TRS Fund Support for internet Protocol Captioned Telephone Service Compensation, 71848-71860 [2024-19559]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 89, Number 171 (Wednesday, September 4, 2024)]
[Rules and Regulations]
[Pages 71848-71860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-19559]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[CG Docket Nos. 22-408, 03-123, and 13-24; FCC 24-81; FR ID 241645]


TRS Fund Support for internet Protocol Captioned Telephone 
Service Compensation

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission or FCC) adopts a revised, five-year plan for support of 
internet Protocol Captioned Telephone Service (IP CTS) by the 
Interstate Telecommunications Relay Services Fund (TRS Fund). To ensure 
that IP CTS providers have the appropriate incentive structure to 
support captioning with communications assistants (CAs) and with only 
automatic speech recognition (ASR), the Commission establishes separate 
compensation formulas for CA-assisted and ASR-only IP CTS. In addition, 
this compensation plan will give providers certainty regarding the 
applicable compensation levels, provide an incentive to improve 
efficiency, and allow the Commission an opportunity to timely reassess 
the compensation formulas in response to potential unanticipated cost 
changes and other significant developments.

DATES: Effective October 4, 2024.

FOR FURTHER INFORMATION CONTACT: Michael Scott, Consumer and 
Governmental Affairs Bureau, 202-418-1264, [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order and Order (Report and Order), in CG Docket Nos. 22-408, 03-
123, and 13-24; FCC 24-81, adopted and released on July 31, 2024. The 
Commission previously sought comment on these issues in a notice of 
proposed rulemaking, released on December 22, 2022, and published at 88 
FR 7049, February 2, 2023 (NPRM). The full text of this document can be 
accessed electronically via the FCC's Electronic Document Management 
System (EDOCS) website at: https://docs.fcc.gov/public/attachments/FCC-24-81A1.pdf or via the FCC's Electronic Comment Filing System (ECFS) 
website at: www.fcc.gov/ecfs. To request materials in accessible 
formats for people with disabilities (Braille, large print, electronic 
files, audio format), send an email to: [email protected] or call the 
Consumer and Governmental Affairs Bureau at: (202) 418-0530 (voice).

Synopsis

    1. Section 225 of the Communications Act of 1934, as amended (the 
Act), 47 U.S.C. 225, requires the Commission to ensure that 
telecommunications relay services (TRS) are available to persons who 
are deaf, hard of hearing, or deafblind or have speech disabilities, 
``to the extent possible and in the most efficient manner.'' TRS are 
defined as ``telephone transmission services'' enabling such persons to 
communicate by wire or radio ``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.'' 
IP CTS, a form of TRS, permits an individual who can speak but who has 
difficulty hearing over the telephone to use a telephone and an 
internet Protocol (IP)-enabled device via the internet to 
simultaneously listen to the other party and read captions of what the 
other party is saying. IP CTS is supported entirely by the TRS Fund, 
which is composed of mandatory contributions collected from 
telecommunications carriers and Voice over internet Protocol (VoIP) 
service providers based on a percentage of each company's annual 
revenue. IP CTS providers receive monthly payments from the TRS Fund to 
compensate them for the reasonable cost of providing the service, in 
accordance with a per-minute compensation formula approved by the 
Commission.
    2. Before 2020, IP CTS captions were produced by a CA, usually with 
the CA repeating (``revoicing'') a caller's speech into an ASR program, 
which then converted the CA's speech to text. In 2018, the Commission 
ruled that IP CTS also could be provided on a fully automatic basis, 
using only ASR technology to generate captions, without the 
participation of a CA.
    3. Before 2018, compensation for IP CTS providers was determined by 
a proxy method, known as the Multistate Average Rate Structure (MARS) 
methodology, in which compensation was set equal to the average per-
minute payment by state TRS programs to providers of an analogous 
service,

[[Page 71849]]

Captioned Telephone Service (CTS). In 2018, the Commission determined 
that this approach had resulted in providers receiving compensation 
substantially higher than the industry average cost to provide IP CTS. 
Therefore, the Commission adopted a different methodology, setting 
compensation based on the weighted average of the actual allowable 
costs reported by providers (that is, total allowable expenses of all 
providers divided by total IP CTS minutes). In the 2020 IP CTS 
Compensation Order, published at 85 FR 64971, October 14, 2020, the 
Commission considered whether to adopt a separate compensation formula 
for calls captioned without CA involvement, to address what appeared to 
be the substantially lower average cost of ASR-only captioning. 
However, the Commission concluded it did not yet have sufficient data 
from the provision of fully automatic IP CTS to accurately estimate the 
relevant costs.

The 2022 Notice of Proposed Rulemaking

    4. On December 22, 2022, the Commission released an NPRM seeking 
comment on establishing a revised IP CTS compensation plan. The 
Commission proposed to apply different compensation formulas to the 
provision of CA-assisted and ASR-only IP CTS and sought comment on 
additional issues potentially affecting the compensation formulas, 
including the appropriate application of such formulas; identifying the 
costs attributable to ASR-only captioning; whether to adjust certain 
allowable-cost criteria and the allowed operating margin; calculation 
of average per-minute cost and compensation level(s); the duration of 
the compensation period; adjustment factors for inflation or 
productivity; and alternatives to reasonable-cost-based compensation.

Separate Rates for CA-Assisted and ASR-Only IP CTS

    5. The Need for Separate Rates. The Commission amends its rules to 
establish separate rates for CA-assisted and ASR-only IP CTS. 
Historically, while the Commission has applied separate compensation 
rates to different relay services, the Commission has rarely applied 
separate rates to different methods of providing a single relay 
service. In this instance, however, the record supports the 
Commission's initial view that special considerations warrant the 
application of different compensation formulas to the CA-assisted and 
ASR-only modes of providing IP CTS. The record also supports the 
concern that continued application of a single formula may lead to 
waste of TRS Fund resources and increase the risk of fraud and abuse. 
Deferring the adoption of separate formulas would prolong the adverse 
effects of the single rate and discourage providers from continuing to 
offer CA-assisted captioning, reducing the availability of a service 
mode that continues to be preferred for some calls.
    6. Cost Difference. The updated cost reports confirm that there is 
a substantial cost difference between ASR-only and CA-assisted IP CTS. 
For 2023, historical allowable expenses reported by providers average 
approximately $0.60 per minute for ASR-only IP CTS and $1.04 per minute 
for CA-assisted IP CTS, a cost difference of $0.44 per minute. For 
2024, providers' projected allowable expenses average approximately 
$0.65 per minute for ASR-only IP CTS and $1.32 per minute for CA-
assisted IP CTS, a cost difference of $0.67 per minute.
    7. Benefits of CA-Assisted Service. The record also confirms that, 
while consumers increasingly select ASR-only captioning when offered a 
choice, CA-assisted captioning continues to be preferred for some 
portion of IP CTS calls. Further, some research indicates that ASR 
technology may show algorithmic bias in the accuracy with which it 
transcribes voices and that the participation of CAs may improve the 
accuracy of captioning for a substantial portion of calls. Establishing 
separate formulas that better reflect the cost difference between ASR-
only and CA-assisted service will strengthen the incentive for 
providers to continue providing CA-assisted captions when preferred by 
the consumer or needed for high-quality service. Conversely, 
maintaining a single rate is likely to reinforce what appears to be a 
substantial incentive for providers to limit the use of the CA-assisted 
mode, even where a consumer would prefer it. Once ASR-only service was 
introduced by most providers, it quickly became the most commonly used 
service mode--averaging 43.5% of compensable minutes in 2022, 74.6% in 
2023, and a projected 84.5% in 2024. Although the percentage of ASR-
only use is different for each provider, as of December 2023, average 
CA-assisted usage (as a percentage of total minutes) is substantially 
higher for providers that offer consumers a choice of service mode than 
for providers that unilaterally determine the service mode.
    8. TRS Fund Stewardship Concerns. The current single rate of $1.30 
per minute became effective July 1, 2021, when approximately 15% of IP 
CTS minutes were ASR-only. As the volume of ASR-only service has 
increased, the average per-minute cost of IP CTS has declined, 
resulting in excessive compensation at the current single rate. In 
2023, compensation for ASR-only minutes produced an operating margin of 
$0.70 per minute--116.7% above expenses. Moving ASR-only compensation 
closer to actual cost will conserve the TRS Fund and may decrease the 
potential incentive for a provider to engage in fraudulent practices.
    9. Need for Metrics. Various parties argue that it would be better 
as a matter of policy and good governance for the Commission to 
establish service quality metrics before resetting IP CTS compensation 
rates. Progress has been made toward establishing metrics. In February 
2023, the MITRE Corporation (MITRE), in its capacity as a Federally 
Funded Research and Development Center, formed a working group to 
develop a recommendation on metrics and measures for IP CTS service 
quality. The working group, composed of community advocates, IP CTS 
providers, academia, and subject matter experts from related 
industries, was tasked by MITRE to: identify and define measures that 
can be used to quantify and compare caption quality as it relates to 
effective communication; propose methods for assessing IP CTS using 
these measures; and identify potential criteria for establishing 
meaningful thresholds for acceptable caption quality. The working 
group's report, completed June 5, 2024, includes six recommendations 
for further study to establish metrics:
     Work with an American National Standards Institute (ANSI)-
certified standards developer to initiate a process to formalize 
caption quality standards;
     Continue to refine measures and metrics as technology 
improves, while recognizing that no single measure reflects caption 
quality for all users, and that there is a distinction between what is 
feasible today and what is needed for full functional equivalence;
     Adopt a more transparent testing framework, as described 
in the report;
     Use the recommended testing framework to measure caption 
accuracy, caption delay, non-speech information, and punctuation and 
formatting;
     Provide more transparency for research plans and results; 
and
     Perform additional research to improve measures, identify 
appropriate metrics, and establish thresholds for acceptable caption 
quality.
    10. By reaching consensus on a number of issues that had been the 
subject of dispute among commenters on the Telephone Caption Metrics

