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Your 50-Cent Contribution: Part Deux

(Note: This is a followup to my December 3rd post on the Video Relay Services arrests. Click here for the original article.)

This Thursday, in the aftermath of the November 19 arrests of 26 people in the Video Relay Services (VRS) industry for allegedly defrauding the U.S. Government of up to $50 million in Federal Communications Commission (FCC) funds, the FCC will hold a three-hour “Workshop on VRS Reform,” a panel discussion to evaluate the effectiveness of the VRS program. The panelists invited to participate in this workshop represent a cross-section of the telecommunications and disability worlds, including an expert on accessible and inclusive technology, professors of communications at two universities, and representatives of several agencies representing the deaf, including Telecommunications for the Deaf Inc. (TDI) and the National Association for the Deaf (NAD).

In its initial announcement of the workshop, the FCC touched on three key areas: how effectively VRS can be delivered, how the VRS companies would be fairly compensated, and how VRS fraud can be dealt with. In this announcement are perhaps the two words that will deliver a major impact on the future of VRS: “competitive bidding.”

As the arrangement is currently set up, VRS companies must meet certain criteria set by the FCC to be eligible for the funds distributed by the National Exchange Carriers Association (NECA), which currently sets the rate at $6.50 per minute, or $390 per hour. Since Barack Obama became President in January, there has been a significant delay in the issuance of certificates to new VRS companies that submitted applications for such certification. (The number of VRS companies has increased in the past several years, from a starting base of three to approximately 12 now, give or take a few.) A source I know mentioned that the delay was in part because of the slow pace of staffing government positions with new Obama Administration appointees, but also because the new administration may have believed that the FCC under the Bush Administration was too laissez-faire in its approach to certifying VRS companies for fund eligibility. Since Obama was elected President, he has strongly emphasized accountability and transparency in government. The FBI investigation into the VRS fraud, which started this past spring, likely gave the FCC the explicit rationale to hold off on granting new certificates.

Now, with the recent arrests in November, the FCC may have the political cover it needs to change the way the NECA funds are administered and distributed. Until the workshop announcement came out two weeks ago, the thought of “competitive bidding” for NECA funds never crossed my mind. The prospect of limiting the number of companies in the VRS industry to a finite number presents both opportunity and danger.  Is this in the best interests of the deaf and hard-of-hearing community?

Telephone and cellphone consumers are financing the VRS program to the tune of a couple quarters a month per consumer, and deaf and hard-of-hearing people – like me — are able to make make VRS calls for free. Of course, we need a broadband Internet connection and a phone line for which we pay for, to make the VRS service work. I admit to being a bit surprised by the fact that I could make international calls to Canada and Italy on your dime.

The philosophy of making phone calls for free on someone else’s money does seem, on first thought, objectionable. But to me it makes sense. If deaf people want to use the VRS service effectively, they need a computer, and a DSL or cable connection, for which they must pay for. For hearing people, all they need is a phone – they do not need other devices. So, it makes sense that deaf people should be “reimbursed” for their use of their own computer and broadband Internet, through the use of free calls. Back in the days when deaf people used TTY’s, it took them up to 10 times as long as hearing people to conduct phone calls, because the transmission speed of TTY’s was extremely slow, and the words-per-minute rate of a typed communication was slower than the spoken equivalent. In other words, deaf people had to pay up to 10 times more than hearing people, especially for long-distance calls. Phone companies eventually provided discounted per-minute rates to deaf telephone customers, as long as the customers provided evidence of their hearing loss.

But making free calls to Italy? It doesn’t happen often, but when it does, I would think that there has to be a fairness standard with respect to the cost of an international call. Full disclosure: I was happily able to call some hotels in Spain to make reservations, and my wife made arrangements to rent a car in Northern Ireland the same way.

The NECA rate of $6.50 per minute is set to compensate VRS companies for the cost of operating the VRS services. I do not have an in-depth look into the typical financials of a VRS company, but I believe the rate also takes into account the cost that the deaf consumer would otherwise pay for a phone call. With VRS usage exploding over the past several years, stretching the NECA funds to their limits, there will certainly be a re-examination of the NECA rate level. The increased VRS usage also necessitates a need for more consistent monitoring by the FCC of VRS companies’ operations, especially on the issue of the amount of call minutes the companies submit to the NECA for reimbursement. As implied in its announcement, the FCC is concerned that too many VRS companies are being certified, stretching the ability of the agency to monitor these companies to ensure their reimbursement requests are legal. Hence, the prospect of competitive bidding.

But in its haste for better monitoring and accountability, is the FCC going to put a muzzle on competition and innovation within the VRS industry? Over the last three years, VRS companies have reinvested the revenue collected from the NECA into new features, devices and service improvements intended to improve the customer experience and ensure better operation of the service. Several new companies have started up over the last 2-3 years with more innovative business models, increasing the competitive bar and putting pressure on more established companies like Sorenson and Purple to provide better service.

If the FCC moves to competitive bidding, putting a limit on the number of VRS companies eligible for NECA funds, some of the new startups will go out of business. Those that are eligible for funds – and I believe this might be limited to perhaps four – will experience decreased competition. Granted, they will compete with each other, they will be better monitored by the FCC to ensure their practices are legal, and they still need to provide a solid customer experience. But the level of innovation will not be the same.

It is a catch-22. On the one hand, the new features that have emerged in the VRS market over the last several years, such as the VPAD and the Ojo, have been a boon for deaf consumers, improving their calling experience, and putting them on a much better par with their hearing counterparts on the ability to use the telephone. But the increasing number of companies licensed to receive funds, and the lack of transparency and accountability, may have opened the door to misuse of funds that were intended to benefit the deaf and hard-of-hearing community. The irony is that, if the charges handed down by the FBI are proven in Federal court, then some deaf people stole money intended to benefit them. A person commented on the Alldeaf.com forum: “Taking advantage of the government is one thing using people who are disabled to do it rather pisses me off.”

Yet if the FCC limits the number of companies eligible for these funds in the interest of better monitoring, then the VRS calling experience is in danger of being degraded. It is one thing to be accountable to the U.S. government when submitting the bill of reimbursable minutes, but it is another thing to ensure that the sign language interpreters are highly qualified, and that the technical operations run flawlessly. There are no policy guidelines at the moment on what constitutes a qualified sign language interpreter for a VRS service, or a certain technical floor above which the VRS platform must run effectively.

If the FCC plans to introduce competitive bids – thus shrinking the number of companies in the VRS market – then it must also implement policies to improve the quality of the experience, and set standards intended to preserve competition within the industry. If these guidelines are implemented, it provides the companies with an incentive to compete with each other for the best experience. The FCC must also be strict in the application of the certifications granted to the VRS companies: if a VRS company falls below a certain quality or profitability standard, then it should not be eligible for the next round of funds.

In business, there has to be a good deal of fear. Fear that your business will go bankrupt, because another company could have a better product than yours, or provide better pricing or customer service. If the FCC takes some of these competitors out of the equation, the fear will not be there, and thus there will be less incentive to improve your product or service.

I am going to watch tomorrow’s hearing with a good deal of interest.

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