[Federal Register Volume 73, Number 169 (Friday, August 29, 2008)]
[Rules and Regulations]
[Pages 51164-51204]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-20253]



[[Page 51163]]

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Part V





Federal Trade Commission





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16 CFR Part 310



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Telemarketing Sales Rule (``TSR''); Final Rule Amendments

  Federal Register / Vol. 73, No. 169 / Friday, August 29, 2008 / Rules 
and Regulations  

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FEDERAL TRADE COMMISSION

16 CFR Part 310

RIN: 3084-AA98


Telemarketing Sales Rule (``TSR'')

AGENCY: Federal Trade Commission

ACTION: Final Rule Amendments

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SUMMARY: The Commission adopts two final amendments to the TSR. The 
first is an amendment making explicit a prohibition in the TSR on 
telemarketing calls that deliver prerecorded messages without a 
consumer's express written agreement to receive such calls. This 
amendment also requires that all prerecorded telemarketing calls 
provide specified opt-out mechanisms so that consumers can opt out of 
future calls. The amendment is necessary because the reasonable 
consumer would consider prerecorded telemarketing messages to be 
coercive or abusive of such consumer's right to privacy.
    The second amendment modifies the method for measuring the maximum 
call abandonment rate prescribed by the TSR's call abandonment safe 
harbor. The new method will permit sellers and telemarketers to 
calculate call abandonment rates for a live calling campaign over a 
thirty-day period, or any part thereof. This amendment is necessary 
because the current ``per day'' standard effectively precludes the use 
of predictive dialers with small calling lists.

DATES: The amendments are effective October 1, 2008. Compliance with 16 
CFR 310.4(b)(4)(i) is required beginning October 1, 2008. Compliance 
with 16 CFR 310.4(b)(1)(v) is required beginning December 1, 2008, 
except that compliance with 16 CFR 310.4(b)(1)(v)(A) is not required 
until September 1, 2009.

ADDRESSES: Requests for copies of these amendments to the TSR and this 
Statement of Basis and Purpose (``SBP'') should be sent to: Public 
Reference Branch, Room 130, Federal Trade Commission, 600 Pennsylvania 
Avenue, NW, Washington, D.C. 20580. The complete record of this 
proceeding is also available at that address. Relevant portions of the 
proceeding, including the final amendments to the TSR and SBP, are 
available at www.ftc.gov.

FOR FURTHER INFORMATION CONTACT: Craig Tregillus, (202) 326-2970, 
Division of Marketing Practices, Room 286, Bureau of Consumer 
Protection, Federal Trade Commission, 600 Pennsylvania Avenue, NW, 
Washington, D.C. 20580.

SUPPLEMENTARY INFORMATION:

I. Overview and Background

A. Overview

    This document states the basis and purpose for the Commission's 
decision to adopt two proposed amendments to the TSR\1\ that were 
published for public comment on October 4, 2006.\2\ After careful 
review and consideration of the entire record of more than 14,000 
comments amassed on the issues presented in this rulemaking proceeding, 
the Commission has decided to adopt, with several modifications 
suggested by the public comments, an amendment making explicit a 
prohibition on prerecorded telemarketing calls without a consumer's 
express written agreement to receive such calls. The prerecorded call 
amendment will take effect in two stages. The requirement that 
prerecorded calls provide an automated interactive keypress or voice-
activated opt-out mechanism will take effect on December 1, 2008, but 
the prohibition on placing calls that deliver prerecorded messages 
without the prior express written agreement of the recipient to receive 
such calls will not take effect until September 1, 2009.
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    \1\ 16 CFR 310.
    \2\ 71 FR 58716 (Oct. 4, 2006).
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    In adopting the amendment explicitly prohibiting prerecorded calls 
delivered to consumers who have not agreed to receive them, the 
Commission has modified the proposed amendment in several respects as 
suggested by the public comments. The most significant revisions will: 
(1) Require sellers and telemarketers to provide a keypress or voice-
activated opt-out mechanism promptly at the outset of any prerecorded 
message call that could be answered by a consumer as of December 1, 
2008; (2) Make the amendment applicable to prerecorded messages left on 
answering machines and voicemail services, requiring that any 
prerecorded message call that could be answered by such a device 
promptly disclose at the outset a toll-free number that a consumer may 
use to assert a request not to receive such calls; and (3) Permit 
sellers to obtain the consumer's signed, written agreement to receive 
calls delivering prerecorded messages in any manner permitted by the 
Electronic Signatures In Global and National Commerce Act (``E-SIGN 
Act'' or ``E-SIGN'').\3\
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    \3\ Pub. L. No. 106-229, 114 Stat. 464 (2000) (codified at 15 
USC 7001 et seq.).
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    Beginning on December 1, 2008, sellers and telemarketers will be 
required to comply with the new requirement to include an automated 
interactive opt-out mechanism pursuant to Section 310.4(b)(1)(v)(B). 
This requirement applies to calls delivering prerecorded messages, 
whether answered by the recipient in person, or answered by an 
answering machine or voicemail service.
    In addition, as of December 1, 2008, the Commission will terminate 
its previously announced policy of forbearing from bringing enforcement 
actions against sellers and telemarketers who, in accordance with a 
safe harbor that was proposed in November 2004, make calls that deliver 
prerecorded messages to consumers with whom the seller has an 
established business relationship (``EBR''). Nevertheless, the 
Commission has determined that sellers and telemarketers may continue 
to place calls that deliver prerecorded messages to consumers with whom 
they have an EBR, provided they do so in compliance with the new 
requirement in Sec.  310.4(b)(1)(v)(B), that prerecorded message calls 
include an automated interactive keypress or voice-activated opt-out 
mechanism. As of September 1, 2009, calls that deliver prerecorded 
messages will no longer be permitted to be placed based solely on the 
existence of an EBR, and calls that deliver prerecorded messages will 
be permitted to be placed only to consumers who have given their prior 
express written agreement to receive such calls.
    The Commission also has decided to adopt two exemptions from the 
requirements of the prerecorded call amendment that commenters strongly 
advocated. First, all healthcare-related calls subject to the Health 
Insurance Portability and Accountability Act of 1996 (``HIPAA'')\4\ 
will be exempt from all of the requirements of the amendment. Second, 
charitable fundraising calls made by for-profit telemarketers to 
members of, or previous donors to, a non-profit charitable organization 
on whose behalf the calls are placed will be exempt from the 
requirement to obtain prior consent, but will be required to provide an 
automated keypress or voice-activated opt-out mechanism and prohibited 
from calling consumers who use the mechanism to opt out.
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    \4\ Pub. L. No. 104-191, 110 Stat. 1936 (1996) (codified, as 
amended, at 42 USC 1320 et seq.).
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    In addition, the Commission is adopting, without modification, an 
amendment proposed in response to a petition from the Direct Marketing 
Association (``DMA'') to change the method for measuring the maximum 
call abandonment rate prescribed by the TSR's call abandonment safe 
harbor. The new method will permit sellers and

[[Page 51165]]

telemarketers to calculate call abandonment rates for a calling 
campaign over a thirty-day period, or any part thereof. This amendment 
will take effect on October 1, 2008.

B. Background

    The issues under consideration in this proceeding arise under the 
``call abandonment'' provisions of the TSR. These issues were first 
presented by two industry petitions. The first was a request from 
Voice-Mail Broadcasting Corporation (``VMBC'')\5\ for modification of 
the amended TSR's ``call abandonment'' provisions to allow 
telemarketing calls that deliver prerecorded messages to consumers with 
whom the seller has an EBR if they allow consumers to opt out and meet 
certain other requirements.\6\ The second, also involving the TSR's 
call abandonment provisions, was a petition from the DMA for 
modification of the method for calculating the maximum call abandonment 
rate permitted under the TSR.
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    \5\ Starz Encore Group, The Spoken Hub, Copilevitz & Canter, and 
SoundBite Communications also submitted similar requests for a 
prerecorded call safe harbor.
    \6\ See note 49, infra.
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    On November 17, 2004, the Commission published a Notice of Proposed 
Rulemaking (``NPRM'') to amend the TSR to create the safe harbor 
requested by VMBC, and sought public comment on that proposal and the 
DMA petition.\7\ The notice also announced that the Commission would 
forebear from bringing enforcement actions against sellers and 
telemarketers using EBR-based prerecorded telemarketing messages that 
comply with the proposed safe harbor during the pendency of the 
rulemaking proceeding.
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    \7\ 69 FR 67287 (Nov. 17, 2004).
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    Section 310.4(b)(1)(iv) of the TSR prohibits telemarketers from 
abandoning calls. An outbound telemarketing call is ``abandoned'' if 
the telemarketer does not connect the call to a sales representative 
within two seconds of the completed greeting of the person who answers. 
Call abandonment is an unavoidable consequence of the use of 
``predictive dialers''--telemarketing equipment that increases the 
productivity of telemarketers by placing multiple calls for each 
available sales representative. Predictive dialers maximize the amount 
of time representatives spend speaking with consumers and minimize the 
time they spend waiting to speak with a prospective customer. An 
inevitable side effect of this functionality, however, is that the 
dialer will sometimes reach more consumers than can be connected to 
available sales representatives. In these situations, the dialer either 
disconnects the call (resulting in a ``hang-up'' call) or keeps the 
consumer connected with no one on the other end of the line in case a 
sales representative becomes available (resulting in ``dead air''). The 
call abandonment prohibition, added to the TSR pursuant to the 
Telemarketing and Consumer Fraud and Abuse Prevention Act 
(``Telemarketing Act''),\8\ is designed to remedy these abusive 
practices.\9\
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    \8\ 15 USC 6101 et seq. This and other amendments to the 
original TSR resulting from a rule review mandated by the 
Telemarketing Act, 15 USC 6108, took effect on March 31, 2003. TSR 
Statement of Basis and Purpose (``TSR SBP''), 68 FR 4580 (Jan. 29, 
2003).
    \9\ TSR SBP, 68 FR at 4641--45. The Telemarketing Act directed 
the Commission to prescribe rules prohibiting deceptive and abusive 
telemarketing acts or practices, including ``a requirement that 
telemarketers may not undertake a pattern of unsolicited telephone 
calls which the reasonable consumer would consider coercive or 
abusive of such consumer's right to privacy.'' 15 USC 6102(a)(3)(A).
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    Notwithstanding the prohibition on call abandonment, Sec.  
310.4(b)(4) of the TSR contains a safe harbor designed to preserve 
telemarketers' ability to use predictive dialers, subject to four 
conditions. The safe harbor is available if the telemarketer or seller: 
(1) Abandons no more than three percent of all calls answered by a 
person (as opposed to an answering machine); (2) Allows the telephone 
to ring for fifteen seconds or four rings; (3) Plays a prerecorded 
message stating the name and telephone number of the seller on whose 
behalf the call was placed whenever a sales representative is 
unavailable within two seconds of the completed greeting of the person 
answering the call; and (4) Maintains records documenting 
compliance.\10\ Because consumers who receive a prerecorded message 
would never be connected to a sales representative, a telemarketing 
campaign that consists solely of prerecorded messages would violate 
Sec.  310.4(b)(1)(iv) and would not meet the safe harbor requirements 
in Sec.  310.4(b)(4).
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    \10\ 16 CFR 310.4(b)(4)(i)--(iv).
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    In a Federal Register notice published on October 4, 2006, the 
Commission reviewed and analyzed the nearly 13,600 comments submitted 
in response to the NPRM. Based on that review, the Commission: (1) 
Denied the VMBC request for creation of a safe harbor for prerecorded 
telemarketing calls; (2) Proposed an amendment to the TSR to make 
explicit the prohibition on prerecorded telemarketing calls that is 
implicit in the TSR's call abandonment provisions; and (3) Proposed an 
additional amendment modifying the method for measuring the maximum 
allowable call abandonment rate prescribed by the TSR's call 
abandonment safe harbor. The notice set forth the text of the proposed 
amendments and posed a series of questions on which the Commission 
sought public comment during a 30-day comment period, which the 
Commission subsequently extended an additional 40 days in response to a 
DMA petition seeking additional time, until December 18, 2006.\11\ More 
than 600 additional comments were submitted during the comment 
period.\12\
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    \11\ 71 FR 65762 (Nov. 9, 2006).
    \12\ The list of comments, including links to each comment 
submitted, is available at: (http://www.ftc.gov/os/comments/tsrrevisedcallabandon/index.htm.) Although the list indicates that 
630 additional comments were submitted, a few are duplicate 
submissions. E.g., Chodelski, No. 196 and Chodelle, No. 197; Call 
Command, Inc., Nos. 608, 610; PolyMedica Corp., Nos. 604, 609.
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    In view of the denial of the proposed amendment to create a safe 
harbor for EBR-based prerecorded telemarketing calls, the notice also 
announced that the Commission would terminate its policy of forbearing 
from bringing enforcement actions against sellers and telemarketers 
using prerecorded telemarketing calls (``forbearance policy'') 
effective January 2, 2007. In response to four petitions seeking an 
extension of the forbearance policy, however, the Commission announced 
in a Federal Register notice published on December 27, 2006, that in 
order to preserve the status quo, it would extend its forbearance 
policy at least until the conclusion of the rulemaking proceeding.\13\
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    \13\ 71 FR 77634 (Dec. 27, 2006). Two of the petitions came from 
healthcare-related businesses that use prerecorded calls as 
permitted by regulations issued by the Department of Health and 
Human Services (``HHS'') pursuant to HIPAA.
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II. The Proposed Amendment Regarding Calls That Deliver a Prerecorded 
Message

    The Commission has decided to adopt the proposed amendment with 
modifications suggested by commenters. As proposed, the final amendment 
will permit prerecorded message calls by or on behalf of a seller only 
to a consumer who has signed an express written agreement authorizing 
the seller to place such calls to his or her designated telephone 
number. However, the amendments will permit a seller to obtain 
agreements from consumers by any electronic means authorized by the E-
SIGN Act. Moreover, the amendment will apply not only to calls answered 
by a person as proposed, but also to prerecorded messages left on an 
answering machine or voicemail system.

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    The final amendment will require that any permitted call delivering 
a prerecorded message must: (1) Allow the consumer's telephone to ring 
for at least 15 seconds or 4 rings before an unanswered call is 
disconnected; (2) Begin the prerecorded message within 2 seconds of the 
completed greeting of the person called; (3) Disclose promptly at the 
outset of the call the means by which the person called may assert a Do 
Not Call request at any time during the message; (4) If the call could 
be answered in person, promptly make an automated interactive voice 
and/or keypress-activated opt-out mechanism available at all times 
during the message that automatically adds the telephone number called 
to the seller's entity-specific Do Not Call list and that thereafter 
immediately terminates the call; (5) If the call could be answered by 
an answering machine or voicemail service, promptly provide a toll-free 
telephone number that also allows the person called to connect directly 
to an automated voice and/or keypress-activated opt-out mechanism that 
is accessible at any time after receipt of the message; and (6) Comply 
with all other requirements of the TSR and applicable federal and state 
laws.
    In order to reduce initial compliance costs and burdens, the 
Commission will defer the effective date of the requirement that 
prerecorded calls provide an automated interactive opt-out mechanism 
for three months, and the express written agreement requirement for 
twelve months, to ensure that the industry will have adequate time to 
prepare to comply. This will permit sellers and telemarketers to 
continue placing prerecorded calls to consumers with whom the seller 
has an EBR until the written agreement requirement takes effect.
    In addition, healthcare-related calls subject to HIPAA will be 
exempt from the amendment, and calls placed by for-profit telemarketers 
on behalf of non-profit entities will be exempt from the written 
agreement requirement of the amendment but subject to the opt-out 
requirements.
    The Commission's decision to adopt the proposed amendment is based 
on a careful review, consideration, and analysis of the entire 
record,\14\ including the alternatives proposed by the public comments 
and the supporting evidence submitted, as well as the Commission's law 
enforcement experience.\15\
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    \14\ The record includes not only the comments submitted in 
response to the Commission's request for public comment issued on 
October 4, 2006, 71 FR at 58716, 58732-33, but also the comments 
submitted in response to the Commission's prior proposal to create a 
safe harbor for prerecorded calls, which raised essentially the same 
issues. 69 FR 67287 (Nov. 17, 2004).
    \15\ E.g., FTC v. Voice-Mail Broad. Corp., No. 2:08-cv-00521 
(C.D. Cal. Feb. 8, 2008) ($3 million civil penalty, with all but 
$180,000 suspended due to inability to pay, for abandoning over 46 
million calls, 11 million of which were directed to numbers on the 
Do Not Call Registry, and providing no opt-out option to consumers 
who answered); United States v. Star Satellite, Inc., No. 2:08-00797 
(D. Nev. June 19, 2008) ($4 million civil penalty, with all but 
$75,000 suspended due to inability to pay, for 80 million abandoned 
calls from prerecorded message blasting); United States v. Guardian 
Commc'n., Inc., No. 4:07-04070 (C.D. Ill. Nov. 15, 2007) ($7.8 
million civil penalty, with all but $150,000 suspended due to 
inability to pay, for automated prerecorded message blasting to up 
to 20 million numbers a day, many of which were placed to numbers on 
the Registry without an EBR, for abandoning calls answered by a 
person, and for failure to transmit Caller ID information); United 
States v. Craftmatic Indus., Inc., No. 07-4652 (E.D. Pa. Nov. 8, 
2007) ($4.4 million civil penalty for hundreds of thousands of calls 
to numbers on the Registry, for abandoning millions of calls by 
failing to connect to a live operator, and for repeat calls to 
consumers who asked to be placed on the entity-specific Do Not Call 
list); United States v. Broad. Team, Inc., No. 6:05-1920 (M.D. Fla. 
Feb. 2, 2007) ($2.8 million civil penalty, with $1.8 million 
suspended due to inability to pay, for over 64 million abandoned 
calls, and 1 million calls to numbers on the Registry); United 
States v. Global Mort. Funding, Inc., No. 07-1275 (C.D. Cal. filed 
Oct. 30, 2007) (complaint alleging hundreds of thousands of calls to 
numbers on the Registry without an EBR, failing to transmit required 
Caller ID information, and abandoning calls by failing to connect to 
a sales agent); United States v. FMFG, Inc., No. 3:05-00711 (D. Nev. 
May 23, 2007) ($900,000 civil penalty for abandoned calls and calls 
to numbers on the Registry); United States v. Conversion Mktn'g., 
Inc., No. 8:06-00256 (C.D. Cal. Mar. 10, 2006) ($580,000 civil 
penalty for abandoned calls and calls to numbers on the Registry); 
United States v. DIRECTV, Inc., No. 05-1211 (C.D. Cal. Dec. 14, 
2005) ($5.3 million civil penalty for abandoned calls and calls to 
numbers on the Registry); United States v. Braglia Mktg. Group, No. 
04-1209 (D. Nev. Mar. 1, 2005)/United States v. Flagship Resort Dev. 
Corp., No. 1:2005-981 (D.N.J. Feb. 22, 2005) ($1.26 million civil 
penalty for calls to hundreds of thousands of consumers without an 
EBR, and abandoned calls). See also 71 FR at 58724 n.90.
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A. Comments Supporting the Proposed Amendment

    More than 13,000 consumer comments previously submitted in this 
proceeding opposed the creation of a safe harbor for prerecorded 
telemarketing calls.\16\ In response to the current proposal to 
prohibit such calls except those where a consumer has given his or her 
express written agreement to receive such calls, the Commission 
received comments from 9 consumer organizations, a state attorney 
general, and some 220 consumers endorsing the proposed amendment.\17\ 
Four clear themes emerge from these comments: (1) Sellers' self 
interest in retaining established customers is not enough to prevent 
abuse through excessive pre-recorded message telemarketing; (2) 
Prerecorded message calls are coercive and abusive invasions of 
consumer privacy; (3) Prerecorded messages impose costs and burdens on 
consumers; and (4) Opt-out approaches may not adequately protect 
consumers.
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    \16\ These comments can be found at (http://www.ftc.gov/os/comments/tsrcallabandon.) See 71 FR at 58718 n.23.
    \17\ Attorney General of the State of Connecticut (``CTAG''), 
No. 585, at 2; Privacy Rights Clearinghouse (``PRC''), No. 552, at 
3; AARP, No. 593, at 3; National Consumers League (``NCL''), No. 
529, at 1. NCL states that its comment is filed on its own behalf 
and on that of the following consumer advocacy groups: Consumer 
Action, Consumer Federal of America, the Electronic Privacy 
Information Center, Junkbusters, Private Citizen, Inc., and the 
Privacy Rights Clearinghouse. NCL at 1. An additional 101 consumer 
comments appear to support the proposed amendment, but do not 
specifically refer to ``prerecorded'' calls.
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1. Companies' Reputational Interest Alone Does Not Prevent Abuses From 
Excessive Prerecorded Message Telemarketing
    Citing their personal experience, a number of the consumers who 
support the proposed amendment place little faith in industry 
assurances ``that they will self regulate and not abuse their 
customers.''\18\ One commenter reports receiving ``one particular pre-
recorded satellite TV message EVERY day, and usually several,'' from a 
well-established provider.\19\ A second reports receiving prerecorded 
calls ``every 10 days or so . . . for many months'' from a major credit 
card service business.\20\ A third is ``deluged with pre-recorded 
calls, urging me to subscribe to cable, satellite, mortgage terms, 
credit card offers and other services.''\21\
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    \18\ Barker, No. 633, at 2; see Lardner no. 168 (``I am on both 
the national and state Do Not Call lists and STILL get these 
obnoxious robo calls all the time.''); Gradwohl, No. 227 (``The pre-
recorded, computer generated methods being used by telemarketers 
presently, has had the effect of making the [Do Not Call] list 
meaningless'').
    \19\ Perrone, No. 555 (emphasis in original).
    \20\ Corgard, No. 596.
    \21\ Williams, No. 376; cf. Miller, No. 528 (``We are elderly, 
handicapped, solvent and rational. We don't need storm windows, 
[satellite TV], refinancing, lower interest rates, `free' trips to 
golf resorts--or hangup calls invading our privacy 24-7''). See 
also, Wall, No. 377 (receives the same prerecorded message from a 
large loan company that ``repeats, repeats and repeats, month after 
month . . . that states I am approved for a loan that I don't want 
and have never sought''); Matthews, No. 152 (``regularly'' receives 
a call asking for a renewal of a major newspaper he ordered for one 
month two years ago); Davies, No. 242 (gets ``3-4 calls per week'' 
from a Visa card issuer that has submitted a comment in this 
proceeding).
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    In light of this type of experience on the part of individual 
consumers, consumer advocates do ``not accept the argument that 
companies will not abuse the EBRs that they have with consumers,'' 
contending that there is ``no guarantee of self-restraint and every

[[Page 51167]]

reason to believe that the economic incentives for using prerecorded 
sales calls will lead to an increase from the current level of sales 
calls'' because ``[n]ew entrants in the marketplace will be motivated 
to use this technology to reach as many consumers as possible and 
established companies will use it to try to retain their market 
share.''\22\ They point out that the savings in labor costs that can be 
realized by substituting prerecorded calls for sales agent calls are 
not simply theoretical. They argue that the potential for these real 
savings suggests prerecorded calls likely will increase if they are 
permitted. As NCL put it, ``if [prerecorded message telemarketing] 
wasn't so attractive, the telemarketing industry would not be pressing 
so vigorously for its use to be sanctioned.''\23\ Another advocate 
concludes that ``[c]onsumer comments, when combined with the 
Commission's record of enforcement actions, confirm that the 
telemarketing industry is not one that can effectively police 
itself.''\24\ Two consumer groups therefore urge the Commission to go 
further than the proposed amendment does and completely ban all 
prerecorded calls.\25\
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    \22\ NCL at 5-6.
    \23\ NCL at 2; cf. AARP at 4 (asserting that ``permitting 
prerecorded calls with prior written consent will increase the 
volume of telemarketing calls'').
    \24\ PRC at 2.
    \25\ Id. at 3; AARP at 4-5.
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2. Prerecorded Calls Are Coercive and Abusive Privacy Invasions
    Consumers are adamant that prerecorded calls are abusive of their 
privacy. A typical expression of this view is that, ``I consider myself 
to be a `reasonable' consumer and I do consider prerecorded 
telemarketing sales calls abusive to my privacy rights.''\26\ A number 
of comments object that prerecorded calls are uninvited and unwanted 
abusive invasions into the private sanctuary of consumers' homes.\27\
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    \26\ Wong, No. 236; see also, e.g., Donohue, No. 30; Calderon, 
No. 301; Cook, No. 320; Steans, No. 351; Whitley, No. 262; Pearson, 
No. 442.
    \27\ E.g., Brick, No. 309 (``This reasonable consumer considers 
that *all* unsolicited calls are abusive of my right of privacy''); 
Macdonald, No. 232 (``Please. Stop the home invasions''); Benson, 
No. 516; Donohue, No. 300; Mathes, No. 449; Seabrook, No. 74; Smith, 
No. 174; Young, No. 330; Wibbens, No. 157; Weintraub, No. 202; Will, 
No. 318 (``[W]e are left with a feeling like the aftermath of rape, 
that we had no choice when a stranger accosted us in [our] 
sanctuary''). Some consumers regard prerecorded calls as a repeated 
harassment that is abusive. E.g., Steans, No. 351; Cook, No. 320; 
Whitley, No. 262; Shaw, No. 399; Wall, No. 377. Several comments say 
that such calls are abusive because they create an inconvenient or 
disruptive disturbance of the peace and quiet at home. E.g., Lillie, 
No. 269; Lilly, No. 522; Thomas, No. 386; Walsh, No. 369. Others 
view prerecorded calls as abusive because they are a ``waste of 
time,'' e.g., Williams, No. 376; Sanders, No. 385; Casabona, No. 
559; Weintraub, No. 202; or a nuisance. E.g., Linam, No. 298; Lilly, 
No. 522;Wall, No. 377; cf. Perrone, No. 555 (``Deliver me from pre-
recorded marketers'').
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    Other consumers find prerecorded calls not only abusive, but 
coercive,\28\ and therefore support the proposed amendment.\29\ Several 
consider prerecorded calls as manipulative attempts to trick them into 
making a purchase.\30\ Others express concern that prerecorded calls 
confuse and mislead vulnerable populations such as the elderly and 
young children.\31\ Consumer groups warn that there is a ``potential 
for large numbers of consumers to be victimized'' by coercive marketing 
pitches ``given the trend toward negative-option marketing and the use 
of preacquired account numbers,'' because prerecorded calls ``are by 
their very nature one-sided conversations,'' and ``if there is no 
opportunity for consumers to ask questions,'' offers ``may not be 
sufficiently clear for consumers to make informed choices'' before 
pressing a button or saying ``yes'' to make a purchase.\32\
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    \28\ Hui, No. 119, at 1; Abramson, No. 122 at 1.
    \29\ E.g., Stump, No. 200. (``[T]he FTC should outlaw all 
prerecorded messages unless I give my written consent for such 
calls''); Blanchard, No. 83; Chodelski, No. 196; Haagen, No. 64; 
Jaujoks, No. 398; Martin, No. 25; Seabrook, No. 74.
    \30\ E.g., Smith, No. 174 (``My experience is these 
[prerecorded] calls are often attempts to fool me with some type of 
SCAM!''); see Weintraub, No. 202 (prerecorded messages contain 
``manipulative tacky advertising''); Mathes, No. 449 (prerecorded 
calls ``try to coerce me into buying something'').
    \31\ E.g., Young, No. 330 (asserting that ``these [prerecorded] 
calls are especially confusing and often misleading and abusive for 
vulnerable populations such as the frail elderly''); Seabrook, No. 
74 (concerned ``about the possibility of minor children taking 
telephone calls from marketing bots and being unable to assess that 
the call is an unsolicited attempt at marketing''); Wall, No. 377 
(worried that repeated calls he receives stating he has been 
approved for a loan could be accepted by a child by ``simply 
pressing a certain number on the dial'').
    \32\ NCL at 4-5. NCL observes that while ``prerecorded calls 
today generally require the consumer to call back and speak to a 
live salesperson to make a transaction,'' there is nothing to 
prevent the use of fully automated prerecorded calls ``in the not-
too-distant future.'' See also, Wibbens, No. 157 (``Allowing pre-
recorded telemarketing calls that require the consumer to follow 
certain prompts in order to indicate the `Do Not Call' status may 
increase the frequency of people being victimized by marketing 
schemes'').
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    Consumer groups assert that consumers find EBR-based prerecorded 
messages ``coercive or abusive'' of their privacy because ``[f]or years 
and at every opportunity, consumers have weighed in against all manner 
of unwanted telemarketing calls, whether from `live' callers, 
prerecorded messages or [abandoned call] hang-ups.''\33\ They emphasize 
that the record contains overwhelming evidence of consumer aversion to 
prerecorded message calls, citing the more than 13,000 consumer 
comments previously received,\34\ and the number of telephones listed 
in the National Do Not Call Registry (now more than 150 million) as 
evidence of continuing public outrage over unwanted calls and 
consumers' desire to preserve their privacy.\35\
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    \33\ PRC at 2; see NCL at 2; AARP at 4.
    \34\ PRC at 2; NCL at 2.
    \35\ PRC at 2; NCL at 1; AARP at 2. AARP notes that 62 percent 
of the respondents in a 2005 survey it conducted of consumers with 
telephone numbers listed on the Registry said they received more 
telemarketing calls than they would like, whereas only 2 percent 
received fewer than they would like. AARP at 3, 4. AARP also reports 
that when asked to respond to the question, ``[o]verall, which 
phrase best describes telemarketing,'' a total of ``84 percent [of 
the respondents] said it was either ```irritating' (62%) or `invades 
my privacy' (32%)'' whereas ``less than 1% of the respondents (0.4%) 
responded that telemarketing `is a great way to hear about new 
products and services.''' AARP at 5-6.
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    Two of the consumer group comments also stress that the value to 
consumers of prerecorded sales calls is ``minimal'' or ``negligible'' 
compared to the harm such calls inflict on their privacy.\36\ While 
acknowledging that some consumers ``might find it easier to hang up on 
recorded sales calls than live ones,'' NCL points out that ``they would 
still have to answer when their phones ring, and it is likely that they 
would be running to answer their phones much more frequently.''\37\
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    \36\ NCL at 5; AARP at 5. Neither of the other two consumer 
advocates suggests that prerecorded calls provide more than a 
minimal consumer benefit. CTAG at 2; NCL at 5.
    \37\ NCL at 5 (adding that ``the surge of prerecorded political 
messages that many of us endured during the recent election cycle is 
only a preview of the deluge that is likely to be unleashed if 
prerecorded sales calls are allowed''). Although political calls are 
not placed for the purpose of inducing purchases of goods or 
services, and therefore are not ``telemarketing'' within the meaning 
of the TSR, 16 CFR 310.2(cc), or the Telemarketing Act, 15 USC 
6106(4), some 30 consumer comments complained about prerecorded 
political calls received during the 2006 election. E.g., Baldwin, 
No. 434; Hetsko, No. 326; Pless, No. 139.
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3. Prerecorded Messages Impose Costs and Burdens on Consumers
    Comments that support the proposed amendment cite both direct and 
indirect costs consumers incur from the receipt of prerecorded 
messages--wholly apart from their loss of privacy and consumers' 
subsidization of such calls through payments for their telephone 
service. NCL notes that with ``the ubiquitous use of cell phones'' the 
cost to consumers of listening to unwanted prerecorded sales messages 
on their cell phones ``would put consumers at an economic 
disadvantage'' when they access their voicemail or answering machines 
remotely or forward landline

[[Page 51168]]

calls to their cell phones.\38\ One consumer says that she often 
forwards calls when away from home to her cellular telephone, and ends 
up ``paying airtime for unwanted calls'' when she receives a 
prerecorded message.\39\ Another notes that while traveling on 
business, he depends on his home message machine to record important 
calls, but that ``[o]n any given trip, 10% of the space is taken up by 
those useless [prerecorded] calls.''\40\
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    \38\ NCL at 4. Although FCC regulations promulgated under the 
TCPA prohibit both live and prerecorded calls made to cell phones, 
pagers, and fax machines, where the called party will be charged for 
the call, 47 CFR 64.1200(a)(1)(iii), (a)(3), NCL limits its argument 
to situations where consumers incur costs from forwarding landline 
calls to a cell phone or from calling long distance while traveling 
to listen to messages on their home voicemail or answering machine.
    \39\ Farrow, No. 365; NCL at 4; cf. Hooper, No. 331; Khitsun, 
No. 546; Munoz, No. 612.
    \40\ Scott, No. 362. This commenter does not indicate whether he 
incurs long-distance charges to retrieve the prerecorded messages 
from his answering machine.
---------------------------------------------------------------------------

    A number of consumers object to prerecorded and other telemarketing 
calls taking a ``free ride'' on the telephone service they pay for, and 
interfering with its intended use. They contend that they pay for a 
telephone to provide a ``communication device for my family, friends 
and work,''\41\ and object to the hijacking of their telephone service 
to transmit unsolicited advertisements, particularly when they receive 
no compensation in return.\42\ Several comments also suggest that 
prerecorded calls may be frustrating the original purpose of telephone 
service, and diminishing its value to consumers.\43\
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    \41\ Pohl, No. 389; see House, No. 424 (``I have a phone so I 
can keep in touch with friends and family. . . . I do not want to 
pay for phone service so companies can use it for their convenience 
in their marketing efforts''); Casabona, No. 559; Mathes, No. 449; 
Scott, No. 362.
    \42\ Walker, No. 52 (``I think folks that agree to receive 
telemarketing calls should be compensated for their time. That would 
be similar to Pay-Per-Click advertising.''); Barnes, No. 560; see 
Khitsun, No. 546 (``Who would like to buy a product from someone who 
calls them at their own expense?'').
    \43\ Snell, No. 210 (noting that merchants will be unable to 
contact him by telephone with important information, such as safety 
recalls, because prerecorded calls have ``forced me to either not 
give out my phone number or to provide a false number'' when making 
purchases); Lepeska, No. 412 (relating that her 86-year-old mother 
frequently does not answer her prepaid calling card calls, which 
identify her as an ``unknown caller,'' because her mother ``thinks 
it might be a sales call''); cf. Robertson, No. 264 (``I have family 
who use prepaid calling cards and so must answer calls from numbers 
I do not recognize, as they may be family'').
---------------------------------------------------------------------------

    Finally, several comments cite potential indirect safety costs. A 
police detective asserts that the fact that prerecorded calls do not 
disconnect ``creates a serious problem should you need immediate access 
to your phone for a 9-1-1 call.''\44\ Similarly, a consumer reports 
that after he hangs up on a prerecorded message from a company that 
calls at least once a month, ``the recording sometimes continues, and 
occasionally calls me right back to finish the message.''\45\
---------------------------------------------------------------------------

    \44\ Palicki, No. 260 (``Your husband goes down with a heart 
attack and you can't get the recording to disconnect. These are 
actual issues''); see Casabona, No. 559 (Prerecorded calls 
``frequently result in one being unable to clear the line until the 
recording is over (you can hang up and pick up and the recording is 
still there)''). Two of the comments from consumer advocates also 
express concern that prerecorded messages may prevent access to a 
telephone line in an emergency. CTAG at 2; NCL at 5. The Commission 
has acknowledged that this ``creates legitimate cause for concern.'' 
71 FR at 58723.
    \45\ Haddox, No. 549.
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4. Opt-out Approaches May Not Adequately Protect Consumers
    In anticipation of industry arguments that prerecorded calls with 
automated keypress opt-out mechanisms should be allowed, AARP, NCL, and 
individual consumers highlight the problems of opting out from 
prerecorded sales calls. AARP emphasizes that under the proposed 
amendment, seniors and others will be harmed if they ``initially 
determine [prerecorded sales] calls would be of interest'' and agree to 
receive them, because ``if a consumer subsequently decides to change 
their `opt-in' with the seller it will be confusing, and possibly 
difficult . . . [to retract it] without a live person to speak 
with.''\46\ AARP also notes that it will be more difficult for 
consumers to ``just hang up'' when they receive prerecorded sales 
calls, because they first will need to determine whether the call is 
one they have agreed to receive.\47\
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    \46\ AARP at 4. AARP is correct in implying that, as proposed, 
the amendment did not provide expressly that an agreement to receive 
prerecorded messages, once given, would remain subject to the 
company-specific opt-out requirements of the TSR, and also did not 
require an effective keypress opt-out mechanism for consumers who 
agree to receive such messages but subsequently change their mind.
    \47\ AARP at 5.
---------------------------------------------------------------------------

    NCL argues that interactive opt-out technologies provide no 
guarantee that consumers will be able to halt repeated prerecorded 
calls that are abusive. NCL emphasizes that ``if the opt-out is 
automatic,'' consumers will be unable to ``ask questions about why they 
have received the call'' or to obtain information ``that would help 
them determine whether the call may have violated their rights'' so 
that they can report the violation for law enforcement action.\48\
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    \48\ NCL at 4; cf. Thomas, No. 386 (reporting that after 
receiving over 20 prerecorded solicitations in 30 days, she had to 
pay her telephone company ``over $1.50 per trace'' in order to 
identify the offending telemarketer). NCL also notes that keypress 
technology ``would obviously not work for people who still have 
rotary dials, and that ``if the opt-out request requires talking to 
a live company representative,'' there is ``no assurance that one 
will be readily available.'' NCL at 4.
---------------------------------------------------------------------------

    Several comments from individual consumers assert that the opt-out 
options in the prerecorded messages they have experienced are 
burdensome and ineffective.\49\ Consumers report problems with both 
live and automated opt-out mechanisms.\50\ Some cite individual company 
policies that have prevented them from adding their number to a Do Not 
Call list, or that they find objectionable.\51\ One comment observes 
that the ``deluge'' of prerecorded calls renders interactive opt-out 
options ineffective because it makes ``consumers impatient, and they 
hang up before they can hear how to get on the `do not call' list, even 
if instructions on how to do so are left at the beginning of the 
message.''\52\
---------------------------------------------------------------------------

    \49\ Pursuant to a non-enforcement policy announced by the 
Commission when it proposed the safe harbor requested by VMBC in its 
petition, sellers and telemarketers placing calls in compliance with 
the proposed safe harbor to deliver prerecorded messages to 
consumers with whom the seller has an EBR have not risked 
enforcement action. 69 FR at 67290; 71 FR at 77635 (extending the 
policy in response to several industry requests). Under that policy, 
prerecorded calls have been permitted if, among other things, a 
keypress opt-out mechanism or other means is provided at the outset 
of the call for consumers to add their telephone number to the 
seller's company-specific Do Not Call list.
    \50\ Lardner, No. 168 (``It is not enough to have an opt-out 
feature (which many robo callers do not offer)'' because ``[w]hen I 
try to speak to a human to get me off the calling list, the person 
just hangs up on me''); Corgard, No. 596 (a prerecorded call ``will 
give you the option of being deleted from their list by pressing a 
certain number,'' but ``[t]his never works'' because ``the recording 
said it is an incorrect prompt,'' and ``[i]f you press the key to 
talk to a representative, before you can finish explaining that you 
are on the federal list, they simply hang up on you''); Anonymous, 
No. 222 (``I also keep getting pre-recorded calls where the phone 
number given in the messages is not the same as the Caller ID phone 
number. When I call the Caller ID phone  to complain, I 
never reach a person. When I call the phone  from the pre-
recorded message, I get a sales person who `can't' put me on the 
company's internal Do not Call/Mail, etc lists''); Abramson, No. 
122, at 2.
    \51\ Cook, No. 320 (``I consistently receive . . . prerecorded 
messages that are for another person . . . every day'' and they ``do 
not allow me to opt out of the calling list because they are calling 
the wrong person''); see Johnson, No. 532; Thomas, No. 386 (``Even 
if you do choose to opt out, it takes weeks for it to go into 
effect, when it should be immediate''); Bankston, No. 382 (``[W]ith 
ID theft out there I should not have to identify who I am to be 
removed from their call list''); but see Rosato, No. 156 (arguing 
that ``authentication'' of the opt-out requestor is necessary to 
prevent others in his household from ``inadvertently'' opting him 
out).
    \52\ Byrne, No. 158 (``deluge'' of prerecorded calls makes 
consumers so ``impatient'' that they hang up before hearing opt-out 
options, even if they are provided at the outset of a message).

