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Final Resp'ts Brief - Sorenson Commc'ns v. FCC & USA (D.C. Cir.)

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Released: January 29, 2014
USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 1 of 109

BRIEF FOR RESPONDENTS

Oral Argument Scheduled For March 17, 2014




IN THE
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
______________

NO. 13-1215

______________

SORENSON COMMUNICATIONS, INC.,










PETITIONER
V.

FEDERAL COMMUNICATIONS COMMISSION
AND
THE UNITED STATES OF AMERICA,










RESPONDENTS
______________

ON PETITION FOR REVIEW OF AN ORDER OF
THE FEDERAL COMMUNICATIONS COMMISSION
______________



WILLIAM J. BAER
JONATHAN B. SALLET
ASSISTANT ATTORNEY GENERAL
ACTING GENERAL COUNSEL

ROBERT B. NICHOLSON
RICHARD K. WELCH
ROBERT J. WIGGERS
DEPUTY ASSOCIATE GENERAL COUNSEL
ATTORNEYS

C. GREY PASH, JR.
UNITED STATES DEPARTMENT
COUNSEL
OF JUSTICE

WASHINGTON, D. C. 20530
FEDERAL COMMUNICATIONS COMMISSION

WASHINGTON, D. C. 20554


(202)
418-1740










USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 2 of 109

STATEMENT OF PARTIES, RULINGS AND RELATED CASES

1.

Parties


All parties appearing in this Court are listed in petitioner’s brief.
2.

Ruling Under Review


Structure and Practices of the Video Relay Service Program, 28 FCC Rcd
8618 (2013) (JA 843)
3.

Related Cases


The order on review has not previously been before this Court or any other
court. We are not aware of any related case pending before this Court or any other
court.





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TABLE OF CONTENTS

Statement of the Issues Presented for Review ........................................................... 1 
Jurisdiction ................................................................................................................. 2 
Statutes and Regulations ............................................................................................ 2 
Counterstatement of the Case .................................................................................... 3 
A. Background ........................................................................................................... 3 
1. The Regulatory Setting .................................................................................... 3 
a. TRS and VRS. .......................................................................................... 3 
b. TRS/VRS Funding ................................................................................... 4 
c. Overcompensation Problems Associated with VRS Funding ................. 8 
d. The 2010 Interim Rate Order ................................................................... 9 
e. The 2010 VRS Inquiry and the 2011 Rulemaking ................................... 9 
B. The Order on Review ......................................................................................... 10 
Summary of Argument............................................................................................. 16 
Argument.................................................................................................................. 19 
I. The Order Is Subject to Deferential Standards of Review ................................. 19 
II. Sorenson Is Precluded from Relitigating Issues that Were
Decided by the Tenth Circuit. ........................................................................... 20 
III. The Order Is Consistent with Section 225. ........................................................ 25 
A. The Commission Reasonably Harmonized Legislative
Objectives in Setting the Transitional Rates. .............................................. 26 
B. Consistent with Section 225, the Order Ensures that
VRS will Be “Available” to Provide “Functionally
Equivalent” Service in the “Most Efficient Manner.” ................................. 30 

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IV. The Commission Acted Reasonably in Setting Transitional
VRS Rates in the Order. ................................................................................... 32 
A. The FCC’s Longstanding Determinations as to What
Constitutes Allowable VRS Provider Costs to Be
Reimbursed from the TRS Fund Are Reasonable. ...................................... 33 
B.  The Commission Properly Retained a Tier Structure
with Reasonable Payment Differentials. ..................................................... 47 
C.  Sorenson’s Challenge to the Commission’s Modifications
to the Speed of Answer Rule Is not Properly before the
Court and, in any Event, Is Meritless. ......................................................... 52 
Conclusion ............................................................................................................... 56 
Certificate Of Compliance
Statutory Appendix



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TABLE OF AUTHORITIES

Cases

 
Achernar Broadcasting Co. v. FCC, 62 F.3d 1441 (D.C. Cir. 1995) ...................... 19
Aeronautical Radio, Inc. v. FCC, 642 F.2d 1221 (D.C. Cir. 1980) ......................... 42
Arkansas AFL-CIO v. FCC, 11 F.3d 1430 (8th Cir. 1993) ...................................... 44
AT & T Corp. v. FCC, 86 F.3d 242 (D.C.Cir.1996) ................................................ 54
* Bechtel v. FCC, 10 F.3d 875 (D.C. Cir. 1993) ................................................. 43, 44
Cablevision Systems Corp. v. FCC, 649 F.3d 695 (2011) ....................................... 19
Cellco Partnership v. FCC, 357 F.3d 88 (D.C. Cir. 2004) ...................................... 19
Chevron USA, Inc. v. Natural Resources Defense Council, Inc.,
467 U.S. 837 (1984) ...................................................................................... 19, 20
City of Arlington, Texas v. FCC, 133 S.Ct. 1863 (2013) ......................................... 20
City of Los Angeles v. United States Dept. of Transp., 165 F.3d 972
(D.C. Cir. 1999) ................................................................................................... 19
Fresno Mobile Radio, Inc. v. FCC, 165 F.3d 965 (D.C. Cir. 1999) ........................ 27
Grand Canyon Air Tour Coalition v. FAA, 154 F.3d 455 (D.C. Cir. 1998) ............ 26
* Gulf Power Co. v. FCC, 669 F.3d 320 (D.C. Cir. 2012) ......................................... 21
In re Core Commications, Inc., 455 F.3d 267 (D.C. Cir. 2006) .............................. 54
In Re: FCC 11-161, No. 11-9900 (10th Cir., argued Nov. 19, 2013) ..................... 40
MCI Cellular Tel. Co. v. FCC, 738 F.2d 1322 (D.C. Cir. 1984) ............................. 56
MCI Telecommunications Corp. v. FCC, 675 F.2d 408 (D.C. Cir. 1982) .............. 42
Montana v. United States, 440 U.S. 147 (1979) ...................................................... 21
National Cable & Tel. Ass’n v. FCC, 567 F.3d 659 (D.C. Cir. 2009) .................... 20
New Hampshire v. Maine, 532 U.S. 742 (2001) ....................................................... 21

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USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 6 of 109

NLRB v. Bell Aerospace Co., 416 U.S. 267 (1973) ................................................. 35
Paralyzed Veterans of America v. D.C. Arena, 117 F.3d 579 (D.C. Cir. 1997) ..... 35
Qwest Corp. v. FCC, 252 F.3d 462 (D.C. Cir. 2001) ....................................... 21, 23
* Rural Cellular Ass’n. v. FCC, 588 F.3d 1095 (2008) ...................................... 27, 32
* Sorenson Communications, Inc. v. FCC, 659 F.3d 1035
(10th Cir. 2011) .......................................... 2, 9, 16, 20, 23, 24, 27, 28, 29, 31, 34,
35, 36, 42, 43, 44, 46, 48, 52, 53
Southwestern Bell Telephone Co. v. FCC, 168 F.3d 1344 (D.C. Cir. 1999) ........... 42
* Taylor v. Sturgell, 553 U.S. 880 (2008) ................................................................... 21
* United States v. FCC, 707 F.2d 610 (D.C. Cir. 1983); accord
Sorenson Communications, Inc., 659 F.3d 1035 (10th Cir. 2011) ...................... 42
WJG Telephone Co. v. FCC, 675 F.2d 386 (D.C. Cir. 1982) .................................. 47
WorldCom, Inc. v. FCC, 238 F.3d 449 (D.C. Cir. 2001) .................................. 42, 47

Statutes


28 U.S.C. § 2342(1) ................................................................................................... 2
28 U.S.C. § 2344 ........................................................................................................ 2
* 47 U.S.C. § 225 ......................................................................................................... 3
* 47 U.S.C. § 225(a)(3) ..................................................................................... 2, 3, 30
* 47 U.S.C. § 225(b)(1) ............................................................. 2, 4, 16, 25, 28, 30, 31
* 47 U.S.C. § 225(c) ..................................................................................................... 4
* 47 U.S.C. § 225(d)(3)(A) .......................................................................................... 5
* 47 U.S.C. § 225(d)(3)(B) .......................................................................... 4, 5, 25, 37
47 U.S.C. § 402(a) ..................................................................................................... 2
47 U.S.C. § 405 ........................................................................................................ 18
* 47 U.S.C. § 405(a) ................................................................................................... 54

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USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 7 of 109

5 U.S.C. § 706(2)(A) ................................................................................................ 19
Pub. L, No. 101-336, Title IV, 104 Stat. 327 (1990) ................................................. 3

Regulations

 
47 C.F.R. § 1.4(b)(1) .................................................................................................. 2
47 C.F.R. § 64.404(b)(2) .......................................................................................... 53
47 C.F.R. § 64.601(a)(26) .......................................................................................... 3
47 C.F.R. § 64.603 ..................................................................................................... 4
47 C.F.R. § 64.604(c)(5)(iii)(A) ................................................................................ 4
47 C.F.R. § 64.604(c)(5)(iii)(E) ...................................................................... 5, 6, 26
47 C.F.R. § 65.800 ................................................................................................... 36
47 C.F.R. §§ 65.300-65.305 ..................................................................................... 36

Administrative Decisions

 
Connect America Fund, 26 FCC Rcd 17663 (2011), pets. for review
pending, In Re: FCC 11-161, No. 11-9900 (10th Cir.,
argued Nov. 19, 2013) .................................................................................. 40, 41
Declaratory Ruling and NPRM, 21 FCC Rcd 5442 (2006) ..................................... 34
Represcribing the Authorized Rate of Return for Interstate Services
of Local Exchange Carriers, 5 FCC Rcd 7507 (1990) ........................................ 39
Telecommunications Relay Services, 15 FCC Rcd 5140 (2000) ............................. 26
* Telecommunications Relay Services, 19 FCC Rcd 12475
(2004) .................................................................................... 3, 6, 7, 26, 27, 31, 34
Telecommunications Relay Services, 20 FCC Rcd 20577 (2005) ............................. 4
* Telecommunications Relay Services, 21 FCC Rcd 8063 (2006) ............ 6, 13, 34, 43
* Telecommunications Relay Services, 22 FCC Rcd 20140 (2007)6, 7, 13, 27, 34, 44,
47, 48, 51

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* Telecommunications Relay Services, 25 FCC Rcd 8689 (2010) ........................ 8, 48
* Telecommunications Relay Services, 25 FCC Rcd 9115 (CGB 2010) ...... 36, 37, 52
Telecommunications Relay Services, 25 FCC Rcd 9115 (CGB 2013) ..................5, 6

Other Authorities

 
FCC NEWS AT&T To Pay $18.25 Million To Settle FCC Investigation
of Improperly Billing Fund That Supports Accessibility of Telecom-
munications Services to Persons With Disabilities
(May 7, 2013) ....................... 8
FCC NEWS Sorenson to Pay $15.75 Million to Settle FCC Investigation
into Improper Billing of TRS Fund (May 28, 2013) .............................................. 8
Majority Staff Report “Deception and Distrust: The Federal Communications
Commission Under Chairman Kevin J. Martin,” Prepared for the Use
of the Committee on Energy and Commerce, U. S. House of Rep.,
110th Congress at 7 (Dec. 2008) ........................................................................... 8
Performance Audit Report of Sorenson Communications, Inc.’s Video Relay
Service for the Year Ending December 31, 2011 (FCC OIG Sept. 27, 2012) ....... 8













* Cases and other authorities principally relied upon are marked with asterisks.

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USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 9 of 109

GLOSSARY


ADA
Americans With Disabilities Act

CA communications
assistant

NECA
National Exchange Carrier Association – Administrator
of the Interstate TRS Fund prior to July 2011

RLSA
Rolka Loube Saltzer Associates – Administrator of the
Interstate TRS Fund

TRS Telecommunications
Relay
Service

VRS
Video Relay Service




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USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 10 of 109
IN THE
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT




NO. 13-1215





SORENSON COMMUNICATIONS, INC.,









PETITIONER
V.

FEDERAL COMMUNICATIONS COMMISSION
AND
THE UNITED STATES OF AMERICA,









RESPONDENTS




ON PETITION FOR REVIEW OF AN ORDER OF
THE FEDERAL COMMUNICATIONS COMMISSION




BRIEF FOR RESPONDENTS




STATEMENT OF THE ISSUES PRESENTED FOR REVIEW

For years, the rates set by the Federal Communications Commission to
reimburse providers of Video Relay Service (VRS), a telecommunications service
for deaf people, have greatly exceeded the cost of providing service. The order on
review, Structure and Practices of the Video Relay Service Program, 28 FCC Rcd
8618 (2013) (Order) (JA 843), implements the FCC’s latest steps in its ongoing
efforts to reform and improve the service for users, reduce costs to the government
fund that supports VRS and eliminate incentives for waste that have burdened VRS


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 11 of 109
- 2 -
and related services for years. The Commission established a VRS rate schedule to
bring the rates closer to VRS providers’ actual costs, which are phased in during a
four-year transitional period. Objecting to the transitional rates, Sorenson Com-
munications, Inc. petitions for review. The questions presented are:
1. Whether Sorenson’s arguments are barred by the doctrine of issue
preclusion in light of the holdings in Sorenson Communications,
Inc. v. FCC, 659 F.3d 1035 (10th Cir. 2011).
2. Whether the rates adopted by the FCC in the Order for VRS are
consistent with the governing statute, which requires that telecom-
munications services for the deaf be “functionally equivalent” to
those available to hearing persons and that such services be “avail-
able, to the extent possible and in the most efficient manner,” 47
U.S.C. §§ 225(a)(3), (b)(1).
3. Whether the agency abused its discretion in setting those rates.

JURISDICTION

This Court has jurisdiction to review the FCC’s order in this case pursuant to
47 U.S.C. § 402(a) and 28 U.S.C. § 2342(1). The Order was released on June 10,
2013. A summary of the Order was published in the Federal Register on July 5,
2013, 78 Fed.Reg. 40582. The petition for review was filed within 60 days of that
date, as required by 28 U.S.C. § 2344 and 47 C.F.R. § 1.4(b)(1).

STATUTES AND REGULATIONS

Pertinent statutes and regulations are set out in the Statutory Appendix to
this brief.


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 12 of 109
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COUNTERSTATEMENT OF THE CASE

A. BACKGROUND


1. The Regulatory Setting
a. TRS and VRS.
Telecommunications Relay Service (TRS) is a telephone transmission ser-
vice that enables persons with hearing or speech disabilities to communicate with
hearing individuals “in a manner that is functionally equivalent” to the ability of
persons without such disabilities to communicate with each other. 47 U.S.C.
§ 225(a)(3). There are several different types of TRS. See, e.g., Telecommunica-
tions Relay Services, 19 FCC Rcd 12475, 12480 (2004) (2004 TRS Order). The
one at issue here, which accounts for the majority of TRS-related costs, is known
as Video Relay Service. VRS “allows people with hearing or speech disabilities
who use sign language to communicate with voice telephone users through video
equipment.” 47 C.F.R. § 64.601(a)(26). The user with a hearing or speech
impairment communicates using sign language via an Internet-based video link
with a third-party “communications assistant” (“CA”) who translates the sign
language into speech, which is then relayed by the CA by telephone to the hearing
person at the other end of the line. The other user communicates by using the
process in reverse. See Order ¶4 (JA 846).


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When Congress adopted Section 225 of the Communications Act, 47 U.S.C.
§ 225, as part of the Americans With Disabilities Act in 1990,1 it directed the FCC
to ensure that TRS is “available, to the extent possible and in the most efficient
manner,” to persons with hearing and speech disabilities. 47 U.S.C. § 225(b)(1).
Congress placed the burden of providing TRS directly on “common carrier[s] pro-
viding telephone voice transmission services,” 47 U.S.C. § 225(c) (i.e., local and
long distance telephone companies), but the FCC additionally authorized third
parties that are not traditional telephone companies, such as Sorenson, to provide
the service. See Telecommunications Relay Services, 20 FCC Rcd 20577, 20586-
20589 (2005); 47 C.F.R. § 64.603. Now, most TRS is provided by such third
parties.
b. TRS/VRS Funding
VRS users do not pay to use the service. See Order n.159 (JA 873). Instead
of collecting money from users, VRS providers are reimbursed directly from a
fund, known as the Interstate TRS Fund, which the FCC established pursuant to
Section 225. See 47 U.S.C. § 225(d)(3)(B). Almost all providers of interstate
telecommunications services must contribute a percentage of their revenues to this
fund. 47 C.F.R. § 64.604(c)(5)(iii)(A).2 Because telecommunications providers

1 See Pub. L. No. 101-336, Title IV, 104 Stat. 327 (1990).
2 The “Interstate” TRS Fund in fact pays for both interstate and intrastate VRS
calls. See Order n.43 (JA 852). An independent entity administers the TRS
Fund for the FCC. Until July 2011, the Fund Administrator was the National
(footnote continued on following page)


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 14 of 109
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pass along to their users the costs of contributing to the TRS Fund, the Fund ulti-
mately is financed by all consumers of covered telecommunications services, who
pay more for the services they use so that VRS customers may receive VRS free of
charge. Telecommunications Relay Services, 22 FCC Rcd 20140, 20161 (2007)
(“2007 TRS Rate Order”).
Growth of the TRS Fund has been dramatic, driven largely by the increasing
costs of VRS. Prior to the development of VRS, the Fund required $38 million to
pay for TRS programs. After VRS became available in 2002, the Fund grew
rapidly, from $115 million in 2003 to a projected $995 million for the 2013-2014
fund year.3 Through June 2013, American ratepayers had paid a total of nearly
$6.7 billion to support TRS services. Of the nearly $1 billion cost of TRS this
year, VRS will account for approximately $622 million – roughly 66 percent.
2013 TRS Rate Order, 28 FCC Rcd at 9226 ¶30. Sorenson has at least an 80
percent share of the VRS market. Br. 13.
Congress directed that VRS providers be allowed to recover “costs caused
by” the provision of TRS services and delegated to the Commission the authority
to “prescribe regulations governing” the recovery of those costs. 47 U.S.C.
________________________
(footnote continued from preceding page)
Exchange Carrier Association (NECA). Since that time, the Administrator has
been Rolka Loube Salzer Associates (RLSA).
3 See Telecommunications Relay Services, 28 FCC Rcd 9219, 9220 ¶3 (CGB 2013
(“2013 TRS Rate Order”); see also historical Interstate TRS Status Reports avail-
able at http://www.r-l-s-a.com/TRS/Reports.htm.


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§§ 225(d)(3)(A) & (B). Under the Commission’s rules, VRS providers are paid by
the Fund under per-minute rates established by the Commission. See 47 C.F.R.
§ 64.604(c)(5)(iii)(E); 2013 TRS Rate Order, 28 FCC Rcd at 9219.
Congress thus created TRS as a ratepayer-funded service provided without
charge to persons with hearing and speech disabilities in order to “remedy the dis-
criminatory effects of a telephone system inaccessible to persons with disabilities,”
2007 TRS Rate Order, 22 FCC Rcd at 20161. Reflecting principles of fiscal
responsibility, accountability, and administrative efficiency, the Commission
determined in 2004 that reimbursement rates should only “cover the reasonable
costs incurred in providing the TRS services.” 2004 TRS Order, 19 FCC Rcd at
12543 ¶179 (emphasis added); 47 C.F.R. § 64.604(c)(5)(iii)(E) (rates must be set
to recover only “reasonable costs”). Through a series of orders, the Commission
has fleshed out the meaning of “reasonable” costs. Collectively, the prior orders
establish that reimbursable costs include only those costs directly incurred to pro-
vide TRS service, such as labor costs, directly attributable overhead, start-up
expenses, executive compensation, and a fixed return of 11.25% on capital invest-
ment. See, e.g., 2007 TRS Rate Order, 22 FCC Rcd at 20172 ¶¶73-82.
By contrast, the Commission for years has excluded from reimbursement
other, indirect costs, such as a profit mark-up on expenses, certain taxes, research
and development costs, and the cost of providing video equipment, software, and
technical assistance to VRS users. See 2004 TRS Order, 19 FCC Rcd at 12545-


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 16 of 109
- 7 -
12550; Telecommunications Relay Services, 21 FCC Rcd 8063, 8070 ¶15-16 &
n.50 (2006) (“2006 MO&O”); 2007 TRS Rate Order, 22 FCC Rcd at 20175 ¶¶73-
82. In identifying the costs that may be reimbursed at ratepayer expense, the
Commission has expressed concern that the TRS Fund should “not become an
unbounded source of funding for enhancements that go beyond” the standard of
functional equivalence established by the FCC, but which a particular provider
nevertheless wishes to adopt. Order ¶18 (JA 853), quoting 2004 TRS Order, 19
FCC Rcd at 12548. Prior to 2010, no VRS provider challenged in court any of
those determinations.
Until 2007, the Commission established VRS rates every year based on
providers’ projections of their costs for the upcoming year. Under that regime,
rates were unpredictable and swung widely, ranging from a low of $5.14 to a high
of $17.04 per minute. See 2007 TRS Rate Order, 22 FCC Rcd at 20145 ¶6. In the
2007 TRS Rate Order, the Commission sought to bring greater predictability to
rates to facilitate planning by VRS providers, and accordingly set rates for three
years. It also established a three-tiered rate structure under which a VRS provider
was paid decreasing rates reflecting typically decreasing average costs as a pro-
vider’s service volume increases. Id. at 20163. Under the tiered system, “all
providers are compensated at the same rate for the same number of minutes.” Id.
at 20167. Again, prior to 2010, no VRS provider challenged those rates or the tier
structure itself.


