting session minutes to conversation minutes, and specifically on
how the factor should be calculated and applied. The Commission also
seeks comment on whether it would be more appropriate to use session
minutes instead of conversation minutes. Further, the Commission seeks
comment on whether some states' practice of rounding call minutes to
the nearest full minute might affect the use of the MARS plan, and if
so, how.
The Commission also seeks comment on how the MARS plan might be
implemented. For example, if a state rate has been based on the
interstate rate, inclusion of that state's rate into the MARS plan
calculation may not be appropriate. The Commission seeks comment on
whether any other factors that might warrant excluding a particular
state's rate from the calculation. The Commission also seeks comment on
how often states adopt TRS compensation rates. The Commission also
seeks comment on what data would be required from the states and the
extent to which this data is readily available. In addition, the
Commission asks parties to comment on any other issues relating to the
implementation of the MARS plan and the calculation of rates under that
approach, including the costs and benefits of implementing this plan.
In addition, Hamilton proposes to weight the individual state rates
by that states' total minutes of use so that states with relatively
high rates and low minutes of use do not skew the average. The
Commission seeks comment on whether it would be appropriate to weight
the states' rates, and, if so, how a weighted rate should be
calculated.
Application of MARS Plan to STS
The Commission recognizes that the MARS Plan is specifically
proposed as a methodology for developing the compensation rate for
interstate traditional TRS. Because intrastate STS is also a mandatory
form of TRS, the Commission seeks comment on whether the MARS plan (or
a similar plan based on state STS rates) could also be used to
determine the interstate STS compensation rate. The Commission also
seeks comment on other issues concerning implementation of the MARS
plan as applied to STS, including the exclusion of particular states'
rates, the effect of using session minutes rather than conversation
minutes, using a weighted average, and whether the rate period should
be one year or some longer period.
Same Compensation Rate for Traditional TRS, STS, and IP Relay
NECA has noted that in recent years, given the small demand for
this service, the STS compensation rate has not been stable. NECA
therefore recommends in its filing for the 2006-2007 Fund year that the
Commission consider adopting one rate that would apply to both STS and
traditional TRS, based on consolidating the providers' data for these
services. The Commission seeks comment on whether the same rate should
apply to both traditional TRS and STS, under the existing cost recovery
methodology, the MARS plan (or a similar type of plan based on state
rates), or any other methodology, including modified versions of the
existing cost recovery methodology and/or the MARS plan. The Commission
further seeks comment on any other matters relating to whether
traditional TRS and STS should be compensated at the same rate.
The Commission seeks comment on whether IP Relay calls should also
be compensated at the same rate as traditional TRS. The Commission
understands that in many instances the same CAs working at the same TRS
facility handle traditional TRS and IP Relay calls interchangeably, and
that the only difference between the calls is how they reach the relay
center (i.e., via the PSTN or via the Internet). The Commission seeks
comment generally on this assumption, and on any cost differences
between providing traditional TRS and providing IP Relay.
Alternative Cost Recovery Methodologies for Traditional TRS, STS, and
IP Relay
The Commission also seeks comment on whether other cost recovery
methodologies might be appropriate for traditional TRS, STS, and IP
Relay, and easier to administer and result in more predictable rates
than the current methodology. For example, the Commission seeks comment
on whether the interstate traditional TRS and STS rates should simply
be the same as the intrastate rate paid for a similar call coming into
the relay center and handled by the same provider. Under this approach,
an interstate traditional TRS or STS call originating in Maryland would
be compensated at the intrastate
[[Page 54013]]
rate for intrastate calls in the state of Maryland. Because the actual
cost of providing a traditional TRS or STS call should be the same
regardless of its jurisdictional nature, the intrastate rate may
provide a reasonable and fair recovery for interstate calls as well.
The Commission seeks comment on this proposal and any related
issues, including whether this methodology may be burdensome or
overcomplicated, or whether there might need to be an adjustment to the
compensation for interstate calls if, for example, the intrastate rate
is impacted by requirements different from the interstate requirements.
In these circumstances, for example, the compensation rate might
appropriately be based on the lesser of the rate resulting from the
MARS plan or the rate the particular state pays for intrastate calls.
The Commission also seeks comment on this alternative.
