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.
Q: legislation?
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.
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