November 21, 2003

By Electronic Filing

Ms. Marlene H. Dortch
Secretary
Federal Communications Commission
445 12th Street, S.W.
TW-A325
Washington, DC  20554

     RE:  Ex Parte Presentation in a Non-Restricted Proceeding In
     the Matter of Rules and Regulations Implementing the
     Telephone Consumer Protection Act of 1991 (CG Dkt. No. 02-
     278)

Dear Ms. Dortch:

The Office of Advocacy, U.S. Small Business Administration
("Advocacy"), respectfully submits this letter to the Federal
Communications Commission ("FCC" or "Commission") in the
aforementioned proceeding.(1)  Advocacy hosted a roundtable
Monday, November 17, 2003, on the economic impacts of the fax
advertising provisions in the FCC final order for the "Do-Not-
Call" rules.  Advocacy is filing this letter to supplement
Advocacy's ex parte notice filed earlier this week.(2)

Commonly referred to as the "Do-Not-Fax" provisions, the Fax
Advertising provisions potentially affect the use of fax
communications by small entities and the membership organizations
that represent them.  The numbers of small entities, as well as
the volume and nature of the fax communications affected by the
rule, are the subject of much debate.   As stated in our earlier
filing, Advocacy held the roundtable to discuss (1) which small
entities are affected by the rule, (2) the scope of the rule's
impact on small entities, and (3) available alternatives that are
less burdensome but still allow the FCC to accomplish its policy
objectives.

1.   Advocacy Background

Congress established the Office of Advocacy in 1976 by Pub. L.
No. 94-305 to represent the views and interests of small business
within the Federal government.  Advocacy's statutory duties
include serving as a focal point for the receipt of complaints
concerning the government's policies as they affect small
business, developing proposals for changes in Federal agencies'
policies, and communicating these proposals to the agencies.(3)
Advocacy also has a statutory duty to monitor and report to
Congress on the Commission's compliance with the Regulatory
Flexibility Act ("RFA").(4)

Congress designed the RFA to ensure that, while accomplishing
their intended purposes, regulations did not unduly inhibit the
ability of small entities to compete, innovate, or to comply with
the regulation.(5)  An objective of the RFA is for agencies to be
aware of the economic structure of the entities they regulate and
the effect their regulations may have on small entities.  To this
end, the RFA requires agencies to analyze the economic impact of
proposed regulations when there is likely to be a significant
economic impact on a substantial number of small entities, and to
consider regulatory alternatives that will achieve the agency's
goal while minimizing the burden on small businesses.(6)  The RFA
does not seek preferential treatment for small businesses.
Rather, it establishes an analytical requirement for determining
how public issues can best be resolved without erecting barriers
to competition.  To this end, the RFA requires the agencies to
analyze the economic impact of proposed regulations on different-
sized entities, estimate each rule's effectiveness in addressing
the agency's purpose for the rule, and consider alternatives that
will achieve the rule's objectives while minimizing burdens on
small entities.(7)

On August 13, 2002, President George W. Bush signed Executive
Order 13272 that requires federal agencies to implement policies
protecting small entities when writing new rules and
regulations.(8)  This Executive Order highlights the President's
goal of giving "small business owners a voice in the complex and
confusing federal regulatory process"(9) by directing agencies to
work closely with the Office of Advocacy and properly consider
the impact of their regulations on small entities.

2.   Small Entities Affected by the Fax Advertising Provisions

The first issue addressed by the roundtable was identifying which
small entities are affected by the FCC's Fax Advertising
provisions.  The rule prohibits the use of any facsimile machine,
computer, or other device to send an unsolicited
advertisement.(10)  The term "unsolicited advertisement" means
any material advertising the commercial availability or quality
of any property, goods, or services which is transmitted to any
person without that person's prior express invitation or
permission.(11)

The roundtable participants stated that such a broad brush
definition captures almost every small business in the country,
and many industry representatives argued that their entire
industry segment was covered by the rule.  The National
Automobile Dealers Association ("NADA"), for example, suggested
that the 20,000 to 30,000 automobile dealers would be subject to
the rule.  The National Association of Wholesaler-Distributors
("NAW") said their 40,000 members would be affected.  The
National Association of Realtors ("NAR") said that their 980,000
members would be affected.   The Associated Builders and
Contractors ("ABC") stated that their 23,000 member companies
would all be affected.(12)  The U.S. Chamber of Commerce stated
that this rule would affect every small business in the country,
particularly home-based businesses.

