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Federal Register / Vol. 86, No. 106 / Friday, June 4, 2021 / Proposed Rules this type of service, or others, to deafblind users, and if so, what kind of service is offered to how many users?
22. As for costs, in addition to the greater TRS Fund expenditures needed to support very high-cost providers, would the costs of perpetuating a special rate for such providers include lessened incentives to innovate, reduce costs, and grow market share? What other costs result from the emergent rate? Are the benefits of retaining the emergent rate sufficient to justify the costs? If retained, should the Commission alter the maximumminutes criterion for applying the emergent rate?
23. Tier Structures. The Commission also seeks comment on whether to retain or modify the current tier structures, whereby Tier I includes a providers first 1 million monthly minutes, Tier II includes additional minutes up to 2.5 million, and Tier III
includes all minutes above 2.5 million.
The Tier I limit of 1 million minutes was adopted to ensure that as providers grew large enough to leave the emergent category, they would be subject to a rate that reflects their size and likely cost structure and that is appropriately lower than the marginal rate applicable to larger providers. Does this tier boundary continue to be appropriate? For example, has the ZVRS-Purple merger resulted in increased efficiencies? If so, what is the scale of such efficiencies, and does the existence of such efficiencies support the conclusion that substantial economies of scale can be achieved by growing above the benchmark of 1 million monthly minutes? Alternatively, if the emergent rate is eliminated, should Tier I be subdivided, so as to apply different rates, for example, to a providers first 500,000 and second 500,000 minutes, or to a providers first 300,000 minutes and its next 700,000 minutes? Are such changes warranted by relevant scale economies in the provision of VRS or a need to support niche services, as discussed above? Would these alternatives unduly limit a providers incentive to increase its monthly minutes beyond 300,000 or 500,000?
24. The Commission also seeks comment on whether to retain or modify the structures of Tiers II and III. To what extent has the gap in per-minute costs between Sorenson and ZP Better Together, LLC ZP, narrowed? The Commission seeks comment on whether the retention of a tier boundary at 2.5
million minutes is supported by experience over the past four years. Is the Commissions 2017 findingthat substantial scale economies are likely to be present even at the 2.5 million
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minutes levelstill supportable or are scale economies exhausted below that level? Alternatively, does experience show that substantial economies are likely present above the current boundary? If the current Tier II upper boundary is no longer appropriate, should the boundary be increased or decreased, and to what level?
Alternatively, should the Commission create a fourth tier, and with what boundaries? Should the current Tiers II
and III be merged? More broadly, how should the Commission account for increasing economies of scale in setting VRS rates, and at what scale do such economies stop increasing? The Commission encourages providers to submit recent real-world data relevant to whether the provision of VRS
continues to be characterized by substantial scale economies and the appropriate boundaries for setting tiered rates that reasonably reflect those economies.
25. With respect to all three tiers, what marketplace distortions, if any, may be created by retaining tier boundariesor drawing new onesthat are not closely correlated to scale economies? What other costs and benefits are relevant to retaining or adjusting the number of tiers or the tier boundaries?
26. Additional Compensation for Specialized Services. The Commission also seeks comment on whether it would serve the objectives of section 225 of the Act for a VRS provider to receive additional per-minute compensation from the TRS Fund in addition to the amount payable under the tiered formula for the provision of certain specialized services, such as, for example, service to deafblind consumers, Spanish-ASL interpreting, or responding to requests that Certified Deaf interpreters be added to a call.
What criteria should the Commission use to decide which, if any, specialized services should be supported by additional compensation and how to define the circumstances in which such services will be compensated? How should the additional reasonable costs of such services be determined for the purpose of setting an appropriate amount of additional compensation?
What measures should the Commission take to prevent waste, fraud, and abuse in the provision of, or requests for, such specialized services?
Setting Tiered Rate Levels 27. Assuming that the Commission adopts adjusted compensation rates at this time, it seeks comment on the appropriate rate level for each tier. In 2017, the Commission sought to set the
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rates for each tier to limit the likelihood that any providers total compensation will be insufficient to provide a reasonable margin over its allowable expenses, and to limit the extent of any overcompensation of a provider in relation to its allowable expenses and reasonable operating margin. The Commission believes it should maintain this goal in setting tiered rates, although by setting rates for providers in discrete size classes based on general cost differentials between large, mediumsized, and small providers, the Commission does not seek or purport to guarantee all providers recovery of their individual costs. The Commission seeks comment on this belief.
28. Operating Margin. The Commission proposes that VRS
compensation rates for the next cycle should aim to ensure that the total compensation paid to all providers allows an average recovery of an operating margin above allowable expenses that is within the zone of reasonableness 7.75%12.35%. The Commission is unaware of relevant changes in financial markets or other conditions affecting the VRS industry that would warrant reassessment of the zone of reasonableness. The Commission seeks comment on this proposal, including any changes that would justify setting a higher or lower range of reasonable operating margins.
Is the current allowable operating margin sufficient to attract capital, new entry, and promote functionally equivalent VRS services? What has been providers experience since 2017?
Further, should the Commission set a specific allowed operating margin within this range, and if so, at what percentage?
29. Allowable Costs. To the extent that, notwithstanding the Commissions history of comprehensive consideration of allowable cost issues, parties believe it is important to revisit allowable cost issues, the Commission urges commenters to state specifically in what respects the Commissions prior determinations on allowable costs are no longer valid, describe in detail any respects in which relevant circumstances have changed in the intervening period, and explain how the outcome they seek is consistent with, and furthers the purposes of, section 225 of the Act.
30. Marginal Cost Benchmarks. The Commission continues to believe that marginal cost for a provider of relevant size would be an appropriate benchmark for Tier II or Tier III rates if it can be reasonably estimated. Of particular concern, some VRS providers distribute substantial amounts of free
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