Use of a ``True-up'' or Transition to Actual Costs
The Commission also seeks comment on whether, under the MARS plan
or any other cost recovery methodology for traditional TRS, STS, and IP
Relay, there should be a ``true-up'' at the end of the Fund-year based
on actual reasonable costs. Under a true-up, providers would be
required to reimburse the Fund for any amount by which their payments
exceed actual reasonable costs.
The Commission seeks comment generally on any issues relating to
the use of a true-up, including how a true-up could be implemented,
what record keeping requirements might be required, and when and how
often the true-up should occur. The Commission also seeks comment on
whether, and how, to transition to a cost recovery methodology under
which rates are set based on actual reasonable costs, thus eliminating
any need for a true-up in most, if not all, cases.
Rate Period for Traditional TRS, STS, and IP Relay
Finally, the Commission seeks comment on whether the interstate
traditional TRS rate, the interstate STS rate, and the IP Relay rate
should continue to be set for a one-year period or whether a longer
rate period is appropriate. The Commission seeks comment on the
advantages and disadvantages of using either a one-year rate period or
some longer or shorter period of time for these services.
Cost Recovery Methodology for VRS
The Appropriate Cost Recovery Methodology
Because of the continued sharp growth in the use of VRS, open
issues concerning what costs may appropriately be included in
determining the compensation rate under the current methodology, and
the providers' demonstrated inability to accurately forecast demand,
the Commission seeks additional comment on the issues raised in 2004
(and summarized above). The Commission also notes that, since 2004, the
Commission has adopted VRS speed of answer and interoperability
requirements, which may also affect cost recovery issues. In addition,
the Commission has recently permitted entities desiring to offer VRS to
be certified by the Commission. As a result, the Commission expects
additional VRS providers to enter the market. Many of these providers,
like some of the existing providers, will not be traditional telephone
companies and therefore, may present unique cost issues. For these
reasons, the Commission believes that it is important to refresh the
record on what the appropriate cost recovery methodology for VRS should
be.
The Commission is particularly interested in adopting a methodology
that would result in more predictability for the providers, and be
consistent with the principle that TRS is intended to be an
accommodation for persons with disabilities, entitling providers to
their ``reasonable'' costs of providing this service. The Commission
therefore seeks comment on whether modifications should be made to the
current methodology or whether there is a methodology other than the
current compensation scheme that is more appropriate. For example,
should the Commission adopt a compensation methodology for VRS where
funds are disbursed based on each individual provider's actual,
reasonable costs? Should the Commission treat VRS as a national
service, seek competitive bids, and thereby permit the two or three
lowest bidders to provide service at the lowest bid rate, or set
compensation rates based on the lowest bid, with some sort of incentive
or disincentive built into the auction process to ensure competitive
bidding without limiting the number of ultimate providers at that rate?
The Commission seeks comment on these proposals and any other issues
relevant to adopting an appropriate cost recovery methodology for VRS.
Use of a ``True-up'' or Transition to Actual Costs
The Commission also seeks comment on whether, under whatever
methodology is used, providers should be required to reimburse the Fund
for any amount by which their payments exceed reasonable actual costs.
A true-up based on reasonable actual costs might both minimize
incentives for providers to underestimate projected minutes of use and
overstate projected costs, and ensure that providers are not over-
compensated. The Commission seeks comment on whether any such over-
compensation from the Fund can be reconciled with section 225 of the
Communications Act.
Rate Period for VRS
In 2004, Commission sought comment on whether it is difficult for
VRS providers to plan and budget for the provision of this service,
particularly with regard to labor costs and staffing. 2004 TRS Report
and Order, 19 FCC Rcd at 12569, paragraph 247; published at 69 FR
53346, September 1, 2006 and 69 FR 53382, September 1, 2004. The
Commission also recognized that, as a general matter, the operating
expenses for VRS are more complex than with the other forms of TRS, and
overall the costs are higher. The Commission therefore sought comment
on whether the VRS compensation rate should be set for a two-year
period, rather than a one-year period.
``Reasonable'' Costs and Confidentiality of Provider Data
NECA's Data Collection Form sets forth several categories of costs
related to the provision of TRS for which providers may seek
compensation. These categories apply to all forms of TRS. As discussed
below, in some instances these categories of costs may not be defined
with sufficient clarity, and therefore providers may have been
submitting costs that should not be included in the compensation rates
as reasonable costs of providing service. For this reason, with regard
to certain types of costs the Commission seeks comment on the nature
and extent of such costs that are reasonable and consistent with
section 225 of the Communications Act.