3.   Scope of the Economic Impact on Small Entities

The impacts of the proposed rule were discussed at length from
the point of view of both small entities and trade associations
representing small entities.  Based on the understanding that the
Established Business Relationship ("EBR") would be eliminated,
the consensus was that such a step would be disastrous from a
variety of reasons.  A small survey from NAW revealed that its
membership expected to pay an average of $22,500 to obtain
consent forms and an average of $20,000 for annual compliance.
It is worth noting that these preliminary results were based on a
membership that sent faxes to 6,912 recipients at an average of
9,034 locations.(13)

To all who were present at the roundtable, the impacts were
pervasive and did not differentiate between occupation and
industry.  The impacts are pervasive because of the established
business relationship between wholesalers and retailers; between
distributors and wholesalers; between manufacturers and
distributors; between realtors and prospective clients; between
lenders and borrowers.  All are currently based on fax
communications.  Within such realm, transactions are conducted,
and information about products and services are introduced.  It
is clear that in the conduct of everyday business, advertisements
and transactional documents are transmitted to facilitate the
conduct of current and future transactions.  Electronic mail has
not yet become as widespread as the telephone line.  A fax
machine hooks into a phone line, and functions just as a phone;
it is the most expedient medium of communication business to
business, and business to customer.  The fax line is a lifeline
for information and contracts to flow, so that goods and services
circulate from point A to point B.

The participants also raised specific issues that would add to
the costs of compliance with the Fax Advertising provisions.
Several participants raised training as a key expense.  Customer
service representatives and other employees must be trained in
what can be faxed and what cannot be faxed under the requirements
of the rule.  The constant turnover in the labor force means that
the training is an on-going annual cost.  Also, participants said
that multiple contacts will be needed to get signatures providing
consent, which increases the amount of time needed to comply with
the rule.  Since the rule requires permission for each fax
machine, recipients that move around a lot will require a new
signature at each location, which adds to the compliance burden.

Several participants raised the issue that members of the public
are hesitant to sign anything because concerns that their
signature could be construed as a contract.  Because the public
is nervous of being defrauded, obtaining signed, written
permission may not be easy to acquire.  Also, this could create a
barrier to new businesses or small businesses seeking new
customers.  Participants stated that the rules would apply to non-
profit as well as for-profit entities, since there is no
exception in the rule.(14)  If a non-profit sent "any material
advertising the commercial availability or quality of any
property, goods, or services," they would be required to get
signed, written permission just as any other business or entity
governed by the rule.

4.   Possible Alternatives to Minimize Burdens on Small Entities

The participants concluded that a few alternatives could
safeguard the use of facsimile devices as a viable form of
communication accomplishing the agency's regulatory objectives of
protecting consumer privacy and resources.  The roundtable
participants and the small businesses and entities they represent
felt there was a significant difference between entites who used
faxes as part of their communications with business partners and
"junk faxers" who send unsolicited faxes.

The participants suggested many alternatives that the FCC should
consider that would help minimize the impact on small businesses.
The suggested alternatives are listed below:

      The FCC should restore the EBR exemption and crack down on
     "junk faxers" by enforcing existing rules.  Regardless of an EBR
     exemption, if the recipient advises the sender to stop sending
     faxes through an opt-out clause, that request must be honored and
     is enforceable under the FCC rules.
    The FCC should eliminate the requirement that consent is
needed for each fax machine.  Instead, the FCC should make
permission entity-based so that a single permission is needed per
entity.
    The FCC should allow oral permission or requests to satisfy
the requirements for prior consent and permit fax on demand from
a direct solicitation from a customer or other business partner.
    The FCC should permit membership in an organization to
qualify as consent to receive faxes from the organization.
    The FCC should clarify its definitions and more narrowly
define what is covered in the rule.  The vagueness of the current
rule is causing a great deal of concern.

5.   Conclusion

Advocacy hopes that this information is helpful to the FCC as it
reconsiders the Fax Advertising portions of the Do-Not-Call rule.
Advocacy will continue to assist the FCC in its efforts to
collect impact information and craft a rule that accomplishes the
Commission's policy objectives and is not unfairly burdensome to
small businesses.  If any additional information becomes
available to Advocacy, we will forward it to the FCC for its
consideration.

Thank you for your consideration of these matters, and please do
not hesitate to contact me or Eric Menge of my staff at (202) 205-
6533 or eric.menge@sba.gov if you have questions, comments, or
concerns.


