Funding DNC: Is the Cart Before the Horse?

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The Federal Trade Commission's release of its amended Telemarketing Sales Rule in December has presented telemarketers a host of new challenges.


The triumvirate of abandonment rates, caller-ID transmission and federal do-not-call registry rules promises to keep telemarketers on their collective toes in 2003 and beyond.


These new provisions, except the DNC rules, can be implemented by the FTC without further action by Congress. However, the DNC registry requires congressional authorization for the FTC to charge telemarketers for access to the list, in an amount estimated at $16 million yearly.


FTC chairman Timothy Muris briefed the House Energy and Commerce Committee on the DNC registry Jan. 8. Given the tone of the briefing, most observers predict that the necessary approvals are forthcoming. It was clear, however, that two important elements need to be in place for congressional authorization to proceed - cooperation of the states in "harmonizing" DNC list information with the federal list and active participation of the Federal Communications Commission to supplement the FTC's proposal in order to cure jurisdictional defects.


The House committee appeared to accept at face value Muris' assertions of "overwhelming" support at the state level for harmonization, and that the FCC appeared to be "moving forward" with adopting rules that would complement the FTC's rules. Muris asked the committee to provide the funding authorization by the end of January to ensure that the DNC list was created and launched in 2003.


Many in the teleservices industry question whether the House committee should grant the FTC's funding request in the absence of clear evidence that all states are willing to participate and that the FCC is on board with the FTC's plans.


Though a few states specifically indicate in their DNC list law that they will adopt a federal registry should one be created, certain other states have expressed concern about a federally mandated DNC program.


The FCC, meanwhile, began a rulemaking process in September that most predict will not conclude until March. However, for the FCC to adopt policies supporting a national DNC registry, it will have to provide a rationale for why it seeks to reverse the determination it made in 1992 not to create a national DNC list.


On this note, pertinent case law indicates that a federal agency carries the burden to justify a reversal of a previously held position, and that the agency must provide a reasoned analysis, supported by the record, for the reversal.


In 1992, as part of its rulemaking implementing the Telephone Consumer Protection Act, the FCC considered several possibilities for residential telephone subscribers to avoid receiving unwanted telephone calls. The FCC decided that company-specific lists presented the best alternative, specifically finding (with regard to the creation of a national DNC database) in "view of the many drawbacks of a national do-not-call database, and in light of the existence of an effective alternative (company-specific do-not-call lists), we conclude that [a national do-not-call database] is not an efficient, effective, or economic means of avoiding unwanted telephone solicitations." The FCC based this determination on three factors: cost, confidentiality and choice.


The FCC determined in 1992 that development and deployment of a national DNC database would cost $20 million to $80 million and that the annual cost for maintaining such a database would be $20 million. The FCC expressed concern that, ultimately, any such cost would be passed on to consumers via either higher prices charged by telemarketers or through costs incurred by a national database administrator and not recovered through fees on telemarketers.


When the FTC first proposed a national DNC list in early 2002, its cost estimate was substantially lower than the FCC's - $5 million to implement and $3 million to maintain. However, the FTC now seeks authority to charge telemarketers $16 million yearly, a figure much closer to the cost that gave the FCC such concern in 1992.


The FCC also decided that company-specific lists, rather than a national registry, provided the best protection for residential subscriber confidentiality. The FCC reasoned that company-specific lists are not universally accessible and could be verified with a telemarketer's own customer information. The FCC expressed concern over the ability of unscrupulous telemarketers to make use of national database information, as well as the potential risk to the privacy of telephone subscribers who have paid to have their telephone number remain unpublished.


The FTC's recent proposal envisions the collection of various consumer information via telephone, Internet and state do-not-call programs. This information will be purged over time, using national databases that reflect disconnections or changes of telephone service. Such purged telephone numbers will be made available to telemarketers on a quarterly basis.


In other words, the FTC will create a national database of telephone numbers that are off limits to legitimate telemarketers, containing public and private numbers that have been merged and purged regularly against appropriate disconnect and related databases. How this proposal addresses the FCC's concerns regarding access to such information by unscrupulous telemarketers remains to be seen.


The final factor the FCC considered in 1992 involved choice - the ability of consumers to choose among telemarketers from whom they do and do not wish to hear. The FCC said in its 1992 rulemaking that its goal was to "implement the TCPA in a way that reasonably accommodates individuals' rights to privacy as well as the legitimate business interests of telemarketers."


In determining that company-specific lists met this goal and that a national DNC registry would not, the FCC stated "[i]n sum, the company-specific do-not-call list alternative represents a careful balancing of the privacy interests of residential telephone subscribers against the commercial free speech rights of telemarketers and the continued viability of a valuable business tool."


The FCC therefore accepted the argument that giving consumers an "all or nothing" choice in the form of a national DNC registry would not properly balance consumer privacy interests against legitimate telemarketer free-speech rights. To support the FTC's DNC registry proposal, the FCC will need to provide a rationale for overturning this "careful balancing," specifically enunciating how the status quo with regard to consumer privacy interests and telemarketer free-speech rights has changed since 1992.


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