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c. Overcompensation Problems Associated with VRS Funding
Soon after the new rates (based on providers’ projected costs) became effec-
tive in 2007, it became apparent that VRS providers’ recoveries from the TRS
Fund could easily outstrip their actual costs. In 2008, a congressional committee
staff report expressed concern that “consumers are being significantly overcharged
to finance the TRS fund and TRS providers are being significantly overcompen-
sated.”4 A 2012 audit conducted by the FCC Inspector General concluded that
during calendar year 2011 “TRS funds received by Sorenson for VRS did not com-
pensate for only the reasonable costs of providing access to VRS.”5 Sorenson dis-
agreed with the conclusions of that audit.6 In addition, given the hundreds of mil-
lions of dollars at stake, the TRS Fund has been an unfortunate target of numerous
instances of abuse and fraud.7

4 Majority Staff Report “Deception and Distrust: The Federal Communications
Commission Under Chairman Kevin J. Martin,” Prepared for the Use of the
Committee on Energy and Commerce, U. S. House of Rep., 110th Congress at 7
(Dec. 2008).
5 See Performance Audit Report of Sorenson Communications, Inc.’s Video Relay
Service for the Year Ending December 31, 2011 at 1 (FCC OIG Sept. 27, 2012),
public redacted version available at
http://transition.fcc.gov/oig/Sorenson Audit Report 09272012 Redacted.pdf .
6 See id. App. B, App. C.
7 See 2011 VRS FNPRM, 26 FCC Rcd at 17373 n.19 (JA 151) (citing actions taken
by the FCC Inspector General in collaboration with the U.S. Department of
Justice); see also FCC NEWS Sorenson to Pay $15.75 Million to Settle FCC
Investigation into Improper Billing of TRS Fund
(May 28, 2013); FCC NEWS
AT&T To Pay $18.25 Million To Settle FCC Investigation of Improperly Billing
(footnote continued on following page)


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d. The 2010 Interim Rate Order
In 2010, the Commission issued an order setting forth interim rates for the
next Fund Year (July 1, 2010 through June 30, 2011). Telecommunications Relay
Services, 25 FCC Rcd 8689 (2010) (“Interim Rate Order”). The rates were
“interim” because they filled the gap until the Commission completed a review of
the VRS program that it began at the same time.
Sorenson sought judicial review of the Interim Rate Order in the Tenth
Circuit. In a 2011 decision, that court affirmed the Commission’s 2010 order in its
entirety, rejecting Sorenson’s array of challenges to the Commission’s rate metho-
dology for VRS and the rates themselves. The court held that the agency’s action
was consistent with its statutory mandate in Section 225 and was not arbitrary and
capricious. Sorenson Communications, Inc. v. FCC, 659 F.3d 1035.
e. The 2010 VRS Inquiry and the 2011 Rulemaking
At the same time as it adopted the 2010 interim rates, the Commission also
began an inquiry to take a “fresh look” at VRS rates. Structure and Practices of
the Video Relay Service, 25 FCC Rcd 8597, 8598 ¶1 (2010) (“VRS NOI”) (JA 1).
“Over the past few years,” the Commission found, “the per-minute compensation
rates have significantly exceeded the estimated average per-minute costs of pro-
viding VRS.” Id. ¶30 (JA 11). The entire VRS program, the agency observed, “is
________________________
(footnote continued from preceding page)
Fund That Supports Accessibility of Telecommunications Services to Persons
With Disabilities
(May 7, 2013).


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 19 of 109
- 10 -
fraught with inefficiencies (at best) and opportunities for fraud and abuse (at
worst).” Id. ¶30 (JA 10). Review was therefore necessary to “ensure that this vital
program is effective, efficient, and sustainable.” Id. ¶1 (JA 2). That inquiry pro-
ceeding ultimately led to the Order on review in this case. The Commission
sought comment on “the most effective and efficient way to make VRS available”
and in particular on “adjustments and modifications to improve the current [VRS]
compensation methodology.” Id. at ¶¶9, 11 (JA 5).
Subsequently, the Commission issued a Notice of Proposed Rulemaking
setting out a number of specific proposals to improve the structure and efficiency
of the VRS program. Structure and Practices of the Video Relay Service, Further
Notice of Proposed Rulemaking, 26 FCC Rcd 17367 (2011) (“2011 VRS FNPRM”)
(JA 146). It explained that the goal of the proceeding was “to improve the VRS
program so that it better promotes the goals Congress established in section 225 of
the Act.” Id. ¶11 (JA 154).

B. THE ORDER ON REVIEW


In June 2013, the Commission adopted the Order on review in this case,
describing it as “an important step in the Commission’s continuing effort to reform
[VRS], which for many years has been beset by waste, fraud and abuse, and by
compensation rates that have become inflated well above actual cost.” Order ¶1
(JA 843) (footnotes omitted). The Commission pointed to steps it had taken in
other recent orders to improve the VRS program, noting that its reliance on compe-


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- 11 -
tition in the provision of VRS services had been undermined by the fact that
“multiple providers offer substantially similar services with no opportunity for
price competition, as end users receive the service at no cost.” Order ¶5 (JA 847).
The Commission also observed that “providers’ self interest in maximizing their
compensation from the Fund may make them less effective at carrying out the
Commission’s policies” and make the Fund more vulnerable to “waste, fraud and
abuse by providers ….” Id. ¶6 (JA 848).
Although the Commission adopted a number of VRS structural reforms in
the Order and initiated a further rulemaking proceeding looking towards the adop-
tion of more far-reaching reforms in the VRS program, the only actions challenged
by Sorenson in this case involve provisions of the Order related to rates and rate
structure for VRS. The Commission proposed structural reforms that “will set
VRS compensation rates based largely if not entirely on competitively established
pricing, i.e., prices set through a competitive bidding process.” Order ¶188 (JA
919). During this “transition to structural reforms,” however, the Commission
concluded that it “should continue to move rates closer to actual cost using cur-
rently available ratemaking tools.” Id. Accordingly, employing essentially the
same judicially approved methodology it had used in adopting the 2010 interim
rates (relying on the fund administrator’s analysis of providers’ projected costs and
actual historical costs), the Commission adopted a multi-year rate plan “that
enables the VRS industry to transition towards cost-based rates.” Id. ¶191 (JA


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920). In so doing, the Commission rejected Sorenson’s urging that it “abandon any
further effort to bring rates closer to costs, whether actual or projected, and instead
to accept the current interim rates as the starting point for a new multi-year rate
plan.” Id. ¶190 (JA 920).
The TRS Fund administrator’s 2012 filing with the Commission proposed an
average VRS reimbursement rate of $3.396 per minute, adjusted to reflect the
established service tiers in which larger providers receive a lower rate.8 Order
¶209 (JA 927). The Commission found that although the administrator’s cost data
“would justify immediate adoption of RLSA’s proposed cost-based rate of $3.396
per minute, we concur with RLSA that taking a step-by step transition from exist-
ing, tiered rates toward a unitary cost-based rate is appropriate.” Id. ¶212 (JA
928). Thus, the Commission adopted a “transitional rate plan” providing a “multi-
year ‘glide path’ towards cost-based rates.” Id. In contrast to the $3.396 per
minute rate that the Commission found would have been justifiable, the Commis-
sion adopted rates that ranged from $5.98 per minute for Tier I rates at the begin-
ning of the four-year transition period to $3.49 per minute for Tier III rates at the
end of the period in 2017. See id. ¶215 (JA 930). It added that it reserved “the

8 The Fund administrator’s proposal would have resulted in per minute rate reduc-
tions of $2.844 ($6.24 – $3.396) in the Tier I rate, $2.834 ($6.23 – $3.396) in the
Tier II rate, and $1.674 ($5.07 – $3.396) in the Tier III rate. To avoid such dra-
matic immediate reductions, the administrator proposed that the reductions be
phased in over a multi-year time period, with the rates restructured in two tiers
instead of the existing three tiers. Order ¶209 (JA 927).


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right to revisit the rates adopted in this Order if provider data shows that, notwith-
standing our actions today, the rates remain substantially in excess of actual pro-
vider costs.” Id. ¶216 (JA 931).
In addition to revising the VRS reimbursement rate schedule, the Commis-
sion also addressed several issues regarding allowable categories of costs and the
setting of rate tiers. For example, it turned aside Sorenson’s “continued urging that
we should include user equipment as allowable costs” in determining VRS rates.
Order ¶194 (JA 922). The Commission explained that it had “consistently held
that costs attributable to the user’s relay hardware and software, including installa-
tion, maintenance, and testing, are not compensable from the Fund.” Id. at ¶193
(JA 921).9 Expenses for which providers are compensated, the Commission
pointed out, “‘must be the providers’ expenses in making the service available and
not the customer’s costs of receiving the equipment. Compensable expenses,
therefore, do not include expenses for customer premises equipment—whether for
the equipment itself, equipment distribution, or installation of the equipment or
necessary software.’” Id.10
The Commission concluded that the “better approach” to achieving Section
225’s goal of “ensuring that TRS is ‘available to the extent possible and in the

9 See 2011 VRS Reform FNPRM, 26 FCC Rcd at 17393 ¶49 (JA 172); 2006
MO&O, 21 FCC Rcd at 8071 ¶17; 2007 TRS Rate Order, 22 FCC Rcd at 20170-
71 ¶82.
10 Quoting 2006 MO&O, 21 FCC Rcd at 8071 ¶17.


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most efficient manner’” was to fund the development of open source VRS access
technology and to contract for the development and deployment of a VRS access
technology reference platform. Id. ¶¶193-94 (JA 921-22); see also id. ¶¶40-61 (JA
864-72) (discussing VRS access technology initiatives). In this manner, the Com-
mission believed, access to VRS would transition to personal computers, tablets
and other devices that are not dependent on a specific provider’s technology. Id.
¶¶53-61 (JA 869-72. The Commission noted that its efforts “urg[ing] the [VRS]
industry to develop interoperability and portability standards … have proven
ineffective.” Id. ¶52 (JA 869).
VRS providers, including Sorenson, had also argued in their comments that
the 11.25% rate of return that the Commission’s rate methodology allowed on their
capital investment did not adequately compensate them and failed to take into
account differences between them and telecommunications carriers from which the
Commission had derived the 11.25% rate. But none of these comments had sug-
gested a “quantified, concrete alternative to the current approach used for calcu-
lating an allowable rate of return, other than to simply reimburse providers for their
actual expenditures on interest and other capital costs,” and thus the Commission
concluded that there was no justification for changing its “longstanding practice” at
this stage when it expected rate of return regulation not to be a part of the
restructured VRS. Order ¶195 (JA 922). It further noted that the Tenth Circuit
had affirmed its 2010 VRS rate schedule that had been based on the same rate of


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return methodology and 11.25% rate of return. Id. ¶196 (JA 923), citing Sorenson,
659 F.3d at 1045-48.
The 2011 FNRPM had sought comment on the justification for continuing to
maintain a tiered rate structure in which smaller, less efficient VRS providers are
reimbursed at a higher rate. The Commission found that regardless of the reasons
for cost differences between the largest VRS provider, Sorenson, and its smaller
competitors, there was no dispute that differences existed and were supported by
historical data. Id. ¶203 (JA 925). The Commission concluded that there was no
“valid reason why the TRS Fund should support indefinitely VRS operations that
are substantially less efficient,” but that there was no “compelling reason” to
completely eliminate the tiered structure at this time:
We conclude that it is worth tolerating some degree of additional inef-
ficiency in the short term, in order to maximize the opportunity for
successful participation of multiple efficient providers in the future, in
the more competition-friendly environment that we expect to result
from our structural reforms. Therefore, we will allow tiered rates to
remain in effect during the transition to structural reforms, but with a
gradually reduced gap between highest and lowest tiers, in order to
allow smaller providers an opportunity to increase the efficiency of
their operations so as to maximize their chances of success after struc-
tural reforms are implemented.
Order ¶200 (JA 924). In redrawing the tier boundaries, it concluded that it “should
err on the side of setting the boundary too high” and established the new boun-


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daries “to ensure that VRS competition is preserved pending the implementation of
structural reform ….” Id. ¶¶205, 206 (JA 926).11

SUMMARY OF ARGUMENT

In furtherance of its statutory mandate to ensure that VRS is “available, to
the extent possible and in the most efficient manner,” 47 U.S.C. § 225(b)(1), the
FCC in the Order on review continued its efforts to move VRS rates closer to the
providers’ costs of providing the service. Representing the second step in a three-
step process, the transitional rates adopted in the Order are designed to be in effect
for no more than four years. Those transitional rates act as a bridge between the
interim rates adopted in 2010 – affirmed by the Tenth Circuit in Sorenson, 659
F.3d 1035 – and the final goal of eliminating rate of return regulation and basing
compensation to VRS providers primarily on marketplace competition. In further
reducing overpayments to VRS providers in the Order, the FCC relied on essen-
tially the same principles and rate methodologies as it did in adopting the judicially
approved interim rates in 2010.
Claiming that the transitional rates will likely destroy the entire VRS indus-
try, Sorenson – alone among VRS providers – petitions for review of the Order.
But Sorenson’s challenge here is largely an attempt to reargue in another court
many of the same issues it lost in the Tenth Circuit just two years ago when that

11 A chart in the Order illustrates the reconfigured rate tiers. See Order ¶208 (JA
927).


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court rejected its multiple challenges to the 2010 interim rates. Sorenson’s repack-
aged and recycled arguments should fare no better in this Court. The doctrine of
issue preclusion bars many of its core arguments in light of the Tenth Circuit’s
holdings in Sorenson v. FCC. And even as to issues in which preclusion may not
apply, the Tenth Circuit’s analysis is relevant and persuasive.
The Order is consistent with Section 225 of the Communications Act. In
crafting Section 225, Congress qualified the objective of making VRS “available”
by using the caveats “to the extent possible” and “in the most efficient manner.”
By including those flexible concepts in the statute, Congress vested considerable
discretion in the federal agency that administers this highly technical statutory
program. Consistent with the statutory scheme, the Commission’s transitional
rates will foster the “efficient” provision of services because they bear a closer
correlation with the costs of providing service than the prior rates. The legislative
command that service be provided “in the most efficient manner” allows the
Commission to ensure that the TRS Fund is not depleted by wasteful spending.
Indeed, it is difficult to imagine that Congress did not intend the Commission to
police the costs of a billion-dollar fund that is ultimately paid for by the public.
Under Sorenson’s reading of the statute, there is no apparent end to the Govern-
ment’s funding obligation, but that is a statutory scheme of Sorenson’s own
devising – not the one Congress enacted.


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Moreover, the transitional rates are reasonable under the Administrative
Procedure Act. The Commission properly based the rates here on the existing
interim rates adopted in 2010 and the cost-based rates suggested by the TRS Fund
administrator, which annually collects cost data from VRS providers. Although
that data reflected the FCC’s exclusion of certain categories of costs (such as the
cost of providing VRS users free equipment), those exclusions have been part of
the Commission’s rules for years. Indeed, the categories of allowable costs were
never challenged until Sorenson’s unsuccessful petition for review in the Tenth
Circuit. The Commission also reasonably retained the existing 11.25% rate of
return and properly applied it in establishing the transitional rates consistent with
long-established rate making principles. In calculating the rates, the Commission
reasonably sought to move VRS rates closer to, although still above, VRS provider
costs while avoiding an abrupt and potentially disruptive change that could hamper
providers’ ability to offer service.
The Commission likewise properly retained the tier system during the transi-
tion to a restructured VRS. Data provided by the Fund Administrator showed that
there remains a cost differential between smaller and larger VRS providers, and the
graduated approach to reimbursement rates under the tier system appropriately
reflects that differential. Moreover, contrary to Sorenson’s claim, similarly situ-
ated providers are paid the same amounts for providing VRS minutes in a given
tier, as the Tenth Circuit emphasized in 2011. Finally, Sorenson’s challenge to the


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revised speed-of-answer standard is waived under 47 U.S.C. § 405 and is baseless
in any event.

ARGUMENT

I. THE ORDER IS SUBJECT TO


DEFERENTIAL STANDARDS OF REVIEW


The Court reviews FCC orders “under the deferential standard mandated by
section 706 of the Administrative Procedure Act, which provides that a court must
uphold the Commission’s decision unless it is ‘arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.’” Achernar Broadcasting Co.
v. FCC, 62 F.3d 1441, 1445 (D.C. Cir. 1995) (quoting 5 U.S.C. § 706(2)(A)).
“Under this ‘highly deferential’ standard of review, the court presumes the validity
of agency action … and must affirm unless the Commission failed to consider rele-
vant factors or made a clear error in judgment.” Cellco Partnership v. FCC, 357
F.3d 88, 93-94 (D.C. Cir. 2004). In conducting this review, the Court does not sit
as “‘a panel of referees on a professional economics journal,’” but rather a “‘panel
of generalist judges obliged to defer to a reasonable judgment by an agency acting
pursuant to congressionally delegated authority.’” Cablevision Systems Corp. v.
FCC, 649 F.3d 695, 717 (D.C. Cir. 2011), quoting City of Los Angeles v. United
States Dept. of Transp., 165 F.3d 972, 977 (D.C. Cir. 1999).
This case also concerns questions of statutory interpretation under the Com-
munications Act. Judicial review of the Commission’s interpretation of the Act is
governed by Chevron USA, Inc. v. Natural Resources Defense Council, Inc., 467


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U.S. 837 (1984). Under Chevron, if “the statute is silent or ambiguous with
respect to the specific issue, the question for the court is whether the agency’s
answer is based on a permissible construction of the statute.” Id. at 843. Unless
the statute “unambiguously forecloses the agency’s interpretation,” a reviewing
court must “defer to that interpretation so long as it is reasonable.” National Cable
& Tel. Ass’n v. FCC, 567 F.3d 659, 663 (D.C. Cir. 2009).
Congress has expressly delegated to the FCC authority to administer Section
225 of the Communications Act, 47 U.S.C. § 225, the statutory provision at issue
here. Under Chevron the FCC has the authority to fill the statutory gap provided
by Section 225’s ambiguous terms so long as its interpretation is based on a per-
missible construction of the statute. Sorenson, 659 F.3d at 1042, citing Chevron,
467 U.S. at 843; see also City of Arlington, Texas v. FCC, 133 S.Ct. 1863, 1868-73
(2013).

II. SORENSON IS PRECLUDED FROM RELITIGATING ISSUES


THAT WERE DECIDED BY THE TENTH CIRCUIT.


Sorenson once again challenges the Commission’s continuing efforts to
more closely align VRS reimbursement rates with providers’ costs. In doing so,
Sorenson repackages and recycles many of the same failed arguments that the
Tenth Circuit rejected little more than two years ago when the company attacked a
prior FCC order in this same proceeding lowering rates for VRS service. Soren-
son, 659 F.3d 1035. Sorenson mentions the Tenth Circuit’s opinion only in pass-
ing in two separate paragraphs of its brief. (Br. 11, 42). Yet the parallels between


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the 2011 Sorenson case and this one are striking, and the Sorenson opinion has
important ramifications for this case. As explained below, the Tenth Circuit’s
holdings in Sorenson preclude a number of fundamental arguments that the
company tries to resurrect in this Court. And even where the doctrine of issue
preclusion may not apply, the Sorenson decision provides a useful framework for
analyzing the remaining issues in this case.
The doctrine of issue preclusion bars “‘successive litigation of an issue of
fact or law actually litigated and resolved in a valid court determination essential to
the prior judgment,’ even if the issue recurs in the context of a different claim.”
Taylor v. Sturgell, 553 U.S. 880, 892 (2008) (quoting New Hampshire v. Maine,
532 U.S. 742, 748-49 (2001)); see also Gulf Power Co. v. FCC, 669 F.3d 320, 323
(D.C. Cir. 2012) (same). “Under that doctrine, judgment in a prior suit can pre-
clude relitigation of an issue actually litigated and necessary to the outcome of the
first action so long as no unfairness results.” Qwest Corp. v. FCC, 252 F.3d 462,
466 (D.C. Cir. 2001). The doctrine protects against “the expense and vexation
attending multiple lawsuits, conserves judicial resources, and fosters reliance on
judicial action by minimizing the possibility of inconsistent decisions.” Montana v.
United States, 440 U.S. 147, 153-154 (1979).
Those requirements are satisfied in this case. The Commission’s adoption of
VRS rates here to govern the transition to a new approach to administering the


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VRS program followed essentially the same methodology as the interim rates
adopted in 2010 and upheld by the Tenth Circuit.
Indeed, the transitional rates are merely an extension of the approach that led
to the interim rates, namely to create a glide path to a competitive market while
safeguarding the Fund and the contributors to the Fund. Sorenson’s arguments to
this Court simply recast the same challenges that the Tenth Circuit rejected. For
example, Sorenson’s core argument to this Court is that the VRS rates adopted by
the Commission in 2013 are arbitrary and capricious because they are “lower than
the rates at which any provider can provide service.” Br. 1. Sorenson argued to
the Tenth Circuit that VRS rates adopted by the Commission generally were so low
as to violate the requirements of Section 225 and specifically were arbitrary and
capricious because they “result[ed] in Sorenson being ‘compensated’ for providing
VRS at a rate well below its costs.” Sorenson 10th Cir. Br. 3 (emphasis in origi-
nal). There, as here, Sorenson’s argument that the rates were unlawfully low was
based on assertions that the Commission excluded costs from the rate calculation
that should have been included and that it had adopted an improper rate of return.
Compare, e.g., Sorenson 10th Cir. Br. 45-50 with its brief here at 36-37, 43-50. In
both the 2010 Interim Rate Order and in the Order here, however, the Commission
relied on essentially the same cost factors and the same rate of return. Sorenson
does not acknowledge that it is making the same arguments, much less claim that
there are any changed circumstances since the Commission took action in 2010.


