FCC Adopts New Compensation Plan for IP Relay Service

July 8, 2022 | by Andrew Regitsky

FCC Adopts New Compensation Plan for IP Relay Service

In a Report and Order (Order) released June 30, 2022, in Docket 03-123. the FCC adopted a new compensation plan for Interstate Telecommunications Relay Services (TRS) Fund support of Internet Protocol Relay Service (IP Relay). The Order will take effect the later of July 1, 2022, or on the date of the Federal Register publication of the Final Rules.

IP Relay service was authorized by the Commission in 2002, it

is an Internet-based text-to-voice relay service. With IP Relay, instead of using a text telephone (TTY), a device designed for use with legacy circuit-switched networks, an individual with a hearing or speech disability can communicate with voice telephone users by transmitting text via the Internet. The text transmission is delivered to an IP Relay call center, where a communications assistant (CA) converts the user’s text to speech for the hearing party and converts that party’s speech to text for the IP Relay user. (Order, at para. 2).

Currently, IP Relay is supported by the Interstate TRS Fund. Since 2007,

the base level of per-minute compensation is determined every three years, based on the weighted average of providers’ reasonable costs. For the purpose of determining “reasonable costs,” the Commission established a number of criteria defining whether various categories of costs reported by providers are “allowable.” The base compensation level approved by the Commission is subject to annual adjustments for inflation and efficiency based on pre-approved factors, as well as ad hoc adjustment in the event that a provider incurs eligible “exogenous” costs. Id., at para. 3).

In the years since IP Relay was created, demand has dropped significantly with T-Mobile, the one approved provider today, although others could offer IP Relay if they so desired. In November 2018, Sprint (now T-Mobile) filed a petition for rulemaking requesting adoption of a new compensation methodology.

The company urged the Commission to “initiate a rulemaking proceeding to adopt a new approach to setting the rates for IP Relay services that will ensure the long-term viability and availability of IP Relay.” The company contended that “the current compensation methodology . . . fails to account for all of the costs that [T-Mobile] reasonably incurs in providing IP Relay service. (Id., at para. 6).

The agency responded by issuing A Notice of Proposed Rulemaking in September 2021 to update the IP Relay compensation program. The current Order is a result of that Rulemaking.

In the Order, the FCC adopts a four-year compensation plan for IP Relay, for the period from July 1, 2022, through June 30, 2026. It sets a base compensation level of $1.9576 per minute, which is also the compensation formula for Fund Year 2022-23.

For each subsequent Fund Year, this amount will be adjusted by: (1) multiplying the previous year’s compensation level by an inflation factor linked to the Bureau of Labor Statistics’ Employment Cost Index for professional, scientific, and technical services; and (2) adding an appropriate amount, if necessary, to compensate a provider for exogenous costs. This compensation formula is applicable to the provision of IP Relay by T-Mobile, the currently certified provider, and by any other company that may be granted certification to provide IP Relay during the compensation period. (Id., at para. 9).

The Commission will continue the practice whereby it periodically resets the base level of IP Relay compensation based on a determination of reasonable provider cost. However, it believes that certain criteria for determining reasonable IP Relay costs need adjustment based on Commission experience.

First, we expand the allowable cost categories to include the reasonable costs of outreach and acquisition of 10-digit telephone numbers. Second, based on the record indicating that projected IP Relay costs have been relatively accurate, we calculate reasonable IP Relay costs based on two years of projected costs and demand. Third, in lieu of return on capital investment, we allow an operating margin analogous to those allowed for VRS and IP CTS. For IP Relay, we allow an operating margin of 12%. In addition, we increase the duration of the compensation period from three to four years. We also modify the factors for annual compensation adjustments, linking the inflation factor to a different price index, foregoing the use of a productivity factor for the next period, and harmonizing the criteria for recovery of exogenous costs with those applied to VRS and IP CTS. (Id., at para 10.).

The Commission does not believe that other, more radical changes are needed at this time.