2017-2018 TRS Filing Presentation Washington DC March 29, 2017 - PowerPoint PPT Presentation

2017-2018 TRS Filing Presentation Washington DC March 29, 2017

Road Map  MARS-based Services ◦ Rate Development Process ◦ Current versus Proposed Rates / Demand Table ◦ Demand Trend Charts  IP CTS ◦ Cost Trends ◦ Demand Trend  IP Relay ◦ Demand Trend ◦ Rate Proposal  Video Relay Service ◦ Cost Trends ◦ Demand Trend ◦ Rate Alternatives  Fund Requirement 2

MARS Based Rate Calculation  Sample Data from Certified State Programs and Providers Intrastate Payment Total Intrastate Total Intrastate State Rate per Basis Conversation Session Total $ Minute Minutes Minutes A $1.26 CM 860,269.07 1,529,497.00 $1.083,939.03 B $0.85 SM 141,312.42 189,595.98 $161,156.58 C $0.93 SM 57,071.00 85,445.00 $79,463.85 D $1.30 CM 926,051.13 1,466,050.19 $1,199,236.21 Other Costs not in Rate $100,000.00 3

MARS Based Rate Calculation  Traditional TRS and Speech to Speech done together ◦ Total Intrastate Payments per minute compensation $17,967,433 ◦ Total Intrastate Conversation Minutes 7,676,149 ◦ Other Costs Paid to Providers $4,436452 ◦ Per minute Rate for Traditional TRS $2.9186 ◦ Per Minute Speech to Speech Outreach Additive $1.1310 ◦ Per minute Rate for Speech to Speech $4.0496  Caption Telephone and IP Caption Telephone ◦ Total Intrastate Payments per minute compensation $34,096,176 ◦ Other Costs Paid to Providers $125,800 ◦ Total Intrastate Conversation Minutes 17,706,054 ◦ Per minute Rate for Caption Telephone Services $1.9328 4

MARS Based Services Alt 1 May 1, 2016 Filing May 1, 2017 Filing Service Demand Rate Fund Demand Rate Fund Rqmt Rqmt Traditional TRS 2,300,487 $2.6155 $6,016,925 1,809,140 $2.9186 $5,280,156 Speech to Speech 134,620 $3.7465 $504,356 160,112 $4.0496 $648,390 Caption Telephone $1.9058 $12,900,014 4,290,592 $1.9328 $8,292,856 5,520,101 IP Caption 284,112,735 $1.9058 $541,462,050 402,308,884 $1.9328 $777,582,611 Telephone Total 292,067,943 $558,503,539 408,568,728 $784,404,013 5

100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 50,000 - 31-Jan-12 31-Mar-12 31-May-12 31-Jul-12 30-Sep-12 30-Nov-12 31-Jan-13 31-Mar-13 31-May-13 31-Jul-13 30-Sep-13 30-Nov-13 31-Jan-14 31-Mar-14 31-May-14 31-Jul-14 Traditional TRS 30-Sep-14 Actual 30-Nov-14 31-Jan-15 31-Mar-15 Trend 31-May-15 31-Jul-15 30-Sep-15 30-Nov-15 31-Jan-16 31-Mar-16 31-May-16 31-Jul-16 30-Sep-16 30-Nov-16 31-Jan-17 31-Mar-17 31-May-17 31-Jul-17 30-Sep-17 30-Nov-17 31-Jan-18 31-Mar-18 31-May-18 6

10,000 12,000 14,000 16,000 18,000 2,000 4,000 6,000 8,000 0 31-Jan-12 31-Mar-12 31-May-12 31-Jul-12 30-Sep-12 30-Nov-12 31-Jan-13 31-Mar-13 31-May-13 31-Jul-13 30-Sep-13 30-Nov-13 31-Jan-14 31-Mar-14 31-May-14 31-Jul-14 30-Sep-14 Actual 30-Nov-14 STS 31-Jan-15 31-Mar-15 31-May-15 Trend 31-Jul-15 30-Sep-15 30-Nov-15 31-Jan-16 31-Mar-16 31-May-16 31-Jul-16 30-Sep-16 30-Nov-16 31-Jan-17 31-Mar-17 31-May-17 31-Jul-17 30-Sep-17 30-Nov-17 31-Jan-18 31-Mar-18 31-May-18 7