[[Page 71850]]

NPRM, published at 86 FR 7681, February 1, 2021, the working group may 
have laid the foundation for ultimate adoption of caption quality 
metrics. However, it is unnecessary--and would not be appropriate--for 
the Commission to defer the adoption of revised compensation formulas 
until metrics are in place. The Commission need not resort to metrics 
to recognize that the current compensation rate for ASR-only service is 
unreasonably high. Continuing to support ASR-only IP CTS at this rate 
would be inconsistent with responsible stewardship of the TRS Fund.
    11. One commenter's expert suggests that rate-setting should be 
delayed because the compliance cost of meeting such metrics are unknown 
today. The Commission's exogenous cost recovery criteria provide a 
mechanism for recovery of such compliance costs in appropriate 
circumstances.
    12. In addition, continuing to pay a single rate for IP CTS, 
regardless of the captioning mode, inherently encourages providers to 
increase or promote even more use of lower-cost ASR-only captioning, 
regardless of whether the quality is better or worse than higher-cost 
CA-assisted captioning. Adopting bifurcated compensation rates will 
mitigate such incentives pending further information about the relative 
quality of the two service modes.
    13. Reliability of Cost Data. Several commenters argued that the 
cost and demand data then available--consisting of historical cost and 
demand for 2021 and 2022 and projected cost and demand for 2023 and 
2024--were insufficiently reliable to support a revised compensation 
plan, and especially the application of different rates to ASR-only and 
CA-assisted IP CTS. For example, it was argued that historical cost and 
demand data for 2021 and 2022 were unreliable due to the impact of the 
COVID-19 pandemic on the demand for IP CTS and that there was 
insufficient experience with ASR-only service to enable the Commission 
to reliably estimate its cost. However, now that the record has been 
updated to include providers' cost and demand reported in February 
2024, which includes historical cost and demand for 2022 and 2023 and 
projections for 2024 and 2025, these arguments for further delay are 
less applicable.
    14. The current record also suggests that any pandemic-related 
effects on IP CTS demand and cost have almost entirely dissipated. It 
now appears that, by mid-2022, IP CTS demand had resumed approximately 
its historical trajectory. As to the effects of the pandemic on labor 
cost, in the case of IP CTS, the Commission finds no persuasive 
evidence of any impact that would render the cost data for 2023 and 
2024 unreliable. Unlike the supply of Video Relay Service (VRS) CAs, 
which is inherently restricted due to the need for highly trained 
American Sign Language interpreters, the supply of CAs of the type 
needed by most IP CTS providers appears to be more elastic, and a 
lasting labor shortage less likely--especially given the shift to 
mostly ASR-only captioning. The record--which shows that historical CA-
assisted costs increased less than 3% from 2022 to 2023--appears to 
confirm that any unusual upward trend did not outlast the pandemic.
    15. Regarding ASR-only IP CTS, an additional year of cost and 
demand data has significantly increased the confidence with which the 
Commission can reasonably estimate the average per-minute cost of ASR-
only service. The cost and demand data now available include at least 
20 months of historical ASR-only data from every IP CTS provider 
offering service prior to January 2024. This is substantially more than 
the 12 months of historical data the Commission ordinarily uses in 
setting rates. Also, because IP CTS compensation rates are set based on 
industry-wide averages, individual cost and demand variations are less 
important than they might have been if the Commission had found it 
necessary to set rates on a more individualized basis. And as noted 
above, delaying the establishment of a separate rate for ASR-only 
service will reinforce providers' incentive to decrease reliance on 
CAs, even where preferred by the consumer or needed for functionally 
equivalent service. By December 2023, ASR-only minutes increased to an 
average of 85% of total IP CTS minutes.
    16. Additional experience with the ASR-only mode may further 
improve the Commission's ability to assess its effect on the cost of IP 
CTS. However, by taking account of current data, the compensation 
formulas herein will reflect the reasonable costs of each service mode 
more accurately than the current formula does. Adopting revised 
formulas also will substantially reduce the current waste of TRS Fund 
resources (as well as possible incentives for fraud and abuse) and 
reduce providers' incentive to inappropriately substitute ASR-only for 
CA-assisted service.
    17. A commenter's expert consultant states that setting a separate, 
lower rate for ASR-only service would discourage innovation in the 
provision of automatic forms of IP CTS. However, no evidence is 
presented for this claim, and given the very substantial difference in 
reported costs for these services, a lower rate can be set for ASR-only 
without depriving providers of resources for innovative research and 
development.

Proposals for Additional Rate Categories

    18. Separate CA-Assisted Rate for CART-Based IP CTS. The Commission 
declines to adopt a separate CA-assisted rate for calls that are 
captioned using the Communications Access Realtime Translation (CART) 
method, as advocated by InnoCaption. The term CART is used in this 
context to refer to a captioning method whereby a professional 
stenographer produces captions without any assistance from ASR 
software. The Commission finds that setting separate rates for the 
broad categories of CA-assisted and ASR-only methods of providing IP 
CTS is justified by special considerations, as a limited deviation from 
the historical practice of applying the same compensation formula to 
all methods of providing a particular relay service. However, except 
for the conditional rate supplement discussed further below, which is 
applicable to any qualifying provider of CA-assisted service, including 
providers using the CART method, the Commission is unpersuaded that any 
analogous considerations warrant a further subdivision of the CA-
assisted rate.
    19. Although the Commission recognizes that the CART method may 
have certain benefits, the record at this time does not indicate that 
those benefits are so clear as to warrant giving special support for 
this approach over other methods of CA-assisted captioning, despite its 
acknowledged higher cost. The evidence in the record regarding the 
particular advantages of the CART method is from 2020, and with recent 
improvements in ASR technology, providers have developed new methods of 
using ASR with CA-assisted captioning. Thus, there are now several 
variants of CA-assisted captioning being used by IP CTS providers--as 
well as variations in the methods used by providers to determine which 
service mode should be applied to a call. The process of developing 
metrics and measures for IP CTS service quality is not yet complete, 
and the current record does not provide definitive evidence as to 
whether testing of the methods in use today, using improved 
measurements, would indicate a material, qualitative difference between 
InnoCaption's performance using the CART method and the performance of 
IP CTS providers using other methods of producing CA-assisted captions.

[[Page 71851]]

Further, the efficacy of any particular captioning method is not 
determined solely by the technology used, but also by the resources and 
skill with which that technology may be implemented by a particular 
service provider. Given the statutory mandates for efficiency and 
technological neutrality, as well as the absence of definitive 
measurements of service quality, the Commission finds insufficient 
basis at this time for setting different compensation rates based on 
the specifics of each CA-assisted captioning method.
    20. Separate ASR-only Rates for Fully Automated and ``Hybrid'' 
Providers. The Commission also declines to adopt a commenter's 
recommendation that two different compensation rates be set for ASR-
only minutes, based on whether the service provider is fully automated, 
i.e., does not employ CAs for captioning any calls, or is a hybrid 
provider that uses CA-assisted methods for some calls and ASR-only for 
others. The commenter also seems to suggest that a provider that uses 
CAs for every call should be subject to a different CA-assisted rate 
than the CA-assisted rate applicable to providers that do not provide 
CA assistance for every call. Currently, no provider uses CAs for every 
call; therefore, it is not necessary to address this theoretical 
concern on the current record.
    21. The concerns noted above regarding deviations from the 
Commission's historical practice are also applicable here. In addition, 
if the Commission adopted the commenter's suggestion, the vast majority 
of ASR-only minutes would be compensated under the rate established for 
hybrid providers. For the same reason, an ASR-only rate based on the 
average ASR-only cost of the four hybrid providers would be similar to 
a cost-based ASR-only rate based on the ASR-only costs of all reporting 
providers. While fully automatic providers would receive a much higher 
compensation rate for their ASR-only minutes, their higher per-minute 
costs are likely attributable primarily to the very low volume of 
minutes projected by fully automatic providers, given the economies of 
scale that appear to be involved in ASR-only captioning. Therefore, it 
is unlikely that differentiating ASR-only rates in this manner would 
succeed in accounting for any cost differential that may be inherent in 
a provider's choice of whether to use multiple captioning methods.