Marketing and Outreach Expenses
The Commission seeks comment on the extent to which marketing and
outreach should continue to be compensated by the Fund. To the extent
these activities should be covered, the Commission seeks comment on the
types of expenses that should be covered and whether there is a
[[Page 54014]]
distinction between a marketing and outreach, and if so, how each
should be defined.
The Commission seeks comment on the nature of outreach and
marketing expenses that may properly be compensable under section 225
of the Communications Act, and how these expenses may be more precisely
defined. The Commission also seeks comment on whether any marketing
expenses are properly includable in the rates. The Commission notes
that, as a general matter, the Commission's rules address outreach and
are directed at making the public aware of the use and availability of
TRS generally and encouraging hearing persons and merchants to stay on
the line and accept relay calls. 47 CFR 64.604(c)(3) of the
Commission's rules (``Public access to information''). Therefore, the
Commission seeks comment on whether anything more than non-branded
educational outreach should be compensated by the Fund. The Commission
tentatively concludes that provider-specific ``branded'' marketing is
inappropriate for compensation from the Fund, and that the Fund should
not be used to promote any particular provider's service over the
service of competing providers, or to encourage consumers to switch
providers. The Commission also seeks comment on whether it is
consistent with the statute to fund marketing or outreach campaigns by
each provider, since they may largely be duplicative and directed at
the same audience. Finally, the Commission seeks comment generally on
the nature and cost of outreach and marketing activities providers have
funded in the past, as well as amount and nature of the providers'
current outreach and marketing efforts that are geared toward hearing
persons and merchants, so that they do not hang up on relay calls.
The Commission also seeks comment on whether, as NECA has
suggested, the amount of outreach and marketing expenses compensated
from the Fund should be based on a given percentage of the compensation
rate.
Overhead Costs
The Commission seeks comment on whether, consistent with section
225 of the Communications Act, any general overhead costs (i.e., those
indirect costs that are neither cost-causative nor definable) should be
compensable by the Fund as a reasonable cost of providing TRS. The
Commission notes that under the statute, TRS was intended to be a
service offered by common carriers that already offer voice telephone
service. Further, the cost recovery mechanism was intended to ensure
that carriers recover the costs of providing this service, since
consumers who use the service cannot be required to pay more than the
rates paid for functionally equivalent voice communication services. 47
U.S.C. 225(d)(1)(D). In this light, the Commission seeks comment on
whether providers' reasonable costs should be limited to their marginal
costs of providing TRS, which would not include an allocation of
general overhead costs. In other words, the Commission seeks comment on
whether, consistent with the statute, the reasonable costs of providing
TRS include only categories of costs actually incurred by providing
TRS.
Assuming compensation of some overhead costs is consistent with the
statute, the Commission seeks comment on the appropriate approach to
allocating general overhead costs to the provision of TRS. Are there
alternatives to allocating overhead costs as a percentage of total
revenues? What limits should be placed on the recovery of such costs?
Commenters supporting a percentage approach should also comment on what
percentage is appropriate and why.
Legal and Lobbying Expenses
The Commission seeks comment on limits to the nature and amount of
legal and lobbying expenses compensable under the ``reasonableness''
standard applicable to the compensation of all TRS costs, particularly
with regard to such costs that are attributable to lobbying and not to
compliance with the existing TRS rules. Should amounts allowed for
legal and lobbying expenses be uniform for all providers, or be tied to
the number or minutes of service provided?
The Commission also seeks comment on whether it is appropriate and
consistent with the statutory meaning of costs caused by the service
for the Fund to reimburse the ``start up'' expenses of new entities
seeking to offer TRS. For example, should the Fund reimburse the legal
and related organizational expenses of multiple new companies that
desire to offer TRS, particularly when there are already numerous
providers offering service?
Executive Compensation
The Commission seeks comment concerning the amount of executive
compensation that is included in the providers' cost data, and on
whether the number of executives for whom compensation is sought should
be tied to, or limited by, the overall size of certain providers.
Should reimbursement of such costs be limited and, if so, how? The
Commission seeks comment, for example, on how the Commission might
clarify the scope and nature of such costs that should be considered
``reasonable'' costs compensable by the Fund, and whether they should
be limited to some percentage of other costs or in some other way.
