[Federal Register Volume 88, Number 201 (Thursday, October 19, 2023)]
[Rules and Regulations]
[Pages 71994-72007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-22936]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[CG Docket Nos. 03-123, 10-51; FCC 23-78; FR ID 177808]


Video Relay Service Compensation Formula

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, to ensure that the providers of 
Telecommunications Relay Services (TRS) are compensated for the 
provision of Video Relay Service (VRS), the Federal Communications 
Commission (Commission) adopts a formula to compensate such providers 
from the Interstate TRS Fund (TRS Fund) for the provision of service 
for the next five-year compensation period.

DATES: This rule has been classified as a major rule subject to 
Congressional review. The effective date is December 18, 2023.

FOR FURTHER INFORMATION CONTACT: Michael Scott, Consumer and 
Governmental Affairs Bureau, 202-418-1264, [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order, in CG Docket Nos. 03-123 and 10-51; FCC 23-78, adopted on 
September 22, 2023, released on September 28, 2023. The Commission 
previously sought comment on these issues in a Notice of Proposed 
Rulemaking, published at 86 FR 29969, June 4, 2021, with a correction 
published at 86 FR 31668, July 15, 2021. The full text of this document 
can be accessed electronically via the FCC's Electronic Document 
Management System (EDOCS) website at https://docs.fcc.gov/public/attachments/FCC-23-78A1.pdf or via the FCC's Electronic Comment Filing 
System (ECFS) website at www.fcc.gov/ecfs. To request materials in 
accessible formats for people with disabilities (Braille, large print, 
electronic files, audio format), send an email to [email protected], or 
call the Consumer and Governmental Affairs Bureau at (202) 418-0530 
(voice).

Synopsis

    1. Section 225 of the Communications Act of 1934, as amended (the 
Act), requires the Commission to ensure the availability of 
Telecommunications Relay Services (TRS) to persons who are deaf, hard 
of hearing, or deafblind or have speech disabilities, ``to the extent 
possible and in the most efficient manner.'' 47 U.S.C. 225(b)(1). TRS 
are defined as ``telephone transmission services'' enabling such 
persons to communicate by wire or radio ``in a manner that is 
functionally equivalent to the ability of a hearing individual who does 
not have a speech disability to communicate using voice communication 
services.'' 47 U.S.C. 225(a)(2). VRS, a relay service that allows 
people with hearing or speech disabilities who use sign language to 
communicate with voice telephone users through video equipment, is 
supported entirely by the TRS Fund. VRS providers are compensated for 
the reasonable costs of providing VRS in accordance with payment 
formulas approved by the Commission. In a number of decisions over the 
past 20 years, the Commission has addressed whether certain cost 
categories are reasonable costs eligible for recovery from the TRS 
Fund. Reasonable costs are generally defined as those costs that 
providers must incur to provide relay service in accordance with 
mandatory minimum TRS standards.
    2. In 2007, to ensure that VRS users could choose from a range of 
service offerings, despite significant disparities in VRS providers' 
market shares and per-minute costs, the Commission introduced a tiered 
compensation structure for VRS. Under this approach, a VRS provider's 
monthly compensation payment is calculated based on the application of 
different per-minute amounts to each of three specified ``tiers'' of 
minutes of service. The highest per-minute amount applies to an initial 
tier of minutes up to a defined maximum number, a lower amount applies 
to the next tier, again up to a second defined maximum number of 
minutes, and a still lower amount applies to any minutes of service in 
excess of the second maximum. Under the tiered approach, providers that 
handle a relatively small amount of minutes and therefore have 
relatively higher per-minute costs will receive compensation on a 
monthly basis that likely more accurately correlates to their

[[Page 71995]]

actual costs--and the same is true of providers that have more minutes 
and lower per-minute costs.

The 2021 Notice of Proposed Rulemaking

    3. In May 2021, the Commission released the Notice of Proposed 
Rulemaking, seeking comment on the adoption of a new VRS compensation 
plan. The Commission proposed to maintain a tiered compensation 
structure. The Commission also found no reason to depart from the 
Commission's longstanding policy objectives of bringing TRS Fund 
payments into closer alignment with allowable costs and preserving and 
promoting quality-of-service competition among multiple providers. In 
addition, the Commission sought comment on how cost and demand 
estimates should be adjusted, if at all, to account for post-COVID 
costs and demand, and whether projected costs were reliable enough to 
serve as a reasonable basis to set rates for a new multi-year rate 
cycle. The Commission also sought comment on whether to rely on 
historical costs only, in anticipation that VRS costs and demand may 
decrease to pre-pandemic levels once the pandemic subsides. Further, 
the Commission asked what labor cost adjustments, if any, should be 
applied. The Commission also sought comment on whether and how to 
modify the current compensation structure, whether to revisit any prior 
Commission determinations on allowable costs, what rate levels should 
be set, how to structure the compensation period, and whether to 
provide for rate adjustments during that period.

The Need for a Revised Compensation Plan

    4. In setting VRS compensation formulas, the Commission first 
determines the relevant costs of providing service. Relying on cost and 
demand data reported by VRS providers to the TRS Fund administrator, 
the Commission estimates each provider's average per-minute cost to 
provide VRS (the provider's total allowable expenses divided by its 
total minutes), and also calculates a weighted-average per-minute cost 
for the industry as a whole (all providers' total allowable expenses 
divided by their total minutes). The Commission then adds an allowed 
operating margin. In the Notice of Proposed Rulemaking, the Commission 
sought comment on whether to revisit any of its prior determinations 
regarding allowable costs.

Changes in Allowable Cost Criteria

    5. Research and Development (R&D). The Commission revises its 
allowable cost criteria to allow TRS Fund support for the reasonable 
cost of research and development to enhance the functional equivalency 
of VRS. No commenter opposes this change. The Commission agrees with 
commenters who assert that the current criterion is unnecessarily 
restrictive. First, in 2013, when it authorized TRS Fund support of 
Commission-directed (non-provider) research to improve the efficiency, 
availability, and functional equivalence of TRS, the Commission 
recognized that TRS Fund resources can appropriately be used to support 
research into service improvements that may exceed the existing minimum 
TRS standards. Authorizing providers (as well as Commission-directed 
entities) to conduct such research is consistent with the Commission's 
policy of promoting service improvement by encouraging VRS providers to 
compete with one another based on service quality--a form of 
competition that logically may lead a provider to develop innovative 
features not already required by the Commission's rules. The Commission 
finds that expenses incurred by VRS providers to develop such 
improvements are appropriately included as part of the ``reasonable 
cost'' of service supported by the TRS Fund.
    6. Second, changed circumstances support removal of the current 
limitation. Recent changes in how people communicate are posing new 
technology challenges for VRS providers. To promote the integration of 
VRS with video conferencing, even though it is not currently required 
by the Commission's rules, VRS providers need to conduct research and 
development on methods of achieving such integration. Further, the risk 
of wasting TRS Fund resources on unproductive research appears less 
likely today, because the Commission no longer resets compensation each 
year based on annual cost reporting, as it did in 2004 when the current 
limitation on allowable research and development costs was established. 
With compensation plans now being set for multi-year periods, providers 
that reduce costs during a compensation period are able to retain the 
resulting profit. Consequently, providers are less likely to spend 
money on wasteful or unnecessary research.
    7. Therefore, the Commission concludes that the development of 
service improvements is deserving of TRS Fund support, even if such 
improvements exceed what is necessary for compliance with the 
Commission's minimum TRS standards. The Commission stresses that, as 
with all provider-reported expenses, expenses for research and 
development to improve VRS are allowable only if reasonable. In 
addition, expenses incurred to develop proprietary user devices or 
software (or any non-TRS product or service) are not recoverable from 
the TRS Fund.
    8. Number Acquisition and 911 Calling. The Commission revises its 
allowable-cost criteria to permit TRS Fund support for the reasonable 
cost of assigning and porting North American Numbering Plan telephone 
numbers for TRS users. Last year, the Commission similarly revised its 
allowable-cost criteria for IP Relay to permit recovery of number 
assignment costs by IP Relay providers. The Commission agrees that 
precluding recovery of such costs is no longer justified. Based on the 
current record, the Commission concludes that voice service providers 
and VRS providers are not similarly situated regarding the ability to 
recover such costs from users. As a threshold matter, since 2008 it has 
become clear that a VRS provider's cost of obtaining the numbers it 
assigns to its registered users actually is attributable to the use of 
relay service to facilitate a call. If relay service were not provided, 
these numbers would not be needed by VRS users. Further, the current 
record indicates that, as a practical matter, these costs are never 
passed on to VRS users, but rather are absorbed by VRS providers. While 
voice service providers have a billing relationship with their 
customers, VRS providers typically do not, and there would be little 
point in creating such a relationship for the sole purpose of passing 
through what likely would be a de minimis monthly charge.
    9. In this regard, there is an important difference between 
traditional text-telephone (TTY) based TRS and internet-based TRS. To 
place a call using a TTY, a consumer must subscribe to traditional 
telephone service, for which a telephone number is automatically issued 
to the subscriber (and for which the number acquisition cost is bundled 
into the service rate). To place a call using VRS, a consumer must 
subscribe to broadband internet access service, for which no telephone 
number is automatically provided (unless the consumer also subscribes 
to Voice over internet Protocol (VoIP) service--which a VRS user would 
have no reason to do).
    10. As for costs associated with acquisition and use of toll-free 
numbers, the record does not indicate that any VRS provider still 
issues toll-free

