NECA Report to FCC
4 05 2009All..
Here is the National Exchange Carrier Association (NECA) report to the Federal Communications Commission (FCC) on funding for Telecommunicaitons Relay Service (TRS).
Basically NECA is submitting report for the FCC to approve the new funding for TRS and explains how they arrive at new rates. Good information there, and not too hard to understand.
Quoting NECA "..submits proposed compensation rates, demand projections, projected fund size and proposed carrier contribution factor for the period July 2009 through June 2010, in accordance with section 64.604 of the Federal Communications Commission’s (FCC or Commission) rules."
Unquote.
A few interesting tidbit of info:
- Approx 4,640 carriers contribute to Interstate TRS Fund.
- If approved by the FCC, carriers will be charged 0.0113 of carrier’s revenue which will be added to the Interstate TRS Fund.
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Multi-state Average Rate Structure is used for TRS (accounting method)
Report explained various methods in calculating TRS reimbursement rates.
Most of you are interested in VRS there is a chart of past and proposed new rates for VRS. Worth checking that out.
Tiered: Past rate was $6.7362 per min to new proposed rate of $6.7025
Tiered: Past $6.4675 to new $6.4352
Tiered3: Past $6.2685 to new $6.2372
Tiered 1 is under 50K VRS Minutes, Tiered2 is between 50K plus one to 500K, and Tiered 3 is above 500K plus one.
Report mentions "Actual weighted average costs" which I think to me means break-even cost of service. If I’m wrong, kindly correct me. Anyway report shows that to be:
- 2007 was $4.5568
- 2007 was $3.9950
- 2008 was $4.1393
Wow…so let’s use 2008 and tiered 2. Theoretically speaking means profit of $2.0979 per minute. No wonder no VRS has bankrupted – at least not yet.
Other intriguing info: Quote: "VRS providers spent over $30 million in marketing and outreach in 2008 (up from approximately $20 million in 2007). The data also reflects that that total legal and regulatory expenses for 2008 (included in the indirect cost category) were approximately $8.9 million (up $4.0 million from legal and regulatory expenses reported for 2007).
Unquote
Folks, it is worth reading through this long report; it’ll give you valuable insights of how TRS reimbursement rates are calculated.
eyes open & thumbs up,
Ed
Hi Ed,
“Weighted Average Costs” refer to assigning costs to units based on the proportional cost/investment.
For example…if you sold coffee…you bought 5 bags of coffee beans for 20 dollars each…and 10 bags for 10 dollars each…your total purchase would be 15 bags for $200…meaning your weighted average cost would be $13.33 per bag ($200/15).
As it refers to the report…I think it means that some VRS companies spend more than others…and the industry wide average cost is $4.55/min.
the only missing info is mintues report that submitted by VRS providers are not on thet list. We pay fees to them therefore they should show the record of mintues that vrs provider submitted. How can you tell who is the largest marketing and who is the smallest marketing?
Tammy Joyce: You made a good point but my big question is how honest the provider will submit the minute report???
To my knowledge: Some operators of each provider would take advantage of timing by using some specific ph nbr in order to chat instead of answering clients’ calls….
In case you are curious – how did I know that????
I have several friends who work for “unnamed” different providers to make calls.. after making calls these friends of mine wanted to chat with me – just “take a break from answering the calls”…
Is that fair for the provider to give the minutes report like that?? To me, it’s unfair to other who works hard and so faithful to help deaf/hoh people by making the calls…
Too much sticky and problemic to me to have the provider’s minutes report to be submitted… unless I’m corrected SMILE!
Tammy Joyce,
That is the decision by the FCC not to divulge each VRS minutes/calls. If I remember right, it was based on VRS providers’ feedback not to divulge the informaiton to the public. However, I agree with you that more information from VRS industry should be shared with the public.
eyes open & thumbs up,
May,
Maybe You should encourage these “friends” to report that to the FCC.
Ed
Quote from the report: “The total projected funding requirement for the 2009-2010 funding year is $891.2 million …”
Taxpayers are angry at “government bailouts” and “government spending”. The US is broke. Foreign investors are less willing to buy US debt making it hard for the government (and everyone else) to borrow money to grease teh wheels of commerce.
President Obama is going after off shore tax havens and off shore profits. Everyone is shopping at Walmart instead of Saks.
And, we want almost $1 billion dollars for VRS that is frequently abused!?
And, we think Congress is not going to notice!?
Today I am going to clean out my junk closet and look for that 1988 TTY, just in case …
This report is interesting, and it became even more interesting after reading the ex parte of a series of meetings involving the legal guns of 4 VRS companies and various representatives from several Commissioners’ offices on May 1st. The ex parte letter summed up the response to a proposal of getting rid of the 3-year tiered payment system put in place 14 months ago.
