Discussion
of Issues
Issue 1:
Should the Commission approve Florida Telecommunications
Relay, Inc.'s proposed budget as presented in Attachment A for Fiscal Year
2022/2023, effective August 15, 2022?
Recommendation:
No. Staff recommends the Commission modify FTRI’s
proposed budget expense of $3,753,703 to increase relay service expense by
$208,042, and approve a total budget expense of $3,961,745 for Fiscal Year
2022/2023. (Williams, Fogleman, Imig, Tan)
Staff Analysis:
Traditional
Telecommunications Relay Service
The
traditional TRS cost to FTRI as approved in the Sprint contract is currently
$1.60 per session minute. Sprint’s projections indicate that traditional
minutes will decrease by 4 percent from the current fiscal year during Fiscal
Year 2022/2023. Traditional relay users are transitioning to the following
services:
·
Internet Protocol (IP) Relay
·
Video Relay Service (VRS)
·
IP Captioned Telephone Service
·
Internet Protocol Speech-to-Speech (STS) Service
·
Wireless Service
CapTel
Service
The CapTel
cost to FTRI as approved in the Sprint contract is currently $1.67 per session
minute. CapTel service uses a specialized telephone that provides captioning of
the incoming call for a deaf or hard of hearing person. Sprint’s projections
show that CapTel minutes of use will decline by 10 percent from the current
fiscal year during Fiscal Year 2022/2023. CapTel users are transitioning to
Internet Protocol Captioned Telephone Service and wireless services.
Florida
Telecommunications Relay, Inc. Budget
Attachment
A reflects FTRI’s Fiscal Year 2022/2023 proposed budget, as amended, which was
reviewed and adopted by FTRI’s Board of Directors prior to filing with the
Commission. FTRI submitted its original budget on February 25, 2022, projecting
total expenses of $3,692,151. On May 24, 2022, FTRI submitted an amended budget
projecting total expenses of $3,753,703, reflecting the addition of a third DPC
position.
Sprint’s forecasted
Fiscal Year 2022/2023 traditional TRS minutes of use are 851,208. Sprint’s forecasted
CapTel minutes of use are 237,981. FTRI’s total estimated expense for TRS and
CapTel for Fiscal Year 2022/2023 is $1,551,319. For comparison, the Fiscal Year
2021/2022 Commission-approved budget reflected traditional TRS minutes of
890,468 and CapTel minutes of 263,681. The total expense for TRS and CapTel for
Fiscal Year 2021/2022 was $1,647,753.
Analysis
Staff
developed an estimate of FTRI’s expenses for Fiscal Year 2021/2022. This data
is presented in Attachment B. Staff used actual data from the first three
quarters of Fiscal Year 2021/2022, and took an average of those three quarters
to estimate the fourth. Staff’s estimates were then used as one element in
evaluating FTRI’s proposed budget. Attachment B also includes FTRI’s budgeted
information for comparison purposes. Staff also analyzed past
Commission-approved FTRI budgets to identify and evaluate ongoing cost
reduction measures.
As
discussed in staff’s recommendation addressing FTRI’s Fiscal Year 2021/2022
proposed budget, Fiscal Years 2020/2021 and 2021/2022 were out of the norm due
to the COVID-19 pandemic. FTRI experienced significant reductions in equipment
distributed, consumer inquiries, and related expense, which it attributed to
the pandemic. As a result, FTRI’s support for its Fiscal Year 2021/2022 budget
request was based largely on pre-pandemic levels instead of Fiscal Year
2020/2021. The Fiscal Year 2022/2023 proposed budget is also impacted by
COVID-19.
Below is
staff’s review of selected items from FTRI’s proposed budget expense by
category.
Category
I – Relay Services
Category I
captures expenses for traditional TRS and CapTel service currently provided by
Sprint. The relay service expenses are calculated using the minutes of use as
projected by Sprint and relay service contract rates. The proposed budget presented
$1,551,319 in relay service expense. However, staff determined that the
calculation used the previous contract rates of $1.35 for TRS and $1.69 for CapTel.
The correct contract rates are $1.60 for TRS and $1.67 for CapTel, which when
applied to the forecasted minutes of use increases relay service expense by $208,042,
resulting in total expense of $1,759,361.
Category
II – Equipment & Repairs
Category
II expenses reflect the purchase of equipment to be distributed to clients and
the repairs that FTRI must make to keep the equipment in working order. FTRI
has requested $376,705 for Fiscal Year 2022/2023. FTRI used contract pricing
for equipment multiplied by the number of units it plans to order over the
course of the year. These contracts for equipment between FTRI and equipment
vendors are separate from the contract for relay service approved by the
Commission. FTRI’s proposed budget represents a $396,530 decrease in expense
from the current Commission-approved budget.
FTRI’s
Fiscal Year 2021/2022 Commission-approved budget for equipment and repairs was
$773,235. FTRI’s estimated fiscal year-end expenses are $453,985. Staff’s
estimated expense is $415,017. FTRI explained that due to the continuing impact
of COVID-19 and limited distribution by Regional Distribution Centers (RDCs), equipment
distribution continues to be disrupted. FTRI does not anticipate equipment
distribution to return to pre-COVID levels over the next 18-24 months.