Sincerely,

Thomas M. Sullivan
 Chief Counsel for Advocacy

Eric E. Menge
Assistant Chief Counsel for Telecommunications

Radwan Saade
Regulatory Economist

Office of Advocacy
U.S. Small Business Administration
409 Third Street, S.W.
Washington, DC  20416
202-205-6533

Attachments:  Participant List for Fax Advertising Roundtable
November 17, 2003
NAW's Memo Summarizing its Fax Survey Data

cc:  Erica McMahon, Consumer and Governmental Affairs Bureau
Helen Hillegass, Consumer and Governmental Affairs Bureau
Carolyn A. Fleming, Office of Communications Business
Opportunities

ENDNOTES

1.   In the Matter of Rules and Regulations Implementing the
Telephone Consumer Protection Act of 1991, Report and Order, CG
Dkt. No. 02-278, FCC 03-153 (rel. July 3, 2003) ("Final Rule" or
"Order").
2.   Notice of an Ex Parte Presentation filed by the Office of
Advocacy, U.S. Small Business Administration in CG 02-278 (Sept.
18, 2003).  In accordance with FCC rules, Advocacy filed a notice
of an ex parte meeting for its roundtable.  In that notice,
Advocacy stated that it would supplement the filing with a more
complete summary of the discussion at the roundtable.
3.  15 U.S.C.  634(c)(1)-(4).
4.  Pub. L. No. 96-354, 94 Stat. 1164 (codified at 5 U.S.C.  601
et seq.) amended by Subtitle II of the Contract with America
Advancement Act, Pub. L. No. 104-121, 110 Stat. 857 (1996). 5
U.S.C.  612(a).
5.  5 U.S.C.  601(4)-(5).
6.  See generally, Office of Advocacy, U.S. Small Business
Administration, A Guide for Federal Agencies:  How to Comply with
the Regulatory Flexibility Act (2003).
7.  5 U.S.C.  604.
8.  Exec. Order. No. 13272  1, 67 Fed. Reg. 53,461 (2002).
9.  White House Home Page, President Bush's Small Business
Agenda, (announced March 19, 2002) (last viewed August 22, 2003)
<http://www.whitehouse.gov/infocus/smallbusiness/regulatory.html>
10. Order, para. 185.
11. 47 U.S.C.  227.
12. Associated Builders and Contractors did not have a
representative present at the roundtable but sent information
independently to Advocacy.
13. In their Petition for Reconsideration, NAW, the U.S. Chamber
of Commerce, and other entities attached discussions of the joint
petitioners addressing the impact on their organizations and
their members.  Petition for Reconsideration filed by the Chamber
of Commerce of the United States, the Associated General
Contractors of America, the Community Associations Institute, the
Credit Union National Association, the National Association of
Manufacturers, the National Association of Wholesaler-
Distributors, the National Grocers Association, the National
Restaurant Association, and the National Federation of
Independent Businesses, in CG 02-278 (August 25, 2003).  NAW
supplemented this filing with more comments on the impact on its
membership.  Reply to Opposition to Petition for Reconsideration
filed by the Office of Advocacy, U.S. Small Business
Administration filed by the National Association of Wholesaler-
Distributors in CG 02-278 (Oct. 27, 2003).  These filings contain
useful data on how small entities are impacted by the rule, and
the FCC should consider them in conjunction with the information
presented here.
14. In his Opposition to Advocacy's Petition for Reconsideration,
Mr. Walter Oney states that the Commission is not changing its
rules in regard to non-profit organizations and cites to
paragraph 128 of the Order.  This paragraph deals with the Do-Not-
Call rules and does not apply to fax communications.  Opposition
to Petition for Reconsideration filed by the Office of Advocacy,
U.S. Small Business Administration filed by Walter Oney in CG 02-
278 (Sept. 5, 2003).  The FCC did clarify its rules concerning
fax communications and membership in trade associations in
paragraphs 192-3 of the Order.


               Advocacy Fax Advertising Roundtable
                        November 17, 2003
                          Participants


Air-Conditioning Contractors of America -- Chris Brown
American Express and its Small Business Franchisees -- Antonella
Pianalto
American Society of Association Executives -- Chris Merida
American Society of Travel Agents -- Barbara O'Hara and Burton
Rubin
Credit Union National Association -- Catherine Orr and Mary Dunn
Halprin, Temple, Goodman & Maher -- Joel Bernstein
IH Counsel -- Taylor Monfort
International Foodservice Distributors Association -- Jonathan
Eisen
Mortgage Brokers Association -- Rod Alba
National Association of Realtors -- Mary Antoun, Jeanne Delgado,
Iona Harrison,
     and Lynn King
National Association of Wholesaler-Distributors -- Jade West
National Association of Women Business Owners -- Amanda Perl
National Automobile Dealers Association -- Paul Metrey
National Federation of Independent Business -- Lara Chamberlain
and Andrew Langer
National Grocers Association -- Tom Wenning
National Newspaper Association -- Jeff Carson and Tonon Rush
Senate Committee on Small Business and Entrepreneurship, Majority
Staff -- Marc Freedman
Senate Committee on Small Business and Entrepreneurship,
Democratic Staff -- Nigel Stephens
U.S. Chamber of Commerce -- Giovanni Coratolo and Michael Zaneis
Washington Policy Associates -- Melissa Moskal
Wiley, Rein & Fielding -- John Kamp
Yellow Page Integrated Media Association -- Amy Healy

