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Case number 17-1198 at L. Thornton Communications LLC Petitioner versus Federal Communications Commission at L. Mr. Borrelli for Petitioner Thornton Communications LLC, Mr. Kaye for Petitioner VRSCA, Mr. Pasch for Respondent FCC, and Ms.

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Rosen for Amiki

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Good morning and may it please the court.

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I'm Don Verrilli for Sorenson.

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The FCC has conceded that the tiered rate structure that it preserved in the 2017 order is highly inefficient.

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That's a serious problem because Section 225 requires the FCC to ensure that functionally equivalent service is provided in the most efficient manner.

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Now the FCC is trying to solve that problem by redefining what functional equivalence means

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and claiming that it is necessary to keep all current providers in the market to ensure functional equivalence.

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But Section 225 does not support the idea of keeping consumer choice alive for the sake of consumer choice.

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The relevant text, what it requires, is that deaf persons be afforded the ability to engage in communication by phone,

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in a manner that is functionally equivalent to that of a hearing person.

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It's about communication capability, not consumer choice.

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So the statute doesn't support that.

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And to the extent the FCC looked to communication capability, and that's trying to preserve the Spanish translation services and the deaf-blind services, what the FCC described as niche services,

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The tiered rate structure is probably the least efficient manner imaginable to preserve access to the services.

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What if what the FCC determined was that this isn't great, but monopoly would be less efficient in the long term and far less reliable as a means for ensuring

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that we will have services provided in a way that's affordable for the fund going forward.

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It's all going to work better if it's not a monopoly.

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several points in answer to that, Your Honor.

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They did say something along those lines also, but there's several problems with their rationale.

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First, what they did here, in contrast, of course, to what they did in the 2013 order, where they said that Section 225's efficiency requirement

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is incompatible with the tiered rate structure because of the inefficiencies it generates, and they adopted a transition plan to try to move to greater efficiency.

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Now it's four years later, and what they're saying is we're going to stick with tiered rates

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in the hope that at some point in the future, we will be in a position where we have closed the efficiency gap.

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Well, not just hope.

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I mean, they did say that we haven't yet got rid of the neutral platform, but we haven't yet really had enough time, for example, for the interoperability, transferability of technology to kick in.

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That had just started within the last year.

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And so the transition needed to go longer to see if these reforms

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would work.

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They just weren't ready to cut off the transition point yet because the only option seemed to be monopoly or continue the transition longer, let these other market reforms have more time to

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get some traction and investigate other technological developments that seem to be happening very rapidly.

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Would that be unreasonable if that's how we read their decision?

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Well, I think it is unreasonable because I think it's important to drill down on what the record actually shows about the structural reforms.

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And I'll focus specifically on interoperability, but let me make a more general point first, if I could, which is that there were a number of structural reforms that the FCC relied on in 2013 in thinking it would close the efficiency gap.

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neutral platform it abandoned, and portability of equipment it's implemented, didn't have the desired effect.

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FCC has acknowledged it.

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What's left is interoperability.

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Now what the record shows, and I think if you just trace through the sites you'll see that and I'll be happy to provide them, is that the interoperability has been largely implemented.

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And what Sorensen showed in his comments, in the records, supported by declarations, which you can find at pages 294 and 365 of the Joint Appendix, is that with respect to all carriers but one, global VRS, the interoperability problem has been solved.

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You'll notice the commission doesn't address that in its order.

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Instead, what it does is cite in footnote 83 at JA 15 to comments from the smaller providers.

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Those comments can be found at JA 272 and 273.

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And what you will see if you look there is that there is a one-paragraph assertion by the smaller companies, supported by no declarations and no empirical analysis,

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suggesting that interoperability is a problem for them because when their customers can't connect with Sorensen, they blame their own company.

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So the whole idea here that the system that failed to work for four years

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and did not close the efficiency gap.

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It's going to work in the next four years.

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Oh, wait.

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Interoperability didn't work for four years.

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It just, it only had a one year.

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It had just come in in the last year, correct?

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Right.

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But as I said, Your Honor, the problem is that what the record shows you based on the empirical evidence and declarations we put in is the problem is solved except for one of

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the two companies that makes up that small 3%.

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And I really don't think that what you're talking about is trying to close this efficiency gap that couldn't be closed not only with these structural reforms four years ago, but remember there was a glide path there where the

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companies' rates got lowered year by year on the assumption that they were going to become more efficient, and there was an end date.

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So what's your predictive judgment about what will take place if your proposal is adopted, single rate?

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So what we proposed, Your Honor, was a single rate with an analogy to a price cap approach, and set a single rate.

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and then have the FCC build in a factor where it predicts efficiency gains over time and reduces the rate over time based on those predicted efficiency gains.

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Now, if companies do better than the predicted efficiency, they make even more, but they've got to at least match the predicted efficiency.

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But the big difference between what we proposed and what the FCC did is that our proposal actually builds in

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that drive towards efficiency to close the efficiency gap.

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Their proposal doesn't.

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It relies entirely on this interoperability rationale, which I would submit really doesn't have any record support.

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But they say your proposal isn't efficient because it results in one company, Sorensen, getting a massive windfall.

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They have to set that price at an amount.

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to still protect at least one other competitor that's going to result in Sorensen getting paid far more than the actual cost of delivering service.

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Why isn't that an alternative form of inefficiency that they were entitled to sort of pick the

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the best of two bad options.

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Can I make two points about that?

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First, with respect to the specific rate, and then with respect to the overall approach.

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With respect to the specific rate, we had indicated a rate of $3.73.

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That's public information.

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And the commission rejected that, saying, you run the numbers on that, that's going to cost the fund more in the aggregate than our tiered rate system.

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Respectfully, that's an apples to oranges comparison.

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in a very important way.

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We calculated that 373 number based on the assumption that we would be compensated for the costs of research and development of IP.

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The commission disallowed those costs.

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If you take those costs out of our number and rerun, holding everything else constant, the number you come up with costs the fund, even in the short term, less.

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So that seems to me not justified, but then over- Can I just interject, and I do want to allow you to get to your second point, but if you take out the R&D costs and are talking about a lower per minute rate, is that a rate that is enough on this record to allow any competitor to remain in the market?

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We believe so.

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In candor, it won't allow the small, the smallest two that make up 3% to remain.

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But they've been in the market a long time.

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And as hard as they tried, they haven't gone above this 3% threshold.

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And that's because consumers aren't choosing them.

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And so in order to keep those two companies in the record, you're actually draining an enormous amount of money.

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from the fund but if I if I could try to get back to the overall approach is that with our overall approach we built in

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drive to close the efficiency gap over time.

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We've built in this efficiency enhancement.

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Theirs doesn't do that.

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In fact, it does the opposite.

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I think this is a really important point that if you contrast what the Commission did in 2013 where they did have a glide path for each company, they did something we disagreed with and that they had started at a different place for different companies.

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rather than a single rate, but they had a glide path that goes down each year because we expect you to get more efficient and we're cutting it off in four years so you have a real incentive to get efficient here because it's not lawful to maintain this system indefinitely.

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Contrast that to what they did here.

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They didn't put any, they put us on a glide path because we are the most efficient, we keep getting more efficient.

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They didn't put anybody else on a glide path.

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Respectfully, I think that tells you all you need to know about whether the commission thinks this efficiency gap is going to close over four years.

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Because if they thought there was a realistic prospect of that, they would have tried to drive towards efficiency in the long term.

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And the fundamental problem with their system is there is nothing in it that drives towards efficiency in the long term.

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Well, they have a four-year rate that they put in place, and they're going to be revisiting it.

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So that's one back-end assurance.

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And I think part of what I'd like to hear from you is you identify efficiency as lowest cost per minute, but clearly the commission is also including in its understanding of efficiency market mechanisms that will put pressure on providers to improve the quality and nature of their services.

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And one of the concerns that they have

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is if you're fighting so hard to get the same total amount of money, but to get it at a flat rate rather than a tiered rate, what's in it for you?

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And what's in it for you on one version is to be the dominant or exclusive provider, and that is on some lights not efficient in terms of pressure to improve the quality of the service.

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Yeah, that's a really important point.

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I'm glad your honor raised it.

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Again, I don't think that this order holds up.

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That rationale does not hold up, and let me try to explain why.

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You start with the statutory text.

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What it requires is that functional equivalence be provided in the most efficient manner.

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Now, one thing the FCC does say in this order is that it's trying to create incentives for innovation beyond functional equivalence and that the tiered rates will do that indirectly by keeping multiple people in the market.

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But with all due respect,

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Innovation above functional equivalence is not something that functional equivalence requires.

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You don't have to take my word for it.

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But why do you say innovation above functional equivalence?

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Functional equivalence evolves over time.

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As we who are hearing phone users know, the functional equivalence baseline has changed enormously.

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over the last decade or two.

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And that's going to continue to be the case.

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And so the question is, what's the mechanism to keep propelling that for the deaf community?

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So two points on that.

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First, Your Honor, the statute itself, as it's currently constructed, has a built-in hydraulic mechanism to achieve that.

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It says that the service that must be provided to deaf persons

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has to be functionally equivalent to the service provided to hearing persons.

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So as technology advances and quality improves and innovation occurs with respect to hearing persons, the law requires that that be matched to the extent possible.

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You can't be in this business

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And you can't meet the minimum standards that the FCC sets.

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Isn't the FCC's judgment that that would be better retained if there's more competition?