Making Provider Cost and Demand Data Public
Historically, the Commission has honored requests by providers
submitting projected cost and demand data to treat that information as
confidential. The Commission recognizes, however, that this approach
makes it is difficult for providers and the public (including entities
that pay into the Fund) to comment on the reasonableness of the rates.
The Commission therefore seeks comment generally on whether the
providers' projected (and/or actual) cost and demand data, or
particular categories of the cost and demand data, should be made
public. The Commission seeks comment on whether there are categories of
data that in particular should be given confidential treatment, and if
so, why.
Management and Administration of the Fund
The Fund has grown from approximately $40 million to over $460
million since 2000. In addition, the number of providers offering
service continues to grow, particularly with regard to IP Relay and
VRS. Further, as noted above, new issues continue to arise concerning
the nature and extent of certain costs that may be appropriately
compensated from the Fund. For these reasons, the Commission seeks
comment generally on steps the Commission may take to ensure the
integrity of the Fund and to ensure that compensation is consistent
with the statute.
Fund Administrator. The Commission seeks comment generally on
measures the Commission might adopt to improve the management and
administration of the Fund. Presently, the Commission's rules provide
for the appointment of a Fund administrator, currently NECA. The
administrator collects funds from all interstate carriers to create the
Fund from which TRS providers are compensated. The administrator also
proposes to the Commission, based on data submitted to it each year by
the providers, the TRS compensation rates and the resulting Fund size
and carrier contribution factor. The Commission seeks comment on how
administration
[[Page 54015]]
of the Fund could be improved, and whether the rules that govern the
activities of the administrator should be modified, including those
addressing both the billing and collection process and the disbursement
of funds to providers. The Commission seeks input from providers,
users, and others, including government agencies, that may have
experience with this and similar programs.
The Commission further seeks comment on ways in which the
Commission might better assess the effectiveness and efficiency of the
administrator's management of the Fund. The Commission seeks comment,
for example, on whether there are performance measures the Commission
might implement to assess the effectiveness of the TRS program and the
Fund administrator. The Commission also seeks comment on whether the
Fund administrator should be subject to additional reporting
requirements and, if so, what they should be. In addition, the
Commission seeks comment on whether such measures should mimic those
used in the Universal Service Fund context. The Commission also seeks
comment on any other changes that might be made to the Fund
administrator's role in initially calculating the compensation rates
proposed to the Commission. Finally, the Commission seeks comment on
whether to adopt rules to implement ethical standards and address
conflicts of interest for officers and employees of the administrator.
Oversight of Providers. The Commission also seeks comment on ways
to ensure that the compensation paid to providers is legitimate and
proper under the Commission's rules. The Commission seeks comment on
whether there are other types of information that providers should be
required to provide to ensure the integrity of Fund payments, such as
financial statements, earning reports, and information related to any
parent or affiliate. The Commission also seeks comment on the efficacy
of the auditing powers presently granted the Fund administrator and the
Commission under the Commission's rules, as well as the scope and
frequency of such audits. See 47 CFR 64.604(c)(5)(iii)(E) of the
Commission's rules.
Deterring Waste, Fraud, and Abuse. Finally, the Commission invites
comment on any other ways to achieve more fair and efficient
administration and management, as well as to deter and detect waste,
fraud, and abuse. The Commission seeks to ensure that, with the number
of providers and number of minutes of use continuing to increase,
particularly with respect to VRS and IP Relay, the Fund is compensating
providers only for legitimate minutes of use provided in compliance
with the mandatory minimum standards, and that the compensation rates
are based on accurate demand and cost data.
Initial Regulatory Flexibility Analysis
As required by the Regulatory Flexibility Act (RFA), the Commission
has prepared this present Initial Regulatory Flexibility Analysis
(IRFA) of the possible significant economic impact on a substantial
number of small entities by the policies and rules proposed in this
2006 Cost Recovery FNPRM. Written public comments are requested on this
IRFA. See 5 U.S.C. 603. The RFA, see 5 U.S.C. 601-612, has been amended
by the Small Business Regulatory Enforcement Fairness Act of 1996
(SBREFA), Public Law Number 104-121, Title II, 110 Statute 857 (1996).
Comments must be identified as responses to the IRFA and must be filed
by the deadlines for comments on the 2006 Cost Recovery FNPRM indicated
on the first page of this document. The Commission will send a copy of
the 2006 Cost Recovery FNPRM, including this IRFA, to the Chief Counsel
for Advocacy of the Small Business Administration (SBA). See 5 U.S.C.