National Association of Wholesaler-Distributors
1725 K Street, N.W., Suite 300
Washington, DC  20006
TEL:  202-872-0885      FAX:  202-296-5940
www.naw.org


Memorandum

TO:       Eric Menge, Assistant Chief Counsel for
Telecommunications
          Office of Advocacy, U.S. Small Business Administration

FROM:     Jade West, Sr. Vice President-Government Relations
          National Association of Wholesaler-Distributors

DATE:     November 17, 2003

RE:       Cost to Small Business of Compliance with FCC Proposed
          Ban on "Unsolicited Advertising" Faxes


In preparation for the November 17th, 2003 Office of Advocacy
Roundtable discussion of the "do not fax" regulations, we
initiated an internet-based survey of small business members of
NAW.  The survey was sent out to 550 individuals (representing
about 265 companies) late in the day on November 6th, and by the
close of business November 13th we had received 212 responses.
That is a response rate of almost 40 percent in only one week -
an indication of how serious this issue is to our small business
members.

All of the respondents had annual sales volume of less than $20
million.  72% had sales of under $15 million, and 39% were under
$5 million.  Almost a quarter of the respondents reported having
ten or fewer employees.

Use of the fax in daily business:

The respondents use faxes to communicate with both vendors and
customers, and it is clear that use of the fax is an integral,
vital part of their everyday business operations.  While clearly
not all uses of the fax would be prohibited, it would be
virtually impossible for small businesses to ensure that all
employees sending faxes accurately distinguish the permissible
uses from those that would be forbidden.  Among the common uses
of the fax cited again and again by respondents:

     Purchase orders, copies of orders, order acknowledgements
and confirmations
     Price quotations, pricing changes, special offers,
confirmation of verbal quote
     Invoices and copies of invoices
     Product information and specifications (esp. to buyers
without internet access)
     Drawings and artwork proofs
     Sales tax exemptions
     Credit applications and inquiries
     Terms of sale changes
     Notification of upcoming classes, seminars, open houses,
training programs
     Material Safety Data Sheets and other safety information
     EPA certifications
     Warranty information and product announcements
     Recall notices and repair bulletins
     Shipping and tracking information


Cost of compliance with proposed FCC regulations:

We asked the respondents how much it would cost them initially to
obtain written consent from all of the customers and vendors with
whom they currently communicate by fax, and how much it would
cost on an annual basis for them to maintain the records
necessary to remain in compliance if the definition of
established business relationship were changed to the 18-month
and 3-month periods proposed by the FCC.

The estimated cost of obtaining initial consent from established
customers and vendors ranged from as little as under a hundred
dollars to well over $100,000.  Discarding verbal rather than
numeric responses (and one that seemed too high to be realistic),
the total cost for the remaining respondents combined was
$3,929,435.  This is an average cost of $22,454, and a median
cost of $5,500.

The responses, similarly adjusted, for the estimated annual cost
of compliance totaled $3,235,057, producing an average annual
cost of $20,346 and a median cost of $10,000.

Many of those who provided verbal rather than numeric estimates
described the likely cost as prohibitive, substantial, expensive,
very high, outrageous, way too much, more than we can afford,
neither cheap nor easy.  One said he didn't want to know, and
several indicated that they did not believe they could comply.


Economic impact of compliance

Wholesaler-distributors typically average a profit of 2% on
sales.  Thus, by multiplying the costs of compliance with the
FCC's proposed fax regulations by 50, the amount of annual sales
necessary to cover these estimated costs can be determined.   The
following table shows the total of estimated costs, initial and
annual, and the new sales that just this small sample of small
businesses would have to generate to cover those estimated costs.


                         Initial cost of     Annual compliance
                         compliance          cost
Total of estimated costs $     3,929,435     $     3,235,057
New sales required to    $ 196,471,750       $ 161,752,850
cover costs