2015 ANA Conference
Keynote Address: Michael O’Rielly, Commissioner, FCC
Missed most of this due to transit, but he thanked advertisers for defending their interests before the FCC and said they should be involved before an issue reaches his desk. Not every call from a legitimate business is a form of harassment, so TCPA rules need to be relaxed.
Q: how will new rules affect the FTC?
A: trying to work together. Net neutrality: broadband = telecom provider and thus under FCC jurisdiction, extending into privacy area. Workshop exploring those issues later this month. Past experience in privacy has been rather narrow and restrictive/problematic than other agencies, including FTC’s approach to info sharing. Narrow compared to world of data available on internet.
Q: will there be regulatory forbearance?
A: have no faith in that. I call it faux-bearance. They pick and choose which provisions they keep. They have forborne from 56% of Title II, but that leaves 44%. Truth: number means nothing. Previous drafts: real heart of Title II is sec. 201, and you don’t need the other provisions to get the same results. All those forborne provisions are applicable under 201, “just and reasonable.” Very vague. Will be chipped away over time by substantive folks and enforcement bureau.
Q: what’s the basis for the claimed jurisdiction over privacy?
A: in declaring broadband a telecom provider, they’re subject to sec. 222 of Title II, dealing with security and privacy. Targeted towards customer proprietary network info like time, date, length of calls (CPNI). Not towards internet data. We’ve subsumed all that authority. My statement: not only because lines b/t broadband and edge are blurry, but also regulatory bodies don’t stop at the lines designed today. Will continue to extend until we get edge providers in FCC jurisdiction. This will make privacy very important.
Q: For marketing teams, what would you tell them?
A: Be very vigilant in examining what’s being done at FCC and in explaining how the products and services you represent are beneficial to consumers. Don’t wait until there’s a crisis. Staff may be focused on something else but they’ll appreciate that you came in before something bad happened. At that point, it’s very messy (data breach, etc.).
Q: You worried about global regulators adopting/expanding the plan—Euro carriers reportedly said that US uncertainty gives them an edge in the internet of things. Could you talk about int’l implications?
A: They see this as an opportunity to get ahead in an industry they’ve always lagged. Tickled pink that US may go down this path. (RT: what would getting ahead mean here? Charging more?) A number of nations look to US as telecom/tech policy leader and tend to adopt what we adopt. We fund a number of programs teaching int’l regulators. (I see a different kind of connection between those two sentences.) One teaching: independence of the regulator is important. We’ve had difficulty—this administration has bridged new era in involving itself in FCC activities, and worries that next admins will not put the genie back in the bottle. When you take that internationally, you’ll see breakdown of independence in other countries. South Korea ITU: African nations were appreciative of the time they’d spent learning the benefits of an independent regulator, but we’ve let an administration weigh in and that’s very problematic. It’s not a partisan issue. (Really.)
Q: Should we expect changes in sponsorship identification rules? Program-length commercials, particularly for kids?
A: Hasn’t heard anything about program-length commercials. We do have waiver petition before us on sponsor IDs, moving that info to the internet, contest rules, etc. No longer need to have them on radio & TV. I have looked favorably on that in the past. The place where the info is may change, but has heard nothing about examining content of info.
Q: can you elaborate on comment that net neutrality would prohibit sponsored data plans?
A: not “would,” but staff is examining various issues. Based on past experience, skeptical that FCC will view sponsored data plans/data caps favorably. It’s been beneficial in poor nations to bring tech to consumers; differentiates carriers in the US; can be beneficial for new tech.
Q: Given CPNI covers who you’re talking to and when you do it, and that info is captured by browsers and ad serving networks online, will we make ISP responsible for controlling that? Will we pull browser/website creators in on CPNI rules?
A: don’t know scope of issues, but wouldn’t be surprised if all were on the table. Complete panoply of info sharing will be examined. That’s why you should be vigilant.
Q: any further views on CPNI beyond the workshop coming up?
A: I have tried to be a public servant: examine all the issues, read all the record, do all the workshops. So doesn’t want to preclude what may happen.
A: when people think they’ve won, they don’t try to find common ground. If the courts change that, things may change.
Dan Jaffe, Group Executive Vice President, Government Relations, ANA
What The New Political Reality Means For Advertisers (AKA news for storage jars—I love this)
Radical political change. Congress was close to comatose; hard to take your own efforts seriously. Now we’ve moved from comatose to superheated. ANA favors lowering overall corporate tax, but traditional treatment of ads doesn’t have to be sacrificed—we must not be duped into thinking this is necessary.
(1) Rapid political change. Historical “Do-Nothing Congress” passed 273 bills, and this past did fewer than that, mostly naming post offices. Republicans are claiming they will push tax, privacy, data security, patent trolling legislation, all w/substantial impacts on ad industry.
New range of players on key committees, all w/activist agendas. But intra and interparty divisions persist. Boehner and Obama and McConnell all have trouble making their constituencies follow a leader. Reid is diminished by retirement. So serious questions about agenda implementation exist. Many divisive issues; bills containing poison pills are lined up to exacerbate these issues—e.g., human trafficking bill. Democrats still have leverage too: filibuster, veto pen. 2016 looms large: small window for action. Republicans will be driven by drive to create contrast w/Hillary Clinton.
