September 2, 2014 / 5:30 PM / 5 years ago

U.S. court rejects Sorenson challenge of FCC rate cut

WASHINGTON, Sept 2 (Reuters) - A U.S. appeals court on Tuesday rejected Sorenson Communications Inc’s challenge of a 2013 order by the Federal Communications Commission that cut the amount the company get paid for a service to help hearing- and speech-impaired people make phone calls.

But the court did vacate the part of the FCC’s 2013 order that raised the standards for how fast the service operates, sending it back to the FCC for review.

Sorenson, which filed for bankruptcy earlier this year, has been the leading provider of so-called video relay services, or VRS, that allow consumers to connect by video with a sign language interpreter who can help them make phone calls.

Like other VRS providers, Sorenson receives payments from the FCC for such calls at a rate set by the agency based on costs incurred by the company in the process.

The FCC lowered its per-minute compensation rates in 2010 and again in 2013, while raising the standard for how fast VRS calls are answered.

Sorenson, which generates revenue almost exclusively from FCC compensation, challenged the 2013 rate-lowering order in court as “arbitrary and capricious.” But the U.S. Court of Appeals for the District of Columbia Circuit on Tuesday rejected the company’s argument.

The ruling noted that Sorenson had mounted “nearly the same” challenge against the FCC’s 2010 rate decrease and lost in another appeals court.

The court agreed with Sorenson that the FCC, in setting new VRS standards in 2013, did not properly address extra labor costs potentially incurred by complying with the required faster speeds in answering VRS calls, however.

The FCC was ordered to review whether its enhanced speed-of-answer requirement increased providers’ costs and, if so, whether faster service was worth an increase in rates.

Sorenson in March filed for Chapter 11 bankruptcy protection, saying that by lowering rates and increasing minimum standards the FCC had made it infeasible to provide the video relay services over the long term.

The case is Sorenson Communications Inc v. FCC, U.S. Court of Appeals for the District of Columbia Circuit, No. 13-1215.

Reporting by Alina Selyukh; Editing by Tom Brown

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