FCC Adopts Interim Rates for VRS
29 06 2010Folks..
The Interim Rates for VRS are finally out…
Basically the FCC Order rejected the NECA’s proposed rates and adopted the following interim rates for VRS.
New Tiered Rates:
Tier I $6.24
Tier II $6.23
Tier III $5.07
Past (current) Tiered Rates were:
Tier I $6.70
Tier II $6.43
Tier III $6.24
NECA’s proposed rates were:
Tier I $5.78
Tier II $6.03
Tier III $3.90
Interim means temporary. This is for one year. The final rates will be decided after all the comments based on past and future comments from all the comments that have and will address VRS rates.
At any rate, these rates seem to be reasonable for all concerned – they’re what I would call "workable rates" pending future rates.
Side note: according to the DebtWire, this seems to be reasonable even for SorensonVRS at Tier III rate as DebtWire indicated that if rates are above $4.90, SVRS will be able to pay its debt obligations and still reap about 140 Million Dollars a year as profit.
eyes open & thumbs up,
Ed
Long Link: http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-10-115A1.pdf
I disagree with this rates. Do you know why?
6.24-6.23 both are pretty close each other while 5.07.. its 1.17 off. I think this still do not make any sense!
I think they should set 6.24 – 6.14 – 6.04 which it will much make sense.
One question for you, do you agree or not?
Hope,
I would love to open up the financial books of all VRS providers and analyze their costs, etc. then I would be able to answer your question. My educated guess is that what the FCC proposed seems to be “workable rates” – meaning they are probably not ideal, but can “live with it”.
eyes open & thumbs up…
Ed, Sorenson just stated that they plan, thru the courts if necessary, to file for a stay of the current rate…..this after first appealing to the FCC.
Hope,
Everyone hates Sorenson. Right or wrong, there’s the explanation. Do I agree? I think it’s too late to go after them or any other provider.
tg
Interesting that Sorenson will go to court on this. I wonder what their justification is in saying that $140 million (according to Ed) in profit is not enough? And by extrapolation, if they are making $140 million on $5/min, imagine what they have been making the last couple of years.
I wonder how this will affect the FCC’s decision on rates next year…
-arpino (Go Spain!!!)
tg,
I’m not sure I agree that everyone hates Sorenson. I’ve seen as much FCC bashing on this issue as Sorenson bashing. Sure, their de facto monopoly means that their business and ethical practices are called into question. So they should be. If their feelings are bruised by this level of scrutiny, well, $140 million buys a lot of kleenex and band-aids.
The number that I have seen thrown around is that Sorenson made 450 million profit for one year. So a 300 million drop justifies spending a couple of hundred thousand on a legal challenge to see if they can get it back! Just plain good business!
85% of Deafies love Sorenson – why else would they give them their business?
FCC bashing? Seen some. I’m talking hate. The feeling may or may not be justified. But someone has to be profitable. If Sorenson shrinks, another co. will take over. It used to be CSD.
At what point does profitable become unconscionable? If $140 million isn’t enough what is?
Maybe community interpreters should apply this model to our practice. We’ll demand that consumers pay for our R&D. After all, it’s our tuition, workshops, and research expenses that keep us at the top of our game. If clients balk at paying these expenses, we’ll threaten bankruptcy and get all of our children to write letters saying that this is the end of interpreting as we know it! If clients do agree to pay some of our expenses but not all, we’ll take them to court and demand more, more, more!
And when it comes out that we’ve been turning quite a tidy profit all along, we’ll say, “After all, someone has to be profitable. If we don’t do it, someone else will.”
Please tell me where $140 million comes from. Is it free & clear? What did CSD used to net? I think they’re all pretty much the same. And if not, they won’t profit.
Sorenson should be on next episode with American Greed TV show.
Terpgirl,
The profit, whatever it is, can be sliced and diced a dozen ways. It’s a private business, and no one outside a select few really need know those details, titillating though they may be.