603(a).
A. Need for, and Objectives of, the Proposed Rule
In recent years, the annual determination of the TRS compensation
rates--and particularly the VRS rate--under the present methodology has
presented a variety of regulatory and administrative challenges, such
as the appropriateness of the current per-minute compensation
methodology, the accuracy of provider demand projections, and the
reasonableness of expenses related to outreach, marketing, overhead,
and legal and lobbying services and Further, comments filed in response
to NECA's filing of proposed compensation rates for the 2006-2007 Fund
year reflect dissatisfaction with the rate setting process, as well as
with the proposed rates and certain cost disallowances. For these
reasons, in this 2006 Cost Recovery FNPRM, the Commission seeks comment
on numerous issues relating to the cost recovery methodology used for
determining the TRS compensation rates paid the Fund, as well as the
scope of the costs properly compensable under section 225 and the TRS
regime as intended by Congress.
This 2006 Cost Recovery FNPRM addresses alternative cost recovery
methodologies for interstate traditional TRS. The present methodology
for compensating traditional TRS providers for the cost of providing
interstate service is based a per-minute compensation rate. Each year
the Fund administrator collects projected cost and demand data from the
providers, and determines an average per-minute compensation rate,
which it submits to the Commission for approval or modification. Each
provider is compensated for its minutes of use at this averaged rate
based on the projected cost and demand data submitted by the providers.
Therefore, providers do not receive reimbursement for their actual
costs; their reimbursements are based on the averaged rate applied to
their actual minutes of use.
Hamilton Relay, Inc. has proposed an alternative methodology to
determine the compensation rate for interstate traditional TRS. Under
Hamilton's proposal--called the ``MARS plan'' (Multi-state Average Rate
Structure)--the compensation rate would be calculated based on an
average of the intrastate TRS rates paid by the states. The state
rates, under Hamilton's proposal, would be weighted based on the total
minutes of use for each state. Hamilton proposes using a weighted
average because otherwise states with a relatively high per minute
intrastate rate, but a very small number of minutes, would skew the
multi-state per minute rate higher than it should be.
Hamilton asserts that its proposed plan would be superior to the
current methodology because state rates are set by a competitive
bidding process. Hamilton also asserts that its proposal would be
easier and less costly to administer. Hamilton further asserts that its
proposal would benefit consumers ``by lowering interstate TRS rates to
the competitively based market value.''
Hamilton also notes that under the present cost recovery
methodology--what it calls ``rate of return regulation''--the Fund
administrator and the Commission have ``to examine the minutiae of each
TRS providers' costs and capital investments,'' and review all costs
submitted by each provider to determine whether to allow or disallow
each individual cost. Hamilton adds that this ``complicated rate-making
process * * * will only get more complicated as providers seek to
include ever more of their costs in the rate base.'' Hamilton also
asserts that the present methodology ``fails to replicate the
competitive market and instead discourages efficiency and encourages
the `padding' of investment.''
Hamilton asserts that, by contrast, the MARS plan would eliminate
the need to examine any carrier data.
[[Page 54016]]
Hamilton states that the Fund administrator would simply collect
the per-minute rate and minutes of use for each state, which are
``presumptively competitive rates * * * because they have been subject
to a state contract competitive bidding process,'' and would determine
the interstate rate by averaging those rates, adjusted for minutes of
use. Hamilton notes that this plan would avoid the costs associated
with collecting, evaluating, correcting, and re-evaluating TRS provider
data.''
Given our underlying regulatory concerns, the 2006 Cost Recovery
FNRPM seeks comment on Hamilton's proposal. Comments are sought on the
advantages and disadvantages of this proposal compared to the current
methodology, how the proposal would be implemented, how state minutes
would be measured, and whether the rates would be set for a one year
period or a longer time. This 2006 Cost Recovery FNPRM also seeks
comment on whether the MARS plan would be easier to administer and
result in administrative cost. This 2006 Cost Recovery FNRPM also seeks
comment on whether the rate for interstate traditional TRS should be
compensated at the same rate as Speech to Speech (STS) service.