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Well, here's the problem with that.

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I guess, Your Honor, and you don't have to take it from me.

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I want to refer the Court to what the FCC has said about this very question in this very order.

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It's in paragraph 11 of the order, which is at JA6.

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Now, what the FCC is discussing here in this paragraph is the question of whether

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The companies in the business should be compensated out of the fund for research and development costs to advance their services beyond what functional equivalence requires.

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And what the FCC says unambiguously in paragraph 11 here,

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is they're not going to cover that compensation, that it would be an impermissible use of the fund, they say, because TRS services, features and enhancements that go beyond the applicable TRS mandatory minimum standards, the standards the FCC

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has promulgated to ensure functional equivalence are not necessary for the provision of functionally equivalent service.

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And that is because mandatory minimum standards define the level of functionality

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that a TRS provider must provide.

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So what they're saying here is we will not cover the R&D costs of innovation.

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It's an inappropriate use of the fund.

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But then to try to justify the tiered rate structure, they're going to say, well, if we spend this additional money that would otherwise be inefficient under the tiered rate system, it'll create some spurs to innovation.

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But one could read that actually.

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You could flip that.

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I mean, it says that the commission is disallowing

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TRS funds support for individual provider research beyond meeting mandatory minimum standards.

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But let's say you have a big spurt forward in technology for the non-deaf community, and there's a conundrum.

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How is the deaf community going to have functionally equivalent forward technological advance?

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That it sounds like is something that at least this paragraph might allow because it's research and development to parallel, to meet the functional equivalence goal as opposed to going beyond meeting that goal.

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And you still, there is a translation involved.

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So simply having a law that ties

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what deaf people should be provided to what's going on in hearing telecommunications.

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That's just the legal requirement.

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There's a technological engine that has to produce the functionally equivalent service opportunity, right?

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And so that's something that I think the FCC is concerned about and that I don't see as necessarily being foreclosed or devalued by paragraph 11 of the order.

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I guess the reason I would push back on that respectfully, Your Honor, is that

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The question the FCC has to answer to justify the maintenance of the tiered rates is not just whether it might create some spurred innovation, but whether it is, in the language of the statute, the most efficient manner of doing so.

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collusively clear that covering the R&D cost of innovation is a far more efficient way of doing so than this backdoor approach.

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And that you will not find a word in this order in which the FCC tries to justify this spurred innovation idea on the ground that it's the most efficient manner of trying to incentivize the innovation to close that gap.

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I wonder, just stepping back, if you could tell us a little bit about what is the competition in this very lopsided market?

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How do individual deaf people choose services, and is there a growing market for these services?

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Are there people who might want them, who don't have them?

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So, you know, I apologize, I don't know the specific answer to the question whether the market's growing.

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I don't think so, though.

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I think it's a relatively stable market.

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There's an obligation under the law that, to the extent possible, deaf persons be provided with this functionally equivalent service.

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That obligation actually falls by law on the common carriers, the phone companies in 225C, and that this system has evolved as a way to accomplish it.

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And in terms of the way in which this system works, I do think one point really important is that

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And it goes to this sufficiency gap problem is that the way in which companies normally have an incentive to become more efficient is price competition.

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They need to lower their costs so they can undercut their competitors.

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doesn't happen in this market, because the FCC sets the rate.

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So no price competition there.

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So there isn't that incentive to get efficient, and that's why we think you've got to build in regulatory matters.

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Although, isn't there, under a set price, still incentive to lower your costs, because whatever the price is that's allowable, you'll get more of it as revenues?

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So, you know, not really.

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I think that's the best answer to that.

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I know the commission has said that,

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Here's the problem with that way of thinking and the experience of the prior four years vividly illustrates the problem with it, that you may have a short-term incentive to lower your cost because it'll increase your margins in the short term, but if at the end of the four-year period you know that you're going to be engaged in another round of cost-based rate setting,

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you're going to cost yourself money the next time around because the new rates are going to be set off the lower costs.

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And that's incentive that we think greatly diminishes any incentive they have over the short term.

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Now, I don't want to go beyond what we've cited in our briefs, but that is a principle, and there's a case why we didn't cite in our briefs, but that's a principle that this Court has recognized in other rate-making cases.

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And if the Court wants, I'd be happy to provide a citation to it.

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and I do think that that's why there just isn't anything in the system to close the efficiency gap so four years from now they're not going to be in any position better than they are now to engage in the kinds of things like reverse auctions and others to bring about the kind of competitive environment they want.

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If you don't close the efficiency gap they're going to be exactly where they are now and exactly where they were four years ago.

[00:20:28] Speaker 07:
Although the rates have been going down over time

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For us, yes.

[00:20:35] Speaker 07:
But also the higher rates, no?

[00:20:38] Speaker 02:
Well, what happened was from 2013 to 2017, they tried to make them go down.

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Didn't work.

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They went back in.

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They jacked them back up.

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If you look at the rates they set now, they're higher than the rates before.

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And if you look at the number of minutes to which those rates apply, they're vastly greater number of minutes to which those higher rates apply.

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So you look at that, this is less efficient now.

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than it was when this system started.

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It's more expensive than it was when the system started.

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And there's nothing in place to try to close the efficiency gap.

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And so we just think you cannot justify this order.

[00:21:10] Speaker 06:
Can I just ask one question to follow up on George Piller's question about technological advancements?

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If I understood it right, is it true that if you had to do research and development to

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catch up to technological developments that were happening for the hearing community, that that would be reimbursed?

[00:21:32] Speaker 06:
I thought they were not reimbursing anything that wasn't designed just to get to the minimum, mandatory minimum standards.

[00:21:39] Speaker 02:
That's correct.

[00:21:40] Speaker 06:
That's correct.

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And do you know when the mandatory minimum standards were last updated?

[00:21:43] Speaker 02:
I don't know that, Your Honor, for certain, but they do, you know, they can update them over time.

[00:21:48] Speaker 02:
And of course, if I may, I realize I'm pushing my luck here a little bit, but if I may, you know, in terms of the providing services to Spanish translation services or services to the deafblind,

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is exponentially more efficient way to do it, it's just included in the minimum standards.

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Then everybody's gotta do it, it's available, there's a guarantee that it's available, and you don't incur these kinds of costs.

[00:22:09] Speaker 02:
And that's the problem with the way the FCC is approaching this.

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You really can't justify what they've done in terms of functional equivalence, and yet that is the sole way they've tried to justify it.

[00:22:18] Speaker 06:
But if the concern is that monopoly, which would be the practical effect of the other approaches, would leave the monopolizing company

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very little incentive to innovate.

[00:22:34] Speaker 06:
Is that relevant to both functional equivalency and efficiency?

[00:22:39] Speaker 02:
Well, you know, our proposal is designed to keep the proposal Z combined entity in the market with a drive towards closing efficiency gap over the long term.

[00:22:52] Speaker 02:
Yeah, but I will say the issue, we're here because Sorensen is by a considerable measure more efficient than any of the other companies in providing this service.

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And we're operating in a statute that requires that the service be provided in the most efficient manner possible.

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And therefore, it's probably not surprising that

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Sorenson's in an advantageous position given what the statute requires.

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Now, as I said, we're not saying that there's inevitable monopoly here or pushing for it.

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The Commission has the authority to consider

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the efficiency over the long term.

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That's what this court said four years ago.

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It's clearly right.

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But they're not considering the efficiency over the long term.

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They haven't done anything to close the efficiency gap.

[00:23:44] Speaker 07:
There is suggestion in the record that the reason that Sorensen is the most price efficient at this stage is because it got a highly subsidized and very

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great head start in the market and that interoperability is only just beginning to be resolved and that that's a bigger hurdle than the Commission believed and that there really is a concern

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that if Sorensen is the only provider, that that really won't be good for the quality of service or the price going forward.

[00:24:24] Speaker 07:
What's your response to that?

[00:24:26] Speaker 02:
Several responses.

[00:24:27] Speaker 02:
First, Sorensen wasn't the first out of the gate.

[00:24:31] Speaker 02:
I forget whether it was Z or purple.

[00:24:33] Speaker 02:
One of the two.

[00:24:33] Speaker 02:
They were the first.

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They've been there longer than we have.

[00:24:35] Speaker 02:
So it's not that we had some first mover advantage.

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Not the case.

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We were better.

[00:24:40] Speaker 02:
So that's why Sorensen is where it is.

[00:24:43] Speaker 02:
Second, with respect to this question of the concern over time, again, I think the question that the commission's got to answer, and it doesn't even try to answer here, is whether its concern is addressed most efficiently by this tiered rate structure and keeping these other companies, particularly the really tiny ones afloat.

[00:25:04] Speaker 02:
Now, what I would suggest, one way of thinking about the

[00:25:08] Speaker 02:
why the risk is not as great as your honest question maybe supposes, is to look at the penalty provisions for providing service that falls below minimum standards.

[00:25:23] Speaker 02:
It's a very lengthy regulatory site here.

[00:25:26] Speaker 02:
It's 47 CFR 64604 C5 3 IE 4, and you can find it at page 11 of the appendix to our brief.

[00:25:36] Speaker 06:
Basically... Sorry, could you say that one more time?

[00:25:40] Speaker 02:
I meant the 604, just the stuff that comes after 604.

[00:25:42] Speaker 02:
It's 604, C5, three little i, E4, which is at page 11 of the appendix to our brief.

