Davis Wright Tremaine LLP

In June, the FCC released a Report and Order, Declaratory Ruling and Further Notice of Proposed Rulemaking (“FNPRM”) proposing, among other things, a new funding source for Internet Protocol Captioned Telephone Service (“IP CTS”), a service which captions speech during a telephone call so that individuals with hearing loss can read the text of conversations in real-time. Specialized providers of such services are reimbursed for the cost of providing IP CTS and other more traditional “relay” services through the federal Telecommunications Relay Services (“TRS”) fund. Currently, the TRS program is funded by assessing fees on the interstate revenues that are reported by telecommunications carriers and VoIP providers on FCC Form 499. The FCC proposes to increase funding for IP CTS by also assessing fees on those entities’ intrastate revenues.

The FCC’s Rationale
In 2007, the FCC clarified that IP CTS providers could seek reimbursement from the TRS fund, which had previously only funded traditional TTY text relay services. At that time, the FCC determined that the funding would come from fees assessed only on interstate revenues, but noted its intent to revisit the issue. The FCC cites several reasons in the FNPRM as to why it now believes it is appropriate to assess such fees on intrastate revenues as well. First, because IP CTS is now available nationwide, the FCC no longer sees a compelling reason to limit the fees to interstate service providers. In addition, the FCC concludes that the majority of IP CTS call minutes (about 76%) are intrastate in nature. Finally, the FCC believes including the intrastate revenue to support IP CTS will not only increase the amount of funding available for the service (by about 150%), but will also be a fairer approach for providers whose services are primarily interstate yet have borne the greater burden of supporting the TRS fund.

How Would it Work?
The FCC proposed two possible means of calculating the fees that would fund IP CTS. One methodology that was proposed is to essentially incorporate the budgetary needs of IP CTS into the current TRS funding mechanism, with the addition of intrastate revenues as a source. Specifically, the entity that administers the TRS fund would first determine the funding needs for IP CTS, compare that to the total revenues reported on the FCC Form 499 in order to determine the required assessment rate to meet those funding needs, and assess subject providers’ revenues. The second methodology proposed would be more complicated. Under the second approach, the administrator would calculate two separate fees: one based on the funding needed to provide interstate IP CTS and a second based on the funding needed to provide intrastate IP CTS. These separate fees would be based on the percentage of IP CTS minutes and provider costs attributed to each jurisdictional category, and the two pools of assessable revenues would be allocated based on the jurisdictional allocation of revenues on providers’ FCC Form 499s.

Statutory Authority
The FCC relies on its general authority under 47 U.S.C. § 225(d)(3) of the Communications Act to establish its legal authority for expanding the base of TRS contributions. Notably, while expressing support for the item overall, Commissioner O’Rielly remarked that this was a “strained interpretation” of the statutory term “generally” where the statute requires that FCC regulations “generally” recover costs caused by intrastate or interstate TRS from the relevant jurisdictional service revenues. Commissioner O’Rielly also thinks it is time to revisit the underlying allocation process as “the notion of jurisdictional separations is increasingly anachronistic in an IP driven app economy.”

Other highlights of the item include the following:

  • An Order establishing interim rates for provider compensation and adopting rules to prevent abuse of the program.
  • A Declaratory Ruling concluding that IP CTS using Automatic Speech Recognition (“ASR”) is eligible for compensation from the TRS fund.
  • The FNPRM seeks comment on how to set future compensation for IP CTS service.
  • The FNPRM also seeks comment on whether certified state programs should be allowed to take a more active role in administering IP CTS, including administering intrastate funding.
  • A Notice of Inquiry seeking comment on potential performance metrics for assessing the IP CTS program and IP CTS providers. 

Comments on the Further Notice of Proposed Rulemaking are due September 17, 2018, and reply comments are due October 16, 2018.

Comments on the Notice of Inquiry are due October 16, 2018, and reply comments due November 15, 2018.