Private Equity Is Taking Your Calls
One of the newest rollups by private equity is in an industry that should not really even be a private market at all.
Video Relay Service (VRS) is a niche area of telecommunications connecting deaf people to sign language interpreters at call centers around the country, so that they can communicate with family and friends, conduct work, or even call in medical emergencies.
This critical communications infrastructure is entirely paid for already by the federal government. But instead of a publicly run service, the government has allowed a private equity–owned duopoly to manage the sector, while fully backstopping their profits. The two companies, Sorenson Communications and ZP Better Together, are owned separately by a collection of Wall Street firms: Ariel Alternatives, Kinderhook Industries, and the Carlyle Group.
These institutional investors have flocked to VRS, because they can fleece a taxpayer slush fund with few repercussions for degrading product quality for deaf people and squeezing workers. Despite receiving an increase in government subsidies last year, those funds haven't trickled down to workers in wages and benefits. In fact, at call centers around the country, interpreters say their working conditions have declined rapidly under private equity ownership and consolidation, leading to layoffs and chronic understaffing.
"Getting bought out has ushered in this era where each day is like running into a burning building but I don't have the proper equipment," said Meg Huseman, an interpreter in the Dallas area who's worked on and off at Sorenson for nearly 15 years.
Union busting and widespread unfair labor practices have taken place on the government's dime at several call centers. Today, the Office and Professional Employees International Union (OPEIU) announced a major unionization drive under way at call centers across the country to try to rectify what has been wrought in this sector. They're demanding better pay, training resources, and benefits for interpreters.
The union is also decrying lax oversight of the program by the Federal Communications Commission, the regulatory body tasked to oversee the industry. Labor groups say the FCC has not responded for months to their request to hold a meeting to discuss working conditions. Meanwhile, commission staff and chair Jessica Rosenworcel have maintained a close relationship with industry leaders, meeting with Sorenson and ZP 16 times in the past two years, according to public record disclosures.
Sorenson and ZP did not respond to a request for comment.
are the result of a series of takeovers and acquisitions over the past decade.
Years ago, private equity giant KKR initiated a leveraged buyout of Sorenson, and currently maintains a minority position along with Blackstone Credit. The outstanding debt obligations are held by a series of other firms. In 2022, management firm Ariel Alternatives, run by high-profile investors on the boards of Starbucks, Nike, and McDonald's, took a controlling interest in Sorenson for $1.3 billion. They made this purchase through essentially a responsible investing fund courting investors to finance minority-operated portfolio companies.
ZP, on the other hand, is the result of the 2017 merger between ZVRS and Purple Communications, which are now divisions of the umbrella company ZP. The conglomerate is owned by private equity firm Kinderhook Industries through a continuation fund, where the lead investor is the Carlyle Group's subsidiary AlpInvest.
There's one other smaller competitor, owned and operated by deaf people.
Though it's a narrow market, VRS has drawn major institutional investors because it's an attractive cash cow with all but guaranteed profits.
Phone companies are required under the Americans With Disabilities Act to make VRS available to the half-million deaf Americans who rely on it. Because of the cost of video service and interpreters, bills for deaf customers would theoretically be much higher, punishing them unfairly, so the government steps in.
VRS is free of charge for users. Providers are fully reimbursed by the FCC at a set rate per minute, which comes out of a fund paid for by a small fee on all phone calls. There are some performance standards providers have to meet to receive reimbursements, such as 24/7 availability and answering 85 percent of calls within ten seconds.
Because the cost of video service and interpreters would be high for deaf customers, punishing them unfairly, the government steps in.
The duopoly has pushed the FCC to jack up these reimbursement rates over the years. In 2023, the commission announced a new five-year rule with 30 to 49 percent rate bumps. For the top tier, which covers the first million minutes of call time, Sorenson and ZP are now compensated at $6.27 per minute, up from the previous rate of $3.92. After a million minutes, there's a lower tiered rate, a system actually intended to level the playing field for smaller competitors that might not rack up as high a volume. It's one of the FCC's attempts to infuse competition in VRS, which hasn't worked.
This year, Sorenson's annual revenues are projected to be $2.1 billion, according to market research aggregator site RocketReach. The two companies that merged under ZP, the smaller arm of the duopoly, each have annual revenues of roughly $200 million. The real money for the private equity firms come in the form of the eventual sales of their ownership stakes and debt service payments. ZP still has $275 million in debt.
The FCC justified this rate increase to both incentivize innovation in the sector and enable higher wages for its workforce. Most interpreters across the industry are kept as part-time employees, without the same wages and benefits as their full-time counterparts.
The agency explicitly estimated that pay for interpreters would increase by 65 percent within five years because of the rate hikes. But without any enforcement power in place, interpreters haven't seen the wage increases they were promised.