[[Page 71996]]

numbers to registered VRS users. Therefore, the Commission does not 
find it necessary to revisit that question.
    11. Similarly, the record does not indicate that any VRS provider 
is currently assessed a fee under a state or local E911 funding 
mechanism. Such fees are typically assessed on providers of telephone 
service. As a general matter, the TRS Fund supports the reasonable cost 
of ensuring that E911 calls placed by VRS users are handled in a 
functionally equivalent manner. FCC rules impose numerous E911-related 
requirements on VRS providers, including that they provide automatic 
location information for mobile VRS calls to 911 if technically 
feasible. The Commission clarifies that the TRS Fund supports 
reasonable expenses incurred by VRS providers to improve their ability 
to quickly connect a VRS user's 911 call to the Public Service 
Answering Point (PSAP) nearest the user's location and to automatically 
provide specific location data to such PSAP. Such costs are directly 
related to routing TRS calls to an appropriate PSAP and facilitating 
emergency call handling. Thus, such costs are allowable under the 
criteria adopted by the Commission in 2008.
    12. Outreach. TRS outreach has a dual educational focus: making the 
general public aware of the availability and use of relay services, 
e.g., to prevent the uninformed rejection of TRS calls by a called 
party; and providing ``non-branded'' information about relay services 
to potential users--i.e., members of the public who are deaf or hard of 
hearing--to make them aware of the availability and benefits of TRS. 
Before 2013, the TRS Fund compensated TRS providers for outreach 
activities. However, the Commission grew concerned about the 
effectiveness of provider outreach. In 2013, the Commission directed 
the establishment of a pilot program to provide coordinated nationwide 
outreach for VRS and IP Relay through contractors or other third 
parties. The Commission also disallowed TRS Fund support for outreach 
conducted by VRS and IP Relay providers. Last year, the Commission 
revised its allowable-cost criteria for IP Relay to permit recovery of 
outreach costs by IP Relay providers.
    13. The Commission concludes that VRS providers' reasonable 
outreach expenses should be recoverable from the TRS Fund. First, the 
pilot National Outreach Program expired in 2017 and has not been 
reauthorized. Although the Commission continues to be skeptical about 
the extent to which provider-conducted outreach can be effective in 
educating the general public, in the absence of a national outreach 
program, the TRS Fund should support outreach by VRS providers who 
choose to engage in it. However, outreach expenses of this kind are 
allowable only to the extent that the communication focuses on 
educating the public about the availability and use of VRS. 
Expenditures on advertisements about other matters do not constitute 
allowable outreach expenses.
    14. Second, it appears that little is accomplished by continuing to 
prohibit TRS Fund support of provider outreach to potential VRS users. 
As the Commission has previously observed, outreach to potential TRS 
users (unlike outreach to the general public) is not always easy to 
distinguish from branded marketing, and branded marketing is an 
allowable TRS expense. Since the Commission's 2013 determination to 
cease TRS Fund support for outreach by VRS providers, the amounts 
reported by VRS providers as outreach have decreased, while the amounts 
reported as allowable marketing expenses have increased. To the extent 
that VRS providers are motivated to communicate with potential users, 
whether through branded marketing or otherwise, such efforts can be 
effective in introducing the service to new users, including subgroups 
that may lack awareness of the availability of a service or how it can 
meet their needs.
    15. In allowing outreach, the Commission does not reopen the door 
to wasteful spending. As explained earlier in connection with research 
and development, with compensation plans being set for multi-year 
periods, providers that reduce costs during a compensation period are 
able to retain the resulting profit. Consequently, providers are less 
likely to spend wastefully on unproductive outreach activity--
especially as the resources involved are more likely to lead to 
increased compensation revenue if used for branded marketing.
    16. User Access Software. The Commission revises its allowable-cost 
criteria to allow TRS Fund support for the reasonable cost of providing 
downloadable software applications that are needed to enable users to 
access VRS from off-the-shelf user devices. The Commission agrees that 
the TRS Fund should support reasonable costs incurred by VRS providers 
in developing, maintaining, and providing the software necessary to 
allow VRS users' non-proprietary equipment to route calls and connect 
to VRS. The Commission allows TRS Fund recovery of VRS providers' 
reasonable costs directly related to the provision of software that can 
be downloaded and self-installed by VRS users onto off-the-shelf user 
devices such as mobile phones, desktop computers, and laptops running 
on widely available operating systems. Such costs must be incurred by 
any provider to enable users to connect to its service platform; 
therefore, they are attributable to the provision of VRS. Further, 
recovery of the cost of software needed to connect such user devices to 
VRS is consistent with the Commission's policy to promote the 
availability of off-the-shelf IP-enabled devices for VRS use and 
decrease consumers' dependence on VRS equipment specifically designed 
for connection to a particular VRS provider.
    17. However, the Commission declines to also allow recovery of 
costs incurred in developing, maintaining, or providing software for 
user devices that are distributed by one VRS provider and cannot be 
directly connected to other VRS providers' services. While the 
Commission agrees that users need a software interface to access VRS, 
they do not need proprietary devices that can be connected to and used 
with only one provider's service, nor do they need software designed 
for such devices. Although the Commission has not prohibited providers 
from distributing such devices and software to consumers requesting 
them, it is not necessary to support proprietary devices and software 
with TRS Fund resources. Sorenson Communications, LLC (Sorenson), 
asserts that the proprietary devices it distributes offer higher video 
resolutions and more screen space than off-the-shelf platforms, but 
provides no details supporting this claim. Even if true, Sorenson fails 
to show that such alleged advantages necessitate the availability of 
TRS Fund payments for such features or the software supporting them. 
Sorenson acknowledges that many of its customers (as well as 100% of 
the customers of other providers that do not distribute proprietary 
devices) use VRS software running on an off-the-shelf device, either 
alone or in addition to using a proprietary Sorenson device. Therefore, 
whatever perceived advantages proprietary devices may have, as a 
practical matter they provide a useful but not essential means of 
accessing VRS.
    18. Further, allowing recovery of such software costs would not 
advance the Commission's policy to enable users to access VRS from off-
the-shelf IP-enabled devices and to avoid dependence on VRS equipment 
specifically designed for a particular provider's network. By limiting 
TRS Fund support to user software that allows VRS access from off-the-
shelf equipment that can be connected to any VRS provider, the

[[Page 71997]]

Commission promotes the availability of multiple service options for 
consumers.
    19. The Commission recognizes that it may often be difficult for a 
VRS provider to differentiate precisely between the portions of certain 
expenses that are attributable to, e.g., the development of software 
applications for connecting proprietary and non-proprietary equipment 
to the provider's platform. In cases where such expenses cannot be 
directly assigned, the provider should adopt a reasonable allocation 
method and specify the method used in its cost reports, so that it can 
be evaluated by the TRS Fund administrator and the Commission.
    20. Field Staff Issues. Because the costs of installing, 
maintaining, and training customers to use provider-distributed devices 
are not recoverable through TRS Fund compensation, providers must not 
report the costs of field staff visits for such purposes as allowable 
expenses. Costs incurred to install and maintain software for a VRS 
provider's proprietary user devices are also non-allowable. Therefore, 
field staff costs related to installation, maintenance, and training of 
customers to use such software also must be excluded. However, the 
Commission clarifies that the reasonable cost of service-related work 
performed by field staff during a visit to a new or current user is an 
allowable cost of providing VRS. Reasonable costs incurred for service-
related field staff visits for the purpose of, e.g., assisting 
customers with registration, use of VRS on a non-proprietary device, or 
completing a port are allowable.
    21. The above clarifications also apply to the reporting of field 
staff costs incurred by IP CTS providers. However, any change in the 
allowability of field staff costs related to installation and provision 
of IP CTS equipment is beyond the scope of this proceeding.

