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[Senate Hearing 109-278]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 109-278
 
              S. 714, THE JUNK FAX PREVENTION ACT OF 2005

=======================================================================

                                HEARING

                               before the

        SUBCOMMITTEE ON TRADE, TOURISM, AND ECONOMIC DEVELOPMENT

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 13, 2005

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation

                    U.S. GOVERNMENT PRINTING OFFICE
25-874                      WASHINGTON : 2006
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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                     TED STEVENS, Alaska, Chairman
JOHN McCAIN, Arizona                 DANIEL K. INOUYE, Hawaii, Co-
CONRAD BURNS, Montana                    Chairman
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon              BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
JIM DeMint, South Carolina           FRANK R. LAUTENBERG, New Jersey
DAVID VITTER, Louisiana              E. BENJAMIN NELSON, Nebraska
                                     MARK PRYOR, Arkansas
             Lisa J. Sutherland, Republican Staff Director
        Christine Drager Kurth, Republican Deputy Staff Director
                David Russell, Republican Chief Counsel
   Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
   Samuel E. Whitehorn, Democratic Deputy Staff Director and General 
                                Counsel
             Lila Harper Helms, Democratic Policy Director
                                 ------                                

        SUBCOMMITTEE ON TRADE, TOURISM, AND ECONOMIC DEVELOPMENT

                   GORDON H. SMITH, Oregon, Chairman
TED STEVENS, Alaska                  BYRON L. DORGAN, North Dakota, 
JOHN McCAIN, Arizona                     Ranking
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
JOHN ENSIGN, Nevada                  JOHN D. ROCKEFELLER IV, West 
GEORGE ALLEN, Virginia                   Virginia
JOHN E. SUNUNU, New Hampshire        JOHN F. KERRY, Massachusetts
JIM DeMint, South Carolina           MARIA CANTWELL, Washington
DAVID VITTER, Louisiana              FRANK R. LAUTENBERG, New Jersey
                                     BILL NELSON, Florida
                                     E. BENJAMIN NELSON, Nebraska
                                     MARK PRYOR, Arkansas

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 13, 2005...................................     1
Statement of Senator Boxer.......................................     2
Statement of Senator Lautenberg..................................     4
Statement of Senator Smith.......................................     1

                               Witnesses

Bladine, Jon E., President/Publisher, News-Register Publishing 
  Company........................................................     5
    Prepared statement...........................................     7
Feeken, Dave, Broker, RE/MAX; on behalf of the National 
  Association of REALTORS ' (NAR).....................    11
    Prepared statement...........................................    13
Kirsch, Steven T., Founder/Chairman, Propel Software Corporation.    19
    Prepared statement...........................................    21

              S. 714, THE JUNK FAX PREVENTION ACT OF 2005

                              ----------                              

                       WEDNESDAY, APRIL 13, 2005

                               U.S. Senate,
      Subcommittee on Trade, Tourism, and Economic 
                                       Development,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:45 p.m. in 
room SR-253, Russell Senate Office Building, Hon. Gordon H. 
Smith, Chairman of the Subcommittee, presiding.