This 2006 Cost Recovery FNPRM also addresses the issue of the
appropriate cost recovery methodology for VRS and the appropriate data
reporting period for VRS. Because of the continued sharp growth in the
use of VRS, open issues concerning what costs may appropriately be
included in determining the compensation rate under the current
methodology, and also because of the providers' demonstrated inability
to accurately forecast demand, the 2006 Cost Recovery FNPRM seeks
additional comment on the issues raised in 2004 (and summarized above).
The Commission also notes that recently the Commission has permitted
entities desiring to offer VRS to be certified by the Commission. As a
result, the Commission expects additional VRS providers to enter the
market. Many of these providers, like some of the existing providers,
will not be traditional telephone companies and therefore may present
unique cost issues. For this reason, the Commission believes that it is
important to refresh the record on what the appropriate cost recovery
methodology for VRS should be.
The Commission is particularly interested in adopting a methodology
that would result in more predictability for the providers, and that
would be consistent with the principle that TRS is intended to be an
accommodation for persons with disabilities, entitling providers to
their ``reasonable'' costs of providing this service. The Commission
therefore anticipates developing rules concerning a methodology other
than the current compensation scheme that is more appropriate. For
example, should the Commission adopt a compensation methodology for VRS
where funds are disbursed based on each individual provider's actual,
reasonable costs? Should the Commission treat VRS as a national
service, seek competitive bids, and thereby permit the two or three
lowest bidders to provide service at the lowest bid rate? The 2006 Cost
Recovery FNPRM seeks comment on these proposals and any other issues
relevant to adopting an appropriate cost recovery methodology for VRS.
The 2006 Cost Recovery FNPRM also addresses certain categories of
provider costs. First, although the Commission continues to recognize
the importance of outreach, the Commission seeks ways to define with
sufficient clarity the nature of outreach and marketing expenses that
may appropriately be included in providers' cost submissions. Second,
with regard to overhead costs, the Commission notes that some providers
have submitted costs that reflect a percentage of total company
overhead costs based on the percentage of company revenues attributable
to TRS. The Commission also notes that some providers' expenses for
legal and lobbying have recently grown to more than $2 million a year
for each provider. Finally, the Commission expresses its concern about
the extent to which some salaries of corporate officers and executives
have been included in submitted costs. This 2006 Cost Recovery FNPRM
therefore seeks to resolve the extent of such costs that are
``reasonable'' costs of providing TRS, including whether, and to what
extent, marketing and outreach expenses, overhead costs, and executive
compensation are compensable from the Fund.
In addition, this 2006 Cost Recovery FNPRM addresses whether the
providers' cost and demand data submitted to the Fund administrator
should be made public. It also seeks comment on ways to improve the
management and administration of the Fund, including adopting measures
for assessing the performance and efficiency of the Fund and to deter
waste, fraud, and abuse.
B. Legal Basis
The authority for actions proposed in this 2006 Cost Recovery FNPRM
may be found in sections 1, 4(i) and (j), 201-205, 218 and 225 of the
Communications Act of 1934, as amended, 47 U.S.C. sections 151, 154(i),
154(j), 201-205, 218 and 225.
C. Description and Estimate of the Number of Small Entities to Which
the Proposed Rules Will Apply
The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of, small entities that may be
affected by the proposed rules, if adopted. 5 U.S.C. 603(b)(3). The RFA
generally defines the term ``small entity'' as having the same meaning
as the terms ``small business,'' ``small organization,'' and ``small
governmental jurisdiction.'' 5 U.S.C. 601(6). In addition, the term
``small business'' has the same meaning as the term ``small business
concern'' under the Small Business Act. 5 U.S.C. 601(3) (incorporating
by reference the definition of ``small business concern'' in 15 U.S.C.
632). Pursuant to the 5 U.S.C. 601(3), the statutory definition of a
small business applies ``unless an agency, after consultation with the
Office of Advocacy of the Small Business Administration and after
opportunity for public comment, establishes one or more definitions of
such term which are appropriate to the activities of the agency and
publishes such definition(s) in the Federal Register.'' A small
business concern is one which: (1) Is independently owned and operated;
(2) is not dominant in its field of operation; and (3) satisfies any
additional criteria established by the Small Business Administration
(SBA). 15 U.S.C. 632.