Classification of Calls

    22. As proposed, the CA-assisted compensation formula shall apply 
to any call (or any call minutes, if a CA is not present for the entire 
call) to which a CA is dedicated, provided that the CA is actively 
engaged in the captioning process. The applicability of the CA-assisted 
rate will not be affected by the specific nature of the active task(s) 
performed by the CA during such assignment (i.e., revoicing, typing the 
captions, or monitoring and correcting the output of an automatic 
speech recognition program). The Commission concludes that assigning a 
CA to monitor and correct any errors in ASR-generated captions 
justifies compensation at the CA-assisted rate, provided that the CA is 
dedicated to these tasks from the beginning to the end of the call (or 
for the entire portion of the call that the provider designates as CA-
assisted). However, the CA-assisted rate shall not apply if the CA is 
monitoring more than one call, or is splitting time between monitoring 
a call and attending to other tasks, or is only monitoring the 
captions, e.g., for research purposes, without actually correcting or 
supplementing the ASR-generated captions when necessary. In such a 
case, the employee's involvement is more in the nature of general 
supervision of ASR-only operations.
    23. The Commission is also sensitive to the potential risk that, 
given the substantial differential between the ASR-only and CA-assisted 
compensation rates adopted herein, an IP CTS provider might have an 
incentive to hire additional CAs or steer consumers to CA-assisted 
calls even if consumers would not benefit from such a mode of IP CTS. 
For example, if such CAs work at home while receiving minimal training 
and supervision, the incremental per-minute cost (for a low-cost 
provider) of additional CA-assisted minutes might be less than the rate 
differential under the Commission's bifurcated compensation plan. 
Therefore, the Commission delegates authority to the Consumer and 
Governmental Affairs Bureau, in coordination with the Office of the 
Managing Director, to work with the TRS Fund administrator to ensure 
that annual cost reports include information that will enable the 
Commission to determine the reasonableness of IP CTS providers' 
practices related to hiring, training, and supervising CAs and to 
prevent waste of TRS Fund resources.
    24. In addition, the Commission reserves the right to revisit and 
revise the compensation formulas for CA-assisted and ASR-only IP CTS 
prior to the end of the compensation period, if it concludes that such 
intervention is called for to achieve statutory objectives. For 
example, if evidence suggests that CAs are being added to calls 
primarily to gain the higher compensation rate, without significantly 
increasing the accuracy of the captions, then--in addition to taking 
other appropriate measures--the Commission may revise the compensation 
formulas to correct providers' incentives and mitigate the risk of 
waste, fraud, and abuse.

Allowable Costs

    25. As proposed in the NPRM, the Commission expands the criteria 
for IP CTS cost recovery for research and development (R&D), numbering, 
and user access software, harmonizing them with the VRS cost criteria 
adopted in 2023. See 88 FR 71994, October 19, 2023 (2023 VRS 
Compensation Order). The Commission declines to revisit the 
longstanding policy that the TRS Fund does not support the cost of 
providing, installing, or maintaining customer premises equipment.
    26. Research and Development. The Commission revises its allowable 
cost criteria to allow TRS Fund support for the reasonable cost of R&D 
to enhance the functional equivalence of IP CTS, including improvements 
in service quality that may exceed the Commission's mandatory minimum 
TRS standards. As in the case of VRS, the Commission finds that the 
current criterion--allowing cost recovery only for R&D conducted to 
ensure that a provider's service meets the minimum TRS standards--is 
unnecessarily restrictive. Authorizing providers (as well as 
Commission-directed entities) to conduct additional research is 
consistent with the statutory mandate to encourage the use of improved 
technology for TRS and with the Commission's policy of authorizing 
multiple IP CTS providers to compete with one another based on service 
quality. Such competition logically may lead IP CTS providers to 
conduct research and development on innovative methods of producing and 
delivering captions, resulting in improved service quality that may 
exceed the level required by the minimum TRS standards. The Commission 
also finds support for this change in commenters' recent submissions 
emphasizing the need to ensure that the compensation plan supports 
research and development to improve IP CTS. To establish consistent 
allowable-cost criteria for all three forms of IP-based TRS, the 
Commission concludes that the expanded allowability of reasonable 
research and development costs shall also apply to internet Protocol 
Relay Service (IP Relay).

[[Page 71852]]

    27. The Commission also sought comment on whether to adopt measures 
to prevent waste and ensure that the benefit of the conducted research 
and development actually enhances functional equivalence. However, the 
Commission also noted that by using an average cost methodology and 
setting compensation formulas for multi-year periods, the Commission 
can provide substantial incentives for providers to use research and 
development funds wisely and avoid incurring unnecessary costs. The 
Commission continues to believe that the above incentive structure is a 
robust safeguard against waste, and agrees with commenters that 
additional safeguards are not necessary at this time. The Commission 
stresses that, as with all provider-reported expenses, expenses for 
research and development to improve IP CTS are allowable only if 
reasonable. In addition, expenses incurred to develop proprietary user 
devices and software (or any non-TRS product or service) are not 
recoverable from the TRS Fund.
    28. Numbering. The Commission treats as allowable the reasonable 
costs of acquiring North American Numbering Plan (NANP) telephone 
numbers for IP CTS users, in those circumstances where assignment of a 
telephone number is necessary to provide the service. In 2008, the 
Commission determined that such costs would not be supported by the TRS 
Fund, reasoning that they are not attributable to the use of relay 
service and that analogous costs incurred by voice service providers 
are typically passed through to their customers. Recently, however, the 
Commission revisited this issue with respect to IP Relay and VRS, 
concluding that the reasonable cost of assigning and porting NANP 
numbers for those services should be supported by the TRS Fund. 
Recognizing that the Commission's rules require the assignment of NANP 
numbers to IP Relay and VRS users and that, based on the current 
record, numbering costs are unlikely to be recoverable from users as a 
practical matter, the Commission concluded that such costs are now 
appropriately attributed to the use of relay to facilitate a call.
    29. While the most common IP CTS configuration allows consumers to 
use existing telephone numbers to place and receive calls over a 
landline voice service, assignment of a new number may be necessary as 
a practical matter for some configurations of IP CTS--for example, 
where an over-the-top application enables captioning of calls placed 
and received on smartphones and other devices. In such instances, the 
provider may assign a new NANP number to the user, which is different 
from the user's landline or mobile number. The new number may be used, 
for example, to enable incoming calls (including 911 callbacks) to be 
received via the captioning app on a smartphone, rather than the 
phone's native telephony application. In such cases, as is true for VRS 
and IP Relay, the IP CTS provider typically does not have a billing 
relationship with the consumer, and there seems to be little point in 
creating such a relationship for the sole purpose of passing through 
what likely would be a de minimis monthly charge for any particular IP 
CTS user.
    30. Therefore, the Commission revises the allowable-cost criteria 
for IP CTS to allow TRS Fund support of an IP CTS provider's reasonable 
costs of acquiring NANP telephone numbers when necessary to provide the 
service. The Commission stresses that the cost of number assignment is 
allowable only where such number assignment is necessary for the 
provision of IP CTS in a particular configuration. As noted above, most 
IP CTS users receive captioning on a landline phone, in a configuration 
that does not require the assignment of a new telephone number. As with 
other reported costs, if audits or other review reveals that numbering 
costs are being reported in excess of reasonable amounts, the excess 
will be disallowed.
    31. The Commission also clarifies that, to the extent IP CTS 
providers are responsible for delivery of a user's 911 call to the 
nearest Public Safety Answering Point (PSAP), the TRS Fund supports 
reasonable expenses to connect the 911 call quickly and to 
automatically provide location data to the PSAP.
    32. Customer Premises Equipment. The Commission's rules do not 
prohibit IP CTS providers or their partners from distributing customer 
premises equipment (CPE) to IP CTS users. However, the TRS Fund does 
not support the provision of CPE to TRS users, except where Congress 
has specifically authorized such support. The NPRM did not re-open or 
seek comment on this issue. Nonetheless, a number of commenters urge 
the Commission to revisit whether the TRS Fund should support the 
provision of CPE to IP CTS users. Because this question does not fall 
within the scope of the NPRM, it is not necessary for the Commission to 
address those comments in this document.
    33. Further, even if those comments could be construed as within 
the scope of the NPRM, for the reasons articulated in the Commission's 
prior orders, commenters provide no persuasive reason to revisit the 
issue on its merits. The Commission long ago decided that costs 
attributable to equipment that a TRS provider distributes to a 
consumer, including installation, maintenance, and testing, are not 
compensable from the TRS Fund. The well-established distinction in the 
Commission's rules between relay services, which are supported by the 
TRS Fund, and end user devices, which are not, is grounded in the text 
of the governing statutory provision. As the Commission has explained, 
section 225 of the Act focuses on the provision of relay service, 
requiring common carriers to provide relay services either directly or 
indirectly (e.g., through a TRS Fund-supported provider), and this is 
apparent from the plain language of section 225 of the Act, which is 
directed at services that carriers must offer in their service areas 
that enable communication between persons who use a TTY or other non-
voice terminal device and an individual who does not use such device. 
The Commission has further held that costs associated with CPE are not 
part of a provider's expenses in making relay services available; 
rather they must be incurred by consumers to receive these services, 
just as people who do not use relay services must purchase their 
phones. The Commission's determinations disallowing CPE costs have been 
upheld by federal courts of appeals.
    34. Contrary to ClearCaptions' argument, a mere analogy between 
section 225 of the Act and certain provisions in section 254 of the 
Act, 47 U.S.C. 254, carries no legal weight. TRS support is governed by 
section 225 of the Act, not section 254 of the Act, and the Commission 
rejects the suggestion that somehow its authority under the former 
provision can be expanded based on a purported analogy to how the 
Commission has exercised its authority under the latter provision.
    35. In addition, even if the Commission had statutory authority to 
do so, it is unconvinced that TRS Fund support for provider 
distribution of user devices--in particular, purpose-built, proprietary 
equipment--would be necessary or appropriate to ensure the availability 
of functionally equivalent relay service. Authorizing TRS Fund support 
for the kinds of user devices currently offered by providers--i.e., 
relatively expensive, proprietary equipment that can only be used with 
one provider's service and that has an unusually short useful life--
appears inconsistent with the Commission's mandate to make TRS 
available in the most efficient manner. In the VRS context, the 
Commission has adopted

