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K. Dane Snowden
Chief, Consumer & Governmental Affairs Bureau
Federal Communications Commission
Direct Marketing Association
Teleservices Conference
"Striking the Proper Balance"
Miami, Florida
Friday, June 20, 2003
Good morning. I would like to thank the Direct Marketing Association for inviting me to speak this morning. I would also like to specifically thank Jerry Cerasale, Senior VP for Government Affairs. I must admit Jerry, as great a guy as you are that I look forward to not seeing you so often once the Commission’s TCPA proceeding is over. I am beginning to wonder if you have an office somewhere in the building.
I am pleased to be here this morning to share with you some thoughts about the FCC’s proceeding examining our telemarketing rules. Because this conference attracts members from all over the country and thus some of you here today may not be familiar with the Federal Communications Commission’s regulatory process. I think it might be helpful for me to give a little bit of background in order to shed light on the how, why and what we do at the FCC to regulate and deregulate industries under our purview.
The FCC is an agency like no other. The creation of the FCC relates back to the sinking of the Titanic and the creation of regulation of broadcast spectrum. Fast forward 75 years and now the FCC holds an amazing portfolio that is both wide and deep and continues to grow as new technologies like broadband come to age. As many of you know, we regulate everything from television to telephones – radio to cable. A lot has changed since the Communications Act of 1934. Gone are the days where we only have to worry about broadcast spectrum. Today we find ourselves on a path to digital migration. A path that is full of both unknown challenges and opportunities for advancement. A path that will change how Americans communicate in the future. We now live in a world where everything from trading stocks to buying goods and services, to protecting our Homeland occurs over some form of the communications network. A communications network that becomes more dynamic and important each day. A communications network that provides opportunities for economic growth for America. A communications network on which the public relies for their safety and comfort.
I should first begin my remarks with our Sunshine rules. And no these are not rules that apply to the great – sunny – state of Florida. Our Sunshine rules are important for today as they guide the manner and substance of today’s discourse. The Sunshine rules state that all presentations to decision-makers concerning matters listed on the Sunshine Agenda are prohibited. Yesterday, the Commission released its sunshine notice, announcing that our telemarketing rules would be voted upon at next Thursday’s agenda meeting. This means I will not be able to take questions from the audience as I had agreed to do several months ago when Jerry asked me to join you at this conference. So I come with both good and bad news. The bad news is that I cannot give you detail on what the Commission plans to do in six days. The good news is that in six days the Commission will have made a decision, thus resolving the unanswered questions in the marketplace that currently exists. I should point out that Congress gave the FCC until September 7th to reach conclusion on our revisions to our telemarketing rules and we are more than two months ahead of schedule. The Commission’s efforts and that of my staff is nothing less than a Herculean effort to bring stabilization and clarity to the marketplace.
In addition to my regular work on the telemarketing proceeding currently before the FCC, I, like all of you, am a consumer. A consumer who receives and welcomes some calls by telemarketers, but certainly not all. In fact, I recently conducted my very own informal survey on the calls to my home. I had recently taken a personal day from work while waiting on the delivery of a new appliance that was purchased the old fashion way – at a department store. During my wait, I logged several calls for all types of products. In one single hour, I could refinance my home, change my long distance service, purchase some steaks, have my house cleaned, lawn mowed and take my family on a trip to an amusement park. By the end of the hour I realized that in order to finance this power-hour of shopping via the telephone I would need another credit card with a huge credit limit. My phone rang once again and yes it was a credit card company offering me their services with a great rate.
I share this story with you only to demonstrate what all of you already know……Americans receive a great many calls to their homes every single day. Is that a bad thing? It depends on the individual Consumer. Our job at the FCC is not to determine if you should be able to buy steaks or change your long distance service. Our task is to examine whether the Commission’s rules addressing telemarketing practices need to be revised in order to balance more effectively the goal of limiting unsolicited advertising against the burdens on telemarketing. Our responsibility in serving the public interest is to ensure that the proper balance between individual privacy and legitimate telemarketing practices continues in place with the emergence of new technologies and practices.
We live in an era where the lessons of business ethics are no longer just topics of instruction in business or law school. You cannot read a newspaper today or turn on the television, or listen to the radio without hearing about a company or a CEO breaking the law. Americans are growing impatient with corporate scandals and the trickery of business practices.
When direct marketing is done in a responsible manner, everyone is a winner. It is not news to anyone here today that the teleservices industry has a somewhat challenging perception in certain sectors and as attention grows on how this industry does business, it is critical that these issues be addressed. If not by the industry itself, then certainly by regulators and even possibly the United States Congress. We know that responsible telemarketing is an essential part of the way the industry will need to do business moving forward. Of course, many if not all of you here this morning, do comply with the rules, but we know first hand by the media attention, consumer complaints and congressional inquiries that the FCC’s proceeding has generated, not everyone follows the law.