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The case for preclusion is particularly strong as to Sorenson’s reprise that
reimbursement rates allegedly are unlawfully low because the Commission
improperly excluded certain categories of costs from reimbursement from the TRS
Fund, especially equipment costs. See, e.g., Br. 27, 29, 31, 37, 43, 45-51. That
fundamental assertion permeated Sorenson’s Tenth Circuit brief and was presented
in a number of different contexts, but the court repeatedly rejected it. Sorenson,
659 F.3d at 1044 (§ 225 “does not … require that VRS users receive free equip-
ment and training”); id. at 1045 (“such disallowances do not violate the statute”);
id. (“Sorenson of course may provide free phones to its VRS users, but nothing in
the statute requires it to be compensated for that expense. The 2010 Order does
not violate § 225 by its refusal to treat such expenses as ‘reasonable’ costs of
providing VRS.”). The exclusion of equipment costs was “litigated and necessary
to the outcome” in Sorenson and “no unfairness results” from applying issue pre-
clusion in these circumstances. Qwest Corp., 252 F.3d at 466. Hence, the doctrine
of issue preclusion is “a fatal bar,” Gulf Power, 669 F.3d at 322, to Sorenson’s
attempt to relitigate the exclusion of equipment costs from VRS rates.
Issue preclusion likewise bars Sorenson’s argument (Br. 57) that the FCC
acted arbitrarily and capriciously when it decided to maintain the three-tiered rate
structure during the transition to a new approach to administering the VRS pro-
gram. Sorenson made that same APA challenge when the Commission retained
the three-tiered rate structure in 2011, but the court flatly rejected it. Sorenson,


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659 F.3d at 1049 (“ample evidence” supports the FCC’s decision); id. (finding
“sufficient evidence in the record to support the FCC’s determination that tiered
rates continue to be workable and reliable during the interim period”).
In a two-sentence reference to the Tenth Circuit opinion (Br. 11), Sorenson
seems to suggest that the earlier case has no bearing at all on this case because the
Commission’s 2010 action involved “interim rates.” Although the Tenth Circuit
acknowledged “the deference owed to the FCC when it engages in interim rate-
making” (659 F.3d at 1046 n.6), there is no evidence that the interim nature of the
rates there was a controlling factor.12 The Tenth Circuit rejected Sorenson’s sta-
tutory arguments completely, describing them, among other things, as “folly” (659
F.3d at 1044). And the court’s rejection of Sorenson’s arbitrary and capricious
arguments was based on the principle that courts “are particularly deferential when
reviewing ratemaking orders because ‘agency ratemaking is far from an exact
science and involves policy determinations in which the agency is acknowledged
to have expertise.’” Id. at 1046.
In any event, similar to the 2010 rates, the rates adopted here were described
repeatedly by the Commission as “transitional,” rates designed to be in place for
four years or less, until the Commission completes this proceeding to adopt new
market-based rates and other significant reforms to the VRS program. Order ¶188

12 Indeed, Sorenson argued to the Tenth Circuit that the rates at issue there were
not interim in any meaningful sense.” Sorenson 10th Cir. Reply Br. 15
(emphasis added).


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(JA 919) (“short-term rate methodology pending implementation of structural
reforms”); see also id. ¶¶10, 107, 189-216 (JA 850, 886, 919-31). In fact, this is
the second step of a three-step process and designed to serve the same purpose as
the interim rates. There is thus no basis to decline to apply the doctrine of issue
preclusion in this ratemaking context (nor to discount the relevance of the analysis
of the court in Sorenson even as to issues that may not be precluded by the
holdings in that case). The fact that different rate amounts are at issue here does
not allow Sorenson to evade a preclusion bar because its arguments are directed at
rate methodologies and structures, which did not change between 2010 and 2013.

III. THE ORDER IS CONSISTENT WITH SECTION 225.


Although Sorenson’s brief is couched largely in terms of alleged arbitrary
and capricious agency action, portions of its argument are actually statutory and
rely on assertions that the Commission’s actions in the Order are in conflict with
its duties under Section 225 of the Act. See, e.g., Br. 28, 36, 46, 48-51, 52. Con-
trary to Sorenson’s claims, the Order is consistent with Section 225 and, indeed,
furthers the statute’s goals.
Congress expressly delegated to the FCC the authority to establish regula-
tions governing the recovery of “costs caused by” the provision of TRS services,
47 U.S.C. § 225(d)(3)(B), and directed the Commission to ensure that TRS
(including VRS) be “available, to the extent possible and in the most efficient
manner.” 47 U.S.C. § 225(b)(1). That statutory language provides no specific


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standards or methodologies; rather, it contemplates that the Commission will fill in
the gaps in the legislative scheme to give concrete meaning to the undefined
standards. “[W]here Congress leaves a statutory term undefined, it makes an
implicit delegation of authority to the agency to elucidate a specific provision of
the statute through reasonable interpretation.” Grand Canyon Air Tour Coalition
v. FAA, 154 F.3d 455, 474 (D.C. Cir. 1998) (quotation marks omitted). Congress
in Section 225 therefore granted the Commission substantial interpretive leeway.

A. The Commission Reasonably Harmonized Legislative


Objectives In Setting The Transitional Rates
The Commission has consistently interpreted Section 225 as implicating a
variety of statutory goals that need to be harmonized. The agency has recognized
that the statute serves an important function in bringing communications services
to persons with hearing and speech disabilities. 2004 TRS Order, 19 FCC Rcd at
12479-12480; Telecommunications Relay Services, 15 FCC Rcd 5140, 5143-5144
(2000). At the same time, however, the Commission has recognized its responsi-
bility under the statute’s “efficiency” mandate to ensure that compensation rates
“do not overcompensate entities that provide TRS.” Order ¶17 (JA 853). Thus,
the Commission has focused on finding the best way to reconcile these two goals;
here by following its longstanding policy that VRS providers are entitled only to
“reasonable” compensation and that expenses that represent indirect costs associ-
ated with providing service should be excluded from reimbursement. See 2004
TRS Order, 19 FCC Rcd at 12543; 47 C.F.R. § 64.604(c)(5)(iii)(E); 2007 TRS Rate


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Order, 22 FCC Rcd at 20170 ¶82. Otherwise, the Commission warned, the TRS
Fund could “become an unbounded source of funding for enhancements that go
beyond” the statute’s requirements. Order ¶18 (JA 853), citing 2004 TRS Order,
19 FCC Rcd at 12548 ¶190; see Sorenson, 659 F.3d at 1042 (quoting language
from 2004 TRS Order).
In establishing VRS reimbursement rates, the Commission thus properly
“balance[d] the interests of contributors to the Fund … with the interests of users
of TRS.” Order ¶17 (JA 853). See Fresno Mobile Radio, Inc. v. FCC, 165 F.3d
965, 971 (D.C. Cir. 1999) (“When an agency must balance a number of potentially
conflicting [statutory] objectives ... judicial review is limited to determining whe-
ther the agency’s decision reasonably advances at least one of those objectives.”).
As the Tenth Circuit concluded in Sorenson, “the FCC has discretion to balance
the objectives of § 225 … , and the interim rates reflect a reasonable balance of
these competing objectives.” 659 F.3d at 1045. Here, the Commission reasonably
considered the interests of all telephone users when setting rates that avoided
overcompensation to VRS providers. See Rural Cellular Ass’n v. FCC, 588 F.3d
1095, 1103 (D.C. Cir. 2009) .
By contrast, Sorenson’s reading of the statute would compel the Commis-
sion to accept essentially whatever rates VRS providers claim are needed to cover
the “actual costs” of providing service in whatever manner of service they choose
to offer – regardless of the ensuing burden on the TRS Fund and the contributors


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thereto. Indeed, it is difficult to discern from Sorenson’s brief what limit it con-
templates on the “actual costs” of providing VRS that it should be reimbursed from
the TRS Fund.13 But the statute directs the Commission to reimburse providers for
the “costs caused by” the provision of TRS. The statute does not say that TRS
services should be available without regard to the expense incurred to all telephone
users who pay into the Fund. Rather, Congress specified that TRS be available “to
the extent possible and in the most efficient manner,” 47 U.S.C. § 225(b)(1). The
balancing of interests of VRS users and the separate group of people who pay for
the service is obviously contemplated by Congress’s use of an efficiency test that
takes costs into account. Otherwise, as Sorenson apparently would have it, the
TRS fund would be a blank check for whatever VRS providers wished to spend on
their services. The Commission has properly rejected that theory, explaining that
“providers are not entitled to unlimited financing,” even if “a relatively higher VRS
compensation rate … would be more beneficial to the providers’ ability … to offer
VRS.” 2004 TRS Order, 19 FCC Rcd at 12551 (emphasis added); see also Order
¶¶190-191 (JA 920). The Tenth Circuit agreed with that approach. See Sorenson,

13 See, e.g., Br. 8, asserting that the Commission historically had improperly
omitted costs that should have been included in VRS providers’ allowable costs
and suggesting that this had been acceptable in the past because the VRS rates
had been set high enough that providers, who “have always been free to spend
their money any way they choose,” could incur whatever costs they deemed
necessary and still “remain profitable.”


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659 F.3d at 1044 (“folly to suggest that § 225 requires VRS to operate at any cost
or entitles VRS providers to unlimited compensation”).
What the Commission did here is entirely consistent with its actions –
upheld on judicial review – in Sorenson’s unsuccessful challenge to the 2010
Interim Rate Order. The Tenth Circuit held that “[d]espite Sorenson’s suggestions
to the contrary, [Section 225] does not entitle Sorenson to compensation for what-
ever VRS-related service it would like to provide to its current or potential cus-
tomers. Instead, the FCC has sensibly adopted an approach that compensates only
the reasonable costs of providing access to VRS, by limiting compensation to
certain ‘allowable costs.’” Sorenson, 659 F.3d at 1043. It is noteworthy that
Sorenson argued to the Tenth Circuit that “the FCC fundamentally misunderstands
Section 225.” Sorenson 10th Cir. Reply Br. 19. In Sorenson’s view, the FCC
lacked authority to engage in any balancing of interests in enforcing Section 225
and Sorenson suggested no limits on what costs the Commission was obligated to
pay to VRS providers to “achieve universal service” for deaf and hearing-impaired
persons under Section 225. See id. 19-29. Despite the Tenth Circuit’s complete
rejection of that view of the statute, Sorenson continues to pursue that approach
before this Court.
Ensuring that reimbursement rates are tied to cost of service is especially
important in setting the rates during the transition period while the Commission is
developing new approaches to the provision of VRS. Record evidence demon-


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strated that in recent years VRS providers had been overcompensated by hundreds
of millions of dollars at the expense of the general public and in violation of the
statutory mandate to provide service “in the most efficient manner.” See, e.g., pp.
7-8 above. At the same time, the Commission took steps to ensure that the reim-
bursement rate would enable VRS providers to continue to provide service by
establishing a “multi-year ‘glide path’ towards cost-based rates” with six month
rate adjustments over a four-year transition period to minimize disruption. Order
¶212 (JA 929). The Commission’s approach was well within the considerable
discretion that Congress granted it in Section 225.

B. Consistent With Section 225, The Order Ensures That


VRS Will Be “Available” To Provide “Functionally
Equivalent” Service In The “Most Efficient Manner.”


Sorenson’s claim that the Commission has adopted rates for VRS that are so
low that it “would degrade VRS in the short run and drive every provider out of
business or into bankruptcy in the long run” (Br. 28) is simply a recasting of its
arguments two years ago to the Tenth Circuit. It argued there that, in adopting
interim rates for VRS at the outset of the proceeding that led to the Order here, the
Commission had violated its mandate under the statute to ensure that deaf and hard
of hearing users have “available” to them telephone service that is “functionally
equivalent” to that available to hearing individuals “to the extent possible and in
the most efficient manner.” 47 U.S.C. § 225(a)(3), (b)(1). The Tenth Circuit
rejected those arguments in 2011, and this Court should reject them as well.


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Sorenson contends (Br. 28) that the data on which the Commission relied in
adopting the new VRS rates, supplied by RLSA from historical and projected costs
submitted to it by VRS providers, was “unmoored from reality” because it
included “only a subset of the real-world costs of providing service.” Br. 32.
However, the Commission relied on the same methodology it had used when it
adopted the 2010 interim rates upheld in Sorenson. The court there held that the
statute “does not entitle Sorenson to compensation for whatever VRS-related
service it would like to provide to its current or potential customers. Instead, the
FCC has sensibly adopted an approach that compensates only the reasonable costs
of providing access to VRS, by limiting compensation to certain ‘allowable
costs.’” Sorenson, 659 F.3d at 1043.
Section 225 requires the FCC to ensure that TRS services be available “in
the most efficient manner.” That language contemplates that the Commission will
exercise its discretion and expertise in setting rates that balance cognizable benefits
against costs. Sorenson, by contrast, appears to read Section 225 as limiting the
Commission to improving the efficiency of services, but leaving the providers with
the unreviewable right to establish whatever service enhancements they deem to
further the statutory objective. That Congress intended a firm with an 80% market
share, in a market where users receive the service for free and in which costs are
levied on third parties, to have unreviewable power is not even a plausible, much
less required, reading of the statute.


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In fact, the Commission properly interpreted and applied the efficiency
clause. See, e.g., Order ¶¶15-18 (JA 852-53). The “efficient manner” of deliver-
ing a “functionally equivalent” service necessarily requires the Commission to
determine the appropriate basis for compensation. It follows that the Commission
may take into account program costs in setting reimbursement rates. Indeed, it is
difficult to imagine that Congress did not intend the Commission to take account of
costs in administering a publicly financed fund that has recently grown to nearly $1
billion annually. Cf. Rural Cellular Ass’n, 588 F.3d at 1095 (it was “entirely rea-
sonable” for the FCC “to consider its interest in avoiding excessive funding from
consumers” and limit the costs of a universal service fund “in the face of evidence
showing providers were receiving subsidies in excess of what is needed to allow
them to remain in the market.”)

IV. THE COMMISSION ACTED REASONABLY IN


SETTING TRANSITIONAL VRS RATES IN THE ORDER.


Sorenson argues that the Order is arbitrary and capricious because the transi-
tional rates that the Commission adopted relied on cost data submitted by the TRS
Fund Administrator, RLSA, that were “unmoored from reality,” and that the rate
methodology used was “irrational” because it failed to take into account all of the
“real world costs” of providing VRS (e.g., Br. 32, 27). Sorenson also asserts that
the FCC unreasonably imposed more demanding “speed of answer” duties on VRS
providers while requiring them to reduce costs, failed to consider the cumulative
impact of rate reductions, and retained an unjustified tiered rate system in which


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most of its reimbursements from the TRS Fund will be at a lower level than its
competitors. Br. 52, 55, 57. To the extent that these arguments survive the Tenth
Circuit’s decision, they fail to demonstrate that the Commission’s action in this
case was arbitrary and capricious.

A. The FCC’s Longstanding Determinations As To What


Constitutes Allowable VRS Provider Costs To Be
Reimbursed From the TRS Fund Are Reasonable.


The Commission set the transitional VRS rates based on cost data provided
by TRS Fund Administrator RLSA. Order ¶¶188-91 (JA 919-20). Sorenson com-
plains that the Commission erred by relying to any extent on RLSA’s proposed
rates. E.g., Br. 27, 32. Just as it argued unsuccessfully to the Tenth Circuit that the
prior fund administrator, NECA, had improperly excluded some of the “real” costs
of providing VRS, “including developing and providing videophones, providing
technical assistance, and taxes and debt service” (Sorenson 10th Cir. Br. 45),
Sorenson argues here that the RLSA data upon which the Commission relied failed
to consider the “real world costs” of providing VRS by omitting the same cate-
gories of costs. See Br. 27, 31, 32, 36.
In fact, the exclusions from the RLSA-proposed rates reflect the very same
costs that the Commission has excluded from VRS reimbursement since at least
2004. For years, the FCC has excluded, for example, certain taxes, research and
development costs, and the cost of providing video equipment, software, and
technical assistance to users. See 2004 TRS Order, 19 FCC Rcd at 12545-12550;


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2006 MO&O, 21 FCC Rcd at 8070 ¶15-16 & n.50; 2007 TRS Rate Order ¶¶73-82.
Sorenson and other VRS providers did not challenge any of those exclusions at the
time. The Commission explained that reimbursement rates are intended to cover
the reasonable costs a TRS provider incurs in providing a level of service that
complies with the Commission’s minimum standards for VRS. Thus, the Com-
mission noted, a VRS provider “cannot determine for itself that it is going to
provide something different from or beyond the Commission’s rules, and still
expect compensation from the Fund.” Declaratory Ruling and NPRM, 21 FCC
Rcd 5442, 5457-5458 ¶39 (2006).
Because the Commission reasonably has excluded those matters from reim-
bursement – and has done so for years without challenge by Sorenson – the Com-
mission did not exceed its discretion when it based its rates in part upon the data
compiled and submitted to it by RLSA that reflected the same longstanding exclu-
sions. The Tenth Circuit’s decision rejecting Sorenson’s challenges to the 2010
Interim Rate Order, even if not preclusive, further bolsters the reasonableness of
these longstanding agency determinations. See Sorenson, 659 F.3d at 1043 (FCC
“sensibly adopted an approach that compensates only the reasonable costs of pro-
viding access to VRS, by limiting compensation to certain ‘allowable costs.’”).
Sorenson dismisses any reliance on the fact that the FCC’s VRS rate deter-
minations reflected “longstanding practice that was affirmed by a federal court of
appeals” (Order ¶196 (JA 923)), with the observation that just because “a practice


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is ‘longstanding’ does not make it correct.” Br. 42. That is no doubt true, but even
before Chevron the fact that an agency practice was consistent and longstanding
was nevertheless entitled to “great weight” in assessing its reasonableness. See
NLRB v. Bell Aerospace Co., 416 U.S. 267, 274-75 (1973) (“A court may accord
great weight to the longstanding interpretation placed on a statute by an agency
charged with its administration.”); Paralyzed Veterans of America v. D.C. Arena,
117 F.3d 579, 586 (D.C. Cir. 1997) (holding that longstanding agency interpreta-
tion of a regulation acquires a status that likely will require notice and comment
rulemaking to modify).
Sorenson’s complaint that RLSA’s proposed rates improperly failed to
reflect debt, or “the cost of obtaining capital” (Br. 45), was made to the Tenth
Circuit and necessarily rejected by that court’s holding that the 2010 interim rates
were not arbitrary and capricious despite excluding cost of debt as an allowable
cost as Sorenson argued. See Sorenson, 659 F.3d at 1046 (noting Sorenson’s
argument that NECA’s proposed rates were flawed because, in addition to other
things, they did not reflect “debt service payments”); Sorenson 10th Cir. Br. 45
(allowable costs “do not include many ‘real’ costs of providing VRS, including …
debt service”). That court found that the “allowable costs” upon which the Com-
mission relied were reasonable, thus rejecting Sorenson’s claims that the 2010
order was arbitrary and capricious because it omitted categories of costs such as
debt service.


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In any event, Sorenson’s contentions with respect to inclusion of the cost of
debt are misleading and premature. Under long-established rate of return regula-
tion, the cost of debt is a key component of the weighted cost of capital. The
authorized rate of return applies to all capital reasonably invested. See 47 C.F.R. §
65.300-65.305, 65.800. The Commission reiterated here that the cost of debt, like
other costs, must be “necessary to the provision of reimbursable services.” Order
¶195 (JA 922). Sorenson raises no question regarding the RLSA calculations
based on those premises. Compare Sorenson, 659 F.3d at 1047 (Sorenson “offers
no reason to question the accuracy of NECA’s computation of the allowable costs
incurred by VRS providers”).
What is fatal to its contention here, therefore, is that Sorenson does not
address the reasonableness of the debt it has incurred and the relationship of that
debt to reimbursable expenses, a not insignificant omission when in the recent past
it has taken on as much as $1.5 billion in debt, a large portion of which went to pay
dividends to a private equity fund that has an ownership interest in Sorenson. See
Telecommunications Relay Services, 25 FCC Rcd 9115, 9121 ¶21 (CGB 2010)
(“2010 Stay Order”); Richard Morgan, “A Failure Of Communication,” The Deal
Magazine, Oct. 1, 2010 (available at http://deaftimes.com/usa-l/a-failure-of-
communication-great-summary-of-vrs-fcc-and-neca/). It also does not address
how much of its debt, for example, represents an investment in customer equip-
ment, which the Commission and the Tenth Circuit have held is not required to be


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reimbursed. A claim of that magnitude requires more justification than the argu-
ment that the Fund should reimburse it because Sorenson paid it. It requires evi-
dence that the payment was reasonable and for a reimbursable expense. Or, as the
Commission staff observed in denying Sorenson’s request for stay of the 2010
Interim Rate Order, “Sorenson has not shown that its claimed costs, which include
interest and dividend payments, are the result of sound business decisions … We
discern no legal or policy basis for setting rates at a level that is designed to
ensure that Sorenson can profitably maintain its particular financial structure.”
25 FCC Rcd at 9121 ¶21.
Sorenson cites no instance in the Order or elsewhere in which VRS provid-
ers have claimed that specific debt costs “necessary to the provision of reimburs-
able services” have been incurred and in which either the Fund Administrator or
the Commission has refused to include those costs as allowable costs for the pur-
pose of calculating reimbursement for providing VRS. The Commission’s long-
established position requiring that debt, like other costs, must be necessary to the
provision of VRS is surely a permissible construction of the language of Section
225 that the TRS Fund reimburse only the “costs caused by interstate telecom-
munications relay services.” 47 U.S.C. § 225(d)(3)(B). In the absence of any
specific showing that the Commission has declined to include specific debt costs
that were so necessary, Sorenson’s generic argument regarding the FCC’s treat-
ment of debt costs in calculating VRS rates is without merit or at least premature.