[[Page 71853]]

policies to encourage the use of non-proprietary, off-the-shelf, 
screen-equipped devices, such as smartphones, laptops, and personal 
computers, to access VRS. In general, the use of non-proprietary 
devices for TRS (e.g., by downloading software applications developed 
by providers) has several advantages. First, it is less costly, as most 
people in the United States already own such devices and use them for a 
wide variety of purposes other than TRS. Second, the use of non-
proprietary devices avoids ``locking in'' users to the service of a 
single TRS provider, which limits consumer choice and which also can 
encourage the offering of free devices as an inducement to use a 
particular provider's relay service. Third, the use of non-proprietary 
devices avoids ``siloing'' TRS users in ways that can hinder access to 
communication technologies available to mainstream users.
    36. The record is clear that IP CTS can be accessed without 
proprietary equipment, by downloading providers' software applications 
to smartphones, tablets, and laptops. For example, many providers make 
their applications available on Google Play and the Apple App Store. 
Although a commenter argues that such applications are generally 
impractical for seniors (who comprise the bulk of IP CTS users), a 
survey indicates that smartphone ownership is growing faster among 
seniors than other age groups, and that as of 2021, 61% of seniors 
owned smartphones--a percentage that presumably will continue to 
increase. In addition, reasonable expenses incurred in helping seniors 
download and use a provider's smartphone application are allowable 
costs supported by the TRS Fund. Finally, even for those consumers who 
are unable to use smartphone or other software applications to access 
IP CTS, it appears that screen-equipped wireline telephones, usable for 
captioned phone calls (or screens that can be connected to a wireline 
telephone) are commercially available for home use.
    37. User Access Software. The Commission adopts its proposal to 
allow TRS Fund support for the reasonable cost of developing, 
maintaining, and providing software and web-based applications that 
enable users to access IP CTS from off-the-shelf user devices, such as 
mobile phones, desktop computers, and laptops running on widely 
available operating systems. This change harmonizes the cost criteria 
for IP CTS with those adopted for VRS. As with VRS, such costs must be 
incurred by an IP CTS provider to enable users to connect to its 
service platform; therefore, they are attributable to the provision of 
IP CTS. Further, recovery of such costs is consistent with the 
efficiency mandate, as it supports the use of off-the-shelf IP-enabled 
user devices to access TRS and decreases consumers' dependence on TRS 
equipment specifically designed for connection to a particular TRS 
provider.
    38. Consistent with its compensation ruling for VRS, the Commission 
declines to allow TRS Fund support for the cost of user access software 
needed for proprietary user equipment supplied by the provider or a 
third party. While TRS users need a software interface to access TRS, 
they do not need proprietary devices that can be connected to and used 
with only one provider's service, nor do they need software designed 
for such devices. Although the Commission does not prohibit providers 
from distributing such devices and software to consumers requesting 
them, it is not necessary to support proprietary devices and software 
with TRS Fund resources. Further, allowing recovery of such software 
costs would not advance the Commission's policy to enable users to 
access TRS from off-the-shelf IP-enabled devices and to avoid 
dependence on TRS equipment specifically designed for a particular 
provider's network. If an IP CTS provider supplies user access software 
for both off-the-shelf and proprietary devices, and the development 
costs for each type of software cannot be directly assigned, a provider 
may adopt a reasonable allocation method to separate such costs, to 
ensure that it does not seek recovery for costs associated with 
proprietary devices. The provider shall specify the method used in its 
cost reports, so that it can be evaluated by the TRS Fund administrator 
and the Commission.
    39. Field Staff Visits. While the Commission did not seek comment 
on the issue of whether providers should be able to recover the costs 
associated with deploying their field staff, the Commission's ruling in 
the 2023 VRS Compensation Order sufficiently addresses the issues 
raised in the comments regarding the treatment of costs incurred by IP 
CTS providers' field staff. In the 2023 VRS Compensation Order, the 
Commission reaffirmed that, because the costs of installing, 
maintaining, and training customers to use provider-distributed devices 
(or software for proprietary provider-distributed devices) are not 
recoverable through TRS Fund compensation, expenses for field staff 
visits for such purposes are not allowable expenses for VRS or IP CTS. 
In addition, the Commission clarified that the reasonable cost of 
service-related work performed by field staff during a visit to a new 
or current user (e.g., to assist customers with registration, use of 
the service on a non-proprietary device, or completing a port) is an 
allowable cost of providing VRS or IP CTS.

Determination of Cost-Based Rates

    40. Cost Averaging. The Commission has broad discretion in choosing 
compensation methodologies and setting compensation rates within the 
parameters established by section 225 of the Act. To set cost-based 
benchmarks for IP CTS compensation rates, the Commission continues to 
rely on the methodology used in the 2020 IP CTS Compensation Order, in 
which rates were set based on the weighted average of each provider's 
projected and historical costs for the current and immediately 
preceding calendar years (now 2023 and 2024). Under this weighted-
average method, the allowable expenses reported by all CA-based and 
ASR-based IP CTS providers respectively for calendar years 2023 
(historical expense) and 2024 (projected expenses) are totaled and the 
allowed operating margin (determined as a percentage of expenses) is 
added to total allowable expenses. The resulting total is divided by 
total historical (for 2023) and projected (2024) compensable minutes of 
demand for CA-based and ASR-based IP CTS respectively for those two 
calendar years, to yield an average cost per minute (including 
operating margin). This average cost per minute is called a 
``weighted'' average because it gives more weight to the per-minute 
cost incurred by providers with relatively high demand and less weight 
to the per-minute cost incurred by providers with relatively low 
demand.
    41. The Commission maintains this approach for essentially the same 
reasons cited in the 2020 IP CTS Compensation Order. First, this 
methodology has produced consistent and reliable results without 
imposing undue administrative burdens on either IP CTS providers or the 
Commission. Second, average-cost-based compensation, especially when 
applied for more than one year, provides substantial incentives and 
opportunities for individual TRS providers to increase their efficiency 
and capture the resulting profits. Third, maintaining a consistent 
compensation methodology provides a measure of transitional stability 
at a time of technological change.
    42. According to Hamilton Relay's expert, the Brattle Group, 
averaging is inappropriate for IP CTS because ``IP

[[Page 71854]]

CTS costs do not appear to follow a normal distribution, which 
typically would mean a few providers with very high costs, a few 
providers with low costs, and a majority of providers with costs 
somewhere in the middle of a bell curve.'' However, the Brattle Group 
cites no authority for the claim that cost-averaging is only 
appropriate when provider costs are in a bell-curve shaped 
distribution--which is unlikely to occur where, as here, the sample 
size is limited to nine providers, five of which are very small or 
start-ups. The Commission is also unpersuaded that there is 
justification for replacing the average-cost approach with a ``mean 
plus one standard deviation'' approach, as advocated by Hamilton Relay. 
Setting a CA-assisted rate based on this approach would overcompensate 
providers with average costs and substantially dilute the incentive for 
higher-cost providers to become more efficient.
    43. Tiered or Small-Provider Rates. CaptionMate urges the 
Commission to adopt a tiered rate structure for IP CTS, or 
alternatively a separate rate for small providers, contending that 
supporting smaller providers with relatively high per-minute costs 
would offer consumers more choice and promote innovation. The 
Commission adopted tiered rates for VRS due to a combination of 
specific circumstances that were threatening the viability of 
competition among VRS providers. In 2020, the Commission declined to 
adopt tiered rates for IP CTS because it was not persuaded that similar 
or equally compelling factors are present in the IP CTS market to an 
extent that would justify introducing the complexities and potential 
inefficiencies of a tiered rate structure or an emergent provider rate. 
This remains the case today.
    44. First, unlike in VRS, the IP CTS market has not been dominated 
for a long period by a single provider. The market share of the largest 
IP CTS provider is not comparable to that of the largest provider in 
the VRS market. Second, while there are economies of scale in IP CTS, 
there is little evidence that such economies of scale are preventing 
the emergence of efficient competitors. IP CTS's record of growth 
suggests that there are substantially greater opportunities than in the 
VRS context for a provider to reach efficient scale within a relatively 
short period of time. Where higher costs are incurred by a relatively 
large IP CTS provider, it is more likely attributable to business 
decisions concerning use of contractors as turnkey service providers, 
prior investments in technology and business processes, and differences 
in business models, rather than issues of scale. Third, unlike VRS, IP 
CTS is not dependent on interoperability and does not have other 
network effects that make it difficult for new entities to enter the 
market or obtain eligible IP CTS users as customers. Fourth, the 
relatively recent introduction of ASR-only IP CTS, as well as new 
methods of providing CA-assisted IP CTS, provides additional evidence 
that Commission policies are not deterring innovation in this arena. 
Fifth, the four recently granted applications for IP CTS certification 
indicate that new entrants believe that additional competitors can 
succeed and innovate in the provision of IP CTS. In summary, given the 
relative ease of new entry and the presence of vigorous competition 
based on service quality, the Commission concludes that the goals of 
offering consumer choice and encouraging innovation can continue to be 
achieved without resorting to the ratemaking challenges, complexities, 
and potential inefficiencies of a tiered rate structure or a separate 
small-provider rate.
    45. The Commission also notes that none of the IP CTS providers 
advocating a special small-provider rate offers CA-assisted service. In 
a recently filed petition, advocates for accessibility contend that the 
TRS Fund should not support the provision of IP CTS by providers that 
do not allow users to select CA-assisted service. While the Commission 
does not prejudge this petition, the fact that none of the providers 
subject to the proposed small-provider rate offers a CA-assisted option 
reinforces its conclusion that the objectives of section 225 of the Act 
would not be served by adopting such a rate.
    46. The Commission also emphasizes that it is mandated to make TRS 
available in the most efficient manner, not to ensure that every TRS 
provider is able to operate successfully, regardless of the cost. A 
small provider claims that it offers a service of unique value, 
targeting a younger demographic and offering captioning in 67 
languages. However, the Commission must balance the potential benefits 
of diverse service offerings with the need for efficiency. To the 
extent that there is significant demand for multiple-language 
captioning, the record does not show that it cannot be made available 
by a provider supported by the TRS Fund at the rates set herein, or 
through other channels. Also, the compensation plan adopted herein, 
which limits the cumulative reduction in the ASR-only compensation rate 
during the five-year compensation period, allows all providers of ASR-
only service to be compensated at a level higher than the current 
average cost. Thus, small ASR-only providers will also be afforded a 
period of stability to support their growth under relatively favorable 
conditions.

