Delaware Utility Telemarketing Restriction Draws Fire

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A controversial clause in Delaware's utility deregulation law restricting telemarketing is drawing sharp criticism from telemarketers and nearly caused the bill's sponsor to vote against it.


On April 1, Delaware Gov. Thomas R. Carper signed into law a bill deregulating the electric utilities and eliminating telemarketing as a means of lead generation and customer acquisition among utility companies.


"We don't think it is constitutional and we need someone to challenge it. I was going to vote against the whole bill when the clause was admitted by one vote, but that would have put deregulation off two years until the next legislature was elected," said State Rep. Roger P. Roy, chair of the House Electric Utility Deregulation Committee, who sponsored the bill but voted against the clause. "You don't shut out a whole bunch of people."


Sky Alland, a customer relationship management company in Columbia, MD, is already planning to work through various trade associations to pressure the state legislature to rescind the telemarketing clause.


"This is the first state to attack telemarketing," said Rich Hebert, Sky Alland chief operating officer. "I think it will be very difficult for the legislature to keep this on the books. As we make phone calls in Delaware to consumers who give us permission, we are following this very closely. I can't imagine that it will be allowed to stay."


He added that he was not concerned about other states enacting similar bans on telemarketing because, "more prudent legislatures will have better judgement."


The clause was added by Senate President Pro Tempore Thomas Sharp just before the general assembly voted on the bill. Sharp did not return phone calls as of press time.


Ted Caddell, a spokesman for Conectiv, Wilmington, DE, one of the major utilities in the state, noted it was too early in the deregulation process to tell what kind of impact the provision will have on marketing strategies among electric companies.


"This is something that is as simple as a senator voicing his opinion about receiving sales calls at home. We have all complained about that," he said. "This is not something we would support."


As a result of deregulation, many utilities have turned to direct telemarketing to reach customers, noted Carol Padon, vice president of investor and public relations for West Teleservices Inc., Omaha, NE.


"This legislation not only restricts telemarketers, it restricts the customer from finding about reduced rates. It has been a very important part of educating consumers," she said.


Padon added that the legislation would probably be contested but that it does not pose a threat to the future of telemarketing.


"Too many Fortune 500 companies are using services such as ours that the demand for telemarketing is too great to ban it all together," she said. "The opportunities for reaching customers are so far reaching that this legislation is not a threat to too many companies."


However, industry lawyers noted that there is cause for concern for utilities who intend to use telemarketing because they may be forced to take legal action to strike down the clause.


"This is not even close to being constitutional. No other form of direct marketing is being banned, also telemarketing can be used for any other purpose but this. That is not right," said Bill Raney, a lawyer with Copilevitz & Canter, LLC, Kansas City, MO. "This could be challenged, and defeated, but the only way to do it is in court," he said.


Raney added that although he is concerned this could be a move towards banning telemarketing in Delaware, the clause could prevent electric companies from entering Delaware's open electric market because they might not want to get into the legal battle that would be necessary to contest the measure.


The Delaware government has been debating the deregulation issue for more than a year.


"To be frank, this legislation was well thought out," Raney said. "But that one line was not. This is discrimination against a particular medium. There is no telling what would happen if other states start including similar rules in their deregulation bills."


Delaware has several corporations, including major credit card companies, that rely on telemarketing as a means of increasing their customer base. Among them are MBNA and AFBA, two of the largest issuers of credit cards in the country.


"We have 30,000 telemarketers in this state," Roy said. "This is an affront to an entire industry."
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