My goal this morning is to help outline what is taking place at the FCC and how these actions may affect the way you do business by explaining our role. In particular, I want to address four pieces of this puzzle: 1.) what has happened since 1992 when the Commission first adopted rules pursuant to the then recently enacted Telephone Consumer Protection Act of 1991; 2.) the issues on which the Commission sought comment on in the Notice of Proposed Rulemaking that is leading up to the Commission’s adoption of revised rules tentatively scheduled for next week; 3.) the FCC’s enforcement efforts for irresponsible marketers who do not abide by the current rules; and finally 4.) the Federal Trade Commission’s recent adoption of a national "Do-Not Call" list and the jurisdictional differences between the FTC and the FCC.
To understand where we are today, at the threshold of revisions to our rules, let’s go back to the beginning. By the early part of the last decade, many consumers were concerned that unsolicited marketing calls were an invasion of privacy and a danger to public safety. In response to this concern, Congress passed the Telephone Consumer Protection Act (TCPA) in 1991, and the FCC adopted rules to implement the Act in 1992.
The main provisions of the 1991 statute restrict the use of automatic telephone dialing systems, artificial and prerecorded messages, and sending unsolicited fax advertisements. The law also prohibits autodialed and prerecorded message calls to emergency numbers, health care facilities, wireless numbers and other services for which the called party pays, and it prohibits prerecorded advertising messages to residential telephone numbers without prior express consent of the called party. Further, the FCC’s 1992 rules include the requirement that telemarketers maintain company specific do-not-call lists -requiring companies to honor do not call requests for 10 years. Finally, the TCPA restricts calls between 8 AM and 9 PM at called party’s location, and requires telemarketers to identify themselves.
In the TCPA, Congress struck a balance between individual privacy and legitimate telemarketing practices, and as I stated earlier all future actions taken by the FCC will work toward that balance. Simply stated, legitimate telemarketing is not in danger by the FCC.
Since the 1991 Act, developing technologies have allowed telemarketers to reach more people by phone and fax, and these techniques have once again raised concern about consumers’ privacy and safety. Based on information from this association, the numbers tell the story: 10 years ago telemarketers contacted 18 million Americans each day – totaling $435 billion sales annually. Fast-forward to today and there has been an impressive growth of as many as 104 million calls to consumers and businesses each day and $600 billion in sales annually. Now I would be remiss if I did not point out that the growth in the annual sales figures indicates that American consumers do welcome many of these calls. Conversely, there are a growing number of consumers who do not welcome these calls to their homes or fax machines. The goal, albeit difficult task for the Commission is to implement this regulatory paradigm in recognition of these developments.
In its Notice of Proposed Rulemaking the Commission commenced this examination. The Commission sought comment on whether the rules need to be revised in order to balance more effectively the goal of limiting unsolicited advertising against the burdens on telemarketers and their interests in conducting beneficial and legitimate telemarketing. Among other things, the Commission sought comment on revising the rules governing unwanted telephone solicitations and the use of automatic dialing systems, prerecorded or artificial voice messages, and telephone fax machines. With regard to what has become perhaps the most controversial issue, the Commission sought comment on whether to revisit the option of establishing a national-do-not-call list.
While this inquiry was underway, the Federal Trade Commission amended its own rules aimed at deceptive and abusive telemarketing practices. On December 18, 2002, the FTC released an order which, among other things, adopted a national do-not-call registry to be maintained by the federal government to help consumers avoid unwanted telemarketing calls.
Finally, a third and significant thing happened on March 11, 2003, when Congress passed the Do-Not-Call Act. This act authorized the FTC to collect fees from telemarketers for the implementation and enforcement of a do-not-call registry. In addition, the act required the FCC to issue a final rule in its ongoing proceeding within 180 days of enactment, and to consult and coordinate with the FTC to "maximize consistency" with the rules promulgated by the FTC. Congress recognized that because the FCC is bound by the TCPA, it would not be possible for the FCC to adopt rules that are identical to those of the FTC in every instance. In those instances where such inconsistencies exist, Congress stated that either the FTC or FCC must address them administratively or Congress must address them legislatively.
It is the convergence of these three things that brings us to next Thursday’s meeting and set the contours of the landscape you as members of the industry will face.
Looking back just a couple of generations, direct marketing has been a part of everyday American life for a long time. In those days it was a heavily male dominated field, compared to the employment opportunities the industry now offers to men and women both young and old. The living embodiment of direct marketing was the door-to-door salesman, plugging along from house to house selling vacuum cleaners or encyclopedias. The salesman was a regular part of neighborhood activity. The door-to-door salesman didn’t have the advantages of today’s technology, but his purpose was twofold: to bring products to the attention of the people who opened the door and to make a living doing it.
Today’s direct marketers are following in this long tradition of providing a service. They’re informing consumers about new products and services. They are offering choices and convenience. When someone calls to say that their company is in the neighborhood cleaning homes or mowing lawns, they’re offering a service. When someone calls to offer a low-interest credit card rate or a cheaper long distance rate, they’re offering a service. Direct marketing helps people get what they want and perhaps need.