Estimating IP CTS Expenses

    47. Attribution of Expenses to Service Categories. The Commission 
adopts the NPRM's tentative conclusion that, when possible, providers 
must directly assign costs to either ASR-only or CA-assisted IP CTS, 
and when that is not possible, they must reasonably allocate such costs 
based on direct analysis of the origin of the costs. Where they could 
not directly attribute costs to one or another service, most providers 
have allocated joint expenses based on the share of their IP CTS 
minutes that are ASR-only or CA-assisted. The Commission finds this to 
be a reasonable method.
    48. Relevant Cost Data. Since 2018, the Commission has established 
the cost basis for IP CTS provider compensation by averaging providers' 
reported historical expenses for the prior calendar year (here, 2023) 
with their projected expenses for the current calendar year (here, 
2024). The Commission has found this method to be a useful way to 
counteract providers' tendency to overestimate future costs. The 
Commission finds no compelling reason for any substantial modification 
of this approach. IP CTS providers' cost projections in the record do 
not include such dramatic variations as were raised by VRS provider 
projections in the recently concluded VRS compensation proceeding.
    49. Adjustment Factor. To ensure that compensation for CA-assisted 
service in the first year of the next period is sufficient to cover 
likely inflation-related cost increases (offset by productivity related 
decreases) between Fund Years 2023-24 and 2024-25, the Commission 
adjusts each provider's average allowable expenses for calendar years 
2023 and 2024 by 3.77%, which is the change from fourth quarter 2022 to 
fourth quarter 2023 in the Bureau of Labor Statistics (BLS) index of 
seasonally adjusted ``total compensation for private industry workers 
in professional, scientific, and technical services.'' This adjustment 
uses the same index that will be used to adjust compensation for CA-
assisted IP CTS in subsequent years of the compensation period. The 
Commission does not apply an adjustment factor to ASR-only service. As 
explained below, an adjustment factor for ASR-only cost is not needed 
for this compensation period.

[[Page 71855]]

    50. Newly Allowable Cost Categories. Although the Commission 
revises several allowable-cost categories, the record does not indicate 
that these changes will result in any significant increase in the 
estimated cost of service. Previously non-allowable expenses reported 
for numbering activities are identified by each IP CTS provider in its 
annual cost report. However, because most IP CTS users do not require 
the assignment of numbers, average per-minute expenses reported for 
number assignment are less than $.001 per minute, resulting in only a 
trivial cost adjustment. In the other categories of previously non-
allowable costs, only one provider reported relevant non-allowable 
expenses for 2023 and 2024, and that provider has stated it was not 
able to segregate proprietary from non-proprietary software costs, or 
research and development for proprietary equipment from research and 
development for relay service. As a result, even this provider did not 
report any expenses in newly allowable cost categories other than 
number assignment. Therefore, the changes in allowable cost categories 
do not result in any adjustment of estimated average allowable per-
minute expenses for either CA-assisted or ASR-only IP CTS. For the 
reasons stated above, costs for customer support provided by field 
staff remain non-allowable to the extent that they are attributable to 
installation, maintenance, or customer assistance with provider-
distributed devices or software for proprietary devices.
    51. Technology Cost. Some commenters argue that the Commission 
should adjust allowable expenses to take account of an asserted need 
for increases in technology investment, beyond the amounts estimated in 
annual cost reports. Given the excess in average TRS Fund payments 
above reasonable cost for the last several years, the Commission finds 
it implausible that IP CTS providers have been unable to spend 
reasonably necessary amounts in technology-related cost categories 
(engineering and research and development). Due to the extraordinarily 
high average operating margins recently achieved by IP CTS providers, 
ample resources have been available to enable providers to purchase any 
technology they may need or develop it in-house. In 2021, IP CTS 
providers reported average expenses of approximately $0.93 per minute 
and were paid approximately $1.36 per minute from the TRS Fund ($1.42 
in January-June and $1.30 in July-December), for an operating margin of 
46.2%. In 2022, they reported average expenses of approximately $0.83 
per minute and were paid $1.30, for an operating margin of 56.9%. In 
2023, they reported average expenses of approximately $0.72 per minute 
and were paid $1.30, for an operating margin of 80.6%. Further, the 
proliferation of ASR technology in other areas, including captioning 
for video conferencing and television, is likely to ensure that ASR 
development costs need not be borne by IP CTS providers alone. As noted 
above, providers have not reported incurring any additional research 
and development expenses for 2023 and 2024 in the newly allowable 
category of expenses for research and development to improve IP CTS 
beyond what is necessary to meet minimum TRS standards. Therefore, the 
Commission is not persuaded that extraordinary levels of additional 
support from the TRS Fund will be needed to assist IP CTS providers in 
securing necessary technology. In addition, the compensation plan 
limits the cumulative reduction in the ASR-only compensation rate 
during the next compensation period, providing an above-cost 
``cushion'' as a safeguard against any unpredicted increases in 
technology-related cost.
    52. CA Cost. Some commenters argue that the current compensation 
rate is insufficient to support a wage rate for CAs at the level they 
assert is needed--specifically, the federal contractor minimum. In 
contrast with the VRS compensation proceeding, the record here does not 
show that there is a continuing shortage of people qualified to work as 
IP CTS CAs. Indeed, the recent substantial decline in CA-assisted IP 
CTS minutes suggests the opposite. On the other hand, the Commission 
agrees that the quality of CA-assisted service likely will benefit if 
CAs are paid at higher hourly rates. To this end, the Commission 
prescribes two rates for CA-assisted service: a base rate, determined 
using the established average cost methodology; and a supplemental 
rate, applicable to the minutes handled by those CAs whose hourly wages 
exceed a threshold amount.
    53. Marketing and Outreach Cost. Some commenters contend that the 
Commission should set rates that provide an additional incentive to 
engage in marketing and outreach, e.g., to ensure the IP CTS industry 
invests in growth by reaching and offering the service to more 
qualifying consumers. They claim that only a small fraction of 
consumers who would benefit from IP CTS are being served. ClearCaptions 
blames declining compensation rates for causing a reduction in 
marketing expenditures by providers. According to providers' cost 
reports, however, marketing expenditures have increased substantially 
since 2020, both in dollars per minute and as a percentage of total 
allowable expenses. IP CTS providers reported spending an average of 
$.0903 per minute, or 13.0% of total expenses, on marketing in 2023, 
and projected spending $.1114 per minute, in 2024, or 15.0% of total 
expenses, in 2024. These percentages are far higher than in any recent 
year--and will continue to be supported at that level by the rates set 
in the Report and Order. Given the significant increase in marketing 
expenditures, the cost data do not suggest a need to provide additional 
monetary incentives for providers to find new IP CTS customers.
    54. The Commission also does not find it credible that, despite the 
extraordinarily large operating margins (far above the allowed 10% 
level) actually earned by providers at the current rate, IP CTS 
providers have been unable to spend what is needed to market the 
service to likely customers. Nor does the Commission find it credible 
that IP CTS providers cannot continue to do so as rates are reduced to 
allow more reasonable operating margins. In this regard, despite some 
commenters' claims, the number of people in the United States who could 
benefit from IP CTS is largely a matter of speculation. While 
ClearCaptions suggests that the estimated 12.8 million U.S. residents 
with moderate to profound hearing loss are all ``potential IP CTS 
customers,'' many individuals who use hearing aids do not need the 
additional assistance of IP CTS. There are a variety of other sources 
of communications assistance available to this population, including 
hearing-aid compatible telephones and mobile phones, specialized high-
amplification phones, and increasingly, commercially available ASR-
enabled telephones and services. In addition, many seniors with 
moderate to profound hearing loss may be precluded from benefitting 
from a captioning service due to vision-related or cognitive 
disabilities. The Commission is setting TRS Fund support at a level 
that should encourage reasonable efforts to promote IP CTS among people 
who can benefit from it, but there is no evidence to support the 
assumption that everyone with at least moderate hearing loss needs, 
wants, and is able to use the service.