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The TRS Fund is intended to reimburse the costs of providing an accommo-
dation to persons with hearing or speech disabilities; it was never meant to support
a lucrative investment vehicle at public expense by a corporation that controls 80%
of the VRS business that is paid out of the TRS Fund. Contrary to Sorenson’s
apparent view, providers of VRS services are not just like “plumbing businesses
[or] law firms” (Br. 38), and they do not compete in the same kind of market
where, by and large, users pay for the services they use and therefore exert direct
control of the prices being charged. Moreover, there is no good reason why the
Commission should establish rates that provide undue incentives to raise capital
through debt rather than equity. As the Commission held here, it would be “irre-
sponsible and contrary to our mandate to ensure the efficient provision of TRS …
to simply reimburse VRS providers for all capital costs they have chosen to incur –
such as high levels of debt – where there is no reason to believe that those costs are
necessary to the provision of reimbursable services.” Order ¶195 (JA 922).
Further, it is not correct that, as Sorenson asserts, the Commissionbelieved
… that borrowing was not a legitimate way to obtain . . . capital.” Br. 45. Rather,
the Commission’s rate methodology simply limits recoverable interest on long-
term debt, along with other capital costs, to an amount that does not exceed the


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allowable return on investment, calculated based on the Commission-prescribed
11.25% rate of return.14
The Commission also was unpersuaded by the arguments of Sorenson and
other VRS providers that the 11.25% rate of return allowed on capital investment,
which had been employed in VRS rate calculations for many years, was not
appropriate because it was based on rate making for telecommunications carriers.
They argued that VRS providers operated in a different manner and the 11.25%
return “does not adequately compensate VRS providers for their capital costs.”
Order ¶195 (JA 922). Critically, however, none of the commenters showed that
the 11.25% return was inadequate or suggested a “quantified, concrete alternative
to the current approach for calculating an allowable rate of return, other than to
simply reimburse providers for their actual expenditures on interest and other
capital costs.” Id. Sorenson cites no other alternatives, and the Commission’s
conclusion that “simply reimburs[ing] VRS providers for all capital costs they have
chosen to incur” would have been an “irresponsible” approach still holds true.
Again, Sorenson’s quarrel here is with the methodology (upheld by the Tenth
Circuit) and not the application of that methodology to a specific set of facts.15

14 See generally Represcribing the Authorized Rate of Return for Interstate Ser-
vices of Local Exchange Carriers, 5 FCC Rcd 7507 (1990) (prescribing an
11.25% rate of return based on a weighted average of debt and equity costs).
15 Sorenson’s claim (Br. 39-40), that using “simple arithmetic,” it is receiving less
than a 2% rate of return is based on a flawed understanding of rate regulation. It
(footnote continued on following page)


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Moreover, the fact that employing the traditional 11.25% rate of return was a
“longstanding practice that was affirmed by a federal court of appeals” and that the
Commission expected that “a capital cost methodology will become unnecessary”
as it transitions to a new VRS structure was a reasonable justification for rejecting
the calls to modify this approach during the transition. Order ¶196 (JA 923).
While Sorenson complains that the 11.25% authorized rate of return is too
low, the FCC tentatively has concluded that it is too high as applied to local
exchange carriers. Accordingly, it has instituted a proceeding to reexamine and
lower the authorized rate of return as part of its comprehensive reform of the
universal service fund. See Connect America Fund, 26 FCC Rcd 17663 ¶¶1044-
1060 (2011), pets. for review pending, In re: FCC 11-161, No. 11-9900 (10th Cir.,
argued Nov. 19, 2013). Noting that it last prescribed the authorized rate of return
for local exchange carriers more than 20 years ago, the Commission has stated its
tentative belief that “fundamental changes in the cost of debt and equity since 1990
no longer allow us to conclude that a rate of return of 11.25 percent is necessarily
‘just and reasonable’ as required by section 201(b)” of the Communications
Act. Id. at ¶1046
________________________
(footnote continued from preceding page)
produces its asserted 2% result by calculating its return on both capital costs and
expenses. However, it is well established that rate of return regulated entities do
not receive a return on expenses, such as labor costs, which apparently constitute
a large portion of Sorenson’s costs. Expenses are reimbursed dollar for dollar.
See n.15 above.


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Contrary to Sorenson’s argument, the Commission explained why it chose to
“continue to move rates closer to actual cost using currently available ratemaking
tools.” Order ¶188 (JA 919). As an initial matter, the Commission pointed out
that although the 2010 interim rates “began to close the gap between rates and
costs,” while those rates have remained in effect “provider costs have declined
significantly.” Id. & n. 497 (JA 919) (citing data submitted by RLSA). The Com-
mission concluded that it was necessary to reduce rates further to “bring them
closer to average provider costs.” Id. Although Sorenson argued in favor of con-
tinuing existing rates as a base for a new multi-year plan, the Commission con-
cluded that it could no longer justify maintaining rates at the existing 2010 interim
rate levels in view of the record evidence of declining provider costs. Id. ¶190 (JA
920). However, as it had done in 2010, the FCC did not lower rates to the actual
costs set out in the RLSA submissions, which averaged $3.39 per minute based on
2013 projected costs. Id. ¶211 (JA 928). Rather, it adopted a “glide path” that
would adopt new VRS rates well above providers’ projected costs for 2013 and
reduce the rates every six months to reach approximately $3.49 per minute at the
end of the transition, assuming its structural reforms of VRS take the full four-year
period. Id. ¶¶212-215 (JA 928-30); see also id. nn.560-562 (JA 930) (noting that
later years of rate schedule are “pending implementation of market-based rates”).
Thus by Sorenson’s own statements, its provision of VRS would not become


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“unsustainable” for Tier I and Tier II minutes until 2017 and for Tier III minutes
until 2016.16
The courts have recognized that the FCC “has broad discretion in selecting
methods for the exercise of its powers to make and oversee rates.” Aeronautical
Radio, Inc. v. FCC, 642 F.2d 1221, 1228 (D.C. Cir. 1980). Thus, the Commis-
sion’s rate-setting decisions are “appropriately treated as policy determinations in
which the agency is acknowledged to have expertise.” United States v. FCC, 707
F.2d 610, 618 (D.C. Cir. 1983); accord Sorenson, 659 F.3d at 1045. “The relevant
question is whether the agency’s numbers are within a zone of reasonableness, not
whether its numbers are precisely right.” WorldCom, Inc. v. FCC, 238 F.3d 449,
461-462 (D.C. Cir. 2001) (internal quotation marks omitted)). And, “[a]s long as
the Commission makes a ‘reasonable selection from the available alternatives,’ its
selection of methods will be upheld ‘even if the court thinks [that] a different deci-
sion would have been more reasonable or desirable.’” Southwestern Bell Tele-
phone Co. v. FCC, 168 F.3d 1344, 1352 (D.C. Cir. 1999), quoting MCI Telecom-
munications Corp. v. FCC, 675 F.2d 408, 413 (D.C. Cir. 1982). Applying that
deferential standard, the Court should affirm the FCC’s decision.

16 Sorenson, relying on its own financial information, asserted to the Commission
that its VRS business would become “unsustainable” when rates reach less than
$4.37 per minute. See [5-2-13 ex parte] JA 1472. Even crediting Sorenson’s
characterization of its financial situation, however, under the schedule adopted
by the Commission, rates will not go below that level until January 2017 for the
higher Tier I and II rates and July 2016 for Tier III rates. See Order ¶215 Table
II (JA 930).


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Much of Sorenson’s brief is taken up with the theme that the Commission
failed to respond to complaints from it and other providers that continuing to
reduce rates would not allow them to recover what they considered allowable costs
and drive them to insolvency and bankruptcy. E.g., Br. 36. But these were not
fundamentally new arguments. Sorenson unsuccessfully raised much the same
“doomsday scenario” about VRS rate levels, allowable costs and rate of return in
the Tenth Circuit. Sorenson, 659 F.3d at 1043. Sorenson does not claim that there
are any substantial changed circumstances that warranted the Commission recon-
sidering any aspect of its VRS rate methodology or the VRS rate structure since it
adopted the interim rates in 2010 or indeed in earlier proceedings. Having
repeatedly addressed these issues in other related proceedings, the agency “need
not repeat itself incessantly.” Bechtel v. FCC, 10 F.3d 875, 878 (D.C. Cir. 1993).
Similarly, the Commission has consistently held with respect to VRS and
other forms of TRS that “costs attributable to the user’s relay hardware and soft-
ware, including installation, maintenance, and testing are not compensable from
the Fund” because the expenses for which providers are compensated “‘must be
the providers’ expenses in making the service available and not the customer’s
costs of receiving the equipment.’” Order ¶193 (JA 921), quoting 2006 MO&O,
21 FCC Rcd at 8071 ¶17; see also FNPRM ¶49 (JA 172); 2007 TRS Order, 22
FCC Rcd at 20170-71 ¶82. Sorenson’s extended argument to the contrary (Br. 45-
51) acknowledges the Commission’s longstanding practice, but simply repeats its


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arguments against it without citing any changed circumstances that would warrant
the Commission’s re-examination of this issue.
Although Sorenson contends (Br. 47) that the record in this proceeding
“established a number of important facts,” none of those facts were in any way
new. Where, as here, “a party attacks a policy on grounds that the agency already
has dispatched in prior proceedings, the agency can simply refer to those proceed-
ings if their reasoning remains applicable and adequately refutes the challenge.”
Bechtel, 10 F.3d at 878; see also Arkansas AFL-CIO v. FCC, 11 F.3d 1430, 1442
(8th Cir. 1993) (the court “will not require the [Commission] to reinvent the wheel
in each case and engage in endless repetitions of its reasoning,” such that the FCC’s
citation of a prior judicial decision “sufficed to identify the reasoning behind its
decision”). No changed circumstances rendered the Commission’s previous reason-
ing on the reimbursement of VRS users’ equipment costs inapplicable in the pro-
ceeding below.
Sorenson ignores as well the Tenth Circuit’s rejection of its argument that
Section 225 required that the Fund reimburse VRS providers for supplying custo-
mer equipment. The court said that “the suggestion that the statute is violated by
Sorenson’s inability to provide free phones to new users has no merit. The statute
only requires that VRS be made ‘available’ and that users pay no higher rates for
calls than others pay for traditional phone services. … It does not require that VRS
users receive free equipment and training.” Sorenson, 659 F.3d at 1044. The court


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added that “[j]ust as users of traditional telephone service do not receive their tele-
phones for free, § 225 does not require that VRS users receive free videophones.”
Id. at 1045.
It is true that commenters “argued that the cost of providing videophones
was one of the necessary” costs of TRS and that the “Commission had a statutory
duty to fund [those costs] from the TRS Fund.” Br. 48. However, to the extent
that commenters made those arguments, they are inconsistent with the Tenth
Circuit’s holding. Sorenson’s brief offers no explanation as to how its argument
that it must be reimbursed by the TRS Fund for the cost of equipment survives the
court’s holding that Section 225 does not require that the Commission reimburse
providers’ costs of supplying equipment. Indeed, Sorenson’s brief here simply
expands the same arguments it presented in the earlier case, repeating the refer-
ences to the high costs of VRS phones, and the labor-intensive and costly nature of
the training it claims users must be provided. Compare Br. 45-51 with Sorenson
10th Cir. Br. 43-44.
Sorenson also complains that it was “arbitrary and capricious for the FCC to
ignore the cumulative effect of rate cuts.” Br. 55. However, that argument would
have force only if there were some basis for Sorenson’s claims that the rates
adopted by the Commission here are inconsistent with the statute or unreasonable
because they do not allow it to recover its costs or for some other reasons. As we
have discussed above, Sorenson has failed to demonstrate that the VRS rates at


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issue here are in any way unlawful. Thus the cumulative effect of rate cuts is
irrelevant where the rates adopted for reimbursement of VRS providers cover their
properly allowable costs even when the rates are reduced to the lowest point at the
end of the four-year transition period. The only “cumulative effect” that may be
relevant here is the cumulative effect of the past rates paid to VRS providers that
have far exceeded their costs of providing VRS and have been shouldered by
general ratepayers.
Not only did the Commission fully explain its approach, but its methodology
was entirely sensible and supported by substantial evidence. It made sense to har-
monize the existing 2010 interim rates and RLSA’s proposed cost-based rates,
thereby reducing overpayments by the TRS Fund while ensuring that the new
transitional rates would permit service providers to continue offering service in
accordance with the Commission’s rules. Indeed, the FCC’s action here to find a
“reasonable balance” closely tracks the agency’s 2010 approach that the Tenth
Circuit upheld against an arbitrary and capricious challenge. Sorenson, 659 F.3d at
1048. And, given the Commission’s twin purposes of moving reimbursement rates
closer toward costs while avoiding a sudden change that could hamper providers’
ability to offer service, it was reasonable to adopt a “glide path” in which rates
would begin well above providers’ actual costs and be reduced in increments over
a four-year period from the existing rates to rates that will be closer to, but still
above, providers’ allowable costs.


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The Commission’s decision fell easily within a “zone of reasonableness.”
WorldCom, Inc., 238 F.3d at 461-62. To be sure, in setting such rates, “an agency
may not pluck a number out of thin air,” but “[w]hen a line has to be drawn …, the
Commission is authorized to make a ‘rational legislative-type judgment.’” WJG
Telephone Co. v. FCC, 675 F.2d 386, 388-89 (D.C. Cir. 1982) (citations omitted).
So long as “the figure selected by the agency reflects its informed discretion, and is
neither patently unreasonable nor ‘a dictate of unbridled whim,’ then the agency’s
decision adequately satisfies the standard of review,” WJG Telephone Co., 675
F.2d at 388-89 (citations omitted). That is the case here.

B. The Commission Properly Retained A Tier


Structure With Reasonable Payment Differentials.


In 2007, the Commission adopted a tiered VRS reimbursement structure
based on data showing that different VRS providers “are not similarly situated with
respect to their market share and their costs of providing service.” 2007 TRS Rate
Order, 22 FCC Rcd at 20163 ¶52. The evidence before the Commission demon-
strated that “providers that handle a relatively small amount of minutes … have
relatively higher per-minute costs” and that “providers that handle a larger number
of minutes … have lower per-minute costs.” Id. ¶54. The Commission therefore
explained that its tiered approach allowed providers to be reimbursed at a rate “that
likely more accurately correlates to their actual costs.” Id. The tiers were struc-
tured on a “cascading” basis so that “providers would be compensated at the same
rate for the minutes falling within a specific tier.” Id. Thus, all providers received


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the same rate, regardless of cost, for the first 50,000 minutes of service provided;
all received the same rate for the next 450,000 minutes; and all received the same
rate beyond that point. Id. at 20163-20164. At the time, Sorenson supported the
use of payment tiers. See 2007 TRS Rate Order, 22 FCC Rcd at 20164 n.160.
In the Interim Rate Order, the Commission retained the tier structure. The
cost-based data showed that Tier III providers had dramatically lower costs than
Tier I and Tier II providers. See Interim Rate Order, 25 FCC Rcd at 8694 Table 1.
Relying on that data, the Commission found that “the current tier structure remains
a workable, reliable way to account for the different costs incurred by carriers
based on their size and volume of TRS minutes relayed” and that “[t]he rationale
for adopting the tiers … remains applicable.” Id. ¶17. The Tenth Circuit rejected
Sorenson’s arbitrary and capricious challenge to the FCC’s retention of the three-
tiered rate structure, finding “ample evidence” to support that decision. Sorenson,
659 F.3d at 1048.
Sorenson once again argues that the Commission was wrong in retaining that
tier system in the Order on a transitional basis. First, Sorenson claims that the
Commission did not justify its conclusion that the tiers reflect cost differentials
based on economies of scale. Br. 59. However, as the Commission held, regard-
less of whether the cost differences are a result of economies of scale or exist for
other reasons, the “actual existence [of cost differentials] is undisputed and is sup-
ported by historical data” contained in RLSA’s submissions. Order ¶ 203 (JA


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- 49 -
925). That alone justifies the Commission’s retention of tiers. It was thus also
reasonable for the Commission to conclude that during this transition period, as it
moved to structural reforms in which its expects that the tier classification will
ultimately be eliminated, it should maintain a tier structure because it was impor-
tant as a matter of policy to “maintain effective competition in the provision of
VRS.” Id. ¶204 (JA 925). Given the Commission’s longstanding policy that
rates should reflect costs, it made sense that higher-cost providers should be
reimbursed at a higher rate.
Sorenson also contends that the record “did not support the Commission’s
speculation about lock-in,” i.e., that problems with interoperability and portability
of VRS equipment “locked-in” VRS users to one provider, typically Sorenson as a
result of its 80% market share, thus effectively limiting competition in the provi-
sion of VRS service. Br. 61. What the Commission concluded was that prior to
the restructuring of VRS that it was undertaking in this proceeding, “there are good
reasons to retain rate tiers and no compelling reasons to eliminate them.” Order
¶200 (JA 924). One of the reasons it cited was that “eliminating the rate tiers
immediately could force out some of the smallest remaining [VRS] providers” and
thus limit consumer choice prior to structural reform under which, the Commission
believed, smaller providers “may be able to operate more efficiently and compete
more effectively ….” Id. Although Sorenson describes the VRS industry as
“highly competitive” (Br. 22) and claims that it has “numerous competitors” (Br.


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 59 of 109
- 50 -
42), it also acknowledges that “almost all service is currently provided by three
VRS providers” and that Sorenson’s share of the VRS market is at least 80%. Br.
12.
In this context, the Commission said that “current conditions” have created
“technical barriers to interoperability [that] continue to inhibit the full development
of competition.” Order ¶200 (JA 924). Contrary to Sorenson’s argument, the
record, in fact, supports that conclusion. Indeed, in the report cited by Sorenson, a
study found that “[t]he Sorenson nTouch VP is compatible with many non--‐Soren-
son products. The nTouch PC, iPhone, iPad, and Evo clients [Sorenson’s newer
VRS products] do not work with non--Sorenson products. The nTouch VP can
leave video mails on most non--‐Sorenson products, but not vice versa.” [TAG
Video Quality & Interoperability Study, Summary] JA 462 (emphasis added).
Where customers of smaller providers cannot fully interoperate with the newest
technology provided by Sorenson, the market leader with at least 80% of VRS
users, it was reasonable for the Commission to conclude that “it is worth tolerating
some degree of inefficiency in the short term, in order to maximize the opportunity
for successful participation of multiple efficient providers in the future ….” Order
¶200 (JA 924). Sorenson also fails to note that the transitional rate plan gradually
reduces the gap between the highest and lowest tier rates over the four-year or less
course of the plan. Id.


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- 51 -
Sorenson further asserts that the tier system is inconsistent with the statutory
requirement that VRS be provided “in the most efficient manner.” Br. 65. Once
again, this is simply a recasting of its unsuccessful argument to the Tenth Circuit
that the tier system “makes no sense” because “it is unclear why the FCC would
choose to pay any other provider more” than it pays the lowest cost provider.
Sorenson 10th Cir. Br. 55. In 2007, when the Commission adopted tiers, it
explained that new entrants to the VRS market typically have higher costs. A tier
system thus would “ensure … that in furtherance of promoting competition, the
newer providers will cover their costs, and the larger and more established provi-
ders are not overcompensated …” 2007 TRS Rate Order, 22 FCC Rcd at 20163.
That policy remains valid. In any event, the Commission’s pending review of the
entire VRS program specifically anticipates that tier classifications ultimately will
be eliminated in the proposed structural reform. Order ¶204 (JA 925).
Finally, Sorenson claims that the tier structure places it at a tremendous dis-
advantage compared to all of its competitors because it will be the only provider
with any significant number of minutes reimbursed at Tier III rates, the lowest
rates. Br. 57. But that claim fails because it ignores the cascading nature of the
tier regime, under which every similarly situated VRS provider is paid the same
per-minute rate. Thus, under the transitional rate plan, Sorenson (like all other
providers) is paid at the Tier I rate for its first 500,000 minutes of VRS service and
at the Tier II rate for the next 500,000 minutes. And any other provider that pro-


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 61 of 109
- 52 -
vides more than 1,000,000 minutes per month will be paid exactly what Sorenson
earns for those Tier III minutes. The Tenth Circuit “easily dispense[d]” with this
argument in Sorenson, holding that the tiered rate structure “treats all providers
equally.” 659 F.3d at 1049.
Sorenson arrives at allegedly inequitable payment disparities only by com-
paring apples (providers principally covered by Tiers I and II) with oranges
(Sorenson itself, given that its minutes largely fall within Tier III). Payment
disparities that correspond to differences in service are inherent in any tier system
and fairly reflect the established cost differentials. Moreover, Sorenson has little
reason to complain: even though it has lower than average provider costs, it is
compensated at Tier I and II rates for calls that fall within those tiers and therefore
is overcompensated relative to smaller providers for those calls. See 2010 Stay
Order, 25 FCC Rcd at 9119 ¶14.

C. Sorenson’s Challenge To The Commission’s Modifications


To The Speed Of Answer Rule Is Not Properly Before The
Court And, In Any Event, Is Meritless.


