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Federal Register / Vol. 86, No. 106 / Friday, June 4, 2021 / Proposed Rules
user equipment as a marketing device to add or retain customers. In light of the waste and market disruption that can result from the use of device giveaways to recruit customers, the Commission seeks comment on whether to limit the compensation rates for tiers above Tier I to levels that do not exceed a reasonable percentage above a relevant providers marginal allowable cost of providing an additional minute of service. The Commission also believes this approach to setting rates will help ensure that the TRS Fund is not providing de facto support for the costs of user devices, contrary to section 225
of the Act and the Commissions longstanding rule precluding the use of the TRS Fund to support such distribution of user devices. The Commission seeks comment on the above-stated beliefs, and on how the Commission should estimate marginal allowable cost for purposes of applying a marginal-cost benchmark. For example, what expense categories should be included or excluded when calculating the marginal cost of providing an additional minute of VRS?
Would a per-minute average of the operating expenses reported in Part B of the TRS Fund administrators annual expense reporting form for VRS
providerswhich includes salaries and benefits for relay center staff, including communications assistants, telecommunications expenses, billing expenses, and relay center expenses serve as a reasonable proxy for the marginal expense of providing an additional VRS minute? Should the marginal cost benchmark for a given tier be calculated as a weighted average of the marginal cost for those VRS
providers for which that tier currently defines or is projected to define the highest applicable rate? The Commission seeks comment on whether marginal cost is an appropriate metric, or whether the Commission should consider alternative metrics. Would marginal-cost benchmarks for Tiers II
and III deter continued investment in the service? Would they cause providers to put on the brakes and stop competing as the Commission feared in 2017? Or would they appropriately discourage providers from incurring wasteful marketing and other costs?
What increment over marginal cost would be needed to ensure that beneficial effects are achieved, and detrimental effects are avoided?
31. Rate Levels. The Commission also seeks comment on where to set rates for the emergent rate if retained and Tiers IIII. If the emergent rate is retained, should the Commission increase it, e.g.,
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to the weighted average 2019 cost per minute for the current emergent providers, plus a 10% operating margin, maintain it at the current level of $5.29, or decrease it, e.g., to the weighted average of the emergent providers projected cost per minute for 2022, plus a 10% operating margin? For Tier I, the Commission seeks comment on whether to increase the rate, e.g., to $5.29 the current emergent rate, maintain the current $4.82 rate, or reduce it, e.g., to the weighted average of the emergent providers projected cost per minute for 2022, plus a 10% operating margin. For Tier II, the Commission seeks comment on whether to maintain the rate at $3.97, or decrease it, e.g., to the level of the weighted-average marginal allowable expense per minute plus a reasonable operating margin of those providers for which the Tier II rate is the lowest applicable rate. For Tier III, the Commission seeks comment on whether to maintain the current $2.63 rate or decrease it, e.g., to the level of the weighted-average marginal allowable expense per-minute plus a reasonable operating margin of those providers for which the Tier III rate is the lowest applicable rate. The Commission also invites parties to submit other suggested rate levels for each tier, with justification and supporting data.
32. To the extent the current tier structure is modified, as discussed above, the Commission seeks comment on appropriate rates for the modified tiers. Are there other factors the Commission should consider in determining appropriate rates of compensation for each tier? As an alternative, should the Commission consider Sorensons suggestion to establish a unitary compensation rate for non-emergent providers at or about $3.33, the current average per-minute compensation paid across all VRS
providers? Should the Commission also consider ZPs proposal that the Commission keep the existing rates but increase the benchmark for Tier II from 2.5 million to 5 million minutes, under the theory, in ZPs view, that doing so would allow continued competition and increased investment in the community? The Commission seeks comment on these proposals.
Rate Period and Adjustments 33. Rate Period. The Commission seeks comment on the duration of the next rate period. In the current circumstances, what rate period will appropriately balance the needs for administrative efficiency, rate certainty, and cost-reduction incentives with the need for a timely review of how VRS
costs may change in the future?

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34. Glide Path. If the Commission makes substantial reductions in any tiered rate, should it transition to that level in stages to avoid disruption of service to VRS consumers? What would be a reasonable annual percentage rate reduction for this purpose? For IP CTS, the Commission recently adopted a glide path for the IP CTS
compensation rate, with a 10% annual reduction towards cost-based rates.
Would a 10% annual reduction be appropriate for VRS?
35. Price Indexing Adjustments. The Commission seeks comment on whether a price indexing formula, analogous to price-cap factors, should be applied to tiered rates during a multi-year rate period, and on the appropriate indices to use to reflect inflation and productivity. Is the application of price indexing factors needed to ensure that VRS providers have a reasonable opportunity to recover costs, to provide a sufficient incentive to reduce costs, or to prevent overcompensation of providers due to predictable future productivity-related cost declines? If adopted, how should a price-indexing approach be structured in the context of tiered rates, e.g., to account for any disparities in expected productivity gains between small and large providers?
Initial Regulatory Flexibility Analysis 36. As required by the Regulatory Flexibility Act of 1980, as amended RFA, the Commission has prepared this Initial Regulatory Flexibility Analysis IRFA of the possible significant economic impact on a substantial number of small entities by the policies and rules proposed in the NPRM. Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA
and must be filed by the deadline for comments specified in the DATES
section. The Commission will send a copy of document FCC 2161 to the Chief Counsel for Advocacy of the Small Business Administration SBA.
Need For, and Objectives of, the Proposed Rules 37. The Commission intends to develop a multi-year cost-based compensation rate methodology for VRS. To develop a complete record the Commission seeks comment on maintaining a tiered rate structure, including the specifics for the tiered structure and for setting such rates, and in the alternative, freezing the current rates. The Commission is making these proposals for the purpose of allowing recovery of reasonable provider costs and ensuring that functionally
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