1000000 100000 200000 300000 400000 500000 600000 700000 800000 900000 0 1/1/2012 3/1/2012 5/1/2012 7/1/2012 9/1/2012 11/1/2012 1/1/2013 3/1/2013 5/1/2013 7/1/2013 9/1/2013 11/1/2013 1/1/2014 3/1/2014 5/1/2014 7/1/2014 9/1/2014 actual 11/1/2014 CTS 1/1/2015 3/1/2015 5/1/2015 trend 7/1/2015 9/1/2015 11/1/2015 1/1/2016 3/1/2016 5/1/2016 7/1/2016 9/1/2016 11/1/2016 1/1/2017 3/1/2017 5/1/2017 7/1/2017 9/1/2017 11/1/2017 1/1/2018 3/1/2018 5/1/2018 8

10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 5,000,000 - Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 IP-CTS Actual Minutes Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 9

IP-CTS Linear Regression Forecast 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 - Jun-14 Dec-14 Jul-15 Jan-16 Aug-16 Mar-17 Sep-17 Apr-18 Oct-18 10

IP-CTS Providers Forecast 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 - Jun-14 Dec-14 Jul-15 Jan-16 Aug-16 Mar-17 Sep-17 Apr-18 Oct-18 May-19 11

IP-CTS Cost Trends:2015-2018 1.6000 1.4000 1.2000 1.0000 0.8000 0.6000 0.4000 0.2000 - Facilities CA Related Non-CA Relay Center Indirect Depreciation Marketing Outreach Other Return on Investment 12

IP-CTS Cost Trend Data Category 2015 2016 2017 2018 0.0386 0.0326 0.0307 0.0304 Facilities 0.2819 0.2672 0.3062 0.3314 CA Related 0.0559 0.0488 0.0498 0.0519 Non-CA Relay Center 0.2830 0.1529 0.1533 0.1350 Indirect 0.0402 0.0275 0.0243 0.0202 Depreciation 0.0579 0.0759 0.0787 0.0770 Marketing 0.0903 0.0710 0.0656 0.0645 Outreach 0.6259 0.6101 0.5889 0.5691 Other 0.0124 0.0106 0.0097 0.0082 Return on Investment 1.4863 1.2965 1.3071 1.2876 Total Cost 13

MARS Revenue Alt 2 Price Minutes Revenue $1.30 402,308,884 $523,001,549 IP-CTS $14,221,402 Other MARS Revenue $537,222,951 Total MARS Revenue 14

Video Relay Service  Current Compensation Tiers: ◦ Emergent Tier 1 (0- 500,000 minutes per month) ◦ Tier 1 (0-500,000 minutes per month) ◦ Tier 2 (500k – 1 million minutes per month) ◦ Tier 3 (> 1 million minutes per month)  Proposed Tiers ◦ Emergent Tier 1 (0- 500,000 minutes per month) ◦ Tier 1 (0-1,000,000 minutes per month) ◦ Tier 2 (1 million – 2.5 million minutes per month) ◦ Tier 3 ( greater than 2.5 million minutes per month) 15

Video Relay Service  Cost Categories ◦ Facilities-  Land, Buildings, Utilities, Property Taxes, etc. ◦ CA Related-  Salaries and Benefits plus Subcontractor ◦ Non-CA Relay Center Expenses-  Management, Staff, Telecom Billing and other “Center Expenses ◦ Indirect Expenses  Accounting, Legal, Engineering, R&D, Operations Support, etc. ◦ Depreciation Expense  Depreciation Expense associated with Capital Investment ◦ Marketing Expense ◦ Other Expense ◦ Return on Investment @ 11.25% plus tax on equity return 16

