At its November Open Meeting, the FCC approved a Report and Order (“Order”) that expands the contribution base for IP captioned telephone service (“CTS”), supported by the telecommunications relay service (“TRS”) Fund, to include intrastate voice communications services. Currently, only interstate voice providers (telecommunications and VoIP) are required to contribute a portion of their end-user revenues to support the TRS Fund. The Order extends that responsibility to providers with intrastate revenues. This rule change, which will be effective for the TRS Fund Year 2020-21, is intended to address an imbalance in the financial obligation on interstate versus intrastate voice providers to support IP CTS costs, which has experienced an approximately $745 million increase from 2013 to the current funding year.

IP CTS allows individuals who have difficulty hearing but are speech-capable to use a telephone with an IP-enabled device to communicate over the Internet by simultaneously listening to and reading captions of what the other party is saying. The FCC established the TRS Fund specifically to fund the costs of interstate TRS and contributions were limited to the interstate revenues of telecommunications service providers as well as interconnected and non-interconnected VoIP providers. However, to encourage development of emerging forms of TRS, like IP CTS, the FCC adopted an interim measure that allowed for providers of IP CTS (and other Internet-based TRS) to receive compensation for providing the service (whether interstate or intrastate) through the TRS Fund.

In recent years, there has been a significant increase in IP CTS use and similarly, the amount paid to reimburse service providers, which the FCC projects will account for 64.5% of all TRS Fund payments for the 2019-2020 fund year. As a result, the FCC has taken a number of actions aimed at curbing costs for the service. In 2018, the FCC adopted a reform package that included (1) revising the rate methodology used to compensate IP CTS providers and (2) imposing interim compensation rates to bring compensation closer to the FCC-determined actual average provider costs. Earlier this year, the FCC approved additional reforms to address waste, fraud, and abuse by requiring IP CTS providers to submit user registration information to the existing video relay service database to limit program access to only those determined to be eligible to use IP CTS.

With this new Order, the FCC responds to concerns raised by some telecommunications providers about the unfair burden IP CTS support puts on TRS Fund contributors that provide mainly interstate services. Now, the FCC adjusts the contribution mechanism for IP CTS to establish a more permanent approach and make the responsibility for IP CTS support more equitable amongst voice service providers. The FCC explains that IP CTS is available to consumers in every state and captions are provided for interstate as well as intrastate calls. Therefore, the Order expands the required TRS Fund contribution base for IP CTS to include the total interstate as well as intrastate end-user revenues for telecommunications and VoIP service providers. While the total contributions needed to support the TRS Fund is not expected to change, the FCC estimates that this change will result in a 59% decrease in the percentage of interstate end-user revenues on which TRS Fund contributions will be based.

The FCC grounded its authority for this decision in section 225 of the Communications Act, which directs the agency to make sure both intrastate and interstate TRS is available. In the Order, the FCC explains that a state’s decision to offer funding for only some TRS (excluding IP CTS) does not affect the FCC’s authority to direct intrastate funds to the service. To implement the change, the FCC will adopt a single IP CTS contribution factor to be applied to TRS contributors’ revenues. Intrastate telecommunications and VoIP providers must contribute revenue to fund intrastate IP CTS beginning with the TRS Fund Year 2020-21.