Operating Margin

    55. The Commission adopts the proposal in the NPRM to maintain the 
previously established reasonable range of operating margins (7.6%-
12.35%),

[[Page 71856]]

and the Commission sets the operating margin for the next period at 
10%, the same level set by the Commission in the 2020 IP CTS 
Compensation Order. In the NPRM, the lower bound of this range was 
incorrectly stated as 7.75%. The Commission finds no reason to change 
the operating margin from the previously allowed level. In particular, 
the record does not support arguments that the allowed 10% operating 
margin is insufficient to encourage capital investment in IP CTS.
    56. The current range of reasonable operating margins for IP CTS is 
based on an average of the margins earned in analogous industries, 
including government contracting and the professional service sector 
that includes translation and interpretation services, as well as 
information technology consulting. For CA-assisted IP CTS, like VRS, 
labor costs continue to comprise a large percentage of total costs. 
Therefore, the Commission finds that the current range of operating 
margins is appropriate for the same reasons cited in the 2023 VRS 
Compensation Order. ASR-based IP CTS, by contrast, is not labor 
intensive, as the CAs are replaced by ASR software. Nonetheless, the 
Commission finds that the current reasonable range, with the 
approximate midpoint at 10%, remains appropriate for ASR-based IP CTS.
    57. ASR-based IP CTS does not depend on labor to generate captions. 
In addition to saving on labor costs, it requires even less physical 
plant than CA-assisted IP CTS, thus saving on capital costs as well. 
Nor is it a very high-risk business. Apart from the spike in demand 
during the COVID-19 pandemic, demand for IP CTS has shown steady growth 
since 2015. Further, while other businesses may face price fluctuations 
based on, for example, changing demand and the pricing decisions of 
competitors, IP CTS providers can rely on government-established prices 
that are predetermined for a period of several years.
    58. ClearCaptions' expert, FTI Consulting (FTI), does not provide a 
convincing explanation of its view that average margins for the 
competitive telecommunications firms, or for a mix of firms in the 
communications and information technologies sector, would provide a 
more appropriate benchmark. As a preliminary matter, the Commission 
notes that FTI's initial study of the margins earned by allegedly 
comparable firms included telecommunications carriers. As explained in 
prior Commission orders, the operating margin approach was adopted 
because the Commission recognized that TRS providers are unlike the 
telecommunications industry, in that TRS is not a capital-intensive 
business. Any proposed benchmark that includes the operating margins of 
telecommunications carriers clearly would not be appropriate for IP 
CTS.
    59. While the most recent analysis submitted by FTI does purport to 
filter out capital-intensive companies from the sample of information 
and communications technology firms, the use of a benchmark based on 
the high technology sector remains flawed, for several reasons. First, 
while ASR-only IP CTS relies on technology, technology costs do not 
loom large in the providers' cost profiles. Rather, the biggest expense 
categories in IP CTS providers' cost reports are subcontractor 
expenses, marketing, and operations support. Engineering expenses--even 
when combined with R&D--come fourth. Second, the FTI analysis looks at 
a sample of companies with net profit of up to 100%. The Commission is 
not persuaded that the companies from the sample are comparable to TRS 
providers. Third, IT companies typically involve high risk, while the 
degree of risk faced by IP CTS providers is limited.
    60. The Commission does not see a reason why ASR-only IP CTS would 
have a higher risk level than CA-assisted IP CTS and therefore warrant 
a higher operating margin. While CA-assisted IP CTS faces some labor 
market risk, ASR-only IP CTS does not. Both services share a stable 
demographic from which to draw customers, and predictable support 
levels. Based on these factors, the Commission finds that it is 
appropriate for ASR-only IP CTS to have the same reasonable range of 
operating margins as CA-assisted IP CTS.

Compensation Period and Rates

    61. Compensation Period. The Commission adopts a compensation 
period that begins the first month after the effective date of this 
Final Rule and ends June 30, 2029--approximately a five-year period. 
The Commission concludes that this period is long enough to give 
providers some degree of certainty regarding the applicable 
compensation levels and an incentive to improve efficiency, but also 
short enough to allow timely reassessment of the compensation formulas 
in response to potential unanticipated cost changes and other 
significant developments. There is substantial support in the record 
for adopting this time frame.
    62. ASR-only Rate. For ASR-only service, the Commission estimates 
average cost as follows. First, the Commission totals all providers' 
reported allowable expenses for 2023 and 2024, respectively (including 
newly allowable costs that were reported). Next, the Commission divides 
these results by 2023 and 2024 minutes, to yield average expenses per 
minute. Then the Commission averages the per-minute rates for 2023 
($0.61) and 2024 ($0.65) to get a blended average of expenses per 
minute for 2023-24 ($0.63). Finally, the Commission adds a 10% 
operating margin, for an average per-minute cost of $0.69.
    63. Glide Path for ASR-Only Rate. The average per-minute cost 
(including operating margin) for ASR-only IP CTS for 2023-24 is $0.69. 
To fulfill the Commission's role as steward of the TRS Fund, it is 
important to set a course toward a rate reduction. However, the 
Commission is concerned that an immediate 47% rate reduction could 
disrupt the provision of both methods of IP CTS by forcing less 
efficient providers to immediately adjust their spending to reflect 
reduced revenue. Further, while the Commission has found the current 
cost and demand data sufficiently reliable to justify setting a 
separate ASR-only rate, future cost developments for this service mode 
are not easy to predict, and the bifurcation of the rate itself may 
cause some cost changes over time. Therefore, the Commission adopts a 
variant of the ``glide path'' approach similar to that used in prior 
TRS compensation proceedings.
    64. Under this approach, the ASR-only rate will be reduced by 
approximately 10% annually for the first three years of the period. The 
initial ASR-only rate, applicable from the effective date through June 
30, 2025, will be $1.17; the second-year rate, applicable from July 1, 
2025, through June 30, 2026, will be $1.05; the third-year rate, 
applicable from July 1, 2026, through June 30, 2027, will be $0.95. For 
the fourth and fifth years, through June 30, 2029, the ASR-only 
compensation rate will remain at $0.95.
    65. As discussed above, the cost and demand data now available on 
ASR-only service, which includes at least 20 months of historical data 
(as well as 24 months of projected cost data) from every mature IP CTS 
provider, has significantly increased the Commission's confidence that 
the average per-minute cost of ASR-only service is substantially below 
the cost of CA-assisted service. But the Commission acknowledges that 
ASR is a nascent service, that ASR-only cost patterns may change over 
time in unpredicted ways, and that there is room for improvement in the 
quality of ASR-only service, which could entail

[[Page 71857]]

increased cost. To the extent that providers compete to provide a 
superior quality of service, such costs may be incurred regardless of 
whether the Commission establishes and enforces quality-of-service 
metrics. By limiting the cumulative reduction of the ASR-only 
compensation rate during this period, the Commission is able to leave 
the issue of quantifying such costs to be addressed in the future, 
based on actual provider cost reports, should that be necessary. At the 
end of the five-year rate cycle established in the Order, the 
Commission will be able to assess additional years of ASR-only cost 
data and adjust costs as necessary at that time.
    66. The Commission concludes that this approach provides a 
sufficient safeguard against the possibility of unexpected increases in 
ASR-only IP CTS costs during the compensation period, including any 
plausible need for additional investment in R&D and technology. In 
effect, this approach establishes a $0.95 ``floor'' on the compensation 
rate for ASR-only service for the duration of the compensation period, 
rather than the $1.00 or $0.99 ``floor'' advocated by some commenters. 
Although advocates for a somewhat higher ``floor'' contend that their 
preferred level is necessary to ensure sufficient support for specified 
(but unreported) levels of marketing and technology expenses, as well 
as non-allowable CPE-related costs, the Commission rejects these 
arguments for the various reasons discussed above. In any event, the 
Commission is not precluded from revisiting the compensation plan prior 
to its expiration, should that be deemed necessary.
    67. A commenter also contends that the floor it advocates is needed 
to ensure that the per-minute dollar amount of operating margin earned 
by a provider from ASR-only service is not lower than the dollar amount 
of operating margin earned from CA-assisted service. While the 
Commission does not necessarily agree with the premise of this argument 
(that provider incentives are based on the per-minute dollar amount of 
operating margin rather than the percentage of underlying cost that it 
represents), it is unnecessary to decide this question. A $0.95 rate 
for ASR-only service still provides a substantial cushion above 
allowable per-minute expenses, rendering it highly unlikely that the 
average dollar amount of ASR-only operating margin will fall below the 
average dollar amount of CA-assisted operating margin.
    68. CA-Assisted Rate. For CA-assisted service, the Commission 
establishes a base compensation rate by applying the methodology 
discussed above. This is a ``base'' rate because it is subject to 
annual adjustment. The Commission totals all providers' reported 
allowable expenses for 2023 and 2024 (including newly allowable costs 
that were reported), and then adjusts the totals for inflation. Next, 
the Commission divides the results by 2023 and 2024 minutes, to yield 
average expenses per minute. Then the Commission averages the per-
minute rates for 2023 ($1.08) and 2024 ($1.37) to get a blended average 
of expenses per minute for 2023-24 ($1.23). Finally, the Commission 
adds a 10% operating margin to arrive at a base rate. This rate for CA-
assisted IP CTS is $1.35, $0.05 higher than the current rate and will 
apply in the first year of the new compensation period, Fund Year 2024-
25.
    69. Alternative CA-Assisted Rate Proposals. The Commission declines 
to adopt the alternative CA-assisted rates recommended by ClearCaptions 
($1.58 per minute), CaptionCall ($1.67 per minute), and Hamilton ($1.78 
per minute). The rates recommended by ClearCaptions and CaptionCall are 
based on their requests that the Commission revisit its longstanding 
policy disallowing TRS Fund support for the cost of provider-
distributed CPE, increase support for CA wages, technology costs, and 
outreach/marketing beyond cost-based levels, and increase the allowed 
operating margin to the 16-21% range. For the reasons stated above, the 
Commission declines most of these requests. However, support for CA 
wages is addressed through a conditional rate supplement, discussed 
below. Hamilton's recommended $1.78 rate is based on its recommendation 
to use a ``mean plus one standard deviation'' approach in lieu of 
average cost, which the Commission declines to adopt for the reasons 
stated earlier.
    70. Conditional Supplement to the CA-Assisted Rate. The Commission 
seeks to ensure that IP CTS providers have the ability to provide a 
high quality of CA-assisted service. The record reflects that some IP 
CTS CAs are currently paid below the federal contractor minimum wage 
(currently $17.20 per hour). There is likely a correlation between the 
quality of CA-assisted service and the amount of compensation that CAs 
receive. Therefore, the Commission seeks to ensure that providers are 
able, if they choose, to pay CA wages at least equal to the federal 
contractor minimum. To this end, the Commission establishes a 
supplemental rate for CA-assisted service, applicable to any of the 
four providers currently certified to provide CA-assisted service 
(CaptionCall, ClearCaptions, Hamilton, and InnoCaption), for those 
minutes of service for which the CAs producing captions were paid a 
minimum hourly rate, initially set at $17.20. If the Commission were to 
set a generally applicable compensation rate for CA-assisted service 
based on the assumption that, going forward, all IP CTS providers would 
pay that minimum, the Commission would have no assurance that reality 
will match that assumption. Especially in the absence of a labor 
shortage comparable to that affecting VRS providers, the Commission has 
less confidence that labor market factors will induce IP CTS providers 
to pay higher wages to CAs. The Commission concludes that, in these 
circumstances, payment of a higher rate for CA service meeting the 
stated condition will produce service-quality improvements that are 
approximately commensurate with the higher cost to the TRS Fund, and 
therefore will not significantly affect the efficiency with which IP 
CTS is provided.
    71. The record contains limited information on the CA wages 
currently paid by IP CTS providers and their subcontractors. However, 
the Commission estimates that if CA wages averaged $17.20 per hour in 
2023-24, the average cost of CA service (including a 10% operating 
margin) would rise by approximately $0.21. To ensure reasonable 
compensation for providers of CA-assisted service that raise CA wages 
to this threshold, the Commission adopts a rate supplement of $0.21 per 
minute, initially applicable to those minutes for which the CA 
producing captions is paid at least $17.20 per hour. The threshold 
amount of $17.20 per hour will be adjusted in the second and third 
years of the compensation period by the same factor applicable to the 
rates for CA-assisted service.
    72. The Commission directs the TRS Fund administrator to issue 
instructions to the four providers of CA-assisted service defining the 
method and format by which wage information should be submitted for any 
CA as to which a provider claims application of the rate supplement. 
The Commission delegates authority to the Consumer and Governmental 
Affairs Bureau and the Office of the Managing Director to review and 
approve such instructions.
    73. To prevent waste, fraud, and abuse of the TRS Fund, the rule 
expressly provides that the initial