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[[Page 51169]]

B. Comments Opposing the Proposed Amendment

    Comments from 73 telemarketers, businesses that use prerecorded 
calls, their trade associations and technology providers overwhelmingly 
opposed the proposed amendment, as did 187 of the consumer 
comments.\53\ These comments primarily follow three lines of argument: 
(1) They question the reliability of the thousands of comments received 
earlier in this proceeding as indicative of consumer aversion to 
telemarketing calls that deliver a prerecorded message; (2) They point 
to surveys that purportedly show that some portion of the consuming 
public welcomes telemarketing calls that deliver prerecorded messages; 
and (3) They rely on data concerning consumer responses when opt-outs 
are provided in prerecorded message telemarketing calls.
---------------------------------------------------------------------------

    \53\ Combined with the 77 consumer comments arguably supporting 
a safe harbor for prerecorded calls received in the prior 
proceeding, 71 FR at 58721 & n.57, these comments represent less 
than 2 percent of the 14,000 consumer comments in the record.
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1. Previous Comments Inaccurately Reflect Consumer Attitudes
    One industry comment argues that ``a substantial number'' of the 
13,000 consumer comments opposing a prerecorded call safe harbor should 
be disregarded because they express dissatisfaction over ``the fact 
that some telemarketing calls continue to be permitted at all'' or over 
the breadth of the EBR definition.\54\ Other industry comments argue 
that complaints about calls from companies with which the consumer has 
no EBR, company-specific Do Not Call mechanisms that do not work, and 
non-compliance with the Commission enforcement forbearance policy 
should be addressed by aggressive enforcement, not tighter rules that 
might limit legitimate EBR-based prerecorded telemarketing 
messages.\55\
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    \54\ Consumer Bankers Association (``CBA''), No. 587, at 2. 
Another contends that ``[n]one of the comments objects per se to all 
calls from businesses with which the consumer has an existing 
business relationship,'' and concludes that the record does not 
support the elimination of EBR-based prerecorded calls, but would 
support a narrowing of the EBR definition for such calls. Voxeo 
Corp. (``Voxeo''), No. 621, at 8,10 (emphasis in original). In a 
similar vein, some industry comments urge that consumer comments 
that ``focus on calls already prohibited'' by the TSR should be 
disregarded. DMA, No. 589, at 5; IAC/Interactive Corp. and HSN LLC 
(``IAC''), No. 600, at 4; Call Command, Inc. (``Call Command''), 
Nos. 608, 610 at 4. Other industry comments assert that the 13,000 
consumer comments opposing a safe harbor for telemarketing calls 
delivering prerecorded messages to established customers should be 
discounted because they ``do not fully or accurately describe the 
marketplace.'' DMA at 5; VMBC, No. 583, at 1-2 (record not a ``fair 
representation'' of all consumers).
    \55\ Soundbite Communications, Inc. (``Soundbite''), No. 575, at 
16-17; DMA at 5; IAC at 4; Valley Technology Consultants (Monion) 
(``Valley''), No. 39, at 1; Interactive Agent Association (``IAA''), 
No. 568, at 11; MP Marketing Services, Inc. (``MP''), No. 562 at 2; 
SmartReply, Inc. (``SmartReply''), No. 105, at 5-6; MinutePoll, LLC 
(``MinutePoll''), No. 540, at 7; Xpedite Systems, LLC (``Xpedite''), 
No. 595, at 4.
---------------------------------------------------------------------------

    Yet other industry comments contend that the Commission should 
disregard consumer comments that indiscriminately lump EBR-based 
telemarketing calls delivering a prerecorded message together in the 
same hated category as ``cold call'' message blasting.\56\ Some of 
these comments see an indication of some level of consumer support for 
an EBR exemption because a handful of earlier consumer comments do 
distinguish between voice blasting and EBR-based prerecorded message 
calls, and do not object to the latter.\57\
---------------------------------------------------------------------------

    \56\ Soundbite at 4-5; IAA at 2, 4; IAC at 4; cf. CBA at 2 
(urging disregard of prior consumer comments ``not directed at the 
proposal to create an EBR-based safe harbor for prerecorded 
telemarketing calls''). See also, Chrysalis Software, Inc. (Ramsay), 
No. 79 (``[T]he focus of [FTC] attention should be calls generated 
from companies unknown to the callee, such as those that have 
purchased a phone directory''); Zucker at 1 (Proposed amendment 
intended to stop ``voice blasting'' by ``phone spammers'' goes too 
far in covering EBR-based prerecorded calls).
    \57\ IAA at 4 n.4. See, e.g., Castellon, No. 471; Castro-
Arellano, No. 472; Manley, No. 112.
---------------------------------------------------------------------------

    A few industry comments assert that consumers who previously 
opposed prerecorded telemarketing were responding largely to their 
experience with ``indiscriminate `blast' telemarketing'' calls that 
lacked the type of interactive opt-out mechanisms available now.\58\ 
According to one of these comments, ``to the extent [it] may have been 
the case in 2004'' that consumers felt ``powerless to make themselves 
heard'' by a prerecorded message, ``it is not the case today.''\59\
---------------------------------------------------------------------------

    \58\ Soundbite at 5, 10-11. See also VMBC at 1; DMA at 5; IAC at 
3 (noting that it still may be true that ``consumers generally have 
had only limited experience with prerecorded messages that provide a 
simple opt-out mechanism'').
    \59\ Soundbite at 6.
---------------------------------------------------------------------------

2. The Proposed Amendment Would Burden Sellers and Consumers
    Several comments protest that requiring an agreement in writing to 
receive calls delivering prerecorded messages would be confusing to 
consumers who are used to receiving these messages.\60\ According to 
these commenters, the requirement would be a major inconvenience for 
consumers.\61\ Others argue that the express written agreement 
requirement would not be in the best interests of consumers who may not 
realize the importance of making the extra effort to opt in to receive 
important messages in the distant future,\62\ consumers who change 
phone numbers,\63\ and consumers who must make a ``double opt-in'' when 
they call for information to authorize a follow-up return call with the 
information requested.\64\
---------------------------------------------------------------------------

    \60\ IAA at 6; cf. Xpedite at 5 (asserting that because of 
differences between the FCC rule permitting prerecorded calls to EBR 
customers and the proposed amendment, consumers will have ``no clear 
picture of when and for whom an EBR permits a prerecorded 
telemarketing call, and when and for whom it does not''); DMA at 6.
    \61\ VMBC at 2; Capelouto Termite & Pest Control, Inc. 
(``Capelouto''), No. 131, at 1; National Newspaper Association 
(``NNA''), No. 578, at 4 (providing consent more burdensome than 
receipt of a prerecorded reminder message about an expired 
subscription); SmartReply at 17; IAC at 9 & n.15; IAA at 5 n.5; see 
DMA at 5. Consumers who oppose the proposed amendment also criticize 
the requirement of an express written agreement as burdensome, e.g., 
Kelly, No. 457; Maruca, No. 602; Schmitz, No. 520; a ``pain,'' e.g., 
Carnes, No. 451; Rososer, No. 426, or ``a waste of time.'' E.g., 
Lemkin, No. 31; see Martin, No. 437 (``big burden on my time'').
    \62\ CenterPost Communications (``CenterPost''), No. 591, at 1.
    \63\ Soundbite at 9; SmartReply at 18. This problem may be 
minimized by FCC regulations requiring Local Number Portability and 
Wireless Number Portability.
    \64\ MP at 2; Career Education Corp. (``Career''), No. 580, at 
3. Other comments, apparently not considering the flexibility 
ensured by E-SIGN, incorrectly argued that this requirement would be 
``impractical'' or would not work when consumers call for 
information. DMA at 5; MinutePoll at 1, 9; Soundbite at 9; IAC at 9; 
MP at 2; Bernhardt at 1.
---------------------------------------------------------------------------

    Other industry comments cite the burden and cost of contacting each 
person in existing EBR customer databases to obtain their agreement to 
receive prerecorded calls.\65\ Several comments also emphasize the 
continuing costs of obtaining consent from new customers after the 
proposed

[[Page 51170]]

amendment takes effect,\66\ and other costs they believe will be 
significant.\67\
---------------------------------------------------------------------------

    \65\ These comments also assume that the required written 
agreement must be obtained on paper. IAC at 9-10 (a direct mail 
piece to obtain a written agreement from HSN's ``millions'' of EBR 
customers on a postage paid postcard would cost $.75 to $1.75 per 
customer and ``will be a lengthy, resource-intensive endeavor''). 
See also SmartReply at 17-19 (estimating a cost of $9,350,000 for a 
``Top 100 Retailer'' in the ``Fortune 500`` with a database of 15 
million customers to obtain such agreements via direct mail, a cost 
of $360,000 to $600,000 to revise and reprint 3-5 million credit 
card and loyalty applications, with ``at best'' a reduction in EBR 
customer databases of ``90% or more''); DMA at 5. Individual 
commenters opposed to the proposed amendment cite the burden on 
business of complying. E.g., Cook, No. 631; Hunley, No. 644; 
Simmons, No. 507.
    \66\ IAC at 9 n.17 (contending that ``even if companies design 
systems to seek and obtain consent in a compliant manner when 
consumers place orders by telephone, such systems also involve 
significant costs,'' and that ``[i]n addition to design, recordation 
and retention costs, each customer contact would take more time,'' 
necessitating the ``need to employ additional personnel or risk 
dropped calls''); Career at 3 (costs would increase by $3.58 million 
a year); SmartReply at 41 (on-going costs would not be de minimis 
because National Retail Federation research shows that ``retail 
companies face a customer attrition rate of between 33% and 50% per 
year''). See also IAA at 5-6); NNA at 4; Call Command at 5; 
MinutePoll at 9; cf. Nolte, No. 429 (objecting that the cost of 
obtaining consent would be ``a waste of time and money that could go 
to passing on additional savings to me''). Two individual comments 
also doubt that it would be practical for businesses to keep the 
required written agreements on file. Bender, No. 62; Haas, No. 76.
    \67\ SmartReply at 20-21(loss of revenue from need to use less 
efficient marketing alternatives than current $10.00 gross return 
for every dollar of prerecorded message marketing, loss of brand 
value and customer ``goodwill'' that would devalue stock prices of 
publicly traded retailers); MinutePoll at 9 (cost of retrieving 
paper records now ordinarily destroyed after entry of information in 
EBR database would be especially burdensome and expensive); National 
Newspaper Association (``NAA''), No. 578, at 10-11 (noting that 20 
percent of the newspaper industry has its own prerecorded call 
equipment that would be of limited use given difficulty of obtaining 
consumer consent).
---------------------------------------------------------------------------

    The industry comments stress that prerecorded message telemarketing 
costs significantly less, and is more effective than the only 
alternatives that are available--direct mail,\68\ live calls,\69\ and 
email.\70\ Three comments insist that there simply ``is no other cost-
effective communication method'' available for businesses for which the 
timeliness of delivery of high-volume messages to customers is 
critical.\71\ Other comments assert that prerecorded messages are the 
only affordable option for businesses to communicate with their 
customers.\72\
---------------------------------------------------------------------------

    \68\ SmartReply at 17 (Interactive message calls ``run about 20% 
of the cost of the next best medium--direct mail''); Call Command at 
3-4 (Direct mail costs are ``ten times higher''); Career at 1 
(Prerecorded call response rates are ``more than twice as high as 
for communications by mail'') (emphasis in original); IAC at 5; 
Compton (``Vontoo CEO''), No. 47, at 1; MinutePoll at 10. See also 
SmartReply, Inc., ``Measuring and Deducing Consumer Acceptance of 
Live Pre-recorded Calls with Prompt Opt-Out Mechanisms Across Ten 
Companies over Eight Months'' (``SmartReply Study''), No. 106, at 11 
(stating that a comparison of 82 client campaigns shows similar 
response rates for direct mail and prerecorded calls, but customers 
responding to the calls out-spent those responding to direct mail 
``by 175%'').
    \69\ IAA at 1 n.2 (a prerecorded call ``costs about $0.25,'' 
whereas industry surveys show that the cost of a live call to a 
consumer ``is from $3.75 to $5.30''); MinutePoll at 8, 10 (would 
have to charge clients ``ten times our current rates per lead'' for 
live calls); IAC at 5.
    \70\ Career at 1 (prerecorded call response rates are ``ten 
times higher than for communications by email'') (emphasis in 
original); MinutePoll at 8; IAC at 5 (email messages are ``less 
effective than telephone messages'' because many consumers ``check 
their voicemail but not their home email daily''); IAA at 5-6 (email 
messages may not ``get past spam filters''); Vontoo CEO at 1 
(retirees ``often do not have email'').
    \71\ IAC at 2 and 5: SmartReply at 39; Messagebroadcast.com 
(``Message''), No. 599, at 6.
    \72\ NNA at 4 (small community newspapers); cf. Career at 3 
(``no choice'' but to use live operators at a much higher cost); 
MinutePoll at 7 (proposed amendment ``will result in a substantial 
increase in live operator calls''); see, e.g., Metcalf, No. 482 
(``more live calls will make a lot of consumers a lot more 
miserable'').
---------------------------------------------------------------------------

    Several comments point out that the higher cost of using such 
alternative marketing methods will be passed on to consumers if, as 
they fear, businesses are unable to obtain the consent of a significant 
number of their customers to receive prerecorded messages.\73\ One 
comment doubts that obtaining enough consents is likely, and 
accordingly asserts that the ``practical effect'' of the proposed 
amendment would be that ``telemarketers could not communicate with 
[their] customers through prerecorded messages.''\74\ Moreover, a 
number of industry comments argue that the proposed amendment will 
disproportionately harm small business telemarketers,\75\ and the small 
businesses that are their clients.\76\ Some small telemarketers assert 
that the proposed amendment ``would reduce our revenue by 85%,'' and 
that continuation in business ``would require the termination of most 
of our existing employees'' and an effort to ``outsource the vast 
majority of our labor force to call centers in foreign countries.''\77\
---------------------------------------------------------------------------

    \73\ IAA at 2; MinutePoll at 8; SmartReply at 17; Vontoo, LLC 
(``Vontoo'') at 3. Several consumers opposed to the amendment also 
worry that businesses will not be able to obtain enough written 
agreements from consumers to continue providing messages they value. 
Shaw, No. 650; see Long, No. 629; Christianson, No. 27.
    \74\ IAA at 1; cf. IAC at 5 n.9 (cost likely to be so great that 
not all sellers may be able to afford it, thus depriving consumers 
of messages they want); IAA at 10 (``[e]conomics dictates that 
prerecorded messages are less likely to be available to 
consumers''); Message at 6; cf. NNA at 3 (community newspapers 
``struggle to create sufficient work for call centers to cover basic 
overhead costs'' which is why ``voice messaging options have become 
more popular'' because ``the revenue driven by them also can pay for 
heightened customer service''). Consumers opposing the amendment 
also express concern about the continued availability of information 
and offers they value. E.g., Ashroff, No. 627; Noack, No. 642; 
Szczepanik, No. 646.
    \75\ MinutePoll at 8 (amendment ``would have a severe, 
disproportionate effect'' on small telemarketers that lack 
``resources from other lines of business to offset the loss of 
revenue'' and ``sufficient scale to operate a large cost-effective 
live call center,'' with ``likely effect'' of ``industry 
consolidation''); Vontoo at 2 (``disproportionately severe'' impact 
on small businesses''); SmartReply at 24 (businesses that provide 
prerecorded message services ``are generally small businesses [with] 
less than $10 million in revenue'').
    \76\ MinutePoll at 1 (``proposed rule would drive up marketing 
costs for small businesses''); SmartReply at 24; but cf. MP at 2 
(amendment ``would force our clients to go to other vendors who 
already offer direct mail and live telemarketing'').
    \77\ MinutePoll at 8; TCIM Services, Inc. (``TCIM''), No. 15, at 
1-2; Valley at 1. Many of the consumers who oppose the proposed 
amendment express concern that ``thousands'' of American jobs will 
be lost to foreign call centers. E.g., Catalan, No. 480; Vivanco, 
No. 501.
---------------------------------------------------------------------------

    Finally, some comments that oppose the proposed amendment argue 
that by lumping sophisticated interactive message systems that may 
include advanced voice recognition together with non-interactive 
systems, the proposed amendment would ``stifle the advancement of 
potentially beneficial media.''\78\ Accordingly, many favor application 
of the written agreement requirement only to non-interactive 
prerecorded calls.\79\
---------------------------------------------------------------------------

    \78\ E.g., Maxwell, No. 20; Auburn, No. 129; Runyan, No. 61; 
Wetzel, No. 95.
    \79\ E.g., Direct Mail Express, Inc., No. 138; Zucker, No. 164, 
at 1; Duke, No. 54; Lane, No. 53.
---------------------------------------------------------------------------

3. Survey Evidence of Consumers' Attitudes Toward Telemarketing Calls 
that Deliver Prerecorded Messages
    Industry commenters submitted three online consumer preference 
surveys as indicative of consumer support for telemarketing calls that 
deliver a prerecorded message with a prompt opt-out.\80\
---------------------------------------------------------------------------

    \80\ The Commission notes, however, that none of these surveys 
allowed respondents to state a preference for receiving prerecorded 
calls only from sellers to whom they had given their prior written 
agreement to accept such calls pursuant to the proposed amendment. 
Thus, these survey results cannot purport to reflect consumer 
attitudes toward the proposed amendment, and are not probative of 
the extent to which consumers might prefer consent-based prerecorded 
calls over prerecorded calls with a prompt opt-out mechanism.
---------------------------------------------------------------------------

    Minutepoll submitted a survey of 388 consumers and advanced it as 
evidence that there is a ``significant minority'' of consumers who 
prefer prerecorded calls to live calls. Most of these survey 
respondents--82 percent--said they had placed their phone numbers on 
the National Do Not Call Registry. When asked in the abstract, 70.1 
percent stated that they would prefer ``live operator'' calls, whereas 
29.9 percent said they would prefer a prerecorded message.\81\ When 
given the choice of a prerecorded call with a ``quick option to get on 
the calling company's `Do not Call list,''' or a live operator call 
that ``would not be required to do this,'' 68.3 percent said they would 
prefer the prerecorded message and only 31.7 percent said they would 
prefer the live call.\82\ In

[[Page 51171]]

responses to open-ended questions, however, 54 percent of those who 
said they preferred prerecorded messages generally or on some occasions 
indicated that a reason for this preference was simply because they 
would be ``[a]ble to hang up.''\83\
---------------------------------------------------------------------------

    \81\ MinutePoll, Exh. A, at 1. The MinutePoll survey reports a 
margin of error of 5 percent.
    \82\ MinutePoll, Exh. A, at 2. While taking care to articulate 
that the TSR does not require sales agents to disclose affirmatively 
that consumers can ask to be placed on the seller's do not call 
list, this survey omits any reference to the TSR requirement that 
sales agents honor a consumer's assertion of a do not call request. 
It is a violation of the TSR to deny or interfere ``in any way, 
directly or indirectly, with a person's right to be placed on any 
registry of names and/or telephone numbers of persons who do not 
wish to receive outbound telephone calls established to comply with 
Sec. 310.4(b)(1)(iii),'' 16 CFR 310.4(b)(1)(ii), or to initiate 
``any outbound telephone call to a person when that person 
previously has stated that he or she does not wish to receive an 
outbound telephone call made by or on behalf of the seller whose 
goods or services are being offered.'' 16 CFR 310.4(b)(1)(iii)(A).
    \83\ MinutePoll, Exh. A, at 1-2. Similarly, of the 68.3 percent 
who preferred prerecorded messages with a quick ``DNC opt-out,'' 33 
percent indicated they made that choice to ``[g]et them to stop 
calling/get off the list'' and 16 percent did so to be able to 
``hang up easier/without guilt.'' Id.
---------------------------------------------------------------------------

    A second online survey of 5,328 consumers conducted by Forrester 
Research for VMBC purports to show that consumers prefer prerecorded 
over live calls ``on average at a rate of two to one, across different 
age, income, geographic, and technological groups.''\84\ The survey 
reports that when given a choice between a recorded message that 
``electronically provides me with the opportunity to either be removed 
from future calls, be transferred to a live representative, or end the 
call'' or ``[a] call from a live telephone representative who begins 
talking without providing [those options],'' from 57 percent to 71 
percent of the Internet users surveyed, depending on ``age, income, 
geographic and technographic groups,'' stated that they would prefer 
the recorded message, with an average of 63 percent across all 
groups.\85\
---------------------------------------------------------------------------

    \84\ VMBC at 1, citing Forrester Research's Consumer 
Technographics, NACTAS Q3 2006 Omnibus Online Survey (``VMBC 
Survey''), No. 584. The survey reports a margin of error of  1.3 percent. VMBC Survey at 1.
    \85\ VMBC Survey at 1.
---------------------------------------------------------------------------

    The findings of a third online survey of some 470 Internet users, 
78 percent of whom had received an ``automated'' call within the past 
12 months,\86\ raise unanswered questions about the consumer 
preferences elicited in the MinutePoll and VMBC surveys. This survey, 
conducted for Silverlink by the Zoomerang Online Survey Service, was 
submitted to show that consumers are willing to receive prerecorded 
healthcare-related calls.\87\ The survey shows, however, that consumers 
may be far less willing to receive commercial prerecorded telemarketing 
calls than the other two surveys might appear to suggest. The 
Silverlink Survey reports that 91 percent of the participants said they 
would be unwilling to listen to a prerecorded telemarketing call from 
their financial services company offering a new credit card at a 
discounted rate, that 87 percent would be unwilling to listen to a 
prerecorded telemarketing call from their travel agent offering a 
discounted vacation package, and that 41 percent would even be 
unwilling to listen to a health-related prerecorded telemarketing 
call.\88\
---------------------------------------------------------------------------

    \86\ Survey respondents were told that an ``automated'' call 
means ``a call made to your home in which you interact with a 
recorded voice rather than a live caller.'' Silverlink 
Communications, Inc. (Rubin) (``Silverlink Survey''), No. 217, 
Attach. A, at 2 (emphasis added). The Silverlink Survey reports a 
margin of error of ``just above 4%.'' Silverlink (Rubin), Attach. B, 
at 1.
    \87\ The survey indicates that 45 percent of those surveyed 
``would like'' or ``would not mind'' having their health plan or 
pharmacy deliver automated message reminders of routine screenings 
or tests recommended by their doctor, immunization reminders for 
themselves or their children, or prescription refill reminders. 
Silverlink Survey at 4.
    \88\ Silverlink Survey at 7. Thirty-six percent of survey 
respondents indicated they would find a prescription refill reminder 
helpful, compared to 45 percent who would not; 42 percent indicated 
they would find an automated reminder of doctor-recommended routine 
screenings or tests helpful, compared to 36 percent who would not; 
and 30 percent would find an automated immunization reminder 
helpful, compared to 51 percent who would not. Silverlink Survey, 
Attach. A, at 2.
---------------------------------------------------------------------------

4. Indirect Evidence Regarding Consumers' Attitudes Toward 
Telemarketing Calls that Deliver Prerecorded Messages
    A number of industry comments cite indirect evidence of consumer 
acceptance of prerecorded message calls that incorporate an interactive 
opt-out mechanism. Summing up this line of argument, DMA asserts that 
``over the past two years, companies that use the prompt opt-out as 
mandated by the safe harbor have found that the opt-out rate is fairly 
low,'' and that this shows ``that consumers often welcome prerecorded 
messages from entities with which they have [an EBR].''\89\ While 
several comments from telemarketers claim opt-out rate percentages that 
may appear to support this contention,\90\ only two--Global\91\ and 
SmartReply\92\--provide the information necessary to evaluate the 
claims. However, their results--less than 2 percent for Global and 0.4 
percent for SmartReply--are based on

[[Page 51172]]

campaigns for unique clients. Moreover, to the extent that Global 
provides data on the number of consumers who ``opted out'' simply by 
hanging up the telephone, the results indicate that a significant 
percentage of consumers may not welcome such calls.\93\ Thus, the low 
opt-out rates reported do not tell the whole story and do not 
necessarily reflect typical consumer acceptance of prerecorded calls 
with a prompt opt-out mechanism, or provide a reliable measure of 
consumer acceptance of such calls.
---------------------------------------------------------------------------

    \89\ DMA at 4; NNA at 3 (newspapers' company-specific do not 
call lists are ``typically small and in some cases nonexistent''); 
IAA at 10 (``low opt-out rates experienced by members' clients'' are 
``consistent with'' low opt-out rates reported in original VMBC 
petition); Soundbite at 6 n. 13 (``usually in the low single 
digits''); Protocol Integrated Direct Marketing, No. 535, at 
1(citing unspecified ``low opt-out rates''). Some comments also 
contend that anecdotal evidence of few complaints shows consumer 
acceptance of prerecorded messages. NNA at 3 (no complaints to 
community newspapers); Snoozester, Inc., No. 49, at 1 (only 4 
complaints out of ``hundreds of thousands of calls my company has 
made''); Capeluto Termite & Pest Control, Inc. (``Capeluto''), No. 
131, at 1 (2 complaints out of 50,000 calls).
    \90\ Most of these comments fail to provide any underlying data 
necessary to evaluate the claims. Two indicate that the stated opt-
out rates combined data from calls where the opt-out mechanism was a 
keypress option and calls where they provided a toll-free number 
requiring a return call that consumers may be less inclined to take 
the time to make. MP at 1-2 (9-11 percent opt-out rate with 
interactive messages ``for most of our programs'') (emphasis added); 
CenterPost at 2 (0.7 percent opt-out rate for prescription refill 
and insurance policy renewal calls where ``75 percent of all calls'' 
had ``in-call opt-out included''). Others do not state whether the 
percentage was calculated based only on the number of opt-outs when 
the prerecorded message was actually answered by a consumer (as 
opposed to the number of opt-outs for all calls placed, which may 
include messages left on answering machines, calls that go 
unanswered by a person or machine, and busy signals). MinutePoll at 
4 (8-10 percent opt-out rate with up-front keypress opt-out, but no 
indication if based only on live answers); VMBC at 2 (3.1 percent 
opt-out rate with ``easy'' up-front opt-out); cf. Xpedite at 4 n.11 
(1 percent opt-out rate for calls providing opt-out telephone 
number); Countrywide Home Loans, Inc. (``Countrywide''), No. 592, at 
2 (``less than 1%'' opt-out rate for messages left only on voicemail 
and answering machines). Two comments provide none of this 
information, Call Command at 2 (1.14 percent opt-out rate with no 
indication of type of opt-out or how computed); Vontoo at 2 (50 of 
12,000 ``persons called'' (0.4 percent) in a single campaign opted 
out), and two others indicate they did not provide the opt-out 
option until the end of the call, when it may have been less likely 
to be used (e.g., if the consumer had already hung-up); Message at 1 
(0.38 percent opt-out rate where calls provided a keypress option at 
the end of the message); Draper's and Damon's (``Draper's''), No. 
108, at 1 (less than 1.36 percent opt-out rate where a keypress 
option was provided at the end of the message).
    \91\ Global Connect Strategic Broadcasting (``Global''), No. 
620, at 5, 19-20 (less than 2 percent opt-out rates with keypress 
opt-out for messages offering casino/hotel discount promotions 
answered by a live person).
    \92\ SmartReply Study at 3 (0.4 percent opt-out rate for 
messages offering discount promotions from 10 of top 15 ``Fortune 
500'' retailer clients). SmartReply asserts that the low opt-out 
rate reported shows ``that some [prerecorded] calls are more 
relevant [to consumers] than others,'' and that the existing EBR 
requirements ``sufficiently guarantee that most of these calls will 
be relevant enough that a significant majority of consumers will 
listen to the call month after month, even when given an easy, free 
and immediate mechanism to opt out of future calls.'' Id. Although 
the data shows that 148,516 of the 4,894,950 customers who answered 
the first call (3 percent) also answered and listened to some or all 
of each of the seven subsequent monthly messages, consumers who 
failed to pick up and answer any one of the calls were excluded from 
further study, even if they subsequently answered a call. SmartReply 
also contends that consumers must find the monthly calls ``relevant 
and non-intrusive,'' because the data indicates that 90 percent of 
the customers who answered all eight calls listened to the prompt 
opt-out option, and on average, 67 percent continued to listen to 
three quarters or more of the message. Id at 6-7. SmartReply further 
compares opt-out rates for prerecorded calls that were answered with 
those for messages left on answering machines with a toll-free opt-
out number, and concludes that customers are ``300% more likely'' to 
make use of the interactive opt-out mechanism than the toll-free 
number. Id. at 10-11.
    \93\ Global at 19 (showing hang-up rates before the opt-out 
message of from 23-68 percent, with a mean of 46 percent and a 
median of 48 percent, in 13 separate sets of calls).
---------------------------------------------------------------------------

    A few comments also assert that affirmative actions taken by 
consumers in response to interactive opt-out prerecorded messages 
manifest consumer satisfaction with such calls.\94\ One comment claims 
that ``66-82% of customers renew a policy or prescription . . . ; 33-
48% of customers select additional products or services along with the 
renewal; and 5-13% of customers renew policies prior to lapse.''\95\ 
Another notes that a major entertainment retailer that ``realized a 6% 
response to their direct mail offer'' obtained an ``11.5% response when 
it supplemented the direct mail offer with a prerecorded message 
campaign.\96\ Similarly, a third asserts that a study of 82 client 
campaigns showed that consumer spending in response to prerecorded 
messages was 175 percent greater than spending in response to a direct 
mail campaign.\97\
---------------------------------------------------------------------------

    \94\ E.g., Message at 2-3 (citing increased customer response 
rates in client campaigns). None of these comments provided 
underlying data that would permit an independent assessment of the 
claims.
    \95\ CenterPost at 1. This comment is unclear as to whether the 
percentages provided refer only to prerecorded message calls that 
are answered. CenterPost also reports that in two voluntary health-
related surveys it conducted that invited consumers to answer a 
single question assessing their satisfaction with an interactive 
prerecorded message offering prescription refill reminders and 
information, 89.4 percent indicated they found the ``notification'' 
to be ``useful'' in one survey and 94 percent were ``extremely'' or 
``highly'' satisfied in the other. Id. at 1-2. Because these two 
surveys apparently were conducted after the refill offer was made, 
the satisfaction percentages necessarily excluded consumers who may 
have chosen to hang up on the call or opt out from future calls.
    \96\ VMBC at 2.
    \97\ SmartReply Study at 11-12.
---------------------------------------------------------------------------

    A number of comments contend that this evidence of the existence of 
a ``subset'' of consumers who may want and ``expect to receive'' at 
least some prerecorded telemarketing messages rebuts any possible 
contention that prerecorded telemarketing messages are ``coercive or 
abusive,''\98\ and undercuts support for the proposed amendment.\99\
---------------------------------------------------------------------------

    \98\ See Smith, No. 544 (does not find prerecorded messages 
coercive or abusive). Other consumers who oppose the proposed 
amendment say prerecorded messages are ``not a problem,'' e.g., 
Arce, No. 469; Marquez, No. 507; Yanes, No. 485; are ``less 
intrusive and coercive,'''' or simply ``less invasive'' than live 
calls, e.g., Azcurra, No. 467; Hernandez, No. 475; Torres, No. 496; 
because they find it easier to hang up on a recording, e.g., 
Boricean, No. 470; Kheriaty, No. 44; Shimko, No. 127; they prefer 
not having to deal with ``pushy telemarketers,'' e.g., Castellon, 
No. 471; Morales, No. 505; Villasenor, No. 500; and find prerecorded 
messages easier to understand than a script read by a disinterested 
telemarketer, e.g., Christianson, No. 27; Lemkin, No. 31; Wiggen, 
No. 28, or an offshore telemarketer with a foreign accent. Auburn, 
No. 129; Zucker, No. 164, at 1.
    \99\ MinutePoll at 6; SmartReply at 25-26; cf. Message at 6 
(asserting the prerecorded messages that comply with the law are not 
coercive or abusive); Superior Communications and Consulting 
(``Superior''), No. 632, at 2 (arguing that an EBR-based prerecorded 
message that ``results in a sale of goods or services'' is not 
``unwanted or abusive''). Two comments also protest that ``there has 
been no study proving that prerecorded calls are inherently 
abusive.'' Vontoo at 2; Message at 6.
---------------------------------------------------------------------------

5. Alternatives to the Proposed Amendment
    Some of the industry comments continue to urge the Commission to 
conform the TSR to FCC regulations that permit calls delivering 
prerecorded messages if a seller has an EBR with the called consumer. A 
few recommend reconsideration and adoption of the safe harbor for 
prerecorded message calls that the Commission had originally proposed 
in response to the VMBC request. Most, however, advocate one or more 
refinements of the original VMBC safe harbor proposal in an effort to 
reduce the likelihood that prerecorded calls would be ``coercive or 
abusive.''
a. Comments Arguing that the EBR Exemption Should be the Only Limit on 
Placing Calls that Deliver Prerecorded Messages, and that the Original 
Safe Harbor Proposal Should be Adopted
    Some industry comments continue to insist that the TSR's existing 
EBR exemption from the prohibition against calls to numbers listed on 
the National Do Not Call Registry should apply equally to live calls 
and prerecorded calls.\100\ They argue that the EBR exemption properly 
effectuates the purpose of the TSR and the Telemarketing Act by 
protecting consumers from unwanted cold calls and is critical to 
businesses.\101\ They also reiterate previous assertions that the 
exemption should apply to prerecorded calls to minimize inconsistency 
between the TSR and parallel FCC regulations.\102\ These contentions, 
however, were considered and rejected by the Commission when it 
considered adopting a prerecorded call safe harbor, and there is 
nothing new in the more recent comments that would warrant 
reconsideration of the Commission's previous conclusions.
---------------------------------------------------------------------------

    \100\ DMA at 1, 3 (the same public policies apply equally to 
live and prerecorded calls); Xpedite at 4.
    \101\ DMA at 4; IAA at 3-4, citing House Report No. 103-20, 1994 
U.S. Code Cong. & Admin. News, at 1626. Two cite a December 2005 
Harris poll conducted for the FTC in which 92 percent of adults with 
numbers on the Registry reported receiving fewer telemarketing calls 
as evidence that the EBR exemption ``strikes the appropriate 
balance'' between protecting consumers from unwanted calls and 
allowing businesses to use a variety of methods including 
prerecorded messages to transmit marketing offers to their 
customers. Verizon, No. 588, at 1; Superior at 2.
    \102\ DMA at 6; Verizon at 6-7; Bank of America (``BoA''), No. 
572, at 3; National Association of Realtors (``NAR''), No. 101, at 
1; TCIM at 1; Commerce Energy Group, Inc., No. 598, at 1. Two 
comments object that ``there normally is no question of `call 
abandonment' regarding prerecorded message calls,'' and therefore 
that ``[a]ll prerecorded message calls should be exempted from the 
call abandonment requirement, or found compliant if the message 
starts within two seconds.'' Verizon, Attach. A, at 4-5 (basing the 
objection on the lack of ``hang-ups'' and ``dead air'' with 
prerecorded messages, but conceding that there may be a ``separate 
policy reason'' for restricting such messages); Beautyrock, Inc. 
(Body) (``Beautyrock''), No. 12, at 1.
---------------------------------------------------------------------------

    A few industry comments ask the Commission to revisit creation of 
the EBR-based safe harbor for prerecorded messages it previously 
proposed in response to the VMBC request.\103\ One reiterates the view 
previously advanced by many in the industry that the safe harbor 
proposal would protect consumers and ``was supported by the record and 
constituted a useful step in the direction of harmonizing the 
Commission's regulations with those of the FCC.''\104\
---------------------------------------------------------------------------

    \103\ CBA at 1; Message at 5; cf. NAR at 1-2 (suggesting that 
the FTC require, as in the safe harbor proposal, a ``toll-free 
number or other means to opt out'').
    \104\ CBA at 8-9. The Commission disagrees that it is obliged to 
conform its Do Not Call requirements to the parallel requirements of 
the FCC. See 71 FR at 58719-20, 58724-25.
---------------------------------------------------------------------------

    Several comments question some of the concerns the Commission 
expressed in rejecting its original safe harbor proposal. One contends 
that the evidence in the record that prerecorded messages could pose a 
health and safety threat is ``anecdotal,'' and that ``any concerns 
about isolated instances of prerecorded calls tying up a phone line so 
that emergency calls cannot get through would be completely avoided'' 
by provision of an automated interactive opt-out mechanism.\105\ A few 
industry comments also opined that the Commission is unduly concerned 
about

[[Page 51173]]

the likelihood that a safe harbor for low-cost prerecorded messages 
could ``substantially increase the volume of telemarketing calls,'' and 
that any such concern is ``speculative.''\106\ Others criticize the 
NPRM for giving ``inadequate consideration'' to sellers' ``strong 
incentives to avoid alienating existing customers with excessive 
reliance on prerecorded messages.''\107\ At least one comment argues 
that the low cost of Voice over Internet Protocol (``VoIP'') calling 
``will not engender a significant increase in call volume over today's 
levels'' because ``long distance rates for high-volume users are 
already extremely low.''\108\
---------------------------------------------------------------------------

    \105\ MinutePoll at 7. The comment also argues that ``the record 
does not indicate that prerecorded calls last any longer or occur 
any more frequently than live operator calls,'' and thus pose no 
greater threat to health or safety. Id.
    \106\ CBA at 3; DMA at 5-6 (acknowledging that ``it is 
theoretically possible that there will be a large number of 
prerecorded messages'' because of their lower cost than live calls, 
but contending, based on discussions with its members, that live 
calls will continue to exceed prerecorded messages, which are most 
``useful in specific, targeted applications'').
    \107\ CBA at 3 (citing the low opt-out rate reported in VMBC's 
petition as evidence of this self-restraint, and arguing that start-
ups and other companies in highly competitive lines of business 
share the same incentives); see IAA at 6 (prerecorded messages are 
most likely to be sent by established firms, with the strongest 
incentives for self-restraint, rather than start-ups or fly-by-
nights). Two comments assert that ``more than 80% of consumers are 
on the national do not call list,'' and this fact deters abuse. 
MinutePoll at 6; IAC at 3. Another says market research shows that 
retailers face customer attrition rates of between 33 percent and 50 
percent each year, and contends they devote their resources to 
``targeted marketing that quickly abandons non-productive 
customers,'' rather than to efforts to minimize this attrition by 
means of low-cost prerecorded calls. SmartReply at 41-42.
    \108\ MinutePoll at 7 (arguing that equipment and facilities 
charges, ``not transmission expenses'' are a significant cost 
factor, but providing no evidence to support that contention); cf. 
Zucker at 1 (arguing that the cost of VoIP ``is not any different'' 
from the current cost of long distance service for high-volume users 
since the largest VoIP providers are all telephone companies ``for 
whom VoIP is replacing their regular [long distance] offering'').
---------------------------------------------------------------------------

    Nevertheless, two industry comments oppose any reconsideration of 
the original safe harbor proposal. One contends that the FTC was right 
to reject the proposal as ``too unreliable or too burdensome for the 
consumer,'' criticizing its contemplated reliance on live operators to 
implement company-specific opt-outs in particular.\109\ One industry 
comment goes even further, contending that mainstream interactive 
message technologies are ``coercive and abusive,'' ``[a]s supported by 
the factual record compiled by the Commission,'' explaining:
---------------------------------------------------------------------------

    \109\ Voxeo at 5; cf. Global at 6 (also implicitly criticizing 
the lack of an automated opt-out requirement).