          OPENING STATEMENT OF HON. GORDON H. SMITH, 
                    U.S. SENATOR FROM OREGON

    Senator Smith. We'll call to order this hearing of the 
Trade, Tourism, and Economic Development Subcommittee of the 
full Commerce Committee. The hearing is on S. 714, The Junk Fax 
Prevention Act of 2005. I apologize to those present that we've 
had votes get in the way of our starting at 2:30, but let's 
begin.
    I thank the witnesses for being here today. Today's hearing 
will focus on The Junk Fax Prevention Act of 2005. I thank my 
colleagues on the Senate Commerce Committee, Senators Inouye, 
Burns, Stevens, Dorgan, Lautenberg, Snowe, and Sununu, a broad 
bipartisan coalition, for co-sponsoring this legislation with 
me.
    S. 714 would create a statutory exemption to the current 
communications law prohibiting the faxing of unsolicited 
advertisements to individuals without their prior written 
invitation or permission. This bill would not legalize the 
sending of junk faxes or blast faxes, which have been 
prohibited for 13 years and will continue to be prohibited 
under this bill. This bill is about continuing legitimate fax 
communications between businesses and customers.
    S. 714 will strengthen existing laws by providing consumers 
the ability to prevent unsolicited fax advertisements and 
provide greater congressional oversight of enforcement efforts 
by the Federal Communications Commission. This bill will also 
help businesses by allowing them to continue to send faxes to 
their customers in a manner that has proven successful with 
both businesses and consumers.
    In July of 2003, the FCC reconsidered its Telephone 
Consumer Protection Act rules, and elected to eliminate the 
ability for businesses to contact their customers even where 
there exists an established business relationship. The effect 
of the FCC rule would be to prevent a business from sending a 
fax, fax solicitation, to any person, whether it is a supplier 
or a customer, without first obtaining prior written consent. 
This approach, while seemingly sensible, would impose 
significant costs on businesses in the form of extensive 
recordkeeping.
    Recognizing the problems created by this rule, the 
Commission has twice delayed the effective date of its 
implementation, with the current extension of its stay expiring 
on June 30, 2005.
    The purpose of this legislation is to preserve the 
established business relationship exemption currently 
recognized under TCPA. In addition, this bill will allow 
consumers to opt out of receiving further unsolicited faxes. 
This is a new consumer protection that does not exist under the 
TCPA today.
    We believe that this bipartisan bill strikes the 
appropriate balance in providing significant protections to 
consumers from unwanted, unsolicited fax advertisements, and 
preserves the many benefits that result from legitimate fax 
communications.
    We have heard from hundreds of associations, representing 
tens of thousands of large and small businesses, on the 
importance of swiftly passing this legislation to avoid 
interfering with legitimate communications. In the 108th 
Congress, this legislation passed both the Senate and the 
House, but was not signed into law prior to adjournment of 
Congress. We hope that both the Senate and the House can pass 
S. 714 in a timely manner prior to June 30, 2005, when the FCC 
stay expires.
    I want to publicly welcome and thank one of my 
constituents, Mr. Jeb Bladine, the publisher and editor of the 
News-Register, in McMinnville, Oregon, who is here to testify 
about how this bill will affect small businesses like him.
    I'm pleased to be joined by my colleague and my neighbor 
from California, Senator Barbara Boxer, who has a slightly 
different view of this bill, I think.