In the Further Notice in this proceeding, the Commission sought comment
on whether it should modify the “speed of answer” requirement in its rules which,
at the time, required VRS providers to answer 80% of all calls made to their call
centers by VRS users within 120 seconds measured on a monthly basis. FNPRM,
¶87 (JA 184). Noting that the record showed that VRS providers already achieved
a speed of answer time of 30 seconds for the majority of calls, the Commission in


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- 53 -
the Order found it reasonable to reduce the permissible wait time for VRS calls to
30 seconds for 85% of calls measured on a daily basis. Order ¶137 (JA 896); see
47 C.F.R. § 64.404(b)(2). The Commission pointed out that this would more
closely align VRS with other forms of TRS that are subject to a 10 second speed of
answer requirement for 85% of calls measured on a daily basis. Order ¶135 (JA
895).
Sorenson states that it “warned the FCC” that the rates proposed by RLSA
“would lead to ‘severe degradation in the quality of service provided’ to VRS
users” and in particular “would cause longer wait times for VRS users,” thus
“violat[ing] the Commission’s statutory duty to ensure that VRS users receive
service that is ‘functionally equivalent’ to the service received by hearing users.”
Br. 52. Sorenson made the identical argument to the Tenth Circuit, stating there
that it had “warned the Commission that the rates in the 2010 Order would lead to
a doubling of average wait times … undermining the progress toward functional
equivalency ….” Sorenson 10th Cir. Br. 38. The Tenth Circuit rejected Soren-
son’s argument (659 F.3d at 1043), and even if the Court finds that Sorenson’s
repetition of the argument here is not precluded, it should reject it just as well.
First, Sorenson’s argument regarding wait times, based on the Commission’s
speed of answer requirement, should be dismissed for want of jurisdiction insofar
as it asserts that the Commission unreasonably reduced the speed of answer
measurement period from monthly to daily. See Br. 52-55. That argument was


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 63 of 109
- 54 -
never presented to the Commission. Sorenson intimates that the FCC failed to
provide adequate notice of a possible change in the measurement period, but it
raises no specific APA notice issue. See Br. 54 (“[H]ad the Commission actually
proposed to measure speed of answer on a daily basis before adopting the require-
ment, providers would have told the Commission that they do not currently meet
such a standard and that it would be difficult if not impossible to do so.”) The
Court has made clear that “even when a petitioner has no reason to raise an argu-
ment until the FCC issues an order that makes the issue relevant, the petitioner
must file ‘a petition for reconsideration’ with the Commission before it may seek
judicial review. 47 U.S.C. § 405(a).” In re Core Communications, Inc., 455 F.3d
267, 276-77 (D.C. Cir. 2006), citing AT&T Corp. v. FCC, 86 F.3d 242, 246 (D.C.
Cir. 1996). No party has sought reconsideration of the Order. Sorenson’s citation
to comments it submitted to the Commission after the Order was adopted to sup-
port its claims (Br. 54, n.161) highlights that this is an issue that should have been
presented first to the FCC and that Section 405 of the Communications Act
prohibits it from being raised first in this case.
The Commission observed that the majority of VRS providers were already
meeting a 30-second speed of answer requirement despite being subject only to a
120-second requirement. It was reasonable for the Commission to conclude that
modifying the rule to align it with what most VRS providers were already doing
was “feasible” and that modifying the requirement in this manner would further the


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 64 of 109
- 55 -
functional equivalency mandate of the statute. Such a modification was especially
reasonable in view of the fact that other forms of TRS are subject to a 10-second
speed of answer requirement. See Order ¶¶136-37 (JA 896).
The Commission did not have before it any comments suggesting that reduc-
ing the measurement period from monthly to daily was not feasible. That is the
standard that applies to other forms of TRS, and it was reasonable for the Commis-
sion to conclude that since VRS is no longer a nascent service there is no longer
any basis to deviate from the measurement period applied to other services. Id
¶139 (JA 897). Indeed, Sorenson concedes that the most providers would have
said, if they had addressed the issue in comments, is that meeting such “a standard
… would be difficult if not impossible ….” Br. 54. That meeting a new standard
would be “difficult” fails to demonstrate that it was arbitrary and capricious for the
Commission to adopt it. That is particularly true here since the FCC’s action on
speed of service was designed to help move VRS closer to the statutory goal of
functional equivalence. See Order ¶136 (JA 896).
In addition, the Commission emphasized that it “will monitor VRS pro-
viders’ compliance with these new standards, and re-visit this issue in the future if
necessary.” Order ¶141 (JA 898). If specific evidence becomes available that
demonstrates the infeasibility of complying with the revised speed of answer
standards there is thus a clear avenue to seek modification of the standard. In the
absence of such evidence, the Commission’s judgment concerning a highly


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 65 of 109
- 56 -
technical issue like this is entitled to deference. See, e.g., MCI Cellular Tel. Co. v.
FCC, 738 F.2d 1322, 1333 (D.C. Cir. 1984) (where a “highly technical question” is
involved, “courts necessarily must show considerable deference to an agency's
expertise”).

CONCLUSION

For the foregoing reasons, the Court should deny the petition for review.








Respectfully
submitted,


William J. Baer
Jonathan B. Sallet
Assistant Attorney General
Acting General Counsel


Robert B. Nicholson
Richard K. Welch
Robert J. Wiggers
Deputy Associate General Counsel

Attorneys
/s/ C. Grey Pash, Jr.


United States Department of Justice
C. Grey Pash, Jr.
Washington, D. C. 20530
Counsel


Federal Communications Commission
Washington, D. C. 20554
(202) 418-1740
Fax (202) 418-2819


January 28, 2014



USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 66 of 109

CERTIFICATE OF COMPLIANCE


Pursuant to the requirements of Fed. R. App. P. 32(a)(7)(B), I hereby certify
that the accompanying “Brief for Respondents” was prepared using a proportion-
ally spaced 14 point typeface and contains 13915 words as measured by the word
count function of Microsoft Office Word 2010.









/s/ C. Grey Pash, Jr.
_____________________







C. Grey Pash, Jr.

January 28, 2014



USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 67 of 109






STATUTES AND REGULATIONS





Contents








Page


47 U.S.C. § 225 ........................................................................................................ 2

47 U.S.C. § 405(a) …………………………………… .....................……………. 7


47 C.F.R. § 64.601 ……………………………………………… .....................…. 8

47 C.F.R. § 64.602 ………………………………… .....................………………. 13

47 C.F.R. § 64.603 ……………………………………………… .....................…. 13

47 C.F.R. § 64.604 ………………………………………………… ...................... 14

47 C.F.R. § 65.300 ………………………………………………… ...................... 38

47 C.F.R. § 65.301 …………………………………………………. ..................... 38

47 C.F.R. § 65.302 …………………………………………………. ..................... 39

47 C.F.R. § 65.303 …………………………………………………. ..................... 39

47 C.F.R. § 65.304 …………………………………………………. ..................... 40

47 C.F.R. § 65.305 …………………………………………………. ..................... 40

47 C.F.R. § 65.800 …………………………………………………. ..................... 41





USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 68 of 109
47 U.S.C. § 225

UNITED STATES CODE ANNOTATED
TITLE 47. TELEGRAPHS, TELEPHONES, AND RADIOTELEGRAPHS
CHAPTER 5. WIRE OR RADIO COMMUNICATION
SUBCHAPTER II. COMMON CARRIERS
PART I. COMMON CARRIER REGULATION

§ 225. Telecommunications services for hearing-impaired and speech-impaired individuals

(a) Definitions

As used in this section--

(1) Common carrier or carrier

The term “common carrier” or “carrier” includes any common carrier engaged in interstate
communication by wire or radio as defined in section 153 of this title and any common carrier
engaged in intrastate communication by wire or radio, notwithstanding sections 152(b) and
221(b) of this title.

(2) TDD

The term “TDD” means a Telecommunications Device for the Deaf, which is a machine that
employs graphic communication in the transmission of coded signals through a wire or radio
communication system.

(3) Telecommunications relay services

The term “telecommunications relay services” means telephone transmission services that
provide the ability for an individual who is deaf, hard of hearing, deaf-blind, or who has a speech
disability to engage in communication by wire or radio with one or more individuals, 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 by wire or radio.

(b) Availability of telecommunications relay services

(1) In general

In order to carry out the purposes established under section 151 of this title, to make available to
all individuals in the United States a rapid, efficient nationwide communication service, and to
increase the utility of the telephone system of the Nation, the Commission shall ensure that
interstate and intrastate telecommunications relay services are available, to the extent possible
and in the most efficient manner, to hearing-impaired and speech-impaired individuals in the
United States.

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USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 69 of 109
(2) Use of general authority and remedies

For the purposes of administering and enforcing the provisions of this section and the regulations
prescribed thereunder, the Commission shall have the same authority, power, and functions with
respect to common carriers engaged in intrastate communication as the Commission has in
administering and enforcing the provisions of this subchapter with respect to any common carrier
engaged in interstate communication. Any violation of this section by any common carrier
engaged in intrastate communication shall be subject to the same remedies, penalties, and
procedures as are applicable to a violation of this chapter by a common carrier engaged in
interstate communication.

(c) Provision of services

Each common carrier providing telephone voice transmission services shall, not later than 3
years after July 26, 1990, provide in compliance with the regulations prescribed under this
section, throughout the area in which it offers service, telecommunications relay services,
individually, through designees, through a competitively selected vendor, or in concert with
other carriers. A common carrier shall be considered to be in compliance with such regulations--

(1) with respect to intrastate telecommunications relay services in any State that does not have a
certified program under subsection (f) of this section and with respect to interstate
telecommunications relay services, if such common carrier (or other entity through which the
carrier is providing such relay services) is in compliance with the Commission's regulations
under subsection (d) of this section; or

(2) with respect to intrastate telecommunications relay services in any State that has a certified
program under subsection (f) of this section for such State, if such common carrier (or other
entity through which the carrier is providing such relay services) is in compliance with the
program certified under subsection (f) of this section for such State.

(d) Regulations

(1) In general

The Commission shall, not later than 1 year after July 26, 1990, prescribe regulations to
implement this section, including regulations that--

(A)
establish functional requirements, guidelines, and operations procedures for
telecommunications relay services;

(B) establish minimum standards that shall be met in carrying out subsection (c) of this section;

(C) require that telecommunications relay services operate every day for 24 hours per day;

(D) require that users of telecommunications relay services pay rates no greater than the rates
paid for functionally equivalent voice communication services with respect to such factors as the
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USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 70 of 109
duration of the call, the time of day, and the distance from point of origination to point of
termination;

(E) prohibit relay operators from failing to fulfill the obligations of common carriers by refusing
calls or limiting the length of calls that use telecommunications relay services;

(F) prohibit relay operators from disclosing the content of any relayed conversation and from
keeping records of the content of any such conversation beyond the duration of the call; and

(G) prohibit relay operators from intentionally altering a relayed conversation.

(2) Technology

The Commission shall ensure that regulations prescribed to implement this section encourage,
consistent with section 157(a) of this title, the use of existing technology and do not discourage
or impair the development of improved technology.

(3) Jurisdictional separation of costs

(A) In general

Consistent with the provisions of section 410 of this title, the Commission shall prescribe
regulations governing the jurisdictional separation of costs for the services provided pursuant to
this section.

(B) Recovering costs

Such regulations shall generally provide that costs caused by interstate telecommunications relay
services shall be recovered from all subscribers for every interstate service and costs caused by
intrastate telecommunications relay services shall be recovered from the intrastate jurisdiction. In
a State that has a certified program under subsection (f) of this section, a State commission shall
permit a common carrier to recover the costs incurred in providing intrastate telecommunications
relay services by a method consistent with the requirements of this section.

(e) Enforcement

(1) In general

Subject to subsections (f) and (g) of this section, the Commission shall enforce this section.

(2) Complaint

The Commission shall resolve, by final order, a complaint alleging a violation of this section
within 180 days after the date such complaint is filed.



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USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 71 of 109
(f) Certification

(1) State documentation

Any State desiring to establish a State program under this section shall submit documentation to
the Commission that describes the program of such State for implementing intrastate
telecommunications relay services and the procedures and remedies available for enforcing any
requirements imposed by the State program.

(2) Requirements for certification

After review of such documentation, the Commission shall certify the State program if the
Commission determines that--

(A) the program makes available to hearing-impaired and speech-impaired individuals, either
directly, through designees, through a competitively selected vendor, or through regulation of
intrastate common carriers, intrastate telecommunications relay services in such State in a
manner that meets or exceeds the requirements of regulations prescribed by the Commission
under subsection (d) of this section; and

(B) the program makes available adequate procedures and remedies for enforcing the
requirements of the State program.

(3) Method of funding

Except as provided in subsection (d) of this section, the Commission shall not refuse to certify a
State program based solely on the method such State will implement for funding intrastate
telecommunication relay services.

(4) Suspension or revocation of certification

The Commission may suspend or revoke such certification if, after notice and opportunity for
hearing, the Commission determines that such certification is no longer warranted. In a State
whose program has been suspended or revoked, the Commission shall take such steps as may be
necessary, consistent with this section, to ensure continuity of telecommunications relay services.

(g) Complaint

(1) Referral of complaint

If a complaint to the Commission alleges a violation of this section with respect to intrastate
telecommunications relay services within a State and certification of the program of such State
under subsection (f) of this section is in effect, the Commission shall refer such complaint to
such State.



5


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 72 of 109

(2) Jurisdiction of Commission

After referring a complaint to a State under paragraph (1), the Commission shall exercise
jurisdiction over such complaint only if--

(A) final action under such State program has not been taken on such complaint by such State--

(i) within 180 days after the complaint is filed with such State; or

(ii) within a shorter period as prescribed by the regulations of such State; or

(B) the Commission determines that such State program is no longer qualified for certification
under subsection (f) of this section.




6


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 73 of 109
47 U.S.C. § 405(a)


UNITED STATES CODE ANNOTATED
TITLE 47. TELEGRAPHS, TELEPHONES, AND RADIOTELEGRAPHS
CHAPTER 5. WIRE OR RADIO COMMUNICATION
SUBCHAPTER IV. PROCEDURAL AND ADMINISTRATIVE
PROVISIONS

§ 405. Petition for reconsideration; procedure; disposition; time of filing; additional
evidence; time for disposition of petition for reconsideration of order concluding hearing or
investigation; appeal of order


(a) After an order, decision, report, or action has been made or taken in any proceeding by the
Commission, or by any designated authority within the Commission pursuant to a delegation
under section 155(c)(1) of this title, any party thereto, or any other person aggrieved or whose
interests are adversely affected thereby, may petition for reconsideration only to the authority
making or taking the order, decision, report, or action; and it shall be lawful for such authority,
whether it be the Commission or other authority designated under section 155(c)(1) of this title,
in its discretion, to grant such a reconsideration if sufficient reason therefor be made to appear. A
petition for reconsideration must be filed within thirty days from the date upon which public
notice is given of the order, decision, report, or action complained of. No such application shall
excuse any person from complying with or obeying any order, decision, report, or action of the
Commission, or operate in any manner to stay or postpone the enforcement thereof, without the
special order of the Commission. The filing of a petition for reconsideration shall not be a
condition precedent to judicial review of any such order, decision, report, or action, except where
the party seeking such review (1) was not a party to the proceedings resulting in such order,
decision, report, or action, or (2) relies on questions of fact or law upon which the Commission,
or designated authority within the Commission, has been afforded no opportunity to pass. The
Commission, or designated authority within the Commission, shall enter an order, with a concise
statement of the reasons therefor, denying a petition for reconsideration or granting such petition,
in whole or in part, and ordering such further proceedings as may be appropriate: Provided, That
in any case where such petition relates to an instrument of authorization granted without a
hearing, the Commission, or designated authority within the Commission, shall take such action
within ninety days of the filing of such petition. Reconsiderations shall be governed by such
general rules as the Commission may establish, except that no evidence other than newly
discovered evidence, evidence which has become available only since the original taking of
evidence, or evidence which the Commission or designated authority within the Commission
believes should have been taken in the original proceeding shall be taken on any reconsideration.
The time within which a petition for review must be filed in a proceeding to which section
402(a) of this title applies, or within which an appeal must be taken under section 402(b) of this
title in any case, shall be computed from the date upon which the Commission gives public
notice of the order, decision, report, or action complained of.

* * * * * *


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47 C.F.R. § 64.601

CODE OF FEDERAL REGULATIONS
TITLE 47. TELECOMMUNICATION
CHAPTER I. FEDERAL COMMUNICATIONS COMMISSION
SUBCHAPTER B. COMMON CARRIER SERVICES
PART 64. MISCELLANEOUS RULES RELATING TO COMMON CARRIERS
SUBPART F. TELECOMMUNICATIONS RELAY SERVICES AND RELATED
CUSTOMER PREMISES EQUIPMENT FOR PERSONS WITH DISABILITIES

§ 64.601 Definitions and provisions of general applicability.

(a) For purposes of this subpart, the terms Public Safety Answering Point (PSAP), statewide
default answering point, and appropriate local emergency authority are defined in 47 CFR
64.3000; the terms pseudo–ANI and Wireline E911 Network are defined in 47 CFR 9.3; the term
affiliate is defined in 47 CFR 52.12(a)(1)(i), and the terms majority and debt are defined in 47
CFR 52.12(a)(1)(ii).

(1) 711. The abbreviated dialing code for accessing relay services anywhere in the United States.

(2) ACD platform. The hardware and/or software that comprise the essential call center function
of call distribution, and that are a necessary core component of Internet-based TRS.

(3) American Sign Language (ASL). A visual language based on hand shape, position,
movement, and orientation of the hands in relation to each other and the body.

(4) ANI. For 911 systems, the Automatic Number Identification (ANI) identifies the calling
party and may be used as the callback number.

(5) ASCII. An acronym for American Standard Code for Information Interexchange which
employs an eight bit code and can operate at any standard transmission baud rate including 300,
1200, 2400, and higher.

(6) Authorized provider. An iTRS provider that becomes the iTRS user's new default provider,
having obtained the user's authorization verified in accordance with the procedures specified in
this part.

(7) Baudot. A seven bit code, only five of which are information bits. Baudot is used by some
text telephones to communicate with each other at a 45.5 baud rate.

(8) Call release. A TRS feature that allows the CA to sign-off or be “released” from the
telephone line after the CA has set up a telephone call between the originating TTY caller and a
called TTY party, such as when a TTY user must go through a TRS facility to contact another
TTY user because the called TTY party can only be reached through a voice-only interface, such
as a switchboard.

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USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 75 of 109
(9) Common carrier or carrier. Any common carrier engaged in interstate Communication by
wire or radio as defined in section 3(h) of the Communications Act of 1934, as amended (the
Act), and any common carrier engaged in intrastate communication by wire or radio,
notwithstanding sections 2(b) and 221(b) of the Act.

(10) Communications assistant (CA). A person who transliterates or interprets conversation
between two or more end users of TRS. CA supersedes the term “TDD operator.”

(11) Default provider. The iTRS provider that registers and assigns a ten-digit telephone number
to an iTRS user pursuant to § 64.611.

(12) Default provider change order. A request by an iTRS user to an iTRS provider to change the
user's default provider.

(13) Hearing carry over (HCO). A form of TRS where the person with the speech disability is
able to listen to the other end user and, in reply, the CA speaks the text as typed by the person
with the speech disability. The CA does not type any conversation. Two-line HCO is an HCO
service that allows TRS users to use one telephone line for hearing and the other for sending
TTY messages. HCO–to–TTY allows a relay conversation to take place between an HCO user
and a TTY user. HCO–to–HCO allows a relay conversation to take place between two HCO
users.

(14) Interconnected VoIP service. The term “interconnected VoIP service” has the meaning
given such term under § 9.3 of this chapter, as such section may be amended from time to time.

(15) Internet-based TRS (iTRS). A telecommunications relay service (TRS) in which an
individual with a hearing or a speech disability connects to a TRS communications assistant
using an Internet Protocol-enabled device via the Internet, rather than the public switched
telephone network. Internet-based TRS does not include the use of a text telephone (TTY) over
an interconnected voice over Internet Protocol service.

(16) Internet Protocol Captioned Telephone Service (IP CTS). A telecommunications relay
service that permits an individual who can speak but who has difficulty hearing over the
telephone to use a telephone and an Internet Protocol-enabled device via the Internet to
simultaneously listen to the other party and read captions of what the other party is saying. With
IP CTS, the connection carrying the captions between the relay service provider and the relay
service user is via the Internet, rather than the public switched telephone network.

(17) Internet Protocol Relay Service (IP Relay). A telecommunications relay service that permits
an individual with a hearing or a speech disability to communicate in text using an Internet
Protocol-enabled device via the Internet, rather than using a text telephone (TTY) and the public
switched telephone network.

(18) IP Relay access technology. Any equipment, software, or other technology issued, leased, or
provided by an Internet-based TRS provider that can be used to make and receive an IP Relay
call.

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(19) iTRS access technology. Any equipment, software, or other technology issued, leased, or
provided by an Internet-based TRS provider that can be used to make and receive an Internet-
based TRS call.

(20) Neutral Video Communication Service Platform. The service platform that allows a
registered Internet-based VRS user to use VRS access technology to make and receive VRS and
point-to-point calls through a VRS CA service provider. The functions provided by the Neutral
Video Communication Service Platform include the provision of a video link, user registration
and validation, authentication, authorization, ACD platform functions, routing (including
emergency call routing), call setup, mapping, call features (such as call forwarding and video
mail), and such other features and functions not provided by the VRS CA service provider.

(21) New default provider. An iTRS provider that, either directly or through its numbering
partner, initiates or implements the process to become the iTRS user's default provider by
replacing the iTRS user's original default provider.

(22) Non–English language relay service. A telecommunications relay service that allows
persons with hearing or speech disabilities who use languages other than English to
communicate with voice telephone users in a shared language other than English, through a CA
who is fluent in that language.

(23) Non-interconnected VoIP service. The term “non-interconnected VoIP service”--

(i) Means a service that--

(A) Enables real-time voice communications that originate from or terminate to the user's
location using Internet protocol or any successor protocol; and

(B) Requires Internet protocol compatible customer premises equipment; and

(ii) Does not include any service that is an interconnected VoIP service.

(24) Numbering partner. Any entity with which an Internet-based TRS provider has entered into
a commercial arrangement to obtain North American Numbering Plan telephone numbers.

(25) Original default provider. An iTRS provider that is the iTRS user's default provider
immediately before that iTRS user's default provider is changed.

(26) Qualified interpreter. An interpreter who is able to interpret effectively, accurately, and
impartially, both receptively and expressively, using any necessary specialized vocabulary.

(27) Registered Internet-based TRS user. An individual that has registered with a VRS or IP
Relay provider as described in § 64.611.

(28) Registered Location. The most recent information obtained by a VRS or IP Relay provider
that identifies the physical location of an end user.

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(29) Sign language. A language which uses manual communication and body language to convey
meaning, including but not limited to American Sign Language.

(30) Speech-to-speech relay service (STS). A telecommunications relay service that allows
individuals with speech disabilities to communicate with voice telephone users through the use
of specially trained CAs who understand the speech patterns of persons with speech disabilities
and can repeat the words spoken by that person.

(31) Speed dialing. A TRS feature that allows a TRS user to place a call using a stored number
maintained by the TRS facility. In the context of TRS, speed dialing allows a TRS user to give
the CA a short-hand” name or number for the user's most frequently called telephone numbers.

(32) Telecommunications relay services (TRS). Telephone transmission services that provide the
ability for an individual who has a hearing or speech disability to engage in communication by
wire or radio with a hearing individual in a manner that is functionally equivalent to the ability of
an individual who does not have a hearing or speech disability to communicate using voice
communication services by wire or radio. Such term includes services that enable two-way
communication between an individual who uses a text telephone or other nonvoice terminal
device and an individual who does not use such a device, speech-to-speech services, video relay
services and non–English relay services. TRS supersedes the terms “dual party relay system,”
“message relay services,” and “TDD Relay.”

(33) Text telephone (TTY). A machine that employs graphic communication in the transmission
of coded signals through a wire or radio communication system. TTY supersedes the term
“TDD” or “telecommunications device for the deaf,” and TT.

(34) Three-way calling feature. A TRS feature that allows more than two parties to be on the
telephone line at the same time with the CA.

(35) TRS Numbering Administrator. The neutral administrator of the TRS Numbering Directory
selected based on a competitive bidding process.