To simplify it let’s call it ‘millions’. That’s millions of dollars in profit from one perspective, but from another perspective it’s a lot of missed job interviews, un-interpreted K-12 and college classrooms, unmet medical assignments, and inaccessible social service in general for Deaf Canadians, Deaf Americans, and other Deaf people around the world. The Canadian Association of the Deaf says, “American VRS is a predator that is doing profound damage to the lives of Deaf Canadians…” At what point does millions of dollars in profit become socially irresponsible?
It’s millions of dollars in profit from one perspective, but from another perspective, consider the enormous sacrifices interpreters make in working for VRS. We’ve sold our names and taken their numbers. This surrender of identity is no small thing in the sociolinguistic environment of interpreting. Company policy makes our work much more difficult, and sometimes more dangerous. The call volume steadily increases, while the number of seconds we have to process and reflect on our work steadily decreases. The ergonomic conditions of our work cubicles are shameful. We have surrendered control of our working environment. Our time is now regimented to the second. Somehow we are now all to believe that a ten-minute (and no longer!) break every hour or so is in our best interests, and that discretion and team interpreting are not.
Implicit in much of this sacrifice by interpreters was embracing the need for us to compromise our standards in the realization of this new wonder. Had we known then that we were making these sacrifices so that the company could turn a profit of hundreds of millions of dollars I’m not so sure we would have been so accommodating. In any event, we are most certainly compromised now.
My concern is less about the millions in profit than about the millions of consequences of that profit.
-arpino (Go Spain!!!)
Folks..
First of all that 140 million dollars remark did not come from me. It came from DebtWire. The best I understood it was that either creditors or investors “hired” DebtWire to analyze SorensonVRS and came out with that analysis (how DebtWire analyzed and with what data, I do not know – but DebtWire has a reputation that creditors and investor believe in).
SVRS did say that they “opened up” their financial to the FCC and SVRS obviously felt $5.07 wasn’t enough. It is very unlikely FCC will change its position, so likely will go to court. It is going to be interesting to see what the court says; so far SVRS has won one court case against the FCC. What will it be this time? I honestly have no foggiest idea.
Henry is right, though, 85% still use SorensonVRS so not all VRS users hate SVRS.
eyes open & thumbs up…
Interesting!! Again thanks Ed for keeping us informed and staying on top of these issues. If the court does take a close look at the rates most likely SVRS will loose. But this is the so called “GREED” tactic. All VRS providers should maintain a profit margin, otherwise why would they be in business,t he question is what is an acceptable margin? With innovation and discipline most of the providers would stay profitable, however, some of them do not like to see their pockets shrinking, so what you will see is that they will reduce their staff. Sadly, we will still see management greed at its best.
Once again I read profit=greed. As though all this money comes in truckloads and is piled in vault so corporate bigwigs can take “treasure baths.” I’ll bet most successful companies take their profits and put it back into the company to pay for the things that FCC doesn’t allow as required and allowable–like office supplies and staff training, interpreter training and so on. I think the interim rates lack of proportion, compared to previous tiers (20 cents between each of the 3 rates) speaks to the inequity of the system. How can the cost of a commodity (minute of interpreting) vary that much between the smaller companies and the larger company? Interpreter rates are pretty standard if one assumes paying interpreters according to the geographic market price. one interpreter can only process one call at a time. Economies of scale theories apply more to mass production of inanimate, concrete products from a factory that can be stored in a warehouse than they do to a skill-based, human knowledge application to a measure of time.
A Question for you to think about……..
Sorenson gave free VP100 7 years ago and DID BLOCK ALL ATTEMPTS for our deaf consumers to use other provider services, instead .. forcing them to use SVRS and threating them to remove their vp100s. at the same time LIMITING THE development of Dlink DVC 1000 which was distributed by the other providers (OH wait… Sorenson did develop DLINK DVC 1000 and allowed Dlink to sell it while Sorenson handles the directory server for Dlinks) REFUSING any proxy number calling between dlinks and vp100 forcing the deaf consumers to use IP addresses… Refusing any futher development of DLINKS, limitied it to its original software without any updates or modification.