[00:25:54] Speaker 02:
And what this provides is that if a company falls below the minimum standards on a given day, the FCC does not pay them for that day.

[00:26:04] Speaker 02:
And that has happened to Sorenson.

[00:26:07] Speaker 02:
It's happened to other companies, too.

[00:26:09] Speaker 02:
If you think about it for a minute and you sort of think about what Sorenson's revenues are as reflected in the record, a one-day non-payment is a very, very substantial fine.

[00:26:21] Speaker 02:
And so I think that in answer to your honor's question, what the commission's got to do, because the statute requires that the services be provided in the most efficient manner, is answer the question of whether that kind of robust enforcement scheme with extremely serious penalties for falling below minimum standards

[00:26:38] Speaker 02:
is a less efficient method of securing quality of service over the long term than the tiered rate structure that keeps these other companies in.

[00:26:47] Speaker 02:
Again, they didn't try to answer that question, and therefore you can't uphold the order on that basis.

[00:26:55] Speaker 02:
I'll reserve my remaining time for that.

[00:26:59] Speaker 02:
Thank you.

[00:27:04] Speaker 03:
Mr. King.

[00:27:11] Speaker 08:
Good morning, and may it please the court.

[00:27:13] Speaker 08:
My name is Anthony Kay, counsel for the Video Relay Services Communication Association.

[00:27:19] Speaker 08:
I'd like to reserve 30 seconds of my time for rebuttal, please.

[00:27:23] Speaker 03:
In 2013, this court ruled that by adopting a new speed... Would you begin by telling us the relationship that your entity has with Sorenson?

[00:27:33] Speaker 08:
the well the entity is an individual entity run by Sharon Hayes Sorenson does provide single member no no there are about 10,000 members she's the director she became actual members member actual members because there's some dispute about

[00:27:51] Speaker 06:
Yes.

[00:27:52] Speaker 08:
Well, there's a dispute.

[00:27:53] Speaker 08:
I mean, it's not a membership like a club, but there are 10,000 people with whom the organization communicates on a regular basis by email and on whose behalf they advocate.

[00:28:05] Speaker 08:
Well, that's membership.

[00:28:06] Speaker 06:
Right.

[00:28:08] Speaker 06:
The defense matters.

[00:28:09] Speaker 08:
Well, there's no charge for membership if that's what you're

[00:28:13] Speaker 06:
No, but people have to fill out a form and say, I'd like to be a member.

[00:28:17] Speaker 06:
Or do you say anyone who's interested in your email or your newsletter counts as a member?

[00:28:23] Speaker 08:
Anybody with whom we communicate on a regular basis would count as a member.

[00:28:27] Speaker 07:
And they don't have any role in selecting leadership or they don't pay dues?

[00:28:33] Speaker 08:
No, they do not.

[00:28:34] Speaker 06:
Do they have any role in the positions the association takes?

[00:28:39] Speaker 06:
Formulating or influencing?

[00:28:40] Speaker 08:
Well, they communicate with the director and provide information.

[00:28:45] Speaker 06:
If they're not providing money, they're not voting for anything, what control would they have over

[00:28:49] Speaker 06:
The whole point of associational standing is that the association is the voice of its members, and if its members don't like the message, it won't communicate that message.

[00:29:00] Speaker 08:
Well, for associational standing, only one member is required, and Ms.

[00:29:05] Speaker 08:
Hayes is a member.

[00:29:06] Speaker 07:
But they have to be a member.

[00:29:07] Speaker 07:
That assumes the predicate fact, which is whether it is actually a membership organization, which is what we were probing.

[00:29:15] Speaker 07:
there's a different argument that her position would suffice, but if it's not a membership organization in the first place, then her being the member on whose behalf the organization is suing would not suffice.

[00:29:31] Speaker 08:
Well, why do you have to, is there a rule that you have to have?

[00:29:34] Speaker 08:
I suppose I shouldn't ask you a question, but I don't believe that an organization has to have more than one member in order to be an association.

[00:29:42] Speaker 08:
I mean, it can be a, you can have one.

[00:29:45] Speaker 08:
I'm not saying that there is one.

[00:29:46] Speaker 08:
I'm not going to concede that there is one.

[00:29:48] Speaker 08:
But it's very clear that Ms.

[00:29:49] Speaker 08:
Hayes, who submitted comments in this docket for years before she became a member.

[00:29:57] Speaker 06:
What makes her a member?

[00:30:00] Speaker 06:
As opposed to the people that you communicate with?

[00:30:04] Speaker 06:
Or you're saying it's the same?

[00:30:05] Speaker 06:
Is her position different, her membership different than everyone you communicate with?

[00:30:10] Speaker 08:
Yeah, she runs the organization.

[00:30:12] Speaker 08:
She helps decide what positions it's going to advocate.

[00:30:16] Speaker 08:
She communicates with counsel to make decisions on what positions she's going to advocate.

[00:30:20] Speaker 06:
Is there anyone else similarly positioned in this organization?

[00:30:23] Speaker 08:
Well, she is the director, so she's the only person making those ultimate decisions, but she does that in communication with other individuals with whom she speaks who are deaf and hearing disabled.

[00:30:39] Speaker 08:
you know, on a regular basis at meetings around the country, through email communications.

[00:30:46] Speaker 08:
I mean, you're trying to, I mean, I'm not gonna say that this is like, you know, the ACLU where everybody pays $50 a year or $25 a year, but I can tell you that I have never, as a member of the ACLU, been asked what issues I would like them to advocate on my behalf for.

[00:31:06] Speaker 08:
All I do is write a check.

[00:31:07] Speaker 06:
Here you have the opposite you don't like the positions they take you stop writing checks And you let them know that you're withdrawing or resigning as a member does that happen?

[00:31:16] Speaker 06:
Here the people just unsubscribe People would unsubscribe

[00:31:22] Speaker 03:
I think you were about to explain the relationship between Sorensen and the VR.

[00:31:28] Speaker 08:
So Sorensen provides some funding.

[00:31:30] Speaker 03:
Summer funding.

[00:31:31] Speaker 08:
Yes.

[00:31:34] Speaker 03:
Does funding come from other sources besides Sorensen?

[00:31:37] Speaker 08:
I don't.

[00:31:41] Speaker 08:
Probably not.

[00:31:42] Speaker 08:
I think Sorensen is their main source of funding.

[00:31:45] Speaker 08:
Ms.

[00:31:45] Speaker 08:
Hayes contributes her own money, but it would be a small amount in comparison to what would be contributed by Sorensen.

[00:31:54] Speaker 07:
Do those subscribers pay for the information that they get?

[00:31:59] Speaker 08:
No, it's provided free of cost.

[00:32:00] Speaker 06:
Do they donate money?

[00:32:01] Speaker 06:
Is there a donate here?

[00:32:04] Speaker 06:
There's no donations.

[00:32:05] Speaker 08:
There's no donation solicited.

[00:32:07] Speaker 06:
This is the members of the video relay services or even common carriers make donations to this organization.

[00:32:16] Speaker 08:
They do not as far as I'm aware.

[00:32:22] Speaker 06:
Is there any way you could verify for this court whether there's any other funding?

[00:32:26] Speaker 08:
Yes, I can submit a brief afterwards.

[00:32:28] Speaker 08:
I can go back and find out if there have been any other sources of financial support for VRSCA after, if that is helpful.

[00:32:39] Speaker 03:
In the rules of our court, the presence of our court, you're supposed to show standing in your opening brief, or it needs to be self-evident from the petition.

[00:32:51] Speaker 03:
In what way have you done that?

[00:32:54] Speaker 08:
In our opening brief, we referenced comments submitted by a member, Sharon Hayes.

[00:33:02] Speaker 08:
We referenced several comments that she made, stating that she is deaf.

[00:33:07] Speaker 08:
and that she's a member, and that she uses VRS to communicate.

[00:33:12] Speaker 08:
And then in our reply in response to this argument... Let's just talk about your opening brief.

[00:33:17] Speaker 03:
I'm saying, what's the case that you made in your opening brief that there is associational standing here?

[00:33:24] Speaker 03:
And I think you answered the question.

[00:33:26] Speaker 07:
Okay, the difficulty is she may well have had standing as an individual, given what you've said about her interest in this issue and in this matter.

[00:33:36] Speaker 07:
But that's distinct from whether she has standing as a member of a membership organization.

[00:33:42] Speaker 07:
And that's the case that you presented in your brief was that you have a membership organization, you represent a membership organization and she's the member for standing purposes and that's a different inquiry and it's not as clear that you've made that case given

[00:34:01] Speaker 07:
the lack of evidence that this is in fact a membership organization?

[00:34:06] Speaker 08:
Or questions about the evidence?

[00:34:08] Speaker 08:
The case that we're relying on for this is Sierra Club versus EPA 292 F3rd 895, which is an opinion of this court.

[00:34:18] Speaker 08:
And the law that is set forth there is that so long as any individual member has standing, the association has standing.

[00:34:28] Speaker 07:
Right.

[00:34:28] Speaker 07:
But the question is, and that was a situation in which there was no doubt that it was a membership organization.

[00:34:34] Speaker 07:
So it doesn't really speak to this question.

[00:34:36] Speaker 08:
I'm not sure we have.

[00:34:38] Speaker 08:
Actually, in the Sierra Club case, the associational standing wasn't found because the Sierra Club hadn't identified any specific members who had standing yet identified.