First of all, here, the NECA report seems to indicate that the ‘break-even’ number is about $4.50 a minute. Now, the tiered payment plan has the rates at above $6.00 in increments. That’s a great contrast.
Anyway, back to the letter: the ex parte letter was a very strongly-worded letter (unnecessarily so, IMHO) but I had to laugh out loud at the arguments raised. Apparently they wanted to keep in place the tiered payment plan because to change it would harm the deaf community, the pursuit of functional equivalence, and so on. The letter even had a sob story of Snap!VRS investing over $50,000,000 in OJO VPs. (This story hasn’t changed since 2005, I think).
Anyway, the intro of the letter said that the proposed changes would inflict great harm on the deaf community, and tried to have a list of horrors but as I read the letter, it’s obvious that the harm would be done to their companies. They did not detail how it would affect the deaf community, only their bottom line.
This prompts me to raise three points:
1.) The VRS providers need to stop repeating the self-serving canard of telling the FCC to keep the interest of the deaf community in mind. Honestly, the VRS providers HAVE NO interest in the deaf community that’s more important to them than their bottom line. They want to keep the $ rolling in regardless of whether they’re efficient, doing it right, or whatnot. And will say anything to keep the status quo.
2.) The pursuit of functional equivalency is a joke. IT seems to be an oft-repeated line that is resorted to where no other legal arguments could be made to justify their positions.
3.) I think the deaf community is greatly saturated with VRS marketing. Since 2001, the VRS providers have repeatedly said that there still exists a great mass of deaf people who know nothing about VRS. It’s 2009 now and if the marketing done by the VRS providers (to the tune of over 30 million a year) hasn’t reached them yet, then by god, NOTHING WILL. Or it says that the marketing efforts are woefully inefficient.
Anon,
Harsh words, but lot of truth in what you say.
Thanks for expressing as you did.
eyes open & thumbs up,
Ed
JK-II,
Aptly put. I have been postponing putting TTY away and closing telephone account for good. What you said plus living out in the countryside (no high speed broadband) are what is holding me back from donating TTY to Goodwill.
eyes open & thumbs up,
Ed
The break even cost for 2008 was $4.1393 . Cost being paid to VRS is $6.2372. Generally a 20 percent markup is considered reasonable but this is close to a 51 percent markup. I am in the wrong business.
J.J. got it right, as far as I can tell. I do not really understand business, but when I put “weighted average cost” into Google, the answers I got seemed to imply that there is a missing word. Weighted average cost of what? I then copied the language into an e-mail to my dad, who would have his MBA if he had written his thesis (completed all the course work) and has spent his life working in the field of business. This was all he could come up with as a reply:
weighted by what, inflation, cost of product???not a very clear comment….weighting means there is a factor like inflation, or cost of oil etc….figured into a calculation….Dad
Again, I am not smart enough to understand all of these things, but the one thing that I do understand is that if you take the amount of reimbursement (six and change, depending on your company’s tier) and subtract the weighted average costs listed for that year, you absolutely do not come up with the amount of profit for the company. I was sick the day they taught math at school, but here is how I know that I am at least right on this one point:
Purple recently laid off a whole lot of people. My understanding is that 35 people were let go as they changed the direction of the company. When I combine that with the alert you sent out about their FCC filing to get rid of the smaller competition, I thought it was very strange. They are the second largest provider. What do they care about small potatoes? If I open up a hamburger stand and sell burgers and fries at a small place in my neighborhood, will Wendy’s care? Will they accuse me of wasting the energies of restaurant employees? If so, there must be a reason. I looked up Purple/Go America’s balance sheet. Here’s the link:
http://moneycentral.msn.com/detail/stock_quote?Symbol=US:PRPL
And here is the analysis, which I also don’t understand:
http://news.moneycentral.msn.com/ticker/article.aspx?Feed=PR&Date=20090331&ID=9747489&Symbol=US:PRPL
I didn’t understand how to read them, so again, I can only post my father’s reply:
Their sales are skyrocketing, but it appears that they are not profitable even at the current sales level….Looks like they owe very little and are possibly poised for profits if sales rise even more….Love DAD
In other words, this idea that owners of relay companies are taking off their clothes and rolling around naked on the floor in their cash, giggling and making plans to go to the Bahamas, may not be as true as it seems. I was shocked to see that they were not profitable yet. The second largest provider isn’t turning a profit? They seem to be earning enough money to do what they do, but nothing more. Is it mismanagement? Did they spend too much money on something they really didn’t need to? Will this change of direction and layoff of 35 people help them? Were the deep budget cuts of a few years ago to difficult for them to handle? I really don’t know. I’m not an insider to the company. However, the public information that any publicly-traded company is required to post shows that they were not profitable for the period displayed on the report.
Terpgirl,
Thank you for such informative comments and thanks to ur father for explaining the term.