 `[P]rerecorded message' telemarketing, as it currently exists, 
consists largely of one-way audio broadcasts designed to convey 
information to consumers. Such messages are nothing other than 
outbound streaming audio files which convert the telephone 
(traditionally an instrument of two-way communication) into a radio 
(an instrument for listening). These campaigns are widely regarded 
as a nuisance and a burden to consumers because consumers are 
powerless to interact with them.\110\
---------------------------------------------------------------------------

    \110\ Interactions Corp. (``Interactions''), No. 571, at 1 
(adding that mainstream ``interactive voice response (IVR) systems 
[that] rely on either touch-tone input (which severely limits the 
consumer's ability to communicate or direct the interaction) or 
frustratingly ill-equipped voice recognition technologies (which 
require the consumer to talk using sound bites and keywords that can 
be recognized by the IVR and in the order and in the fashion 
dictated by the IVR)'' are ``generally considered more intrusive and 
more of an invasion of privacy'' primarily ``[b]ecause these forms 
of `prerecorded messages' have no ability to listen to, understand 
or truly interact with consumers in a natural and conversational 
fashion'').

    Considering this viewpoint and industry's previous opposition to 
the original safe harbor proposal, the Commission concludes that the 
prior safe harbor proposal should not be resuscitated. This conclusion 
is bolstered by the many divergent industry suggestions for modifying 
the proposal, discussed immediately below, and, of course, the strong 
consumer opposition to the original proposal and support for the 
current proposal.
b. A Modified Safe Harbor Should be Considered
    The great majority of the industry comments ask the Commission to 
revisit and refine its prior safe harbor proposal, rather than adopt 
the proposed amendment. They argue that a safe harbor for prerecorded 
telemarketing messages with an interactive opt-out is necessary for 
businesses to provide many important and convenient messages to 
consumers who wish to receive them.\111\ Although, as the Commission 
has emphasized, the TSR does not cover purely ``informational'' 
messages,\112\ the current round of industry comments provides numerous 
examples of messages that fall within the purview of the TSR because 
they combine information with a direct or indirect solicitation.\113\
---------------------------------------------------------------------------

    \111\ The industry recognizes that informational messages that 
include a sales offer are ``telemarketing'' messages, but argues 
that such messages provide consumers with ``information they desire, 
in a format they prefer,'' DMA at 4; IAA at 2; Message at 6; cf. 
Soundbite at 5 (consumers would be ``frustrated'' by an 
``incomplete'' message that omitted the sales component to ensure 
that the message was strictly informational); SmartReply at 39 
(purely informational messages would be ``less relevant'' and 
consumers would be less happy to get them). At least one argues that 
a safe harbor is also necessary to prevent a ``chilling effect'' on 
informational calls in view of industry ``uncertainty as to the 
regulatory dividing line between informational and telemarketing 
calls.'' Xpedite at 5; see also Global at 9 (an up-front keypress 
opt-out option would ``alleviate any ambiguity between an 
informational message and a promotional message''); NAR at 1; Zucker 
at 1.
    \112\ 71 FR at 58719, 58725.
    \113\ The comments cite such examples as expiration and renewal 
reminders (e.g., DMA at 4 (magazine subscription); NNA at 2 
(newspaper subscriptions); Soundbite at 4; Capelouto at 1; Tiesenga, 
No. 651 (snow removal service); Wussler, No. 97 (termite 
inspection); Kelly, No. 457 (bank CD renewal)); airline flight 
upgrade and rebooking offers (e.g., DMA at 4; IAA at 8-9; Beatty, 
No. 22; Romoser, No. 426); overdue payment notices with incentives 
to pay promptly (e.g., DMA at 4; Xpedite at 1; Romoser (overdue 
mortgage payment offer)); bounced check and overdraft alerts with 
overdraft protection offers (e.g., Soundbite at 4; Christianson, No. 
27); insurance lapse warnings with renewal offers (e.g., CenterPost 
at 1; Craig, No. 110; Rosato, No. 156); invitations to special 
retail sales and events (e.g., Draper's at 1; SmartReply at 8; Long, 
No. 629; Tiesenga, No. 651); cell phone and wireless plan savings 
offers (e.g., Soundbite at 4; Carnes, No. 451; Rankin, No. 136); 
reminders of prior-year purchases (e.g., SmartReply at 14 (flowers 
for birthdays or anniversaries)); ticket offers for musical events 
(e.g., Shaw, No. 650; Tiesenga, No. 651); car service reminders and 
lease and warranty expiration offers (e.g., Minkoff, No. 183, at 1; 
AutoLoop, LLC (Anderson, Steve), Nos. 63, 184, at 1; Cronin, No. 
655; VanHaaren, No. 623); lower interest rate offers (e.g., 
Countrywide at 2 (refinancing); Geyerhahn, No. 153 (refinancing); 
Knoll, No. 162 (credit card)); time-sensitive sales notifications 
(e.g., Agranovsky, No. 19 (eBay end-of-bidding alerts); Gutierrez, 
No. 82 (stock market alerts)); and local promotions (e.g., Simmons, 
No. 648 (pre-order offer for school photos); Szczepanik, No. 646 
(sports league paraphernalia offers)).
---------------------------------------------------------------------------

    In urging the Commission to allow telemarketing calls that deliver 
prerecorded messages and require that they include an interactive opt-
out mechanism,\114\ many industry comments propose one or more 
modifications of the original EBR-based safe harbor proposal to reduce 
the likelihood that prerecorded calls would be ``coercive or abusive.'' 
Several of the comments acknowledge that industry opposition in 2004--
on the basis that the required technology to implement the keypress 
opt-out mechanism would be ``costly, burdensome, and not widely 
available''--was a factor in the Commission's withdrawal of the 
original safe harbor proposal.\115\ Many accordingly take pains to 
point out that interactive keypress and voice-activated technologies 
have become ``readily available'' and ``cost effective,''\116\ and 
therefore contend that a mandatory interactive keypress opt-out 
requirement would now be ``feasible.''\117\
---------------------------------------------------------------------------

    \114\ E.g., Bender, No. 62; Haas, No. 76; Kheriaty, No. 44.
    \115\ 71 FR at 58725. E.g., Xpedite at 2-3; Voxeo at 6; DMA at 
3.
    \116\ E.g., IAC at 3; DMA at 3; Xpedite at 3; Global at 8; 
MinutePoll at 9.
    \117\ DMA at 3; Xpedite at 3. At least one industry comment 
argues that interactive prerecorded calls allow consumers to assert 
company-specific opt-outs even more ``quickly, effectively and 
efficiently'' than live calls. Schwartz, No. 640, at 3 (citing the 
test proposed by the Commission for approval of a safe harbor for 
prerecorded calls in 71 FR at 58718, 58725).

---------------------------------------------------------------------------

[[Page 51174]]

    Most of the industry commenters now are willing to support a safe 
harbor for prerecorded calls to EBR customers that includes an 
interactive opt-out mechanism utilizing Interactive Voice Response 
(``IVR'') technology.\118\ As summarized below, the industry proposals 
include recommendations for: (1) refinements in the prompt keypress 
opt-out requirement; (2) disclosure of the nature of the EBR that 
permits the call; (3) limitations on the permissible frequency and 
duration of prerecorded calls; and (4) restrictions narrowing the scope 
of permissible EBRs for prerecorded calls.
---------------------------------------------------------------------------

    \118\ Although many of the industry proposals refer to IVR 
technology, e.g., IAC at 3, this term may be a misnomer, to the 
extent it suggests that such systems are uniformly capable of 
responding to a consumer's voice commands. While some IVR systems 
may also have ``Automated Speech Recognition'' (``ASR'') capability 
that responds to a consumer's spoken words--the direction in which 
the technology appears to be evolving, e.g., Voxeo at 6; 
Interactions at 1--many comments appear to use the term to describe 
a system limited to accepting a consumer's telephone keypad input to 
select a desired option.
---------------------------------------------------------------------------

i. Prompt Keypress Opt-Out Option
    The industry proposals for modifying the original safe harbor begin 
by suggesting that prerecorded messages be required to provide an 
interactive keypress or voice-activated mechanism that would allow 
consumers to make a company-specific opt-out request after the message 
informed consumers of this option at the outset of the call.\119\ They 
appear to take for granted what only one comment explicitly advocates, 
that the keypress option should be active throughout the prerecorded 
message.\120\
---------------------------------------------------------------------------

    \119\ E.g., DMA at 1; cccInteractive (Johnson, CJ), No. 159, at 
1; Call Command at 4; NNA at 1-2, 6; IAA at 11; VMBC at 2; MP at 2; 
Xpedite at 2; Voxeo at 6; Zucker, No. 164, at 1. One comment 
suggests specifying that the opt-out disclosure be delivered within 
the first 20 seconds of the message. IAC at 7.
    \120\ Soundbite at 13; see IAC at 7.
---------------------------------------------------------------------------

    Some comments assert that the simplicity of such a mechanism will 
make prerecorded messages convenient and efficient for consumers and 
businesses.\121\ Two comments further submit that the prompt 
availability of such a convenient company-specific opt-out mechanism 
would prevent prerecorded calls from being ``coercive.''\122\ One 
comment notes that such an option would at least alleviate concerns 
about consumers' inability to interrupt a prerecorded message to ask to 
be placed on the company's do not call list.\123\ Another emphasizes 
that the requirement will create a powerful and ``immediate incentive 
to companies not to abuse prerecorded telemarketing by flooding 
consumers with a large number of calls of questionable value'' because 
once a consumer opts out, the company will be barred from placing any 
future calls, live or prerecorded, to the consumer.\124\
---------------------------------------------------------------------------

    \121\ DMA at 3; IAA at 2; Superior at 2. Three comments note 
that voice recognition systems exist that can provide equally 
convenient opt-out functionality for users of rotary dial 
telephones. Voxeo at 6 & n.6.; Soundbite at 6 & n.15; Schwartz, No. 
640, at 4. It is not clear, however, that these advanced systems are 
widely in use. See IAC at 7 (suggesting that a toll-free number be 
provided for users of rotary phones); cf. Global at 3 (suggesting a 
toll-free number for messages left on answering machines).
    \122\ Career at 2; MinutePoll at 1.
    \123\ Soundbite at 8. One telemarketer mentions that its prompt 
opt-out disclosure includes both a keypress option and a toll-free 
number (for consumers who receive the prerecorded message on their 
answering machines) that connects to the same automated system used 
for the keypress opt-out. SmartReply at 5.
    \124\ Soundbite at 13-14.
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    The comments differ, however, on the precise details of how a 
prompt keypress opt-out option should function.\125\ Most recommend 
that a single keypress should trigger an automated opt-out, without the 
intervention of a live operator, so that a ``consumer knows with 
certainty that they have made the request.''\126\ However, one comment 
argues that businesses should have the option of using customer service 
representatives to take opt-out requests, rather than an automated 
system,\127\ while another seeks the flexibility to require a second 
keypress to confirm an opt-out request.\128\ Likewise, one comment 
suggests that an automated opt-out keypress should lead directly to 
immediate termination of the call after a recorded brief acknowledgment 
of the request,\129\ without requiring navigation of any intervening 
submenus, while another recommends a limit of two layers of 
submenus.\130\ Finally, many of the comments appear to suggest that an 
automated opt-out request should take effect immediately to prevent any 
future calls (although most are silent on this point), but one comment 
recommends that companies be given 30-days to process the request, to 
allow sellers time to scrub their lists after receiving new opt-outs 
from third-party telemarketers.\131\
---------------------------------------------------------------------------

    \125\ For example, one comment recommends that a uniform opt-out 
keypress be required, such as two presses on the ``6`` key (which 
would spell ``NO'' on the keypad, so that the FTC could advise 
consumers to ``Just Press `NO'''). Soundbite at 14. Other comments 
indicate, however, that different systems may be limited to the use 
of a single specific key for opt-out requests. E.g., Global at 
11(``7'' key); MinutePoll at 4 (``9'' key); IAC at 3 n.2 (``1'' 
key).
    \126\ DMA at 2; Soundbite at 13 (so consumers can be assured 
that opt-out is ``easy and effective''); Voxeo at 7; Global at 3; 
Xpedite at 3.
    \127\ IAC at 7 (noting that permissible hold times while waiting 
for an operator could be limited by the safe harbor).
    \128\ MinutePoll at 8.
    \129\ Soundbite at 13.
    \130\ IAC at 7.
    \131\ IAC at 3 nn.2-3. However, interactive technology 
apparently exists that allows telemarketers to automatically scrub 
call lists against recent additions to a seller's company-specific 
do not call list. See Global at 12.
---------------------------------------------------------------------------

ii. Express Identification of the EBR
    A number of the industry comments recommend adding a provision to a 
safe harbor for prerecorded message calls that would require an 
indication that the call is based on an EBR.\132\ Two comments appear 
to contemplate only a brief indication that the consumer is a 
``customer'' or ``made an inquiry,''\133\ one would go further and 
disclose ``how the [consumer's] phone number was obtained.''\134\ 
Another comment suggests that, in lieu of a mandatory disclosure, this 
information could be conveyed via a required keypress option that would 
trigger an explanation of why the consumer is receiving the 
message.\135\
---------------------------------------------------------------------------

    \132\ DMA at 1, 3; MinutePoll at 2; MP at 1; SmartReply at 5.
    \133\ DMA at 3; MinutePoll at 2 (``briefly identify the nature 
of the EBR'')
    \134\ MP at 1.
    \135\ SmartReply at 5.
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iii. Call Frequency and Duration Limitations
    Several comments indicate that limiting telemarketing to no more 
than one call a month is regarded, at least by some in the industry, as 
a ``best practice.''\136\ Two comments accordingly recommend adding 
this limitation to a prerecorded call safe harbor, arguing that such a 
restriction would ensure that prerecorded calls would not be 
``abusive.''\137\ They contend that, in combination with a prompt 
keypress opt-out option designed to prevent prerecorded messages from 
being ``coercive,'' this additional restriction would prevent 
prerecorded calls from being either ``coercive or abusive,'' thereby 
obviating any need or justification for requiring a consumer's express 
written agreement to receive prerecorded telemarketing calls.
---------------------------------------------------------------------------

    \136\ SmartReply at 7; see IAC at 3; Career at 1; MinutePoll at 
1.
    \137\ MinutePoll at 1; Career at 1. See IAC at 6 (suggesting 
that the Commission could consider this or other limitations on the 
frequency of prerecorded calls).
---------------------------------------------------------------------------

    Two comments also suggest that limits on the length of prerecorded 
messages may be regarded as a ``best practice.'' One indicates that as 
a ``best practice, not only does it limit contact with its client's 
customers to once a month, but also limits the average

[[Page 51175]]

message length to ``about 37 seconds.''\138\ Another proposes that the 
FTC consider such a limitation, and suggests that it be 45 
seconds.\139\
---------------------------------------------------------------------------

    \138\ SmartReply at 7; but cf. SmartReply Study at 7 (survey 
results noting that SmartReply recommends a 17 second message); but 
see CenterPost at 2 (reporting an ``average call length of over one 
minute'').
    \139\ IAC at 7; but see Global at 19-20 (showing message lengths 
of from 33 to 93 seconds).
---------------------------------------------------------------------------

iv. EBR Limitations
    Other industry comments propose one or more additional requirements 
that would restrict the scope of an EBR for prerecorded calls in answer 
to consumer objections about ``calls from sellers that use a one-time, 
insignificant purchase, or even a mere inquiry, as a license to bombard 
the consumer with solicitations relating to all aspects of the seller's 
business.''\140\ Several suggest imposing restrictions on the source of 
the telephone numbers to which prerecorded calls may be placed.\141\ 
Others advocate that the Commission consider limitations on the number 
of transactions between the seller and customer to confine the EBR to 
businesses with which consumers have regular dealings, or from which 
they would reasonably expect a follow-up to an inquiry or 
purchase.\142\ Two comments also recommend that consideration be given 
to shortening the 18-month time period in the current EBR definition to 
12 months for prerecorded calls.\143\ Two other comments suggest that 
EBR-based prerecorded message calls might be limited to those that are 
made in response to prior purchases or existing contracts.\144\ 
Finally, one additional comment asks the FTC to consider modifying the 
National Do Not Call Registry to permit consumers to opt out of all 
calls from businesses with which they have an EBR,\145\ while another 
advocates a segregation of company-specific opt-out lists that would 
require consumers to opt out separately from prerecorded calls and live 
calls, so that businesses could continue to make live calls to EBR 
customers who only opt out of prerecorded calls.\146\
---------------------------------------------------------------------------

    \140\ Voxeo at 7-8.
    \141\ VMBC at 2 (allowing prerecorded messages only to consumers 
who provide the seller with their contact information); Soundbite at 
15-16 (allowing messages only where the seller obtains the 
consumer's number directly from the consumer, and prohibiting calls 
where the consumer's number is obtained from a directory, another 
company, or some other source); Chrysalis Software, Inc. (Ramsey, 
Greg), No. 79 (prohibiting use of purchased lists); Global at 9 
(prohibiting calls to numbers collected in promotional or prize 
drawings, or obtained from affiliated companies); Valley at 1 
(disallowing sale of customer lists to affiliate parties).
    \142\ IAC at 6 (suggesting that the EBR be limited to allow 
calls only to consumers who have purchased, rented or leased goods 
or services on two or more occasions within an 18 month period); 
Voxeo at 4 (proposing that EBR calls only be permitted if the 
consumer has engaged in ``a series of regular transactions'' with 
the seller or if the calls ``directly pertain'' to a prior 
transaction).
    \143\ SmartReply at 43 (noting that ``[i]n general, our clients 
only call customers that have transacted in the prior 12 months'' 
because messages ``lose relevance'' after that time, and that ``some 
states require a 6 month EBR.'' Id. at 11); IAC at 6; but see DMA at 
3-4 (the same EBR parameters should exist for both live and 
prerecorded calls).
    \144\ VMBC at 1 (``a previous purchase or service agreement''); 
IAA at 11 (``contract renewals'' and ``proposed changes to existing 
contracts to address post-contract events and/or changed 
circumstances'').
    \145\ Call Command at 2 (suggesting that consumers who exercise 
this option could then consent to receive any EBR calls they 
wanted). Unfortunately, the significant cost of any such alteration 
to the Registry precludes that possibility.
    \146\ The Heritage Co. (``Heritage''), No. 581, at 3.
---------------------------------------------------------------------------

C. Discussion and Analysis of the Safe Harbor Modification Proposals

    The question the Commission must consider in determining whether to 
adopt a revised safe harbor with any of the modifications proposed by 
the industry comments is whether such a safe harbor would serve the 
public policy interests articulated in the Telemarketing Act. In making 
that assessment, the Commission continues to employ the same analytical 
framework used in considering the prior prerecorded call safe harbor 
proposal:\147\
---------------------------------------------------------------------------

    \147\ None of the comments in the current round questions the 
Commission's analytical approach in evaluating the prior safe harbor 
proposal for prerecorded calls.

 [T]he Commission's analysis begins from the premise that a new safe 
harbor that treats prerecorded telemarketing calls to established 
customers differently from other prerecorded calls might be 
appropriate if: (1) The consumer aversion to prerecorded calls 
(which led to enactment of the TCPA ban on such calls) does not 
apply when such calls are made to established customers; (2) any 
harm to consumer privacy is outweighed by the value of prerecorded 
calls to established customers; or (3) there is something unique 
about the relationship between sellers and their established 
customers that gives sellers a sufficient incentive to self-regulate 
so that they would avoid prerecorded telemarketing campaigns that 
their customers would consider abusive.\148\
---------------------------------------------------------------------------

    \148\ 71 FR at 58723.
---------------------------------------------------------------------------

1. Are Consumers Averse to EBR-Based Prerecorded Messages?
    We begin, therefore, with the first question for analysis: whether 
consumer aversion to prerecorded calls does not apply when the calls 
are made to EBR customers. As the Commission previously stated, if 
consumers have little or no aversion to prerecorded calls to EBR 
customers, the fact that such calls avoid the twin harms of ``hangups'' 
and ``dead air'' would weigh heavily in favor of the adoption of a new 
safe harbor.\149\
---------------------------------------------------------------------------

    \149\ Id. Some of the industry comments contend that the 
proposed amendment improperly treats prerecorded calls as 
``abandoned,'' arguing that they are not ``abandoned'' because a 
message is delivered within two seconds of a live answer. Beautyrock 
at 1; Superior at 1; Verizon, Attach. A, at 5. However, these 
objections ignore the text of the prohibition, which defines a call 
as ``abandoned'' whenever ``a person answers it and the telemarketer 
does not connect the call to a sales representative within two (2) 
seconds of the person's completed greeting.'' 16 CFR 310.4(b)(iv) 
(emphasis added).
---------------------------------------------------------------------------

    Almost all of the few consumer comments in the record that favored 
the prior safe harbor proposal for prerecorded calls confined their 
support for such calls to informational messages,\150\ while the 
industry in effect took the position that the need for such 
informational messages required blanket approval of prerecorded 
telemarketing messages to EBR customers without an interactive opt-out 
mechanism.\151\ The Commission therefore took pains to point out that 
purely informational messages are not ``telemarketing'' messages 
covered by the TSR.\152\
---------------------------------------------------------------------------

    \150\ 71 FR at 58720 & n.53.
    \151\ See 71 FR at 58719 & n.29.
    \152\ 71 FR at 58725.
---------------------------------------------------------------------------

    However, as previously noted, the comments opposing the proposed 
amendment now emphasize for the first time that the exclusion of purely 
informational reminder messages from TSR coverage still leaves many 
convenient prerecorded messages covered by the definition of 
``telemarketing,'' because they are both informational and involve a 
direct or indirect solicitation.\153\ Several industry comments argue 
that a safe harbor for prerecorded telemarketing messages with an 
interactive opt-out is necessary for businesses to provide these 
convenient messages to consumers who wish to receive them.
---------------------------------------------------------------------------

    \153\ One consumer expresses concern that the industry may turn 
to the use of ``informational'' messages that include an option of 
``finding out more'' about a sales offer. Hubbard, No. 115. Such 
calls would be covered by the TSR as ``telemarketing'' calls.
---------------------------------------------------------------------------

    Industry commenters argue, moreover, that many of the consumer 
comments that oppose prerecorded calls should be discounted because 
they do not specifically state their opposition to prerecorded calls 
with the various interactive opt-out options that industry members now 
advocate. The industry would have the Commission parse out the more 
than 13,000 consumer comments, and ignore those which object to non-
interactive prerecorded

[[Page 51176]]

message blasting, those which object to receiving any telemarketing 
calls at all (including prerecorded calls), those which object to the 
breadth of the EBR definition, and those which object to violations of 
the TSR.
    The industry comments appear to recognize, however, that the 
majority of consumer comments that oppose prerecorded calls cannot be 
placed into any of these categories because they do not provide 
sufficient information to permit such a classification. The industry 
presumes, instead, that because prerecorded messages with interactive 
opt-outs were not widely used at the time of the prior comment period, 
the comments from consumers at that time could not have been addressing 
them. For that reason, the industry contends that the majority of 
consumer comments that cannot be categorized could not have been 
objecting to prerecorded messages with an interactive opt-out, and 
should be disregarded.
    The industry's critique of the consumer comments ignores the fact 
that a few prerecorded call telemarketers had been using interactive 
opt-out technology that consumers may have experienced before the 
Commission requested public comment on a prerecorded message safe 
harbor. Industry's advocacy also overlooks the clear majority of the 
most recent consumer comments that specifically object to receiving 
prerecorded calls with an interactive opt-out mechanism. Further, 
industry neglects to account for a fact not previously placed on the 
record--that the purportedly quick and easy opt-out provided by an 
interactive mechanism at most may be accessible by no more than 15 to 
20 percent of the consumers who receive prerecorded messages, because 
at least 80 to 85 percent of these messages end up on consumers' 
answering machines, where consumers are powerless to avoid the greater 
burden of calling the seller in an effort to be placed on an entity-
specific opt-out list.\154\
---------------------------------------------------------------------------

    \154\ See note 246, infra, and accompanying text. Although one 
industry member states that consumers who receive prerecorded 
messages on their answering machines and call the toll-free number 
provided are connected to the same automated opt-out mechanism as 
those who answer a call, none of the other industry comments 
indicates that the opt-out mechanism for recipients of answering 
machine messages would be equally convenient. See note 123, supra, 
and accompanying text.
---------------------------------------------------------------------------

    The Commission noted, when it denied the request for a safe harbor 
for prerecorded messages delivered to EBR customers, that the consumer 
comments in the record provided ``compelling evidence that consumer 
aversion to prerecorded message telemarketing--regardless of whether an 
established business relationship exists--has not diminished since 
enactment of the TCPA, which, in no small measure, was prompted by 
consumer outrage about the use of prerecorded messages.''\155\ The 
Commission would therefore be hard pressed to ignore the scope and 
force of that consumer opposition to prerecorded telemarketing messages 
now--as the industry analysis does--absent compelling evidence that 
consumers affirmatively support and accept such messages when they 
provide an interactive opt-out mechanism. The consumer surveys and opt-
out rate data submitted by the industry fall short in providing such 
evidence.
---------------------------------------------------------------------------

    \155\ 71 FR at 58723.
---------------------------------------------------------------------------

    The Minutepoll survey shows that when asked in the abstract, 70 
percent of the respondents said that they prefer live telemarketing 
calls, and only 30 percent said they prefer prerecorded calls.\156\ 
Both the Minutepoll and Forrester surveys purport to show, however, 
that consumers really prefer prerecorded calls to live calls. For 
example, Minutepoll reports that when given a choice between a 
prerecorded call with a ``quick option to get on the calling company's 
Do Not Call list'' and a ``live operator call that would not be 
required to do this,'' 68 percent of the respondents said they 
preferred prerecorded calls and only 32 percent said they preferred 
live calls.\157\ There is reason to doubt, however, that the surveys 
actually show that consumers affirmatively want to receive prerecorded 
sales calls. Of the 68 percent of consumers in the more in-depth 
MinutePoll survey who said they would prefer a prerecorded message with 
a ``quick DNC opt-out,'' 33 percent directly attributed that choice to 
their ability to stop future calls and 16 percent to their ability to 
hang up easier or without guilt. Thus, when forced to choose between an 
opt-out option with prerecorded calls and no such option with live 
calls, 33 percent of those who said they prefer prerecorded calls may 
have been misled by the survey to believe that accepting a prerecorded 
call was the only way to stop such calls and another 16 percent did not 
want to listen to the call at all.\158\ Thus, neither the Minutepoll 
nor Forrester results convincingly demonstrate that consumers want 
prerecorded calls.
---------------------------------------------------------------------------

    \156\ See note 81, supra, and accompanying text. The Commission 
notes that, by asking whether consumers would rather receive 
prerecorded message calls or calls from a sales agent, both the 
MinutePoll and Forester surveys may have led survey respondents to 
presume that they were being asked to choose between an equal number 
of prerecorded calls and sales agent calls. The choices of those who 
said they would prefer prerecorded calls might have changed if they 
understood they could receive a greater number of pre-recorded calls 
than sales agent calls.
    \157\ See note 82, supra, and accompanying text; cf. note 85, 
supra, and accompanying text (Forrester data).
    \158\ MinutePoll, Exh. A, at 2. Similarly, of the 30 percent of 
consumers who initially said they preferred prerecorded calls when 
asked ``in the abstract,'' more than half (54 percent) said the 
reason for this preference was that they could easily hang up on the 
prerecorded calls. This might indicate that at most 15 percent of 
the survey respondents may actually have wished to receive 
prerecorded calls. Id.
---------------------------------------------------------------------------

    The Silverlink Survey appears to confirm what the other two surveys 
suggest--that at best a comparatively small minority of consumers 
affirmatively appreciate receiving prerecorded telemarketing 
calls.\159\ More importantly, the Silverlink Survey, which was 
submitted to show greater consumer acceptance of prerecorded healthcare 
messages than of other telemarketing messages, demonstrates that 
consumer acceptance of prerecorded messages varies dramatically 
depending on the subject matter of the message. By overwhelming 
margins, survey participants said they would be unwilling to listen to 
a prerecorded credit card offer at discounted rates (91 percent) or an 
offer of discounted vacation travel packages (87 percent), whereas only 
41 percent said they would be unwilling to listen to a healthcare-
related prerecorded telemarketing call.\160\
---------------------------------------------------------------------------

    \159\ It is noteworthy that 78 percent of the Silverlink Survey 
participants reported that they actually received an automated call 
within the preceding 12 months. Silverlink Survey, Attach. A at 2.
    \160\ Silverlink Survey at 5 & n.14. The fact that as many as 41 
percent of the survey participants said they would be unwilling to 
listen to healthcare-related messages indicates that the high 
satisfaction rates (89-94 percent) reported in the CenterPost 
surveys can best be attributed to the fact that only customers who 
responded to the prerecorded call were surveyed.
---------------------------------------------------------------------------

    Thus, far from providing compelling evidence of consumer acceptance 
of prerecorded telemarketing messages with an interactive opt-out 
option, the industry surveys manifest widespread consumer disaffection 
with such calls. With these surveys as background, the other evidence 
proffered by the industry to show consumer approval of prerecorded 
messages--opt-out rates and consumer actions in response to prerecorded 
messages--is not only indirect, but singularly unpersuasive.
    As previously noted, most of the industry claims about low opt-out 
rates fail to provide sufficient information for an assessment of the 
claims, either because they combined rates for calls that had an 
interactive opt-out with those that did not, based the rate on

[[Page 51177]]

calls that deferred the opt-out information until the end of the call, 
or failed to indicate whether the rate calculation was based only on 
calls that were actually answered.\161\ The two that did provide 
sufficient information are exceptional cases, with one providing 
prerecorded calls offering casino discount promotions and the other 
notifying customers of special sales at ``Fortune 500'' retailers.\162\ 
In contrast to the low rates cited in the industry comments, the 
Commission's law enforcement investigations suggest that interactive 
opt-out rates for prerecorded telemarketing calls correctly calculated 
as a percentage of the calls actually answered may range from 10 to 20 
percent. The likely reason for the apparently low opt-out rates 
reported by the industry is that the great majority of consumers 
probably hang up on prerecorded calls without waiting for information 
on how to opt out.\163\
---------------------------------------------------------------------------

    \161\ See note 90, supra, and accompanying text.
    \162\ See note 91, supra. The brevity of the messages in the 
SmartReply study also may have contributed to the unusually low opt-
out rates reported.
    \163\ See note 52, supra, and accompanying text.
---------------------------------------------------------------------------

    The fundamental problem with opt-out rates and other indirect 
measures of consumer acceptance of prerecorded calls is that consumers 
who do not wish to be bothered by prerecorded telemarketing messages, 
if they do not simply answer and hang up, may let the message roll over 
to an answering machine where they can delete it later.\164\ The 
SmartReply study reporting that consumers are 300 percent less likely 
to call a toll-free number to opt out in response to an answering 
machine message than to use an interactive opt-out mechanism suggests 
that consumers are quite averse to non-interactive opt-out 
mechanisms.\165\ It appears more than likely that the percentage who 
bother to assert an entity-specific opt-out is a small percentage of 
those who dislike prerecorded telemarketing messages. Similarly, while 
there is some evidence in the record that consumers who answer 
prerecorded message calls and listen to them actually make purchases, 
particularly of healthcare products,\166\ this may occur only in a 
relatively small percentage of the prerecorded calls that are 
made.\167\
---------------------------------------------------------------------------

    \164\ Only three percent of the customers in the SmartReply 
study answered the phone and listened to some or all of each of 
eight monthly calls. See note 92, supra.
    \165\ See note 92, supra.
    \166\ See note 95, supra, and accompanying text.
    \167\ None of the industry comments provides data showing both 
the number of prerecorded calls made and the number of sales 
resulting from those calls.
---------------------------------------------------------------------------

    After a careful review of the record in its entirety, it is the 
Commission's considered opinion that the evidence shows that a 
substantial majority of consumers dislike telemarketing calls that 
deliver prerecorded messages, with or without an EBR or even an 
interactive opt-out mechanism, but that a comparatively small minority 
of consumers may, in fact, appreciate the convenience of EBR-based 
prerecorded calls when they provide an interactive opt-out mechanism, 
at least in some circumstances.\168\ While a precise percentage cannot 
be determined from the information in the record, the record evidence 
suggests that at least 65 to 85 percent of consumers do not wish to 
receive prerecorded telemarketing calls.\169\ In fact, these 
percentages would likely have been higher, perhaps significantly 
higher, if the MinutePoll survey had given participants the choice of 
receiving no prerecorded calls without their consent. Consequently, the 
first potential rationale for creating a new safe harbor for 
interactive prerecorded telemarketing calls is not supported by the 
record.
---------------------------------------------------------------------------

    \168\ At least three consumers opposed to the proposed amendment 
say that prerecorded messages benefit them because the same offers 
might get lost or go unread in the volume of junk mail they receive. 
Knoll, No. 162; Kelly, No. 457; DeSimone, No. 161; see Harvey, No. 
186; cf. Beebe, No. 62. Other consumers equate prerecorded messages 
with the junk mail and spam they receive and believe that the volume 
of prerecorded calls will grow overwhelming unless restrictions are 
placed on such calls. See Wallace, No. 375 (gets ``way too much junk 
mail also''); Brady, No. 569 (already gets ``more than enough. . . 
junk mail and internet spam''); Leach, No. 311 (gets ``so much junk 
mail everyday, isn't that enough?'').
    \169\ See notes 156-158 , supra, and accompanying text. Although 
the 2005 AARP survey similarly indicated that 84 percent of sampled 
consumers with numbers on the Registry considered telemarketing 
calls ``irritating'' or invasive of ``my privacy,'' see note 35, 
supra, the Commission does not rely on that survey because it 
inquired about all ``telemarketing'' calls, not just prerecorded 
calls.
---------------------------------------------------------------------------

2. Is Harm to Privacy Outweighed by the Value of Prerecorded Calls?
    The entire record in this proceeding is clear that an overwhelming 
number of consumers hate prerecorded calls, and consider them a gross 
invasion of their privacy at home. Although the record also now 
contains some limited evidence of consumer willingness to accept some 
telemarketing calls that deliver a prerecorded message and include an 
interactive opt-out mechanism, only a small minority of consumers say 
they want to receive such calls.\170\ There is clear consumer support 
in the record for prerecorded informational messages that are not 
prohibited by the TSR--i.e., messages that do not include a sales pitch 
or information about how to make a purchase. In contrast, there is 
scant consumer support for interactive prerecorded telemarketing 
messages that combine an informational component and a sales component, 
or provide only a sales pitch.
---------------------------------------------------------------------------

    \170\ See note 53, supra (2 percent of consumer comments oppose 
a written agreement requirement). If the previous consumer comments 
did not think to object specifically to calls from businesses with 
which the consumer has an EBR, see note 56, supra, and accompanying 
text, that oversight is hardly a reliable indication that the 
commenters would welcome EBR calls in some circumstances, as an 
industry comment asserts. See note 57, supra, and accompanying text.
---------------------------------------------------------------------------

    The relatively few consumers who want to receive interactive 
prerecorded telemarketing messages primarily say they value such 
messages because they find them a ``useful'' convenience in their busy 
lives, or because they regard them as less invasive than live 
conversations with a telemarketer. The greater majority who object to 
prerecorded telemarketing messages in general, or to interactive 
messages in particular, consider them an intrusive and disruptive 
invasion of their privacy at home that amounts to harassment.
    Any argument that the harm of an invasion of privacy is outweighed 
by the value of prerecorded telemarketing messages as a ``useful'' 
convenience, or their value as a means of avoiding the possible 
discomfort of conversing with a telemarketer, would be untenable unless 
the privacy invasion were relatively minor. For the great majority of 
consumers, however, the ringing of the telephone is anything but a 
minor invasion of the privacy of their homes, particularly when the 
call they answer converts a two-way instrument of communication into a 
one-way broadcast of a prerecorded advertisement, even if that 
broadcast has some interactive features.
    The Commission is satisfied that there is nothing new in the record 
that would warrant a different conclusion on this issue than it reached 
before in denying the VMBC request for a safe harbor for prerecorded 
messages with an interactive opt-out mechanism. The fact that the 
record now includes evidence that some consumers would find interactive 
prerecorded messages useful does not outweigh the significant harm to 
the privacy interests of consumers, as attested by the great majority 
of consumer comments in the record and by the survey data submitted. 
This argues for choice in this matter--to allow those consumers who 
want such calls to consent to receive them, while protecting the large 
majority who deplore them from having to receive and opt out, one by 
one, from each seller's

[[Page 51178]]

call list. Thus, the second potential rationale for adoption of a safe 
harbor for interactive prerecorded telemarketing calls is not supported 
by the record. That fact, as the Commission previously noted, ``assumes 
particular importance in view of Supreme Court precedent that has long 
recognized the significant governmental interest in protecting 
residential privacy.''\171\
---------------------------------------------------------------------------

    \171\ 71 FR at 58723.
---------------------------------------------------------------------------

    The Commission emphasizes that this conclusion is by no means 
solely the result of the relative percentages of consumers who say they 
oppose or support prerecorded telemarketing messages, or who do or do 
not perceive that their privacy at home is harmed by receiving them. 
The conclusion is influenced in no small part by the considerable value 
Congress clearly attached to preserving the privacy of citizens in 
their homes when it enacted the Telemarketing Act, and specifically 
directed the Commission to ``include in [the TSR] a requirement that 
telemarketers may not undertake a pattern of unsolicited telephone 
calls which the reasonable consumer would consider coercive or abusive 
of such consumer's right to privacy.''\172\
---------------------------------------------------------------------------

    \172\ 15 USC 6102(a)(3)(A). This directive appears consistent 
with the previously expressed intent of Congress, as stated in the 
preamble to the TCPA, that ``banning . . . automated or prerecorded 
telephone calls to the home, except when the receiving party 
consents to receiving the call . . . is the only effective means of 
protecting telephone consumers from this nuisance and privacy 
invasion.'' TCPA, Pub. L. No. 102--243, 105 Stat. 2394 (1991) at 
Sec.  2(12).
---------------------------------------------------------------------------

