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May 29, 2014

Coalition Seeks Support to Lower TRS Contributions

Reply Comments Due June 3rd

Jonathan Marashlian

On May 23, the Ad Hoc Coalition of International Telecommunications Companies ("Coalition")(www.TelecomCoalition.com) filed with the Federal Communications Commission (“Commission”) an Opposition to the proposed continued imposition of the Telecommunications Relay Service ("TRS") Fund Contribution Factor on International Telecommunications Services (“Opposition”).  In its Opposition, the Coalition asks the FCC to suspend all further imposition of the proposed TRS Fund fee factor on international telecommunications revenues pending equitable reform of the TRS contribution regime.

The TRS Fund compensates telecommunications providers that offer services to persons in the U.S. with hearing and speech disabilities.  The Federal Communications Commission (“FCC” or “Commission”) administers the interstate TRS Fund, which it finances through mandatory contributions on carriers providing interstate and/or international telecommunications services to end users in the United States. The Commission collects this contribution by applying a fee factor to revenue generated by telecommunications services in the United States, and it applies the same fee factor to revenue generated by both interstate and international services.

While supporting the TRS Fund is important, the current contribution system disproportionately and unlawfully burdens international service providers.  The Americans with Disabilities Act, which established TRS, provides only for interstate services, and the Commission’s rules only require TRS for interstate services, not international services.  Nonetheless, the Commission expanded the scope of its authority to cover international services based on the assumption that hearing and speech disabled customers would use international TRS, which providers may choose to offer under the Commission’s rules, at the same rate that they use interstate TRS.

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Unfortunately, the Commission’s assumptions on the use of international TRS have proven completely inaccurate.  Rolke Loube Salzer & Associates (“RLSA”), the TRS Fund administrator, stopped providing disaggregated data on international and interstate usage of TRS when it took over administration of the TRS Fund three years ago.  However, a number of factors suggest interstate TRS use far outpaces international use.  For example, Video Relay Services (“VRS”) – a type of TRS service – are prohibited from international IP addresses.  Reduced reimbursement rates also disincentivize TRS providers from offering international services, and the limited availability of foreign language interpreter services makes it difficult to complete many international TRS calls.  Finally, FCC investigations have revealed that a large number of historic international TRS calls were fraudulent, illegitimate, and unlawful.

As a result of the miniscule use of international TRS and the Commission’s uniform treatment of interstate and international revenue, international providers contribute a disproportionate share of the TRS Fund.  According to the 2011 USF Annual Monitoring Report, international revenue comprised approximately 11.5% of the TRS Fund base, but based on the available information, international TRS makes up approximately 1% of the compensable TRS minutes offered by providers.  In short, international service providers are paying up to ten times the relative value international providers recoup in terms of TRS use.

Earlier in May, RLSA announced the proposed 2014-2015 fee factor of just over 1%.  While 1% may not seem like much, the Commission’s contribution calculation remains incredibly unfair for predominantly international service providers – particularly providers of prepaid international long distance services that are unable to pass through the cost to end users.  More importantly, however, is that the 1% fee factor is temporal in nature.  Before adopting the 1.48% TRS factor applicable to the 2013-2014 funding year, RLSA proposed a fee that exceeded 2.5%.  Because the fee factor is set each year based on funding obligations and prior year revenues, the exact amount cannot be predicted.  One percent this year could become 2.5% next year!

In addition to being disproportionate and unfair, the current TRS Fund contribution calculation ignores pertinent new evidence.  It is settled law that an agency decision must consider relevant data and make a rational connection between that data and the agency’s decision.  The Commission’s initial assumptions may not have been arbitrary or capricious, but if it continues to rely on erroneous assumptions in the face of real-world facts, it opens the door to challenges of its TRS Funding calculation system. 

Therefore, the Coalition proposed a new contribution scheme in its opposition. In the Coalition’s bifurcated system, RLSA would:

1.    Calculate the total Fund requirements;

2.    Separately identify the total number of compensable minutes of interstate and international TRS/VRS calling;

3.    Determine the percentage represented by interstate and international TRS/VRS minutes, respectively, of the total compensable interstate and international TRS/VRS minutes; and

4.    Apply a separate contribution factor to interstate and international telecommunications services revenue based on the proportional use of interstate and international TRS/VRS minutes.

The filing of the Opposition is the first step of what is likely to be long administrative and judicial process.  Merely asking the FCC to change the rules is rarely sufficient to achieve one’s goal of modifying rules & regulations to achieve fairness – even when the underlying facts and law so obviously support change, as is the case here.

This is where you and your company come into the picture.  The Ad Hoc Coalition’s ultimate goal is to achieve a 90+% reduction to the current TRS Fund contribution levels for international revenue.  For the Coalition to achieve its goal of creating a fair and equitable TRS Fund contribution system, it needs the support of a broad community of affected service providers to engage in lobbying efforts before the FCC and its staff, possible administrative appeals before the FCC, and ultimately a judicial review by the District of Columbia Court of Appeals.

If you have any questions about the Ad Hoc Coalition or would like to support its Opposition by filing Reply Comments in Docket 03-123 or funding further advocacy (including Appellate Court review, if necessary), please contact Jonathan S. Marashlian at 703-714-1313 or by email:jsm@commlawgroup.com.

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