"The only way to effect change is through unionization, as both companies in the duopoly can't see past the dollar signs to do what's right for the communities we serve and the interpreters providing the services that ensure their revenue continues to flow," said Justin Young, an interpreter who's working with the union.
Despite the unusual characteristics of this market, it's essentially the same private equity playbook. They drive up rate increases while slashing costs on the labor side. They get away with some of the labor practices because VRS providers are not technically government contractors, which comes with greater worker protections.
VRS instead receives periodic certification by the FCC. Sorenson and ZP have both been operating for several years under conditional certification, which the FCC has extended with no clear horizon for a final decision.
It's a critical distinction, because under high-road contracting rules put in place by President Biden's and other administrations, contractors can't use government funds to explicitly union-bust.
In 2011, the FCC actually issued a notice of proposed rulemaking and invited comments regarding potentially making VRS a contracted service. FCC noted that this would likely reduce costs through a competitive bidding process. It would also bring interpreters greater labor and anti-discrimination protections, as the Private Equity Stakeholder Project has noted .
If the FCC had implemented this overhaul of VRS, it could have helped avoid some of the events that have transpired recently at call centers where workers tried to organize.
'S 2023 RATE BUMP, ZP closed down two ZVRS call centers in the Minneapolis area after learning that employees had started organizing with the Communications Workers of America. Workers also refused to sign forced arbitration agreements, a routine practice across the industry to strong-arm interpreters to forgo some of their legal rights.
The company cited "profitability" as the reason for the closures, but had just recently posted offerings for a round of new hires, according to a report from .
At the time, OPEIU president Richard Lanigan said it was a repeated pattern of behavior. ZP also closed down two Purple centers in California after settling a case for $320,000 over worker wage theft and retaliation.
Before ZP's ownership, Purple had been subject to 21 unfair labor practice charges and settled each one. In a 2020 NLRB ruling under the Trump administration, the Board found ZP to be a joint employer responsible for even more labor charges, including harassment and retaliation.
Since private equity's full-scale takeover of VRS, these practices have only ramped up, according to workers. That's a major cause for the renewed unionization efforts under way.
Shortly after Ariel bought Sorenson, the company immediately started shedding labor costs. They began a major downsizing effort by laying off middle management, one of the few employment strata filled with full-time employees. A lot of the management at Sorenson who lost their jobs were actually deaf people. They'd started as interpreters themselves, been loyal to the company, and moved up through the ranks.
According to interpreters, Sorenson limps along with fewer managers, and the ones Ariel did replace are typically not even certified interpreters. This means they don't understand the hardships and nuances of the job.
Interpreting is a pretty demanding profession that leads to burnout. Calls have to be answered at rapid fire because companies assign quotas for the minutes workers have to meet for each hour on their assigned shifts to get paid. The nature of those calls fluctuates dramatically from mundane to life-threatening.
"You'll go from one call where you have to tell a parent their kid just died and then on the next one explain that a caller's check was bounced ... there's no time in between to process any of what you just translated," said Sorenson interpreter Meg Huseman, who is organizing with the union in large part because she believes there aren't adequate resources provided to interpreters to manage the psychological demands of the job.
Call centers such as ZP's have seen their quotas increase lately to make up for workforce shortages, further straining the remaining workforce. "They're trying to squeeze more work out of fewer of us and that's a direct result of the private equity owners in my opinion," said Emma Sills, an interpreter at a ZP center in Florida.
Sills says that she noticed the quality of interpreter training get significantly worse under new management. When she started working there years ago, many interpreters weren't allowed to interpret many categories of calls until after roughly three years. Now, the training is down to one year. She doesn't fault the new interpreters but says many of them are just not qualified to do the work. That means calls often get routed to longtime interpreters like herself, which increases her workload.
She's been organizing with the union to hopefully bargain with the company about this issue in particular. Her top priority would be demanding more investment in training for interpreters, which the company in her opinion could certainly afford. "There needs to be better overall compensation and resources for the hardships of this job," she said.
Workers are raising similar complaints at Sorenson. Since the ownership change, Huseman holds the new management regime responsible for a certain level of dysfunction. "I feel like I'm rolling a big bin of bingo balls and any given day whatever ball rolls down that's my luck for the day because everything is so crazy ... it's a dumpster fire internally there."
She cited technology malfunctions that she's sure are taking place on the company server's end, because they happen so routinely across different network connections with callers. Sometimes, she said, five calls in a row will have glitches. When she reports these malfunctions, they mostly go unanswered. Her daily communications to management have been replaced with automated email responses.
Because of high turnover, Huseman is also being asked to interpret certain types of calls she isn't fully equipped to handle. For example, she isn't certified to do legal translations, yet has been forced to lately.
Management at ZP is aware of the union organizing taking place and reportedly convened managers at its Florida call centers to notify them. Workers say they're uneasy about what might transpire given the company's record, but they believe a union is necessary.