3. Do Sellers Have a Strong Incentive to Avoid Abuses?
    The third potential rationale for creation of a new safe harbor as 
indicated in the NPRM is that sellers might self-regulate the number of 
prerecorded messages they send in order to preserve the goodwill of 
established customers. The Commission determined that this 
consideration could not support such a safe harbor. Some industry 
comments submitted in response to the NPRM challenge this 
determination, but not persuasively. The Commission previously 
concluded that: (1) While well-established businesses with brand or 
name recognition may have incentives to exercise restraint, the same is 
not necessarily true for new entrants or small businesses in highly 
competitive markets; (2) A safe harbor for prerecorded calls would 
expose consumers to prerecorded calls from every seller from whom they 
had made a single purchase within the past 18 months; (3) Sellers would 
have less incentive to exercise self-restraint with respect to 
customers who make inquiries, because they would have no existing 
customers to lose, but only customers to gain; (4) The likelihood that 
industry-wide self-restraint would be effective requires consideration 
of the industry's record of compliance; (5) Although overall compliance 
is quite good, not all covered entities are complying, and that fact 
presents a particular problem with respect to consumer concerns about 
the breadth of the industry's interpretation of what constitutes an 
EBR; and (6) The significantly lower cost of prerecorded telemarketing 
calls, compared to live calls, will create economic incentives to 
increase the number of prerecorded telemarketing calls consumers 
receive in their homes.\173\
---------------------------------------------------------------------------

    \173\ 71 FR at 58723-24.
---------------------------------------------------------------------------

    Some in the industry assert that the Commission gave ``inadequate 
consideration'' to the argument that sellers have strong incentives to 
avoid alienating existing customers, 80 percent of whose telephone 
numbers may be listed on the Registry. These comments argue that 
because the availability of an interactive opt-out mechanism could 
easily lead to the loss of the right to contact many EBR customers by 
telephone, sellers would exercise caution in using prerecorded 
messages.\174\ The Commission believes it did give appropriate weight 
to these considerations, however, when it explicitly acknowledged that 
sellers with brand or name recognition may have sufficient incentives 
to exercise restraint in placing prerecorded telemarketing calls to 
their customers.\175\
---------------------------------------------------------------------------

    \174\ See note 107, supra, and accompanying text.
    \175\ 71 FR at 58723.
---------------------------------------------------------------------------

    Some industry comments further criticize the Commission's concern 
about whether new entrants and small businesses in highly competitive 
markets would have sufficient incentives to exercise the same self-
restraint, contending that they share the same incentives and are less 
likely than established businesses to use prerecorded telemarketing 
calls.\176\ This criticism ignores the powerful economic incentives for 
new entrants and small businesses to seek to grow their businesses. The 
Commission considers it noteworthy that none of the industry comments 
challenged its conclusion that sellers would have less incentive to 
exercise self-restraint with respect to consumers who make an inquiry 
that creates an EBR, and thus are potential customers, rather than 
existing customers.\177\
---------------------------------------------------------------------------

    \176\ See note 107, supra.
    \177\ 71 FR at 58723-24.
---------------------------------------------------------------------------

    Based on the entire record and its enforcement experience, three 
considerations lead the Commission to conclude that, if anything, it 
may have overestimated the incentives for industry self-restraint in 
the use of prerecorded telemarketing messages. First, any such self-
restraint is called into question by the more than 100 consumer 
complaints a month that the Commission has been receiving about 
prerecorded telemarketing calls--the fifth highest number of all TSR 
violation complaints.\178\ Second, the Commission's recent law 
enforcement investigations and cases provide evidence that millions of 
prerecorded calls are being made to numbers on the Registry, and that 
many of these calls are abandoned if a consumer answers the 
telephone.\179\ Third, two facts about which the Commission was not 
previously aware--an industry analysis showing that consumers are 300 
percent less likely to opt out from an answering machine message that 
provides a toll-free number than from a prerecorded call that has an 
interactive opt-out mechanism,\180\ and industry reports that between 
80 and 85 percent of prerecorded messages end up on answering 
machines\181\--suggest that sellers may have little reason to be overly 
concerned about losing EBR customers from too frequent use of 
prerecorded telemarketing messages since most consumers do not bother 
to call back to opt out after retrieving such messages. This data also 
suggests that the relatively low opt-out rates reported in the industry 
comments may be more a function of the relatively small percentage of 
such calls answered by a

[[Page 51179]]

consumer rather than an answering machine. Thus, the supposed incentive 
for industry self-restraint created by the availability of an 
interactive opt-out mechanism is liable to be less effective than it 
previously appeared.\182\
---------------------------------------------------------------------------

    \178\ Consumers filed more than 1200 complaints about 
prerecorded calls with the Commission from January 1 through 
December 31, 2007.
    \179\ E.g., FTC v. Voice-Mail Broad. Corp., No. 2:08-cv-00521 
(C.D. Cal. Feb. 8, 2008) ($3 million civil penalty for failing to 
comply with the FTC's enforcement forbearance policy in delivering 
prerecorded messages; i.e., abandoning over 46 million calls, that 
provided no opt-out option to consumers who answered); United States 
v. Guardian Commc'n., Inc., No. 4:07-04070 (C.D. Ill. Nov. 15, 2007) 
($7.8 million civil penalty for automated prerecorded message 
blasting to up to 20 million numbers a day, many of which were 
placed to numbers on the Registry, and for abandoning calls answered 
by a person); United States v. Craftmatic Indus., Inc., No. 07-4652 
(E.D. Pa. Nov. 8, 2007) ($4.4 million civil penalty for hundreds of 
thousands of calls to numbers on the Registry and for abandoning 
millions of calls); Global Mort. Funding, Inc., No. 07-1275 (C.D. 
Cal. filed Oct. 30, 2007) (complaint alleging hundreds of thousands 
of calls to numbers on the Registry, and abandoning many calls 
answered by a consumer). See also note 15, supra.
    \180\ See note 92, supra.
    \181\ See note 246, infra, and accompanying text.
    \182\ The annual 33 to 50 percent customer attrition experienced 
by retailers, SmartReply at 41, would appear to provide a strong 
incentive to use prerecorded calls to make sales before the 
attrition occurs, whereas opt-out rates are so low as to provide 
little incentive for self restraint.
---------------------------------------------------------------------------

    A number of comments also object to the Commission's consideration 
of the industry's record of compliance with the TSR in assessing the 
likelihood that industry-wide self-restraint would be effective. They 
argue, in essence, that it is unfair to judge industry members who try 
to comply with the law by the actions of bad actors who are unlikely to 
comply with any TSR requirement unless brought to account by law 
enforcement action.\183\ This argument would have greater force were it 
not for the fact that, as some in the industry have privately 
acknowledged, a few industry submissions show,\184\ and the 
Commission's law enforcement experience demonstrates,\185\ it was not 
until late in 2006 that many finally began to comply with a key 
requirement of the enforcement forbearance policy for prerecorded calls 
announced by the Commission in November 2004, by telling consumers how 
to opt out at the outset of the call, rather than at the end of the 
message.\186\ The Commission's consideration of this issue has focused 
more narrowly, however, on the fact that the industry compliance record 
presents a particular problem with respect to consumer concerns about 
the breadth of the industry's interpretation of what constitutes an 
EBR, as the consumer comments and the Commission's enforcement 
experience have indicated.\187\
---------------------------------------------------------------------------

    \183\ See Charles Duhigg, Bilking the Elderly with a Corporate 
Assist, N.Y. Times, May 20, 2007, at A-1 (reporting that, since the 
start of 2006, ``federal agencies have filed lawsuits or injunctions 
against at least 68 telemarketing companies and individuals accused 
of stealing more than $622 million'').
    \184\ Message at 2-3 (message scripts with opt-out at end of 
call); Draper's and Damon's (message script with opt-out at end of 
call).
    \185\ FTC v. Voice-Mail Broad. Corp., No. 2:08-cv-00521 (C.D. 
Cal. Feb. 8, 2008) ($3 million civil penalty, with all but $180,000 
suspended due to inability to pay, for law violations including 
failure to provide consumers who answered prerecorded calls with an 
opportunity, at the outset of the message, to opt out). This 
violation was somewhat surprising since it was VMBC that first 
advocated a safe harbor for prerecorded messages with an interactive 
opt-out opportunity at the outset of the message.
    \186\ 69 FR at 67290 (requiring, inter alia, a disclosure of the 
opt-out mechanism provided at the outset of a prerecorded call) 
(emphasis added). The argument would also be more compelling if the 
record did not include consumer complaints about prerecorded calls 
from well-established businesses with brand or name recognition. See 
notes 19-21, supra, and accompanying text.
    \187\ 71 FR at 58724 & n.91, citing United States v. Columbia 
House Co., No. 05C--4064 (N.D. Ill. filed July 14, 2005) ($300,000 
civil penalty settlement for alleged calls to tens of thousands of 
numbers on the Registry to consumers who last made a purchase from 
the defendant far outside the prior 18-month period during which the 
EBR exemption would have applied). The Commission has no reason to 
believe that narrowing the EBR definition would succeed in 
protecting consumer privacy, and would eliminate the problems 
addressed by the proposed amendment. Such an approach would have the 
undesirable effect of reducing the ability of businesses to 
communicate with their EBR customers with live calls.
---------------------------------------------------------------------------

    Finally, the industry challenges consumer and Commission concerns 
that industry-wide self-restraint would be unlikely to prevent an 
increase in prerecorded telemarketing calls as ``speculative'' and 
``not supported by the record,'' notwithstanding an industry comment 
acknowledging that such an increase is ``theoretically possible.''\188\ 
Even if it is true, as industry comments argue,\189\ that VoIP is 
unlikely to reduce call transmission costs much below current long-
distance rates for high volume users, industry cannot (and does not) 
dispute that prerecorded message telemarketing is significantly less 
expensive for sellers than live telemarketing conducted by sales 
agents. While any forecast of likely future events may be unavoidably 
``speculative'' to some degree, it is only reasonable to expect that 
the prospect of labor cost savings would increasingly lead sellers to 
convert as much live telemarketing as possible to prerecorded calls.
---------------------------------------------------------------------------

    \188\ See note 106, supra, and accompanying text. The Commission 
is not persuaded that it should ignore the basic economic principles 
which led to its concern, and rely instead on vague industry 
assurances, based on anecdotal evidence, that prerecorded calls 
``are most useful in specific, targeted applications'' to conclude 
that an increase in prerecorded calls would not occur if a safe 
harbor were created.
    \189\ See note 108, supra, and accompanying text.
---------------------------------------------------------------------------

    Because the record does not provide persuasive support for any of 
the three potential justifications for according special treatment to 
interactive prerecorded telemarketing calls to EBR customers, there is 
no justification for creation of a safe harbor for such calls. 
Accordingly, the Commission has decided not to reconsider its previous 
denial of the VMBC request for a safe harbor.

D. The Proposed Amendment

    As discussed earlier in this notice, the October 2006 NPRM proposed 
and sought public comment on an amendment to the TSR that would permit 
prerecorded telemarketing calls only to consumers who provided their 
express written agreement to receive them.\190\ This proposal was based 
in large measure on the extensive record of strenuous consumer 
opposition to the VMBC request for a safe harbor for prerecorded calls. 
In proposing the amendment to make explicit the prohibition of calls 
delivering prerecorded telemarketing messages when answered by a 
consumer that is implicit in the TSR's call abandonment 
prohibition,\191\ the Commission emphasized that the Telemarketing Act 
directs the FTC ``to include in [the TSR] a requirement that 
telemarketers may not undertake a pattern of unsolicited telephone 
calls which the reasonable consumer would consider coercive or abusive 
of such consumer's right to privacy.''\192\ The Commission further 
concluded that ``the present record supports a finding that a 
reasonable consumer would consider prerecorded telemarketing calls 
coercive or abusive of such consumer's right to privacy,''\193\ but 
specifically requested public comment on that issue.\194\
---------------------------------------------------------------------------

    \190\ 71 FR at 58726-27.
    \191\ 16 CFR 310.4(b)(1)(iv) (prohibiting call abandonment, and 
defining call abandonment as a failure to connect a call to a sales 
representative within two seconds of the completed greeting of the 
person who answers).
    \192\ 71 FR at 58726.
    \193\ Id.
    \194\ 71 FR at 58733.
---------------------------------------------------------------------------

1. Discussion and Analysis of the Proposed Amendment
    Consumers find non-interactive prerecorded calls abusive because 
they are powerless to interact with a recording.\195\ For this reason, 
most of the industry comments apparently accept that a reasonable 
consumer would consider non-interactive telemarketing message calls 
``coercive or abusive of such consumer's right to privacy.''
---------------------------------------------------------------------------

    \195\ 71 FR at 58723.
---------------------------------------------------------------------------

    The industry comments strongly contest, however, the Commission's 
authority to prohibit the delivery of prerecorded telemarketing 
messages that provide an interactive opt-out mechanism without a 
consumer's prior written agreement to receive them. They primarily 
argue that interactive messages are significantly different from non-
interactive messages because consumers are not ``powerless'' to prevent 
privacy abuses from prerecorded message calls that provide an 
interactive opt-out mechanism. The industry comments therefore contend 
that it would be unreasonable for consumers to consider such messages 
abusive of their privacy.

[[Page 51180]]

    The Commission does not find this argument persuasive. As the 
Commission noted when it amended the TSR to establish the Registry, 
``the company-specific approach is seriously inadequate to protect 
consumers' privacy,'' not only from calls from a single telemarketer, 
but especially when the volume of telemarketing calls from multiple 
sources is so great that ``consumers find even an initial call from a 
telemarketer or seller to be abusive and invasive of privacy.''\196\ 
Consequently, reasonable consumers may very well experience even 
telemarketing calls that deliver a prerecorded message but include an 
interactive entity-specific opt-out as coercive and abusive of their 
rights to be left alone in their own homes. Such a conclusion might be 
particularly justified if an overall increase in the number of such 
calls were anticipated because of their low cost; but it would not be 
unreasonable even if no such increase were anticipated, given the 
evidence in the record that interactive opt-out mechanisms do not 
always work,\197\ and can be just as ineffective and burdensome for 
consumers as the entity-specific opt-out procedures criticized in the 
Commission's decision to create the Registry.\198\
---------------------------------------------------------------------------

    \196\ 68 FR at 4629-30.
    \197\ See Section II.A.4, supra.
    \198\ 68 FR at 4629.
---------------------------------------------------------------------------

    Second, the industry argues that the record cannot support a 
finding that interactive prerecorded messages are ``coercive or 
abusive'' because the consumer comments submitted during the initial 
comment period in 2004 do not explicitly object to interactive 
messages. For the reasons previously discussed, the Commission finds 
this argument unpersuasive.\199\ In this regard, the most telling 
evidence in the record is the industry survey results showing that a 
significant majority of consumers do not want to receive interactive 
prerecorded messages.\200\ Thus, the Commission concludes that the 
preponderance of the evidence on the record as a whole supports 
adoption of the proposed amendment.\201\
---------------------------------------------------------------------------

    \199\ See the discussion in Section II.B.1, supra.
    \200\ The Commission notes that the fact that a clear majority 
of consumers do not want to receive interactive prerecorded 
telemarketing messages does not necessarily compel a finding that a 
reasonable consumer would consider such messages ``coercive or 
abusive,'' any more than the fact that a minority may want to 
receive such messages would compel the opposite conclusion. The 
standard is an objective one, which requires the Commission to 
determine, from the perspective of a ``reasonable consumer,'' 
whether such a consumer ``would consider'' prerecorded telemarketing 
messages to be ``coercive or abusive.''
    \201\ Two additional industry arguments are based on a 
misunderstanding of the applicable evidentiary standard. According 
to these arguments, no conclusion can be drawn that reasonable 
consumers could consider such calls coercive or abusive of their 
right to privacy absent a study proving that interactive prerecorded 
message calls are abusive, or because there is a ``subset'' of 
consumers who say they want to receive such messages. See notes 98-
99, supra, and accompanying text.
---------------------------------------------------------------------------

    Having reviewed the entire record, the Commission concludes that 
the reasonable consumer would consider interactive prerecorded 
telemarketing messages to be coercive or abusive of such consumer's 
right to privacy. The mere ringing of the telephone to initiate such a 
call may be disruptive; the intrusion of such a call on a consumer's 
right to privacy may be exacerbated immeasurably when there is no human 
being on the other end of the line. The Commission is inclined to agree 
that prerecorded telemarketing messages, whether interactive or non-
interactive, convert the telephone from an instrument for two-way 
conversations into a one-way device for transmitting advertisements, as 
one industry comment notes. The Commission believes that the other 
narrowly focused industry arguments to the contrary disregard the 
intrusiveness and disruptiveness of calls delivering prerecorded 
messages, and seriously underestimate the very high value consumers 
place on their privacy at home.
    In reaching this conclusion, the Commission remains mindful of 
industry concerns about the impact of this determination, and 
appreciates the potential consequences for law-abiding industry 
participants. For this reason--and out of consideration for the 
minority of consumers who may wish to receive prerecorded messages--the 
Commission declines to adopt the suggestion of two consumer groups that 
prerecorded telemarketing calls be banned completely.\202\ Also for 
this reason, the Commission is adopting a number of provisions industry 
commenters have advocated to mitigate the burden of implementing the 
amendments the Commission is adopting, as discussed below.
---------------------------------------------------------------------------

    \202\ AARP at 4; PRC at 5.
---------------------------------------------------------------------------

    The Commission is also mindful of the legitimate interests of both 
sellers and consumers in communicating immediately following a sale. 
The Commission therefore wishes to emphasize that prerecorded messages 
communicating delivery or service dates or times, and similar 
information, are informational calls that fall outside the ambit of the 
TSR's regulation of ``telemarketing.'' Thus, sellers may continue to 
use prerecorded messages for those purposes without restriction.
    Finally, the Commission notes that it is aware that the technology 
used in making prerecorded messages interactive is rapidly evolving, 
and that affordable technological advances may eventually permit the 
widespread use of interactive messages that are essentially 
indistinguishable from conversing with a human being. Accordingly, 
nothing in this notice should be interpreted to foreclose the 
possibility of petitions seeking further amendment of the TSR or 
exemption from the provisions adopted here.
2. Commenters' Suggestions for Revisions to the Proposal
    The public comments on the proposed amendment urge several 
revisions that the Commission has taken into consideration in refining 
it. The comments variously advocate: (1) modification of the 
requirement for a signed, written agreement to give sellers greater 
flexibility in obtaining consumer consent to receive prerecorded 
message calls; (2) clarification of what disclosures sellers must make 
when obtaining a written agreement from a consumer; (3) reconsideration 
of whether the amendment should apply to messages left on answering 
machines; and (4) other technical revisions.
a. Suggested Modifications of the ``Written Agreement'' Requirement
    Several industry comments request modification of the ``written 
agreement'' requirement of the proposed amendment to mitigate 
compliance burdens. Because ``much commerce occurs over the Internet, 
by phone, and in other simple formats without writing and without a 
clear signature,''\203\ several comments urge the Commission to modify 
the proposed amendment to give businesses greater flexibility in 
obtaining the required agreement from consumers to receive prerecorded 
message calls.\204\ Specifically, several ask that the amendment be 
modified so that the agreement need not be in writing,\205\ and so that 
an old-fashioned,

[[Page 51181]]

pen-to-paper signature not be required.\206\ Another contends that the 
amendment should require no more than that the seller or telemarketer 
``document a consumer's intent to be called.''\207\
---------------------------------------------------------------------------

    \203\ DMA at 8; cf. Voxeo at 9 (``[W]ith the widespread use of 
the Internet and other platforms for electronic or long-distance 
shopping,'' many transactions never leave ``the confines of 
cyberspace'').
    \204\ DMA at 8; IAA at 11; IAC at 8; SmartReply at 23, 28 
(seeking ``liberalizing'' of ``the definition of express consent'' 
so that it can be obtained ``with minimal effort and minimal 
commitment''); Call Command at 5 (requesting ``a less restrictive 
approach to obtaining a consumer's express consent'').
    \205\ E.g., DMA at 9; IAA at 11; NNA at 5 (permit ``oral 
consent''); SmartReply at 28 (no ``burdensome document or 
contract''); SMG Group, LLC (Grossman, Steven), No. 613 at 1 (``a 
more reasonable measure would be to require verbal or even 
electronic consent'').
    \206\ E.g., DMA at 9; Schwartz at 5 (contending that the 
signature requirement is ``too burdensome for businesses to 
implement and will prevent [use of] interactive telemarketing 
calls''); see IAA at 4-5, 8.
    \207\ Call Command at 5.
---------------------------------------------------------------------------

    Similarly, a number of comments request clarification that the E-
SIGN Act applies not only to the signature requirement of the proposed 
amendment,\208\ but also to the ``written agreement'' requirement.\209\ 
Several comments assert that E-SIGN permits an on-line means via 
website or email of obtaining a consumer's agreement;\210\ a telephone 
keypress authorization;\211\ a recording of oral agreement given during 
a call;\212\ or an oral agreement given during a call with third-party 
verification.\213\ Other comments without reference to E-SIGN urge the 
Commission to permit a check-box on a return postcard without a 
signature,\214\ an unsigned application on which a consumer provides 
his or her telephone number,\215\ or an in-store disclosure by a 
consumer of his or her telephone number in response to a sales agent's 
request.\216\
---------------------------------------------------------------------------

    \208\ E.g., SmartReply at 33; Countrywide at 2;Vontoo at 2; 
Voxeo at 9.
    \209\ Call Command at 6 (``With respect to consents obtained 
through e-mail and the Internet, it is assumed that the answer is 
straightforward--i.e., such methods of consent are clearly 
considered written consents under the Federal E-SIGN Act'').
    \210\ Id.; Voxeo at 9; Call Command at 5-6; DMA at 9; Vontoo at 
2; Third Party Verification, Inc. (``Verification''), No. 134, at 1; 
Draper's at 1; Booking Angel (McEvoy, Dean), No. 121, at 1; 
Healthcare Technology Systems (Mundt), No. 103 at 1; Zucker at 2. A 
few consumers who oppose the amendment agree. E.g., Eapen, No. 57; 
Kaushik, No. 48; Shimko, No. 502.
    \211\ Countrywide at 2; Global at 11; Call Command at 5; 
SmartReply at 15; see also, e.g., Brockbank, No. 96; Maruca, No. 602 
; Rosato, No. 156.
    \212\ DMA at 9 ; Career at 2; Call Command at 5, 6; NAA at 7 
(noting that Sections 310.3(a)(3) and 310.4(a)(6) of the TSR already 
permit oral consent in different contexts); NNA at 5; NAA at 6; 
MinutePoll at 9.
    \213\ Verification at 1.
    \214\ DMA at 9.
    \215\ Call Command at 5; SmartReply at 15.
    \216\ SmartReply at 15 (with store signage disclosing the 
purpose of the telephone number request or an oral disclosure read 
from a point of sale system screen by a sales associate).
---------------------------------------------------------------------------

    It is clear from the comments that much of the industry's 
opposition to the proposed amendment centers on the requirement of a 
signed, written agreement to receive prerecorded calls, and the 
presumed cost and paperwork burden such a requirement would entail. The 
industry comments appear to overlook the fact that the TSR already 
expressly permits obtaining consumer signatures electronically as 
permitted by the E-SIGN Act in other provisions requiring signed 
written agreements from consumers:

 For purposes of this Rule, the term ``signature'' shall include an 
electronic or digital form of signature, to the extent that such 
form of signature is recognized as a valid signature under 
applicable federal law or state contract law.\217\
---------------------------------------------------------------------------

    \217\ 16 CFR 310.3(a)(3)(i) n.5 and 310.4(b)(1)(iii)(B)(i) n.6.

    Because it always has been the Commission's intention to minimize 
any paperwork cost or burden on businesses by permitting electronic 
signatures as evidence of compliance with the amendment, the Commission 
has added an identical footnote to the proposed amendment so that 
sellers can be assured that written agreements obtained in compliance 
with E-SIGN will satisfy the requirements of the amendment, such as, 
for example, agreements obtained via an email or website form, 
telephone keypress, or voice recording.\218\ Any agreement obtained 
pursuant to E-SIGN must be sufficient to show that the consumer: (1) 
received clear and conspicuous disclosure of the consequences of 
providing the requested consent -- i.e., that the consumer will receive 
future calls that deliver prerecorded messages--and (2) having received 
this information, agrees unambiguously to receive such calls at a 
telephone number the consumer designates.\219\ The seller will have the 
burden of proof to demonstrate that a clear and conspicuous disclosure 
has been provided, and an unambiguous consent obtained.\220\ The 
Commission will monitor E-SIGN compliance closely to ensure that 
consumers' privacy preferences are protected.
---------------------------------------------------------------------------

    \218\ The E-SIGN Act defines an ``electronic signature'' as ``an 
electronic sound, symbol, or process attached to or logically 
associated with a contract or other record and executed or adopted 
by a person with the intent to sign the record.'' 15 USC 7006(5). 
The Act further defines an ``electronic record'' as ``a contract or 
other record created, generated, sent, communicated, received, or 
stored by electronic means.'' 15 USC 7006(4).
    \219\ Thus, if a seller wishes to capture a consumer's telephone 
number via automated number identification (``ANI''), the consumer 
must have an opportunity to authorize calls to a number that is 
different from the number used to consent to receipt of prerecorded 
calls.
    \220\ Thus, disclosures hidden in lengthy end user license 
agreements or on the back of printed forms will not pass muster.
---------------------------------------------------------------------------

    The amendment's written agreement and signature elements are 
essential, however, to ensure that consumers are adequately apprised of 
the nature of the request and the fact that they will receive 
prerecorded calls as a consequence of their agreement.\221\ Return 
postcards or applications that are unsigned therefore will not suffice 
to demonstrate a consumer's agreement to receive prerecorded message 
calls. For the same reason, a consumer's oral response to an in-store 
request from a sales clerk for a home telephone contact number would 
not evidence the consumer's agreement to receive prerecorded calls, nor 
would an oral response to a sales clerk's express request for the 
consumer's agreement to receive prerecorded message calls.
---------------------------------------------------------------------------

    \221\ Obtaining the required agreement need not prolong a 
conversation with a telephone sales agent, and either could precede 
or follow the conversation using an automated request and an 
interactive voice or keypress mechanism to document the response. 
See IAC at 9 n.17. In an incoming call, the request could be made 
during the ``hold'' time before the call is transferred to an agent. 
If no sales agent is immediately available, the amendment would not 
prevent a consumer from leaving a message or otherwise agreeing to 
receive a one-time automated return call when an agent ultimately 
becomes available. See Eckert, No. 90.
---------------------------------------------------------------------------

    Point-of-sale agreements can be obtained electronically on POS 
devices or on paper, at the seller's option, so long as consumers have 
a clear choice to receive, or not to receive, prerecorded message 
calls. Both ``Yes'' and ``No'' check boxes would serve that purpose 
when placed below a straightforward statement such as: ``I would like 
to receive telephone calls with prerecorded messages from ABC Co. that 
provide special sales offers such as -------------- at this telephone 
number: --------------.'' Other formulations may serve as well, and 
although there might be some efficiencies from mandating this 
language,\222\ the Commission believes it preferable to allow industry 
some flexibility on this point, rather than to prescribe mandatory 
language.
---------------------------------------------------------------------------

    \222\ See Dunlop, No. 118, at 1 (suggesting that the Commission 
prescribe ``explicit sample waiver language'' that would not only 
help sellers ``avoid attorney drafting costs and litigation costs'' 
but also ``save consumers reading time'').
---------------------------------------------------------------------------

b. Suggested Disclosure Requirements
    A variety of suggestions were advanced as to the potential need for 
additional disclosures with regard to obtaining a consumer's written 
agreement. Two industry commenters, correctly noting that sellers will 
have the burden of proving that they have obtained a consumer's written 
agreement, urged that the Commission adopt limited disclosure 
requirements for obtaining the written agreements required by the 
amendment.\223\ One of

[[Page 51182]]

these comments suggest that a ``clear and conspicuous'' disclosure be 
required.\224\ Another requests that any disclosure requirement be a 
``clear, simple, plain language disclosure'' that ``neither sugarcoats 
nor implicitly disparages what the customer is agreeing to.''\225\
---------------------------------------------------------------------------

    \223\ DMA at 9; Career at 4. One consumer similarly suggests 
that sellers only be required to retain ``proof'' that a consumer 
``was informed that prerecorded messages would be used. See also 
Strang, No. 189, at 4 (recommending that in lieu of an express 
written agreement requirement, sellers be required to maintain 
documentation that provides ``clear and convincing evidence'' of a 
consumer's consent to receive prerecorded calls, including ``the 
name of the party giving permission, the telephone number that the 
advertiser may call, proof that the recipient was informed that 
prerecorded messages would be used, and the date that permission was 
given'').
    \224\ DMA at 9. See also, Vontoo at 3 (also advocating a ``clear 
and conspicuous'' disclosure and adding that a ``non-deceptive'' 
disclosure should also be required).
    \225\ Career at 5.
---------------------------------------------------------------------------

    Consumers who address the issue agree that the proposed amendment 
should specify what must be disclosed to consumers before they give 
their express written agreement to receive prerecorded calls, but take 
a more expansive view of the disclosures that are needed. One consumer 
advocate asks that the Commission ``propose specific rules to ensure 
the clarity and simplicity of a seller's invitation to consumers'' to 
provide their express written agreement, and publish the proposed rules 
for additional public comment.\226\ The Commission disagrees that an 
additional notice and comment period is necessary for this purpose, 
given the thoughtful comments already provided on this issue.
---------------------------------------------------------------------------

    \226\ AARP at 6.
---------------------------------------------------------------------------

    Some consumers express concern that sellers' requests for their 
agreement to receive prerecorded calls might be hidden in contest entry 
or other forms,\227\ or on the back of credit card receipts.\228\ The 
Commission recognizes that these concerns are legitimate, based on its 
enforcement experience,\229\ and accordingly has incorporated in the 
amendment a requirement that a seller's request for a consumer's 
agreement to receive prerecorded calls be ``clearly and conspicuously'' 
disclosed, as two industry comments also recommend.\230\ Legal 
precedent established by the Commission's long use of this term of art 
will ensure that consumers are not deceived or confused by hidden 
``agreements'' buried in fine print.\231\
---------------------------------------------------------------------------

    \227\ Bashinsky, No. 123, at 1; Crider, No. 234 (agreement 
should ``not [be] hidden in other forms or paperwork'').
    \228\ Hui, No. 119.
    \229\ E.g., United States v. Craftmatic Indus., Inc., supra n.15 
(hundreds of thousands of calls to consumers whose telephone numbers 
were obtained from allegedly deceptive prize promotion entry forms).
    \230\ DMA at 9; Vontoo at 3 (adding that a ``non-deceptive'' 
disclosure should also be required).
    \231\ Two consumers suggest the Commission specify location and 
font size requirements. Bashinsky, No. 123, at 1; Crider, No. 234. 
The Commission believes that the ``clear and conspicuous'' standard 
provides sufficient guidance, and mandating more specific 
requirements is not necessary.
---------------------------------------------------------------------------

    One consumer comment recommends a disclosure that a consumer's 
agreement to receive prerecorded calls is not required as a condition 
of the purchase of any good or service.\232\ The Commission agrees that 
the entire purpose of the amendment would be defeated if sellers could 
require consumers to agree to receive future calls delivering 
prerecorded messages as a condition of making a purchase. The 
Commission believes this point is well taken, and has incorporated in 
the amendment a prohibition that will prevent any such practice. The 
Commission does not agree, however, that an additional affirmative 
disclosure is necessary.
---------------------------------------------------------------------------

    \232\ Maddock, No. 137, at 3.
---------------------------------------------------------------------------

    Two consumers also advocate a requirement to disclose whether the 
seller will sell consumers' contact information to third parties or 
share it with affiliates or other companies.\233\ In this regard, the 
Commission emphasizes that a consumer's agreement with a seller to 
receive calls delivering prerecorded messages is non-transferable. Any 
party other than that particular seller must negotiate its own 
agreement with the consumer to accept calls delivering prerecorded 
messages. Prerecorded calls placed to a consumer on the National Do Not 
Call Registry by some third party that does not have its own agreement 
with the consumer would violate the TSR. Thus, because information 
sharing cannot be a shortcut for the required written agreement to 
receive prerecorded calls, the Commission sees no need to impose a 
disclosure about information sharing.
---------------------------------------------------------------------------

    \233\ Byrne, No. 158; Wibbens, No. 157, at 1.
---------------------------------------------------------------------------

    Suggestions that the Commission require disclosures about the risk 
that prerecorded calls could tie up a consumer's telephone line and 
pose a health or safety risk,\234\ about how frequently the seller 
would make such calls,\235\ and about whether a consumer can later opt 
out after agreeing to receive prerecorded calls\236\ are unnecessary. 
The need for any such disclosure is obviated because the Commission has 
decided to incorporate in the amendment a requirement that all 
prerecorded calls promptly disclose and provide an automated 
interactive opt-out mechanism that immediately terminates the call 
after adding the called party's number to the seller's Do Not Call 
list.\237\ Consequently, consumers who believe they are receiving an 
excessive number of calls from a seller or who otherwise wish to 
withdraw their agreement to receive such calls will be able to do so by 
utilizing the interactive mechanism. In addition, if a telephone line 
must be cleared quickly to handle an emergency, this requirement will 
ensure that consumers can terminate a message at any time. Similarly, a 
consumer request for a disclosure about whether prerecorded messages 
will be left on answering machines is unnecessary,\238\ because, as 
discussed below, the Commission has decided to expand the coverage of 
the amendment to include prerecorded messages delivered to answering 
machines.\239\
---------------------------------------------------------------------------

    \234\ Hui, No. 119, at 1.
    \235\ Wibbens, No. 157, at 1.
    \236\ Id.
    \237\ See the discussion in Section II.E.2, infra.
    \238\ Wibbens, No. 157, at 1.
    \239\ See the discussion in Section II.D.2.c, infra.
---------------------------------------------------------------------------

    The Commission is not persuaded of the need to require any of the 
other disclosures the consumer comments suggest. Disclosure of the 
times when prerecorded telemarketing calls may be made is 
unnecessary\240\ because the TSR limits the times when telemarketing 
calls may be made.\241\ Likewise, a disclosure that a consumer may not 
be able to speak to a sales representative, as advocated by one 
consumer,\242\ would be unnecessary and redundant to a request to agree 
to receive ``prerecorded'' message calls.
---------------------------------------------------------------------------

    \240\ Byrne, No. 158.
    \241\ 16 CFR 310.4(c) (restricting permissible telemarketing 
calls to a residence to the hours of 8:00 a.m. until 9:00 p.m., 
local time).
    \242\ Byrne, No. 158.
---------------------------------------------------------------------------

c. Coverage of Calls That Deliver Prerecorded Messages to Answering 
Machines
    The proposed amendment did not apply to prerecorded messages left 
on answering machines or voicemail systems, based on the assumption 
that consumer privacy interests would not be affected to the same 
degree when the consumer is not at home to answer the telephone and an 
answering machine or voicemail service picks up the message.\243\ 
Nevertheless, the Commission specifically sought comment on whether 
this assumption is borne out in reality, and whether or not the 
amendment should apply to messages left on answering machines or 
voicemail systems.\244\
---------------------------------------------------------------------------

    \243\ 71 FR at 58733 (limiting the proposed amendment to calls 
``answered by a person'').
    \244\ 71 FR at 58726-27, 58733.