Many deafy got too comfortable and prefer EASY way out so they settled for vp100….
now VP200 came out… SVRS made it VERY HARD for other providers access even though FCC ordered interoperability,, SVRS gave out 866 numbers in direct despite of FCC’s request of 10 digit local number…
NOW… do you think those Deaf people REALLY HAD THE CHOICE to pick SVRS as their preferred provider…… NO they did not.. they were coerced, conned, manipulated or whatever other way you call it into using SVRS……
IF it was the other way around…. SVRS would NOT be #1.. it would have been a TRUE competitive playing field!
Don’t forget.. Sorenson is pressing the case to increase 3rd tier minutes WHY??? to keep their CEO happy with his $22 Million dollar bonus check and to keep Sorenson’s owners of GTCR, Madison happy with $200million -$300million dollars paycheck within the past 6 months!
Re: 140 million profit???
The reimbursement rate allows the VRS providers to add about 11 percent profit in reporting their operating costs to NECA.
Question: Does this 140 million profit include the 11 percent or is this profit over and above the per minute operating costs?
For example, for March minutes all 9 VRS providers were reimbursed in May, 2010 $510,437,934 (510 million dollars). Assuming that 85 percent of all VRS users used SVRS, Sorenson’s 85 percent share of this distribution would be approximately $433,872,244 (almost 434 million dollars). If the 140 million dollar profit does not include the 11 percent allowed for operating costs, then that means that the built in profit came to $47,725,946 (almost 48 million dollars). And that 48 million dollars is just for the month of March. Over the course of a year, the built in profit would amount to almost $573 million dollars or 4 times the 140 million profit that Debtwire came up with. Like Ed, I wonder how Debtwire came up with that amount if they didn’t see the numbers provided by Sorenson which is proprietary information.
If you’re wondering where I got my numbers, it’s public information on the web page as follows:
https://www.neca.org/cms400Min/NECA_Templates/NECA_Home.aspx
then
https://www.neca.org/cms400min/NECA_Templates/TRSInterior.aspx?id=1253
If anyone else does the math or has more information, I’d like to know if I have my facts straight and if not, please say so as I’d appreciate confirmation or correction on the accuracy of my analysis. If my approach is correct, then I believe I’ve answered my own question in that the 140 million dollars does NOT include the built in 11 percent profit allowed for operating costs.
“so far SVRS has won one court case against the FCC”
i heard they won 2 cases. is it true? was it related to rates?
TERPgirl…
Sorenson won a court case in 2007 which HAD nothing to do with rates at all! FCC had ordered Sorenson to stop using the money for lobbying purpose , using VRSCA to send post cards to protest against FCC’s possible decision back in 2007 ,
Court had ruled in favor of Sorenson that they are enabled to do freedom of speech marketing…
REMEMBER it had NOTHING to do with Rates at all
Lawrence J Brick,
According to Debtwire, Sorenson management TOLD them that they needed $4.90 per minute to service their needs, Debtwire figured it will come to $140 million dollars at the $4.90 rate NOT the previous rate which you used to apply against May 2010′s number.
so $140 mil was a projection?
“REMEMBER it had NOTHING to do with Rates at all”
what about the other case?
Terpgirl,
It was really one case, FCC had appealed the decision and Upper court denied it so in a way, Sorenson won 2.
That statement, “REMEMBER it had nothing to do with rates at all” was reflected on the previous court case. this time… Sorenson has filed an intent to file lawsuit if FCC has not replied by July 9th and OBVIOUSLY it has to do with RATES this time.
The FCC has a problem with setting VRS rates. The problem is that Sorenson provides the service at a greater efficient manner than their competitors. As a result the FCC came up with the Tier structure. It’s a very bad idea to do this and is a waste of tax payer funds. By paying Sorenson less than their competitors for doing the same thing they are punishing the efficient provider and subsidizing inefficient providers. The FCC should just sent 1 rate for everyone (perhaps a small difference in tiers to give the small players an equal advantage given their lack of economies of scale), but certainly not such a big discrepency like this. It is absurd to pay company A one rate and Company B another rate just because Company B does it better. Would anyone intentionally pay a higher price for the same product if they were shopping at the store? Of course not. The FCC should reject the anti profit, anti business attitude in Washington. They are wasting money and killing jobs.