[00:34:48] Speaker 08:
It stated generally that it had individuals who lived

[00:34:52] Speaker 08:
near the environmental hazards about which they were concerned.

[00:34:59] Speaker 08:
And that's why associational standing wasn't found there.

[00:35:01] Speaker 06:
That's all your declaration does here, too.

[00:35:03] Speaker 06:
She says, I'm deaf and I use VRS, which is no different than saying, I live near the waterway.

[00:35:09] Speaker 08:
Well, she uses the VRS services, and her complaint is that there's going to be a decline in VRS services and service quality if rates are cut, which is less speculative.

[00:35:20] Speaker 07:
We don't know which service she uses, do we?

[00:35:23] Speaker 07:
Is she a Sorensen user?

[00:35:26] Speaker 08:
She uses multiple services, but I would assume.

[00:35:28] Speaker 07:
We don't have anything in the record telling us which service she uses.

[00:35:32] Speaker 08:
Your Honor, with respect, why should it matter?

[00:35:34] Speaker 08:
If she's using VRS services, they're all covered by this rate-making

[00:35:39] Speaker 07:
Because whether she would be affected, adversely affected in a way that an order would remedy is a question.

[00:35:48] Speaker 08:
Well, the general concern that she's raised is that by reducing rates without having conducted an evaluation of service quality metrics, that it's unclear.

[00:36:02] Speaker 08:
Well, there's a general concern that for all of the providers, not just Sorensen, that rate cuts have shown in the past that

[00:36:11] Speaker 08:
service quality has gone down, particularly with interpreting quality, and interpreting is important for the members and for deaf people, and generally because it affects their ability to communicate, and it affects their perceived competence.

[00:36:30] Speaker 06:
And so... Did she allege any place in her... I see nothing in the declaration, and I didn't see anything in her testimony that says she individually has suffered a deterioration in service.

[00:36:43] Speaker 08:
Well, she says in commentary that they have observed.

[00:36:52] Speaker 08:
So she has observed, I mean that's based on her observation that and discussing with her, her biggest concern is a decline in the quality of interpreting services.

[00:37:03] Speaker 06:
Well, you say a concern.

[00:37:06] Speaker 06:
As I read her submissions, they were more sort of, you know, I think the law is being violated and that really bothers me because I like this law and I'm someone who could be affected by this law, but she doesn't say anywhere that she's been injured or facing imminent

[00:37:22] Speaker 06:
injury or direct injury as a result of this rule, which I think is also required.

[00:37:28] Speaker 08:
She hasn't commissioned a study to look at the broad picture.

[00:37:32] Speaker 06:
She doesn't have to question a study.

[00:37:33] Speaker 06:
I'm talking about her personal experience.

[00:37:35] Speaker 06:
You're talking about her as the individual member here.

[00:37:38] Speaker 06:
You have a declaration that says, I'm deaf and I use VRS, which again is just the beginning, not the end of the standing inquiry.

[00:37:45] Speaker 06:
We all know it has.

[00:37:46] Speaker 06:
three prongs, you have to show injury and redress.

[00:37:50] Speaker 06:
And I just didn't see what her injury was.

[00:37:52] Speaker 08:
You have to show us a likelihood of injury.

[00:37:54] Speaker 08:
You don't have to show actual injury.

[00:37:56] Speaker 06:
Where did she allege a likelihood of personal injury?

[00:37:59] Speaker 08:
In comments.

[00:38:01] Speaker 06:
Where?

[00:38:02] Speaker 06:
Or if you could let me know on rebuttal.

[00:38:05] Speaker 08:
So her comments were at JA108 through 09.

[00:38:13] Speaker 06:
And if you'd rather do it on rebuttal, that's fine.

[00:38:16] Speaker 06:
But if you see in there where I missed an individualized injury or individual risk of injury.

[00:38:43] Speaker 06:
What else we get is, quality of interpreting appears to deteriorate.

[00:38:47] Speaker 06:
But she doesn't actually say that she's suffered any deterioration.

[00:38:51] Speaker 08:
But I mean, it's necessary.

[00:38:53] Speaker 08:
I mean, if she didn't say, I have suffered this personally, if she's saying, it's appeared to, it's based on her observation.

[00:38:58] Speaker 06:
Well, appeared to actually sounds like I didn't suffer it myself.

[00:39:01] Speaker 06:
Maybe she heard from someone else or something.

[00:39:03] Speaker 06:
But actually, if I had suffered a deterioration, I wouldn't go, well, it appears there was a deterioration.

[00:39:08] Speaker 06:
That's not how we speak.

[00:39:09] Speaker 06:
It was worse for me on Monday.

[00:39:13] Speaker 06:
That's kind of at least how I would read that language.

[00:39:17] Speaker 08:
Well, I mean, with respect, I think that the general concern here is a perception that she has from her experience as the director that over time, as rates get cut, the service quality goes down.

[00:39:34] Speaker 08:
And ironically, it's the FCC that's

[00:39:38] Speaker 08:
should have been evaluating service quality metrics over the last several years, but has only opened a docket since last year to look at this issue.

[00:39:46] Speaker 08:
So there's no data at this point to evaluate it.

[00:39:54] Speaker 08:
And the basic point that VRSA is trying to make is that without objective

[00:40:01] Speaker 08:
an objective analysis of service quality metrics, there's no way to know whether these rate cuts are going to contribute to a further deterioration in service quality.

[00:40:12] Speaker 08:
And it's just a basic, if you're trying to deliver functionally equivalent services, understanding

[00:40:22] Speaker 08:
whether or not the service, the level of service quality is up, it's not as important, and there's, one can assume that if rates keep getting cut, it's going to impact service negatively, not positively.

[00:40:33] Speaker 07:
Mr. Kay, is there a growing market for these services, or is it basically a fixed number of people, and most of them have access to the equipment and the service?

[00:40:44] Speaker 08:
Most don't have access.

[00:40:45] Speaker 08:
Well, not most.

[00:40:46] Speaker 08:
Many people don't have access, so there should be a growing market.

[00:40:49] Speaker 08:
In my opinion.

[00:40:50] Speaker 07:
Is this the kind of thing, so there are deaf people who don't have access?

[00:40:54] Speaker 08:
It was deaf people are disproportionately lower income and lower income people have a harder, can't afford, all can't afford broadband and broadband is one of the things that you need to have access to VRS services.

[00:41:08] Speaker 07:
Because the FCC is in a process of including broadband in its minimum services, so that should be an improvement.

[00:41:15] Speaker 08:
It's trying to, but the amount that it will pay to individuals for broadband is way below the amount that's required for VRS services.

[00:41:25] Speaker 07:
Is there also a market among businesses or individuals?

[00:41:29] Speaker 07:
I mean, if I wanted to call a deaf person, I couldn't use VRS because I don't have it at my home.

[00:41:37] Speaker 08:
Yes, you could.

[00:41:38] Speaker 08:
You pick up the phone and you call a person that you know who is deaf and it gets routed through one of these providers.

[00:41:43] Speaker 07:
Or if I had a deaf houseguest, that person couldn't call from my house?

[00:41:47] Speaker 08:
No, not unless they brought their own video phone or used a tablet or some other FaceTime.

[00:41:53] Speaker 08:
I mean, there are ways of, there are other forms of technology that you can use now besides a video phone.

[00:42:00] Speaker 08:
But a video phone is what's used by most people.

[00:42:04] Speaker 07:
And is it really better?

[00:42:05] Speaker 07:
I wondered about that, why a desktop with a camera isn't just going to put this whole question about equipment.

[00:42:11] Speaker 08:
I wondered that too, but as a practical matter, you're dealing with a lot of elderly people and people who have not adapted to the changes in technology yet, so equipment like video phones is still relied on heavily by the market.

[00:42:29] Speaker 08:
I agree with you.

[00:42:30] Speaker 08:
At some point, I think it's going to become outdated.

[00:42:35] Speaker 08:
FaceTime and products like that will be interoperable with thank you very much Thank you

[00:43:12] Speaker 01:
I think everybody this morning understands that the point of the statute that we're dealing with is to provide deaf and hard of hearing individuals comparable quality telephone service to the service that's provided to individuals, functional equivalency is the term the statute uses.

[00:43:37] Speaker 01:
According to Sorensen, this simply involves the FCC setting minimum standards, and once it sets the minimum standards, then it has to adopt the lowest cost way of implementing those standards.

[00:43:51] Speaker 01:
The Commission has taken a different approach for several reasons.

[00:43:56] Speaker 01:
One is because functional equivalency is not a static matter.

[00:44:01] Speaker 06:
It seems to me the FCC is the one that has said time and again and again that what functional equivalency means is compliance with the mandatory minimum standards.

[00:44:13] Speaker 06:
And we are not going to look at the issue from the perspective of the consumer.

[00:44:18] Speaker 06:
It's a technological equivalency in how service is provided

[00:44:23] Speaker 06:
by service providers.

[00:44:25] Speaker 06:
We won't look at it when it comes to innovation.

[00:44:28] Speaker 06:
We won't look at it when it comes to access to the necessary equipment.

[00:44:33] Speaker 06:
And then all of a sudden here, for the first time, without explaining all the times you previously defined functional equivalency as compliance with mandatory minimum, you're saying let's throw in a little nugget here where we look at it from the consumer's perspective and say they'd like to have choice.