               STATEMENT OF HON. BARBARA BOXER, 
                  U.S. SENATOR FROM CALIFORNIA

    Senator Boxer. Thank you, Mr. Chairman, so very much. And, 
Senator Smith, thank you for the cooperative manner in which we 
have worked since the last session on this legislation.
    I expressed my objections then, and I was able to negotiate 
greater protections for consumers in the final bill that passed 
the Senate on December 8, 2004. A lot of it had to do with the 
fact that you were willing to work with me, and I so appreciate 
it now. These improvements included important protections for 
consumers, as well as for small business; however, S. 714, the 
legislation before us today, includes none of these protections 
and is a huge step backwards. This is clear to me that, instead 
of a Junk Fax Prevention Act, which is its title, I think it 
should be called The Junk Fax Promotion Act, because, at the 
end of the day, that's what we're doing.
    Let me begin by stating the facts. To clarify, if we do 
nothing here, junk faxes will end on July 1st. This legislation 
that's before us does not ban junk faxes, it lets them 
continue. It's important that this fact is on the record and 
that everyone understands it, because when you read a bill 
that's called The Junk Fax Prevention Act, you think that 
you're doing a good thing; but, in essence, you're promoting 
junk faxes.
    Let me explain in more detail. The FCC regulations 
scheduled to take effect on July 1 says that someone sending a 
junk fax needs written consent from the recipient. Pretty tough 
rule. You can't send a fax unless you get permission. On the 
other hand, the bill before us will allow any business with, 
``an established business relationship with the consumer to 
send unrequested faxes to that consumer's machine.'' Now, I'm 
sure you've gotten some of those Senator Smith. I certainly 
have. And it makes me crazy, using up my paper, my electricity, 
to come into my house, and I don't want another mortgage. You 
know? I've got a good one. And if I want a better one, I'll 
take action. And these people are sending me things. I'm 
getting them every day. And what I should have done is 
collected them, since December, but I didn't. Maybe I'll start 
today, and we'll see how many we'll have when we get this to 
the floor.
    Consumers interact with hundreds, if not thousands of 
businesses, each year. To say that all those businesses should 
then be allowed to indiscriminately flood individuals with 
faxes in perpetuity does not put a stop to a lot of our junk 
faxes. In fact, I believe it will open up the flood gates.
    One expert estimates--listen to this--that 2 billion faxes 
are sent every year, and that this language, the language in 
this bill, will allow for 4 billion faxes in the near future. 
Think of it. Under the bill that my colleague supports, which I 
hope we're going to be able to amend, any restaurant, drug 
store, or gas station that a consumer has visited will be able 
to send junk faxes to their home or business fax machines.
    Junk faxes tie up machines of individuals and businesses, 
rendering them unusable to their owners. It is not a trivial 
matter. It can be quite serious. For example, the University of 
Washington Medical Center in Seattle had to go to court to stop 
a sender of junk faxes who was crippling its machines, and, 
therefore, compromising patient care.
    Under this bill, the University of Washington Medical 
Center, or any other hospital, could be contacted by any drug 
or medical supply company, janitorial service, cleaning 
product, telephone system, or courier they had ever used, and 
have junk faxes sent to them. So we are opening the door to 
junk faxes wide open. I never thought that's what Senator Smith 
intended to do. But, in essence, that's what your bill does.
    As the San Jose Mercury News editorial page stated on 
August 27, 2004, ``Junk faxes rival only spam as the most 
egregious form of intrusive marketing. They unfairly force 
recipients to pay, in reams of paper and toner cartridges, for 
ads they never asked for.''
    Now, I acknowledge that the Federal Communications rule 
went too far. I think it's too burdensome to have to get a 
written consent for a business. And requiring such consent from 
every fax recipient, it is too burdensome, and it's too 
expensive for small businesses and others. But I disagree that 
an established business relationship should constitute consent 
for businesses to send faxes to homes and business just because 
I walk into a store and buy a product in that store. Part of 
the deal was, I gave my money, and I got the product, and 
that's the end of the deal. The deal doesn't mean that they can 
fax me forever. As much as I might love that store, I'm not 
inviting them into my home.
    So here's what I think we should do. Instead of written 
consent, I would support allowing verbal consent to suffice 
before a fax is sent. I think that's a pretty fair deal. You 
want to send a fax? Get verbal consent. That's important. Get 
consent. There must be consent. Because I buy toothpaste at 
Wal-Mart or I order pizza from Domino's doesn't mean that Wal-
Mart or Domino's should have the right to fax me, at will, with 
anything they want.
    So, in closing, the bill before us cancels the FCC's 
regulation, and it goes too far in the opposite direction. We 
shouldn't let it become law without provisions to protect 
consumers. Surely we can pass more reasonable legislation. 
We've done it on the Do Not Call List. That's one of our most 
popular pieces of legislation.
    So now we have a bill before us. It's misnamed The Junk Fax 
Prevention Act, when, in fact, it weakens, by miles, an FCC 
rule that I admit has gone too far. This takes us in the other 
direction, and it sanctions probably 4 billion faxes a year. 
We, as policymakers, should protect consumers from junk faxes, 
and I want to find this middle ground. And I'm hopeful that 
this panel will help us toward that middle ground.
    Thank you, Mr. Chairman.
    Senator Smith. Thank you, Senator Boxer. And there will be 
a mark-up tomorrow, and we'll certainly consider your ideas for 
finding that right middle ground. I think that is all of our 
motives.
    We've been joined by Senator Lautenberg, of New Jersey.