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[[Page 51183]]

    Industry comments uniformly oppose expanding the scope of the 
proposed amendment to apply to answering machine messages.\245\ Two 
industry comments indicate that 80-85 percent of the messages in 
prerecorded telemarketing campaigns are not answered by a person and 
are left on an answering machine or voicemail.\246\ One comment argues 
that the low opt-out rate by consumers who find messages on their 
answering machines indicates that they appreciate receiving the 
messages.\247\ Another contends that messages left on a machine ``are 
less disruptive and intrusive because called parties can simply delete 
or skip messages'' that do not interest them.\248\ Two industry 
comments assert that consumers will benefit from the proposed exemption 
for prerecorded messages on answering machines in the form of lower 
prices resulting from lower marketing costs.\249\
---------------------------------------------------------------------------

    \245\ NAA at 7; SmartReply at 29; Message at 7.
    \246\ Message at 5 (stating that the ``[t]ypical message left 
rate for voice marketing is 85%''); Draper's at 1 (reporting that 
the live answer rate for prerecorded messages is only 20 percent).
    \247\ SmartReply at 34 (contending that 99.7 percent of the 
consumers who receive such calls do not opt out).
    \248\ NAA at 11.
    \249\ SmartReply at 30; Message at 7.
---------------------------------------------------------------------------

    No fewer than 60 individual consumers and 4 consumer advocacy 
organizations, in contrast, unanimously urge extension of the coverage 
of the amendment to prerecorded messages left on answering machines and 
voicemail systems.\250\ Several comments point out that because of the 
sheer number of telemarketing calls, there has been a significant shift 
in consumer behavior and many consumers now use their answering 
machines or Caller ID devices while they are at home to screen out 
telemarketing calls.\251\ As one says, ``I listen to the messages as 
they are being left on my answering machine, and thereby decide if I 
should pick up the phone . . . . Thus, prerecorded telemarketing 
messages that are left on my answering machine are often just as 
disruptive to me as the prerecorded telemarketing messages that I pick 
up before my answering machine.''\252\ For these consumers, as one 
asserts, a prerecorded answering machine ``message is no less coercive 
or abusive'' than a prerecorded message that is delivered when they 
answer a call in person.\253\
---------------------------------------------------------------------------

    \250\ CTAG at 1, 3; PRC at 3; AARP at 4; NCL at 1, 6.
    \251\ E.g., Harlach, No. 000 (``[T]he majority of people have an 
answering service --so that we can screen our calls and talk to the 
people we want''); Wagner, No. 353 (``The large number of 
prerecorded and abandoned calls we receive has forced us to change 
our habits such that we now screen all calls through our answering 
machine. But now we have to rush to answer when it is a `valid' 
call''); Abramson, No. 122 at 1; Brick, No. 309; Linan, No. 298; 
McCloskey, No. 248; Strang, No. 529 at 2.
    \252\ Abramson, No. 122 at 1-2; see Brick, No. 309 (``The only 
difference between an answered call and a message left on my 
answering machine is that I do not usually get up and cross the room 
to retrieve messages from the machine''); Hui, No. 119 (``The fact 
that I may do it [delete messages] in one fell swoop, as opposed to 
interrupting what I'm doing and answering the phone each individual 
time is irrelevant'').
    \253\ Abramson, No. 122 at 2. Three of the consumer comments 
assert that the amendment as proposed is ``not consistent with the 
TCPA, which targets even the initiation, not just delivery of such 
calls, to address harms such as the ringing of the phone,'' Worsham, 
No. 283; Abramson, No. 122 at 2; Strang, No. 189, at 3; and that 
application of the amendment to prerecorded messages left on 
answering machines is necessary ``to maintain consistency with the 
FCC'' which ``has determined that prerecorded calls left on 
answering machines violate the TCPA.'' Strang, No. 189, at 3, citing 
Report and Order 03-153, Rules and Regulations Implementing the 
Telephone Consumer Protection Act of 1991, 18 FCC Rcd 14014, 14107 ] 
154, n. 544 (rel. July 3, 2003); available at (http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-03-153A1.pdf) at p. 
93; Worsham, No. 283.
---------------------------------------------------------------------------

    One consumer comment emphasizes that if the amendment were not 
modified to apply to prerecorded messages left on answering machines, 
``nothing would prevent telemarketers from shifting to using only calls 
to answering machines in their campaigns, a strategy that would further 
increase the number of abandoned calls.''\254\ The comment explains 
that ``[m]achines that use Answering Machine Detection (`AMD') are 
programmed to disconnect if an answering machine is not detected when 
the call is answered,'' and that ``if the telemarketer is trying to 
leave a message on an answering machine, it will abandon the call if a 
live person answers.''\255\ The comment asserts that the use of AMD 
devices ``has shown a dramatic rise over the past few years that has 
resulted in an explosion of calls that are `abandoned' and 
untraceable.''\256\
---------------------------------------------------------------------------

    \254\ Strang, No. 189, at 2 (emphasis in original); see 
Bashinsky, No. 123, at 1 (Companies ``will presumably target more 
voicemail systems'' and this ``would have an effect of penalizing 
consumers who do not answer the phone when telemarketers call'').
    \255\ Strang, No. 189, at 2 & n.1. Such a strategy would violate 
Sec.  310.4(b)(1)(iv) of the TSR for failure to connect the call to 
a sales representative if the resulting abandonment rate exceeds the 
three percent permitted by the call abandonment safe harbor. 16 CFR 
310.4(b)(1)(iv) and 310.4(b)(4)(i).
    \256\ Id. at 1; see also, Haddox, No. 549 (receives ``many'' 
abandoned calls); Raqib, No. 439; Anderson, No. 354.
---------------------------------------------------------------------------

    Several consumer commenters consider prerecorded messages left on 
answering machines as no less intrusive on their privacy than 
prerecorded calls they answer.\257\ One regards the proposed 
amendment's inapplicability to answering machines as ``[a] monstrous 
loophole through which industry can continue to penetrate the serenity 
of the home'' because ``[a]t least when one is there to pick up the 
phone and receive such calls in person he or she can hang-up and end 
the intrusion almost immediately.''\258\
---------------------------------------------------------------------------

    \257\ E.g., Popat, No. 120; Gray, No. 130; Racco, No. 124; see 
NCL at 4. Some comments similarly argue that deleting unwanted 
messages ``wastes a person's time.'' Popat, No. 120; Gold, No. 406; 
see Murphy, No. 332; Mathes, No. 252. One comment takes a more 
extreme position and cites having to listen to and delete unwanted 
prerecorded messages as a privacy infringement on the theory that 
``[a]nything that requires me to exert effort that I wouldn't 
otherwise have had to exert that I did not ask for and from which I 
receive no benefit is very intrusive on my privacy.'' Hui, No. 119.
    \258\ Racco, No. 124; see Popat, No. 120; Gray, No. 130 (``A 
prerecorded message is intrusive no matter if it is received in 
person or on an answering device. Regardless of how the message is 
relayed to a person, the person will still have to listen''); 
Bashinsky, No. 123 (``A person can hang up on a recording'' but 
``[t]he answering machine keeps recording and ties up the line even 
longer''); Maddock, No. 137; see Wang, No. 126 at 3 (suggesting that 
consumers may have a reasonable privacy expectation that messages 
left on their answering machines will be personal messages or 
messages they have requested).
---------------------------------------------------------------------------

    One consumer advocate points out that because consumers can forward 
landline calls to their cell phones, the cost of listening to 
prerecorded messages could put them at ``an economic 
disadvantage.''\259\ Another similarly notes that consumers may incur 
costs to retrieve prerecorded messages when doing so by cell phone or 
over a long distance connection.\260\
---------------------------------------------------------------------------

    \259\ NCL at 4; cf. Swafford, No. 521 (``My biggest complaint is 
that solicitors are now calling my cell phone . . . & the same 
number keeps calling me & leaving me a voicemail which I have to 
delete'').
    \260\ CTAG at 2.
---------------------------------------------------------------------------

    Three consumer advocates argue that prerecorded messages may fill 
up the message capacity of consumers' answering machines and voicemail 
systems, thereby preventing consumers from receiving other more urgent 
messages.\261\ AARP stresses that ``[f]or older Americans, this is of 
particular concern, given the importance of communications with health 
providers and loved ones.''\262\ Several consumers agree that their 
homes are so bombarded by prerecorded messages that ``eat up

[[Page 51184]]

space''\263\ on their answering machines that they cannot receive the 
important messages they need for ``lack of a functional answering 
machine.''\264\ Some point out that an answering machine filled with 
prerecorded messages ``prevents important calls or emergency calls from 
sick family members from getting through.''\265\
---------------------------------------------------------------------------

    \261\ AARP at 5; CTAG at 2; NCL at 3. NCL also expresses concern 
that message system limitations may result in ``information that is 
incomplete or too quickly spoken to be fully comprehended--the 
equivalent of the indecipherable fine print used in many 
advertisements.'' NCL at 3.
    \262\ AARP at 5; cf. NCL at 3 (contending that clogged message 
systems may prevent consumers from receiving important informational 
messages ``that are allowed by the TSR'' such as ``product recall 
alerts'' and implies that this harm is little different from a phone 
line that is tied up by a prerecorded message and unavailable for 
use in an emergency).
    \263\ Stumpel, No. 392, Scott, No. 362; Antonelli, No. 281; 
Gray, No. 130.
    \264\ Wong, No. 146; see Byrne, No. 158; Khitsun, No. 546; 
Perrone, No. 555; Racco, No. 124; Bashinsky, No. 123 (``Recordings 
can fill up a voicemail system pretty fast . . . and by monopolizing 
the phone's functionality with unsolicited information, 
telemarketers are effectively depriving consumers of the use of 
their phone''); Riley, No. 402 (allowing ``prerecorded calls to be 
sent to my telephone answering machine'' is ``an unauthorized use of 
my property and akin to a trespass'').
    \265\ Woods, No. 328; Henderson, No. 182; Gray, No. 122. One 
comment even confesses that ``[w]e no longer have an answering 
machine on our home phone, as it was being filled with more canned 
messages than messages we wanted.'' Burr, No. 211 (reporting that 
``[w]e use our cell phone voicemail as an answering machine thanks 
to the extra protection against telemarketers on cell phones,'' and 
arguing that ``prerecorded messages should be outlawed as they are a 
form of harassment that can not easily be dealt with'').
---------------------------------------------------------------------------

    In view of the comments, the Commission is now persuaded that 
privacy interests are implicated to a significant degree when 
prerecorded messages are delivered to answering machines, rather than 
to consumers who answer and listen to the messages. Taken as a whole, 
the comments make it clear that consumers now very often use answering 
machines not only to pick up messages when they are away, but also to 
screen out unwanted telemarketing calls when they are at home. The 
comments suggest that consumers may have adopted this strategy when 
they faced a deluge of telemarketing calls before the National Do Not 
Call Registry was established. At any rate, the comments indicate that 
consumers persist in using this strategy to deal not only with EBR-
based calls, but also continuing charitable and political calls that 
are not subject to the Registry's restrictions. For consumers who are 
at home but choose not to answer a prerecorded call, the intrusion of 
the message as the answering machine records it is hardly less than 
when a message is delivered when they answer such a call. It is for 
this reason that the Commission now concludes that a reasonable 
consumer would consider prerecorded telemarketing messages left on an 
answering machine or voicemail service to be abusive of such consumer's 
right to privacy.\266\
---------------------------------------------------------------------------

    \266\ The Commission accordingly need not determine whether the 
consumers who contend that this result is required for conformity 
with FCC restrictions on messages left on answering machines are 
correct in their interpretation of the FCC's position.
---------------------------------------------------------------------------

    The consumer comments also highlight a perceived increase in the 
number of calls that are abandoned when a consumer answers the 
telephone. The fact that the TSR's call abandonment prohibition does 
not apply to calls picked up by an answering machine may have created 
an inadvertent incentive for an increase in prerecorded calls targeting 
such devices. While calls targeting answering machines do not violate 
the TSR when sales agents are available to speak with consumers who 
answer in person, this detail of the call abandonment prohibition may 
have escaped the notice of some prerecorded call telemarketers. The 
Commission's decision to expand the scope of the amendment to include 
prerecorded messages left on answering machines consequently will have 
the added benefits of ending any such misunderstanding, and avoiding 
any similar incentive for targeting answering machines as a result of a 
difference in regulatory treatment. The Commission accordingly expects 
that the number of abandoned calls will diminish when the amendment 
takes effect.
d. Suggested Technical Modifications to the Amendment
    Two industry comments request technical modifications to the 
amendment as first proposed. One asks that the reference to ``outbound 
telemarketing call'' in the amendment be replaced with ``outbound 
telephone call,'' the phrase used in the TSR's call abandonment 
provision,\267\ in order to give businesses some assurance that the 
scope of the amendment is limited to prerecorded messages that include 
an offer to sell goods or services, or solicit a charitable 
contribution, and that a purely informational call ``made as part of a 
larger campaign'' will not be deemed to be part of a ``telemarketing'' 
campaign.\268\ The Commission agrees that this change is appropriate, 
both for the sake of consistency with the call abandonment prohibition 
and to provide sellers and telemarketers with the assurance requested. 
Accordingly, the Commission has incorporated this revision into the 
final amendment.
---------------------------------------------------------------------------

    \267\ 16 CFR 310.4(b)(1)(iv).
    \268\ DMA at 1, 7-8. A number of industry comments request 
clarification of whether particular calls will be regarded as 
``informational'' calls not covered by the TSR and the proposed 
amendment. Countrywide at 2; Remindmecall (Barnett, Brian), No. 46, 
at 1; Call Command at 4-5; Draper's at 1; NAA at 2; CenterPost at 1; 
MinutePoll at 2. The proper forum for such inquiries, as the 
Commission has previously stated, 71 FR at 58725-26, is an advisory 
opinion request pursuant to the Commission's Rules of Practice. 16 
CFR 1.1 - 1.4.
---------------------------------------------------------------------------

    The second request for a technical change seeks a revision of the 
call abandonment prohibition to clarify that it does not apply to calls 
to consumers who have provided the seller with a signed written 
agreement to receive prerecorded telemarketing calls, because no live 
operator will pick up such calls, as the call abandonment prohibition 
requires.\269\ The Commission agrees that the TSR should expressly 
exclude prerecorded calls that comply with all applicable requirements 
of the amendment from the scope of the call abandonment prohibition, 
and has added a provision to the amendment to make that clear.\270\
---------------------------------------------------------------------------

    \269\ Call Command at 2, 5.
    \270\ See Section 310.4(b)(1)(v)(C) of the final amendment.
---------------------------------------------------------------------------

E. The Final Amendment

    Pursuant to its authority under the Telemarketing Act to include in 
the TSR a requirement that telemarketers may not undertake a pattern of 
unsolicited telephone calls which the reasonable consumer would 
consider coercive or abusive of such consumer's right to privacy, the 
Commission has determined, after careful consideration of the record 
and for the reasons stated above, that it should adopt a new paragraph 
(v) to the ``Pattern of Calls'' prohibitions in Section 310.4(b)(1) of 
the TSR as follows:
    (v) Initiating any outbound telephone call that delivers a 
prerecorded message, other than a prerecorded message permitted for 
compliance with the call abandonment safe harbor in Sec.  
310.4(b)(4)(iii), unless:
    (A) in any such call to induce the purchase of any good or service, 
the seller has obtained from the recipient of the call an express 
agreement, in writing, that:
    (i) the seller obtained only after a clear and conspicuous 
disclosure that the purpose of the agreement is to authorize the seller 
to place prerecorded calls to such person;
    (ii) the seller obtained without requiring, directly or indirectly, 
that the agreement be executed as a condition of purchasing any good or 
service;
    (iii) evidences the willingness of the recipient of the call to 
receive calls that deliver prerecorded messages by or on behalf of a 
specific seller; and
    (iv) includes such person's telephone number and signature;\7\ and
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    \7\ For purposes of this Rule, the term ``signature'' shall 
include an electronic or digital form of signature, to the extent 
that such form of signature is recognized as a valid signature under 
applicable federal law or state contract law.

---------------------------------------------------------------------------

[[Page 51185]]

    (B) in any such call to induce the purchase of any good or service, 
or to induce a charitable contribution from a member of, or previous 
donor to, a non-profit charitable organization on whose behalf the call 
is made, the seller or telemarketer:
    (i) allows the telephone to ring for at least fifteen (15) seconds 
or four (4) rings before disconnecting an unanswered call; and
    (ii) within two (2) seconds after the completed greeting of the 
person called, plays a prerecorded message that promptly provides the 
disclosures required by Sec.  310.4(d) or (e), followed immediately by 
a disclosure of one or both of the following:
    (A) in the case of a call that could be answered in person by a 
consumer, that the person called can use an automated interactive voice 
and/or keypress-activated opt-out mechanism to assert a Do Not Call 
request pursuant to Sec.  310.4(b)(1)(iii)(A) at any time during the 
message. The mechanism must:
    (1) automatically add the number called to the seller's entity-
specific Do Not Call list;
    (2) once invoked, immediately disconnect the call; and
    (3) be available for use at any time during the message; and
    (B) in the case of a call that could be answered by an answering 
machine or voicemail service, that the person called can use a toll-
free telephone number to assert a Do Not Call request pursuant to Sec.  
310.4(b)(1)(iii)(A). The number provided must connect directly to an 
automated interactive voice or keypress-activated opt-out mechanism 
that:
    (1) automatically adds the number called to the seller's entity-
specific Do Not Call list;
    (2) immediately thereafter disconnects the call; and
    (3) is accessible at any time throughout the duration of the 
telemarketing campaign; and
    (iii) Complies with all other requirements of this Part and other 
applicable federal and state laws.
    (C) Any call that complies with all applicable requirements of this 
paragraph (v) shall not be deemed to violate Sec.  310.4(b)(1)(iv) of 
this Part.
    (D) This paragraph (v) shall not apply to any outbound telephone 
call that delivers a prerecorded healthcare message made by, or on 
behalf of, a covered entity or its business associate, as those terms 
are defined in the HIPAA Privacy Rule, 45 CFR 160.103.
1. Overview of the Final Amendment
    Subparagraph (A) of the final amendment incorporates the substance 
of the amendment as originally proposed, with the revisions discussed 
above. Subparagraph (B) makes two principal modifications to the 
original proposal. First, it requires sellers and telemarketers to 
provide an automated voice and/or keypress-activated interactive opt-
out mechanism in their prerecorded messages so that consumers who have 
agreed to receive such messages will have the option of revoking their 
agreement and opting out of future messages as quickly, effectively, 
and efficiently as consumers who receive a live telemarketing call. 
Second, subparagraph (B) is partly based on, and incorporates elements 
of, the Commission's enforcement forbearance policy with which the 
industry has been required to comply since that policy took effect in 
2004.
    The requirement that sellers and telemarketers provide an automated 
voice and/or keypress-activated interactive opt-out mechanism is 
consistent with industry comments representing that interactive 
technology is now affordable and in widespread use. Based on these 
representations, the Commission has determined that non-interactive 
prerecorded messages no longer need be permitted, and the proposed 
amendment will have the effect of prohibiting them. The record is clear 
that consumers regard such messages as extremely invasive of their 
privacy because they are completely powerless to interact with them.
    By requiring an automated interactive opt-out mechanism, the 
amendment will enable consumers who have agreed to receive prerecorded 
telemarketing calls from a seller to revoke that agreement if they no 
longer wish to receive such calls, or find the frequency of calls from 
the seller abusive of their privacy. The Commission intends the 
requirement for an automated interactive mechanism to make revoking an 
agreement to receive such messages as easy as opting out from a live 
telemarketing call.
    The Commission has also added to subparagraph (B) the requirements 
it originally proposed for creation of a safe harbor for prerecorded 
calls, and incorporated in the enforcement forbearance policy announced 
in anticipation of the creation of such a safe harbor in 2004. When 
these requirements for the proposed safe harbor were published for 
public comment, the responses from the industry overwhelmingly opposed 
the safe harbor proposal, without focusing on the proposed compliance 
requirements. When the Commission proposed to terminate the forbearance 
policy after abandoning the safe harbor proposal, however, the industry 
petitioned for an extension of the policy to preserve the status quo, 
asserting that sellers and telemarketers had been relying on and 
complying with the policy in delivering their prerecorded messages. 
Based on that understanding, the Commission granted the extension.
    By incorporating these requirements into the amendment, the 
Commission is adopting provisions on which the industry has had an 
opportunity to comment, and with which the industry asserts many 
industry members have been complying for some time.\271\ Now that the 
Commission has determined to permit the use of prerecorded messages 
where the consumer has expressly agreed to receive calls delivering 
such messages, these requirements are essential to the effective 
implementation of an interactive opt-out regime.
---------------------------------------------------------------------------

    \271\ See Section II.B.5.b.i, supra.
---------------------------------------------------------------------------

    The most significant difference between the requirements of the 
Commission's forbearance policy and the requirements of subparagraph 
(B) is the elimination of the option under the forbearance policy for 
sellers and telemarketers to provide a telephone number consumers could 
call to opt out as the sole and exclusive opt-out mechanism. That 
option was necessary to permit the continued use of prerecorded 
messages when the forbearance policy was announced in 2004 because, as 
many in the industry argued at that time, interactive technology was 
``costly, burdensome, and not widely available.''\272\ Now that the 
industry comments uniformly represent that interactive technology is 
affordable and widely available, it would be inconsistent with the 
interactive opt-out requirement of the final amendment to permit 
sellers and telemarketers to require consumers who answer a prerecorded 
call in person to place a separate call to a specified telephone number 
in order to opt out. The final amendment further modifies this element 
of the forbearance policy, as discussed below, to clarify that a toll-
free telephone number that connects to an automated interactive opt-out 
mechanism must be provided whenever a prerecorded message may be 
delivered to an answering machine or voicemail service, so that 
consumers who receive such messages will have an easy and effective 
opt-out option.
---------------------------------------------------------------------------

    \272\ 71 FR at 58725.
---------------------------------------------------------------------------

2. Analysis of Revisions to the Final Amendment
    The introductory language in Section 310.4(b)(1)(v) revises the 
proposed amendment in five respects. The most significant is the 
deletion of the phrase,

[[Page 51186]]

``when answered by a person,'' to expand the coverage of the amendment 
to include prerecorded messages left on answering machines and 
voicemail services for the reasons previously discussed in Section 
II.D.2.c above. The revised language also replaces the phrase 
``outbound telemarketing call'' with ``outbound telephone call'' for 
the reasons discussed in Section II.D.2.d above. In addition, the 
revised introduction incorporates the proviso that appeared at the end 
of the original proposal, with no change in substance, to make it clear 
that the requirements of the amendment do not apply to prerecorded 
messages used to comply with the call abandonment safe harbor pursuant 
to Section Sec. 310.4(b)(4)(iii).
    Section 310.4(b)(1)(v)(A)(i) adds to the substance of the amendment 
as proposed a requirement that sellers obtain the written agreement 
necessary to place prerecorded calls only after ``clearly and 
conspicuously'' disclosing that the purpose of the agreement is to 
authorize the seller to place such calls to the consumer, as discussed 
in Section II.D.2.b above. Section 310.4(b)(1)(v)(A)(ii) further 
specifies that a seller may not condition the purchase of any good or 
service on a consumer's agreement to authorize prerecorded calls, as 
previously discussed in Section II.D.2.b.
    Section 310.4(b)(1)(v)(A)(iii) contains the written agreement 
requirement of the amendment as proposed. The only change from the 
original language is the substitution of the words ``specific seller'' 
in place of the words ``specific party'' in the proposed amendment to 
make it clear that prerecorded calls may be placed only by or on behalf 
of the specific seller identified in the agreement. It is the 
Commission's intention that agreements authorizing prerecorded calls be 
limited to the specific seller identified in the agreement, and not be 
transferable to any other party. The only new element in Section 
301.4(b)(1)(v)(A)(iv), which retains the requirement of a signature and 
telephone number that a seller or telemarketer is authorized to call, 
is the addition of a footnote that is intended to eliminate any 
ambiguity regarding the Commission's intention that any electronic 
signature permitted by the E-SIGN Act may be used to formalize the 
required written agreement, which may itself be an electronic agreement 
made pursuant to that Act, as discussed in Section II.D.2.a above.
    Unlike Section 310.4(b)(1)(v)(A), which applies only to outbound 
telephone calls ``to induce the purchase of any good or service,'' 
Section 310.4(b)(1)(v)(B) additionally covers outbound telephone calls 
by for-profit telefunders ``to induce a charitable contribution from a 
member of, or previous donor to, a non-profit charitable organization 
on whose behalf the call is made,'' pursuant to a partial exemption the 
Commission is granting for the reasons discussed in Section II.G.3 
below. Neither Section 310.4(b)(1)(v)(A) nor Section 310.4(b)(1)(v)(B) 
applies to a non-profit charity that places its own prerecorded calls, 
because the Commission lacks jurisdiction over not-for-profit entities.
    Section 310.4(b)(1)(v)(B) adopts the four interactive opt-out 
requirements the Commission proposed for a prerecorded call safe 
harbor, and accordingly incorporated in its enforcement forbearance 
policy. Section 310.4(b)(1)(v)(B)(i) incorporates the first provision 
of the proposed safe harbor and forbearance policy, which requires 
sellers and telemarketers to allow the telephone to ring for at least 
fifteen seconds or four rings so that consumers have a reasonable 
opportunity to answer.\273\ Section 310.4(b)(1)(v)(B)(ii) copies the 
second provision of the proposed safe harbor and forbearance policy, 
requiring that the message begin playing within two seconds of the 
called party's completed greeting.\274\ The requirement in Section 
310.4(b)(1)(v)(B)(ii)(A) that prerecorded calls provide an up-front 
disclosure of how to opt out of future calls adopts the third 
requirement of the proposed safe harbor and enforcement forbearance 
policy.\275\ Finally, Section 310.4(b)(1)(B)(iii) tracks the fourth 
requirement of the proposed safe harbor and forbearance policy, which 
mandates that sellers and telemarketers comply with all other 
requirements of the TSR and federal and state law.\276\
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    \273\ This provision tracks Section 310.4(b)(5)(i) of the 
proposed amendment to create a safe harbor for prerecorded calls and 
the first requirement of the forbearance policy. Compare 69 FR at 
67294 with 71 FR at 77635. This part of the proposed amendment in 
turn mirrored Section 310.4(b)(4)(ii) of the TSR's call abandonment 
safe harbor. 16 CFR 310.4(b)(4)(ii).
    \274\ This requirement duplicates Section 310.4(b)(5)(ii) of the 
proposed amendment to create a prerecorded call safe harbor and the 
second requirement of the forbearance policy. Compare 69 FR at 67294 
with 71 FR at 77635. This part of the proposed amendment in turn was 
based on Section 310.4(b)(4)(iii) of the TSR's call abandonment safe 
harbor.
    \275\ This provision mirrors Section 310.4(b)(5)(ii)(A) of the 
proposed safe harbor amendment and the third requirement of the 
forbearance policy. Compare 69 FR at 67294 with 71 FR at 77635.
    \276\ This requirement replicates Section 310.4(b)(5)(ii)(B) of 
the proposed amendment to create a prerecorded call safe harbor and 
the fourth requirement of the forbearance policy. Compare 69 FR at 
67294 with 71 FR at 77635.
---------------------------------------------------------------------------

    Sections 310.4(b)(1)(v)(B)(ii)(A) and (B) expand on the third 
requirement of the proposed safe harbor and forbearance policy by 
clarifying that prerecorded calls must present an opportunity to assert 
an entity-specific Do Not Call request if the call ``could be answered 
in person by a consumer'' [subparagraph (A)], or if the call could be 
answered ``by an answering machine or voicemail service'' [subparagraph 
(B)].\277\ Two separate provisions are necessitated in the interest of 
minimizing the disclosures required. If a seller or telemarketer 
provides both voice and keypress-activated opt-out mechanisms, and is 
able to determine whether a call is answered by a person or by an 
answering machine or voicemail service, it may tailor the message to 
include the appropriate opt-out message and mechanism.
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    \277\ Id. The NPRM for the proposed safe harbor contemplated 
either the provision of a toll-free number for opt-out requests or 
an interactive mechanism that would connect to an operator or 
automatically record an opt-out request. 71 FR at 77635 (the 
forbearance policy provision); see also 67 FR at 67289 at nn.13-14, 
and accompanying text (proposed safe harbor).
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    Section 310.4(b)(1)(v)(B)(ii)(A) specifies that, if there is any 
possibility that a call could be answered in person by a consumer, an 
automated interactive opt-out mechanism must be available throughout 
the call. The provision permits either a voice or keypress-activated 
opt-out mechanism to be used, or both in combination. The provision 
further requires that, once invoked, the interactive mechanism must 
automatically add the number called to the seller's entity-specific Do 
Not Call list, and must then promptly terminate the call, as 
recommended by some industry comments.\278\ As the Commission has 
previously stated, the inability of some consumers to use their 
telephone in an emergency because a prerecorded message cannot be 
disconnected simply by hanging up ``creates legitimate cause for 
concern.''\279\ To ensure that all consumers can quickly disconnect a 
prerecorded call in an emergency, it is necessary to require, as this 
provision does, that sellers and telemarketers use an opt-out mechanism 
that automatically records the number called

[[Page 51187]]

on the entity's Do Not Call list, as interactive systems now in use 
permit,\280\ rather than allow the potential delays of connecting the 
call to an operator or sales agent to add the number to the list.\281\
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    \278\ See note 126, supra, and accompanying text. The Commission 
intends the requirement that the mechanism ``promptly disconnect'' 
the call to permit a very brief automated acknowledgment that the 
telephone number of the person called has been added to the seller's 
entity-specific Do Not Call list.
    \279\ 71 FR at 58723. For analogous policy reasons, the FCC 
prohibits prerecorded calls ``[t]o any emergency telephone line, 
including any 911 line and any emergency line of a hospital, medical 
physician or service office, health care facility, poison control 
center, or fire protection or law enforcement agency.'' 47 CFR 
64.1200(a)(1)(i).
    \280\ MinutePoll at 8; Global at 11; see DMA at 2 (noting that a 
keypress ``is unambiguous, and the consumer knows with certainty 
that they have made the request'').
    \281\ Consumer advocates make the point that rotary dial 
telephone users will be unable to assert opt-out requests in 
recorded messages with only keypress opt-out mechanisms. See note 
48, supra. The record contains nothing, however, indicating that any 
appreciable number of households still use such antiquated 
equipment, and it is reasonable to conclude that few remain. The 
record does suggest, in contrast, that the industry's use of voice 
recognition systems is growing and is likely to increase. The 
Commission therefore believes that it is not necessary for the 
amendment to mandate inclusion of potentially costly voice 
recognition capability in the required interactive opt-out 
mechanism.
---------------------------------------------------------------------------

    Section 310.4(b)(1)(v)(B)(ii)(B), in turn, details what is required 
if there is any possibility that a prerecorded call could be answered 
by an answering machine or voicemail service. Like the proposed safe 
harbor, which permitted sellers and telemarketers to provide a toll-
free number consumers could call to opt out, this provision requires 
that such a number be provided and disclosed promptly at the outset of 
the call because industry data shows that 80-85 percent of all 
prerecorded calls are delivered to answering machines and voicemail 
services. The provision further requires that the number connect 
directly to an automated interactive opt-out mechanism that is 
accessible at any time throughout the duration of the telemarketing 
campaign. This is necessary to ensure that consumers can easily and 
immediately assert their opt-out rights, regardless of the time of day 
when they listen to their messages, without the additional burden of 
having to wait to opt out until the next business day during regular 
business hours when an operator would be available to record the opt-
out request.
    Section 310.4(b)(1)(v)(C) provides a clarification requested by the 
industry. It specifies that ``any call that complies with all 
applicable requirements'' of the amendment will not violate the call 
abandonment prohibition in Section 310.4(b)(1)(iv) of the TSR. This 
provision is intended to provide assurance that a fully compliant 
prerecorded call will not violate the call abandonment prohibition 
solely because the person who answers is connected within two seconds 
to a recording, rather than to a telemarketer, as the call abandonment 
prohibition requires.
    Finally, Section 310.4(b)(1)(v)(D) provides an exemption from all 
the requirements of the amendment for certain prerecorded healthcare 
calls. For the reasons discussed in Section II.G.2 below, the 
Commission is exempting outbound telephone calls made by or on behalf 
of a covered entity or its business associate, as those terms are 
defined in the HIPAA Privacy Rule.

F. Implementation Issues

    A number of industry comments urged two related implementation 
measures. First, many industry comments ask that their databases of 
current EBR customers be ``grandfathered,'' either temporarily or 
permanently, to ease the transition to the written agreement 
requirement. Second, these and other industry comments also request 
that the Commission provide an adequate ``phase-in'' period to allow 
time for industry education efforts and preparation of systems to 
comply.
1. Requests for ``Grandfathering'' Existing Customer Databases
    Several comments urged that the Commission allow sellers to 
continue placing prerecorded message calls to established customers 
without requiring those customers' agreement to continue receiving 
them. Two industry comments seek permanent ``grandfathering,'' whereby 
they would have no obligation to obtain consent from their established 
customers, and would need to seek consent only from new customers 
acquired after the written agreement requirement takes effect.\282\ 
Others seek a more limited type of ``grandfathering.''\283\ One 
advocates treating established customers who have been given an 
interactive opportunity to opt out of prerecorded messages calls, but 
have not done so, as having given express consent.\284\ Another asks 
that existing EBR customers be ``grandfathered'' where ``policies are 
in place to gradually convert willing customers'' into ``customers who 
have provided consent,'' because this would give businesses an 
``incentive to comply immediately, and time to migrate so that their 
business does not suffer'' the harm of a firm deadline for the 
conversion.\285\ Finally, one comment argues that companies should be 
permitted to obtain consent from established customers with a telephone 
keypress mechanism.\286\
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    \282\ NAA at 3 (Newspapers ``have more than 40 million existing 
residential subscribers, and to require newspaper circulation 
departments to contact each of these subscribers to obtain written 
consent would be exceptionally unreasonable and burdensome''); NNA 
at 5 (``[T]he burden of contacting a large database to obtain 
written consent would far outweigh any benefit specific express 
consent may provide'').
    \283\ E.g., Draper's at 1; Message at 5.
    \284\ Message at 6.
    \285\ SmartReply at 6, 22-23. SmartReply notes that many ``top 
100'' retailers have EBR customer databases of from 15-30 million 
customers. SmartReply at 18.
    \286\ Global at 11. See the discussion in Section II.D.2.a, 
supra.
---------------------------------------------------------------------------

    The industry comments that advocate some form of ``grandfathering'' 
of sellers' EBR customers argue that it will be costly and time-
consuming for sellers to seek agreements to receive prerecorded 
messages from every EBR customer. The Commission is keenly aware of 
this concern, and accordingly has decided to defer the effective date 
of the written agreement requirement for a full year during which 
sellers and telemarketers may continue to place prerecorded calls to 
the seller's existing and new EBR customers, as part of the phase-in of 
the amendment's requirements discussed below.
2. Requests for a ``Phase-In'' Period
    Many of the industry comments request that the Commission defer the 
effective date of the proposed amendment for some period of time after 
it is issued in order to give businesses time to prepare to 
comply.\287\ One comment explains that, depending on the form of 
consent required, it will take time for businesses to redesign web 
sites, revise telemarketing scripts, and prepare and print new credit 
card and loyalty program applications and response cards to obtain 
consent from new customers, as well as to use up existing supplies of 
these materials and create new record-keeping systems and procedures to 
store and access the new consents they obtain.\288\ Another adds that 
small business telemarketers will need time, given a 9-12 month 
development and sales cycle, to find new business options to replace 
anticipated revenue losses from reductions in prerecorded 
messaging.\289\ A third comment points out that time will also be 
needed for industry education efforts.\290\
---------------------------------------------------------------------------

    \287\ Soundbite at 19 (a ``reasonable period''); Countrywide at 
3 (3 months); DMA at 2 (6 months); MP at 3 (6 months); Xpedite at 5 
(6 months); Career at 5-6 (at least 6 months); MinutePoll at 10 (at 
least 6 months); IAC at 2, 10 (at least 6 months); VMBC at 2 (6-8 
months); SmartReply at 15 (18 months for ``Top 100'' Fortune 500 
retailers with 15 million customers in their databases).
    \288\ DMA at 9.
    \289\ MinutePoll at 10.
    \290\ NAA at 9-10.
---------------------------------------------------------------------------

    These requests from the industry comments for a ``phase in'' period 
before the amendment takes effect range from 3 to 18 months. In order 
to ensure that there is sufficient time for industry to conduct needed 
training on the new requirements and to transition to

[[Page 51188]]

revised contracts, web pages and systems and procedures needed to 
preserve evidence of customer agreements to receive prerecorded calls 
after the effective date, the Commission has decided to provide a one-
year phase-in period from the date of publication of the final 
amendment in the Federal Register for the express written agreement 
provisions added to Section 310.4(b)(1)(v)(A) of the TSR by the final 
amendment.
    There is no evident reason, however, to provide an equally 
prolonged phase-in period for the automated interactive opt-out 
provisions of the amendment. Because sellers and telemarketers assert 
they are already complying with the Commission's forbearance policy, 
and many already are using systems with automated interactive keypress 
or voice-activated opt-out capabilities,\291\ the Commission has no 
reason to believe that a great deal of time will be needed for 
implementation of these requirements. Accordingly, the Commission has 
determined that the automated interactive opt-out provisions should 
take effect on December 1, 2008.
---------------------------------------------------------------------------

    \291\ See Section II.B.5(b)(i), supra.
---------------------------------------------------------------------------

    Thus, beginning on December 1, 2008, prerecorded messages, whether 
delivered by sellers and telemarketers to consumers who answer the 
telephone or to answering machines or voicemail services, will be 
required to comply with the new automated interactive opt-out 
requirements added to the TSR as Section 310.4(b)(1)(v)(B) by the 
amendment. Although the Commission's previously announced enforcement 
forbearance policy will be revoked on that date because it is 
inconsistent with the amendment's automated interactive opt-out 
requirements, the Commission will continue to permit sellers to place 
prerecorded calls to both existing and new EBR customers for an 
additional nine months, until September 1, 2009, except to an EBR 
customer who uses the required automated interactive mechanism to opt 
out or whose EBR has expired. Thereafter, sellers and telemarketers may 
place prerecorded calls only to consumers from whom they have obtained 
signed, written agreements to receive such calls. Thus, after the 
amendment takes complete effect on September 1, 2009, the written 
agreement requirement will replace the EBR requirement as the sole 
authorization for continuing to place prerecorded message calls to 
numbers on the Registry, although an EBR will continue to serve as 
authorization for placing live telemarketing calls to consumers.

G. Exemptions

    Several industry comments seek exemptions from the requirements of 
the proposed amendment. These comments urge exemptions for healthcare-
related calls governed by HHS regulations issued pursuant to 
HIPAA,\292\ or by Medicare requirements for enrolled durable medical 
equipment (``DME'') suppliers;\293\ for non-profit entities that use 
third-party telefunders to deliver prerecorded solicitations;\294\ for 
small businesses as defined by Small Business Administration 
regulations;\295\ and for prerecorded messages offering contract 
renewals or changes to existing contracts addressing post-contract 
events or changed circumstances.\296\ Other comments urge either an 
exemption or non-enforcement policy statement that would permit 
entities that are not themselves subject to FTC jurisdiction to employ 
third-party telemarketers (over which the FTC does have jurisdiction) 
to deliver prerecorded messages without the express written agreement 
of their EBR customers, as they themselves may do under FCC rules.\297\
---------------------------------------------------------------------------

    \292\ Silverlink Communications, Inc. and Eliza Corp. (Winslow) 
(``Silverlink/Eliza''), No. 586, at 16; medSage Technologies, LLC 
(``medSage''), No. 606, at 8; PolyMedica Corp. (``PolyMedica''), 
Nos. 594, 609, at 4-5. Two comments seek only an extension of the 
Commission's enforcement forbearance policy, PMSI-Tmesys, No. 215, 
at 2; Gorman Health Group, No. 102, at 2; while another asks only 
that prescription refill reminders be considered ``informational'' 
calls that are not covered by the proposed amendment. National 
Association of Chain Drug Stores, No. 634, at 2. See also, e.g., 
Sliwa, No. 113 (consumer urging an ``exception'' for 
``lifemarketing'' healthcare calls); Merrow, No. 94 (objecting to 
any restriction on healthcare calls); Conway, No. 81; Erwin, No. 
133; Genter, No. 68; Lopez, No. 73; Pace, No. 104.
    \293\ medSage at 8; PolyMedica at 4-5; Access Diabetic Supply 
LLC (``Access''), No. 630, at 12.
    \294\ DMA at 6-7; cf. Heritage at 2 (citing First Amendment 
cases). One consumer comment also supports an exemption for 
charities. Maddock, No. 137, at 1-2.
    \295\ NNA at 5. The 13 brief comments received from small and 
medium sized community newspapers generally express their opposition 
to any restriction on their ability to use prerecorded telemarketing 
messages to contact established customers, but do not request an 
exemption. Thomasville Times-Enterprise, No. 175; Stillwater News 
Press, No. 176; Joplin Globe, No. 177; The News and Tribune, No. 
178; The Tribune-Democrat, No. 179; Effingham Daily News, No. 180; 
Eagle-Tribune Publishing Co., No. 181; Clinton Herald, No. 187; CNHI 
- Terre Haute Tribune Star, No. 190; Pharos-Tribune, No. 191; Eagle 
Tribune, No. 214; Ada Evening News, No. 445; and Community Newspaper 
Holdings, Inc., No. 464.
    \296\ IAA at 11.
    \297\ CBA at 4 (requesting an express exemption); Wells Fargo & 
Co., No. 573, at 2 (seeking either an exemption or non-enforcement 
policy statement); Visa U.S.A., Inc., No. 597, at 2 (advocating a 
non-enforcement policy statement). Although CBA advances an argument 
that the requested exemption is required by the Telemarketing Act, 
based on the status of exempt entities, the argument does not 
address the activity basis for the Commission's assertion of 
jurisdiction over third-party telemarketers that are employed by 
exempt entities. Commission Advisory Opinion, Stonebridge Life 
Insurance Co. (Aug. 19, 2003), available at (http://www.ftc.gov/os/2003/08/tsradvopinion.htm).
---------------------------------------------------------------------------

1. Legal Authority for Granting Exemptions
    In adopting the original TSR in 1995, the Commission incorporated a 
number of exemptions. At that time, the Commission stated:

 The Commission has concluded that it is vested by the Telemarketing 
Act with discretion both in determining what constitutes 
``telemarketing'' under the Act and in defining deceptive and 
abusive practices. In exercising that discretion, the Commission has 
decided that narrowly-tailored exemptions are necessary to prevent 
an undue burden on legitimate businesses and sales transactions. 
Section 310.6 enumerates these exemptions. The Commission determined 
the advisability of each exemption after examining the Act and 
considering the following factors: (1) Whether Congress intended 
that a certain type of sales activity be exempt under the Rule; (2) 
Whether the conduct or business in question already is regulated 
extensively by Federal or State law; (3) Whether, based on the 
Commission's enforcement experience, the conduct or business lends 
itself easily to the forms of deception or abuse that the Act is 
intended to address; and (4) Whether requiring businesses to comply 
with the Rule would be unduly burdensome when weighed against the 
likelihood that sellers or telemarketers engaged in fraud would use 
an exemption to circumvent Rule coverage.\298\
---------------------------------------------------------------------------

    \298\ 60 FR 43842, 43859 (Aug. 23, 1995). In addition, the 
Telemarketing Act expressly empowers the Commission to prevent 
violations of the TSR ``in the same manner, by the same means, and 
with the same jurisdiction, powers, and duties as though all 
applicable terms and provisions of the Federal Trade Commission Act 
(`FTC Act'), 15 USC 41 et seq., were incorporated into and made a 
part of this chapter.'' 15 USC 6105(b) (emphasis added). Among the 
powers conferred by the FTC Act, and thus by the Telemarketing Act, 
is authority to grant exemptions, pursuant to a petition or on the 
Commission's own motion, if ``the Commission finds that the 
application of a rule . . . to any person or class of persons is not 
necessary to prevent the unfair or deceptive act or practice to 
which the rule relates.'' 15 USC 57a(g)(2). Section 553 of the 
Administrative Procedure Act (``APA''), 5 USC 553, which governs any 
such exemption action, requires a notice and comment proceeding 
except ``when the agency for good cause finds (and incorporates the 
finding and a brief statement of reasons therefore in the rules 
issued) that notice and public procedure thereon are impracticable, 
unnecessary or contrary to the public interest.'' 5 USC 553(b)(3)(B) 
(emphasis added). The Commission has determined that there is good 
cause to adopt the two exemptions discussed below. No further notice 
and comment is necessary or appropriate because the position of all 
interested parties on the relevant issues has been adequately 
developed in this proceeding, and no public interest purpose would 
be served by protracting this proceeding further.