[00:44:50] Speaker 06:
Well, they might also like to have broadband and equipment they can afford, but you refuse to look at it then.

[00:44:55] Speaker 06:
So isn't there an inconsistency in the FCC's position here?

[00:44:57] Speaker 01:
Well, Your Honor, if I can respectfully disagree with your statement at the Commission, this is the first time the Commission has ever looked at it this way.

[00:45:06] Speaker 01:
That's not true, and the Commission has on a number of occasions talked about the fact that

[00:45:14] Speaker 01:
It needs to consider consumer choice and the benefits of competition because functional equivalence is a changing consideration.

[00:45:25] Speaker 01:
I point you particularly to paragraph 31 in the joint appendix.

[00:45:30] Speaker 01:
Joint Appendix 17, paragraph 31 in the order.

[00:45:34] Speaker 01:
And footnote 92, which cites four or five commission orders going back to 2000, in which the commission has pointed to the benefits of consumer choice and the innovation provided by competition

[00:45:50] Speaker 01:
as an element in determining.

[00:45:52] Speaker 06:
No, no, no, no, that's just saying the same thing you said here.

[00:45:55] Speaker 06:
Have you, is it, am I wrong that the FCC has repeatedly said that what functional equivalency means is compliance with the mandatory minimum standards?

[00:46:04] Speaker 06:
What the Commission has... Is that yes or no?

[00:46:08] Speaker 01:
The Commission has said that one element of functional equivalency... One element?

[00:46:11] Speaker 06:
Where have they said one element?

[00:46:13] Speaker 01:
Well, the commission was not faced with someone saying you can only limit it to that.

[00:46:19] Speaker 01:
It's true that the commission... No, they were.

[00:46:20] Speaker 06:
They were faced with it when people said, hey, let's support providing this equipment to people who can't afford it.

[00:46:28] Speaker 06:
No, no, that's looking at...

[00:46:30] Speaker 06:
That's consumer choice as much as anything else.

[00:46:33] Speaker 06:
If they can't afford the equipment, they can't even choose to be able to communicate by phone.

[00:46:37] Speaker 01:
Respectfully, Judge, the Commission's judgment was that the statute did not extend to the provision of equipment.

[00:46:44] Speaker 01:
Because?

[00:46:45] Speaker 01:
Because the statute talked about services.

[00:46:48] Speaker 06:
Equivalence services.

[00:46:50] Speaker 06:
That's right.

[00:46:51] Speaker 06:
Equivalent services.

[00:46:52] Speaker 06:
It didn't look at the consumer's interest in choice, which you're doing now.

[00:46:55] Speaker 06:
You looked at it only from a technological service perspective.

[00:46:59] Speaker 06:
And now to say we'd like consumers to have the same choices that everyone else does seems to be inconsistent with the statement that we're not even going to allow these companies, all of the companies, to help cover the costs of the equipment for people to even be in a position to choose anything.

[00:47:18] Speaker 01:
It wasn't, Your Honor, it was, again, respectfully, it wasn't the Commission saying we have a range of choices and we choose not to

[00:47:28] Speaker 01:
adopt a policy of allowing service providers to provide equipment.

[00:47:33] Speaker 01:
The Commission interpreted the statute to restrict compensation to the provision of services and not to equipment, and this is a determination.

[00:47:46] Speaker 06:
Because what I'm going to do is the rationale.

[00:47:48] Speaker 06:
My understanding of the rationale there was that

[00:47:52] Speaker 06:
The statute focuses on the service end.

[00:47:55] Speaker 06:
The service needs to be equivalent.

[00:47:59] Speaker 06:
The statutory text, as he's even said, the text compels this.

[00:48:04] Speaker 06:
Statutory text says we don't look at how it feels on the consumer end, what options they have.

[00:48:12] Speaker 06:
We look at the service.

[00:48:14] Speaker 06:
Are we providing equivalent service?

[00:48:17] Speaker 06:
There's nothing in there that says consumer choice.

[00:48:20] Speaker 06:
Equivalency in service is not the same as consumer choice.

[00:48:23] Speaker 06:
Consumer choice is from their perspective.

[00:48:26] Speaker 06:
Looks at it from the consumer's end.

[00:48:28] Speaker 06:
And that seems to me a change, quite a change in the FCC's position.

[00:48:33] Speaker 01:
Well, I'm obviously not making myself clear on this, but if the Commission had understood when it addressed the issue of providing equipment in the past, if the Commission had understood that the statute permitted compensation for that,

[00:48:52] Speaker 01:
I believe it very well might have included compensation for that as an element of consumer choice.

[00:49:00] Speaker 07:
I was just going to say, bracketing the equipment question, you pointed us to paragraph 13, and you talk about competition to ensure a range of service offerings.

[00:49:13] Speaker 07:
and incentive to improve VRS offerings and maintaining higher standards of service quality than if it faced no competition.

[00:49:22] Speaker 07:
And I wondered if you could give us examples of the kinds of service improvements or benefits that are encompassed within functionally equivalent service, bracketing and putting to the side what the commission has said is not encompassed.

[00:49:39] Speaker 01:
Well, one is that an example of service quality that involves both a mandatory minimum standard and an element of competition is this issue of speed of answer.

[00:49:54] Speaker 01:
How quickly a VRS provider answers the phone when a consumer calls.

[00:50:00] Speaker 01:
The Commission has a rule on that for VRS.

[00:50:02] Speaker 01:
It requires speed of answer to be two minutes.

[00:50:05] Speaker 01:
Now, no one really thinks that if you picked up your regular phone, that if you had to wait two minutes to get it dialed down, that that would be acceptable.

[00:50:17] Speaker 01:
The Commission tried to reduce that by adopting a reduced minimum in 2013.

[00:50:24] Speaker 01:
And for, because of the inadequacy of the record, that was romantic.

[00:50:29] Speaker 01:
What the Commission has attempted to do, so that standard remains in effect.

[00:50:35] Speaker 01:
What the Commission has attempted to do to provide the benefits of competition is that it now publishes

[00:50:42] Speaker 01:
providers performance and their actual performance is significantly less than two minutes.

[00:50:48] Speaker 07:
That's very helpful.

[00:50:49] Speaker 07:
Are there other examples of service improvements of the kind that might be affected one way or the other by more or fewer participants in the market?

[00:51:01] Speaker 01:
Well, look, the commission in the 2017 further notice of proposed rulemaking, which is that

[00:51:08] Speaker 01:
Paragraph 155 of the Joint Appendix, the Commission has listed a series of things that it is exploring that would not be mandatory, but would be optional services.

[00:51:20] Speaker 01:
One is skills-based routing, where service providers could provide, for example, interpreters who were specialized in technical areas or legal areas.

[00:51:31] Speaker 01:
Another is the provision of deaf interpreters.

[00:51:34] Speaker 01:
say, specialized form in which there would be interpreters who are themselves deaf and there would be two interpreters on the line, which is helpful for some users of VRS.

[00:51:48] Speaker 01:
Another issue is at-home interpretation, which the Commission has, for several reasons, the Commission has been hesitant.

[00:51:56] Speaker 01:
to provide in which interpreters would operate from home instead of from a call center.

[00:52:02] Speaker 07:
But those aren't required by the mandatory minimum standards.

[00:52:05] Speaker 01:
Those are not required by the mandatory minimum standards, but the patient has begun tests of those and with the idea of authorizing them, and this is something that... Does it pay for those services now?

[00:52:18] Speaker 06:
Pardon me?

[00:52:18] Speaker 06:
Does it pay for those services now?

[00:52:20] Speaker 01:
The services are not, to the extent that they are part of these tests, developmental tests, yes, it will pay for them.

[00:52:29] Speaker 01:
They're not authorized to be paid for now.

[00:52:32] Speaker 01:
I suppose they could be provided, but they wouldn't be part of... Sorry, I'm confused.

[00:52:37] Speaker 06:
Right now...

[00:52:38] Speaker 06:
If a company were to provide this in-house interpreter, could they then include that in the rate that they think they need to get from the fund?

[00:52:50] Speaker 01:
Well, some of the at-home interpretation, for example, is not permitted now.

[00:52:55] Speaker 01:
That's not authorized.

[00:52:56] Speaker 01:
something like skills-based routing, I think that potentially could be authorized, but it would be... None of it is right now.

[00:53:04] Speaker 01:
None of it is right now as far as I know.

[00:53:06] Speaker 07:
So just to circle back, just to close the loop on this one point, I was curious what were examples that would substantiate the point that you were making by reference to paragraph 31, which was that competition was important to

[00:53:24] Speaker 07:
to improve VRS offerings, higher standards of quality of, as I understood it, the mandatory minimum service.

[00:53:34] Speaker 07:
answer time.

[00:53:36] Speaker 07:
Are there other aspects that are now part of mandatory minimum service, but where the quality could be really affected by competition or not?

[00:53:48] Speaker 01:
There are mandatory minimums that, for example, address interpreters.

[00:53:55] Speaker 01:
They require certain, if this is

[00:54:00] Speaker 01:
Section 64.60, this is again the 64.604 of the rules, but this is right at the beginning.

[00:54:09] Speaker 01:
It's on page 14 of our statutory addendum, 64.604A, operational standards, which actually go beyond technical standards.

[00:54:20] Speaker 01:
and right at the beginning it has standards for communications assistants or interpreters, and it requires that they be competent in skills in typing, grammar, spelling, interpretation, familiarity with hearing and speech, disability, cultures, language, and etiquette.