            STATEMENT OF HON. FRANK R. LAUTENBERG, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Lautenberg. Thank you very much, Mr. Chairman. I 
commend you for holding this hearing.
    People are weary of hearing the fax machine beckon your 
attention and finding out that you got another chance to buy 
stocks you didn't need. But it is, unfortunately, a good way to 
curtail the invasion of privacy, as Senator Boxer just said. 
You know, we did it on telephone calls; why shouldn't we be 
able to do the same thing concerning the unwanted faxes? The 
issue of unsolicited fax advertisements dates back to 1991, 
when we passed the Telephone Consumer Protection Act. Now, that 
law, still in effect, generally prohibits anyone from faxing 
unsolicited advertisements without, ``prior expression--express 
invitation or permission from the recipient.''
    In October 1992, the FCC released its original order 
interpreting the ban on unsolicited faxes. That order contained 
a footnote that facsimile transmission from persons or entities 
who have an established business relationship with the 
recipient can be deemed to be invited or permitted by the 
recipient.
    Now, this interpretation was followed for more than a 
decade, but in July 2003 the Commission reversed its position. 
As a result, many businesses and nonprofit organizations are 
confused about what is and is not permissible, and we need to 
clear up this confusion, while still protecting consumers from 
faxes that they don't want and allowing them to receive those 
they do.
    I'm an original co-sponsor of the Junk Fax bill. It is a 
sensible compromise. It balances the need for businesses, 
nonprofit organizations, and trade groups to continue to 
communicate with their consumers and members, while recognizing 
the right of the consumer to say ``no thanks'' to unsolicited 
faxes. The bill gives consumers an easy way to opt out of 
receiving unsolicited faxes, at no cost to themselves. And, 
finally, it requires the FCC to report annually on the 
enforcement of the junk fax provision, so we'll know how well 
these protections are working. And with effective enforcement 
and oversight, I believe that this bill will serve the public 
well.
    I thank you, again, Mr. Chairman, and I look forward to the 
testimony of the witnesses and the opportunity to ask 
questions. And, Mr. Chairman, I have a briefing, a sensitive 
briefing that I must go to. I assume the record will be kept 
open so that we can submit questions.
    Senator Smith. We'll keep the record open, Senator, so you 
can ask, in writing, any questions you like.
    Senator Lautenberg. Thank you very much.
    Senator Smith. Thank you.
    Our witnesses will go in this order: Mr. Jon Bladine, 
President and Publisher of the News-Register Publishing 
Company, in McMinnville, Oregon; Mr. Dave Feeken, Broker of RE/
MAX of the Peninsula, Kenai, Alaska--you've come a long way, 
and we thank you for that; and Mr. Steve Kirsch, Founder and 
Chairman of Propel Software Corporation, in San Jose, 
California. We thank you for being here.
    So, Jon, the mike's yours. We invite your testimony now.