[[Page 51189]]


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    The Commission has determined that, for different reasons, it is 
appropriate to incorporate into the amendments adopted herein two 
suggested exemptions: one for healthcare-related prerecorded message 
calls subject to HIPAA and one for prerecorded message charitable 
fundraising calls by third-party telemarketers.\299\
---------------------------------------------------------------------------

    \299\ See 16 CFR 1.25. The other industry requests for relief, 
for small businesses, for contract renewals and modifications, and 
for third-party telemarketers covered by the TSR that are employed 
by businesses not subject to FTC jurisdiction, do not make a 
persuasive case for exemption under the exemption criteria discussed 
above.
---------------------------------------------------------------------------

2. Exemption for Healthcare-Related Prerecorded Calls Subject to HIPAA
    Healthcare-related prerecorded message calls subject to HIPAA 
include not only calls by medical providers and their third-party 
telemarketers, but also calls by DME suppliers and by Medicare Part D 
providers and their third-party telemarketers. The purpose of the HIPAA 
regulations is to maintain the privacy of personally identifiable 
medical information, whereas the purpose of the amendment is to protect 
consumers' privacy in their homes. Nonetheless, the Commission is 
persuaded by certain of the commenters' arguments that these purposes 
are related and intertwined and, moreover, that the placing of such 
calls ``already is regulated extensively by Federal . . . law.''\300\ 
Further, the Commission's law enforcement experience does not suggest 
that the placing of healthcare-related prerecorded message calls 
subject to HIPAA ``lends itself easily to the forms of deception or 
abuse that the [Telemarketing] Act is intended to address.''\301\ 
Therefore, the Commission has determined that an exemption--similar to 
several original exemptions incorporated into the Rule in 1995\302\--is 
warranted for healthcare-related prerecorded message calls subject to 
HIPAA.
---------------------------------------------------------------------------

    \300\ 60 FR 43842 at 43859 (Aug. 23, 1995).
    \301\ Id.
    \302\ See, e.g., 16 CFR 310.6(b)(1) (partial exemption for sale 
of pay-per call services subject to the Telephone Disclosure and 
Dispute Resolution Act); 16 CFR 310.6(b)(2) (partial exemption for 
sale of franchises subject to the Franchise Rule); 16 CFR 
310.6(b)(7) (full exemption for telephone calls between a 
telemarketer and any business).
---------------------------------------------------------------------------

a. Arguments Advanced for an Exemption
    Unlike the other exemption requests, the comments seeking exemption 
of healthcare-related prerecorded calls governed by HIPAA and by 
Medicare requirements for enrolled DME suppliers provide extensive and 
specific information about the industry and practices for which an 
exemption is sought, detailed rationales, and draft language for an 
exemption. An exemption is necessary, the commenters contend, because 
many important healthcare-related calls might be considered 
``telemarketing'' calls, rather than ``informational'' calls not 
covered by the TSR, because they are arguably part of ``a plan, 
program, or campaign conducted to induce the purchase of goods or 
services.''\303\ These prerecorded calls include flu shot and other 
immunization reminders, prescription refill reminders, health screening 
reminders; calls to obtain permission to contact doctors for renewal of 
medication or medical supply orders; calls to obtain documentation 
needed for billing health plans; calls by home health agencies to 
follow-up on patients for six months after discharge; calls monitoring 
patient compliance with prescribed medical therapies; and calls 
encouraging enrollment in disease management or treatment programs, and 
in migration from branded to generic drugs, and from retail to mail 
order pharmacies.\304\ Commenters fear that such calls may not be 
considered to be strictly ``informational'' because they can result in 
a payment or co-pay for medication, durable medical equipment, or 
medical services.\305\
---------------------------------------------------------------------------

    \303\ 16 CFR 310.2(cc).
    \304\ Silverlink/Eliza at 3-5; medSage at 2; see Access at 2; 
PolyMedica at 2; PMSI-Tmesys, at 2.
    \305\ For calls to be covered under the TSR, they must be part 
of a ``plan, program, or campaign which is conducted to induce the 
purchase of goods or services or a charitable contribution, by use 
of one or more telephones and which involves more than one 
interstate telephone call.'' 16 CFR 310.2(cc). The commenters 
addressing the need for an exemption for health-related HIPAA-
covered calls largely assume, but do not methodically analyze, 
whether the calls in question meet each element of the definition. 
While prerecorded calls to induce consumers to make an initial 
selection of a particular healthcare plan or provider would meet the 
definition, these calls by a plan or provider previously selected--
which are, for the most part, in the nature of medical treatment and 
prevention reminders--arguably do not constitute a ``plan, program, 
or campaign which is conducted to induce'' purchases. The October 4, 
2006, Federal Register notice drew a careful distinction between 
commercial telemarketing calls and purely ``informational'' calls. 
The notice made it clear that the Commission considers calls ``such 
as notifications of flight cancellations, reminders of medical 
appointments and overdue payments, and notices of dates and times 
for delivery of goods or service appointments'' as informational in 
nature, and not for the purpose of conveying a sales message. ``Such 
strictly informational calls . . . whether live or prerecorded, have 
never been covered by the TSR.'' 71 Fed. Reg. at 58719.
---------------------------------------------------------------------------

    At any rate, the crux of the arguments seeking exemption is the 
contention that Congress, in the case of DME suppliers, and HHS, in the 
case of HIPAA, has already considered and prescribed rules based on 
important public policy considerations that govern healthcare-related 
calls that might be subject to the proposed amendment under the TSR's 
definition of ``telemarketing.'' If these requirements have not 
occupied the field, the comments urge the Commission to consider the 
weight that the Congressional and administrative determinations have 
given to the improvement of healthcare on a cost-efficient basis, and 
exempt these healthcare-related calls from any restriction in the TSR 
on prerecorded telemarketing calls.
i. DME Supplier Telephone Solicitation Restrictions
    Two commenters emphasize that calls from DME suppliers--permitted 
by statute and by HHS regulations--provide measurable public benefits 
in the treatment of patients by reducing the taxpayer-supported costs 
of the Medicare and Medicaid programs and by measurably improving 
patient compliance rates with home treatment regimens. This results in 
improved clinical outcomes and a reduction in costly 
complications.\306\ The use of prerecorded messages, one commenter 
asserts, is necessary not just to control costs, but to ensure that 
elderly and chronically ill patients receive uniform, clear messages 
they can understand and, with the aid of interactive technology, to 
enable DME suppliers to obtain patient responses that provide 
documentation required by Medicare rules.\307\
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    \306\ medSage at 5; Access at 10.
    \307\ Access at 11-12. DME suppliers are required, for example, 
to document the frequency with which a patient is actually using 
diabetic supplies, and of the replacement of nebulizer accessories, 
such as respiratory supplies, Id., and are prohibited from shipping 
many replacement supplies, particularly diabetic testing supplies, 
on a regular basis unless the patient has nearly exhausted a prior 
supply. Id. at 2-3.
---------------------------------------------------------------------------

    These calls are subject to significant federal regulation similar 
in purpose to the prerecorded call amendment. As two of the comments 
point out,\308\ Congress has expressly prohibited DME suppliers and 
their agents by statute from unfettered telephone solicitation of 
Medicare patients. The statute states that a DME supplier ``may not 
contact an individual enrolled under this part by telephone'' except in 
three specific circumstances: (1) ``The individual has given written 
permission to the supplier to make contact by telephone regarding the 
furnishing of the covered item;'' (2) ``The supplier has furnished a 
covered item to the individual and the supplier is contacting the 
individual only regarding the furnishing of the covered

[[Page 51190]]

item;''\309\ and (3) ``If the contact is regarding the furnishing of a 
covered item other than a covered item already furnished to the 
individual, the supplier has furnished at least 1 covered item to the 
individual during the 15-month period preceding the date on which the 
supplier makes such contact.''\310\
---------------------------------------------------------------------------

    \308\ Access at 8; medSage at 3.
    \309\ HHS implementing regulations specify that this provision 
is limited to arranging delivery of the item. 42 CFR 424.57(c)(11).
    \310\ 42 USC 1395m(a)(17)(A).
---------------------------------------------------------------------------

    Other subsections of this provision, enforced by the HHS Inspector 
General, prohibit Medicare payment for any items furnished to an 
individual by a supplier that knowingly violates the telemarketing 
prohibition,\311\ and, in the case of a pattern of unlawful telephone 
solicitations, exclusion from participation in the DME supplier 
program.\312\ In addition, HHS Medicare regulations provide for civil 
penalties of up to $12,000 for any DME supplier that fails to make a 
refund to a Medicare beneficiary for a covered service for which 
payment is precluded due to a violation of the telephone solicitation 
prohibition.\313\
---------------------------------------------------------------------------

    \311\ 42 USC 1395m(a)(17)(B).
    \312\ 42 USC 1395m(a)(17)(C).
    \313\ medSage at 4.
---------------------------------------------------------------------------

    The commenters add that to be enrolled as a DME supplier eligible 
to receive payments for an item covered by Medicare under the Social 
Security Act, a company must submit an application for billing 
privileges, and receive approval from the Centers for Medicare and 
Medicaid Services (``CMS''). The application requires DME suppliers to 
meet (and continue to meet as a condition of receiving payments) 
certain quality standards that serve to provide further protection for 
consumers. They include requirements that the DME supplier operate its 
business in compliance with all federal and state licensing 
requirements from a physical facility that can be inspected by CMS (and 
not a mere postal box), and maintain liability insurance and a customer 
complaint process.\314\ This ``detailed and protective'' regulatory 
scheme, as one commenter notes, operates ``to screen [out] scofflaws'' 
and ``to protect patients from, inter alia, abusive 
telemarketing.''\315\
---------------------------------------------------------------------------

    \314\ 42 CFR 424.57(c). DME suppliers that violate the terms of 
their certification are subject to adverse regulatory action by HHS. 
E.g., Medisource Corp. v. CMS, Docket No. A-05-112 (HHS Department 
Appeals Board, Jan. 31, 2006).
    \315\ medSage at 4.
---------------------------------------------------------------------------

ii. HIPAA Marketing Restrictions
    Silverlink/Eliza note that when Congress enacted HIPAA in 1996, one 
of its stated goals was to ``improve . . . the efficiency and 
effectiveness of the health care system by encouraging . . . the 
electronic transmission of certain health information.''\316\ In 
enacting HIPAA to set standards under which the healthcare sector could 
share and use health information and communicate with patients, 
Congress recognized that the use of advanced communications technology 
could compromise an individual's privacy interests, and accordingly, 
directed HHS to promulgate rules that would appropriately balance 
patient interests in protecting the privacy of their healthcare 
information with the Congressional ``objective of reducing the 
administrative costs of providing and paying for healthcare.''\317\
---------------------------------------------------------------------------

    \316\ Silverlink/Eliza at 9, citing HIPAA, Pub. L. No. 104-191, 
Sec.  261, 110 Stat. 1936 (1996) (codified, as amended, at 42 USC 
1320d).
    \317\ Id. at Sec.  1172(b) (codified, as amended, at 42 USC 
1320d-1(b)).
---------------------------------------------------------------------------

    Another comment points out that the HIPAA Privacy Rule\318\ issued 
by HHS as directed by Congress, prohibits a ``covered entity''\319\ and 
its ``business associate''\320\ from using or disclosing ``protected 
health information''--information relating to a patient's medical 
condition or treatment--for purposes of marketing, without specific, 
written authorization from the patient.\321\ The commenter emphasizes 
that this prohibition covers not only written communications, but ``any 
form of telephonic communication, whether through a live caller or a 
prerecorded message, regardless of whether there is a pre-existing 
business relationship,'' and in this regard, ``is far broader than'' 
the prerecorded call amendment.\322\
---------------------------------------------------------------------------

    \318\ Standards for Privacy of Individually Identifiable Health 
Information, 45 CFR Parts 160 and 164.
    \319\ A ``covered entity'' is defined as ``(1) A health plan; 
(2) A health care clearinghouse; and (3) A health care provider who 
transmits any health information in electronic form . . . .'' 45 CFR 
160.103. One comment explains that health insurers, home healthcare 
providers that bill electronically, and billing services are 
therefore ``covered entities.'' medSage at 5 n.7.
    \320\ Businesses that make prerecorded calls on behalf of a 
``covered entity'' are ``business associates'' of the covered 
entity, as are Medicare suppliers and pharmacies. See 45 CFR 
160.103.
    \321\ medSage at 5. See 45 CFR 164.508(a)(3)(i) (``a covered 
entity must obtain an authorization [from the patient] for any use 
or disclosure of protected health information for marketing'').
    \322\ Id. See also 45 CFR 164.501 (``Marketing'' definition 
specifically prohibiting (in Sec.  (2)) a covered entity from 
disclosing, without patient consent, protected health information to 
another entity that would enable the other entity (or its 
affiliates) to communicate with patients of the covered entity to 
market the other entity's products or services); 67 FR 53182, 53188-
89 (Aug. 14, 2002) (announcing the addition of ``a new provision to 
the definition of `marketing' [45 CFR 164.501(2)] to prevent 
situations in which a covered entity could take advantage of the 
business associate relationship to sell protected health information 
to another entity for that entity's commercial marketing 
purposes'').
---------------------------------------------------------------------------

    Two of the commenters point out that although HHS ``originally 
proposed privacy rules that would not have excluded healthcare 
communications from their patient authorization requirement,'' HHS 
ultimately concluded, after two full notice and comment rulemaking 
proceedings, that such a restriction on healthcare communications 
``would materially affect the quality and efficiency of 
healthcare.''\323\ Thus, in order to allow ``the flow of health 
information needed to provide and promote high quality health care and 
to protect the public health and well being,''\324\ the final HIPAA 
Privacy Rule exempts only healthcare-related communications from the 
requirement of prior authorization by patients.\325\ The requirements 
of the Privacy Rule and its exemptions are enforced by the Office of 
Civil Rights in HHS, with violations subject to both civil and criminal 
penalties, and therefore, according to one comment, ``the `cost' of 
violating HIPAA can be enormous.''\326\
---------------------------------------------------------------------------

    \323\ Silverlink/Eliza at 9-10; medSage at 6.
    \324\ Access at 6.
    \325\ The final Privacy Rule permits only the following types of 
communications with patients without their prior authorization:
    (i) To describe a health-related product or service . . . that 
is provided by, or included in a plan of benefits of, the covered 
entity making the communication . . .; (ii) For treatment of the 
individual; or (iii) For case management or care coordination for 
the individual, or to direct or recommend alternative treatments, 
therapies, health care providers, or settings of care to the 
individual.
    45 CFR 164.501. One comment quotes HIPAA guidance that ```many 
services, such as [prescription] refill reminders or the provision 
of nursing assistance through a telephone service, are considered 
treatment activities if performed by or on behalf of a health care 
provider, such as a pharmacist.''' PolyMedica at 3.
    \326\ medSage at 5 & n.6.
---------------------------------------------------------------------------

iii. Improved Healthcare Outcomes
    The comments advocating an exemption for healthcare-related 
prerecorded message calls subject to HIPAA emphasize that the ``opt-
in'' requirement of the proposed amendment would jeopardize the 
progress that interactive prerecorded messages have made in improving 
patient outcomes and helping control healthcare costs.\327\ As one 
comment

[[Page 51191]]

explains, while proactive patients who are attentive to their 
healthcare may be likely to provide a written agreement to authorize 
prerecorded messages from their healthcare providers, such reminder and 
other communications are most needed by the patients who are least 
attentive to their healthcare--those who ``frequently procrastinate or 
make ill-informed decisions''--and therefore are least likely to get 
around to responding to requests for authorization to receive such 
calls.\328\ Thus, for example, as one commenter reports, ``up to 70% of 
patients with long-term prescriptions fall off therapy'' in the absence 
of prescription refill reminders, with resulting costly adverse 
impacts, including increased ``hospitalization, morbidity and mortality 
rates.''\329\ Two of the comments cite independent statistics and 
studies, including a report by the Government Accountability Office, as 
evidence of measurable health benefits from the use of interactive 
prerecorded messages in patient care.\330\
---------------------------------------------------------------------------

    \327\ The comments emphasize that available alternatives to the 
use of interactive prerecorded messages are more expensive, less 
efficient or less successful in communicating with patients, 
Silverlink/Eliza at 5; medSage at 5; and would strain the ability of 
the healthcare system to comply without passing on significant cost 
increases. PolyMedica at 3 (a switch to live calls would be cost 
prohibitive); Access at 2-3 (DME suppliers work on ``very small 
profit margins'' and the cost of new communication systems would 
detract from ability to serve patients).
    \328\ Silverlink/Eliza at 2; see also Silverlink /Eliza Corp., 
Petition Requesting That the FTC Maintain its Current Enforcement 
Policy Permitting the Use of Prerecorded Messages (When There Is an 
Established Business Relationship) for the Narrow Subset of Health-
Related Calls Made by Entities Regulated under HIPAA (``Silverlink 
Petition''), available at (http://www.ftc.gov/os/comments/telemarketingrulefees/061130ftcPetition.pdf), at 6 n.14; cf. Access 
at 5 (elderly and chronically ill patients not likely to respond 
quickly to request for written permission for use of prerecorded 
messages).
    \329\ Silverlink/Eliza at 3.
    \330\ Silverlink/Eliza at 3-4, 6; medSage at 5; see also 
Silverlink Petition at 6-7.
---------------------------------------------------------------------------

iv. No Record of Coercive or Abusive Healthcare Calls
    Two commenters who advocate an exemption for healthcare-related 
prerecorded message calls subject to HIPAA contend that the record 
shows no history of conduct by those who place such calls that is 
``coercive or abusive.''\331\ Both cite the Silverlink Survey, 
discussed above,\332\ where 45 percent of the respondents indicated 
they ``would like'' or ``would not mind'' automated healthcare reminder 
calls, as evidence showing ``to a `statistically significant' 
degree''\333\ that consumers are more tolerant of healthcare-related 
calls than other types of calls.\334\ One emphasizes that ``[i]n fact, 
the level of consumer support for automated health-related calls is 
similar to the level of consumer support for the established business 
relationship exemption the FTC already granted for telemarketing calls 
that use sales representatives.''\335\
---------------------------------------------------------------------------

    \331\ Silverlink/Eliza at 8, 11; Access at 7, 9-10.
    \332\ See note 86, supra, and accompanying text.
    \333\ Silverlink Survey at 5.
    \334\ Silverlink/Eliza at 7-8 & n.4; Access at 8.
    \335\ Silverlink Survey at 1. See 68 FR 4580, 4593 (Jan. 29, 
2003) (40 percent of consumers who commented favored an EBR 
exemption to the TSR).
---------------------------------------------------------------------------

    The comments also cite other evidence of consumer acceptance of 
prerecorded healthcare calls. One asserts that low opt-out rates show 
consumer approval,\336\ as does the percentage of consumers who respond 
to healthcare messages left on answering machines or with another 
household member.\337\ The comment adds that interaction rates also 
demonstrate consumer acceptance of automated healthcare calls, noting 
that the percentage of recipients who answer and respond to the first 
question without hanging up ``typically exceeds 75%,'' whereas 
``interaction rates for other calls are much lower, 17% for financial 
services and 2% interaction rate for utility services.''\338\ Other 
comments point to affirmative patient action as evidence of acceptance 
of prerecorded healthcare calls. One reports that in its 4 million 
calls annually to 500,000 clients for prescription refills or medical 
supply reorders, ``better than 50%'' have reordered on average, and 
reorders have sometimes ``exceeded 67%,'' with fewer ``than 1% 
complaints'' about the calls, and ``very few'' opt-out requests.\339\
---------------------------------------------------------------------------

    \336\ Silverlink/Eliza at 8 (noting that only 50 of 140,000 
patients who received an automated prescription refill call opted 
out, and that only 10 of 60,000 Medicaid members who received an 
automated interactive call opted out); Silverlink Petition at 7 
(reporting that only 25 of 100,000 Medicaid members who received 
interactive automated calls opted out). Because it is not clear when 
or whether an opt-out option was provided in these calls, and the 
number of live answers is not provided, the Commission does not rely 
on this and similar reports of low rates of complaints and opt-outs 
for healthcare calls.
    \337\ Silverlink/Eliza at 8 (citing a 20 percent response rate).
    \338\ Id. at 7.
    \339\ PMSI-Tmesys at 1-2. See also CenterPost at 1 (reporting 
that ``66-82% of customers renew a policy or prescription in an 
automated call''); cf. PolyMedica at 2 (asserting that its 
interactive calls are ``generally welcomed by patients'' and noting 
that of its 913,000 patients, 25,000 refilled prescriptions in 
response to interactive calls in November 2006, and that it expected 
an additional 29,000 to do so in December 2006).
---------------------------------------------------------------------------

    The exemption advocates also argue that there is no justification 
for application of the proposed amendment to healthcare-related calls, 
because the benefits of healthcare calls ``far outweigh any intrusion 
on privacy interests.''\340\ One comment adds that given the potential 
civil and criminal penalties for violations of the restrictions on 
healthcare related calls, patients will be protected from abusive 
marketing calls, and that consequently there is no need for the 
additional protection of the proposed amendment.\341\
---------------------------------------------------------------------------

    \340\ Silverlink/Eliza at 12; medSage at 6-7.
    \341\ medSage at 4. In addition, one request argues that the 
Commission provided inadequate notice of the proposed amendment to 
the healthcare industry, and that the rulemaking should be reopened 
so that their requests can be considered, if an exemption is not 
granted. Silverlink/Eliza at 12-13.
---------------------------------------------------------------------------

b. Discussion and Conclusion
    As the comments make clear, in addition to generating demonstrable 
improvements in patient outcomes, the use of inexpensive prerecorded 
calls plays an important cost-containment role in the provision of 
medical services, many of them publicly funded, and in facilitating the 
record-keeping that governmental healthcare reimbursement regulations 
require. Requiring the prior written agreement of patients to receive 
prerecorded calls subject to HIPAA quite obviously could burden or 
jeopardize the improved medical outcomes that such calls have made 
possible by enabling healthcare providers to achieve higher rates of 
patient compliance with treatment regimens at low cost. Government 
Accountability Office reports and other studies have shown that the 
prior low rates of patient compliance contributed to significantly 
higher than necessary national healthcare costs because they resulted 
in increased hospitalizations, morbidity and mortality rates.\342\ 
Quite apart from the risk that some patients might decline to agree to 
receive such calls, requiring written agreements from current patients 
would be inconsistent with the healthcare system's cost-containment 
mandate.
---------------------------------------------------------------------------

    \342\ See notes 329-330, supra, and accompanying text.
---------------------------------------------------------------------------

    The Commission has given careful consideration to the possibility 
of exempting healthcare calls from the express written agreement 
requirement of the amendment, while requiring that they comply with its 
opt-out provisions. The difficulty with such a partial exemption in the 
healthcare context, as some of the commenters argue, is that a partial 
exemption may create a health or safety risk. The patients who most 
need healthcare calls may be confused as a result of age or other 
health-related conditions, and might opt out of the calls, thereby 
preventing their healthcare provider from contacting them even with a 
live call to check on their condition without violating the TSR. For 
this reason, the Commission is persuaded that a complete exemption from 
the amendment for healthcare-related calls is necessary.

[[Page 51192]]

    Significantly, unlike other telemarketing calls, the number of 
healthcare-related calls subject to HIPAA is limited by the nature of 
the calls, depends on the patient's health and medical condition, and 
would not expose consumers to an unlimited number of sellers seeking to 
generate sales.\343\ For healthy consumers, the calls would be limited 
to infrequent annual reminders of check-ups, immunizations, or health 
screenings. For consumers with a medical condition, the calls would 
continue periodically only for so long as prescribed medicine, medical 
equipment or supplies, or home healthcare follow-up continue to be 
medically necessary.\344\ In either case, the calls would come from a 
limited number of providers, and would be limited in their frequency by 
the medical needs of the patient.
---------------------------------------------------------------------------

    \343\ An argument could be made that Congress did not intend DME 
suppliers in particular, and perhaps healthcare providers in 
general, to be subject to the Telemarketing Act, because the 
restrictions on telephone solicitations by DME suppliers in 42 USC 
1395m(a)(17)(A), which include an exemption similar to an EBR, were 
added to the Social Security Act on October 31, 1994, just over two 
months after passage of the Telemarketing Act on August 16, 1994. 
Pub. L. No. 103-432 Sec.  132(a). Because DME suppliers, like other 
healthcare providers, are subject to the HIPAA Privacy Rule, an 
exemption based on that Rule will also exempt DME suppliers.
    \344\ The exemption would not apply to sales of over-the-counter 
medications and dietary supplements unless prescribed by a covered 
entity as part of a plan of treatment.
---------------------------------------------------------------------------

    In summary, the Commission has determined to exempt healthcare-
related prerecorded message calls subject to HIPAA from the prerecorded 
call amendment. This determination is based on six primary 
considerations, first among them the fact that delivery of healthcare-
related prerecorded calls subject to HIPAA already is regulated 
extensively at the federal level. Second, coverage of such calls by the 
amendment could frustrate the Congressional intent embodied in HIPAA, 
as well as other federal statutes governing healthcare-related 
programs. The third basis for the exemption is that the number of 
healthcare providers who might call a patient is inherently quite 
limited--as is the scope of the resulting potential privacy 
infringement--in sharp contrast to the virtually limitless number of 
businesses conducting commercial telemarketing campaigns. Fourth, there 
is no incentive, and no likely medical basis, for providers who place 
healthcare-related prerecorded calls to attempt to boost sales through 
an ever-increasing frequency or volume of calls. Fifth, the existing 
record does not persuade the Commission that it should find that ``the 
reasonable consumer'' would consider prerecorded healthcare calls 
coercive or abusive.\345\ Finally, FTC law enforcement experience does 
not suggest that healthcare-related calls have been the focus of the 
type of privacy abuses the amendment is intended to remedy. For these 
reasons, the Commission has determined, pursuant to both its authority 
under the Telemarketing Act and its authority under the FTC Act, that 
healthcare-related prerecorded message calls subject to HIPAA should be 
exempt, because application of the amendment to such calls ``is not 
necessary to prevent the unfair or deceptive act or practice [that 
harms consumer privacy] to which the [amendment] relates.''\346\
---------------------------------------------------------------------------

    \345\ The record contains survey evidence indicating that some 
45 percent of consumers ``would like'' or ``would not mind,'' 
getting prerecorded healthcare calls. Silverlink Survey, Attach. A, 
at 2. A separate survey question demonstrates that consumers are 
much less willing to listen to pure sales calls than to health-
related calls: When asked how willing they were to listen to 
different kinds of prerecorded calls, 34 percent rated their 
willingness to listen to prerecorded health calls at ``4'' or 
``5''on a 5-point scale, compared to only 3 percent who were equally 
willing to listen to calls for discounted rate credit cards, and 
only 5 percent to discount vacation package calls. Id., Attach. A, 
at 3 (using a 5-point scale with ``5'' being the most willing). This 
evidence is confounded by the fact that the survey also shows that 
12 percent of consumers would be ``upset'' if they received a 
prerecorded call from their healthcare company, and that an 
additional 29 percent would ``prefer not to be contacted in this 
way.'' Id., Attach. A, at 2. Nonetheless, considering all of the 
evidence, the Commission is not persuaded that it should find that 
``the reasonable consumer would consider [such calls] coercive or 
abusive of such consumer's right to privacy.'' 15 USC 6102(a)(3)(A). 
Absent such a finding, the Commission lacks authority under the 
Telemarketing Act to apply the prerecorded call amendment to 
healthcare-related calls governed by the HIPAA Privacy Rule.
    \346\ 15 USC 57a(g)(2). See note 298, supra.
---------------------------------------------------------------------------

    Accordingly, the Commission has exempted from the requirements of 
16 CFR 310.4(b)(1)(v) any outbound telephone call that delivers a 
prerecorded healthcare message made by, or on behalf of, a covered 
entity or its business associate, as those terms are defined in the 
HIPAA Privacy Rule, 45 CFR 160.103.\347\
---------------------------------------------------------------------------

    \347\ Because the amendment makes explicit the prohibition 
against such prerecorded messages that is implicit in 16 CFR 
310.4(b)(1)(iv), the effect of the exemption is also to shield calls 
within the scope of the exemption from violation of that provision.
---------------------------------------------------------------------------

3. Exemption for Calls Made by For-Profit Telemarketers to Deliver 
Prerecorded Charitable Solicitation Messages on Behalf of Non-Profit 
Organizations
    Concerned that for-profit telemarketers using prerecorded messages 
to solicit contributions on behalf of non-profit charities otherwise 
would be subject to the requirements of the amendment, when prerecorded 
message calls placed by the charities themselves are not covered 
because the Commission lacks jurisdiction over non-profit entities, DMA 
and Heritage urge that such calls be exempted.\348\
---------------------------------------------------------------------------

    \348\ The Commission notes that prior to this amendment, for-
profit telemarketers calling to solicit charitable contributions on 
behalf of non-profit organizations--like telemarketers placing sales 
calls--have been subject to the TSR's call abandonment prohibition, 
which prohibits the use of prerecorded messages in all calls 
answered in person by a consumer (except the 3 percent permitted 
under the call abandonment safe harbor). For-profit telemarketers 
calling to solicit charitable contributions on behalf of non-profit 
organizations could not use prerecorded messages pursuant to the 
non-enforcement policy, announced in November 2004, because that 
policy was limited to prerecorded message calls placed to consumers 
with whom a seller had an EBR. An EBR, by definition, is based on a 
commercial transaction, not a charitable contribution. Thus, as 
compared to the status quo, this amendment substantially reduces 
restrictions on for-profit telemarketers that make calls to solicit 
charitable contributions on behalf of non-profit organizations.
---------------------------------------------------------------------------

a. Comments Advocating an Exemption
    Both commenters who address this issue seek, at a minimum, an 
exemption for such calls made to those with whom the charity has an 
existing relationship, ``which in most cases would include donors or 
members of [the] charity.''\349\ They also argue that the Commission 
should go further, and grant for-profit telemarketers a blanket 
exemption from any of the requirements of the amendment when soliciting 
charitable contributions.
---------------------------------------------------------------------------

    \349\ DMA at 6,7; see Heritage, No. 581, at 2. As indicated in 
note 334, supra, the TSR's defined term, ``established business 
relationship,'' 16 CFR 410.2(n), has no applicability to charitable 
solicitations or the activities of those who perform them. Rather, 
the term establishes the parameters of an exemption to the Do Not 
Call Registry provisions, which reach neither charities nor the for-
profit telemarketers that place solicitation calls on their behalf. 
See 16 CFR 310.6(a) (``Solicitations to induce charitable 
contributions via outbound telephone calls are not covered by 
Sec. 310.4(b)(1)(iii)(B) [the Do Not Call Registry provisions] of 
this Rule''). Where commenters use the term ``established business 
relationship'' in the context of charitable solicitations, the 
Commission interprets it to mean ``previous donors to or members of 
the non-profit charitable organization.'' The Commission construes 
``members'' broadly to include volunteers, whether or not they have 
a formal membership in the charity. See 68 FR at 4634 & n.660.
---------------------------------------------------------------------------

    DMA emphasizes that analogous FCC regulations implementing the TCPA 
permit the use of prerecorded message calls without the called party's 
consent when a call is made ``by or on behalf of a tax-exempt nonprofit 
organization.''\350\ DMA further notes that:
---------------------------------------------------------------------------

    \350\ DMA at 6, citing 47 CFR 64.1200(a)(2)(v).

 The Commission has crafted different rules in the Do Not Call area 
in the past for

[[Page 51193]]

charities, and should continue to recognize the enhanced First 
Amendment protections given to charitable speech and the lower 
concern for abuse. . . . [T]he Commission [should] exclude calls 
made to induce a charitable contribution from the scope of the 
[contemplated amendment] . . . . This would afford charities the 
same right to contact donors as they were afforded by Congress under 
the TCPA.\351\
---------------------------------------------------------------------------

    \351\ DMA at 7.

    Similarly, Heritage asserts that under relevant Supreme Court 
decisions ``charities enjoy protected free speech rights beyond that 
provided to commercial speech.'' Heritage also asserts that 
restrictions on for-profit telefunders will not enhance consumer 
privacy because these restrictions, due to limits on the FTC's 
jurisdiction, cannot reach non-profit charities that own and operate 
their own equipment for making calls that deliver prerecorded 
fundraising messages.\352\
---------------------------------------------------------------------------

    \352\ Heritage at 2.
---------------------------------------------------------------------------

b. Discussion and Conclusion
    The Commission has given careful consideration to the impact of the 
prerecorded call amendment on charities that use for-profit telefunders 
to solicit contributions. It has also given careful consideration to 
the impact on the privacy of potential donors in their homes.
    It is important to note at the outset that there is a significant 
factual difference between this exemption request and the exemption for 
prerecorded healthcare-related calls governed by the HIPAA Privacy Rule 
that bears directly on the governmental interest in protecting the 
privacy of consumers in their homes. As previously noted, the number of 
healthcare calls is inherently limited by the fact that HIPAA 
regulations specify that ``marketing'' calls unrelated to medical 
treatment can only be made with the prior consent of the patient, and 
permit periodic treatment-related calls only by the patient's 
healthcare provider and its business associates. The limited number and 
frequency of potential healthcare calls governed by HIPAA stands in 
sharp contrast to the large number of charities that inevitably compete 
with each other for donations, and the tide of low-cost prerecorded 
charitable solicitation calls consumers would likely receive from 
telefunders.\353\ Thus, while coverage under these amendments of 
prerecorded healthcare message calls governed by the HIPAA Privacy Rule 
is not necessary to prevent the acts or practices to which the 
amendment relates, the same cannot be said for prerecorded message 
calls placed by for-profit telemarketers to solicit charitable 
contributions on behalf of non-profit organizations.
---------------------------------------------------------------------------

    \353\ The Combined Federal Campaign of the National Capital Area 
(``CFCNCA'') alone supported more than 3,400 local, national and 
international charities in 2006-2007. See CFCNCA, Stewardship Report 
to the Federal Community 2006-2007, p.4, available at (http://www.cfcnca.org/?pastcampaignresults).
---------------------------------------------------------------------------

    The challenge for the Commission is to achieve the appropriate 
balance between the strongly-protected right of non-profit 
organizations to reach donors through telefunding, and the privacy 
rights of those potential donors to be free, in their own homes, of 
prerecorded message calls that they do not want. To achieve what it 
believes is the best balance in this regard, the Commission has decided 
to permit telefunders to place prerecorded messages calls to those with 
whom the charity has an existing relationship--i.e., members of, or 
previous donors to the non-profit organization on whose behalf the 
calls are made--without first obtaining the call recipients' consent, 
so long as the messages enable the recipients of the calls to opt out 
from the calls they do not wish to continue to receive.\354\
---------------------------------------------------------------------------

    \354\ This means that telefunders would be covered by 
subparagraph (B) of the amendment, but not subparagraph (A).
---------------------------------------------------------------------------

    Balancing the competing bedrock rights at issue must be achieved 
within the framework of relevant First Amendment principles. As the 
Commission noted in the SBP for the Amended Rule, the framework for 
First Amendment analysis is more stringent with respect to 
telemarketing that solicits charitable contributions than it is for 
commercial telemarketing for the purpose of inducing purchases of goods 
or services.\355\
---------------------------------------------------------------------------

    \355\ 68 FR 4636 (Jan. 29, 2003).
---------------------------------------------------------------------------

    The analytical framework for determining the constitutionality of a 
regulation of commercial speech that is not misleading and does not 
otherwise involve illegal activity is set forth in Central Hudson Gas & 
Elec. v. Pub Serv. Comm. of N.Y.\356\ Under that framework, the 
regulation (1) must serve a substantial governmental interest; (2) must 
directly advance this interest; and (3) may extend only as far as the 
interest it serves\357\--that is, there must be ``a `fit' between the 
legislative ends and the means chosen to accomplish those ends . . . a 
fit that is not necessarily perfect, but reasonable . . . that employs 
not necessarily the least restrictive means but . . . a means narrowly 
tailored to achieve the desired objective.''\358\
---------------------------------------------------------------------------

    \356\ 447 U.S. 557 (1980).
    \357\ Id. at 566.
    \358\ Bd. of Trs. of State Univ. of N.Y. v. Fox, 492 U.S. 469, 
480 (1989).
---------------------------------------------------------------------------

    With regard to the first of these criteria, protecting the privacy 
of consumers from unwanted commercial telemarketing calls delivering 
prerecorded messages is a substantial governmental interest. 
``Individuals are not required to welcome unwanted speech into their 
own homes and the government may protect this freedom.''\359\The 
amendment is designed to advance the privacy rights of consumers by 
providing them with an effective way to limit prerecorded message 
calls, and to make known to sellers their wishes not to receive such 
calls. The amendment requires consumers' prior agreement to receive 
prerecorded calls, and must provide an interactive opt-out mechanism at 
the outset of the message to enable a call recipient to withdraw 
consent and avoid receiving any more prerecorded calls. Thus, the 
amendment directly advances the privacy interest at issue, and the 
second Central Hudson criterion is met. Finally, with respect to the 
third criterion, the prerecorded message amendment comprises a 
mechanism closely and exclusively fitted to the purpose of protecting 
consumers from prerecorded telemarketing calls that a reasonable 
consumer would find abusive of his or her privacy.
---------------------------------------------------------------------------

    \359\ Frisby v. Schultz, 487 US 474, 485 (1988).
---------------------------------------------------------------------------

    In considering the more stringent analysis that pertains to 
charitable fundraising, the Commission notes, preliminarily, that 
application of the prerecorded message amendment to charitable 
solicitation telemarketing would be content-neutral. ``Laws that confer 
benefits or impose burdens on speech without reference to the ideas or 
views expressed are in most instances content neutral.''\360\ The 
prerecorded message amendment applies equally to all for-profit 
solicitors, regardless of whether they are seeking sales of goods or 
services or charitable contributions, and regardless of what may be 
expressed in the solicitation calls themselves or the viewpoints of the 
organizations on whose behalf the solicitation calls are made.
---------------------------------------------------------------------------

    \360\ Turner Broad. Sys., Inc. v. FCC, 512 U.S. 622, 648 (1994). 
``[R]egulations that are unrelated to the content of speech are 
subject to an intermediate level of scrutiny because in most cases 
they pose a less substantial risk of excising certain ideas or 
viewpoints from the public dialogue.'' Turner at 642, citingClark v. 
Cmty. for Creative Non-Violence, 468 U.S. 288, 293 (1984). See also 
Ward v. Rock Against Racism, 491 U.S. 781, 791 (1989) (``[The] 
principal inquiry in determining content neutrality is whether the 
government has adopted a regulation of speech because of 
disagreement with the message it conveys''). See also Am. Target 
Adver. v. Giani, 199 F.3d 1241 (10th Cir.), cert. denied, 531 U.S. 
811 (2000) (applying this principle in the context of solicitation).