[00:54:38] Speaker 01:
Now, this is a fairly general requirement.

[00:54:42] Speaker 01:
This is an area, for example, in which I think there is competition now.

[00:54:47] Speaker 01:
There's competition for getting the best interpreters.

[00:54:50] Speaker 01:
And this is something that the service metrics preceding the Commission has begun.

[00:54:55] Speaker 01:
It's trying to determine how it can measure

[00:54:58] Speaker 01:
the quality of service of something like this and make this available to the public so that there are two users of VRS so that they will be able to make a choice if they have a choice between a company that provides better quality interpreters

[00:55:16] Speaker 01:
than some of the others.

[00:55:19] Speaker 07:
Is there anything in the record about, for example, incentive-based wages from different companies?

[00:55:27] Speaker 07:
If I were a very skilled deaf ASL interpreter, I might expect to get a higher wage if there's more than one company bidding for my services, but is there anything in the record on that?

[00:55:41] Speaker 01:
If there is, I'm not aware of it, Your Honor.

[00:55:45] Speaker 01:
The compensation of interpreters and the quality of interpreters is a subject of continuing debate, I believe, as a general matter.

[00:55:55] Speaker 01:
But I'm not sure there's anything specific.

[00:55:57] Speaker 06:
Where did the FCC say that we want consumer choice, that competition, so there's consumer choice,

[00:56:03] Speaker 06:
so that the service provided will be better as opposed to, as I read it, we want consumer choice because that's what people who are non-DEF have.

[00:56:13] Speaker 06:
That's what I read.

[00:56:14] Speaker 06:
Where do they say?

[00:56:15] Speaker 01:
Well, again, back to 31, one of the reasons, paragraph 31 on JA 17, one of the reasons the Commission says it believes competitive choice is necessary is because it provides a competitive incentive to improve VRS offerings.

[00:56:32] Speaker 01:
I'm not sure if that addresses, but that was certainly what the commission was looking at because it believed that the... But it found that hadn't happened.

[00:56:41] Speaker 01:
Pardon me?

[00:56:41] Speaker 06:
How is that going to happen?

[00:56:43] Speaker 06:
It had found that hadn't happened for the last four years.

[00:56:47] Speaker 06:
And that all we were talking about was interoperability was the only thing left to work on.

[00:56:51] Speaker 01:
Interoperability is a significant issue.

[00:56:53] Speaker 06:
That's not translators.

[00:56:54] Speaker 06:
That's technical equipment, right?

[00:56:57] Speaker 01:
Interoperability is technical equipment, yes.

[00:56:59] Speaker 06:
So that's not a consumer.

[00:57:01] Speaker 06:
That the interpreter is good is part of the service end of things, right?

[00:57:07] Speaker 06:
It's just not a service if the interpreter isn't doing the interpreter's job.

[00:57:12] Speaker 06:
But when I heard the Commission talking about consumer choice, it was

[00:57:17] Speaker 06:
And it seems to make perfect sense that non-deaf people have choice of providers and the deaf community should as well.

[00:57:28] Speaker 06:
It seems perfectly sensible.

[00:57:30] Speaker 06:
It just seems quite inconsistent with the FCC's decisions time and again before that functional equivalence is measured by compliance with the mandatory minimums and it's looked at from the service

[00:57:43] Speaker 06:
And time answering calls, quality of interpreters is a service, and the SCD hasn't looked from the experience or choice.

[00:57:53] Speaker 06:
They haven't tried to make consumers equivalent to non-deaf consumers.

[00:57:59] Speaker 06:
If it did, then it would have to help them out with their extraordinarily high costs of equipment.

[00:58:03] Speaker 01:
Well, again, I think, for example, those sites in footnote 92, I think, address that issue rather.

[00:58:12] Speaker 06:
And I think it's certainly true that... But do they see anything different there than what we just said, and that is that we want to have choice because we think they should have choice, like non-DIF customers do?

[00:58:23] Speaker 01:
Well, perhaps not.

[00:58:26] Speaker 01:
So it's just the same thing.

[00:58:27] Speaker 01:
I'm not sure that I had looked at them in that context.

[00:58:32] Speaker 01:
But again, this is functional equivalence, as I said right at the start, is a dynamic and evolving process.

[00:58:39] Speaker 01:
And the Commission's attempt to address that issue and to ensure that... Has the Commission said it's dynamic and evolving?

[00:58:46] Speaker 01:
Yes.

[00:58:49] Speaker 06:
From a technological perspective or from a consumer end?

[00:58:54] Speaker 01:
Well, I think both.

[00:58:55] Speaker 01:
I mean, it's certainly from a technology.

[00:58:57] Speaker 06:
Technology is certainly dynamic and evolving these days.

[00:58:59] Speaker 01:
It certainly is because the functional equivalence when TRS was first provided was a teletype machine.

[00:59:08] Speaker 01:
Right.

[00:59:08] Speaker 06:
No, from the technological end, I take traditional notice of the fact that it's changing rapidly for everybody.

[00:59:14] Speaker 01:
Right.

[00:59:16] Speaker 01:
But from functional equivalence as a matter, it works together because

[00:59:24] Speaker 01:
By providing consumer choice, it provides competitive incentive for providers to improve their service.

[00:59:33] Speaker 07:
Let me ask you, Mr. Power, what would need to happen before 2021 for the providers to be on a more equal footing where the FCC might migrate toward one rate?

[00:59:46] Speaker 07:
Is that a goal still for the FCC to migrate toward one rate?

[00:59:50] Speaker 01:
I think the commission would consider that ideal because that would be, to the extent that we're looking at lower cost, that would be a more efficient rate.

[01:00:01] Speaker 07:
And what would need to happen and is that on deck?

[01:00:05] Speaker 01:
I'm not sure I can say it's on deck.

[01:00:07] Speaker 01:
What would need to happen is that the smaller providers would have to become larger.

[01:00:14] Speaker 01:
And when you're in a market when one entity controls 80 percent of the market, it's unlikely it's going to change dramatically.

[01:00:23] Speaker 07:
Would two providers suffice from the FCC's perspective?

[01:00:28] Speaker 01:
I can't answer that question.

[01:00:31] Speaker 01:
I think the Commission, that would provide some competition.

[01:00:35] Speaker 01:
The Commission is committed to re-examining this, certainly by 2021.

[01:00:39] Speaker 03:
We defer to the predictive judgments of agencies a great deal, but why should we defer to the predictive judgment of the FCC in this one when you got it so wrong in 2013?

[01:00:52] Speaker 03:
There was a predictive judgment that this would head towards more competition, better choice for consumers, and it hasn't.

[01:01:00] Speaker 03:
What's going to change this time that should appeal to our desire to defer to predictive judgment?

[01:01:11] Speaker 01:
Judge Gerber, there are a couple of things.

[01:01:13] Speaker 01:
Number one, keep in mind that VRS is still a relatively new service.

[01:01:17] Speaker 01:
It certainly was quite new in 2013 when the commission made those judgments.

[01:01:22] Speaker 01:
Secondly, the smaller providers are working things out.

[01:01:30] Speaker 06:
It's quite new.

[01:01:32] Speaker 06:
I mean, there's a 2010 order.

[01:01:34] Speaker 06:
It's been a decade, right?

[01:01:36] Speaker 01:
Yes.

[01:01:37] Speaker 06:
Okay.

[01:01:38] Speaker 06:
That's not normally quite new.

[01:01:39] Speaker 01:
Well, the TRS service goes back to 1990.

[01:01:45] Speaker 01:
So as an element of TRS service, it's a relatively new service.

[01:01:49] Speaker 01:
But yes, it has been for more than 10 years.

[01:01:54] Speaker 03:
But the commission... You were saying that the smaller companies are, you said, working together, what do you mean by that?

[01:02:00] Speaker 01:
Well, the two of the smaller companies have combined and they're going to, by 2020 or sooner, they will become one somewhat larger company.

[01:02:10] Speaker 06:
And combined they will have what percentage of the market based on current numbers?

[01:02:15] Speaker 01:
Maybe 10%.

[01:02:17] Speaker 01:
I'm not sure exactly.

[01:02:19] Speaker 01:
That's changing as well.

[01:02:20] Speaker 01:
The third provider, Mr. Rosen is representing this morning, who Mr. Rosen is representing, well, is also increasing.

[01:02:30] Speaker 01:
It's still in the emergent category, and I think it's like perhaps 3% of the market, but their service is improving.

[01:02:37] Speaker 01:
So I think it's not, I think there's, it's not pie in the sky as,

[01:02:43] Speaker 01:
Sorenson says to think that there will be some improvement between now and 2021.

[01:02:47] Speaker 06:
Where does the Commission say that imposing this tiered rate structure, this revised one, will not just keep these smaller companies alive, keep them on life support, but will actually, there's any realistic prospect that it will empower them to take over

[01:03:11] Speaker 06:
enough of a share of the market to actually viably compete with someone who's got 80 percent of the market now.

[01:03:18] Speaker 06:
That's what the SEC needs to find to say that this is going to lead to real competition efficiencies.

[01:03:24] Speaker 06:
So where do we make that connection?

[01:03:25] Speaker 01:
I'm not sure the Commission has made that conclusion.

[01:03:28] Speaker 01:
What the Commission has made is

[01:03:29] Speaker 01:
sort of the opposite conclusion, which is without this tiered right structure, there would be no hope that these or any other providers could survive if there was not a tiered right structure.