STATEMENT OF JON E. BLADINE, PRESIDENT/PUBLISHER, NEWS-REGISTER 
                       PUBLISHING COMPANY

    Mr. Bladine. Thank you, Senator.
    Good afternoon, Mr. Chairman, Members of the Committee. My 
name is Jon Bladine, better known in my community as Jeb 
Bladine. I'm here to testify in support of S. 714.
    I'd like to summarize my testimony and provide a longer 
statement for the record, if I may.
    Senator Smith. Yes, we'll accept that. And you can shorten 
your statements, if you want, if you have longer ones, all of 
you. We will include them in the record.
    Mr. Bladine. Thank you.
    I am president and publisher of the News-Register in 
McMinnville. Our family business spans four generations, since 
1928, with business interests that include the newspaper, 
commercial printing, Internet access, and Internet software 
development. I'm here today, though, in my role as regional 
director of the National Newspaper Association, a board on 
which I represent community newspapers from Alaska, Idaho, 
Montana, Oregon, and Washington.
    The National Newspaper Association has nearly 2,500 members 
across America, and all of them are alarmed at the prospects of 
a signed-consent rule for commercial faxes. The FCC order 
eliminated the exemption for established business relationship, 
and would now require that we get written and signed permission 
before sending any advertising-related fax.
    The established business relationship was sufficient 
before. With this order, we would have to maintain a costly 
database and compliance system or abandon fax communications 
altogether. But the true faxers, those whose practices are 
already illegal, would continue. So, with that order, the 
guilty would proceed, and this order would punish the innocent.
    We were grateful that that deadline was extended. But now 
we are facing a July 1 compliance date. Unless Congress acts 
now, the cost of compliance with the FCC order will start to 
hit our balance sheets in a matter of days.
    Junk faxes waste resources at our business, too. But that 
blitz of anonymous ads does not come from the newspapers that I 
represent, and they don't come from the small businesses across 
America. We use the fax machine as an efficient and urgent tool 
to communicate information to people who want it. S. 714 would 
allow us to continue that responsible use of fax machines.
    I'd like to give a brief sense of how we use the facsimile 
machine. We send rate cards and market information to people 
who request it. We send information about advertising, 
circulation, distribution zones. The signed-consent rule would 
stop our advertising department in its tracks every day, maybe 
every hour. That department generates more than 80 percent of 
our newspaper revenue, so that's a pretty important thing.
    My newspaper has more than 5,000 current advertising 
clients, and many more who call for information. They call from 
local, regional, and national offices. To comply with the 
signed-consent rule, we would need a fax approval file that 
might reach 20,000 numbers.
    Many of our customers advertise only in special sections. 
For example, a wedding shop might miss the announcement about 
the bridal guide, and miss the single best marketing week of 
the season. We fax those announcements, because the advertisers 
prefer it, quickly, with the information that they want to get.
    Our clients want to see their ads in advance, and the fax 
machine often is the only realistic way to deliver them. E-mail 
has many problems with software and file attachments. In-person 
delivery is very expensive. So we use the fax machine.
    The FCC order would require that we interfere with our 
customers' lives to get signed consent forms. My colleague, 
Cheryl Kaechele, of Michigan, described this burden last 
summer, when she testified before the House of Representatives. 
She described that, ``We would have to deliver thousands of 
consent forms, try to convince clients that we need them, send 
staff out again and again to collect them, apologize for 
bothering them, hire staff to manage the process. Our newspaper 
members say that they would need the equivalent of a half-time 
person to comply with that rule.''
    And, even then, even if we were 99 percent compliant, still 
fax numbers change, people make mistakes. We worry that people 
might change their mind overnight about us, because of 
something we write. An angry reader might spot a fax that falls 
within that 1 percent margin of error, and, aha, a lawsuit. We 
would pay, even if the real conflict had nothing to do with the 
fax.
    This bill restores a sensible flow of commerce on fax 
machines. It recognizes established business relationships. 
Most importantly, it tells regulators to consider the true 
problem. Real junk fax doesn't come from newspapers or other 
business that have solid customer relationships. It comes from 
people trying to make a buck without building a business around 
respectable business practices.
    The solution is sound enforcement of laws against fax 
abusers, not punishing innocent small businesses. Congress can 
improve enforcement, and S. 714 takes a sound step in that 
direction. Our association, the National Newspaper Association, 
looks forward to working with this Committee for quick passage 
of this legislation.
    Senator Smith. Thank you very much.
    Mr. Bladine. Thank you, Senator.
    [The prepared statement of Mr. Bladine follows:]

      Prepared Statement of Jon E. Bladine, President/Publisher, 
                    News-Register Publishing Company

    Good afternoon. My name is Jon E. (Jeb) Bladine. My purpose here 
today is to testify in support of S. 714, The Junk Fax Prevention Act 
of 2005. Junk faxes are the bane of many small businesses, including 
mine, and I want to congratulate Senator Smith and his co-sponsors for 
introducing a reasonable way to address them while trying to avoid 
undue burdens on businesses that use the fax machine responsibly.