Estimating Costs

    22. Need for adjustment of provider cost projections. For the past 
13 years, the Commission has established the cost basis for provider 
compensation by averaging VRS providers' reported historical expenses 
for the prior calendar year with their projected expenses for the 
current calendar year. The Commission has found this method to be a 
useful way to counteract providers' tendency to overestimate future 
costs. However, for a number of reasons specific to this proceeding, 
the Commission's averaging approach requires modification to achieve 
reasonably accurate estimates of provider costs for the purpose of 
establishing VRS compensation for the new compensation period.
    23. First, due to a recent increase in the general inflation rate, 
which does not appear to be offset by comparable efficiency 
improvements, the average of VRS providers' historical 2022 and 
projected 2023 expenses is likely to understate the costs that will be 
incurred by VRS providers in many expense categories in the new 
compensation period. There is likely to be significant inflation during 
the 12-month lag between this 2022-23 reporting period and the 2023-24 
Fund Year, which is the first year of the new compensation period. 
Second, VRS providers may incur expenses in newly allowable cost 
categories, which are not reflected in their current reporting of 
allowable costs. Third, the record indicates that, due to a shortage of 
qualified American Sign Language (ASL) interpreters and the challenges 
posed by new modes of communication, VRS providers need to 
substantially increase communications assistant (CA) wages and 
technology spending to continue providing high-quality, functionally 
equivalent service.
    24. Finally, recent inflation and other factors appear to have 
caused an unusual amount of uncertainty and variation in VRS providers' 
estimates of future costs. In projecting costs for 2023 and 2024, 
different providers appear to have made very different assumptions 
about future input costs, as well as the extent to which compensation 
levels will increase sufficiently to justify additional spending. As a 
result, estimating each provider's cost of providing VRS based on an 
average of that provider's historical and projected expenses is likely 
to cause discrepancies.
    25. Providers suggest different approaches for addressing these 
concerns. ZP Better Together, LLC (ZP) argues that the Commission 
should abandon any attempt to estimate current provider costs. Instead, 
ZP recommends applying an inflation adjustment (as well as certain 
adjustments meant to reflect newly allowable costs) to the compensation 
rates set in 2017. The Commission rejects this approach, which 
incorrectly assumes that providers' 2016-17 costs (on which the rates 
set in 2017 were based) remain relevant for purposes of setting 
compensation for 2023-24 and beyond. There is no logical or record 
basis for this assumption, which underlies a number of the assertions 
in ZP's recent ex partes--e.g., that any rate card should give ZP and 
Convo Communications, LLC, a share of the new revenues at least equal 
to its market share. Due to the changes that have taken place since 
2017, ``old'' provider revenues resulting from the current rates are 
disproportionately allocated in relation to provider cost. Therefore, 
there is no logical necessity for ``new'' revenues to be proportionate 
to providers' market shares. There is no conceivable basis in section 
225 of the Act or economics for such a proposal, divorced from costs 
and operating margins. The relative per-minute costs of VRS providers 
are now very different than they were seven years ago. Further, ZP's 
argument that the tiered rate structure and rates of 2017 reflect 
immutable truths about economies of scale at different volumes of 
minutes is based on a flawed study.
    26. Sorenson, on the other hand, suggests that the Commission 
modify past practice by using historical 2022 cost, rather than an 
average of historical and projected cost, as a baseline for estimating 
future VRS cost, and apply uniform factors to adjust each provider's 
2022 costs for inflation and to make the targeted, above-inflation 
adjustments needed in certain areas. The Commission believes this 
approach has merit. Historical costs are more reliably accurate, and 
each provider's historical cost can be adjusted by a uniform factor to 
address inflation or other likely cost changes affecting all providers, 
so as not to unduly distort, or give any provider an undue advantage 
in, the resulting rates. While ZP has raised concerns about some 
aspects of Sorenson's reported 2022 costs, Sorenson has provided 
reasonable explanations for its 2022 cost increases.
    27. To address this unusual confluence of rate-setting issues, the 
Commission adjusts the costs reported in 2022 to: take account of cost 
changes due to inflation during the 18-month time lag between calendar 
year 2022 (the cost reporting period) and Fund Year 2023-24 (the first 
year of the new compensation period); add amounts sufficient to cover 
necessary increases in technology spending and CA wages and benefits; 
include estimates of provider expenditures in newly allowable cost 
categories; and address new costs incurred by Sorenson to provide 
video-text service. Finally, the Commission adds an appropriate 
operating margin. The Commission does not anticipate that the 
modifications made to address these issues will need to be repeated in 
subsequent compensation proceedings. The current confluence of 
pandemic-related effects, a sudden change in the inflation rate, 
shortage of skilled labor, and provider uncertainty regarding future 
costs is unlikely to recur, or if it does, is

[[Page 71998]]

unlikely to coincide with the end of a compensation period.
    28. Adjusting Historical Cost for Inflation. To ensure that 
compensation is sufficient to cover likely inflation-related cost 
increases between calendar year 2022 and Fund Year 2023-24, the 
Commission increases its estimate of each provider's expenses in most 
categories by 7.23%, which is the change from fourth quarter 2021 to 
second quarter 2023 in the Bureau of Labor Statistics (BLS) index of 
seasonally adjusted total compensation for private industry workers in 
professional, scientific, and technical services.
    29. Estimating CA Cost. Several commenters report that VRS labor 
costs are likely to continue increasing by substantially more than the 
18-month inflation adjustment described above, due to a continuing 
shortage of CAs. All providers increased CA wages in 2022, and Sorenson 
and ZP both projected further wage increases, leading to higher CA cost 
in 2023 and 2024. While the Commission agrees that a further increase 
in CA wages is needed, providers' projections in that regard vary 
widely. As discussed above, these disparate projections appear to be 
based on different assumptions about future inflation and future 
compensation levels. To address the need for CA wages to increase 
substantially more than inflation, while avoiding the distorting 
effects caused by disparate provider projections, the Commission 
estimates costs in this category by assuming that all providers' CA 
wages and benefits will increase by a constant percentage over 
historical levels.
    30. For this category only, the Commission uses Fund Year 2020-21 
as the baseline for estimating increased CA cost. This is because, CA 
wages were relatively stable through the end of 2021, and the wage 
increases provided in 2022 differed substantially among the providers. 
Given the wide disparity among the providers' projections of future 
wage increases, the Commission must resort to rough estimates. The 
Commission believes Sorenson's projection, which is at the high end, is 
closer to being accurate than those of ZP and Convo. However, the 
Commission is not convinced that CA wages will or should increase to 
the full extent of Sorenson's estimate.
    31. Sorenson's projection is largely based on its claims that 
community interpreters' compensation averages $80-$100 per hour, and 
that CA wages must be raised closer to that level to ensure that 
qualified interpreters are willing to work as VRS CAs. However, the 
Commission questions the extent to which Sorenson's estimate of $80-
$100 per hour for community interpreter compensation is applicable 
nationwide. Information from other sources appears inconsistent with 
Sorenson's claim. Also, many of the rates cited by Sorenson do not 
include travel time. If an interpreter can handle VRS calls at home, as 
many increasingly do, two hours of VRS work at $50 per hour would earn 
the interpreter $100, while a one-hour community interpreting 
engagement, paying $90 per hour of interpreting and requiring an 
additional hour of travel to and from the interpreter's home, would 
earn the interpreter only $90. Where travel time is compensated, hourly 
compensation may be substantially lower.
    32. Further, while the Commission recognizes the inherent 
difficulty of VRS work, working as a CA also has certain advantages 
that may make it attractive to interpreters despite lower hourly 
compensation. First, in general, community interpreting work is only 
available when a meeting has been scheduled that requires an 
interpreter. VRS, by contrast, is operating 24/7, and there must always 
be interpreters ready to handle any call that happens to be made. Thus, 
it is often possible for interpreters to arrange for VRS work during 
periods when community interpreting work is unavailable. Second, 
community interpreting necessitates travel, while many VRS CAs handle 
calls from their homes. As a result, VRS work not only is more 
convenient for interpreters, but also can be performed by interpreters 
who live in areas where community interpreting work is relatively 
scarce or whose personal circumstances make it difficult to work away 
from home.
    33. Finally, as noted above, VRS providers have frequently over-
projected the amount by which costs are likely to increase. Taking all 
these factors into account, the Commission finds it reasonable to 
assume that the CA costs of VRS providers will rise by a percentage of 
the increase projected by Sorenson. Under this approach, each 
provider's CA cost is estimated to be 65% higher than its CA cost in 
2020-21. The Commission notes that this estimate gives substantial 
weight to Sorenson's projection, as 65% is substantially more than a 
simple average of the CA cost increases projected by the three 
providers.
    34. The Commission recognizes that this estimate is necessarily a 
matter of judgment. While the Commission is setting compensation for a 
five-year period, the Commission reserves the right to make adjustments 
in the formulas, based on a strong showing that such adjustments are 
needed. Thus, if CA wages are increased consistently with the above 
estimate, and VRS providers then conclude that further increases are 
needed, they may present relevant evidence for the Commission's 
consideration. On the other hand, to the extent that CA wages are not 
increased consistently with the above estimate, the Commission may also 
consider and make appropriate adjustments in light of such evidence.
    35. Estimating Engineering and R&D Cost. The Commission finds that 
engineering and R&D expenses are likely to increase by a percentage 
higher than inflation, as all providers work to address the unusually 
demanding technology upgrades needed to meet service challenges in the 
next compensation period. Engineering and R&D are closely related 
aspects of technology spending: successful research and development 
leads to service innovations, the deployment of which increases 
engineering costs, and increased engineering staff and resources can 
also be used to expand research and development. Important changes in 
how people communicate--such as the rapid growth of video 
conferencing--are posing new technology challenges for VRS providers. 
For example, VRS providers must dedicate additional research, 
development, and engineering resources to collaboration with video 
platform providers, so that VRS CAs can have an integrated, audio-
visual presence in video conferences. In addition, with the Commission 
taking steps to modernize the E911 system, the Commission anticipates 
the deployment of new technology to automatically provide the 
dispatchable location of any mobile VRS user calling 911. VRS providers 
may expend additional resources to help find and implement a one-number 
solution that ends the ``siloing'' of VRS, seamlessly merging the use 
of relay with mainstream voice, video, and texting services.
    36. The Commission must ensure that the TRS Fund supports 
sufficient spending on technology to address the challenges described 
above, so that VRS users have functionally equivalent access to video 
conferencing and emergency communication. As directed by the Act, the 
Commission must implement TRS in a way that both encourages the use of 
existing technology and does not deter the development of improved 
technology. Further, support for emergency communications is a 
fundamental part of the Commission's TRS mandate. The amounts that VRS 
providers will need to spend to address these specific