[01:03:45] Speaker 06:
I didn't say that, as to Sorensen's proposal of this sort of flat rate that would be big enough to accommodate at least one other provider.

[01:03:55] Speaker 06:
The concern there wasn't that they wouldn't survive, it was that Sorensen would get paid too much, but that's not the same as the competition wouldn't survive.

[01:04:03] Speaker 01:
What the Commission said is that that would

[01:04:05] Speaker 01:
is that that would provide at best maybe one additional competitor at a much greater cost to the TRS fund.

[01:04:12] Speaker 01:
That would be much more costly than the... Well, they say that if you back out the R&D stuff that it would actually be cheaper.

[01:04:21] Speaker 06:
Do you dispute that?

[01:04:22] Speaker 01:
I'm sorry.

[01:04:24] Speaker 06:
So Sorensen said that when the Commission made that conclusion, Sorensen's number had included research and development costs that the FCC subsequently said we're not going to include.

[01:04:34] Speaker 06:
And if you back that out of the price, they said it will be cheaper.

[01:04:38] Speaker 01:
I don't think the Commission would be willing to back that out of the price for two reasons.

[01:04:42] Speaker 01:
One is I think the Commission views the R&D cost to be a very difficult matter to oversee.

[01:04:50] Speaker 01:
from the perspective of waste and abuse.

[01:04:54] Speaker 01:
What the Commission did do, I would point out, is the Commission devoted $6 million to research and development that the agency itself will oversee at the end of the order.

[01:05:05] Speaker 07:
Let me ask you, Mr. Pasch, about the ZVRA purple deal.

[01:05:11] Speaker 07:
My understanding is that those two companies are merging.

[01:05:16] Speaker 07:
Yes.

[01:05:16] Speaker 07:
And there's a provision in their consent decree that they have up to three years to do that.

[01:05:23] Speaker 07:
And as I understand the commission's order, they're permitted to be treated as separate, whether they are in fact separate or not, for purposes of qualifying under the tiers.

[01:05:35] Speaker 07:
And I wondered why that is and whether that's non-arbitrary, and if so, what the support for that is.

[01:05:40] Speaker 01:
I don't think that's the proper characterization.

[01:05:44] Speaker 01:
What they're permitted to do is to continue operating as separate companies until their merger is complete.

[01:05:53] Speaker 01:
or until 2020 when they have to complete it.

[01:05:56] Speaker 01:
If they complete it before 2020, then they will operate as a unified company.

[01:06:06] Speaker 01:
They're still operating as separate entities right now, and they have not completed the merger.

[01:06:16] Speaker 07:
And is there a criterion by which the Commission will know?

[01:06:21] Speaker 01:
Yes, there is.

[01:06:22] Speaker 01:
I can't describe what it is.

[01:06:24] Speaker 07:
Is that in the agreement?

[01:06:25] Speaker 01:
It's spelled out in the terms of the agreement, or the term of merger.

[01:06:29] Speaker 01:
It's spelled out in legal documents related to the consent decree.

[01:06:34] Speaker 06:
Once they are factually merged, will they then be treated by the FCC order as a single entity or will they continue that status until the last year?

[01:06:43] Speaker 01:
No, they're treated separately as long as they're separate until 2020 when they're required to merge.

[01:06:59] Speaker 03:
We have your argument.

[01:07:00] Speaker 01:
Thank you very much.

[01:07:01] Speaker 01:
No further questions.

[01:07:01] Speaker 03:
Thank you, Your Honor.

[01:07:02] Speaker 03:
We'll hear from Mr. Rosen.

[01:07:13] Speaker 04:
Your Honors, my name is Jeff Rosen.

[01:07:17] Speaker 04:
I represent the four remaining FCC certified ERS providers.

[01:07:22] Speaker 04:
Our stake in this matter is that if the court grants Sorenson

[01:07:28] Speaker 04:
This misplaced inefficiency argument, that would cause us the inability to continue business, would cause monopoly, and would deprive consumers of hundreds of thousands of consumers of choice.

[01:07:43] Speaker 04:
I am General Counsel for Combo VRS.

[01:07:46] Speaker 04:
It is a debt-owned and operated company established in 2011.

[01:07:57] Speaker 04:
based on the compensable allowed costs to survive.

[01:08:03] Speaker 04:
So we borrowed heavily $9 million to continue business.

[01:08:10] Speaker 04:
And under the 2017 rates, we are finally able to breathe.

[01:08:14] Speaker 04:
We are finally able to invest in our business, and we're able to grow as a result of that.

[01:08:21] Speaker 04:
We're growing at about 6% monthly,

[01:08:23] Speaker 04:
And we are on our way to outgrowing the emerging tier by the end of this rate period.

[01:08:36] Speaker 06:
On what basis in the record will your companies be able to compete effectively without a tiered rate structure after 2021?

[01:08:52] Speaker 04:
We are looking forward to resolving the interoperability issue.

[01:08:58] Speaker 04:
Sorensen has always said that interoperability is a non-issue.

[01:09:03] Speaker 04:
And even VRSCA says they say nothing about interoperability because they don't make those kind of claims.

[01:09:11] Speaker 04:
We have a market where tens of thousands of pieces of equipment

[01:09:18] Speaker 04:
were distributed to people for free that are not interoperable with any other company's devices.

[01:09:27] Speaker 04:
Those VRS providers are using devices that are not interoperable.

[01:09:32] Speaker 04:
When we contact customers on other VRS providers, our first question we have is, can you see me?

[01:09:41] Speaker 04:
And often there's a black screen.

[01:09:44] Speaker 04:
It is very difficult.

[01:09:47] Speaker 04:
Sometimes it can take 15 or 20 minutes to connect.

[01:09:50] Speaker 04:
You do not have that kind of expectation when you make your phone calls, audio calls.

[01:09:56] Speaker 04:
You expect to be able to immediately begin conversation.

[01:10:01] Speaker 04:
We have an issue where many consumers have tried our phones and they find it difficult to... Will that be resolved by 2021?

[01:10:11] Speaker 06:
Will that be fixed under this tiered rate scheme?

[01:10:16] Speaker 06:
Or will it have to continue probably longer?

[01:10:17] Speaker 04:
Yes, yes.

[01:10:19] Speaker 04:
The SEC has adopted interoperability standards, which began December of 2017, and they should have began long ago in the old rate structure of 2013, but it has been delayed significantly.

[01:10:36] Speaker 04:
December of 2017, we established a platform that will be able to test, assess, and enforce interoperability.

[01:10:47] Speaker 04:
The first test will be in two weeks, conducted by the FCC contractors called MITRE.

[01:10:57] Speaker 04:
We are looking forward to being able to make progress with interoperability.

[01:11:04] Speaker 06:
Is that the only barrier, the interoperability that you see to allowing your company and the other smaller companies to actually be able by 2021 to be serious competitors with Sorensen or are there other barriers?

[01:11:20] Speaker 04:
The rate is the barrier.

[01:11:23] Speaker 04:
We used to be a barrier with the 2013.

[01:11:26] Speaker 00:
We were unsolvent.

[01:11:28] Speaker 00:
We could not hurry.

[01:11:29] Speaker 00:
We borrowed money to save business.

[01:11:30] Speaker 04:
Now we're able to invest in our business and to grow.

[01:11:33] Speaker 04:
To answer your question, interoperability is a significant issue.

[01:11:39] Speaker 04:
When you do not have interoperability,

[01:11:42] Speaker 04:
then you're experiencing a majority of customers being locked into a Sorensen product.

[01:11:48] Speaker 04:
And I've heard over and over and over again Sorensen customers say, I don't really feel like their quality of interpreting is great, but I don't have any choice.

[01:11:58] Speaker 04:
Let me ask you, Mr. Rosen, your view about the potential markets that may be untapped.

[01:12:28] Speaker 07:
Is this an issue of everybody competing for aspects of a market that is already participating, the customer base already participating, or are there new customers that may enter the market if there are more appealing products and interoperability is resolved?

[01:12:54] Speaker 04:
To answer your question, there are a lot of consumers who are still underrepresented in VRS.

[01:13:01] Speaker 04:
Deafblind consumers, for example, currently they have a hard time participating in VRS because the technology is not where it needs to be to provide those services.

[01:13:14] Speaker 04:
The FCC is making progress in those areas.

[01:13:18] Speaker 04:
Other areas where we have difficulty,

[01:13:21] Speaker 04:
are those with limited English proficiency.

[01:13:25] Speaker 04:
Often they have a tough time being able to communicate with interpreters because of different language abilities.

[01:13:34] Speaker 04:
So that's where the interpreters come in.

[01:13:36] Speaker 04:
They're able to help overcome that.

[01:13:39] Speaker 04:
Yes, there are still significant untapped markets available.

[01:13:44] Speaker 04:
So you also have to understand that the market that we have currently is not being fully served.

[01:13:52] Speaker 04:
We continually must continue the dynamics of functional equivalence.

[01:13:59] Speaker 04:
Right now.

[01:14:02] Speaker 06:
How big is the percentage of people who simply can't afford, elderly people in particular, can't afford or impoverished people or elderly people who can't either afford the technology or are sort of limited in their technological capabilities, how big is that market?

[01:14:24] Speaker 04:
is considerable, no question.