(2) Increasing threats to ad tax treatment. (I’m pretty sure this is his perennial theme.) Draft ad amortization proposals for 2014—Senate Bill saying you can deduct only 50% of advertising and remaining should be written off over 5 years, House 10 years. Could cost over $169 billion in increased taxes over 10 years. (You mean some of these guys might owe Uncle Sam money?) Chairman Ryan of Ways & Means says he wants a major tax reform move this summer. Five different subgroups in the Finance Committee in the Senate studying the issues; we’re submitting comments against amortization.
Main arguments for amortization: (1) It would raise a lot of money. That’s not an argument at all. Claim: Everyone has to give blood so we can lower corporate tax rate. (2) An ad today creates lasting value in brand awareness and customer loyalty—generates ongoing revenues. It would be nice if that were true, but advertisers don’t advertise just every ten years. (3) Advertising as a whole creates longterm value that needs to be written off over time. But that doesn’t justify changing present treatment of ads; it’s the engine of our economy and drives 21 million jobs/$6.7 trillion of economic activity.
Life of an ad is getting shorter, not longer. Better consumer info, targeting, faster response time to market changes. If ads not performing, advertisers know about it almost immediately and change them. Competitors are also responding more rapidly. Many advertisers use ads w/an expiration date—coupons, sales.
Ads do build brands, but that only happens through constant reiteration/hammering. If you stop for a day, begins to erode. Famous companies have gone bankrupt: Borders, Circuit City, Radio Shack, Polaroid, Pets.com, Lehman Bros. Their ads are not effective today. (Not my field, but: Isn’t that true of a lot of their assets, though, inasmuch as they are bankrupt?) Are we really like an office building (40 years), laptop, car? Congress is not seeing the obvious. If you advertised a 2015 model car, you’d have to amortize 9 years past when the model was sold. Stigler & Arrow says it’s not reasonable/rational. None of the other major economic powers have needed to amortize advertising to lower corporate tax rates (China, Japan, Germany, France, UK). Every country w/lower tax rates than us has done this w/o burdening advertising—why are we the only country that needs to do so? (Oh, so many possible answers there.)
Tax threat isn’t just federal—Pa., Ill., Cal., and Puerto Rico are considering applying service taxes to advertising.
(3) Present status of privacy and data security/breach legislation. President’s Privacy Bill of Rights was DOA—business, consumer groups, FTC, Democrats and Republicans thought it was too weak or too strong. Major privacy legislation is unlikely this Congress. Though breach/security legislation is absolutely essential in response to major breaches in 2014-2015. If you haven’t had a breakin, you just haven’t realized you’ve had one. Result: reasonable consumer concern. Breach of security legislation is not separate from privacy legislation. If you can’t convince people their data is secure, they will resist agreeing to give you that data, and they’ll put more restrictions on its use. 47 inconsistent, conflicting state data breach laws across the US, plus Puerto Rico, V.I., D.C., and Guam. Laws are constantly being changed. Hard to stay on top even for large companies. Virtually impossible for everyone else.
Data breach legislation is moving, focused on federal preemption; material financial harm triggers to avoid meaningless breach notification; and expansion of FTC authority into new areas. Likely to expand to triggers for health info and geolocation info. Markup expected in full committee after Easter recess. Companies w/a POV should weigh in now.
(4) How the digital revolution is upending existing regulation. Regulatory world is developing away from clear divisions between media. Convergence is ever more rapid. Regulatory divisions may need to be recalibrated/drastically altered. Most pronounced between FTC/FCC but we’ll see it in other areas like CFPB. Need to avoid overlapping/inconsistent rules. House legislation looks to give FTC more authority, while FCC proposed to regulate more activities under Title II. FCC says “trust us” on forbearance over 30 statutes and 700 existing rules.
(5) Who if anyone will control the regulation of the internet? FCC’s net neutrality rules take authority from FTC; FTC data breach and security legislation takes authority from FCC. Delegation of root to ICANN—e.g., .SUCKS issues. EU’s right to be forgotten—attempting to extend it internationally, along with other types of privacy issues.
Q: with ads to millennials increasing, and millennials less concerned about privacy, how will that shift policy? (This is a great example of the rhetoric that danah boyd so incisively deconstructs, deployed for a specific purpose—loosening of scrutiny of what is done with data, as if posting selfies for friends were the same thing as sharing medical data with advertisers.)
A: As they start taking more control of legislatures and courts, that voice may be heard louder, but in the interim, old people run legislatures and courts and are unsophisticated about these issues. Politicians, often with good reason, are particularly sensitive about data. Less sophisticated and highly concerned—in the short run, even though millennials don’t care what they put on Facebook, that won’t drive policy.
Q: about harms of amortization.
A: would cost millions of jobs. If they can’t find the money for something, they will come looking for advertising—they haven’t mentioned ads for funding the Highway Trust Fund, but he fears it.
Q: realistically, what are the chances for patent reform or privacy legislation being signed?
A: High chance of legislation for tax reform—highest nominal corporate tax rate in developed world, resulting in inversions. Tax reform is going to happen; we need to be working right from the beginning or we will be lost at the end. Does not see privacy legislation going forward, but data security/breach legislation has a better chance than it’s had for many years. Wouldn’t bet anything for sure, but better than 50/50. Patent reform: better chance of moving forward—was moving quickly in last Congress.