Sorenson Offers Auction Plan for VRS Rates, Urges FCC Inclusion in FNPRM

Sorenson Communications said an FCC draft Further NPRM "missed an opportunity" to explore "less regulatory" proposals for new video relay service compensation rates, though it praised agency transparency in releasing text and its effort to provide "certainty and stability." The largest VRS provider urged the FCC to seek comment on a "market-based" auction proposal for setting price caps that the company outlined this week. GlobalVRS, a smaller provider, rejected Sorenson's plan. Commissioners tentatively plan to vote March 23 on a draft VRS order, FNPRM and notice of inquiry that prominently sought comment on the proposals of smaller providers to increase rates except for the highest traffic tier covering Sorenson, which would be cut further (see 1703020070 and 1703030053).

"Sorenson is concerned that the FNPRM does not ask questions to test key assumptions and potentially could be read to preclude consideration of more efficient and less regulatory approaches, all while seeking additional services at additional cost to VRS providers," the company wrote in a filing in docket 10-51 posted Wednesday on a meeting with an aide to Commissioner Mike O'Rielly. "While the draft acknowledges a balance between efficiency and competition, it should also seek comment on whether it remains appropriate to pay for inefficient providers after a decade of tiered rates."

If the FCC wants efficient rates and appropriate pricing signals, it should seek comment on market-oriented frameworks, as a "unanimous Commission committed" to doing in 2013, Sorenson said. "A market-based approach reduces regulation and Commission oversight and should not be abandoned," Sorenson wrote, summarizing a new proposal patterned after Federal Energy Regulatory Commission auctions that the firm asked to be included in the FNPRM. "A concern with the 2013 auction proposal was that it would have significantly interfered with consumers’ ability to choose their VRS provider because the proposal would have auctioned the right to provide minutes of use inbound to particular destinations, such as the Social Security Administration or a wireless carrier," Sorenson wrote. "Instead of auctioning the right to provide a specified number of minutes of use, we propose to auction the right to continue to receive compensation from the TRS [telecom relay service] Fund."

The FCC first would need to decide how many providers are necessary to ensure sufficient competitive choice, Sorenson said. "The auction would consist of VRS providers making bids for the lowest price at which they are willing to provide service," the company wrote. "To ensure that functionally equivalent service will be provided, the Commission should set a floor on the bid price. If the Commission determined that three providers were necessary to offer a competitive choice, the rate would be the amount bid by the third-lowest bidder. Because the right to receive compensation is at stake, providers would have a strong incentive to bid as low as they can." It offered an example and said: "The winning rate would then be used to initialize a price cap that would be adjusted annually for inflation and productivity gains." It said the price-cap regime should be in effect for five to 10 years.

Even if the FCC declines a market-based approach, "a price cap system based on the costs of an efficient provider’s end-to-end service, with a reasonable after-tax margin, would be a less regulatory alternative that still protects the TRS Fund ratepayers," Sorenson wrote. It said the commission has recognized the benefits of price caps over rate-of-return regulation, and incorporated incentive-based mechanisms into USF mechanisms.

"Sorenson’s 'market' and 'efficiency'-based proposal is founded on quicksand," emailed GlobalVRS. "A key assumption the Commission should consider, but one Sorenson conveniently ignores, is whether the 'market' it touts exists. Efficiency and market-based approaches may work in competitive markets. The current relay services program is neither. As long as Sorenson retains a choke hold on the Deaf community and interpreters, Sorenson’s 'market-based' approach is nothing more than wishful thinking and should be disregarded." Other VRS providers didn't comment.

Groups representing deaf and hard-of-hearing consumers backed the FCC decision to seek additional comment on VRS rates in the FNPRM. The FCC should "sufficiently compensate all VRS providers and ensure competition in the VRS marketplace," said a filing of Telecommunications for the Deaf and Hard of Hearing Inc. (TDI) on a meeting it and other advocates had with aides to Chairman Ajit Pai. They didn't elaborate on rates.

Advocates "expressed support and gratitude for the proposed rules" in the draft. They said they back "the FCC’s adoption of trials for skills-based routing and deaf interpreters, making [internet-based] TRS phone numbers available to hearing individuals to allow direct-dialed video calls with deaf and hard-of-hearing consumers, and at-home VRS call handling with proposed safeguards." TDI Executive Director Claude Stout, one of the advocates, made similar comments to us last week.