(36) TRS Numbering Directory. The database administered by the TRS Numbering
Administrator, the purpose of which is to map each registered Internet-based TRS user's NANP
telephone number to his or her end device.

(37) TRS User Registration Database. A system of records containing TRS user identification
data capable of:

(i) Receiving and processing subscriber information sufficient to identify unique TRS users and
to ensure that each has a single default provider;

(ii) Assigning each VRS user a unique identifier;

(iii) Allowing VRS providers and other authorized entities to query the TRS User Registration
Database to determine if a prospective user already has a default provider;

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(iv) Allowing VRS providers to indicate that a VRS user has used the service; and

(v) Maintaining the confidentiality of proprietary data housed in the database by protecting it
from theft, loss or disclosure to unauthorized persons. The purpose of this database is to ensure
accurate registration and verification of VRS users and improve the efficiency of the TRS
program.

(38) Unauthorized provider. An iTRS provider that becomes the iTRS user's new default
provider without having obtained the user's authorization verified in accordance with the
procedures specified in this part.

(39) Unauthorized change. A change in an iTRS user's selection of a default provider that was
made without authorization verified in accordance with the verification procedures specified in
this part.

(40) Video relay service (VRS). A telecommunications relay service that allows people with
hearing or speech disabilities who use sign language to communicate with voice telephone users
through video equipment. The video link allows the CA to view and interpret the party's signed
conversation and relay the conversation back and forth with a voice caller.

(41) Visual privacy screen. A screen or any other feature that is designed to prevent one party or
both parties on the video leg of a VRS call from viewing the other party during a call.

(42) Voice carry over (VCO). A form of TRS where the person with the hearing disability is able
to speak directly to the other end user. The CA types the response back to the person with the
hearing disability. The CA does not voice the conversation. Two-line VCO is a VCO service that
allows TRS users to use one telephone line for voicing and the other for receiving TTY
messages. A VCO–to–TTY TRS call allows a relay conversation to take place between a VCO
user and a TTY user. VCO–to–VCO allows a relay conversation to take place between two VCO
users.

(43) VRS access technology. Any equipment, software, or other technology issued, leased, or
provided by an Internet-based TRS provider that can be used to make and receive a VRS call.

(44) VRS Access Technology Reference Platform. A software product procured by or on behalf
of the Commission that provides VRS functionality, including the ability to make and receive
VRS and point-to-point calls, dial-around functionality, and the ability to update user registration
location, and against which providers may test their own VRS access technology and platforms
for compliance with the Commission's interoperability and portability rules.

(45) VRS CA service provider. A VRS provider that uses the Neutral Video Communication
Service Platform for the video communication service components of VRS.

(b) For purposes of this subpart, all regulations and requirements applicable to common carriers
shall also be applicable to providers of interconnected VoIP service.

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47 C.F.R. § 64.602

§ 64.602 Jurisdiction.

Any violation of this subpart F by any common carrier engaged in intrastate communication shall
be subject to the same remedies, penalties, and procedures as are applicable to a violation of the
Act by a common carrier engaged in interstate communication.


47 C.F.R. § 64.603

§ 64.603 Provision of services.
Each common carrier providing telephone voice transmission services shall provide, not later
than July 26, 1993, in compliance with the regulations prescribed herein, throughout the area in
which it offers services, telecommunications relay services, individually, through designees,
through a competitively selected vendor, or in concert with other carriers. Speech-to-speech relay
service and interstate Spanish language relay service shall be provided by March 1, 2001. In
addition, each common carrier providing telephone voice transmission services shall provide, not
later than October 1, 2001, access via the 711 dialing code to all relay services as a toll free call.
A common carrier shall be considered to be in compliance with these regulations:

(a) With respect to intrastate telecommunications relay services in any state that does not have a
certified program under § 64.606 and with respect to interstate telecommunications relay
services, if such common carrier (or other entity through which the carrier is providing such
relay services) is in compliance with § 64.604; or

(b) With respect to intrastate telecommunications relay services in any state that has a certified
program under § 64.606 for such state, if such common carrier (or other entity through which the
carrier is providing such relay services) is in compliance with the program certified under §
64.606 for such state.



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47 C.F.R. § 64.604

§ 64.604 Mandatory minimum standards.

The standards in this section are applicable December 18, 2000, except as stated in paragraphs
(c)(2) and (c)(7) of this section.

(a) Operational standards--

(1) Communications assistant (CA).

(i) TRS providers are responsible for requiring that all CAs be sufficiently trained to effectively
meet the specialized communications needs of individuals with hearing and speech disabilities.

(ii) CAs must have competent skills in typing, grammar, spelling, interpretation of typewritten
ASL, and familiarity with hearing and speech disability cultures, languages and etiquette. CAs
must possess clear and articulate voice communications.

(iii) CAs must provide a typing speed of a minimum of 60 words per minute. Technological aids
may be used to reach the required typing speed. Providers must give oral-to-type tests of CA
speed.

(iv) TRS providers are responsible for requiring that VRS CAs are qualified interpreters. A
“qualified interpreter” is able to interpret effectively, accurately, and impartially, both
receptively and expressively, using any necessary specialized vocabulary.

(v) CAs answering and placing a TTY–based TRS or VRS call shall stay with the call for a
minimum of ten minutes. CAs answering and placing an STS call shall stay with the call for a
minimum of twenty minutes. The minimum time period shall begin to run when the CA reaches
the called party. The obligation of the CA to stay with the call shall terminate upon the earlier of:

(A) The termination of the call by one of the parties to the call; or

(B) The completion of the minimum time period.

(vi) TRS providers must make best efforts to accommodate a TRS user's requested CA gender
when a call is initiated and, if a transfer occurs, at the time the call is transferred to another CA.

(vii) TRS shall transmit conversations between TTY and voice callers in real time.

(viii) STS providers shall offer STS users the option to have their voices muted so that the other
party to the call will hear only the CA and will not hear the STS user's voice.

(2) Confidentiality and conversation content.

(i) Except as authorized by section 705 of the Communications Act, 47 U.S.C. 605, CAs are
prohibited from disclosing the content of any relayed conversation regardless of content, and
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with a limited exception for STS CAs, from keeping records of the content of any conversation
beyond the duration of a call, even if to do so would be inconsistent with state or local law. STS
CAs may retain information from a particular call in order to facilitate the completion of
consecutive calls, at the request of the user. The caller may request the STS CA to retain such
information, or the CA may ask the caller if he wants the CA to repeat the same information
during subsequent calls. The CA may retain the information only for as long as it takes to
complete the subsequent calls.

(ii) CAs are prohibited from intentionally altering a relayed conversation and, to the extent that it
is not inconsistent with federal, state or local law regarding use of telephone company facilities
for illegal purposes, must relay all conversation verbatim unless the relay user specifically
requests summarization, or if the user requests interpretation of an ASL call. An STS CA may
facilitate the call of an STS user with a speech disability so long as the CA does not interfere
with the independence of the user, the user maintains control of the conversation, and the user
does not object. Appropriate measures must be taken by relay providers to ensure that
confidentiality of VRS users is maintained.

(3) Types of calls.

(i) Consistent with the obligations of telecommunications carrier operators, CAs are prohibited
from refusing single or sequential calls or limiting the length of calls utilizing relay services.

(ii) Relay services shall be capable of handling any type of call normally provided by
telecommunications carriers unless the Commission determines that it is not technologically
feasible to do so. Relay service providers have the burden of proving the infeasibility of handling
any type of call.

(iii) Relay service providers are permitted to decline to complete a call because credit
authorization is denied.

(iv) Relay services shall be capable of handling pay-per-call calls.

(v) TRS providers are required to provide the following types of TRS calls: (1) Text-to-voice and
voice-to-text; (2) VCO, two-line VCO, VCO–to–TTY, and VCO–to–VCO; (3) HCO, two-line
HCO, HCO–to–TTY, HCO–to–HCO.

(vi) TRS providers are required to provide the following features: (1) Call release functionality;
(2) speed dialing functionality; and (3) three-way calling functionality.

(vii) Voice mail and interactive menus. CAs must alert the TRS user to the presence of a
recorded message and interactive menu through a hot key on the CA's terminal. The hot key will
send text from the CA to the consumer's TTY indicating that a recording or interactive menu has
been encountered. Relay providers shall electronically capture recorded messages and retain
them for the length of the call. Relay providers may not impose any charges for additional calls,
which must be made by the relay user in order to complete calls involving recorded or interactive
messages.

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(viii) TRS providers shall provide, as TRS features, answering machine and voice mail retrieval.

(4) Emergency call handling requirements for TTY–based TRS providers. TTY–based TRS
providers must use a system for incoming emergency calls that, at a minimum, automatically and
immediately transfers the caller to an appropriate Public Safety Answering Point (PSAP). An
appropriate PSAP is either a PSAP that the caller would have reached if he had dialed 911
directly, or a PSAP that is capable of enabling the dispatch of emergency services to the caller in
an expeditious manner.

(5) STS called numbers. Relay providers must offer STS users the option to maintain at the relay
center a list of names and telephone numbers which the STS user calls. When the STS user
requests one of these names, the CA must repeat the name and state the telephone number to the
STS user. This information must be transferred to any new STS provider.

(6) Visual privacy screens/idle calls. A VRS CA may not enable a visual privacy screen or
similar feature during a VRS call. A VRS CA must disconnect a VRS call if the caller or the
called party to a VRS call enables a privacy screen or similar feature for more than five minutes
or is otherwise unresponsive or unengaged for more than five minutes, unless the call is a 9–1–1
emergency call or the caller or called party is legitimately placed on hold and is present and
waiting for active communications to commence. Prior to disconnecting the call, the CA must
announce to both parties the intent to terminate the call and may reverse the decision to
disconnect if one of the parties indicates continued engagement with the call.

(7) International calls. VRS calls that originate from an international IP address will not be
compensated, with the exception of calls made by a U.S. resident who has pre-registered with his
or her default provider prior to leaving the country, during specified periods of time while on
travel and from specified regions of travel, for which there is an accurate means of verifying the
identity and location of such callers. For purposes of this section, an international IP address is
defined as one that indicates that the individual initiating the call is located outside the United
States.

(b) Technical standards--

(1) ASCII and Baudot. TRS shall be capable of communicating with ASCII and Baudot format,
at any speed generally in use.

(2) Speed of answer.

(i) TRS providers shall ensure adequate TRS facility staffing to provide callers with efficient
access under projected calling volumes, so that the probability of a busy response due to CA
unavailability shall be functionally equivalent to what a voice caller would experience in
attempting to reach a party through the voice telephone network.

(ii) TRS facilities shall, except during network failure, answer 85% of all calls within 10 seconds
by any method which results in the caller's call immediately being placed, not put in a queue or
on hold. The ten seconds begins at the time the call is delivered to the TRS facility's network. A
TRS facility shall ensure that adequate network facilities shall be used in conjunction with TRS
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so that under projected calling volume the probability of a busy response due to loop trunk
congestion shall be functionally equivalent to what a voice caller would experience in attempting
to reach a party through the voice telephone network.

(A) The call is considered delivered when the TRS facility's equipment accepts the call from the
local exchange carrier (LEC) and the public switched network actually delivers the call to the
TRS facility.

(B) Abandoned calls shall be included in the speed-of-answer calculation.

(C) A TRS provider's compliance with this rule shall be measured on a daily basis.

(D) The system shall be designed to a P.01 standard.

(E) A LEC shall provide the call attempt rates and the rates of calls blocked between the LEC
and the TRS facility to relay administrators and TRS providers upon request.

(iii) Speed of answer requirements for VRS providers.

(A) Speed of answer requirements for VRS providers are phased-in as follows:

(1) By January 1, 2007, VRS providers must answer 80% of all VRS calls within 120 seconds,
measured on a monthly basis;

(2) By January 1, 2014, VRS providers must answer 85% of all VRS calls within 60 seconds,
measured on a daily basis; and

(3) By July 1, 2014, VRS providers must answer 85% of all VRS calls within 30 seconds,
measured on a daily basis. Abandoned calls shall be included in the VRS speed of answer
calculation.

(B) VRS CA service providers must meet the speed of answer requirements for VRS providers
as measured from the time a VRS call reaches facilities operated by the VRS CA service
provider.

(3) Equal access to interexchange carriers. TRS users shall have access to their chosen
interexchange carrier through the TRS, and to all other operator services, to the same extent that
such access is provided to voice users.

(4) TRS facilities.

(i) TRS shall operate every day, 24 hours a day. Relay services that are not mandated by this
Commission need not be provided every day, 24 hours a day, except VRS.

(ii) TRS shall have redundancy features functionally equivalent to the equipment in normal
central offices, including uninterruptible power for emergency use.

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(iii) A VRS CA may not relay calls from a location primarily used as his or her home.

(iv) A VRS provider leasing or licensing an automatic call distribution (ACD) platform must
have a written lease or license agreement. Such lease or license agreement may not include any
revenue sharing agreement or compensation based upon minutes of use. In addition, if any such
lease is between two eligible VRS providers, the lessee or licensee must locate the ACD platform
on its own premises and must utilize its own employees to manage the ACD platform. VRS CA
service providers are not required to have a written lease or licensing agreement for an ACD if
they obtain that function from the Neutral Video Communication Service Platform.

(5) Technology. No regulation set forth in this subpart is intended to discourage or impair the
development of improved technology that fosters the availability of telecommunications to
person with disabilities. TRS facilities are permitted to use SS7 technology or any other type of
similar technology to enhance the functional equivalency and quality of TRS. TRS facilities that
utilize SS7 technology shall be subject to the Calling Party Telephone Number rules set forth at
47 CFR 64.1600 et seq.

(6) Caller ID. When a TRS facility is able to transmit any calling party identifying information to
the public network, the TRS facility must pass through, to the called party, at least one of the
following: the number of the TRS facility, 711, or the 10–digit number of the calling party.

(7) STS 711 Calls. An STS provider shall, at a minimum, employ the same means of enabling an
STS user to connect to a CA when dialing 711 that the provider uses for all other forms of TRS.
When a CA directly answers an incoming 711 call, the CA shall transfer the STS user to an STS
CA without requiring the STS user to take any additional steps. When an interactive voice
response (IVR) system answers an incoming 711 call, the IVR system shall allow for an STS
user to connect directly to an STS CA using the same level of prompts as the IVR system uses
for all other forms of TRS.

(c) Functional standards--

(1) Consumer complaint logs.

(i) States and interstate providers must maintain a log of consumer complaints including all
complaints about TRS in the state, whether filed with the TRS provider or the State, and must
retain the log until the next application for certification is granted. The log shall include, at a
minimum, the date the complaint was filed, the nature of the complaint, the date of resolution,
and an explanation of the resolution.

(ii) Beginning July 1, 2002, states and TRS providers shall submit summaries of logs indicating
the number of complaints received for the 12–month period ending May 31 to the Commission
by July 1 of each year. Summaries of logs submitted to the Commission on July 1, 2001 shall
indicate the number of complaints received from the date of OMB approval through May 31,
2001.

(2) Contact persons. Beginning on June 30, 2000, State TRS Programs, interstate TRS providers,
and TRS providers that have state contracts must submit to the Commission a contact person
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and/or office for TRS consumer information and complaints about a certified State TRS
Program's provision of intrastate TRS, or, as appropriate, about the TRS provider's service. This
submission must include, at a minimum, the following:

(i) The name and address of the office that receives complaints, grievances, inquiries, and
suggestions;

(ii) Voice and TTY telephone numbers, fax number, e-mail address, and web address; and

(iii) The physical address to which correspondence should be sent.

(3) Public access to information. Carriers, through publication in their directories, periodic
billing inserts, placement of TRS instructions in telephone directories, through directory
assistance services, and incorporation of TTY numbers in telephone directories, shall assure that
callers in their service areas are aware of the availability and use of all forms of TRS. Efforts to
educate the public about TRS should extend to all segments of the public, including individuals
who are hard of hearing, speech disabled, and senior citizens as well as members of the general
population. In addition, each common carrier providing telephone voice transmission services
shall conduct, not later than October 1, 2001, ongoing education and outreach programs that
publicize the availability of 711 access to TRS in a manner reasonably designed to reach the
largest number of consumers possible.

(4) Rates. TRS users shall pay rates no greater than the rates paid for functionally equivalent
voice communication services with respect to such factors as the duration of the call, the time of
day, and the distance from the point of origination to the point of termination.

(5) Jurisdictional separation of costs--

(i) General. Where appropriate, costs of providing TRS shall be separated in accordance with the
jurisdictional separation procedures and standards set forth in the Commission's regulations
adopted pursuant to section 410 of the Communications Act of 1934, as amended.

(ii) Cost recovery. Costs caused by interstate TRS shall be recovered from all subscribers for
every interstate service, utilizing a shared-funding cost recovery mechanism. Except as noted in
this paragraph, with respect to VRS, costs caused by intrastate TRS shall be recovered from the
intrastate jurisdiction. In a state that has a certified program under § 64.606, the state agency
providing TRS shall, through the state's regulatory agency, permit a common carrier to recover
costs incurred in providing TRS by a method consistent with the requirements of this section.
Costs caused by the provision of interstate and intrastate VRS shall be recovered from all
subscribers for every interstate service, utilizing a shared-funding cost recovery mechanism.

(iii) Telecommunications Relay Services Fund. Effective July 26, 1993, an Interstate Cost
Recovery Plan, hereinafter referred to as the TRS Fund, shall be administered by an entity
selected by the Commission (administrator). The initial administrator, for an interim period, will
be the National Exchange Carrier Association, Inc.

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(A) Contributions. Every carrier providing interstate telecommunications services (including
interconnected VoIP service providers pursuant to § 64.601(b)) and every provider of non-
interconnected VoIP service shall contribute to the TRS Fund on the basis of interstate end-user
revenues as described herein. Contributions shall be made by all carriers who provide interstate
services, including, but not limited to, cellular telephone and paging, mobile radio, operator
services, personal communications service (PCS), access (including subscriber line charges),
alternative access and special access, packet-switched, WATS, 800, 900, message telephone
service (MTS), private line, telex, telegraph, video, satellite, intraLATA, international and resale
services.

(B) Contribution computations. Contributors' contributions to the TRS fund shall be the product
of their subject revenues for the prior calendar year and a contribution factor determined
annually by the Commission. The contribution factor shall be based on the ratio between
expected TRS Fund expenses to the contributors' revenues subject to contribution. In the event
that contributions exceed TRS payments and administrative costs, the contribution factor for the
following year will be adjusted by an appropriate amount, taking into consideration projected
cost and usage changes. In the event that contributions are inadequate, the fund administrator
may request authority from the Commission to borrow funds commercially, with such debt
secured by future years' contributions. Each subject contributor that has revenues subject to
contribution must contribute at least $25 per year. Contributors whose annual contributions total
less than $1,200 must pay the entire contribution at the beginning of the contribution period.
Contributors whose contributions total $1,200 or more may divide their contributions into equal
monthly payments. Contributors shall complete and submit, and contributions shall be based on,
a “Telecommunications Reporting Worksheet” (as published by the Commission in the Federal
Register). The worksheet shall be certified to by an officer of the contributor, and subject to
verification by the Commission or the administrator at the discretion of the Commission.
Contributors' statements in the worksheet shall be subject to the provisions of section 220 of the
Communications Act of 1934, as amended. The fund administrator may bill contributors a
separate assessment for reasonable administrative expenses and interest resulting from improper
filing or overdue contributions. The Chief of the Consumer and Governmental Affairs Bureau
may waive, reduce, modify or eliminate contributor reporting requirements that prove
unnecessary and require additional reporting requirements that the Bureau deems necessary to
the sound and efficient administration of the TRS Fund.

(C) Registration Requirements for Providers of Non–Interconnected VoIP Service.

(1) Applicability. A non-interconnected VoIP service provider that will provide interstate service
that generates interstate end-user revenue that is subject to contribution to the
Telecommunications Relay Service Fund shall file the registration information described in
paragraph (c)(5)(iii)(C)(2) of this section in accordance with the procedures described in
paragraphs (c)(5)(iii)(C)(3) and (c)(5)(iii)(C)(4) of this section. Any non-interconnected VoIP
service provider already providing interstate service that generates interstate end-user revenue
that is subject to contribution to the Telecommunications Relay Service Fund on the effective
date of these rules shall submit the relevant portion of its FCC Form 499–A in accordance with
paragraphs (c)(5)(iii)(C)(2) and (3) of this section.

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(2) Information required for purposes of TRS Fund contributions. A non-interconnected VoIP
service provider that is subject to the registration requirement pursuant to paragraph
(c)(5)(iii)(C)(1) of this section shall provide the following information:

(i) The provider's business name(s) and primary address;

(ii) The names and business addresses of the provider's chief executive officer, chairman, and
president, or, in the event that a provider does not have such executives, three similarly senior-
level officials of the provider;

(iii) The provider's regulatory contact and/or designated agent;

(iv) All names that the provider has used in the past; and

(v) The state(s) in which the provider provides such service.

(3) Submission of registration. A provider that is subject to the registration requirement pursuant
to paragraph (c)(5)(iii)(C)(1) of this section shall submit the information described in paragraph
(c)(5)(iii)(C)(2) of this section in accordance with the Instructions to FCC Form 499–A. FCC
Form 499–A must be submitted under oath and penalty of perjury.

(4) Changes in information. A provider must notify the Commission of any changes to the
information provided pursuant to paragraph (c)(5)(iii)(C)(2) of this section within no more than
one week of the change. Providers may satisfy this requirement by filing the relevant portion of
FCC Form 499–A in accordance with the Instructions to such form.

(D) Data Collection and Audits.

(1) TRS providers seeking compensation from the TRS Fund shall provide the administrator with
true and adequate data, and other historical, projected and state rate related information
reasonably requested to determine the TRS Fund revenue requirements and payments. TRS
providers shall provide the administrator with the following: total TRS minutes of use, total
interstate TRS minutes of use, total TRS investment in general in accordance with part 32 of this
chapter, and other historical or projected information reasonably requested by the administrator
for purposes of computing payments and revenue requirements.