The Commission believes that the entities that may be affected by
the proposed rules are TRS providers that offer interstate traditional
TRS, interstate STS, interstate Captioned Telephone Service, IP Relay
and VRS. Neither the Commission nor the SBA has developed a definition
of ``small entity'' specifically directed toward TRS providers. The
closest applicable size standard under the SBA rules is for Wired
Telecommunications Carriers, for which the small business size standard
is all such forms having 1,500 or fewer employees. 13 CFR 121.201,
NAICS Code 517110. Currently, there are eleven TRS providers that offer
interstate traditional TRS, interstate STS, interstate Captioned
Telephone Service, IP Relay and VRS. These providers consist of
interexchange carriers, local exchange carriers, state-managed
entities, and non-profit organizations. Approximately three or fewer of
these entities are small businesses.
[[Page 54017]]
D. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements
The proposed methodology for setting the interstate compensation
rate for traditional TRS service may require the providers to submit
rate data to the Commission, either annually or for a multi-year
period, for the states in which they provide service. Further, adoption
of a cost recovery methodology for VRS other than the current per-
minute compensation methodology may require VRS providers to maintain
different records, although there would be no new reporting
requirements. Presently, VRS providers report their costs annually, and
their minutes of use monthly, to the Interstate TRS Fund Administrator.
In addition, the 2006 Cost Recovery FNPRM contemplates adoption of a
means of documenting the ``reasonable'' costs compensable under the
present cost recovery methodology for all forms of TRS.
E. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
The RFA requires an agency to describe any significant
alternatives, specific to small businesses, that it has considered in
reaching its proposed approach, which may include the following four
alternatives (among others): ``(1) The establishment of differing
compliance or reporting requirements or timetables that take into
account the resources available to small entities; (2) the
clarification, consolidation, or simplification of compliance or
reporting requirements under the rule for small entities; (3) the use
of performance rather than design standards; and (4) an exemption from
coverage of the rule, or any part thereof, for small entities.'' 5
U.S.C. 603(c)(1)-(4).
Adoption of Hamilton's proposed methodology for setting the
interstate traditional TRS rate would eliminate the need to file the
much more voluminous cost and demand data that providers presently must
submit to the Fund administrator. Further, if the rate period is
extended for more than one year, reporting requirements would be
lessened by less frequent data filings with the Fund administrator.
Therefore, the effect of the adoption of Hamilton's proposed
methodology would be to lessen the reporting burden on small business.
In addition, adoption of a cost recovery methodology for VRS other
than the current per minute compensation methodology could eliminate
apparent dissatisfaction among the providers about the rate setting
process and improve the predictability and efficiency in reporting the
cost data and receiving the compensation for the provision of VRS. A
seamless and efficient cost recovery methodology, including clear cost
data submission guidelines, would lessen the reporting burden on small
business.
Further, setting a standard of what and how the ``reasonable''
costs should be compensable under the present cost recovery methodology
for all forms of TRS, including whether, and to what extent, marketing
and outreach expenses, overhead costs, and executive compensation are
compensable from the Fund, would provide guidance for the providers
that may improve the predictability in the cost of providing TRS. It
would also eliminate uncertainties with whether the costs submitted
would be compensable or not. Eliminating uncertainties would lessen the
reporting burden on small business.
The majority of TRS service is provided by large interexchange
carriers and large incumbent local exchange carriers. Because the
Commission believes that few small business entities would be impacted
by these proposals, and that the impact, if any, would be minor, it is
premature to propose specific alternatives that would minimize
significant economic impact on small businesses. Further, since the
Commission believes the rules adopted pursuant to this proceeding will
result in a more streamlined approach to administering TRS for all
entities, including small entities, the Commission further persuaded
that it would be premature to consider alternatives to the conferral of
such benefits. However, the Commission invites comment on specific
alternatives that may minimize the economic impact of the proposed
rules on small businesses.
F. Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
None.
Ordering Clauses
Pursuant to the authority contained in sections 1, 4(i) and (o),
225, 303(r), 403, 624(g), and 706 of the Communications Act of 1934, as
amended, 47 U.S.C. 151, 154(i) and (o), 225, 303(r), 403, 554(g), and
606, this Further Notice of Proposed Rulemaking is adopted.
The Commission's Consumer & Governmental Affairs Bureau, Reference
Information Center, SHALL SEND a copy of this Further Notice of
Proposed Rulemaking, including the Initial Regulatory Flexibility
Analysis, to the Chief Counsel for Advocacy of the Small Business
Administration.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. E6-14901 Filed 9-12-06; 8:45 am]
BILLING CODE 6712-01-P