[[Page 71999]]

challenges are not easy to quantify. Perhaps because providers have 
more leeway to defer spending on new technology, current projections 
for technology spending are subject to wide variation among the 
providers. Sorenson projects substantially increased spending on R&D 
and engineering in 2023 and 2024, while ZP and Convo project declines. 
For the reasons stated above, the Commission believes all VRS providers 
will need to increase spending substantially in these areas to ensure 
that they remain competitive in the evolving communications landscape. 
Despite their projections of a decline in spending on engineering and 
R&D, ZP and Convo agree that such increases are needed. Given the 
uncertainties inherent in predicting future spending on technology, the 
Commission recognizes that any estimate it makes may be subject to 
error. However, the Commission prefers to err on the side of over-
predicting the amount of spending that will be necessary to ensure that 
VRS technology provides functionally equivalent service to consumers. 
While Sorenson projects a substantial increase in technology spending, 
that projection was made before the Commission issued its Report and 
Order and Proposed Rule on Access to Video Conferencing, which pose 
additional technology challenges to VRS providers. 88 FR 50053, August 
1, 2023; 88 FR 52088, August 7, 2023. The Commission estimates that, in 
the first year of the new compensation period, each provider will need 
to increase spending on engineering and R&D by approximately 75% over 
the levels reported for 2022. Therefore, the Commission further adjusts 
each provider's estimated costs in these areas by adding 75% of the 
provider's reported 2022 level. As with CA costs, the Commission notes 
that it reserves the right to make adjustments in the compensation 
formulas, either upward based on a strong showing that additional 
technology expenditures are necessary, or downward, based on evidence 
that the increased technology expenditures described above have not 
been made.
    37. Estimated Expenses in Newly Allowable Cost Categories. The 
Commission also adjusts estimated VRS costs to include certain expenses 
that were previously non-allowable and are now allowable. Newly 
allowable R&D costs are included in the estimates discussed above. 
However, R&D costs for user devices and proprietary user software 
remain non-allowable. Previously non-allowable expenses for numbering 
activities in 2022 are identified by each VRS provider in its annual 
cost report and are included in the Commission's cost estimates. Costs 
for customer support provided by field staff remain non-allowable to 
the extent that they are attributable to installation, maintenance, or 
customer assistance with provider-distributed devices or software for 
proprietary devices. The record indicates that Sorenson currently 
attributes service-related field staff costs to the Operations Support 
cost category. Thus, service-related field staff costs are already 
included in reported allowable costs.
    38. Outreach. During the next compensation period, VRS provider 
expenditures on outreach may increase somewhat, building on the 
Commission's and other Federal initiatives to expand broadband access, 
and the expected increase in VRS availability to incarcerated persons. 
However, the Commission finds that such expenditures are unlikely to 
average $0.09 per minute, as ZP estimates. As a general matter, the 
Commission believes VRS providers are less likely to spend substantial 
sums on ``unbranded'' outreach than ``branded'' marketing, as unbranded 
communications are less likely to result in the registration of users 
generating additional compensation for that provider. No significant 
amount of outreach expenses have been reported by providers after 2020. 
Given the virtual absence of provider outreach at present and the 
relatively weak economic incentives for providers to engage in 
unbranded outreach rather than branded marketing, the Commission 
estimates that providers' outreach spending is unlikely to exceed one-
quarter of their marketing expenses, on average.
    39. Further, the Commission finds no justification for the view 
that providers will spend on outreach at a uniform per-minute rate. It 
seems more likely that outreach spending will represent a relatively 
uniform percentage of each provider's total expenses. Industry-wide, 
VRS providers' marketing costs (adjusted for recent inflation) average 
$0.13 per minute, or 3.1% of total expenses. If outreach expenses 
average one-quarter of the industry-wide average marketing cost, then 
each provider will devote approximately 0.8% of its total expenses to 
outreach. The Commission therefore adjusts each provider's estimated 
VRS cost by an amount equal to 0.8% of its total expenses.
    40. Estimated Costs of Video-Text Service. With the decision of ASL 
Services Holding, LLC, dba GlobalVRS (GlobalVRS) to terminate its 
involvement with VRS, another VRS provider, Sorenson, has undertaken 
efforts to prepare to offer Video-Text Service for ASL users who are 
deafblind. Sorenson anticipates that it will incur a substantial amount 
of relatively fixed costs, which are unlikely to vary substantially 
with the number of minutes of service provided. Sorenson estimates 
these costs to include an initial capital expenditure and annually 
recurring costs for field support, maintenance, testing, software 
development, etc. The Commission finds that this cost estimate is 
reasonable, and increases Sorenson's adjusted annual expenses by this 
amount. Other VRS providers are not precluded from offering this type 
of service. However, in response to GlobalVRS's impending exit, only 
Sorenson has represented that it is actively preparing to provide this 
service. Therefore, the Commission adjusts Sorenson's costs to reflect 
these estimated expenditures. Sorenson's estimated variable cost of 
providing this service is not included in this adjustment. As discussed 
below, the Commission adopts a separate compensation formula to allow 
recovery of such costs through an additive payment for each minute of 
Video-Text Service.
    41. Operating Margin. The Commission finds no reason to modify the 
range of reasonable VRS operating margins, currently defined as between 
7.6% and 12.35%. The record does not support Sorenson's argument that 
the allowed operating margin is insufficient to encourage capital 
investment in VRS.
    42. The Commission declines to adjust the operating margin to 22% 
to reflect average operating margins for competitive telecommunications 
firms or to 17.8% to reflect average operating margin for companies in 
the communications and information technologies sectors, as urged by 
Sorenson. The current range of reasonable operating margins for VRS is 
based on an average of the margins earned in analogous industries, 
including government contracting and the professional service sector 
that includes translation and interpretation services, as well as the 
information technology sector.
    43. Sorenson does not provide a convincing explanation of its view 
that average margins for the competitive telecommunications firms, or 
for a mix of firms in the communications and information technologies 
sector would provide a more appropriate benchmark. As a preliminary 
matter, the Commission notes that Sorenson's initial filing was based 
on a study that included telecommunications carriers.

[[Page 72000]]

The operating margin approach was adopted in 2017 because the 
Commission recognized that VRS providers are unlike the 
telecommunications industry, in that VRS is not a capital intensive 
business. Any proposed benchmark that includes the operating margins of 
telecommunications carriers is clearly inappropriate.
    44. While the most recent analysis submitted by Sorenson does 
purport to filter out capital-intensive companies from the sample of 
information and communications technology firms, the use of a benchmark 
based on the high technology sector remains flawed, for several 
reasons. First, while VRS certainly makes use of advanced technology, 
the bulk of VRS costs are labor costs, primarily salaries and benefits 
for interpreters, who need not be highly skilled in technology. This 
will remain the case despite the technology challenges that require VRS 
companies to increase spending on research and development and 
engineering. The economic profile of a VRS provider is quite different 
from the high technology companies analyzed in the study on which 
Sorenson relies.
    45. Second, that analysis looks at a sample of companies with net 
profit of up to 100%. The Commission is not persuaded that these high-
profit companies are comparable to TRS providers. Third, there are a 
number of important differences between the risks typically faced by IT 
companies and the risks involved in VRS. For example, while IT 
companies may be subject to unexpected, dramatic changes in demand for 
their products, demand for VRS has been remarkably stable over time. 
Further, while the prices that IT companies can expect to receive for 
their products are subject to variation based on, e.g., changing demand 
and the pricing decisions of competitors, VRS providers can rely on 
government-established prices that are predetermined for a period of 
several years.
    46. In short, neither Sorenson nor the study on which Sorenson 
relies persuasively explain why their operating margin analysis, 
relying on surveys of industry sectors that are markedly dissimilar to 
the VRS industry, should be deemed preferable to the Commission's 2017 
determination of reasonable operating margins, based on data from a 
diverse set of industries analogous to VRS.
    47. In addition, according to recent census figures, typical 
margins for companies in a number of professional service sectors, 
including the interpretation services sector, are substantially lower 
than the numbers cited by Sorenson and are relatively similar to or 
below the levels of operating margin relied upon in setting the range 
of reasonableness. The Census Bureau's survey of public companies' 
financial data for this sector, defined as ``Professional, Scientific, 
and Technical Services,'' but excluding legal, shows that average 
quarterly pre-tax operating margins between 2019 and 2022 ranged from -
3.06% (in 1Q2020) to 3.58% (in 3Q2020), averaging 0.09% in the 2019-22 
period as a whole and -1.78% in 2022 (the most recent year). The 
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) 
saw an average operating margin for the public firms included in the 
Census Bureau's survey ranging from 0.62% (in 1Q2020) to 11.56% (in 
2Q2019) for the 2019-22 period and averaging 6.67% in the 2019-22 
period as a whole and 6.11% in 2022. Sorenson's analysis does not 
address the relevant census data.
    48. While the operating margins for public companies defined as 
``Professional, Scientific, and Technical Services,'' but excluding 
legal, have fluctuated over time (and currently are lower than when the 
Commission adopted the reasonableness range of 7.6%-12.35%), the 
Commission does not believe it would be beneficial to revise the 
reasonable range of operating margins that has guided the Commission's 
TRS compensation methodology over the past decade. It is also 
beneficial to retain consistency in the reasonable operating margin 
range that participants in the TRS program should expect, absent a 
clearer indication that operating margins for companies providing 
comparable services have significantly changed. The record does not 
establish such a significant change to operating margins when 
considering the complete scope of industries comparable to VRS. 
Therefore, the Commission retains the current reasonableness range for 
the VRS operating margin.
    49. Sorenson's argument that the operating margin should be 
reassessed to take account of a previously proposed increase in Federal 
corporate income tax applicable to the top tax bracket, from 21% to 
28%, appears to be moot, as the proposed tax rate increase was not 
adopted. The Commission also notes that the current range of reasonable 
operating margins was established in 2017, based on estimates of 
average pre-tax operating margins for companies comparable to VRS 
providers. During the 2013-16 period from which the sample was drawn, 
corporate income tax for the top bracket was 35%--substantially higher 
than the current 21% and even higher than the 28% rate projected by 
Sorenson. Therefore, the corporate income tax burden that Sorenson 
claims is unfairly depressing its returns has actually decreased, not 
increased, since the reasonable range of margins was established by the 
Commission.