CW,
I understand where you are coming from but consider the alternative if FCC did not have a Tier structure
If FCC established a single rate that only Sorenson could provide service then the competition would wither away and Sorenson would be the only one left.
This might sound okay at first because Sorenson (despite what many bashers on here say) provides decent VRS services at a lower rate than anyone else. They also throw in a free Videophone to boot.
Take away the competition and this would change dramatically
Sorenson would have no incentitive to research and develop better equipment. They would not need to maintain a high quality their VRS service. If there is no competition I believe we would still be using the vp100 and newer exciting products that we are hearing about would probably be decades away rather than months or a few years.
Also, the rates would be cheaper at first but then later when Sorenson is the only dog in town they will be setting the rates. There will be nobody else who can do what they do so FCC will be forced to accept whatever rate Sorenson requests. If FCC doesn’t, Sorenson can simply exit the business and leave us without any VRS. Competition keeps the power where it belongs…in FCC’s hands. It also keeps us from having all of our chickens in one basket.
Companies like CSDVRS and Purple are important to VRS because they help drive innovation and keep the quality of our calls high. Even if they don’t provide VRS in the most efficient manner they need to be here to keep Sorenson on their toes and the VRS industry moving forward.
Look at the new technologies that Purple,Viable and CSD have brought to the market. Viable and Purple came out with mobile devices. CSD recently demontrated their VRS on the 4th generation iphone. Developments like this keep Sorenson sweating and it keeps the pressure on them to Research and Develop better products to stay ahead of the game.
I agree with all the statements about competition. Competition is crucial for this. As Claude Stout (sp?) said at the FCC workshop, “TTY and IP relay is only required to provide bare minimum service, and that is all they provide – -the bare minimum service.” Competition keeps us all on our toes. Having the appropriate set of skills is more critical in video relay than it is in other types of relay. Yes, there is a difference between a lousy TTY relay operator and a good one. However, there is a much greater difference between a lousy sign language interpreter and a good one. That is because we usually are not going word for word, but basing our interpretation on the meaning. Quality (or lack thereof) is more noticeable when you are going from one language to another than it is when you are transcribing the same language into two different forms. This does not mean that TTY relay is easier. It’s just a fact that poor transcription is usually a little easier to deal with than poor interpretation. And if it’s not a fact, it’s my opinion. Even if you disagree with me, I’m sure you agree that you want good interpreters and high-quality video relay. Without competition, we wouldn’t have what we have, even with all its flaws. We would have much less. I hope that never happens. I also agree with the fact that research and development is better when there is competition. Did you ever see anybody from TTY relay invent anything?
You are absolutely correct, competition is a very good thing. It’s a very tricky postion the FCC is in. They have to balance being efficient and saving tax payer money and also create an environment that fosters competition. I wouldn’t worry about Sorenson becoming so big that they can dictate to the FCC what the rate should be. That won’t happen because the FCC sets the rates and they do look at Sorenson’s books. If you do keep the tier structure I don’t think you the rates should be this different. There really is no economic justificaiton for this. If I’m the FCC I would be pushing some form of mobile VRS. It would help with getting the mandate to full equivalent service and it would be an open race to all the competitors. VRS is in its infancy, there should be a lot more innovation going forward. But the most important thing they need to do is come out with a long-term plan. You can’t keep doing this every year or every 3 years. These companies can’t invest in the future if you are constantly threatening them with drastic rate cuts.
Sorenson Communications has filed a petition for review of
the FCC’s rates with the United States Court of Appeals for the 10th
Circuit. The 10th Circuit is located in Denver and the filing states that it
is an appropriate choice because it is close to Sorenson’s Headquarters
…in Salt Lake City. The filing is a one page document and does not have much information.