(2) Call data required from all TRS providers. In addition to the data requested by paragraph
(c)(5)(iii)(C)(1) of this section, TRS providers seeking compensation from the TRS Fund shall
submit the following specific data associated with each TRS call for which compensation is
sought:

(i) The call record ID sequence;

(ii) CA ID number;

(iii) Session start and end times noted at a minimum to the nearest second;

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(iv) Conversation start and end times noted at a minimum to the nearest second;

(v) Incoming telephone number and IP address (if call originates with an IP–based device) at the
time of the call;

(vi) Outbound telephone number (if call terminates to a telephone) and IP address (if call
terminates to an IP–based device) at the time of call;

(vii) Total conversation minutes;

(viii) Total session minutes;

(ix) The call center (by assigned center ID number) that handled the call; and

(x) The URL address through which the call is initiated.

(3) Additional call data required from Internet-based Relay Providers. In addition to the data
required by paragraph (c)(5)(iii)(C)(2) of this section, Internet-based Relay Providers seeking
compensation from the Fund shall submit speed of answer compliance data.

(4) Providers submitting call record and speed of answer data in compliance with paragraphs
(c)(5)(iii)(C)(2) and (c)(5)(iii)(C)(3) of this section shall:

(i) Employ an automated record keeping system to capture such data required pursuant to
paragraph (c)(5)(iii)(C)(2) of this section for each TRS call for which minutes are submitted to
the fund administrator for compensation; and

(ii) Submit such data electronically, in a standardized format. For purposes of this subparagraph,
an automated record keeping system is a system that captures data in a computerized and
electronic format that does not allow human intervention during the call session for either
conversation or session time.

(5) Certification. The chief executive officer (CEO), chief financial officer (CFO), or other
senior executive of a TRS provider with first hand knowledge of the accuracy and completeness
of the information provided, when submitting a request for compensation from the TRS Fund
must, with each such request, certify as follows:

I swear under penalty of perjury that:

(i) I am ---- (name and title), --an officer of the above-named reporting entity and that I have
examined the foregoing reports and that all requested information has been provided and all
statements of fact, as well as all cost and demand data contained in this Relay Services Data
Request, are true and accurate; and

(ii) The TRS calls for which compensation is sought were handled in compliance with Section
225 of the Communications Act and the Commission's rules and orders, and are not the result of
impermissible financial incentives or payments to generate calls.
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(6) Audits. The fund administrator and the Commission, including the Office of Inspector
General, shall have the authority to examine and verify TRS provider data as necessary to assure
the accuracy and integrity of TRS Fund payments. TRS providers must submit to audits annually
or at times determined appropriate by the Commission, the fund administrator, or by an entity
approved by the Commission for such purpose. A TRS provider that fails to submit to a
requested audit, or fails to provide documentation necessary for verification upon reasonable
request, will be subject to an automatic suspension of payment until it submits to the requested
audit or provides sufficient documentation.

(7) Call data record retention. Internet-based TRS providers shall retain the data required to be
submitted by this section, and all other call detail records, other records that support their claims
for payment from the TRS Fund, and records used to substantiate the costs and expense data
submitted in the annual relay service data request form, in an electronic format that is easily
retrievable, for a minimum of five years.

(E) Payments to TRS providers.

(1) TRS Fund payments shall be distributed to TRS providers based on formulas approved or
modified by the Commission. The administrator shall file schedules of payment formulas with
the Commission. Such formulas shall be designed to compensate TRS providers for reasonable
costs of providing interstate TRS, and shall be subject to Commission approval. Such formulas
shall be based on total monthly interstate TRS minutes of use. The formulas should appropriately
compensate interstate providers for the provision of TRS, whether intrastate or interstate.

(2) TRS minutes of use for purposes of interstate cost recovery under the TRS Fund are defined
as the minutes of use for completed interstate TRS calls placed through the TRS center
beginning after call set-up and concluding after the last message call unit.

(3) In addition to the data required under paragraph (c)(5)(iii)(C) of this section, all TRS
providers, including providers who are not interexchange carriers, local exchange carriers, or
certified state relay providers, must submit reports of interstate TRS minutes of use to the
administrator in order to receive payments.

(4) The administrator shall establish procedures to verify payment claims, and may suspend or
delay payments to a TRS provider if the TRS provider fails to provide adequate verification of
payment upon reasonable request, or if directed by the Commission to do so. The TRS Fund
administrator shall make payments only to eligible TRS providers operating pursuant to the
mandatory minimum standards as required in this section, and after disbursements to the
administrator for reasonable expenses incurred by it in connection with TRS Fund
administration. TRS providers receiving payments shall file a form prescribed by the
administrator. The administrator shall fashion a form that is consistent with 47 CFR parts 32 and
36 procedures reasonably tailored to meet the needs of TRS providers.

(5) The Commission shall have authority to audit providers and have access to all data, including
carrier specific data, collected by the fund administrator. The fund administrator shall have
authority to audit TRS providers reporting data to the administrator.
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(6) The administrator shall not be obligated to pay any request for compensation until it has been
established as compensable. A request shall be established as compensable only after the
administrator, in consultation with the Commission, or the Commission determines that the
provider has met its burden to demonstrate that the claim is compensable under applicable
Commission rules and the procedures established by the administrator. Any request for
compensation for which payment has been suspended or withheld in accordance with paragraph
(c)(5)(iii)(L) of this section shall not be established as compensable until the administrator, in
consultation with the Commission, or the Commission determines that the request is
compensable in accordance with paragraph (c)(5)(iii)(L)(4) of this section.

(F) Eligibility for payment from the TRS Fund.

(1) TRS providers, except Internet-based TRS providers, eligible for receiving payments from
the TRS Fund must be:

(i) TRS facilities operated under contract with and/or by certified state TRS programs pursuant to
§ 64.606; or

(ii) TRS facilities owned or operated under contract with a common carrier providing interstate
services operated pursuant to this section; or

(iii) Interstate common carriers offering TRS pursuant to this section.

(2) Internet-based TRS providers eligible for receiving payments from the TRS fund must be
certified by the Commission pursuant to § 64.606.

(G) Any eligible TRS provider as defined in paragraph (c)(5)(iii)(F) of this section shall notify
the administrator of its intent to participate in the TRS Fund thirty (30) days prior to submitting
reports of TRS interstate minutes of use in order to receive payment settlements for interstate
TRS, and failure to file may exclude the TRS provider from eligibility for the year.

(H) Administrator reporting, monitoring, and filing requirements. The administrator shall
perform all filing and reporting functions required in paragraphs (c)(5)(iii)(A) through
(c)(5)(iii)(J) of this section. TRS payment formulas and revenue requirements shall be filed with
the Commission on May 1 of each year, to be effective the following July 1. The administrator
shall report annually to the Commission an itemization of monthly administrative costs which
shall consist of all expenses, receipts, and payments associated with the administration of the
TRS Fund. The administrator is required to keep the TRS Fund separate from all other funds
administered by the administrator, shall file a cost allocation manual (CAM) and shall provide
the Commission full access to all data collected pursuant to the administration of the TRS Fund.
The administrator shall account for the financial transactions of the TRS Fund in accordance
with generally accepted accounting principles for federal agencies and maintain the accounts of
the TRS Fund in accordance with the United States Government Standard General Ledger. When
the administrator, or any independent auditor hired by the administrator, conducts audits of
providers of services under the TRS program or contributors to the TRS Fund, such audits shall
be conducted in accordance with generally accepted government auditing standards. In
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administering the TRS Fund, the administrator shall also comply with all relevant and applicable
federal financial management and reporting statutes. The administrator shall establish a non-paid
voluntary advisory committee of persons from the hearing and speech disability community,
TRS users (voice and text telephone), interstate service providers, state representatives, and TRS
providers, which will meet at reasonable intervals (at least semi-annually) in order to monitor
TRS cost recovery matters. Each group shall select its own representative to the committee. The
administrator's annual report shall include a discussion of the advisory committee deliberations.

(I) Information filed with the administrator. The Chief Executive Officer (CEO), Chief Financial
Officer (CFO), or other senior executive of a provider submitting minutes to the Fund for
compensation must, in each instance, certify, under penalty of perjury, that the minutes were
handled in compliance with section 225 and the Commission's rules and orders, and are not the
result of impermissible financial incentives or payments to generate calls. The CEO, CFO, or
other senior executive of a provider submitting cost and demand data to the TRS Fund
administrator shall certify under penalty of perjury that such information is true and correct. The
administrator shall keep all data obtained from contributors and TRS providers confidential and
shall not disclose such data in company-specific form unless directed to do so by the
Commission. Subject to any restrictions imposed by the Chief of the Consumer and
Governmental Affairs Bureau, the TRS Fund administrator may share data obtained from
carriers with the administrators of the universal support mechanisms (see § 54.701 of this
chapter), the North American Numbering Plan administration cost recovery (see § 52.16 of this
chapter), and the long-term local number portability cost recovery (see § 52.32 of this chapter).
The TRS Fund administrator shall keep confidential all data obtained from other administrators.
The administrator shall not use such data except for purposes of administering the TRS Fund,
calculating the regulatory fees of interstate common carriers, and aggregating such fee payments
for submission to the Commission. The Commission shall have access to all data reported to the
administrator, and authority to audit TRS providers. Contributors may make requests for
Commission nondisclosure of company-specific revenue information under § 0.459 of this
chapter by so indicating on the Telecommunications Reporting Worksheet at the time that the
subject data are submitted. The Commission shall make all decisions regarding nondisclosure of
company-specific information.

(J) [Reserved by 76 FR 63563]

(K) All parties providing services or contributions or receiving payments under this section are
subject to the enforcement provisions specified in the Communications Act, the Americans with
Disabilities Act, and the Commission's rules.

(L) Procedures for the suspension/withholding of payment.

(1) The Fund administrator will continue the current practice of reviewing monthly requests for
compensation of TRS minutes of use within two months after they are filed with the Fund
administrator.

(2) If the Fund administrator in consultation with the Commission, or the Commission on its own
accord, determines that payments for certain minutes should be withheld, a TRS provider will be
notified within two months from the date for the request for compensation was filed, as to why
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its claim for compensation has been withheld in whole or in part. TRS providers then will be
given two additional months from the date of notification to provide additional justification for
payment of such minutes of use. Such justification should be sufficiently detailed to provide the
Fund administrator and the Commission the information needed to evaluate whether the minutes
of use in dispute are compensable. If a TRS provider does not respond, or does not respond with
sufficiently detailed information within two months after notification that payment for minutes of
use is being withheld, payment for the minutes of use in dispute will be denied permanently.

(3) If the VRS provider submits additional justification for payment of the minutes of use in
dispute within two months after being notified that its initial justification was insufficient, the
Fund administrator or the Commission will review such additional justification documentation,
and may ask further questions or conduct further investigation to evaluate whether to pay the
TRS provider for the minutes of use in dispute, within eight months after submission of such
additional justification.

(4) If the provider meets its burden to establish that the minutes in question are compensable
under the Commission's rules, the Fund administrator will compensate the provider for such
minutes of use. Any payment by the Commission will not preclude any future action by either
the Commission or the U.S. Department of Justice to recover past payments (regardless of
whether the payment was the subject of withholding) if it is determined at any time that such
payment was for minutes billed to the Commission in violation of the Commission's rules or any
other civil or criminal law.

(5) If the Commission determines that the provider has not met its burden to demonstrate that the
minutes of use in dispute are compensable under the Commission's rules, payment will be
permanently denied. The Fund administrator or the Commission will notify the provider of this
decision within one year of the initial request for payment.

(M) Whistleblower protections. Providers shall not take any reprisal in the form of a personnel
action against any current or former employee or contractor who discloses to a designated
manager of the provider, the Commission, the TRS Fund administrator or to any Federal or state
law enforcement entity, any information that the reporting person reasonably believes evidences
known or suspected violations of the Communications Act or TRS regulations, or any other
activity that the reporting person reasonably believes constitutes waste, fraud, or abuse, or that
otherwise could result in the improper billing of minutes of use to the TRS Fund and discloses
that information to a designated manager of the provider, the Commission, the TRS Fund
administrator or to any Federal or state law enforcement entity. Providers shall provide an
accurate and complete description of these TRS whistleblower protections, including the right to
notify the FCC's Office of Inspector General or its Enforcement Bureau, to all employees and
contractors, in writing. Providers that already disseminate their internal business policies to its
employees in writing (e.g. in employee handbooks, policies and procedures manuals, or bulletin
board postings--either online or in hard copy) must include an accurate and complete description
of these TRS whistleblower protections in those written materials.

(N) In addition to the provisions set forth above, VRS providers shall be subject to the following
provisions:

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(1) Eligibility for reimbursement from the TRS Fund.

(i) Only an eligible VRS provider, as defined in paragraph (c)(5)(iii)(F) of this section, may hold
itself out to the general public as providing VRS.

(ii) VRS service must be offered under the name by which the eligible VRS provider offering
such service became certified and in a manner that clearly identifies that provider of the service.
Where a TRS provider also utilizes sub-brands to identify its VRS, each sub-brand must clearly
identify the eligible VRS provider. Providers must route all VRS calls through a single URL
address used for each name or sub-brand used.

(iii) An eligible VRS provider may not contract with or otherwise authorize any third party to
provide interpretation services or call center functions (including call distribution, call routing,
call setup, mapping, call features, billing, and registration) on its behalf, unless that authorized
third party also is an eligible provider, or the eligible VRS provider is a VRS CA service
provider and the authorized third party is the provider of the Neutral Video Communication
Service Platform, except that a VRS CA service provider may not contract with or otherwise
authorize the provider of the Neutral Video Communication Service Platform to perform billing
on its behalf.

(iv) To the extent that an eligible VRS provider contracts with or otherwise authorizes a third
party to provide any other services or functions related to the provision of VRS other than
interpretation services or call center functions, that third party must not hold itself out as a
provider of VRS, and must clearly identify the eligible VRS provider to the public. To the extent
an eligible VRS provider contracts with or authorizes a third party to provide any services or
functions related to marketing or outreach, and such services utilize VRS, those VRS minutes are
not compensable on a per minute basis from the TRS fund.

(v) All third-party contracts or agreements entered into by an eligible provider must be in
writing. Copies of such agreements shall be made available to the Commission and to the TRS
Fund administrator upon request.

(2) Call center reports. VRS providers shall file a written report with the Commission and the
TRS Fund administrator, on April 1st and October 1st of each year for each call center that
handles VRS calls that the provider owns or controls, including centers located outside of the
United States, that includes:

(i) The complete street address of the center;

(ii) The number of individual CAs and CA managers; and

(iii) The name and contact information (phone number and e-mail address) of the manager(s) at
the center. VRS providers shall also file written notification with the Commission and the TRS
Fund administrator of any change in a center's location, including the opening, closing, or
relocation of any center, at least 30 days prior to any such change.

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(3) Compensation of CAs. VRS providers may not compensate, give a preferential work
schedule or otherwise benefit a CA in any manner that is based upon the number of VRS minutes
or calls that the CA relays, either individually or as part of a group.

(4) Remote training session calls. VRS calls to a remote training session or a comparable activity
will not be compensable from the TRS Fund when the provider submitting minutes for such a
call has been involved, in any manner, with such a training session. Such prohibited involvement
includes training programs or comparable activities in which the provider or any affiliate or
related party thereto, including but not limited to its subcontractors, partners, employees or
sponsoring organizations or entities, has any role in arranging, scheduling, sponsoring, hosting,
conducting or promoting such programs or activities.

(6) Complaints--

(i) Referral of complaint. If a complaint to the Commission alleges a violation of this subpart
with respect to intrastate TRS within a state and certification of the program of such state under §
64.606 is in effect, the Commission shall refer such complaint to such state expeditiously.

(ii) Intrastate complaints shall be resolved by the state within 180 days after the complaint is first
filed with a state entity, regardless of whether it is filed with the state relay administrator, a state
PUC, the relay provider, or with any other state entity.

(iii) Jurisdiction of Commission. After referring a complaint to a state entity under paragraph
(c)(6)(i) of this section, or if a complaint is filed directly with a state entity, the Commission
shall exercise jurisdiction over such complaint only if:

(A) Final action under such state program has not been taken within:

(1) 180 days after the complaint is filed with such state entity; or

(2) A shorter period as prescribed by the regulations of such state; or

(B) The Commission determines that such state program is no longer qualified for certification
under § 64.606.

(iv) The Commission shall resolve within 180 days after the complaint is filed with the
Commission any interstate TRS complaint alleging a violation of section 225 of the Act or any
complaint involving intrastate relay services in states without a certified program. The
Commission shall resolve intrastate complaints over which it exercises jurisdiction under
paragraph (c)(6)(iii) of this section within 180 days.

(v) Complaint procedures. Complaints against TRS providers for alleged violations of this
subpart may be either informal or formal.

(A) Informal complaints--

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(1) Form. An informal complaint may be transmitted to the Consumer & Governmental Affairs
Bureau by any reasonable means, such as letter, facsimile transmission, telephone
(voice/TRS/TTY), Internet e-mail, or some other method that would best accommodate a
complainant's hearing or speech disability.

(2) Content. An informal complaint shall include the name and address of the complainant; the
name and address of the TRS provider against whom the complaint is made; a statement of facts
supporting the complainant's allegation that the TRS provided it has violated or is violating
section 225 of the Act and/or requirements under the Commission's rules; the specific relief or
satisfaction sought by the complainant; and the complainant's preferred format or method of
response to the complaint by the Commission and the defendant TRS provider (such as letter,
facsimile transmission, telephone (voice/TRS/TTY), Internet e-mail, or some other method that
would best accommodate the complainant's hearing or speech disability).

(3) Service; designation of agents. The Commission shall promptly forward any complaint
meeting the requirements of this subsection to the TRS provider named in the complaint. Such
TRS provider shall be called upon to satisfy or answer the complaint within the time specified by
the Commission. Every TRS provider shall file with the Commission a statement designating an
agent or agents whose principal responsibility will be to receive all complaints, inquiries, orders,
decisions, and notices and other pronouncements forwarded by the Commission. Such
designation shall include a name or department designation, business address, telephone number
(voice and TTY), facsimile number and, if available, internet e-mail address.

(B) Review and disposition of informal complaints.

(1) Where it appears from the TRS provider's answer, or from other communications with the
parties, that an informal complaint has been satisfied, the Commission may, in its discretion,
consider the matter closed without response to the complainant or defendant. In all other cases,
the Commission shall inform the parties of its review and disposition of a complaint filed under
this subpart. Where practicable, this information shall be transmitted to the complainant and
defendant in the manner requested by the complainant (e.g., letter, facsimile transmission,
telephone (voice/TRS/TTY) or Internet e-mail.

(2) A complainant unsatisfied with the defendant's response to the informal complaint and the
staff's decision to terminate action on the informal complaint may file a formal complaint with
the Commission pursuant to paragraph (c)(6)(v)(C) of this section.

(C) Formal complaints. A formal complaint shall be in writing, addressed to the Federal
Communications Commission, Enforcement Bureau, Telecommunications Consumer Division,
Washington, DC 20554 and shall contain:

(1) The name and address of the complainant,

(2) The name and address of the defendant against whom the complaint is made,

(3) A complete statement of the facts, including supporting data, where available, showing that
such defendant did or omitted to do anything in contravention of this subpart, and
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(4) The relief sought.

(D) Amended complaints. An amended complaint setting forth transactions, occurrences or
events which have happened since the filing of the original complaint and which relate to the
original cause of action may be filed with the Commission.

(E) Number of copies. An original and two copies of all pleadings shall be filed.

(F) Service.

(1) Except where a complaint is referred to a state pursuant to § 64.604(c)(6)(i), or where a
complaint is filed directly with a state entity, the Commission will serve on the named party a
copy of any complaint or amended complaint filed with it, together with a notice of the filing of
the complaint. Such notice shall call upon the defendant to satisfy or answer the complaint in
writing within the time specified in said notice of complaint.

(2) All subsequent pleadings and briefs shall be served by the filing party on all other parties to
the proceeding in accordance with the requirements of § 1.47 of this chapter. Proof of such
service shall also be made in accordance with the requirements of said section.

(G) Answers to complaints and amended complaints. Any party upon whom a copy of a
complaint or amended complaint is served under this subpart shall serve an answer within the
time specified by the Commission in its notice of complaint. The answer shall advise the parties
and the Commission fully and completely of the nature of the defense and shall respond
specifically to all material allegations of the complaint. In cases involving allegations of harm,
the answer shall indicate what action has been taken or is proposed to be taken to stop the
occurrence of such harm. Collateral or immaterial issues shall be avoided in answers and every
effort should be made to narrow the issues. Matters alleged as affirmative defenses shall be
separately stated and numbered. Any defendant failing to file and serve an answer within the
time and in the manner prescribed may be deemed in default.

(H) Replies to answers or amended answers. Within 10 days after service of an answer or an
amended answer, a complainant may file and serve a reply which shall be responsive to matters
contained in such answer or amended answer and shall not contain new matter. Failure to reply
will not be deemed an admission of any allegation contained in such answer or amended answer.

(I) Defective pleadings. Any pleading filed in a complaint proceeding that is not in substantial
conformity with the requirements of the applicable rules in this subpart may be dismissed.

(7) Treatment of TRS customer information. Beginning on July 21, 2000, all future contracts
between the TRS administrator and the TRS vendor shall provide for the transfer of TRS
customer profile data from the outgoing TRS vendor to the incoming TRS vendor. Such data
must be disclosed in usable form at least 60 days prior to the provider's last day of service
provision. Such data may not be used for any purpose other than to connect the TRS user with
the called parties desired by that TRS user. Such information shall not be sold, distributed,
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shared or revealed in any other way by the relay center or its employees, unless compelled to do
so by lawful order.

(8) Incentives for use of IP CTS.

(i) An IP CTS provider shall not offer or provide to any person or entity that registers to use IP
CTS any form of direct or indirect incentives, financial or otherwise, to register for or use IP
CTS.

(ii) An IP CTS provider shall not offer or provide to a hearing health professional any direct or
indirect incentives, financial or otherwise, that are tied to a consumer's decision to register for or
use IP CTS. Where an IP CTS provider offers or provides IP CTS equipment, directly or
indirectly, to a hearing health professional, and such professional makes or has the opportunity to
make a profit on the sale of the equipment to consumers, such IP CTS provider shall be deemed
to be offering or providing a form of incentive tied to a consumer's decision to register for or use
IP CTS.