---------------------------------------------------------------------------

[[Page 51194]]

    As in the case of commercial speech, the analysis applicable to 
charitable solicitations also inquires into the nature of the 
governmental interest that the regulation seeks to advance. The case 
law indicates that with respect to the higher level of scrutiny 
applicable to charitable solicitations, privacy protection is a 
sufficiently strong governmental interest to support a regulation that 
touches on protected speech.\361\ However, the case law also indicates 
that, in the case of charitable solicitation, greater care must be 
taken to ensure that the governmental interest is actually advanced by 
the regulatory remedy, and that the regulation is tailored narrowly so 
as to minimize its impact on First Amendment rights. In Riley v. Nat'l 
Fed. of the Blind,\362\ and Schaumburg v. Citizens for Better 
Env't,\363\ the Court rigorously examined laws that regulated the 
percentage of charitable contributions raised by a professional 
fundraiser that could be retained as the fundraiser's fee. The Court 
struck down the laws because there was, in the Court's view, at best an 
extremely tenuous correlation between charity fraud and the percentage 
of funds paid as a professional fundraiser's fee; the laws therefore 
were unlikely to achieve their intended purposes of preventing fraud 
and protecting charities. The Court also found that these laws were not 
drawn narrowly enough to minimize the impact on the charities' First 
Amendment rights.
---------------------------------------------------------------------------

    \361\ ``The Village argues that three interests are served by 
its ordinance: the prevention of fraud, the prevention of crime, and 
the protection of residents' privacy. We have no difficulty 
concluding, in light of our precedent, that these are important 
interests that the village may seek to safeguard through some form 
of regulation of solicitation activity.'' Watchtower Bible & Tract 
Soc'y v. Vill. of Stanton, 536 U.S. 150, 164-65 (2002); Schaumburg 
v. Citizens for Better Env't, 444 U.S. 620, 637 (1980) (protecting 
the public from fraud, crime, and undue annoyance are indeed 
substantial interests); Nat'l Fed. of the Blind v. FTC, 420 F.3d 331 
(4th Cir.), cert. denied, 547 U.S. 1128 (2006) (prevention of fraud 
and the protection of privacy in the home are sufficiently 
substantial governmental interests to justify a narrowly tailored 
regulation).
    \362\ 487 U.S. 781 (1988).
    \363\ 444 U.S. 620, 637 (1980).
---------------------------------------------------------------------------

    In contrast, a close nexus exists between the government's 
legitimate interest in protecting consumers' privacy from unwanted 
prerecorded telemarketing calls from telefunders and the requirement 
that such calls give call recipients an opportunity to opt out. This 
nexus does not rely on an attenuated theoretical connection between 
fraud and the percentage of funds raised that a telefunder may take as 
its fee. Rather, there is a direct correlation between the governmental 
interest and the regulatory means employed to advance that interest: 
The consumer indicates his or her preference not to receive such a call 
again, and the regulation requires the telefunder to record and honor 
that request in the future.
    As noted in the SBP for the Amended TSR, the Commission approaches 
with extreme care the issue of tailoring the TSR privacy provisions 
narrowly to advance the Commission's legitimate governmental interest, 
yet minimize the impact on the First Amendment rights of charitable 
organizations and the for-profit telemarketers who solicit on their 
behalf.\364\ The Commission is concerned that subjecting charitable 
solicitation telemarketing to the same prior written agreement 
requirement that applies to commercial telemarketing for the purpose of 
soliciting sales of goods and services may sweep too broadly, and 
inadvertently act as an impermissible prior restraint, given the 
difficulties charitable organizations say they have in securing donors' 
agreements to receive charitable solicitation calls.\365\
---------------------------------------------------------------------------

    \364\ 68 FR 4636 (Jan. 30, 2003).
    \365\ The Commission notes that, in a slightly different 
context, non-profit organizations uniformly condemned a proposal in 
the NPRM for the Amended TSR that they would be able to obtain 
consent to place charitable solicitation calls to persons who had 
placed their phone numbers on the National Do Not Call Registry and 
thereby preserve their right to call those persons. Non-profit 
organizations asserted that it would be too costly for them to 
obtain prospective donors' express permission to call, and too 
difficult for consumers to exercise their right to hear from them. 
68 FR 4636 (Jan. 30, 2003).
---------------------------------------------------------------------------

    After careful consideration, the Commission has determined that the 
best approach to achieve a narrow tailoring of the prerecorded message 
amendment is to exempt solicitations by telefunders to induce 
charitable contributions via outbound telephone calls from the prior 
written agreement requirement of the amendment, and instead require 
only that such calls, like charitable solicitation calls that are 
placed by live representatives, enable the recipients of the calls to 
opt out of receiving such calls in the future, if they so desire.
    Limiting telefunders' use of prerecorded messages to those calls 
placed to members of, or previous donors to, the non-profit 
organization on whose behalf the calls are placed serves two important 
purposes. First, it will prevent a likely tide of low-cost charitable 
solicitation calls to potential donors made by telefunders on behalf of 
a virtually infinite array of non-profit organizations seeking to boost 
donations. There are consumer complaints about charitable solicitations 
in the record,\366\ and the record suggests--and common sense 
confirms--that the abuse of consumer privacy intensifies as the number 
and frequency of telemarketing calls, including prerecorded calls, 
increases. Second, there is evidence in the record that the abuse of 
consumer privacy is greatly compounded by prerecorded calls from 
entities with which consumers have no prior relationship. Permitting 
telefunders to make impersonal prerecorded cold calls on behalf of 
charities that have no prior relationship with the call recipients, 
therefore, would defeat the amendment's purpose of protecting 
consumers' privacy.\367\ Thus, permitting the use of prerecorded 
messages to calls made by telefunders to members of, or previous donors 
to, a charitable organization is a limiting principle that makes good 
practical and policy sense. This is an alternative supported by the two 
industry commenters who addressed the issue of an exemption for 
charitable solicitation calls.
---------------------------------------------------------------------------

    \366\ E.g., Bashinksy, No. 123, at 1; Harlach, No. 000; Popat, 
No. 120, at 1; but see Maddock, No. 137, at 1-2.
    \367\ Cold calls prospecting for new donors are also far less 
likely to induce financial support than calls to prior donors and 
members. See 68 FR at 4634 (citing comments contending that ``it is 
axiomatic that persons who have already contributed to a nonprofit 
or charitable organization are much more likely to contribute than 
are persons who have never done so'').
---------------------------------------------------------------------------

    The Commission notes that the provision requiring for-profit 
telefunders to honor entity-specific Do Not Call requests, which this 
amendment implements for prerecorded calls, has been challenged and 
upheld.\368\ It is instructive to note that, in analyzing whether this 
provision is tailored narrowly enough to pass First Amendment scrutiny, 
the Fourth Circuit compared the TSR's regulatory scheme to a federal 
statute challenged in Rowan v. U.S. Post Office Dep't.\369\ That 
statute empowered a homeowner to bar mailings from specific senders by 
notifying the Postmaster General that she wished to receive no further 
mailings from that sender. The Fourth Circuit stated:
---------------------------------------------------------------------------

    \368\ Nat'l Fed. of the Blind v. FTC, 420 F.3d 331 (4th Cir.), 
cert. denied, 547 U.S. 1128 (2006).
    \369\ 397 U.S. 728 (1970).

 The parallels between the law at issue in Rowan and the do-not-call 
list in this case are unmistakable. If consumers are 
constitutionally permitted to opt out of receiving mail which can be 
discarded or ignored, then surely they are permitted to opt out of 
receiving phone calls that are more likely to disturb their peace. 
In this way, a do-not-call list is more narrowly tailored to 
protecting privacy than was the law in Rowan.

[[Page 51195]]

 Moreover, this particular restriction seems even more reasonable 
given the fact that the FTC has only subjected telefunders to a 
charity specific list. Under this procedure, a consumer cannot 
report to a central authority that he wishes not to be called by any 
telemarketers generally; he must instead repeat his request as to 
each caller individually. This charity-specific alternative to a 
national list is an option that the Mainstream Marketing court 
called ``extremely burdensome to consumers.'' 358 F.3d at 1244. In 
light of this, we have no trouble finding the charity-specific 
restriction on speech to be a permissibly narrow means of protecting 
the home environment.\370\
---------------------------------------------------------------------------

    \370\ Nat'l Fed. of the Blind v. FTC, 420 F.3d at 342.

    The purpose and effect of this exemption is to allow for-profit 
telefunders to make use of prerecorded messages while maintaining the 
Rule's privacy protections for consumers. The amendment ensures the 
same privacy protection for recipients of prerecorded message calls 
soliciting a charitable contribution that the Rule currently affords 
recipients of calls from live representatives soliciting a charitable 
contribution.\371\ To paraphrase the Fourth Circuit, if consumers are 
constitutionally permitted to opt out of receiving phone calls from 
live telefunding representatives, then surely they are permitted to opt 
out of receiving calls that are more likely to disturb their peace 
because they deliver no live human voice, but only a prerecorded 
message.
---------------------------------------------------------------------------

    \371\ With respect to the underinclusiveness objections raised 
by both DMA and Heritage to the effect that the amendment's coverage 
only of for-profit telefunding, but not telephonic fundraising 
conducted in-house by non-profit organizations, the Commission notes 
that the Fourth Circuit, in Nat'l Fed. of the Blind, held that:
    When an agency regulates to the extent of its jurisdiction it 
will unavoidably leave out some speakers and some speech that is 
beyond its authority to regulate. But, in such circumstances, the 
danger of governmental overreaching--which cases such as Discovery 
Network aim to prevent--is removed. Unlike in those cases, here it 
does not make sense to see this unavoidable distinction as a red 
flag indicating First Amendment problems. Any underinclusiveness 
that appellants have identified is not the result of the FTC 
attempting to favor one side of a public debate over another, or 
pursuing an illegitimate governmental interest, or not genuinely 
serving the interest it purports to seek. Rather, such 
underinclusiveness results from the simple fact that the PATRIOT Act 
designated ``charitable solicitations'' as being within the type of 
behavior the FTC could regulate, but it left speech by charities 
outside the agency's jurisdiction.
    The agency's jurisdictional boundary, therefore, serves as the 
`neutral justification' for the distinction that was missing in 
Discovery Network. While plaintiffs complain that the regulation 
also fails to cover some commercial, political, and intrastate 
speech, this fact too is explained by the FTC's assiduous attention 
to its own jurisdiction.
    420 F.3d at 348 (citations omitted).
---------------------------------------------------------------------------

    Accordingly, the Commission has modified the prerecorded call 
amendment to make it clear that only the opt-out requirements in 16 CFR 
310.4(b)(1)(v)(B) apply to prerecorded calls ``to induce a charitable 
contribution from a member of, or previous donor to, a non-profit 
charitable organization on whose behalf the call is made.''

III. Proposed Abandoned Call Measurement Standard Revision

    The second proposed amendment would revise the TSR's standard for 
measuring the permissible call abandonment rate. Section 310.4(b)(4)(i) 
of the TSR now requires that a seller or telemarketer employ 
``technology that ensures abandonment of no more than three (3) percent 
of all calls answered by a person, measured per day per calling 
campaign.''\372\ The proposed amendment would revise the standard to 
permit sellers and telemarketers to measure the abandonment rate ``over 
the duration of a single calling campaign, if less than 30 days, or 
separately over each successive 30-day period or portion thereof that 
the campaign continues.''\373\
---------------------------------------------------------------------------

    \372\ 16 CFR 310.4(b)(4)(i) (emphasis added).
    \373\ 71 FR at 58734 (emphasis added).
---------------------------------------------------------------------------

    The Commission proposed the revision because the ``record shows 
that particular problems arise in connection with the use of smaller, 
segmented lists that are the most economical for small businesses and 
the most useful in targeting only those consumers most likely to be 
interested in a particular sales offer.''\374\ This occurs because the 
predictive dialers used to place live telemarketing calls use 
statistical projections, based on continuous sampling of the number of 
calls that are answered in person, to determine the rate at which to 
place calls for the sales representatives that are available to take 
them. As with all such statistical models, small samples produce large 
standard deviations, a fact which manifests itself, in the case of 
predictive dialers, in decreased accuracy for smaller calling lists and 
unexpected spikes in call abandonment rates. Consequently, the current 
``per day per calling campaign'' call abandonment standard effectively 
precludes the use of predictive dialers with smaller calling lists 
because of the likelihood that call abandonments will exceed the three 
percent daily maximum permitted.
---------------------------------------------------------------------------

    \374\ 71 FR at 58730.
---------------------------------------------------------------------------

    Some 144 consumers, 9 consumer advocates, and 12 industry members 
and trade associations commented on the proposed amendment. All of the 
consumer advocacy comments and nearly all of the individual consumer 
comments oppose any change that might increase the number of abandoned 
calls consumers receive, with many consumers insisting that all 
abandoned calls are ``abusive'' and should be prohibited. The industry 
comments generally applaud the proposed amendment, but most argue that 
its ``per campaign'' limitation still makes it unduly restrictive 
compared to the FCC standard, which permits telemarketers to compute a 
single abandonment rate for all the campaigns they conduct during a 30-
day period.\375\
---------------------------------------------------------------------------

    \375\ 47 CFR 64.1200(a)(6) (Prohibiting abandonment ``of all 
telemarketing calls that are answered live by a person, measured 
over a 30 day period'').
---------------------------------------------------------------------------

A. Consumer Comments

    All of the comments from consumer advocates oppose the proposed 
amendment, as do nearly all of the individual consumers who refer to 
it, most of whom specifically object to ``abandoned'' or ``dead air'' 
calls.\376\ Twelve consumer comments ask in particular that the present 
``3 percent per day'' standard be retained,\377\ while only four 
clearly voice any support for the proposed amendment.\378\
---------------------------------------------------------------------------

    \376\ Six of the comments refer to calls that are ``auto-
dialed,'' ``auto call,'' ``computer generated,''or ``machine 
calls,'' Eng, No. 277; Schell, No. 430; Herman, No. 305; Reeves, No. 
355; Block, No. 226; Anderson, No. 395; and two cite ``automatic 
dialers'' or ``automated systems.'' Griffiths, No. 319; Warsaw, No. 
388. One objects to ``any expansion in the rights of telemarketers 
to call my phone numbers,'' Bergman, No. 302, and another considers 
``the proposed amendments to be vital'' but does not ``wish to be 
disturbed.'' Murphy, No. 332.
    \377\ E.g., Chastain, No. 518; Hamilton, No. 219; Ryan, No. 645; 
Woods, No. 328; ; but see Parlante, No. 216 (would prefer only ``1% 
per day'').
    \378\ Bashinski, No. 123, at 1; Byrne, No. 158, at 2; Popat, No. 
120, at 3; McDaniel, No. 557; cf. Dunlop, No. 118, at 3 (``The rule 
should be amended to allow a four or five percent dropped call rate 
`per day' instead of three percent `per 30 days''').
---------------------------------------------------------------------------

    The consumer advocates and individual consumers make five basic 
arguments against the proposed amendment: (1) Abandoned calls are 
harassing and an invasion of privacy; (2) Abandoned calls should be 
banned to protect consumers; (3) Any change in the current standard 
will further harm consumers; (4) The record does not support any change 
in the current standard; and (5) The ``per campaign'' standard should 
be retained.
1. Abandoned Calls are Harassing and an Invasion of Privacy
    More than 35 consumers say abandoned calls are ``annoying.''\379\

[[Page 51196]]

Others find them ``frustrating,''\380\ ``irritating,''\381\ and a 
``nuisance.''\382\ Ten cite the inconvenience of being interrupted in 
what they are doing for no reason,\383\ be it working outside,\384\ 
sitting in a comfortable chair to read or relax,\385\ or preparing or 
eating a meal.\386\ Several consumers say they consider the repeated 
interruptions of their home life by abandoned calls a form of 
harassment.\387\ While two consumers say they have learned to cope with 
abandoned calls by screening calls before they answer them,\388\ 
several say, like PRC, that they consider abandoned calls an invasion 
or violation of their right to privacy in their home.\389\
---------------------------------------------------------------------------

    \379\ E.g., Bernardy, No. 307 (``[T]here is NOTHING more 
annoying than running to the phone and finding dead air !!! I detest 
these calls'') (emphasis in original); Sanders (It is ``very 
annoying'' when ``[y]ou rush to the phone and it's a recording or no 
one is there''); Steep, No. 422 (```Dead air' calls'' are 
``particularly'' annoying); see also, e.g., Anderson, No. 354; 
Brown, No. 350; Donohue, No. 300; Kelm, No. 271; Paradise, No. 241; 
No. 415; Redwine, No. 324.
    \380\ Adams, No. 169 (``I cannot tell you how frustrating it is 
to pick up the phone after it has rang two times only to hear a 
`click' on the other end''); Fulleylove-Krause, No. 423.
    \381\ Churchwell, No.381(``Nothing is more irritating than to 
pick up the phone and no one is on the other end''); Roberson, No. 
264 (I ``want to be protected from . . . those automatic calls that 
have no message, just silence. Those are just as irritating and 
unwanted''); Shell, No. 430; cf. Lindo, No. 310 (``I despise the 
`dead' telephone line that results from call abandonment''); 
Saloiye, No. 554(``[V]ery aggravated by calls'' where ``no one is on 
the line'').
    \382\ Griffith, No. 524 (``Abandoned calls are a great nuisance 
and should be strictly prohibited''); Gwinn, No. 553 (``Abandoned 
calls are a major nuisance''); Lilly, No. 522; cf. Haddox, No. 549 
(``I find it such a waste of my time--especially when no one is on 
the end of the line'').
    \383\ Aston, No. 551 (``Rushing to answer the phone only to find 
nobody there constitutes an unacceptable interruption as well as a 
waste of the victim's valuable time''); Gwinn, No. 553 (``I quit 
what I am doing--go to the phone--and silence! I see no 
justification for that annoying business practice''); Sawyer, No. 
517 (``This allowance [for call abandonment] simply enables 
telemarketers to do the damage of interrupting what I am doing'').
    \384\ Flanagan, No. 347 (``As a farm family dead air time is a 
real problem when working outside. You dash in the barn thinking it 
is the tractor dealer and you get this dead air phone call''); 
Schmidt, No. 450 (``I want this to stop, as many times I am busy 
outside, and must run in to a dead phone'').
    \385\ Fielding, No. 267 (``The `do not call' concept becomes a 
joke when companies are allowed to call and make you get up from 
your reading chair to answer a non-existent phone call''); Hall, No. 
618 (``I don't want to get out of my chair every 10 minutes to 
answer'' telemarketers' ``dead silence computer calls'').
    \386\ Adams, No. 321 (``I race to answer the phone and there's 
no one there. It undoubtedly happens when I am preparing a meal, or 
when I have just sat down to enjoy it''); Hooper, No. 331 
(``Abandoned calls are especially annoying when I get up from a meal 
or run from another task to answer the phone and there is no one 
there'').
    \387\ Casabona, No. 559 (``The use of equipment to dial more 
numbers than the telemarketers can possibly answer amounts to 
harassment. This practice is worse than a prankster ringing your 
line constantly and then hanging up when you answer''); Steans, No. 
351 (``It's like being harassed in your own home.'') Citizen, No. 
396 ( I consider them [abandoned calls] a form of harassment, and 
you should too''); Burr, No. 211; Leuba, No. 466; see Harlach, No. 
000 (``Telemarketers ``hang up leaving no message at all, only to 
call again the same day; sometimes within the same hour'').
    \388\ Swafford, No. 521 (using Caller ID); Wagner, No. 353 
(using an answering machine).
    \389\ PRC at 4; see also, e.g., Budnitz, No. 282; Hockaday, No. 
255; Miller, No. 528.
---------------------------------------------------------------------------

2. Abandoned Calls Should Be Banned To Protect Consumers
    One consumer advocacy group and at least 14 individual consumers 
assert that ``the only acceptable rate for abandoned or dead-air calls 
is a zero tolerance.''\390\ Similarly, NCL's joint comment for itself 
and six other consumer advocacy groups, as well as several comments 
from individual consumers, contend that the only ``acceptable level for 
abandoned calls is zero.''\391\ PRC argues that abandoned calls should 
be banned completely because ``any tolerance for `dead-air' calls 
denies consumers the opportunity to complain about abusive calls'' for 
the simple reason that ``[e]ven when the consumer's phone has Caller 
ID, the display usually shows only `private caller' or `out of 
area.'''\392\ Six consumer comments confirm that they have no way to 
identify the source of the abandoned calls they receive, and therefore 
``no way of knowing what company to call to have the calls stop.''\393\
---------------------------------------------------------------------------

    \390\ PRC at 4; see also, e.g., Chester, No. 208; McCleery, No. 
218; Parlante, No. 216; Snell, No. 210.
    \391\ NCL at 6; see also, Calderon, No. 301; Citizen, No. 396; 
Smallwood, No. 303; cf. Proctor, No. 403 (``I also support 
tightening of the method for measuring the maximum allowable 
abandonment rate''); Young, No. 330 (``Please STRENGTHEN rather than 
weaken any regulations about . . . methods for measuring the maximum 
allowable call abandonment rate'') (emphasis in original); Casabona, 
No. 559 (``Computer dialing of numbers for telemarketers who cannot 
possibly attend to them should be banned''); Warsaw, No. 388 (``I 
would like these systems banned and be considered wire fraud upon 
the public'').
    \392\ PRC at 4 (Contending that ``[w]ithout the FTC's ability to 
conduct compliance audits and without consumers' ability to 
complain, the only enforcement mechanism is a telemarketer's 
requirement to keep records of abandoned call rates,'' and that 
measures to ensure more effective enforcement should be pursued, 
``either through rulemaking or, if appropriate, seeking an amendment 
to the law itself'').
    \393\ Cooper, No. 285; accord, Palicki, No. 260 (Police 
detective attesting that when consumers attempt to obtain the 
numbers from which abandoned calls are placed, they ``show out of 
area''); Strang, No. 189, at 4-5 (citing calls to ``my residential 
phone line'' where ``the majority of the `hangup' calls'' provided 
``no Caller ID information as required by FCC rules''); Kostenko, 
No. 417; Sawyer, No. 517; Warsaw, No. 388.
---------------------------------------------------------------------------

    NCL adds two additional justifications for a total ban. The first 
is that, ``[u]nlike airlines, which are permitted to overbook but must 
then compensate consumers for being bumped, consumers receive no 
compensation for being subjected to abandoned calls.''\394\ NCL's 
second rationale is that abandoned calls cause ``anger and fear among a 
certain percentage of consumers for the sake of commercial 
efficiency,'' and ``this is not a fair trade-off.''\395\
---------------------------------------------------------------------------

    \394\ NCL at 6; see Gorman, No. 387 (``Now they want to increase 
the Abandon Rate of their calls? They should not be calling us 
anyway unless they are going to pay for our phone service'').
    \395\ Id. at 7.
---------------------------------------------------------------------------

3. Any Change in the Current Standard Will Further Harm Consumers
    Both AARP and PRC stress the fear abandoned calls create for 
consumers as a ground for their opposition to the proposed amendment. 
AARP and several consumer comments point out that ``[f]or mid-life and 
older Americans these calls are more than just a nuisance,'' because 
``[i]n addition to the inconvenience and risk associated with rushing 
to answer the telephone, there is the uncertainty and concern for the 
consumer, especially for women living alone.''\396\ PRC adds that 
receiving an abandoned call ``needlessly increases anxiety for stalking 
victims'' and for ``[c]onsumers whose homes have been burglarized or 
who live in a neighborhood where home burglaries have occurred.''\397\ 
A comment from a police detective attests that ``[o]ur residents who 
get numerous hang-ups (dead air calls) make police reports thinking 
these are from a `specific' person who is harassing them,'' and that 
``these calls create additional work for law enforcement throughout the 
country as well as create a harmful atmosphere for the receiving 
person.''\398\
---------------------------------------------------------------------------

    \396\ AARP at 7; Anderson, No. 354 (``I work with seniors and it 
makes them feel very uncomfortable''); Baker, No. 201 (``Frequent 
afternoon and evening dead-air calls are a worry when you are alone 
as I am''); Hardesty, No. 543 (``I receive at least seven abandoned 
calls daily at my home. Not only is this a concern for me, but it is 
a worry for my elderly mother''); Leuba, No. 466 (``At least I hope 
they were robo calls, there is a possibility that they were 
predators, looking for a woman at home''); Matulis, No. 410 (``Too 
many seniors become alarmed when they receive dead air calls''); 
May, No. 333; cf. Johnson, No. 532 (Abandoned calls leave me 
``wondering if a family member is in trouble'').
    \397\ PRC at 4.
    \398\ Palicki, No. 260.
---------------------------------------------------------------------------

    PRC also asserts that the proposed amendment ``does nothing to 
promote consumer interests.''\399\ The Connecticut Attorney General 
agrees, opposing the proposed amendment both because abandoned calls 
``represent a substantial intrusion into consumers' lives'' and because 
``the telemarketing industry's comments acknowledge that it can

[[Page 51197]]

configure dialers to comply with the current standards.''\400\ NCL also 
sees no reason to relax the per-day standard because it ``forces 
telemarketers to monitor and adjust their use of predictive dialing 
closely,'' and ``[if] it requires them to switch to manual dialing at 
times, we think that is a good thing, because manual dialing does not 
result in abandoned calls.''\401\ Moreover, NCL doubts that any change 
would be a change for the better. NCL observes that ``[i]f changing the 
standard . . . would actually reduce the number of consumers who 
receive [abandoned calls], and telemarketers can ensure that certain 
groups of consumers are not disproportionately subjected to such calls, 
it might be an improvement over the current situation,'' but notes that 
it is ``not confident, however, that that will be the result.''\402\
---------------------------------------------------------------------------

    \399\ PRC at 4.
    \400\ CTAG at 3.
    \401\ NCL at 7.
    \402\ Id. at 6-7.
---------------------------------------------------------------------------

    The few consumers willing to contemplate anything but a complete 
ban on abandoned calls also argue that the `per day' standard should be 
retained because it ``limits the numbers of abandoned calls that 
consumers receive'' compared to the proposed amendment.\403\ One argues 
that the 30-day standard of the proposed amendment ``will inevitably 
harm consumers'' and ``benefits firms at the expense of 
consumers.''\404\ Another believes that the proposed ``30-day standard 
. . . makes it too easy for an irresponsible marketer to violate the 
laws with impunity for a whole month.''\405\
---------------------------------------------------------------------------

    \403\ Hui, No. 119, at 2
    \404\ Dunlop, No. 118, at 2, 3.
    \405\ Byrne, No. 158, at 2.
---------------------------------------------------------------------------

4. The Record Does Not Support Any Change in the Current Standard
    PRC further contends that the industry ``has shown no good reason 
why this [proposed amendment] should be granted or that consumers have 
anything to gain by changing the calculation.''\406\ A consumer comment 
more specifically argues that the ``industry has not demonstrated a 
clear and convincing need'' for the change, noting that while the 
industry's arguments ``are certainly plausible . . . little empirical 
evidence is offered to support them.''\407\ This comment expresses 
particular doubt about the industry argument that a 30-day standard is 
necessary to permit the use of small, segmented lists that are most 
likely to ensure that telemarketing offers are made to the consumers 
who are most likely to be interested in them. ``Given the consumer 
response to the prior NPRM,'' the comment observes, ``it seems safe to 
say that very few telemarketing offers reach interested 
consumers.''\408\
---------------------------------------------------------------------------

    \406\ PRC at 4.
    \407\ Platt, No. 11, at 1, 2.
    \408\ Id. at 1-2.
---------------------------------------------------------------------------

    A second industry rationale, that there is ``no evidence that 
telemarketers will abuse a 30-day standard,'' is challenged by another 
consumer comment as ``a nice sound bite'' but one that ``may be lacking 
in candor.''\409\ The comment argues that ``[t]he telemarketing 
industry is known for bending, and for flat out ignoring, telemarketing 
rules,'' and that because ``no one has ever studied the problem . . . 
there is also no evidence to suggest the industry will not abuse a 30-
day standard.''\410\
---------------------------------------------------------------------------

    \409\ Strang, No. 189, at 5-6.
    \410\ Id.
---------------------------------------------------------------------------

    Finally, AARP finds fault with the industry ``argument that 
consumers can address their concerns [about abandoned calls] by using 
Caller ID to identify the names of telemarketers abandoning calls to 
their telephone numbers.''\411\ AARP argues that ``[t]his suggested 
solution incorrectly places the burden and expense on the consumer to 
remedy this practice,'' and contends that ``consumers who cannot afford 
the extra cost of a Caller ID service . . . will be unable to check on 
the identity of an incoming call.''\412\
---------------------------------------------------------------------------

    \411\ AARP at 7-8.
    \412\ Id. (Noting that ``[p]revious AARP comments have 
recommended that abandoned calls include some identifying 
information: calls using predictive dialers should provide a taped 
message in lieu of hanging up''). In fact, section 310.4(b)(4)(iii) 
of the TSR's call abandonment safe harbor includes such a 
requirement. 16 CFR 310.4(b)(4)(iii).
---------------------------------------------------------------------------

5. The ``Per Campaign'' Standard Should be Retained
    In anticipation of industry arguments to the contrary,\413\ the 
Connecticut Attorney General affirms the importance of the requirement 
in the amendment, as proposed, that the abandonment ``rate be measured 
during each campaign to reduce potential discriminatory treatment of 
disfavored groups.'' He argues that ``[a] thirty-day (30) standard, 
including any and all campaigns, would make less valued consumers the 
target of a disproportionate share of abandoned calls.''\414\ The 
Attorney General notes that without this ``safeguard, consumers can 
only rely on the good faith of the industry that it will not engage in 
such practices, which directly conflicts with its financial incentive 
to do otherwise.''\415\ Several consumer comments concur in this 
view.\416\
---------------------------------------------------------------------------

    \413\ See Section III.B.2 infra.
    \414\ CTAG at 3 (emphasis in original).
    \415\ Id. at 4.
    \416\ Popat, No. 120, at 3 (``[A]veraging the campaigns within a 
period will lead to an increase in discriminatory abandonment''); 
Bashinski, No. 123, at 2 (Averaging across all of a telemarketer's 
campaigns ``would also allow some campaigns to have a much higher 
rate of call abandonment''); Hui, No. 119, at 2 (``Averaging out 
across campaigns comes at the expense of at least one group of 
consumers''); Wang, No. 126, at 3 (``It should not cover all 
campaigns because this would allow discriminatory treatment of 
campaigns'').
---------------------------------------------------------------------------

B. Industry Comments

    Ten telemarketers, trade associations and businesses that use live 
telemarketing calls submitted comments on the proposed amendment to the 
current ``per day per calling campaign'' standard for measuring call 
abandonment. The industry comments are generally supportive of the 
proposed amendment, but most argue that it does not go far enough, and 
should eliminate the ``per campaign'' limitation. The comments provide 
information intended to show that: (1) The current ``per day'' standard 
inhibits small, targeted campaigns; (2) The continued ``per campaign'' 
limitation creates compliance issues; and (3) Discriminatory call 
abandonments need not be a concern.
1. The Current ``Per Day'' Standard Inhibits Small, Targeted Campaigns
    All but two of the industry comments support the proposed amendment 
because it will reduce the costs and enhance the efficiency of live 
telemarketing.\417\ Two of the comments urge the Commission to adopt 
the proposed amendment in its present form,\418\ while the remainder 
argue that the proposed amendment's ``per campaign'' limitation is 
unnecessary.
---------------------------------------------------------------------------

    \417\ DMA at 2, 10; ATA at 2; NAA at 4; Verizon at 6; Heritage, 
No. 80, at 1; Countrywide at 1; Verizon at 2, 6; ccc Interactive at 
1; but see BoA at 1 (Noting, with approval, ``the Commission's 
willingness to take an approach similar to that taken by'' the FCC, 
but not endorsing the proposed amendment); TCIM, at 1 (Recommending 
only that the FTC adopt the FCC's standard for measuring call 
abandonment).
    \418\ Countrywide at 3 (``Countrywide urges the Commission to 
make this proposed rule change final without any additional 
amendment''); ccc Interactive at 1.
---------------------------------------------------------------------------

    Several of the comments take pains to point out how the current 
``per day'' standard for measuring call abandonment rates adversely 
affects the efficiency of the predictive dialers used in live 
telemarketing.\419\ The comments acknowledge that the Commission is 
correct in its understanding that the biggest problem arises from ``the 
limitations of predictive dialers in adjusting to unexpected spikes in

[[Page 51198]]

average call abandonment rates.''\420\ They confirm that ``if the call 
abandonment rate is calculated daily, the telemarketer may not have a 
sufficient amount of time to recover . . ., particularly if one of 
those spikes occurs near the end of the day.\421\
---------------------------------------------------------------------------

    \419\ ATA at 5-7; NAA at 12; Verizon at 3-4; Heritage at 3.
    \420\ DMA at 9, citing 71 FR 58730.
    \421\ Verizon at 3; see Heritage at 3 (The proposed amendment 
``would remove the necessity of managing the abandonment rate by the 
hour, which is essentially what the per-day rule requires us to 
do'').
---------------------------------------------------------------------------

    As two comments note, ``[t]his effect is exacerbated in the case of 
targeted telemarketing campaigns directed to small groups of 
consumers'' because ``[b]asic principles of statistics indicate that 
when the group of consumers to be called is smaller, the deviation from 
expected answer rates--and expected abandonment rates--is 
greater.''\422\ This adversely affects small businesses such as 
``smaller community newspapers'' that are ``hampered the most because 
their telemarketing universe is small (calling lists less than 
5000).''\423\ It also impacts larger companies that ``use market 
research and data research . . . to focus individual telemarketing 
campaigns on those consumers most likely to be interested.''\424\ Such 
``segmented'' or ``targeted'' marketing ``means that consumers are most 
likely to receive those offers that are relevant to them, and less 
likely to receive telemarketing calls . . . that are not,'' and allows 
businesses ``to focus on smaller groups of consumers, which lowers 
marketing costs,'' permitting the cost savings to be ``passed on to 
consumers in the form of lower prices.''\425\
---------------------------------------------------------------------------

    \422\ Id. at 3, 4; see NAA at 12 (``When calling a small list, 
the balance between the algorithm used by the dialer and the number 
of sales representatives available at any particular time (due to 
length of previous call, bathroom breaks, etc.) is easily upset'').
    \423\ NAA at 12.
    \424\ Verizon at 3.
    \425\ Id. at 4.
---------------------------------------------------------------------------

    To ensure compliance with the per day standard, companies 
conducting such small or targeted campaigns ``may abandon predictive 
dialers altogether, relying instead on more expensive manual dialing,'' 
or ``program the dialer with a substantially lower abandonment rate 
[than 3 percent],'' thereby ``slowing the rate of outgoing calls'' and 
increasing costs by ``increasing operators' down-time between 
calls.''\426\ These inefficiencies may lead companies to expand their 
campaigns to larger groups of consumers to minimize the effect of 
variations in the abandonment rate, with the result that ``consumers 
receive more, rather than fewer, telephone solicitations in which they 
have no interest.''\427\
---------------------------------------------------------------------------

    \426\ Id. at 4; see Heritage at 2.
    \427\ Id. at 5 (emphasis in original).
---------------------------------------------------------------------------

    One comment also highlights a second effect of the per day 
standard: that call centers require more telemarketers at the beginning 
of a calling campaign than toward the end because they ``see a dramatic 
decrease in contact rates as campaigns continue over time.''\428\ This 
means either that ``management is forced to overstaff on a daily 
basis,'' or to adjust by ``decreasing staffing to accommodate smaller 
calling files later in programs.''\429\ The problem with the latter 
approach is that new personnel must be hired and trained at no little 
cost because of turnover caused by the lack of a steady income. Thus, 
either strategy required by the per day standard increases costs that 
ultimately may be passed on to consumers.
---------------------------------------------------------------------------

    \428\ ATA at 5.
    \429\ Id.
---------------------------------------------------------------------------

    The comment points out that small business telemarketers are 
particularly disadvantaged by the high staffing costs they incur under 
the ``per day'' standard, and that ``many'' of them ``do not utilize 
predictive dialers'' for that reason.\430\ Unlike large telemarketers 
that operate several campaigns from a single call center, who can move 
agents from one calling campaign to another, small telemarketers who 
run ``relatively few programs and who initiate relatively few 
telemarketing calls do not have this luxury.''\431\ The comment 
contends that the ``economic reality for relatively small telemarketers 
will vastly improve'' if the proposed amendment is adopted because they 
will no longer be burdened by ``significantly higher costs, either in 
wages or attrition rates.''\432\
---------------------------------------------------------------------------

    \430\ Id. at 7 n.11.
    \431\ Id. at 7.
    \432\ Id. Although ATA's comment does not specify why this is 
so, the most likely explanation appears to be that small 
telemarketers will be able to reduce their staffing requirements at 
the outset of new calling campaigns, since they will be able to 
average the abandonment rate over a 30-day period.
---------------------------------------------------------------------------

