October 2004              return to the newsletter contents page

Fax Ban Regulations Postponed - Remedial Legislation Pending

The Federal Communications Commission has voted to postpone the effective date of its new fax ban regulations until July 1, 2005. This is the second time the FCC has postponed implementation of the rules in the face of stiff opposition from business organizations.

In June, SEDA joined with the National Association of Wholesaler-Distributors to urge Congress to pass legislation to remedy the flawed rule adopted by the FCC that will interfere with ongoing business communications. While the volume of email has dramatically increased, faxes remain an important part of business communications,

especially for small businesses. The FCC badly erred, and threatened great economic harm, when it adopted an overly-broad rule restricting the sending of commercial faxes. If not reversed by Congress, the FCC's new rule will have a severe impact on the ability of businesses and trade associations to use faxes to reach their customers (consumer and business entity), subcontractors, suppliers and members. It is critical that the Congress enact the Upton-Markey-Barton-Dingell bill that will restore an "established business relationship" exception to the general rule against the sending of unsolicited advertising faxes.

After ten years of experience with the present established business relationship rule, and in the absence of any evidence that it was not working well, the FCC has inexplicably issued new regulations that would substantially change the rules for businesses using faxes to communicate with other businesses and their customers. Specifically, the FCC ruled that a business cannot fax commercial information to any person, whether a subcontractor, supplier, or existing customer, without first obtaining the recipient's written and signed consent. The same rule would even forbid a trade association to send faxes to its members. Businesses and trade associations filed numerous petitions for postponement of the effective date of the regulations, and urged the FCC to revise its rules. The FCC agreed to postpone the effective date, first delaying implementation of the new regulations until January 1, 2005, and now until July 1, 2005. But without Congressional intervention, the new regulations are likely to go into effect with no substantial change.

If the FCC's rule goes into effect, it will have a harsh impact on business communications, without providing any tangible benefit to consumers. The rule adopted by the FCC is unnecessary -- no one identified faxes to existing customers as a problem that needed to be "solved." While the rule has no public interest benefit, it would severely disrupt regular business communications. Its economic costs and burdens include the following:

• In a recent survey of its small business members (three-quarters of the respondents having fewer than 20 employees), the U.S. Chamber of Commerce found that the cost of the new rule to the average small business would be at least $5,000 in the first year and more than $3,000 per year thereafter.

• Small business owners indicated it would take, on average, more than 27 hours of staff time to gather all the forms containing written consent and 20 more hours each year to keep the forms current.

• Nearly two-thirds of small businesses would be required to obtain written consent for more than 100 separate fax numbers in the first year of implementation. For many small businesses, the number of required consents would be in the thousands. Some very small businesses would be required to invest in software to obtain and maintain consent records.

• The impact on larger businesses is exponentially greater. Many large companies deal with hundreds of thousands of existing customers, and the costs of obtaining and maintaining individual written consent forms for each fax number used to communicate with each customer would be overwhelming.

• Other negative impacts reported in the Chamber's survey include an increase in the time it takes to complete projects (84% of respondents), decreased communications with customers (79%), the loss of potential business opportunities (66%), and the loss of existing customers (44%).

• Again, the impact on larger companies in these areas would be similar in scope and far greater in economic impact. The result would be huge increases in the cost of doing business.

To make sure that the FCC's ill-advised rule does not interfere with the flow of necessary business communication, business and trade groups need Congress to enact the Upton-Markey-Barton-Dingell legislation. This legislation, which passed the House unanimously earlier this year, has met an obstacle in the Senate. The bill was reported by the Senate Commerce Committee and was “hot-lined” to determine if it could be passed by unanimous consent in the Senate.