[[Page 71858]]

payment of this compensation supplement is a preliminary payment, 
conditional on subsequent verification by audit that the CAs producing 
captions for minutes for which the supplement was paid actually were 
paid the hourly rate claimed by the provider. In this regard, any of 
the four IP CTS providers certified for CA-assisted service may request 
application of the rate supplement to minutes for which captioning was 
provided by a subcontractor. However, the provider is responsible for 
ensuring and documenting the accuracy of its representations to the TRS 
Fund administrator regarding the wages paid to the subcontractor's CAs. 
Further, a subcontractor's CA wages are equally subject to subsequent 
verification and audit. In such subsequent audit, if an IP CTS provider 
fails to produce documentation, satisfactory to the TRS Fund 
administrator, verifying the hourly rate paid to affected CAs--whether 
employed by the provider or a subcontractor--then the administrator is 
entitled to immediately reclaim any prior payments of the rate 
supplement for minutes handled by such CAs, by offsetting such prior 
payments against any amounts claimed in the provider's next monthly 
compensation request.
    74. When the Revised Rates Apply. To ensure that no party is 
adversely affected by the timing of the Report and Order, the new rates 
will not be applicable until the first day of the first month that 
begins after the effective date of the Report and Order. Therefore, the 
Commission directs the TRS Fund administrator to continue compensating 
providers of IP CTS under the current compensation formula of $1.30 per 
minute for all service provided through the last day of the calendar 
month that immediately precedes the effective date of the Report and 
Order. Service provided on or after November 1, 2024, shall be paid in 
accordance with the formulas adopted in Report and Order.

Annual Adjustment of Formulas

    75. For CA-assisted IP CTS, as a price indexing formula to be 
applied during the compensation period to reflect inflation and 
productivity, the Commission adopts its proposal to use the Bureau of 
Labor Statistics' Employment Cost Index for ``professional, scientific, 
and technical services'' (ECI-PST)--the same index used to annually 
adjust compensation for VRS and IP Relay, on the basis that this 
seasonally adjusted index, which includes translation and interpreting 
services. This approach is consistent with the index currently used to 
adjust the compensation formulas for VRS and IP Relay. As with IP Relay 
and VRS, labor is the largest expense incurred to provide CA-assisted 
IP CTS and the most likely to cause a cost increase over time. And as 
with VRS and IP Relay, the ECI-PST index tracks an industry sector 
similar to CA-assisted IP CTS. The Commission assumes that this index 
reasonably captures relevant productivity enhancements as well, and 
that accordingly, it is not necessary to set a separate productivity 
factor at this time.
    76. For ASR-only IP CTS, the Commission concludes it is unnecessary 
to adopt an adjustment factor at this time. It is possible that a 
technology-based service of this kind may exhibit productivity 
enhancements over time, which may more than offset the general 
inflation rate. However, technology cost is only one component--and not 
the largest component--of the cost of ASR-only service. After five 
years of additional experience with ASR-only service, the Commission 
will be better positioned to adopt an appropriate adjustment factor. In 
the interim, the Commission concludes that an adjustment factor is not 
needed, as a 10% annual reduction in the ASR-only rate will leave this 
rate substantially above average 2023-24 cost through the end of the 
compensation period.
    77. As proposed in the NPRM, the compensation rule also provides 
for annual review and adjustment of any claims for exogenous cost 
recovery, in accordance with the criteria adopted in 2020.

Final Regulatory Flexibility Analysis

    78. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission incorporated an Initial Regulatory 
Flexibility Analysis (IRFA) in the. The Commission sought written 
public comment on the proposals in the NPRM, including comment on the 
IRFA. No comments were filed addressing the IRFA.
    79. Need for, and Objectives of, Report and Order. In the Report 
and Order, pursuant to 47 U.S.C. 225, the Commission adopts multi-year 
compensation plans for IP CTS. To provide the appropriate compensation 
for the provision of, and continued availability of IP CTS, the 
Commission adopts separate compensation levels for IP CTS using only 
automatic speech recognition technology (ASR-only IP CTS) and IP CTS 
provided with communications assistants (CA-assisted IP CTS). 
Establishing two compensation formulas gives the Commission the ability 
to encourage the provision of both ASR-only IP CTS and CA-assisted IP 
CTS, while limiting the burden to the TRS Fund. For ASR-only IP CTS, 
the Commission adopts a compensation plan that reduces the ASR-only 
rate in stages, giving the Commission an opportunity to reassess the 
reasonable cost of ASR-only IP CTS, in light of future developments, 
before the rate actually reaches the cost-based level indicated by 
current cost data. For CA-assisted IP CTS, the Commission adopts a 
compensation plan that addresses cost changes due to inflation. The 
Commission also updates the reasonable cost criteria to improve the 
ability of IP CTS providers to provide and receive compensation for IP 
CTS, whether provided as ASR-only IP CTS or CA-assisted IP CTS. The 
Commission takes these steps to ensure the provision of IP CTS in a 
functionally equivalent manner to persons who are deaf, hard of 
hearing, DeafBlind, or have speech disabilities.
    80. Description and Estimate of the Number of Small Entities to 
Which the Rules Will Apply. The policies adopted in the Report and 
Order will affect obligations of IP CTS providers. Neither the 
Commission nor the SBA has developed a small business size standard 
specifically for TRS providers. All Other Telecommunications is the 
closest industry with an SBA small business size standard.
    81. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities. The provider compensation 
plan adopted in the Report and Order clarifies certain existing 
reporting, recordkeeping, and other compliance requirements for small 
entities. The adopted rules establish the compensation structure for IP 
CTS providers which may impose additional costs for small providers. 
The Commission retains the status quo of continuing to require IP CTS 
providers, including small providers, to file annual cost and demand 
data reports with the TRS Fund administrator. The Commission clarifies 
the data related to engineering, research and development, and 
communications assistant costs that shall be collected in the 
providers' annual cost and demand data filing. While there are no new 
or additional burdens on IP CTS providers to file these reports, small 
entities may need to hire professionals to complete cost reports with 
new formulas and calculations such as the glidepath approach for the 
ASR-only formula for example, so that they may comply with the adopted 
rules. These calculations and reports must also be adjusted to include 
certain expenses that were previously not allowable, such as for 
research and development to enhance