[01:14:27] Speaker 04:
As are many other factors, what the SEC offers for low-income persons is Lifeline.

[01:14:38] Speaker 04:
Lifeline gets funding under Lifeline to purchase broadband.

[01:14:45] Speaker 04:
Also, almost every state has equipment

[01:14:50] Speaker 04:
Prior to this, deaf people were able to afford TTY.

[01:14:55] Speaker 04:
You know, the old-fashioned type box phone.

[01:14:59] Speaker 04:
That cost maybe five or six hundred dollars.

[01:15:02] Speaker 04:
We were able to afford patients.

[01:15:05] Speaker 04:
So Sorensen came up with a method that deaf people can't afford.

[01:15:10] Speaker 04:
There's no way they could acquire their equipment.

[01:15:13] Speaker 04:
The only reason why they wanted to sell that idea is because they want

[01:15:19] Speaker 04:
those consumers to use their equipment to lock them in as consumers, just like Ma Bell did with the rotary phone.

[01:15:29] Speaker 04:
Not until the court separated products and services did we have a more flexible marketplace.

[01:15:35] Speaker 04:
And that's what the FCC is trying to do, trying to refocus, instead of distributing proprietary equipment,

[01:15:42] Speaker 04:
that people should use off-the-shelf devices.

[01:15:45] Speaker 04:
You made a great point, Judge Peller, about if I go to someone's home as a visitor who does not have a device available, how do I access VRS?

[01:15:57] Speaker 04:
I do it on my phone, on my mobile phone.

[01:16:00] Speaker 04:
I am able to make calls from my phone.

[01:16:03] Speaker 04:
That is how the industry has evolved.

[01:16:06] Speaker 04:
Sorensen is a dinosaur.

[01:16:10] Speaker 04:
Their biggest market are baby boomers.

[01:16:14] Speaker 04:
The greater part of our upcoming market relies on software and the ability to access VRS through software.

[01:16:25] Speaker 07:
So Mr. Rosen, would you identify areas of service equivalence that either now or in the near future you believe will benefit from provider competition?

[01:16:40] Speaker 07:
We heard from Mr. Posh about speed of answer, about the quality and versatility of interpreters.

[01:16:48] Speaker 07:
Are there other aspects under

[01:16:52] Speaker 07:
equivalent service where competition is an important engine to the quality.

[01:17:02] Speaker 04:
Well, I'd like to point out the difference between VRS and in-person interpreting.

[01:17:07] Speaker 04:
For example, I have my fantastic interpreter here with me today, whom I know and have known and worked well with for quite some time.

[01:17:23] Speaker 04:
It takes a call with no background, with no idea of who the person will be, no idea of who the person will be speaking to.

[01:17:31] Speaker 04:
It is a tremendous challenge.

[01:17:34] Speaker 03:
And we have to improve those.

[01:17:36] Speaker 03:
We have to develop technologies.

[01:17:40] Speaker 04:
to acquire information more immediately from the consumer to assess their language, context, purpose of the call, and to be able to process the call.

[01:17:52] Speaker 04:
Some companies put more focus on efficiency.

[01:17:56] Speaker 04:
They are pursuing racing to the bottom with efficiency.

[01:18:02] Speaker 04:
Some other companies are focusing on effectiveness.

[01:18:06] Speaker 04:
And Mr. Posh explained some factors are critical for effective communication.

[01:18:15] Speaker 04:
The FCC has taken on rulemaking that looks at matters of measure effectiveness of the calls.

[01:18:22] Speaker 04:
And that will help to push the quality

[01:18:25] Speaker 07:
Mr. Rosen, you don't mean to concede that the only factor that matters for efficiency under the statute is price, do you?

[01:18:38] Speaker 07:
No.

[01:18:38] Speaker 07:
So you're talking about service quality and delivery of equivalent service to the consumer as something that the FCC wants to do efficiently?

[01:18:53] Speaker 04:
Yes, that's right.

[01:18:54] Speaker 04:
There is a balance of competitive factors.

[01:18:59] Speaker 04:
The ADA is written in a way, in terms of various factors, swarms and focuses only on one, efficiency.

[01:19:12] Speaker 04:
But that is a very specific part of the statute.

[01:19:15] Speaker 04:
There are other parts of the statute that are more important to the Commission.

[01:19:19] Speaker 04:
And obviously, a person can benefit and do well from using telecommunication to be involved with hearing people.

[01:19:29] Speaker 04:
And that is the concept of functional equivalency.

[01:19:35] Speaker 03:
Great.

[01:19:36] Speaker 03:
Thank you very much.

[01:19:38] Speaker 04:
Thank you.

[01:19:44] Speaker 03:
We took up all your time.

[01:19:46] Speaker 03:
We'll give you three minutes back for rebuttal.

[01:19:49] Speaker 03:
Thank you for your graciousness, your honor.

[01:19:53] Speaker 02:
On the question of whether functional equivalence encompasses anything more than minimum standards and what the FCC's position historically has been on that,

[01:20:04] Speaker 02:
I'm sorry, but what they're saying just isn't right.

[01:20:06] Speaker 02:
I'm going to identify four places to look.

[01:20:09] Speaker 02:
First is paragraph 11 of this very order, where they expressly define functional equivalence as meeting minimum standards and refuse to pay for R&D to advance beyond it because it's not functional equivalence.

[01:20:23] Speaker 02:
Then the 2013 order, which we cite in particular, the part of it, paragraph 198, I think it is, we cite at page 37 of our opening brief.

[01:20:33] Speaker 02:
In the 2013 order, the FCC said that consumer choice is not a valid reason to maintain the inefficiencies of the tiered-rate system.

[01:20:44] Speaker 02:
And that's a problem both with respect to change of definition, but, of course,

[01:20:50] Speaker 02:
It's a deeper problem, and I think questions have alluded to it already, in that what they're doing now is an unexplained, unacknowledged 180-degree reversal from the specific conclusion which we quoted at page 37.

[01:21:05] Speaker 02:
Third, I just direct the Court to the numerous citations at pages 12 to 14 of our reply brief where the FCC defined functional equivalences limited to meeting the standards.

[01:21:18] Speaker 02:
And the fourth point I'd like to make about that is that, of course, it's about equipment, but it's not just about equipment.

[01:21:24] Speaker 02:
And paragraph 11 shows you that.

[01:21:26] Speaker 02:
It's R&D to improve services that they won't pay for in addition to equipment.

[01:21:31] Speaker 02:
With respect to interoperability, you know, it's taken on a great deal of importance in this morning's argument, and I would just urge the Court to do the following in coming to a judgment about interoperability.

[01:21:44] Speaker 02:
I'd urge the Court to compare the declaration that Swanson submitted, which is at J.A.

[01:21:48] Speaker 02:
365 and 6, declaration,

[01:21:53] Speaker 02:
containing specific evidence about what's happened on the issue, states that in the main, interoperability problems had been solved as of 2012 with respect to all carriers except global VRS.

[01:22:05] Speaker 02:
It goes on and on.

[01:22:07] Speaker 02:
Contrast it to the submission of my friends on the other side, which is one short paragraph that carries over from JA 272 to 273.

[01:22:18] Speaker 02:
And I think, I just don't think that the commission could responsibly conclude based on that and that alone that the

[01:22:27] Speaker 02:
problem of interoperability is A, a series impediment, and B, solving whatever is left to solve on it is going to make a material difference in this market moving forward.

[01:22:38] Speaker 02:
One last point.

[01:22:39] Speaker 02:
Just on the question of interpreters, direct the Court's attention to JA-705, where you will see that

[01:22:48] Speaker 02:
Sorenson asked the Commission in this proceeding to increase the rate at which they would compensate interpreters because we made the point that the cost of hiring good interpreters is going up and we don't just compete with other VRS companies, we compete with all kinds of people who need interpreters.

[01:23:05] Speaker 02:
And the commission said, no.

[01:23:08] Speaker 02:
Again, wouldn't fund directly the improvement saying, but they're relying on this tiered rate system by making an argument that they're going to improve it indirectly.

[01:23:18] Speaker 02:
And that's what they can't do.

[01:23:20] Speaker 07:
Just a question out of curiosity, how do blind and deaf people use video relay services?

[01:23:27] Speaker 07:
Are these people who are legally blind but have some sight, or is it having someone come to your house?

[01:23:32] Speaker 02:
Yeah, I apologize, you know, I don't know the answer.

[01:23:34] Speaker 02:
I should know the answer to that, but I don't.

[01:23:36] Speaker 02:
But I mean, Sorenson does provide some deafblind services, but again, just to repeat my basic point that, you know, making sure that the deafblind population gets functionally equivalent service is really important.

[01:23:50] Speaker 02:
The way to do it is to make it a minimum standard.

[01:23:52] Speaker 02:
That's the way to do it.

[01:23:54] Speaker 02:
That would be much more efficient, much less costly, and would guarantee

[01:23:58] Speaker 02:
that the service would be provided, instead of hoping that it's provided through maintaining all of these companies through the tiered rate system.

[01:24:06] Speaker 02:
Thank you.

[01:24:07] Speaker 02:
Thank you very much.

[01:24:11] Speaker 03:
Mr. Kaye, do you have anything on rebuttal or?

[01:24:15] Speaker 03:
No, there wasn't a rebuttal unless you have additional questions for me.

[01:24:19] Speaker 03:
Okay, thank you very much.

[01:24:20] Speaker 03:
The case is submitted.