Compensation Structure and Formulas

    50. The Commission adopts the tentative conclusion of the Notice of 
Proposed Rulemaking that the purposes of section 225 of the Act are 
best served by structuring VRS compensation to support multi-provider 
competition based on quality of service. The record supports the 
Commission's prior findings that, by offering VRS users a choice among 
multiple providers, the Commission can efficiently and effectively 
ensure that functionally equivalent VRS is available to all eligible 
users. The availability of multiple service offerings encourages VRS 
providers to compete for customers by exceeding minimum service quality 
standards. In addition, a multi-provider environment encourages diverse 
service offerings, including specialized services and features needed 
by sub-groups within the sign language-using population.
    51. Therefore, the Commission has consistently sought to structure 
VRS compensation so as to maintain competitive choices for consumers 
while minimizing waste of TRS Fund resources. There is no simple recipe 
for achieving these objectives. However, the Commission has flexibility 
to adjust its approach as necessary to address changed circumstances.

Compensation for Large Providers

    52. The record of this proceeding shows that circumstances have 
changed materially since 2017, when the current compensation plan was 
adopted. See Structure and Practices of the Video Relay Services 
Program, 82 FR 39673, August 22, 2017 (2017 VRS Compensation Order). 
Specifically, the cost structures of the largest VRS providers have 
come closer to parity. As a result, modifications are needed to avoid 
overcompensating one or both of these providers. To equitably allocate 
TRS Fund resources and ensure the availability of functionally 
equivalent VRS in the most efficient manner, the Commission modifies 
the current tier structure by eliminating the third tier.
    53. The essential purpose of rate tiering is ``to compensate VRS 
providers

[[Page 72001]]

in a manner that best reflects the financial situation'' of providers 
with disparate cost structures. In the Notice of Proposed Rulemaking, 
the Commission proposed to maintain a tiered structure but sought 
comment on various possible modifications of that structure. The record 
now confirms that such modifications are needed. Since 2017, the cost 
gap between the two largest VRS providers, while still substantial, has 
progressively diminished. The reasons for the substantial decline in 
ZP's per-minute costs may not be easy to pinpoint, but they are likely 
a combination of ZP having successfully grown its call volume, allowing 
it to operate on a much larger scale, and having apparently completed 
the consolidation of the 2017 merger of its predecessor entities, 
enabling ZP to more fully realize the expected scale economies from 
that merger. As modified above to take account of inflation, newly 
allowable costs, and the Commission's expectation of increased CA 
wages, engineering and R&D, and certain other costs, the similarity in 
the estimated costs of the two providers persists.
    54. These cost changes raise significant concerns about the 
continuing validity of the justification for tiering that the 
Commission relied on in 2017. While one provider continues to handle 
the majority of VRS minutes, its share of minutes has dwindled, and it 
appears to have lost its unique cost advantage. Since 2017, the second 
largest provider has increased its minutes and its market share, and 
its per-minute costs are now somewhat closer to those of the largest 
provider. Thus, the two largest providers now have somewhat similar 
per-minute costs, and yet there continues to be a substantial disparity 
in their shares of VRS minutes.
    55. These changed circumstances warrant a reconsideration of the 
compensation structure. One alternative suggested in the record would 
involve compensating the two largest providers at a single rate. A 
single-rate plan (e.g., based on the weighted average of the providers' 
costs) would be simple to administer. Arguably, a single-rate plan 
could distribute resources efficiently and equitably, ensuring that 
both providers earn reasonable operating margins above allowable 
expenses. And it would avoid the growth-incentive issues that can arise 
under a tiered structure, due to the reduction in compensation for 
additional minutes of service when a provider's minutes increase beyond 
a tier's upper boundary.
    56. However, at this time the Commission concludes it would be 
premature to adopt a single-rate compensation plan. First, the record 
continues to be highly contested--and inconclusive--regarding the 
conditions under which tiering is or is not necessary. For example, the 
record contains widely varying estimates regarding the volume of 
minutes that a provider must achieve for economies of scale to be 
exhausted. Citing studies presented in previous proceedings, Sorenson 
continues to argue that relevant economies of scale are essentially 
exhausted at the level of 250,000 monthly minutes. The Commission has 
previously found Sorenson's evidence unconvincing, and Sorenson 
provides no new information that warrants revisiting this view. At the 
other extreme, ZP argues that relevant economies of scale continue to 
be significant until at least 5 million monthly minutes. That argument 
too is less than persuasive, given the limitations of the model used by 
ZP's expert. An assessment of ZP's model by Commission staff shows that 
a reliable estimate of industry cost functions through regression 
analysis is not possible on the basis of the data points provided by 
ZP's expert.
    57. Second, setting TRS Fund compensation, like ratemaking in 
general, is far from an exact science. While the historical gap between 
the per-minute costs of the two largest providers has lessened over the 
last few years, it is only in the last year that their reported costs 
are actually similar. The Commission cannot rule out the possibility 
that the similarity is unique to this historical moment and may not be 
repeated in future years. If the apparent narrowing of the cost 
differential were to be reversed during the compensation period, 
applying a single rate to both providers could endanger the 
availability of competitive choices for VRS users. In analogous 
situations in prior proceedings, the Commission has adopted a similarly 
conservative approach when weighing the imponderables involved in VRS 
compensation methodology.
    58. For these reasons, the Commission chooses to preserve a tiered 
compensation structure for the next period, while modifying it to 
reduce unnecessary inefficiency or inequity in the allocation of TRS 
Fund resources. Specifically, the Commission merges the current Tier II 
(applicable to monthly minutes between 1,000,001 and 2,500,000) and 
Tier III (applicable to monthly minutes in excess of 2,500,000). As a 
result, the new plan for VRS providers with more than 1 million monthly 
minutes will have two tiers:
     Tier I--applicable to a provider's 1st 1 million monthly 
minutes; and
     Tier II--applicable to a provider's monthly minutes in 
excess of 1 million.
    Merging the current Tiers II and III allows the Commission to set a 
rate for the merged tier that is low enough to ensure that, in 
conjunction with the Tier I rate, providers are not over-compensated, 
i.e., do not earn an operating margin above the reasonable range, but 
still provides an incentive to continue providing additional minutes of 
service.
    59. Compensation Rates. Within this structure, as in 2017, the 
Commission seeks to set the rates for these tiers to limit the 
likelihood that any provider's total compensation will be insufficient 
to provide a reasonable margin over its allowable expenses. The 
Commission also seeks to avoid overcompensating any provider, i.e., by 
allowing a provider to earn an operating margin above its total 
expenses that is outside the reasonable range. The Commission achieves 
this by setting per-minute compensation amounts of $6.27 for Tier I 
minutes and $3.92 for Tier II minutes. Together, these rates will 
enable providers subject to the tiered formula to recover their 
allowable expenses and earn an operating margin within the zone of 
reasonableness. In addition, because the Tier II rate is not 
substantially lower than the average per-minute expenses of any 
provider subject to that rate, setting the rate at this level is 
unlikely to deter a provider from increasing its VRS minutes.
    60. The Commission does not agree with ZP's contention that the 
Commission should not seek to limit the operating margins of VRS 
providers. VRS is entirely funded by contributions from 
telecommunications and VoIP service providers, which are generally 
passed on to communications rate payers. The Commission has a statutory 
obligation to ensure that these funds are used efficiently. As with the 
Universal Service Fund, moreover, the Commission is the steward of the 
TRS Fund and is obligated to protect it from waste, fraud, and abuse. 
To the extent that a VRS provider's operating margin exceeds the 
reasonable range, the additional revenues paid from the TRS Fund (and 
the additional contributions exacted from telecommunications providers 
to cover them) are wasted. Further, to the extent that ZP's per-minute 
cost exceeds Sorenson's, manipulating rates to provide a higher 
operating margin for a higher-cost provider would be inconsistent with 
economic principles, as in competitive

[[Page 72002]]