[[Page 71859]]

functional equivalence of IP CTS; the costs of acquiring NANP telephone 
numbers; and the reasonable costs of developing, maintaining, and 
providing software and web-based applications that enable users to 
access IP CTS from off-the-shelf user devices running on widely 
available operating systems. Although the Commission allows IP CTS 
providers to recover reasonable costs for numbering, certain software, 
and certain research and development costs, these allowances do not 
change the cost categories reported by providers. When it is possible 
to directly assign costs to either ASR-only or CA-assisted IP CTS, 
providers must do so, and when that is not possible, they must 
reasonably allocate such costs based on direct analysis of the origin 
of the costs themselves.
    82. Steps Taken To Minimize the Significant Economic Impact on 
Small Entities, and Significant Alternatives Considered. The adopted 
compensation structure and levels will apply only to entities which 
are, or may become, certified by the Commission to offer ASR-only IP 
CTS or CA-assisted IP CTS in accordance with the Commission's rules. 
The Commission adopted these multi-year compensation levels to 
compensate providers for their reasonable cost of providing service, to 
reduce the burden on TRS Fund contributors and their subscribers, and 
to ensure that TRS is made available to the greatest extent possible 
and in the most efficient manner. Among the steps taken to minimize 
significant impact on small and other entities is the adoption of 
separate compensation structures for ASR-only IP CTS and CA-assisted IP 
CTS based on their reported costs. The compensation for ASR-only IP CTS 
will be adjusted over a multi-year glide path. The CA-assisted rate 
will be subject to adjustment based on a factor that reasonably 
predicts whether relevant costs will rise or fall in the coming years. 
The compensation period will be effective for approximately five years, 
which is longer than the three-year alternative proposed in the NPRM, 
providing an incentive to improve efficiency and reassess formulas in 
response to unanticipated cost changes. These actions by the Commission 
should minimize the economic impact for small entities who provide IP 
CTS.
    83. The Commission considered various proposals from small and 
other entities, and the adopted rules reflect its best efforts to 
minimize significant economic impact on small entities. The Commission 
adjusted the allowable cost categories that it considers in determining 
the appropriate compensation formulas for the provisioning of IP CTS to 
allow small and other providers to recover costs and benefit 
economically from the increased compensation they will receive.

Ordering Clauses

    84. Pursuant to sections 1, 2, and 225 of the Communications Act of 
1934, as amended, 47 U.S.C. 151, 152, 225, the Report and Order is 
ADOPTED and the Commission's rules are hereby AMENDED as set forth.

Congressional Review Act

    85. The Commission sent a copy of the Report and Order to Congress 
and the Government Accountability Office pursuant to 5 U.S.C. 
801(a)(1)(A).

Final Paperwork Reduction Act of 1995 Analysis

    86. The Report and Order does not contain new or modified 
information collection requirements subject to the Paperwork Reduction 
Act of 1995, Public Law 104-13. Therefore, it does not contain any new 
or modified information collection burden for small business concerns 
with fewer than 25 employees, pursuant to the Small Business Paperwork 
Reduction Act of 2002, Public Law 107-198. See 44 U.S.C. 3506(c)(4).

List of Subjects in 47 CFR Part 64

    Individuals with disabilities, Telecommunications, Telephones.

Federal Communications Commission.
Marlene Dortch,
Secretary, Office of the Secretary.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR part 64 as follows:

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

Subpart F--Telecommunications Relay Services and Related Customer 
Premises Equipment for Persons With Disabilities

0
1. The authority citation for part 64, subpart F, continues to read as 
follows:

    Authority: 47 U.S.C. 151-154; 225, 255, 303(r), 616, and 620.

0
2. Add Sec.  64.641 to read as follows:


Sec.  64.641  Compensation for Internet Protocol Captioned Telephone 
Service.

    (a) Captioning with only automatic speech recognition technology. 
For the period from November 1, 2024, through June 30, 2029, TRS Fund 
compensation for the provision of Internet Protocol Captioned Telephone 
Service when captioning is produced using only automatic speech 
recognition technology (ASR-only IP CTS) shall be as described in this 
paragraph (a).
    (1) Initial rate. For the period from November 1, 2024, through 
June 30, 2025, the Compensation Level for ASR-only IP CTS shall be 
$1.17 per minute.
    (2) Second year rate. For the period from July 1, 2025, through 
June 30, 2026, the Compensation Level for ASR-only IP CTS shall be 
$1.05 per minute.
    (3) Rates for subsequent years. For the period from July 1, 2026, 
through June 30, 2029, the Compensation Level for ASR-only IP CTS shall 
be $0.95 per minute.
    (b) Captioning with communications assistants. For the period from 
November 1, 2024, through June 30, 2029, TRS Fund compensation for the 
provision of internet Protocol Captioned Telephone Service when 
captioning is produced with communications assistants (CA-assisted IP 
CTS) shall be as described in this paragraph (b).
    (1) Initial rate. For the period from November 1, 2024, through 
June 30, 2025, the Compensation Level for CA-assisted IP CTS shall be 
$1.35 per minute.
    (2) Succeeding years. For each succeeding TRS Fund Year through 
June 30, 2029, the per-minute CA-assisted Compensation Level shall be 
determined in accordance with the following equation:


Equation 1 to Paragraph (b)(2)

LFY = LFY-1*(1+AFFY)

Where LFY is the CA-assisted Compensation Level for the 
new Fund Year, LFY-1 is the CA-assisted Compensation 
Level for the previous Fund Year, and AFFY is the 
Adjustment Factor for the new Fund Year.

    (3) Adjustment Factor. The Adjustment Factor for a Fund Year 
(AFFY), to be determined annually on or before June 30, is 
equal to the difference between the Initial Value and the Final Value, 
as defined in paragraphs (b)(3)(i) and (ii) of this section, divided by 
the Initial Value. The Initial Value and Final Value, respectively, are 
the values of the Employment Cost Index compiled by the Bureau of Labor 
Statistics, U.S. Department of Labor, for total compensation for 
private industry workers in professional, scientific, and technical 
services, for the following periods:
    (i) Final Value. The fourth quarter of the Calendar Year ending 6 
months before the beginning of the Fund Year; and
    (ii) Initial Value. The fourth quarter of the preceding Calendar 
Year.

[[Page 71860]]

    (c) Supplemental Compensation for CA-assisted IP CTS. For the 
period from November 1, 2024, through June 30, 2029, Supplemental 
Compensation for CA-assisted IP CTS may be paid in accordance with this 
paragraph (c) to any of the following four IP CTS providers currently 
certified to provide CA-assisted IP CTS: CaptionCall, ClearCaptions, 
Hamilton, InnoCaption (Certified Providers).
    (1) Initial rate. For the period from November 1, 2024, through 
June 30, 2025, the Supplemental Compensation Rate for CA-assisted IP 
CTS shall be $0.21 per minute. This rate shall be paid, in addition to 
the compensation defined in paragraph (b) of this section, for all 
compensable minutes of CA-assisted service provided by a Certified 
Provider for which the communications assistant producing captions was 
paid an hourly wage of at least $17.20 (the Minimum Hourly Wage).
    (2) Succeeding years. (i) For each succeeding TRS Fund Year through 
June 30, 2027, the per-minute Supplemental Compensation Rate for CA-
assisted IP CTS shall be determined in accordance with the following 
equation:


Equation 2 to Paragraph (c)(2)(i)

LFY = LFY-1*(1+AFFY)

Where LFY is the CA-assisted Compensation Level for the 
new Fund Year, LFY-1 is the CA-assisted Compensation 
Level for the previous Fund Year, and AFFY is the 
Adjustment Factor for the new Fund Year, as defined by paragraph 
(b)(3) of this section.

    (ii) The rate in paragraph (c)(2)(i) of this section shall be paid, 
in addition to the compensation defined in paragraph (b) of this 
section, for all compensable minutes of CA-assisted service provided by 
a Certified Provider for which the communications assistant producing 
captions was paid a Minimum Hourly Wage of at least the amount 
determined by the following equation:


Equation 3 to Paragraph (c)(2)(ii)


WFY = WFY-1*(1+AFFY)

Where WFY is the Minimum Hourly Wage for the new Fund 
Year, WFY-1 is the Minimum Hourly Wage for the previous 
Fund Year, and AFFY is the Adjustment Factor for the new 
Fund Year, as defined by paragraph (b)(3) of this section.

    (3) Verification and offset. The initial payment of Supplemental 
Compensation for CA-assisted IP CTS is a preliminary payment only and 
is conditional on subsequent verification by audit that the CAs 
producing captions for those minutes for which the supplement was paid 
actually were paid the hourly rate claimed by the provider. The 
Certified Provider is responsible for ensuring and documenting the 
accuracy of its representations to the TRS Fund administrator regarding 
the wages paid to each affected CA, whether such wages were paid by the 
Certified Provider or by a subcontractor. In such subsequent audit, if 
a Certified Provider fails to produce documentation, satisfactory to 
the TRS Fund administrator, verifying the hourly rate paid to affected 
CAs--whether employed by the Certified Provider or a subcontractor--
then the administrator is entitled to immediately reclaim any prior 
payments of Supplemental Compensation for minutes handled by such CAs, 
by offsetting such prior payments against any amounts claimed in the 
provider's next monthly compensation request.
    (d) Exogenous cost adjustments. In addition to the applicable per-
minute Compensation Level, an IP CTS provider shall be paid a per-
minute exogenous cost adjustment if claims for exogenous cost recovery 
are submitted by the provider and approved by the Commission on or 
before June 30. Such exogenous cost adjustment shall equal the amount 
of such approved claims divided by the provider's projected IP CTS 
minutes for the Fund Year. An exogenous cost adjustment shall be paid 
if an IP CTS provider incurs well-documented costs that:
    (1) Belong to a category of costs that the Commission has deemed 
allowable;
    (2) Result from new TRS requirements or other causes beyond the 
provider's control;
    (3) Are new costs that were not factored into the applicable 
compensation formula(s); and
    (4) If unrecovered, would cause a provider's current allowable-
expenses-plus-allowed-operating margin to exceed its revenues.

[FR Doc. 2024-19559 Filed 9-3-24; 8:45 am]
BILLING CODE 6712-01-P