Staff
recommends approval of FTRI’s budgeted amount for equipment and repairs.
However, staff believes FTRI should continue to pursue efforts to expand the
distribution of equipment to pre-COVID levels.
Category
III – Equipment Distribution & Training
Category
III reflects the cost of distributing equipment throughout the state and the
training of consumers in the use of that equipment. FTRI’s proposed budget requests
$220,720 for distribution and training, which reflects a $342,228 decrease in expense
from the current Commission-approved budget.
Regional
Distribution Centers
Expenses
related to RDCs are the largest component of Category III expenses. FTRI’s
proposed budget for RDCs is $202,446, which is $329,172 lower than the current
Commission-approved budget. Consistent with its explanation for Category II
Equipment & Repairs, FTRI explains that COVID-19 continued to impact RDC
expense.
In support
of its Fiscal Year 2020/2021 proposed budget, FTRI indicated that it intended
to “expand the quantity of Regional Distribution Centers (RDCs) while working
with the existing RDCs to evaluate and implement a business model that enables
them to provide FTRI services at break-even.” Staff did not recommend approval
of FTRI’s proposed Fiscal Year 2020/2021 RDC expense of $664,128. However, in
consideration of FTRI’s intent to increase the number of RDCs, and recognizing
the importance of adequately funding equipment distribution channels, staff
recommended, and the Commission-approved continued funding at FTRI’s estimated
2019/2020 expense level of $535,647.
FTRI indicated,
as part of its Fiscal Year 2020/2021 budget request, that the fee per service
structure was not financially performing at a break-even point for the RDCs.
FTRI contracts with the non-profit RDCs to perform equipment distribution and
training throughout Florida. The amount of funds for FTRI’s contracts with RDCs
varies based on the number of clients they assist. More funds are provided for
connecting a new client, while fewer funds are provided to assist existing
clients in the system.
The
Commission determined that FTRI did not present sufficient cost detail
regarding the compensation to RDCs and their associated costs. The Commission
concluded that additional information was needed to confirm the appropriate
reimbursement rate FTRI pays RDCs. The Commission requested FTRI provide a
financial break-even analysis related to the RDC fee structure and present the
results to the Commission with its Fiscal Year 2021/2022 proposed budget
filing. The analysis was not included with that proposed budget filing.
In
response to a staff data request
regarding the break-even analysis, FTRI stated that only three of the
twenty-three RDCs responded. FTRI explained that it did not believe the
information received was sufficient to provide a meaningful analysis. FTRI
further responded that the pandemic made it difficult to determine RDC
break-even. FTRI requested a postponement of the analysis until a more normal
business environment returned.
FTRI was
ordered to submit the RDC break-even analysis with its Fiscal Year 2022/2023
budget filing. FTRI submitted its break-even analysis to the Commission as
ordered. FTRI reported that RDC survey responses provided an average cost per
center of $41,531. Using that as a break-even amount in the proposed budget
would result in RDC expense of $913,682, which is almost double the amount in
FTRI’s current Commission-approved budget. In its report to the Commission,
FTRI concluded that “[a]fter reviewing the data, it is apparent that using
services rendered in 2020-2021 the fees per service would have to be increased
to an amount that may not be feasible to pay.”
FTRI
acknowledged in its report that it will continue to discuss and evaluate RDC
compensation. FTRI did increase RDC per service fees in its proposed Fiscal
Year 2022/2023 budget. As stated earlier, the impact of COVID-19 continues to affect
RDC service levels, resulting in lower over-all expense for this category. FTRI’s
estimated current fiscal year-end RDC expense is $123,136, and its proposed
Fiscal Year 2022/2023 RDC expense is $202,446. Staff believes FTRI’s proposed
budget for Category III expense is reasonable for budgeting purposes and
provides FTRI flexibility while continuing to negotiate fees with the RDCs.
Category
IV – Outreach
Outreach
efforts are designed to promote FTRI’s equipment distribution services and to
raise awareness about Florida relay service. FTRI’s proposed Fiscal Year
2022/2023 outreach budget remains unchanged from the current Commission-approved
outreach budget.
FTRI
employs various forms of communication in its outreach strategy. FTRI plans to
continue advertising in newspapers using free-standing insert ads (flyers) in
markets where effective. However, FTRI acknowledges that it has witnessed rapid
changes in the newspaper industry. In response, FTRI will utilize other print
tools such as direct mail post cards and coupon book advertisements. FTRI also
plans to continue expanding its digital marketing campaign, including increased
use of banner ads on websites, as well as targeted email and social media
campaigns.
The
Commission has previously encouraged FTRI to research and consider more technologically
advanced and cost-effective forms of outreach. Most recently, the Commission
discussed FTRI exploring improvements to its website. The Commission encouraged
FTRI to consider adding an online chat function to help with customer
inquiries, as well as the creation of an online consumer portal similar to what
is utilized by the Florida Department of Children and Families. Through such a
portal, consumers could enter personal qualifying information and be
automatically advised of available equipment and directed to the appropriate
RDC for service.