VRS Per Minute Component Costs in Dollars Category 2015 2016 2017 2018 0.1911 0.2085 0.2145 0.2183 Facilities 1.3964 1.3920 1.5072 1.5450 CA Related 0.3508 0.3339 0.3345 0.3371 Non-CA Relay Center 0.5212 0.5788 0.5338 0.5271 Indirect 0.0956 0.0999 0.1036 0.1020 Depreciation 0.1297 0.1451 0.1472 0.1493 Marketing - - - - Other 0.0423 0.0355 0.0351 0.0352 Return on Investment 2.7270 2.7937 2.8758 2.9140 Total Cost 17

Combined Cost without CPE and Outreach Combined Cost per minute 3.5000 3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 - Facilities CA Related Non-CA Relay Center Indirect Depreciation Marketing Other Return on Investment Total Cost 2015 2016 2017 2018 18

Combined Cost with CPE and Outreach Combined Cost including CPE and Outreach 3.5000 3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 - 2015 2016 2017 2018 19

VRS Cost Per Minute Facilities CA Related Non-CA Relay Center Indirect Depreciation Marketing Other Return on Investment 0.0352 - 0.0351 - 0.1493 0.0355 0.1472 - 0.0423 0.1451 - 0.1020 0.1036 0.1297 0.0999 0.0956 0.5271 0.5338 0.5788 0.5212 0.3371 0.3345 0.3508 0.3339 1.5450 1.5072 1.3920 1.3964 0.2183 0.2085 0.2145 0.1911 20

Rate Proposals year 1 year 2 year 3 Year 4 Jan Jan July July 2020- July 2021- July 2017- Jan 2018- 2018-Dec Jan 2019- 2019-Dec June 2020-Dec June high end rates Dec 2017 June 2018 2018 June 2019 2019 2020 2020 2021 Tier one emergent 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 Tier One 4.82 4.82 4.82 4.82 4.82 4.82 4.82 4.82 Tier Two 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 Tier Three 3.49 3.49 3.49 3.49 3.49 3.49 3.49 3.49 Low end rates Tier one emergent 4.82 4.71 4.60 4.49 4.39 4.28 4.17 4.06 Tier One 4.06 3.98 3.90 3.82 3.73 3.65 3.57 3.49 Tier Two 3.49 3.43 3.37 3.31 3.26 3.20 3.14 3.08 Tier Three 2.83 2.80 2.77 2.74 2.72 2.69 2.66 2.63 21

VRS Revenue: High Rate Proposal July – December January – April May – June 2017 2017 2018 Demand Rate Revenue Demand Rate Revenue Demand Rate Revenue 1,995,539 $5.29 $10,556,401 Emergent 608,530 $5.29 $3,219,124 1,494,600 $5.29 $7,906,434 16,060,167 $4.82 $77,410,005 Tier 1 5,378,239 $4.06 $21,835,650 $4.82 $51,812,132 10,749,405 10,478,906 $4.35 $45,583,241 Tier2 3,407,175 $4.06 $13,833,161 $4.35 $29,352,191 6,747,630 36,510,246 $3.49 $127,420,760 Tier 3 12,315,316 $3.49 $42,980,453 $3.49 $89,292,603 25,585,273 $178,363,360 65,044,858 $260,970,407 Total 21,709,260 $81,868,388 44,576,908 Total: $521,202,155 22

VRS Revenue: Low Rate Proposal July – December January – April May – June 2017 2017 2018 Demand Rate Revenue Demand Rate Revenue Demand Rate Revenue 1,995,539 $4.82 $9,618,498 Emergent 608,530 $4.82 $2,933,115 1,494,600 $4.71 $7,039,566 16,060,167 $4.06 $65,204,278 Tier 1 5,378,239 $4.06 $21,835,650 $3.98 $42,782,632 10,749,405 10,478,906 $3.49 $36,571,382 Tier2 3,407,175 $4.06 $13,833,161 $3.43 $23,144,371 6,747,630 36,510,246 $2.83 $103,323,996 Tier 3 12,315,316 $3.49 $42,980,453 $2.80 $71,638,754 25,585,273 $178,363,360 65,044,858 $260,970,407 Total 21,709,260 $80,582,379 44,576,908 Total: $440,905,836 23