markets, less-efficient providers are not rewarded for having higher 
costs.
    61. Moreover, the limits the Commission sets to prevent 
overcompensation do not conflict with the Commission's policy in the 
2017 VRS Compensation Order. In that rulemaking, as in every recent TRS 
compensation proceeding, the Commission made clear that avoiding 
overcompensation of VRS providers is a necessary objective to ensure 
that TRS is provided in the most efficient manner. For example, a key 
benefit of the tier structure, cited in that decision, is that it 
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. 
Further, the Commission stressed that the range of reasonable operating 
margins set in that decision was a range of ``allowable'' operating 
margins, cautioning that ``[the Commission does] not thereby authorize 
providers to recover additional `markup' or profit that goes beyond 
such reasonable allowance.'' Indeed, there would have been little point 
in setting an upper limit on the reasonable range of operating margins, 
had the Commission intended to permit providers free rein to earn 
profits above that limit.
    62. In 2017, while the Commission sought to reduce 
overcompensation, it stopped short of reducing compensation all the way 
down to cost. In that decision, the Commission sought to address a 
specific concern raised regarding tier structures: that they could 
limit providers' incentives to grow and increase their efficiency, 
especially if a provider's monthly minutes were about to cross the 
numerical threshold for the next tier. This theoretical risk often can 
be addressed by ensuring that tier boundaries are wide enough to cover 
a provider's likely growth during the life of the rate plan. However, 
it appears that the Commission was uncertain whether the tier 
boundaries it set actually would be wide enough to completely erase 
this risk. Therefore, it also sought to set the rate for the next tier 
high enough to ensure that, if a provider did grow large enough that it 
came close to a tier boundary, it would not be deterred from crossing 
that boundary. Under today's circumstances, by contrast, the Commission 
can set the tier boundaries wide enough to avoid this risk. By merging 
the existing Tiers II and III into a single tier, the Commission 
completely removes any tier boundary that could affect the growth 
incentives of the two largest providers. And by increasing the highest 
tier rate from $2.63 to $3.92, the Commission eliminates any realistic 
possibility of deterring any provider subject to that tier from serving 
additional minutes.
    63. Alternative Tiering Proposals. The Commission declines to adopt 
the alternative tiering proposals proposed by ZP and Sorenson in this 
proceeding. None of the alternatives would ensure that all providers 
subject to tiered rates earn operating margins within the reasonable 
range. The initial ZP and Sorenson proposals--to expand Tier II without 
changing the current per-minute amounts for any tier--were made before 
the filing of the 2023 cost reports showing a substantial increase, as 
well as convergence, in these providers' costs. The proponents of these 
proposals no longer advocate their adoption.
    64. As for the June 2023 proposals of ZP and Sorenson, they would 
do nothing to address the problems with the current tier structure, 
discussed above. In addition, both these proposals would result in 
excessive operating margins for one or both providers--even with 
providers' reported costs adjusted upward. Sorenson's September 2023 
proposal also would result in excessive operating margins for both 
Sorenson and ZP.

Compensation for Small Providers

    65. For VRS providers--including new entrants--that handle 1 
million monthly minutes or less, the Commission maintains a separate 
compensation formula. When the Commission established such a separate 
formula (the ``emergent provider'' formula, then applicable to VRS 
providers with up to 500,000 monthly minutes) in 2017, it was intended 
as a temporary measure, to allow the small providers operating at that 
time a reasonable window of opportunity to grow. The two providers 
compensated under that formula during this most recent compensation 
period did not experience a substantial growth in traffic volume, and 
they incurred per-minute costs substantially higher than those of the 
two larger providers. Nevertheless, as the Commission recognized in 
2017, the availability of additional, reliable service options from 
smaller VRS providers can effectively reinforce service quality 
incentives.
    66. Further, maintaining a separate compensation formula for 
smaller providers encourages new entry into the VRS program by 
potentially innovative firms. Some small providers may advance the 
availability of TRS by focusing on specialized offerings to niche 
populations not served by larger providers. Rather than applying a 
single compensation formula to all providers, regardless of size and 
cost structure--with the likely result of driving out the remaining 
small provider, deterring new entry, and leaving only two VRS providers 
from which VRS users could choose--the Commission preserves a separate 
VRS formula for the next period. The Commission concludes that this 
approach is the most efficient way to maintain the availability of 
functionally equivalent VRS, including specialized services that may be 
needed by niche populations.
    67. To avoid reducing any small provider's incentive to grow their 
business, the Commission also raises the upper limit for application of 
the small-provider formula from 500,000 to 1 million monthly minutes. 
The Commission is concerned that if it maintained the 500,000-minutes 
limit, a small provider growing its minutes above that limit may not 
have an opportunity to recover its allowable costs and earn a 
reasonable operating margin. Based on the record (which indicates that 
the current small provider has not grown substantially since 2017), it 
seems unlikely that any small provider or new entrant will approach the 
expanded limit of 1 million monthly minutes during the next 
compensation period. However, to address that possibility, the 
Commission provides that, during the next compensation period, if a 
provider handled 1 million or fewer monthly minutes in June 2023 (or in 
the first year of operation for a new entrant), and if such provider 
subsequently exceeds 1 million monthly minutes, the small-provider 
formula shall continue to apply to the provider's first 1 million 
monthly minutes, and the large-provider formula shall apply to all 
monthly minutes after the first million. This is comparable to the plan 
adopted by the Commission in 2017 to address analogous circumstances 
under the emergent-provider formula.
    68. Compensation Amount. As in previous compensation proceedings, 
when the Commission sets compensation formulas for small VRS providers, 
there is no single ``right answer'' to the question; rather, the matter 
is inherently a question of administrative line-drawing. For VRS 
providers providing 1 million monthly minutes or fewer, the Commission 
adopts a compensation formula of $7.77 per minute, applicable to all 
minutes of such providers. This formula is based on the adjusted per-
minute expenses of the remaining VRS provider handling 1 million 
monthly minutes or fewer, and

[[Page 72003]]

is designed to allow VRS providers with 1 million monthly minutes or 
fewer a reasonable opportunity to earn an operating margin within the 
range of reasonableness. In setting this per-minute formula, the 
Commission seeks to ensure that VRS providers that have demonstrated 
some ability to grow have an opportunity to recover their expenses and 
earn a reasonable operating margin. This formula also provides an 
opportunity for very small providers and new entrants to recover their 
reasonable fixed or start-up expenses. However, the Commission does not 
guarantee cost recovery for every such provider, regardless of their 
per-minute costs.

Additional Compensation for Video-Text Service

    69. The Commission prescribes additional per-minute compensation 
for the provision of a specialized form of VRS to ASL users who are 
deafblind, applicable to any VRS provider that chooses to offer it. 
Such additional compensation will be paid, in addition to the otherwise 
applicable per-minute amount, for each compensable minute of this 
specialized form of VRS.
    70. The Commission refers to this specialized form of VRS as Video-
Text Service. In a typical VRS call, a deaf or hard-of-hearing person 
communicates in ASL to a CA, who then voices the message to the hearing 
party. The CA then signs the hearing party's voice response to the ASL 
user. Some ASL users who are deafblind, however, are able to sign to a 
CA but unable to see the signs from the CA well enough to understand 
them. For such users, there is a special variant of VRS, in which a CA 
converts the other party's side of the conversation to text (instead of 
ASL video), which the deafblind party can read using a refreshable 
braille display. A CA assigned to a Video-Text Service call must not 
only be fluent in ASL, but must also be a swift, accurate, and reliable 
typist.
    71. Up to the present, only GlobalVRS has offered this specialized 
form of VRS. With GlobalVRS's announced exit from the VRS industry, 
Sorenson states it intends to provide Video-Text Service to users. 
Sorenson's cost estimates indicate that, while most of the costs 
involved in offering this service do not vary significantly with the 
number of minutes served, there are some variable costs due to the 
higher salaries Sorenson expects to pay for those CAs equipped with the 
additional skills described above.
    72. Given the Commission's statutory responsibility to ensure the 
availability of TRS to persons who are deafblind and the additional 
costs involved in providing this Video-Text Service, the Commission 
concludes that additional per-minute compensation should be authorized 
for the provision of this service by any VRS provider choosing to offer 
it. As an interim measure, pending the availability of more precise 
cost data, the Commission estimates the variable cost of this service 
based on the estimate submitted by Sorenson plus an operating margin to 
incentivize the provision of this specialized service, resulting in an 
additive of $0.19 per minute. This amount shall be paid to a VRS 
provider for each compensable conversation minute of Video-Text 
Service, in addition to the per-minute amount otherwise payable to the 
provider under the applicable compensation formula for an ordinary VRS 
call. Sorenson's non-variable costs for this service will be recovered 
through the base compensation rate, as they are relatively unaffected 
by the number of minutes of Video-Text Service provided.
    73. Alternative Compensation Proposal. In its comments, GlobalVRS 
proposes a ``Specialized Access Small Business'' (SASB) designation as 
an alternative compensation approach. To qualify for this compensation, 
providers would have to serve 5% or less of total program minutes and 
provide specialized language and modality. Each SASB-designated 
provider would be subject to an individualized payment formula, reset 
annually to compensate for that provider's reported allowable costs.
    74. The Commission rejects this proposal for several reasons. 
First, it excludes larger VRS providers from receiving additional 
compensation for the provision of specialized services. The Commission 
has stated that offering VRS users a choice among multiple providers 
can most effectively carry out the Commission's statutory mandate to 
ensure that functionally equivalent VRS is available to all eligible 
individuals to the extent possible and in the most efficient manner. By 
adopting a formula that encourages only small providers to offer a 
specialized service, the Commission may prevent the service from being 
offered by a provider with greater access to the necessary resources 
and inputs, which may enable it to provide the service more effectively 
and at lower cost. Second, the method by which a provider would be 
compensated under GlobalVRS's proposal is more administratively 
burdensome (as it requires annual recalculation of the formula based on 
annual review of the provider's individual costs), and unlike the 
multi-year compensation plans generally preferred by the Commission 
provides no incentive for cost savings.
    75. Registration Process. A VRS provider may provide Video-Text 
Service to any registered VRS user who states that they need to use the 
service. Registered VRS users need not have their identities re-
verified by the Database administrator before using Video-Text Service. 
To enable the TRS User Registration Database administrator to review 
and pay compensation requests for this service, the Commission directs 
the administrator to design and execute a field in the User 
Registration Database to allow a VRS provider to register a new or 
existing user as a registered user of Video-Text Service. Once the 
field is implemented, VRS providers shall update User Registration 
Database registrations to identify existing users of this service and 
additional users when they begin using this service. The Commission 
directs the Consumer and Governmental Affairs Bureau to release a 
public notice announcing when the Database is ready to accept such 
updates and setting a 60-day deadline for such updates of existing VRS 
users. Once a user is registered in the Database, the TRS Fund 
administrator may presume that call detail records associated with that 
user are for Video-Text Service, but the administrator may review and 
verify payment claims in accordance with the Commission's rules.
    76. At this time, the Commission does not establish additional 
identification requirements for Video-Text Service users. The 
Commission notes that the conversation process in Video-Text Service is 
slower than an ordinary VRS conversation--and a less satisfactory 
process for those VRS users who can see and understand video-
transmitted signs. Therefore, the Commission believes VRS users that do 
not need to receive a return communication in text will be unlikely to 
use this service. Further, the Commission believes the additive rate 
for Video-Text Service is not so high as to significantly increase 
incentives for fraud and abuse, especially as the number of minutes of 
use of this service is very small.
    77. Pending the implementation of this update, to allow Video-Text 
Service calls to be identified in call detail records submitted for 
payment, the Commission directs the TRS Fund administrator to accept 
from any VRS provider offering Video-Text Service a list of telephone 
numbers and IP addresses assigned to users who have requested Video-
Text Service. VRS providers seeking compensation for Video-Text Service 
shall submit such

[[Page 72004]]

lists in accordance with instructions provided by the TRS Fund 
administrator. VRS providers shall provide additional information 
regarding such users and their Video-Text Service calls to the TRS Fund 
administrator, upon request, as necessary for the administrator to 
perform its data collection, auditing, payment claim verification, and 
TRS Fund payment distribution functions.