FTRI has included implementation
of the chat function, termed “FTRI Chat”, in its proposed Fiscal Year 2022/2023
budget. In response to a staff data request, FTRI explained that once approved,
it will need to spend the first few months developing this project with its outside
platform provider. FTRI also explained that the new chat function will require
weeks of testing before it becomes operational. FTRI has included funding for a
new position related to this new feature in its employee expense for Fiscal
Year 2022/2023. The position will be responsible for handling and responding to
chat inquiries, along with assisting other FTRI staff as needed. The position
will work with FTRI DPCs and the Equipment Distribution Program (EDP) Manager
in providing customer assistance. Staff believes FTRI’s proposed budget for
Category IV expense is reasonable.
Category
V – General & Administrative
Category V
reflects expenses associated with FTRI’s operations, such as office and
furnishings, employee compensation, contracted services (auditors, attorney and
computer consultants), computers, and other operating expenses. FTRI is
proposing $1,069,309 for Fiscal Year 2022/2023, which represents a $138,168
increase in Category V expense from the current Commission-approved budget.
Employee compensation expense represents the largest increase in this category
at $82,935, which includes the newly created FTRI Chat position and the third DPC
position. FTRI’s justification for the FTRI Chat position was discussed in
Category IV.
FTRI
explained in its amended budget filing that there is an urgent need to support
the two current DPCs and the EDP Manager who have been inundated with an
increased number of service calls in recent months. FTRI states that more
customers have chosen to call FTRI directly rather than visit local RDCs. FTRI
further points out that the number of RDCs have declined in the past year. FTRI
states that when compared to the beginning of the current fiscal year, FTRI has
seen a 14 percent increase in the number of new service calls. In addition to
handling calls, DPCs process applications, equipment orders, and shipment of
telecommunications equipment to customers. Staff believes FTRI’s Category V
expenses are reasonable.
Conclusion
Staff recommends the Commission modify FTRI’s proposed budget
expenses of $3,753,703 to increase relay service expense by $208,042, and
approve a total budget expense of $3,961,745 for Fiscal Year 2022/2023.
Issue 2:
Should the Commission approve FTRI’s request to
reduce the Telecommunications Relay Service (TRS) surcharge to $.07 per month?
Recommendation:
Yes. Staff recommends the Commission approve FTRI’s
request to reduce the surcharge to $0.07. Staff recommends the Commission order
all local exchange companies to bill the $0.07 TRS surcharge for Fiscal Year
2022/2023. (Williams, Fogleman, Imig, Tan)
Staff Analysis:
Based
on current industry trends, FTRI estimates that access lines will decrease at
the rate of approximately seven percent from the current fiscal year as more
consumers transition from landline phones. Holding the TRS surcharge constant,
a decrease in access lines results in a decrease in revenues to support FTRI’s
activities. FTRI’s proposal to reduce the TRS surcharge from $0.10 to $0.07 per
access line places further downward pressure on revenues.
If
approved, FTRI’s proposed surcharge is expected to generate $2,769,749 in
revenue. Compared to staff’s recommended budget expense amount, this represents
a $1,190,475 shortfall for Fiscal Year 2022/2023. Staff estimates that FTRI’s revenue
less expenses at the current fiscal year-end will result in a surplus of
$716,151, which will be added to the operating account for 2022/2023. FTRI
proposes that the remaining shortfall be covered by drawing from the reserve
account, as the Commission has similarly approved in recent years. FTRI’s reserve
account after the proposed reduction would be approximately $15 million.
The
reserve account represents funds that were originally set aside in anticipation
that the Federal Communications Commission (FCC) might delegate intrastate
costs associated with Video Relay Service (VRS) and Internet Protocol Caption
Telephone Service (IP-CTS) to states. FTRI explained that based on its review
and understanding, there is no indication that the FCC will delegate VRS and
IP-CTS authority to states in the foreseeable future. Given the overall size of
the surplus account, and the expected surplus from the current fiscal year,
staff believes a reduction in the surcharge is reasonable. Staff notes that
leaving the surcharge at the current $0.10 would result in estimated revenue of
$3,956,784, which is nearly identical to the recommended budget expense amount
for Fiscal Year 2022/2023.
Conclusion
Staff
recommends the Commission approve FTRI’s request to reduce the surcharge to
$0.07. Staff recommends the Commission order all local exchange companies to
bill the $0.07 TRS surcharge for Fiscal Year 2022/2023.
Issue 3:
Should this docket be closed?
Recommendation:
If no person whose substantial interests are
affected by the proposed agency action files a protest within 21 days of the
issuance of the order, this docket should be closed upon the issuance of a
consummating order. (Imig, Tan)
Staff Analysis:
At the conclusion of the protest period, if no
protest is filed this docket should be closed upon the issuance of a
consummating order.