When I first began my professional career at the Sony Corporation, the first round of telemarketing rules were coming into effect. I was a marketing manager of business products and had the task of getting leads to pitch the company’s latest products. I found the telemarketing process to be invaluable and a cost effective way to get Sony’s products to consumers. I learned at an early stage of my career that telemarketing is a legitimate business practice. Since joining the Commission, I have also learned that there are those who do not follow our rules. Of course the FCC is tasked with taking enforcement action against those who do not comply.
I want to emphasize again that our purpose is to permit the legitimate business of telemarketing to continue. We do, however, act to protect consumers against those who abuse the law. The FCC is committed to the enforcement of our rules. In 2002, we had more than 25,000 inquiries and almost 7,500 complaints about TCPA issues, including unsolicited faxes and telemarketing.
In the last quarter of 2002, the FCC’s Enforcement Bureau issued 13 citations or warnings to companies. We work hard at being fair, and recipients of citations have the right to a personal hearing with Commission staff if they have any questions or concerns.
But if a company continues to violate our rules after receiving a citation, we do have the authority to impose fines in the form of a Notice of Apparent Liability, which can be up to $11,000 per violation. This is a lot more than the $500 available under the TCPA’s private right of action a consumer may seek in state court for a willfully and knowingly committed violation. Nearly $7 million in forfeitures were proposed or issued by the FCC since December 1999. As you can tell the Commission takes its enforcement responsibility seriously.
Likewise, we take the business of legitimate telemarketing seriously. The FCC has no quarrel with legitimate telemarketers, and we want all such parties to understand our rules so that they can avoid violating them. We will, however, proceed against the bad actors, either based on a pattern of illegal activity or even based on one single complaint, if the offense is egregious enough.
When the rules are broken it hurts the entire industry. Consumers file complaints. The FCC investigates. Congressional leaders receive and send letters of inquiry. And the American consumer – also known as the taxpayer - begins to ask why no one is doing anything?
Part of our job is to educate consumers about their rights. Our fact sheet on telemarketing calls, for example, has received over 200,000 hits since we posted it on our Web site in March 2002. About 80,000 of these have been posted just since January of this year. Obviously, people are very interested in the issues.
Beyond informing consumers and enforcing the current rules, the more daunting task of re-examining the 1992 rules fell to my office, the Consumer & Governmental Affairs Bureau. Our direction from Chairman Powell was clear: craft rules that protect the privacy of the American consumer without penalizing legitimate telemarketers. In this quest, our goal is to avoid regulatory duplication by fashioning rules that achieve a regulatory balance for consumers and the telemarketing industry.
There has been a great deal in the news lately concerning actions by the FCC and the Federal Trade Commission to exercise more control over telemarketers. Many of these accounts may have given the impression that we somehow plan to wipe out telemarketing, but I assure you that the survival of telemarketing is simply not the issue. An overall consideration guiding our inquiry has been to work closely with the FTC, as we have done since our proceeding was initiated last September.
One important thing to remember is that the FTC and the FCC share responsibility, along with state consumer protection statutes, for regulating telemarketing. The Federal Trade Commission Act sets out the limitations on any actions taken by the FTC. Most important, the FTC’s jurisdiction does not extend to intrastate telemarketing, banks, savings and loan institutions, federal credit unions, and common carriers.
Therefore, the requirements adopted by the FTC, including the national do-not-call list, do not cover common carriers, banks, savings and loan institutions, and federal credit unions, as well as intrastate telemarketing.
The TCPA gives the FCC authority to regulate "all entities using unsolicited phone calls and faxes to market," including common carriers whether interstate or intrastate. The FCC, therefore, can establish telemarketing rules that apply to all entities using telephone and fax machines for unsolicited advertising, including banks, airlines, insurance companies, and common carriers.
The TCPA also expressly permits the FCC to require the establishment and operation of a national do-not-call list, which would apply to the entities over which the FTC has no jurisdiction. As the FCC contemplates its decision on crafting new telemarketing rules, we will continue to keep a careful eye on the actions of the FTC, the mandates expressed by Congress, the dynamic nature of state consumer protection laws, the regulatory effects on the telemarketing industry and of course the interest of the American consumer.
It is important that we all have the freedom to choose. In a few weeks we will celebrate America’s independence. One of the things we are proudest of in this country is our right to freedom of speech. It is one of the things we hope to extend to other nations, and it is something we are willing to fight for, die for and to protect. The freedom to choose is the American way.
As I stated earlier, the FCC has no quarrel with legitimate telemarketing and we want all such parties to clearly understand and follow our rules. As always, our effort in crafting any regulation is to balance the rights of the parties involved. I believe that we --- private enterprise and the federal and state governments -- can and will work together to ensure that consumers continue to have choices offered through the efforts of teleservices.
In our efforts to implement Congress’s will expressed in 1991 and to protect consumers and at the same time permit the legitimate use of the network as a tool for direct marketing, we are grateful to DMA, both for your comments in our current proceeding and for your ongoing efforts to promote responsible law abiding telemarketing.
Together, DMA and the Commission can bolster trust in the power of markets. Once again I want to thank you for inviting me today. Stay tuned, as I am sure you will, for the Commission’s decision next Thursday.
Thank you.
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last reviewed/updated on 06/20/03 |
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