Other Specialized Services

    78. Except in the case of Video-Text Service, the record is 
insufficient for the Commission to make a determination as to whether, 
and under what circumstances, a specialized service should be supported 
by additional compensation.

Effect of New Compensation Formulas

    79. Looking to just the effect on the TRS Fund, in the first year 
of the new period the compensation plan adopted herein would result in 
an estimated $143 million increase in costs compared to maintaining the 
current compensation formulas. Based on available data, it will result 
in an industry average operating margin within the range of 
reasonableness and provide an opportunity for providers to recover 
their costs plus earn a reasonable operating margin.

Compensation Period and Adjustments

    80. The Commission concludes that the compensation period should be 
five years, ending June 30, 2028. This period is long enough to give 
providers certainty regarding the applicable compensation formulas, 
provide incentives for providers to become more efficient without 
incurring a penalty, and mitigate any risk of creating the ``rolling 
average'' problem previously identified by the Commission regarding 
TRS. On the other hand, the period is short enough to allow timely 
reassessment of the compensation formulas in response to substantial 
cost changes and other significant developments.
    81. The Commission finds commenters' proposal for a compensation 
period of 6-8 years incompatible with the need to periodically reassess 
compensation formulas in response to changes in provider cost 
structures, possible technological innovations, or other developments. 
Historically, the Commission has not set TRS Fund compensation periods 
longer than four years. Further, the VRS providers neither detail nor 
support their claims that increasing the compensation period to 6-8 
years will affect providers' stability, opportunities to obtain loans 
or attract long-term investment. The Commission is unpersuaded that any 
potential benefits of a longer period outweigh the benefits from 
reassessing compensation formulas on a five-year schedule.
    82. Adjustments for exogenous costs. Under the current methodology, 
an upward adjustment for well-documented exogenous costs is available 
for costs that belong to a category of costs that the Commission has 
deemed allowable, result from new TRS requirements or other causes 
beyond the provider's control, are new costs that were not factored 
into the applicable compensation formula, and if unrecovered, would 
cause a provider's current costs (allowable expenses plus operating 
margin) to exceed its revenues. The Commission maintains this approach 
to exogenous cost recovery and codifies these criteria in its rules. 
Any exogenous cost claims should be submitted to the TRS Fund 
administrator with the provider's annual cost report, so that the 
administrator can review such claims and make appropriate 
recommendations. The Commission delegates authority to the Consumer and 
Governmental Affairs Bureau to make determinations regarding timely 
submitted exogenous cost claims.
    83. Adjustments for future cost changes. In the Notice of Proposed 
Rulemaking, the Commission sought comment on whether per-minute 
compensation amounts should be adjusted during the compensation period 
to reflect inflation and productivity. The Commission agrees with 
several commenters that there should be annual adjustments for cost 
changes. In the past, the trend of VRS costs has been generally 
downward. However, in light of recent developments, including increases 
in general inflation indices and reports of increased wages for VRS 
CAs, the Commission finds it reasonable to adopt an adjustment factor 
to ensure that the rates continue to fairly compensate providers if 
relevant costs continue to increase.
    84. As a reference point for determining such annual adjustments, 
the Employment Cost Index appears best suited for tracking relevant 
cost changes. Specifically, the seasonally adjusted index of total 
compensation for private industry workers in professional, scientific, 
and technical services, which covers translation and interpreting 
services (including sign language services), can serve as a reasonable 
proxy for the annual change in VRS costs. As interpreters, CAs fall 
squarely in this labor cost category, and labor and related costs for 
CAs, non-CA professionals, and administrative personnel make up the 
bulk of VRS costs.
    85. This index is better suited than the Producer Price Index or 
the Gross Domestic Product Chain-type Price Index (GDP-CPI). Both these 
indices reflect changes in the national economy as a whole, based on a 
broad array of data from various product and service sectors. While 
these indices may be useful inflation measures for the economy as a 
whole, reflecting the ups and downs of so many disparate industries may 
not ensure that annual adjustments are reasonable. A more reliable 
approach is one that tracks changes in a related industry sector. 
Commenters agree that labor is the primary expense incurred by VRS 
providers and the most likely to increase over time, and the Commission 
finds that labor costs are likely to be a key determinant of the 
quality of VRS as currently provided. While there is no index that 
focuses solely on the cost of VRS, the index the Commission adopts here 
measures employment cost for a sector that includes translation and 
interpreting services, and thus includes employee costs for VRS as well 
as other highly comparable services. Adopting such an index is more 
likely to provide a stable inflation adjustment that reflects cost 
changes providers are likely to incur, while excluding changes that are 
specific to unrelated sectors of the national economy.
    86. As for productivity gains, the record provides no clear 
indication of the extent to which, if at all, recent VRS cost increases 
have been offset by productivity gains. Absent more specific data, the 
Commission finds it reasonable to presume no change to productivity 
over the rate period.
    87. The Commission delegates authority to the Consumer and 
Governmental Affairs Bureau to approve annual inflation adjustments of 
each compensation formula, beginning with Fund Year 2024-25. The 
Commission directs the TRS Fund administrator to specify in its annual 
TRS Fund report, beginning with the report due May 1, 2024, the index 
values for each quarter of the previous calendar year and the last 
quarter of the year before that. The Commission also directs the TRS 
Fund administrator to propose adjustments for each per-minute amount by 
a percentage equal to the percentage change in the index between the 
first and fifth quarters specified in the report. Those adjusted 
compensation levels also should be used to calculate the recommended 
funding requirement for

[[Page 72005]]

VRS and the relevant contribution factor.

Accountability Concerns

    88. In adopting VRS compensation formulas for the next five years, 
the Commission relies on estimates of future provider costs that, in 
total, exceed the most recent historical level by approximately $121.5 
million, or 27%. In 2023-24, as a result, VRS compensation will be 
$142.5 million, or 29.5%, higher than it would be under the current 
formulas. This increase in compensation--which will require higher TRS 
Fund contributions from telecommunications and VoIP service providers--
is premised on the Commission's belief that maintaining and improving 
VRS service quality requires a major increase in CA wages and 
technology spending by VRS providers. As stewards of the TRS Fund, the 
Commission needs to be able to assess the extent to which the increased 
TRS Fund support the Commission authorizes is achieving the intended 
results.
    89. This requires the collection, review, and auditing of relevant 
cost data by the TRS Fund administrator. Therefore, the Commission 
delegates authority to the Consumer and Governmental Affairs Bureau, in 
coordination with the Office of the Managing Director, to work with the 
TRS Fund administrator to update the Interstate TRS Fund Annual 
Provider Data Request to align with the actions taken in this 
proceeding. The Commission directs these entities to focus special 
effort on ensuring the collection of accurate data quantifying CA wages 
and benefits, based on uniform definitions and methods of calculating 
key elements such as hourly CA compensation, and expenditures on 
improved technology. The Commission expects that annual provider cost 
reports shall include detailed descriptions of ongoing, planned, 
recently completed, and canceled engineering and R&D projects, the 
purpose and intended outcome of each project, and the current or 
projected timeline for each project.
    90. By annually collecting such specific information, the 
administrator will enable the Commission to review whether the 
increased compensation authorized herein is having the intended results 
of enabling service improvements that enhance functional equivalence, 
and to make appropriate changes in compensation at the end of--or if 
necessary, during--the five-year compensation period. In addition, such 
information will help the Commission ensure that R&D supported by the 
TRS Fund is being used for TRS improvements, rather than projects of 
little or no benefit to TRS users. The inclusion of this additional 
information and data will also ensure the Commission may address the 
timing of cost changes and concerns of attempted regulatory arbitrage.