I thought I better ask John Ricker who works for NECA and oversees TRS Fund operations to explain the term. John is the acknowledged expert on TRS Fund issues. That is what he responded:
“The weighted average cost takes into account all of the costs and all of the minutes where a simple average cost would be the average of the individual provider costs without taking into account how many minutes of service that provider handles. For example, say you have two providers one that handles 300 minutes and the other handles 100 minutes. The first provider has a cost of $4 per minute while the secont has a cost of $8 per minute. A simple average cost would be $4 + $8 divided by 2 or $6 per minute. The weighted aveage cost would take into account the minutes handled by each as follows (300 x $4) + (100 x $8) or $1200 + $ 800 divided by the total minutes of 400. This produces a weighted average cost of $5 per minute ($2000 divided by 400 minutes). Hopefully this helps highlight the difference. The weighted average methodology is the one that was used prior to the introduction of the new rate methodologies in the Nov 2007 Cost Recovery Order.”
Hope this is bit more clearer now.
eyes open & thumbs up,
Ed
Terpgirl,
On ur explanation of the profit/sales/etc of Purple. The following remarks are just educated-guess. I venture to opine that if salaries at the management level and higher are taken out of calculation, spreadsheet will show quite a bit profit. I would guess that most of the management folks in Purple are making lot of money – most certainly in 6 figures. Disclaimer: now this is educated guess so take it as an educated guess rather than as a fact. If I am wrong, feel free to correct me.
Now the fact that management folks make 6 figures and higher is not “wrong”. That is up to the shareholders to decide that. I just wanted to clarify how one can interpret spreadsheets.
eyes open & thumbs up,
Ed
Like you, I have no way of knowing if anyone is earning six figures for a management position at Purple. Although you do have to pay a certain amount of money to attract talent and skill in the interpreting and interpreter-related fields, I do not know if they are actually paying quite that much at that company. At the companies where I have worked, some salaries were more lavish than others, but I never heard of anybody quite hitting six figures. Then again, they may have kept it to themselves. Only 6.5% of the United States work force makes six figures off of one single job according to Time Magazine. However, if they ARE paying that much, then it is no wonder they cannot earn their profits! The other possibility is that they’re paying much lower salaries to management, but they have hired too many of them, becoming top heavy. There are also several other possibilities of what could be going on behind the scenes to lead to the balance sheet we saw. Either way, the company is not giving profit dividends out because it is earning no profits, and they cannot pay anything to the stockholders nor can they make their stock look attractive for purchase, as if it is going up and up. It is just sitting still. If there are exorbitant salaries being paid to management, that means that their expenses are probably too high, and they should look at cutting back. Nobody wants this kind of a balance sheet at their company. This lack of profits probably explains the recent shakeup with the layoffs and the filing to the FCC about the mom and pop relay shops driving up the cost of interpreters and making it difficult for Purple to compete. I do not want anything to happen to Purple. It would be wrong not to have competition; that is what keeps us all on our toes! Not only do companies who have to compete create better products and provide better customer service, but they also have to treat their employees pretty well. It works for the consumers as well as for the interpreters and other employees to have good competition out there. I’m concerned for Purple right now, even though I am not working there. I did take their training a long time ago, but it ended up never fitting into my schedule. There were a lot of things about the training that were good. I would not want to lose them, but I would also not want to lose the below-20,000-minute centers. ALL the competition should be there. It’s in everybody’s best interest.
YAAAAAY, I’M SO HAPPY FOR YOU! I know you’ll be successful!
I want understand all those base on FCC decision and not clear of reason why. I understand that base of cost is a lot because we are using VRS service by various provider.
My concerned about VRS such as opening new provider and while there are another two center recent laid off by Purple.
My concerned—
* the call on hold could impact due several VRS provider could be longer to wait while FCC says allow up to 2 minutes on hold. If the fund is lower than we are expecting or the needs to cover that expense for interpreter/VRS. If the VRS fund isn’t enough due the amount large interpreter under VRS and it could affect slow service as new product, feature, and so on.
* I do not know if the VRS become two or three provider as not same as today. Again, it could increase on hold waiting.
* I don’t know if that VRS fund that has cause decision change base on abuse due cost is too high for only Sorenson getting approx 70 and 80 percents from fund.
* My other concerned about 10 digit numbers that not going be the FCC’s concerns?
I just want see VRS go crazy and keep marketing is fun thing to see success as show there are Deaf employee role to show Hearing people to see that we have ability!
I believe, if there are service that involved with device such as MVP, VP200, or VPAD+ . I don’t know if you agree or disagree that word “pay” their service instead have FCC pay more on that expense?
It just interesting how it will turn around but just my concerned not enough interpreter due provider doesn’t get enough met fund to keep VRS provider run and turn out laid off and not have enough interpreter with any VRS provider that we need to make call via VRS.
As only Sorenson shared the newsletter about FCC while the remain VRS provider doesn’t share the news, it make me wonder why…