(iii) Joint marketing arrangements between IP CTS providers and hearing health professionals
shall be prohibited.

(iv) For the purpose of this paragraph (c)(8), a hearing health professional is any medical or non-
medical professional who advises consumers with regard to hearing disabilities.

(v) Any IP CTS provider that does not comply with this paragraph (c)(8) shall be ineligible for
compensation for such IP CTS from the TRS Fund.

(9) IP CTS registration and certification requirements.

(i) IP CTS providers must first obtain the following registration information from each consumer
prior to requesting compensation from the TRS Fund for service provided to the consumer. The
consumer's full name, date of birth, last four digits of the consumer's social security number,
address and telephone number.

(ii) Self-certification prior to demarcation date. IP CTS providers, in order to be eligible to
receive compensation from the TRS Fund for providing IP CTS, also must first obtain a written
certification from the consumer, and if obtained prior to the demarcation date, such written
certification shall attest that the consumer needs IP CTS to communicate in a manner that is
functionally equivalent to the ability of a hearing individual to communicate using voice
communication services. The certification must include the consumer's certification that:

(A) The consumer has a hearing loss that necessitates IP CTS to communicate in a manner that is
functionally equivalent to communication by conventional voice telephone users;

(B) The consumer understands that the captioning service is provided by a live communications
assistant; and

(C) The consumer understands that the cost of IP CTS is funded by the TRS Fund.
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(iii) Self-certification on or after demarcation date. IP CTS providers must also first obtain from
each consumer prior to requesting compensation from the TRS Fund for the consumer, a written
certification from the consumer, and if obtained on or after the demarcation date, such
certification shall state that:

(A) The consumer has a hearing loss that necessitates use of captioned telephone service;

(B) The consumer understands that the captioning on captioned telephone service is provided by
a live communications assistant who listens to the other party on the line and provides the text on
the captioned phone;

(C) The consumer understands that the cost of captioning each Internet protocol captioned
telephone call is funded through a federal program; and

(D) The consumer will not permit, to the best of the consumer's ability, persons who have not
registered to use Internet protocol captioned telephone service to make captioned telephone calls
on the consumer's registered IP captioned telephone service or device.

(iv) The certification required by paragraphs (c)(9)(ii) and (iii) of this section must be made on a
form separate from any other agreement or form, and must include a separate consumer signature
specific to the certification. Beginning on the demarcation date, such certification shall be made
under penalty of perjury. For purposes of this section, an electronic signature, defined by the
Electronic Signatures in Global and National Commerce Act, 15 U.S.C. 7001 et seq., as an
electronic sound, symbol, or process, attached to or logically associated with a contract or other
record and executed or adopted by a person with the intent to sign the record, has the same legal
effect as a written signature.

(v) Third-party certification prior to demarcation date. Where IP CTS equipment is or has been
obtained by a consumer from an IP CTS provider, directly or indirectly, at no charge or for less
than $75 and the consumer was registered in accordance with the requirements of paragraph
(c)(9) of this section prior to the demarcation date, the IP CTS provider must also obtain from
each consumer prior to requesting compensation from the TRS Fund for the consumer, written
certification provided and signed by an independent third-party professional, except as provided
in paragraph (c)(9)(xi) of this section.

(vi) To comply with paragraph (c)(9)(v) of this section, the independent professional providing
certification must:

(A) Be qualified to evaluate an individual's hearing loss in accordance with applicable
professional standards, and may include, but are not limited to, community-based social service
providers, hearing related professionals, vocational rehabilitation counselors, occupational
therapists, social workers, educators, audiologists, speech pathologists, hearing instrument
specialists, and doctors, nurses and other medical or health professionals;

(B) Provide his or her name, title, and contact information, including address, telephone number,
and email address; and
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(C) Certify in writing that the IP CTS user is an individual with hearing loss who needs IP CTS
to communicate in a manner that is functionally equivalent to telephone service experienced by
individuals without hearing disabilities.

(vii) Third-party certification on or after demarcation date. Where IP CTS equipment is or has
been obtained by a consumer from an IP CTS provider, directly or indirectly, at no charge or for
less than $75, the consumer (in cases where the equipment was obtained directly from the IP
CTS provider) has not subsequently paid $75 to the IP CTS provider for the equipment prior to
the date the consumer is registered to use IP CTS, and the consumer is registered in accordance
with the requirements of this paragraph (c)(9) on or after the demarcation date, the IP CTS
provider must also, prior to requesting compensation from the TRS Fund for service to the
consumer, obtain from each consumer written certification provided and signed by an
independent third-party professional, except as provided in paragraph (c)(9)(xi) of this section.

NOTE to paragraphs (c)(9)(ii), (iii), (iv), (v) and (vii): The date demarking which certification
obligations apply to which consumers shall be the date when notice of OMB approval of the
amendments to the registration and certification requirements is published. The FCC will publish
a notice of the effective date along with a corrective amendment to specify the demarcation date.

(viii) To comply with paragraph (c)(9)(vii) of this section, the independent third-party
professional providing certification must:

(A) Be qualified to evaluate an individual's hearing loss in accordance with applicable
professional standards, and must be either a physician, audiologist, or other hearing related
professional. Such professional shall not have been referred to the IP CTS user, either directly or
indirectly, by any provider of TRS or any officer, director, partner, employee, agent,
subcontractor, or sponsoring organization or entity (collectively “affiliate”) of any TRS provider.
Nor shall the third party professional making such certification have any business, family or
social relationship with the TRS provider or any affiliate of the TRS provider from which the
consumer is receiving or will receive service.

(B) Provide his or her name, title, and contact information, including address, telephone number,
and email address.

(C) Certify in writing, under penalty of perjury, that the IP CTS user is an individual with
hearing loss that necessitates use of captioned telephone service and that the third party
professional understands that the captioning on captioned telephone service is provided by a live
communications assistant and is funded through a federal program.

(ix) In instances where the consumer has obtained IP CTS equipment from a local, state, or
federal governmental program, the consumer may present documentation to the IP CTS provider
demonstrating that the equipment was obtained through one of these programs, in lieu of
providing an independent, third-party certification under paragraphs (c)(9)(v) and (vii) of this
section.

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USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 100 of 109
(x) Each IP CTS provider shall maintain records of any registration and certification information
for a period of at least five years after the consumer ceases to obtain service from the provider
and shall maintain the confidentiality of such registration and certification information, and may
not disclose such registration and certification information or the content of such registration and
certification information except as required by law or regulation.

(xi) IP CTS providers must obtain registration information and certification of hearing loss from
all IP CTS users who began receiving service prior to March 7, 2013. Notwithstanding any other
provision of paragraph (c)(9) of this section, IP CTS providers shall be compensated for
compensable minutes of use generated prior to the registration deadline by any such users, but
shall not receive compensation for minutes of IP CTS use generated on or after the registration
deadline by any IP CTS user who has not been registered.

NOTE to paragraph (c)(9)(xi): The deadline for compliance with the requirement for IP CTS
providers to register consumers who began service prior to March 7, 2013 shall be 180 days after
OMB approval has been obtained, and IP CTS providers shall be permitted to receive
compensation for minutes of use generated by such consumers prior to the registration deadline.
The FCC will publish a notice of the effective date along with a corrective amendment to specify
the deadline for compliance.

(10) IP CTS default settings.

(i) IP CTS providers must ensure that their equipment and software applications used in
conjunction with their service have a default setting of captions off, so that all IP CTS users must
affirmatively turn on captioning for each telephone call initiated or received before captioning is
provided.

(ii) Each IP CTS provider shall ensure that each IP CTS telephone they distribute, directly or
indirectly, shall include a button, icon, or other comparable feature that is easily operable and
requires only one step for the consumer to turn on captioning.

(iii) For software applications on mobile phones, laptops, tablets, computers or other similar
devices, the requirements of this paragraph (c)(10) are satisfied so long as:

(A) Consumers must log in to access the IP CTS software feature with a unique ID and
password, and

(B) The default setting switches to captions on only while the consumer is logged in, and does
not remain on indefinitely.

(iv) Hardship exception. If a consumer has a cognitive or physical disability that significantly
impedes the ability of the consumer to turn on captioning at the start of each call, the IP CTS
provider may set that consumer's IP CTS telephone to have a default of captions on, provided
that the consumer submits, in addition to the self-certification required under paragraphs
(c)(9)(ii) or (iii) of this section, the following to the IP CTS provider:

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USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 101 of 109
(A) A self-certification, dated and made under penalty of perjury, that the requirement to turn on
captioning at the start of each call significantly impedes the consumer's ability to make use of
captioned telephone service, provided that such certification shall be made by the consumer's
spouse or legal guardian or a person with power of attorney where the consumer is not competent
to provide the required self-certification; and

(B) A certification from a licensed, independent, third party physician in good standing, dated
and made under penalty of perjury, that the consumer has a physical or mental disability or
functional limitation that significantly impedes the consumer's ability to activate captioning at
the start of each call, including a brief description of the basis for such statement. Such physician
shall be the consumer's primary care physician or a physician whose specialty is such that the
physician is qualified to make such certification and shall provide his or her name, title, area of
specialty or expertise, and contact information, including address, telephone number, and email
address on such certification. Providers shall not accept a certification from any physician
referred to the IP CTS user, either directly or indirectly, by any provider of TRS or any officer,
director, partner, employee, agent, subcontractor, or sponsoring organization or entity
(collectively “affiliate”) of any TRS provider. Nor shall the physician making such certification
have any business, family or social relationship with and shall not have received any payment,
referral, or other thing of value from the TRS provider or any affiliate of the TRS provider from
which the consumer is receiving service.

(C) Each IP CTS provider shall maintain detailed records of all consumers, who, because of a
showing of hardship under this section, have been permitted to receive IP CTS equipment with a
setting of default captions on, including the dated and signed consumer and physician
certifications submitted by each such consumer pursuant to this paragraph (c)(10)(iv), for a
period of at least five years after the consumer ceases to obtain service from the provider. Each
IP CTS provider shall maintain the confidentiality of such certification information, and may not
disclose such certification information or the content of such certification information except as
required by law or regulation.

(D) Each IP CTS provider shall submit, on a monthly basis and subject to confidentiality
requirements, a report to the Commission on the consumers who have received a hardship
exception pursuant to this paragraph (c)(10)(iv), which shall include a list of such newly
excepted individuals (with names redacted), including the dates on which each individual
registered for IP CTS with the provider and was provided with IP CTS equipment with a default
setting of captions on, the area of specialty or expertise of the certifying physician accompanying
each hardship certification, and the basis for granting each hardship exception.

(v) 911 Calling. Each IP CTS provider may turn captions on automatically for 911 calls so long
as the provider remains in compliance with the provisions of this paragraph (c)(10) for all other
types of calls.

(11) IP CTS Equipment.

(i) Any IP CTS provider, including its officers, directors, partners, employees, agents,
subcontractors, and sponsoring organizations and entities, that provides equipment, software or
applications to consumers, directly or indirectly, at no charge or for less than $75, whether
35


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 102 of 109
through giveaway, sale, loan, or otherwise, on or after September 30, 2013 shall be ineligible to
receive compensation for minutes of IP CTS use generated by consumers using such equipment.
An IP CTS provider may provide software or applications at no charge or for less than $75 to a
consumer who has already paid a minimum of $75 for equipment, software or applications to
that IP CTS provider without affecting the IP CTS provider's eligibility to receive compensation
for minutes of IP CTS use generated by that consumer. This paragraph (c)(11)(i) of this section
shall not apply in instances where the consumer has obtained IP CTS equipment from a local,
state, or federal governmental program.

(ii) No person shall use IP CTS equipment or software with the captioning on, unless:

(A) Such person is registered to use IP CTS pursuant to paragraph (c)(9) of this section; or

(B) Such person was an existing IP CTS user as of March 7, 2013, and either paragraph
(c)(9)(xi) of this section is not yet in effect or the registration deadline in paragraph (c)(9)(xi) of
this section has not yet passed.

(iii) IP CTS providers shall ensure that any newly distributed IP CTS equipment has a label on
its face in a conspicuous location with the following language in a clearly legible font:
“FEDERAL LAW PROHIBITS ANYONE BUT REGISTERED USERS WITH HEARING
LOSS FROM USING THIS DEVICE WITH THE CAPTIONS ON.” For IP CTS equipment
already distributed to consumers by any IP CTS provider as of the effective date of this
paragraph, such provider shall distribute to consumers equipment labels with the same language
as mandated by this paragraph for newly distributed equipment, along with clear and specific
instructions directing the consumer to attach such labels to the face of their IP CTS equipment in
a conspicuous location. For software applications on mobile phones, laptops, tablets, computers
or other similar devices, IP CTS providers shall ensure that, each time the consumer logs into the
application, the notification language required by this paragraph appears in a conspicuous
location on the device screen immediately after log-in.

NOTE to paragraph (c)(11)(iii): The deadline for compliance with the requirement for IP CTS
providers to distribute to consumers equipment labels along with instructions for applying the
labels to equipment already distributed to consumers shall be thirty days after OMB approval has
been obtained. The FCC will publish a notice of the effective date along with a corrective
amendment to specify the deadline for compliance.

(iv) IP CTS providers shall maintain, with each consumer's registration records, records
describing any IP CTS equipment provided, directly or indirectly, to such consumer, stating the
amount paid for such equipment, and stating whether the label required by paragraph (c)(11)(iii)
of this section was affixed to such equipment prior to its provision to the consumer. For
consumers to whom IP CTS equipment was provided directly or indirectly prior to the effective
date of this paragraph (c)(11), such records shall state whether and when the label required by
paragraph (c)(11)(iii) of this section was distributed to such consumer. Such records shall be
maintained for a minimum period of five years after the consumer ceases to obtain service from
the provider.

(12) Discrimination and preferences. A VRS provider shall not:
36


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 103 of 109

(i) Directly or indirectly, by any means or device, engage in any unjust or unreasonable
discrimination related to practices, facilities, or services for or in connection with like relay
service,

(ii) [FN1] Engage in or give any undue or unreasonable preference or advantage to any particular
person, class of persons, or locality, or

1 So in original; there are two subsections (c)(12)(ii). See 78 FR 40608.

(ii) [FN1] Subject any particular person, class of persons, or locality to any undue or
unreasonable prejudice or disadvantage.

1 So in original; there are two subsections (c)(12)(ii). See 78 FR 40608.

(13) Unauthorized and unnecessary use of VRS. A VRS provider shall not engage in any practice
that causes or encourages, or that the provider knows or has reason to know will cause or
encourage:

(i) False or unverified claims for TRS Fund compensation,

(ii) Unauthorized use of VRS,

(iii) The making of VRS calls that would not otherwise be made, or

(iv) The use of VRS by persons who do not need the service in order to communicate in a
functionally equivalent manner. A VRS provider shall not seek payment from the TRS Fund for
any minutes of service it knows or has reason to know are resulting from such practices. Any
VRS provider that becomes aware of such practices being or having been committed by any
person shall as soon as practicable report such practices to the Commission or the TRS Fund
administrator.

(d) Other standards. The applicable requirements of §§ 64.605, 64.611, 64.615, 64.617, 64.621,
64.631, 64.632, 64.5105, 64.5107, 64.5108, 64.5109, and 64.5110 of this part are to be
considered mandatory minimum standards.




37


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 104 of 109
47 C.F.R. § 65.300

CODE OF FEDERAL REGULATIONS
TITLE 47. TELECOMMUNICATION
CHAPTER I. FEDERAL COMMUNICATIONS COMMISSION
SUBCHAPTER B. COMMON CARRIER SERVICES
PART 65. INTERSTATE RATE OF RETURN PRESCRIPTION PROCEDURES AND
METHODOLOGIES
SUBPART C. EXCHANGE CARRIERS

§ 65.300 Calculations of the components and weights of the cost of capital.

(a) Sections 65.301 through 65.303 specify the calculations that are to be performed in
computing cost of debt, cost of preferred stock, and financial structure weights for prescription
proceedings. The calculations shall determine, where applicable, a composite cost of debt, a
composite cost of preferred stock, and a composite financial structure for all local exchange
carriers with annual revenues equal to or above the indexed revenue threshold as defined in §
32.9000. The calculations shall be based on data reported to the Commission in FCC Report 43–
02. (See 47 CFR 43.21). The results of the calculations shall be used in the represcription
proceeding to which they relate unless the record in that proceeding shows that their use would
be unreasonable.

(b) Excluded from cost of capital calculations made pursuant to § 65.300 shall be those sources
of financing that are not investor supplied, or that are otherwise subtracted from a carrier's rate
base pursuant to Commission orders governing the calculation of net rate base amounts in tariff
filings that are made pursuant to section 203 of the Communications Act of 1934, 47 U.S.C. 203,
or that were treated as “zero cost” sources of financing in section 450 and subpart G of this Part
65. Specifically excluded are: accounts payable, accrued taxes, accrued interest, dividends
payable, deferred credits and operating reserves, deferred taxes and deferred tax credits.


47 C.F.R. § 65.301

§ 65.301 Cost of equity.

The cost of equity shall be determined in represcription proceedings after giving full
consideration to the evidence in the record, including such evidence as the Commission may
officially notice.




38


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 105 of 109
47 C.F.R. § 65.302

§ 65.302 Cost of debt.

The formula for determining the cost of debt is equal to:

Embedded Cost of Debt
=
Total Annual Interest Expense


Average Outstanding Debt

Where:

“Total Annual Interest Expense” is the total interest expense for the most recent two years for all
local exchange carriers with annual revenues equal to or above the indexed revenue threshold as
defined in § 32.9000.

“Average Outstanding Debt” is the average of the total debt for the most recent two years for all
local exchange carriers with annual revenues equal to or above the indexed revenue threshold as
defined in § 32.9000.


47 C.F.R. § 65.303

§ 65.303 Cost of preferred stock.


The formula for determining the cost of preferred stock is:

Cost of Preferred Stock
=
Total Annual Preferred
Dividends


Proceeds from the Issuance of
Preferred Stock
Where:

“Total Annual Preferred Dividends” is the total dividends on preferred stock for the most recent
two years for all local exchange carriers with annual revenues equal to or above the indexed
revenue threshold as defined in § 32.9000. “Proceeds from the Issuance of Preferred Stock” is
the average of the total net proceeds from the issuance of preferred stock for the most recent two
years for all local exchange carriers with annual revenues equal to or above the indexed revenue
threshold as defined in § 32.9000.




39


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 106 of 109
47 C.F.R. § 65.304


§ 65.304 Capital structure.

The proportion of each cost of capital component in the capital structure is equal to:

Proportion in the capital structure =

Book Value of particular component
Book Value of Debt + Book Value of Preferred Stock + Book Value of Equity
Where:

“Book Value of particular component” is the total of the book values of that component for all
local exchange carriers with annual revenues equal to or above the indexed revenue threshold as
defined in § 32.9000.

“Book Value of Debt+Book Value of Preferred Stock+Book Value of Equity” is the total of the
book values of all the components for all local exchange carriers with annual revenues equal to
or above the indexed revenue threshold as defined in § 32.9000.

The total of all proportions shall equal 1.00.


47 C.F.R. § 65.305

§ 65.305 Calculation of the weighted average cost of capital.

(a) The composite weighted average cost of capital is the sum of the cost of debt, the cost of
preferred stock, and the cost of equity, each weighted by its proportion in the capital structure of
the telephone companies.

(b) Unless the Commission determines to the contrary in a prescription proceeding, the
composite weighted average cost of debt and cost of preferred stock is the composite weight
computed in accordance with § 65.304 multiplied by the composite cost of the component
computed in accordance with § 65.301 or § 65.302, as applicable. The composite weighted
average cost of equity will be determined in each prescription proceeding.




40


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 107 of 109
47 C.F.R. § 65.800

CODE OF FEDERAL REGULATIONS
TITLE 47. TELECOMMUNICATION
CHAPTER I. FEDERAL COMMUNICATIONS COMMISSION
SUBCHAPTER B. COMMON CARRIER SERVICES
PART 65. INTERSTATE RATE OF RETURN PRESCRIPTION PROCEDURES AND
METHODOLOGIES
SUBPART G. RATE BASE

§ 65.800 Rate base.

The rate base shall consist of the interstate portion of the accounts listed in § 65.820 that has
been invested in plant used and useful in the efficient provision of interstate telecommunications
services regulated by this Commission, minus any deducted items computed in accordance with
§ 65.830.

41


USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 108 of 109
13-1215

IN THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT


SORENSON COMMUNICATIONS, INC.
AND CAPTIONCALL, LLC, PETITIONER

V.

FEDERAL COMMUNICATIONS COMMISSION
AND UNITED STATES OF AMERICA, RESPONDENTS.



CERTIFICATE OF SERVICE


I, C. Grey Pash, Jr., hereby certify that on January 28, 2014, I electronically
filed the foregoing Final Brief For Respondents with the Clerk of the Court
for the United States Court of Appeals for the D.C. Circuit by using the
CM/ECF system. Participants in the case who are registered CM/ECF users
will be served by the CM/ECF system.


Christopher J. Wright
Robert J. Wiggers
Timothy J. Simeone
Robert B. Nicholson
John T. Nakahata
U.S. Department of Justice
Mark D. Davis
Antitrust Div., Appellate Section
Wiltshire & Grannis LLP
950 Pennsylvania Avenue, N.W.
1200 Eighteenth Street, N.W.
Room 3224
12th Floor
Washington, D.C. 20530
Washington, D.C. 20036
Counsel for: USA
Counsel for: Sorenson
Communications, Inc. and
CaptionCall, LLC








USCA Case #13-1215 Document #1477167 Filed: 01/28/2014 Page 109 of 109
13-1215
Roy T. Englert, Jr.
Robbins, Russell, Englert, Orseck,
Untereiner & Sauber LLP
1801 K Street, NW
Suite 411-L
Washington, D.C. 20006
Counsel for: National Association
of the Deaf




/s/ C. Grey Pash, Jr.


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