True-Up

    91. True-Up of Compensation. The Commission directs the TRS Fund 
administrator to perform a true-up, after the effective date of 
document FCC 23-78, of the VRS compensation payments made pursuant to 
waivers granted by the Commission to extend the expiration date of the 
previously adopted compensation formulas until the effective date of 
the new compensation formulas. The revised compensation formulas 
adopted in document FCC 23-78 are based on estimates of the costs VRS 
providers will incur in the 2023-24 Fund Year. Overall, these revised 
formulas substantially increase provider compensation to reflect recent 
increases in reported costs, as well as the Commission's expectation of 
further increases in certain areas. To allow providers a reasonable 
opportunity to recover such increased costs, the Commission concludes 
that they should be compensated under the revised formulas for all 
services provided during the 2023-24 TRS Fund Year. The Commission 
finds that the benefits of ensuring full compensation for this Fund 
Year outweigh the minor administrative burden involved in such a true-
up process. Accordingly, after document FCC 23-78 becomes effective, 
the Commission directs the TRS Fund administrator to make a 
supplemental payment to each VRS provider for all compensable minutes 
of service provided after June 30, 2023, for which compensation was 
paid under the extended formulas. Such supplemental payment shall 
consist of the difference between the compensation that would be 
applicable under document FCC 23-78 and the compensation actually paid 
to the provider.

Final Regulatory Flexibility Analysis

    92. As required by the Regulatory Flexibility Act of 1980, as 
amended, the Commission incorporated an Initial Regulatory Flexibility 
Analysis (IRFA) into the Notice of Proposed Rulemaking. The Commission 
sought written public comment on the proposals in the Notice of 
Proposed Rulemaking, including comment on the IRFA. No comments were 
received in response to the IRFA.
    93. Need for, and Objectives of, the Report and Order. In document 
FCC 23-78, pursuant to 47 U.S.C. 225, the Commission adopts a five-year 
compensation plan for VRS. To provide the appropriate compensation for 
the provision of, and continued availability of VRS, the Commission 
adopts a compensation plan that addressed increasing costs due to 
inflation and the effect of the COVID-19 pandemic. It also updates the 
inputs for reasonable cost criteria to improve the ability of VRS 
providers to provide and receive compensation for VRS that is 
functionally equivalent. The Commission also adopts a compensation 
formula for the provision of VRS to individuals who are deafblind, as a 
specialized service to help ensure the continued availability of this 
service to the extent possible for the individuals who use this 
service. Finally, to address changes in the cost structures of various 
VRS providers, the Commission transitions from a three-tiered rate 
structure to a two-tiered rate structure for larger VRS providers 
providing more than one million monthly minutes, while maintaining a 
separate compensation rate for providers providing one million or fewer 
monthly minutes.
    94. Description and Estimate of the Number of Small Entities to 
Which the Rules Will Apply. The policies adopted in document FCC 23-78 
will affect obligations of VRS providers. These services can be 
included within the broad economic category of All Other 
Telecommunications.
    95. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities. The provider compensation 
plan will not create significant reporting, recordkeeping, or other 
compliance requirements for small entities. VRS providers that seek 
compensation for the provisioning of a specialized form of VRS to 
deafblind individuals must identify any users of that specialized 
service in the TRS User Registration Database. This minor database 
modification will be implemented through a new field in the TRS User 
Registration Database that will allow small and other VRS providers to 
identify users of that service. The Commission anticipates this 
modification to be of minimal impact to small and other VRS providers, 
as it is the addition of a single new field to a database VRS users are 
already using and will allow them to be fully compensated for providing 
VRS to deafblind users.
    96. Steps Taken to Minimize the Significant Economic Impact on 
Small Entities, and Significant Alternatives Considered. The adopted 
compensation

[[Page 72006]]

structure and formulas will apply only to entities who are, or may 
become, certified by the Commission to offer VRS in accordance with its 
rules. The Commission adopted these multi-year compensation formulas to 
compensate providers for their reasonable cost of providing service, to 
reduce the burden on TRS Fund contributors and their subscribers, and 
to ensure that TRS is made available to the greatest extent possible 
and in the most efficient manner. The Commission adopted separate 
compensation structures for large and small providers to allow small 
entities the opportunity to recover their costs in providing VRS, which 
the record suggests are higher than for large providers who have 
achieved some level of economies of scale. This action by the 
Commission should minimize the economic impact for small entities who 
provide VRS.
    97. The Commission considered various proposals for compensation 
methodologies and compensation structure and formulas from small and 
other entities, and the adopted rules reflect its best efforts to 
minimize significant economic impact on small entities. The Commission 
adjusted the allowable cost categories that it considers in determining 
the appropriate compensation formulas for the provisioning of VRS to 
allow small and other providers to recover costs and benefit 
economically from the increased compensation they will receive.

Ordering Clauses

    98. Pursuant to sections 1, 2, and 225 of the Communications Act of 
1934, as amended, 47 U.S.C. 151, 152, 225, document FCC 23-78 is 
adopted and the Commission's rules are hereby amended as set forth.

Congressional Review Act

    99. The Commission sent a copy of document FCC 23-78 to Congress 
and the Government Accountability Office pursuant to 5 U.S.C. 
801(a)(1)(A).

Final Paperwork Reduction Act of 1995 Analysis

    100. Document FCC 23-78 does not contain new or modified 
information collection requirements subject to the Paperwork Reduction 
Act of 1995, Public Law 104-13. Therefore, it also 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, Public Law 107-198. See 44 U.S.C. 
3506(c)(4).

List of Subjects in 47 CFR Part 64

    Individuals with disabilities, Telecommunications, Telephones.

Federal Communications Commission.
Marlene Dortch,
Secretary, Office of the 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

0
1. The authority citation for part 64 continues to read as follows:

    Authority: 47 U.S.C. 151, 152, 154, 201, 202, 217, 218, 220, 
222, 225, 226, 227, 227b, 228, 251(a), 251(e), 254(k), 255, 262, 
276, 403(b)(2)(B), (c), 616, 617, 620, 1401-1473, unless otherwise 
noted; Pub. L. 115-141, Div. P, sec. 503, 132 Stat. 348, 1091.


0
2. The authority citation for subpart F continues to read as follows:

    Authority:  47 U.S.C. 151-154; 225, 255, 303(r), 616, and 620.


0
3. Amend Sec.  64.601 by redesignating paragraphs (a)(52) through (55) 
as paragraphs (a)(53) through (56) and adding new paragraph (a)(52) to 
read as follows:


Sec.  64.601  Definitions and provisions of general applicability.

    (a) * * *
    (52) Video-text service. A specialized form of VRS that allows 
people who are deafblind who use sign language and text to communicate 
through a video link. The video link allows the communications 
assistant to view and interpret a party's sign language communication 
and the text functionality allows the communications assistant to send 
text to peripheral devices employed in connection with equipment, 
including software, to translate, enhance, or otherwise transform 
advanced communications services into a form accessible to people who 
are deafblind. The communications assistant relays the conversation 
using sign language, voice, and text between the participants of the 
call.
* * * * *

0
4. Add Sec.  64.643 to subpart F to read as follows:


Sec.  64.643  Compensation for Video Relay Service.

    For the period from July 1, 2023, through June 30, 2028, TRS Fund 
compensation for the provision of Video Relay Service (VRS) shall be as 
described in this section.
    (a) First year. For Fund Year 2023-24, TRS Fund compensation shall 
be paid in accordance with the following formulas.
    (1) The Compensation Amount for VRS providers handling one million 
conversation minutes or less in a month shall be $7.77 per minute.
    (2) The Compensation Amount for VRS providers handling more than 
one million conversation minutes in a month shall be:
    (i) $6.27 per minute for the first 1,000,000 conversation minutes 
each month;
    (ii) $3.92 per minute for monthly conversation minutes in excess of 
1,000,000.
    (3) For Video-Text Service, as defined in this subpart, in addition 
to the applicable Compensation Amount under paragraph (a)(1) or (2) of 
this section, an additional Compensation Amount of $0.19 per minute 
shall be paid for each conversation minute.
    (b) Succeeding years. For each succeeding Fund Year through June 
30, 2028, each per-minute Compensation Amount described in paragraph 
(a) of this section shall be redetermined in accordance with the 
following equation:

AFY = AFY-1 * (1+IFFY)

Where:

AFY is the Compensation Amount for the new Fund Year,
AFY-1 is the Compensation Amount for the previous Fund 
Year,
IFFY is the Inflation Adjustment Factor for the new Fund 
Year.

    (c) Inflation Adjustment Factor. The Inflation Adjustment Factor 
for a Fund Year (IFFY), to be determined annually on or 
before June 30, is equal to the difference between the Initial Value 
and the Final Value, as defined herein, divided by the Initial Value. 
The Initial Value and Final Value, respectively, are the values of the 
Employment Cost Index compiled by the Bureau of Labor Statistics, U.S. 
Department of Labor, for total compensation for private industry 
workers in professional, scientific, and technical services, for the 
following periods:
    (1) Final Value--The fourth quarter of the Calendar Year ending 6 
months before the beginning of the Fund Year; and
    (2) Initial Value--The fourth quarter of the preceding Calendar 
Year.
    (d) Exogenous cost adjustments. In addition to LFY, a 
VRS provider shall be paid a per-minute exogenous cost adjustment if 
claims for exogenous cost recovery are submitted by the provider and 
approved by the Commission on or before June 30. Such exogenous cost 
adjustment shall equal the amount of

[[Page 72007]]

such approved claims divided by the provider's projected minutes for 
the Fund Year. An exogenous cost adjustment shall be paid if a VRS 
provider incurs well-documented costs that:
    (1) Belong to a category of costs that the Commission has deemed 
allowable;
    (2) Result from new TRS requirements or other causes beyond the 
provider's control;
    (3) Are new costs that were not factored into the applicable 
compensation formula; and
    (4) If unrecovered, would cause a provider's current allowable-
expenses-plus-operating margin to exceed its revenues.

[FR Doc. 2023-22936 Filed 10-18-23; 8:45 am]
BILLING CODE 6712-01-P