2. The Continued ``Per Campaign'' Limitation Creates Compliance Issues
    Many of the industry comments urge the Commission to revise the 
proposed amendment to eliminate the ``per campaign'' limitation 
retained from the current standard, and permit call abandonment rates 
to be averaged across multiple campaigns.\433\ The industry comments 
contend that retention of the ``per campaign'' limitation will create 
several compliance difficulties. First, DMA asserts, without further 
explanation, that ``[f]or small campaigns, the efficiencies are 
achieved by allowing one predictive dialer to operate on multiple 
campaigns with a combined three-percent rate over 30 days.''\434\
---------------------------------------------------------------------------

    \433\ DMA at 9-10; ATA at 4-5; NAA at 12-13; Verizon at 5; BoA 
at 2-3;
    \434\ DMA at 10. While it is not entirely clear from the 
comment, DMA appears to be arguing that it is not economical to use 
more than one predictive dialer for a number of small, targeted 
campaigns, not that the costs of additional equipment, time and 
labor needed to ensure that ``systems track all calling campaigns 
individually'' make the per campaign requirement unduly burdensome, 
as another comment argues. Heritage at 1-2.
---------------------------------------------------------------------------

    Second, DMA notes that the Commission's effort to reduce the 
obstacles to the use of small, segmented calling lists is impeded by 
the fact that ``the rule as proposed still requires those small and 
targeted campaigns that last less than 30 days be calculated over the 
life of the campaign.''\435\ Another comment explains ``that the `per 
campaign' limitation will either result in marketers continuing to call 
on a particular program to solve for an abandonment rate issue, which 
is inefficient and provides little appreciable consumer benefit, or 
continuing to use the more restrictive `per day, per campaign' 
standard,'' thereby negating the advantage that telemarketing gives a 
marketer--the ability ``to limit its expenses in campaigns that are 
producing lower than expected results and [to] move resources to more 
productive programs very quickly.''\436\
---------------------------------------------------------------------------

    \435\ Id.; see NAA at 13 (``Measuring call abandonment over the 
duration of the campaign instead of over a 30-day period provides 
little relief when applied to small, tailored campaigns typical of 
small business sellers and telemarketers'').
    \436\ BoA at 2.
---------------------------------------------------------------------------

    Finally, several comments criticize the use of the term, 
``campaign,'' on the ground that it leaves sellers and telemarketers 
``uncertain as to whether they are in compliance with the safe harbor'' 
in the absence of official guidance on its meaning.\437\ One comment 
asserts that ``[i]ndustry members often assign different meanings to 
the term based upon the underlying purpose of the calls,'' and that the 
``regulatory use of such an amorphous term has generated confusion 
amongst sellers and telemarketers.''\438\ One comment contends that it 
is ``this uncertainty'' that ``is likely to reduce efficiency in the 
use of predictive dialers for many businesses.''\439\
---------------------------------------------------------------------------

    \437\ ATA at 4-5; NAA at 13; BoA at 2.
    \438\ ATA at 4-5.
    \439\ BoA at 2-3.
---------------------------------------------------------------------------

3. Discriminatory Call Abandonments Need Not be a Concern
    Aware of the Commission's concern that eliminating the ``per 
campaign'' limitation might allow telemarketers to

[[Page 51199]]

target less valued consumers with a disproportionate share of abandoned 
calls, several industry comments contend that this concern, ``while 
noble, is unfounded.''\440\ One comment asserts that ``it is 
questionable whether there are `less valued' consumers in telemarketing 
campaigns'' because ``[t]elemarketers generally strive to target their 
calls to consumers who are most likely to be interested,'' and 
``[t]here is a substantial economic incentive to structure call 
campaigns in this fashion.''\441\ The comment emphasizes that targeting 
less valued consumers with a disproportionate share of call 
abandonments is unlikely for this reason, and emphasizes that it doubts 
``that marketers operate in this manner,'' and that it ``did not see 
evidence in the record to that effect.''\442\
---------------------------------------------------------------------------

    \440\ ATA at 8; see DMA at 10; BoA at 2.
    \441\ BoA at 2;
    \442\ Id.; see Heritage at 2 (``Put simply, we would not want to 
set an abandonment rate above three percent for one ``lower-value'' 
group and one below three percent for a ``higher value'' group 
because all of our donor groups are vital to the success of our 
campaigns'') (emphasis in original).
---------------------------------------------------------------------------

    A second comment endeavors to explain why discriminatory call 
abandonments are unlikely. It contends that sellers and telemarketers 
``have no motive'' to abandon calls to any of the three categories of 
consumers they call: (1) consumers who have asked for information; (2) 
consumers with whom the seller has an EBR; and (3) consumers who have 
no previous relationship with the seller.\443\ The comment asserts that 
sellers and telemarketers would not want to risk ``alienating those 
consumers who are most likely to purchase'' by abandoning calls to 
consumers in either of the first two categories.\444\ Concern about 
calls to consumers in the third category ``is similarly unfounded,'' 
according to the comment, because ``the vast majority of sellers and 
telemarketers purchase lists of consumers to call'' that are compiled 
from ``purchasing patterns, credit history, family income, 
demographics, etc.'' that indicate they are also ``most like to 
purchase the offered products or services.''\445\ There is no 
incentive, the comment argues, ``to abandon calls at different rates to 
different demographics within a particular program'' because it would 
be a ``waste of resources'' to select consumers for a particular 
campaign for any reason other than ``a perceived relatively high 
likelihood of purchasing.''\446\
---------------------------------------------------------------------------

    \443\ ATA at 8.
    \444\ Id.
    \445\ Id.; see Heritage at 2 (Similarly acknowledging that ``it 
may take ten calls to non-donors to gain one pledge of support while 
calling previous donors may result in a pledge in three of every 
four calls,'' but asserting that there are ``no donor groups whom we 
deem of more or less value'').
    \446\ Id.
---------------------------------------------------------------------------

    Finally, a third comment emphasizes that averaging abandonment 
``rates from a number of small, highly targeted campaigns'' can be done 
``without resulting harm to consumers'' because ``small and targeted 
campaigns are the ones likely to yield results for callers, which makes 
it unlikely that the caller would use a high abandonment rate.''\447\ 
The comment adds that ``it is simply not mathematically possible to 
combine a relatively low abandonment rate for a small campaign with a 
high abandonment rate for a large campaign and reach the three percent 
requirement.''\448\
---------------------------------------------------------------------------

    \447\ DMA at 10 & n.23.
    \448\ Id. at n.24.
---------------------------------------------------------------------------

C. Discussion and Analysis

    The abandoned and unidentified ``hang-up'' calls about which many 
consumers rightly complain are a cause for concern, but not necessarily 
a reason to forego adoption of the proposed amendment. These ``hang-
up'' calls--which consumers understandably consider a form of 
harassment and an invasion of privacy because they have no way to 
identify the caller to stop future calls--violate two distinct 
requirements of the TSR. Section 310.4(a)(7) of the TSR requires all 
telemarketers to transmit the telephone number of the seller or 
telemarketer responsible for the call and, if the carrier's technology 
permits, the name of the seller or telemarketer.\449\ In addition, 
Section 310.4(b)(4)(iii) requires a telemarketer to play a recorded 
message that states the name and telephone number of the seller on 
whose behalf the call is placed if no salesperson is available within 
two seconds of a consumer's completed greeting upon answering the 
call.\450\
---------------------------------------------------------------------------

    \449\ 16 CFR 310.4(a)(7).
    \450\ 16 CFR 310.4(b)(4)(iii). Nothing in this provision limits 
its application only to calls placed by predictive dialers. It 
applies with equal force to calls placed by automated dialers, which 
also must play a recording if an operator is unavailable when a call 
is answered.
---------------------------------------------------------------------------

    The fact that the consumer comments suggest there may be too many 
ill-informed or rogue telemarketers who routinely violate these two TSR 
requirements provides no basis in policy for abandoning a carefully 
considered amendment that would benefit businesses that are attempting 
to comply with the law. The well-founded consumer complaints in the 
record about abandoned calls instead indicate that the Commission may 
need to redouble its industry education and law enforcement efforts. 
The Commission does not agree with the consumer groups and consumers 
who believe effective enforcement will be impossible without a complete 
ban on abandoned calls. Moreover, violators who are now intentionally 
ignoring the TSR's requirements are just as likely to violate a total 
ban on abandoned calls.
    Likewise, the continued opposition of consumer advocates and 
consumers to any safe harbor that allows a small percentage of 
abandoned calls in order that industry and consumers may benefit from 
the cost savings permitted by the efficiencies of predictive dialers 
simply seeks a reconsideration of the Commission's careful balancing of 
the competing interests during the TSR amendment proceeding.\451\ It 
also ignores the fact that the Commission endeavored to minimize the 
harms of abandoned calls at that time by adding the Caller ID and 
recorded message requirements to the TSR, precisely so that consumers 
would not be frightened by hang-ups from unidentified callers, and 
would be able to make company-specific Do Not Call requests.\452\
---------------------------------------------------------------------------

    \451\ 68 FR 4580, 4642 (Jan. 29, 2003).
    \452\ One purpose of the requirement that telemarketers play a 
recorded message identifying the source of an abandoned call is to 
ensure that consumers without Caller ID can still assert a company-
specific Do Not Call request, without the burden of the costs of 
that service about which AARP expresses concern. See note 412, 
infra, and accompanying text.
---------------------------------------------------------------------------

    Moreover, opponents of the proposed amendment object, in effect, to 
allowing sellers and telemarketers the full three percent abandonment 
rate previously set by the Commission. They focus not on the fact that 
sellers and telemarketers still would be required to maintain no more 
than a three percent abandonment rate, but on the fact that there may 
be some modest increase in the number of abandoned calls because the 
industry would no longer be forced by the current ``per day'' standard 
to hold their abandonment rates below three percent, so that unexpected 
spikes in abandonment rates that occur late in the day do not violate 
the TSR.
    Opponents contend that the proposed amendment must fail because the 
record lacks ``clear and convincing evidence.'' Nevertheless, the 
Commission concludes that the preponderance of the evidence on the 
record as a whole supports adoption of the proposed amendment. The 
factual basis for the proposed amendment does not necessarily require 
``empirical evidence,'' and in this case demands only a rudimentary 
understanding of statistical theory and standard deviation. The 
Commission is more than

[[Page 51200]]

satisfied that the reasons it set forth when it proposed the amendment 
and those stated here meet the applicable standard.\453\
---------------------------------------------------------------------------

    \453\ 71 FR at 58728-30.
---------------------------------------------------------------------------

    The industry, for its part, primarily criticizes the proposed 
amendment for retaining the ``per campaign'' standard in the current 
call abandonment requirement. The industry expresses particular concern 
that the ``per campaign'' limitation may create inefficiencies if 
sellers cannot switch their resources from underperforming campaigns of 
less than 30 days duration solely because the abandonment rate for the 
campaign at that point is more than three percent. This concern, as 
well as industry uncertainty about the meaning of the term, 
``campaign,'' may be alleviated by an explanation of the term. The 
Commission intends the term ``campaign'' to refer to the offer of the 
same good or service for the same seller. As long as the same good or 
service is being offered for the same seller, the Commission will 
regard the offer as part of a single campaign, without regard to 
whether there are changes in the terms of the offer or the wording of 
any telemarketing script or scripts used to convey the offer.
    The Commission recognizes that the amendment will not eliminate 
every possible inefficiency in the use of predictive dialers that may 
arise from the TSR's call abandonment prohibition. However, industry 
arguments that telemarketers are unlikely to target less-valued 
customers with a disproportionate share of abandoned calls in the 
absence of a ``per campaign'' limitation remain unpersuasive, because 
removal of that requirement would leave consumers to rely on the 
industry's good faith that it would not engage in such practices, 
despite obvious economic incentives to do otherwise.\454\ Even if the 
``vast majority'' of cold calls are based on purchased calling lists, 
not all are, and telemarketers would have a greater financial incentive 
to keep abandonment rates low in wealthier zip codes than in middle or 
low-income zip codes.\455\
---------------------------------------------------------------------------

    \454\ While it may not be mathematically possible to reduce a 
high abandonment rate for a large campaign enough to meet the three 
percent requirement by averaging it with a low abandonment rate for 
a small campaign, as one industry comment asserts, see note 448, 
supra, and accompanying text, it would be possible to reduce a high 
abandonment rate in a small campaign by averaging it with a low rate 
from a large campaign.
    \455\ See note 445, supra. Just as the need for the proposed 
amendment is supported by an understanding of statistics, rather 
than empirical evidence, an understanding of economics supports the 
``per campaign'' limitation. See note 453, supra, and accompanying 
text.
---------------------------------------------------------------------------

D. The Final Amendment

    For the foregoing reasons, after careful consideration of the 
entire record, the Commission has determined that it should adopt the 
amendment as proposed, and amend paragraph (i) of the ``Pattern of 
Calls'' prohibitions in Section 310.4(b)(4) of the TSR, as follows:

 (i) The seller or telemarketer employs technology that ensures 
abandonment of no more than three (3) percent of all calls answered 
by a person, measured over the duration of a single calling 
campaign, if less than 30 days, or separately over each successive 
30-day period or portion thereof that the campaign continues.

The Commission has further determined that the amendment should take 
effect on October 1, 2008.

IV. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act (``PRA''), as 
amended,\456\ the Commission staff is seeking OMB approval of the final 
rule amendments to the TSR under OMB Control No. 3084-0097.
---------------------------------------------------------------------------

    \456\ 44 USC 3501-3521.
---------------------------------------------------------------------------

V. Regulatory Analysis and Regulatory Flexibility Act Requirements

    Under section 22 of the FTC Act, the Commission must issue a 
regulatory analysis for a proceeding to amend a rule only when it: (1) 
estimates that the amendment will have an annual effect on the national 
economy of $100,000,000 or more; (2) estimates that the amendment will 
cause a substantial change in the cost or price of certain categories 
of goods or services; or (3) otherwise determines that the amendment 
will have a significant effect upon covered entities or upon consumers.
    In general, the comments opposing the prerecorded call amendment 
asserted that sellers might be unable as a result of the amendment to 
use low-cost prerecorded messages, and thus would not be able to pass 
on the resulting savings to consumers. Many also argued that the cost 
of obtaining the consumers' agreements to receive prerecorded messages 
as required by the amendment would not be insignificant, but this 
argument was based on the mistaken assumption that the amendment would 
not permit the use of electronic signatures and records allowed by the 
E-SIGN Act, and would necessitate the use of paper records, with their 
attendant printing and storage costs. Finally, many comments predicted, 
based on the same mistaken assumption, that the costs and burdens 
imposed by such an amendment would reduce the number of consumers who 
could be called to such an extent that it would no longer be 
economically feasible for telemarketers to provide prerecorded message 
services, and telemarketers specializing in such services would not be 
able to remain in business.\457\ Only one comment attempted to quantify 
the cost of the prerecorded call amendment,\458\ but neither it nor any 
of the other comments indicated, except as noted, that the amendment 
would have an annual impact of more than $100,000,000, cause 
substantial change in the cost of goods or services, or otherwise have 
a significant effect upon covered entities or consumers.
---------------------------------------------------------------------------

    \457\ Although similar gloomy forecasts were provided in 
industry comments on the Commission's proposal to establish the 
National Do Not Call Registry, the telemarketing industry has 
subsequently flourished. The Commission has no more reason to 
believe that these doomsday scenarios are more likely to occur as a 
result of the prerecorded call amendment than as a result of the 
creation of the Registry.
    \458\ SmartReply at 18-21. This comment appears to assume that 
the amendment would not permit sellers to obtain the required 
consumer agreements to receive prerecorded calls electronically 
pursuant to the E-SIGN Act.
---------------------------------------------------------------------------

    To the extent, if any, that either of the two final rule amendments 
adopted by the Commission will have such effects,\459\ the Commission 
has explained above the need for, and the objectives of, the final 
amendments; the regulatory alternatives that the Commission has 
considered; the projected benefits and adverse economic or other 
effects, if any, of the amendments; the reasons that the final 
amendments will attain their intended objectives in a manner consistent 
with applicable law; the reasons for the particular amendments that the 
agency has adopted; and the significant issues raised by public 
comments, including the Commission's assessment of and response to 
those comments.
---------------------------------------------------------------------------

    \459\ None of the comments on the amendment revising the method 
for measuring the permissible call abandonment rate provided any 
such data, or indicated that the amendment would have any of these 
effects.
---------------------------------------------------------------------------

    The Regulatory Flexibility Act (``RFA'')\460\ requires that the 
agency conduct an analysis of the anticipated economic impact of 
proposed rule amendments on small businesses. The purpose of a 
regulatory flexibility analysis is to ensure that the agency considers 
the impact on small entities and examines regulatory alternatives that 
could achieve the regulatory purpose while minimizing burdens on small 
entities. Section 605 of the RFA provides that such an analysis is not 
required if the agency head certifies that

[[Page 51201]]

the regulatory action will not have a significant economic impact on a 
substantial number of small entities.\461\
---------------------------------------------------------------------------

    \460\ 5 USC 601-612.
    \461\ 5 USC 605.
---------------------------------------------------------------------------

    The Commission believes that the two amendments to the TSR that it 
is adopting are not likely to have a significant impact on small 
business for several reasons. By their nature, most small businesses 
serve local customers, develop personal relationships with their 
clientele, and are therefore likely to be able to obtain their 
customers' agreements to receive useful prerecorded telemarketing 
messages. Moreover, purely informational prerecorded messages are not 
covered by the TSR, and the use of such messages to schedule service 
calls, delivery times, and the like therefore will not be subject to 
the written agreement requirement. In addition, to the extent that, in 
this Internet age, small businesses may no longer be strictly local 
businesses, the option provided by the amendment to obtain written 
agreements to receive prerecorded message calls pursuant to E-SIGN will 
place them on an equal footing with other businesses. Finally, as a 
result of the Commission's decision to defer the effective date of the 
written agreement requirement for twelve months, small businesses with 
annual service or other contracts with their customers will have ample 
time to revise their contracts and seek their customers' permission to 
receive prerecorded telemarketing messages.
    For these same reasons, the Commission believes that small business 
telemarketers providing prerecorded call services to such small 
business sellers are unlikely to be significantly affected by the 
prerecorded call amendment. In addition, for more than two years, small 
and large telemarketers alike, as well as sellers that conduct their 
own telemarketing, have been governed by the Commission's enforcement 
forbearance policy for prerecorded messages answered by a consumer, 
which has mandated an up-front disclosure to consumers of how to opt 
out, and encouraged the use of an interactive opt-out mechanism. During 
that time, according to the comments, many of which came from small 
business telemarketers, the industry has transitioned to automated 
interactive message systems that are now affordable and widely 
available. Consequently, the Commission has no reason to believe that 
the 90 days it is allowing for sellers and telemarketers to provide 
automated interactive opt-out mechanisms will disadvantage either small 
or large business telemarketers or sellers. Although prerecorded 
message calls placed on answering machines or voicemail services were 
not subject to the Commission's enforcement forbearance policy, there 
is nothing in the record to suggest that application of the requirement 
of an automated interactive opt-out mechanism to such calls could not 
be accomplished within the phase-in period, or would disadvantage 
either small or large business telemarketers or sellers.
    The Commission also believes that the amendment adjusting the 
method for measuring the permissible call abandonment rate by 
predictive dialers in live telemarketing campaigns is not likely to 
have a significant impact on small business. If anything, the change in 
the standard from a ``per day'' to a per-30-day calculation should lead 
to a reduction in the cost of live telemarketing campaigns for both 
small and large businesses, for the reasons previously stated, and will 
likely encourage the use of such calls to EBR customers by small and 
large businesses alike. In fact, small business sellers and 
telemarketers are likely to derive the greatest benefit from the 
amendment because the smaller size of their calling lists has prevented 
full realization of the efficiencies of predictive dialers under the 
existing measurement standard, an unintended consequence that the 
amendment will correct.
    Accordingly, the Commission concludes that the two amendments to 
the TSR will not have a significant or disproportionate impact on the 
costs of small business. Based on the information in the record, 
therefore, the Commission certifies that the two amendments published 
in this document will not have a significant economic impact on a 
substantial number of small businesses.
    Nonetheless, to ensure that no such impact has been overlooked, the 
Commission has conducted the following final regulatory flexibility 
analysis, as summarized below:

A. Need for and Objective of the Amendments

    As previously discussed, the Commission is issuing the prerecorded 
call amendment to make explicit the prohibition on such calls implicit 
in the TSR's call abandonment provision, while expressly permitting 
prerecorded calls made by or on behalf of sellers to consumers who have 
given the seller a written agreement to receive such calls. The 
proposed explicit prohibition of all prerecorded telemarketing calls 
without the consumer's express prior written agreement implements the 
Telemarketing Act requirement that the Commission prohibit a pattern of 
unsolicited telephone calls that ``the reasonable consumer would 
consider coercive or abusive of such consumer's right to privacy,'' and 
effectuates the apparent intent of Congress in the TCPA to prohibit 
prerecorded telemarketing calls, regardless of whether they are 
answered in person or by an answering machine or voicemail 
service.\462\
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    \462\ Although the call abandonment prohibition applies only to 
calls ``answered by a person,'' the Commission has determined, 
pursuant to the Telemarketing Act, that the amendment should also 
apply to prerecorded calls picked up by answering machines and 
voicemail services.
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    The Commission is also issuing an amendment that will modify the 
existing safe harbor to allow sellers and telemarketers to measure the 
three percent maximum call abandonment rate prescribed in Sec.  
310.4(b)(4)(i) for a single calling campaign over a 30-day period, 
rather than on a daily basis, as is currently required. This amendment, 
also made pursuant to the Telemarketing Act, will enhance the 
efficiency of the predictive dialers used in live telemarketing 
campaigns, allowing businesses to focus their telemarketing on smaller 
groups of consumers, which will lower marketing costs and make live 
campaigns more affordable for small businesses. The amendment will also 
permit more narrowly targeted telemarketing to smaller groups of 
consumers who are the most likely to be interested in a particular 
offer.

B. Significant Issues Raised by Public Comment; Summary of the Agency's 
Assessment of these Issues; and Changes, if any, Made in Response to 
Such Comments

    As discussed in Section III above, the principal issues raised by 
the industry comments relate to the potential costs and burdens of the 
requirement for obtaining consumers' express written agreement to 
receive prerecorded telemarketing calls, and concerns about economic 
hardship for telemarketers that specialize in prerecorded telemarketing 
and their customers if too few consumers agree to receive such 
calls.\463\
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    \463\ None of the comments on the amendment revising the method 
for measuring the maximum permissible call abandonment rate 
challenged the Commission's analysis of the issue or proposed an 
alternative solution.
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    As previously noted, most of the industry comments that objected to 
the cost and burden of obtaining written agreements from consumers to 
receive prerecorded calls mistakenly assumed that the amendment would 
not permit the use of agreements obtained

[[Page 51202]]

electronically pursuant to the E-SIGN Act, notwithstanding express 
statements in comparable provisions of the TSR permitting such 
agreements.\464\ The Commission has accordingly added a comparable 
footnote to the final amendment to make it clear that the required 
agreements may be obtained electronically pursuant to E-SIGN in order 
to minimize compliance costs and burdens.
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    \464\ 16 CFR 310.3(a)(3)(i) n.5; 310.4(b)(1)(iii)(B)(i) n.6.
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    Many comments also requested that the Commission provide adequate 
time for preparations to comply with the written agreement requirement 
by deferring its effective date for six months or longer, and 
permitting all affected entities to continue calling EBR customers 
until the requirement takes effect. Although the Commission previously 
had stated that it did not believe that a delayed effective date would 
necessarily reduce compliance burdens for small entities,\465\ the 
Commission has been persuaded by the comments to defer the effective 
date of the written agreement requirement for twelve months.
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    \465\ 71 FR at 58732.
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    The Commission has also been persuaded by the comments to defer the 
effective date of the requirement in the amendment that sellers and 
telemarketers provide an automated interactive opt-out mechanism until 
December 1, 2008, even though the comments, many of which came from 
small business telemarketers that currently use such mechanisms, assert 
that this technology is now affordable and widely available.
    A number of comments from industry and consumers who oppose the 
amendment expressed concern that the written agreement requirement 
would create economic hardships for entities specializing in 
prerecorded telemarketing and their customers if too few customers 
agree to receive such calls. However, many in the industry contended, 
on the contrary, that there are a significant number of consumers who 
wish to receive prerecorded telemarketing messages. The Commission 
believes that the prerecorded call amendment will enhance consumer 
choice, and permit those consumers who wish to receive prerecorded 
messages to sign up to receive them while protecting the privacy of 
those who do not wish to be disturbed. Having received industry 
comments asserting that a National Do Not Call Registry would result in 
the demise of the telemarketing industry, when it has subsequently 
flourished, the Commission doubts that the amendment will have the 
predicted negative effect.\466\
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    \466\ For example, the use by government and private sector 
entities of purely informational prerecorded messages that are not 
subject to the amendment appears to be increasing.
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C. Description and Estimate of Number of Small Entities Subject to the 
Final Amendments or Explanation Why no Estimate is Available

    Each of the proposed rule amendments will affect sellers and 
telemarketers that make interstate telephone calls to consumers 
(outbound calls) as part of a plan, program, or campaign which is 
conducted to induce the purchase of goods or services or a charitable 
contribution.\467\ For the majority of entities subject to the proposed 
rule, a small business is defined by the Small Business Administration 
as one whose average annual receipts do not exceed $6 million or that 
has fewer than 500 employees.\468\
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    \467\ Thus, the amendments will not apply to purely 
``informational'' outbound calls that do not induce the purchase of 
goods or services or a charitable contribution.
    \468\ These numbers represent the size standards for most retail 
and service industries ($6 million total receipts) and manufacturing 
industries (500 employees). A list of the SBA's size standards for 
all industries can be found at (http://www.sba.gov/size/summary-whatis.html).
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    Prior to the October 2006 request for comment, the Commission had 
not previously sought comment on an explicit prohibition of prerecorded 
telemarketing calls without the consumer's express prior written 
agreement. Although the Commission specifically requested information 
or comment on the number of small entities that would be subject to the 
proposed prerecorded call amendment, none of the comments provided this 
information. Based on the absence of available data in this and related 
proceedings, the Commission believes that a precise estimate of the 
number of small entities that would be subject to the prerecorded call 
amendment is not currently feasible.
    For example, in the proceedings to amend the TSR in 2002, the 
Commission sought public comment and information on the number of small 
business sellers and telemarketers that would be impacted by amendment 
of the standard for measuring the three percent call abandonment rate. 
In its request, the Commission noted the lack of publicly available 
data regarding the number of small entities that might be impacted by 
the proposed Rule.\469\ The Commission received no information in 
response to its request.\470\
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    \469\ See TSR SBP, 68 FR at 4667 (noting that Census data on 
small entities conducting telemarketing does not distinguish between 
those entities that conduct exempt calling, such as survey calling, 
those that receive inbound calls, and those that conduct outbound 
calling campaigns. Moreover, sellers who act as their own 
telemarketers are not accounted for in the Census data).
    \470\ Id.; see also 68 FR 45134, 45143 (July 31, 2003) (noting 
that comment was requested, but not received, regarding the number 
of small entities subject to the National Do Not Call Registry 
provisions of the amended TSR).
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    Likewise, neither the original petition to amend the call 
abandonment safe harbor to expand the period over which the three 
percent call abandonment ceiling for live telemarketing calls is 
calculated,\471\ nor the industry comments on that issue,\472\ provided 
any data regarding the number of small entities that may be affected by 
the Commission's ultimate determination.\473\ Although the Commission 
subsequently renewed its request for this information in the most 
recent request for comment,\474\ none of the comments on the amendment 
addressed the issue. Based on the absence of available data in this and 
related proceedings, the Commission believes that a precise estimate of 
the number of small entities that fall under the amendment of the 
method for measuring the maximum permissible call abandonment rate is 
not currently feasible.
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    \471\ See DMA petition, available at (http://www.ftc.gov/os/2004/10/041019dmapetition.pdf).
    \472\ 71 FR at 58731.
    \473\ Although industry comments have argued that the proposed 
revision would remove an obstacle to small business compliance with 
the call abandonment safe harbor, as discussed in Section III, 
supra, none of the comments has addressed the number of small 
businesses that might benefit from revision of the current standard.
    \474\ 71 FR at 58731.
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D. Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements of the Amendments, Including an Estimate of the 
Classes of Small Entities That Will Be Subject to the Amendments and 
the Type of Professional Skills That Will Be Necessary to Comply

    The rule amendment explicitly prohibiting prerecorded telemarketing 
calls unless the consumer has agreed in writing to accept such calls 
will affect the TSR's recordkeeping requirements insofar as it would 
compel regulated entities to keep records of such agreements under the 
general recordkeeping requirements of the existing rule.\475\ It 
appears, however, that there should be no significant change in this 
burden since regulated entities, regardless of size, already are 
required to maintain electronic or other

[[Page 51203]]

records of the existence of an EBR in the ordinary course of business 
in order to demonstrate compliance with existing FTC and FCC 
restrictions on prerecorded calls. The only difference is that, instead 
of keeping records of EBR relationships as a precondition for placing 
prerecorded calls, the amendment instead will require sellers to 
maintain records of consumers' agreements to receive such calls. Since 
the Commission has emphasized that these agreements may be obtained 
pursuant to E-SIGN, minimal additional recordkeeping should be 
necessary. For these reasons, the prerecorded call amendment would not 
impose or affect any new or existing reporting, recordkeeping or third- 
party disclosure requirements within the meaning of the PRA.
---------------------------------------------------------------------------

    \475\ See 16 CFR 310.5(a)(5).
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    In addition, the Commission does not believe that the amendment to 
expand the period over which the three percent call abandonment ceiling 
for live telemarketing calls is calculated will create any new burden 
on sellers or telemarketers, because the existing ``per day per 
campaign'' standard of the TSR already requires them to establish 
recordkeeping systems to demonstrate their compliance. The Commission 
also does not believe that this modification of the Rule will 
materially increase any existing compliance costs, and may in fact 
reduce them for small entities that are able to take advantage of the 
revised safe harbor requirement.

E. Identification of Other Duplicative, Overlapping, or Conflicting 
Federal Rules

    The FTC is mindful that the amendment explicitly prohibiting all 
prerecorded telemarketing calls without the consumer's express prior 
written agreement differs from the FCC's regulations and some State 
laws, which permit sellers to place such calls to consumers who have 
given their prior express consent or to consumers with whom the seller 
has an ``established business relationship.''\476\ However, the 
Commission does not believe that an explicit prohibition would conflict 
with the FCC regulations or similar State laws, because compliance with 
the TSR's present prohibition does not violate those more permissive 
standards.
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    \476\ 47 CFR 64.1200(a)(2)(iv). See also, e.g., Ariz. Rev. 
Stat., Sec.  44--1278(B)(4) (permitting prerecorded calls with 
called party's ``prior express consent''); Ind. Code, Sec.  24--5--
14--5 (permitting prerecorded calls where there is a ``current 
business or personal relationship'').
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    With respect to the amendment revising the method for measuring the 
maximum permissible call abandonment rate, the FTC has not identified 
any other Federal or State statutes, rules, or policies that would 
overlap or conflict with this amendment, except as indicated below. The 
amendment would help to reduce the differences on this issue between 
the TSR and the FCC's TCPA rules, as well as similar state 
requirements.\477\ As the Commission has reiterated, compliance with 
the FTC's more precise standard would constitute acceptable compliance 
with the FCC rule and similar state requirements, so there is no 
conflict between these regulations.\478\
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    \477\ See, e.g., Cal. Pub. Util. Comm'n, Decision 03-- 03--038 
(Mar. 13, 2003), at 19 (adopting the FCC's 30-day standard for 
measuring call abandonment rates).
    \478\ 69 FR at 67291 & n.19; 71 FR at 58727.
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F. Steps the Agency Has Taken to Minimize Any Significant Economic 
Impact on Small Entities, Consistent with the Stated Objectives of the 
Applicable Statutes, Including the Factual Policy, and Legal Reasons 
for Selecting the Alternatives Finally Adopted, and Why Each of the 
Significant Alternatives, If Any, Were Rejected.

    The amendment adding an explicit prohibition of prerecorded 
telemarketing calls without a consumer's express prior written 
agreement implements the requirement in the Telemarketing Act that the 
Commission prescribe rules that include a prohibition against ``a 
pattern of unsolicited telephone calls which the reasonable consumer 
would consider coercive or abusive of such consumer's right to 
privacy.'' Since the Commission has previously rejected a safe harbor 
to permit EBR-based prerecorded calls, the only workable alternatives 
to this explicit prohibition would be to retain the present implicit 
prohibition of such calls in Sec.  310.4(b)(4)(i) (the call abandonment 
provision), or to limit the prohibition on prerecorded calls except 
with a consumer's prior written agreement only to calls that are 
answered in person, rather than by an answering machine or voicemail 
service. After careful consideration, the Commission has rejected each 
of these alternatives as inconsistent with the mandate of the 
Telemarketing Act, based on the record in this proceeding and its 
enforcement experience.
    The amendment of the existing call abandonment safe harbor replaces 
the present requirement that the three percent maximum call abandonment 
rate be measured ``per day per campaign,'' with a revised requirement 
that the maximum be measured ``over the duration of the campaign, if 
less than 30 days, or separately over each successive 30-day period or 
portion thereof that the campaign continues.'' Other regulatory options 
considered by the Commission included retaining the present ``per day 
per campaign'' standard or requiring that the maximum call abandonment 
rate be measured over a 30-day period for all of a telemarketer's 
campaigns. The Commission does not believe, however, that the present 
standard should be retained, or that a standard that lacks a ``per 
campaign'' limitation would be adequate to protect disfavored consumers 
from receiving a disproportionate share of abandoned calls.
    The amendments explicitly prohibiting prerecorded calls without 
consumers' express agreement to receive them and revising the method 
for measuring the maximum permissible call abandonment rate are 
intended to apply to all entities subject to the amendments. The 
Commission has carefully considered industry comments requesting a 
sufficient phase-in period to minimize the costs and burdens of 
complying with the prerecorded call amendment, and for these reasons 
has decided to defer the effective date of the amendment's written 
agreement requirement for twelve months for all entities, including 
small businesses. Although the industry comments, including comments 
from small business telemarketers, indicated that automated interactive 
opt-out mechanisms are now affordable and widely available, the 
Commission is also deferring the effective date of the interactive opt-
out requirements of the amendment until December 1, 2008, to ensure 
that all affected entities will have sufficient time to prepare to 
comply. Although the Commission will revoke its enforcement forbearance 
policy for prerecorded telemarketing calls when the interactive opt-out 
requirements take effect because of inconsistencies in their 
requirements, the Commission has decided to permit sellers to continue 
making prerecorded calls to existing and new EBR customers who do not 
opt out until the written agreement requirement takes effect.
    None of the comments on the amendment of the method for measuring 
the maximum permissible call abandonment rate similarly requested any 
delay to give affected entities sufficient time to prepare to comply. 
Since this amendment will benefit all small and large entities making 
live telemarketing calls, there is no apparent reason to delay its 
implementation. Accordingly, the Commission has determined that the

[[Page 51204]]

amendment should take effect on October 1, 2008.

VI. Final Amendments

List of Subjects in 16 CFR Part 310

    Telemarketing, Trade practices.

0
For the reasons discussed in the preamble, the Federal Trade Commission 
amends 16 CFR part 310 as follows:

PART 310--TELEMARKETING SALES RULE

0
1. The authority citation for part 310 continues to read as follows:

    Authority: 15 USC 6101--6108.

0
2. In Sec.  310.5, redesignate footnote 8 as 9.

0
3. In Sec.  310.4, redesignate footnote 7 as 8.

0
4. Amend Sec.  310.4 by adding new paragraph (b)(1)(v), and revising 
paragraph (b)(4)(i) to read as follows:


Sec.  310.4  Abusive telemarketing acts or practices.

* * * * *
    (b) * * *
    (1) * * *
    (v) Initiating any outbound telephone call that delivers a 
prerecorded message, other than a prerecorded message permitted for 
compliance with the call abandonment safe harbor in Sec.  
310.4(b)(4)(iii), unless:
    (A) in any such call to induce the purchase of any good or service, 
the seller has obtained from the recipient of the call an express 
agreement, in writing, that:
    (i) the seller obtained only after a clear and conspicuous 
disclosure that the purpose of the agreement is to authorize the seller 
to place prerecorded calls to such person;
    (ii) the seller obtained without requiring, directly or indirectly, 
that the agreement be executed as a condition of purchasing any good or 
service;
    (iii) evidences the willingness of the recipient of the call to 
receive calls that deliver prerecorded messages by or on behalf of a 
specific seller; and
    (iv) includes such person's telephone number and signature;\7\ and
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    \7\ For purposes of this Rule, the term ``signature'' shall 
include an electronic or digital form of signature, to the extent 
that such form of signature is recognized as a valid signature under 
applicable federal law or state contract law.
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    (B) in any such call to induce the purchase of any good or service, 
or to induce a charitable contribution from a member of, or previous 
donor to, a non-profit charitable organization on whose behalf the call 
is made, the seller or telemarketer:
    (i) allows the telephone to ring for at least fifteen (15) seconds 
or four (4) rings before disconnecting an unanswered call; and
    (ii) within two (2) seconds after the completed greeting of the 
person called, plays a prerecorded message that promptly provides the 
disclosures required by Sec.  310.4(d) or (e), followed immediately by 
a disclosure of one or both of the following:
    (A) in the case of a call that could be answered in person by a 
consumer, that the person called can use an automated interactive voice 
and/or keypress-activated opt-out mechanism to assert a Do Not Call 
request pursuant to Sec.  310.4(b)(1)(iii)(A) at any time during the 
message. The mechanism must:
    (1) automatically add the number called to the seller's entity-
specific Do Not Call list;
    (2) once invoked, immediately disconnect the call; and
    (3) be available for use at any time during the message; and
    (B) in the case of a call that could be answered by an answering 
machine or voicemail service, that the person called can use a toll-
free telephone number to assert a Do Not Call request pursuant to Sec.  
310.4(b)(1)(iii)(A). The number provided must connect directly to an 
automated interactive voice or keypress-activated opt-out mechanism 
that:
    (1) automatically adds the number called to the seller's entity-
specific Do Not Call list;
    (2) immediately thereafter disconnects the call; and (3) is 
accessible at any time throughout the duration of the telemarketing 
campaign; and
    (iii) Complies with all other requirements of this Part and other 
applicable federal and state laws.
    (C) Any call that complies with all applicable requirements of this 
paragraph (v) shall not be deemed to violate Sec.  310.4(b)(1)(iv) of 
this Part.
    (D) This paragraph (v) shall not apply to any outbound telephone 
call that delivers a prerecorded healthcare message made by, or on 
behalf of, a covered entity or its business associate, as those terms 
are defined in the HIPAA Privacy Rule, 45 CFR 160.103.
* * * * *
    (4)
    (i) The seller or telemarketer employs technology that ensures 
abandonment of no more than three (3) percent of all calls answered by 
a person, measured over the duration of a single calling campaign, if 
less than 30 days, or separately over each successive 30-day period or 
portion thereof that the campaign continues.
* * * * *
    By direction of the Commission.

Donald S. Clark
Secretary.
[FR Doc. E8-20253 Filed 8-28-08; 8:45 am]
BILLING CODE: 6750-01-S