1. Introduction and Biography
    I am Publisher and Editor of the News-Register Publishing Company 
in McMinnville, Oregon. I am president of Oregon Lithoprint, Inc., a 
partner in McMinnville Access Company and Pacific Wave Communications, 
and chairman of the board of Oregon Interactive Corporation. Those 
titles are the long version of what I really do, which is to deliver 
information in print and electronically to my community in Northwest 
Oregon, and through the Internet, worldwide.
    My newspaper, the News-Register, has been in our family since my 
grandfather purchased it in 1928 and moved to Oregon from Iowa. Our 
family business spans four generations, and I am the fourth family 
member to serve as publisher. Our business interests include the 
newspaper, commercial printing, Internet access and Internet software 
development.
    I have served in local and statewide civic organizations, including 
the McMinnville Jaycees, McMinnville and Oregon downtown development 
associations, Oregon Children's Services and the Oregon Heritage 
Commission. I have been a board member, legislative chairman and 
president of the Oregon Newspaper Publishers Association.
    I am here today in my role as a regional director of the National 
Newspaper Association, a 120-year-old organization of community 
newspapers. NNA maintains a headquarters co-located with the University 
of Missouri, Columbia, MO, and a small office in Arlington, Virginia, 
to carry out our public affairs work. My job on the board, among other 
things, is to speak for community newspapers in my five states: Alaska, 
Idaho, Montana, Oregon and Washington.

2. Background of the Junk Fax Issue
    The National Newspaper Association has nearly 2,500 members. It is 
no understatement to say that our members are quite alarmed about the 
prospect that the Federal Communications Commission signed consent rule 
for commercial faxes goes into effect July 1.
    The Federal Communications Commission delivered quite a jolt to our 
industry with its Report and Order In the Matter of Rules and 
Regulations Implementing the Telephone Consumer Protection Act of 1991. 
That order, adopted June 26, 2003, and released July 3, 2003, turned 
our world upside down by reversing the Commission's long-standing 
recognition that faxes from our newspapers to our established business 
customers are not, in fact, unsolicited faxes in the meaning of the 
TCPA. In discussion of its Report and Order, the Commission said 
consumers feel ``besieged'' by unsolicited faxes, despite the fact that 
the law prohibited them before 2003 and continues to do so. It 
announced:

        ``The Commission has determined that the TCPA requires a person 
        or entity to obtain the prior express invitation or permission 
        of the recipient before transmitting an unsolicited fax 
        advertisement. This express invitation or permission must be in 
        writing and include the recipient's signature. The recipient 
        must clearly indicate that he or she consents to receiving such 
        faxed advertisements from the company to which permission is 
        given, and provide the individual or business's fax number to 
        which faxes may be sent.''

    The Commission expressly reversed its decision that an established 
business relationship (EBR) would be sufficient to show that an 
individual or business had given consent to receive a fax. This new 
rule was even more draconian than the procedures for compliance with 
the new Do Not Call rules, which were the principal subject of this 
Report and Order. At least in those rules, businesses were permitted to 
maintain relationships with their customers. Here, barring the creation 
of a costly database and compliance system, we will have to halt our 
recognized and traditional means of conveying information to people who 
want to receive faxes.
    To add to our consternation, the Commission initially permitted our 
businesses only about six weeks to come into compliance. I know 
concerned and agitated business owners and staffers all over the 
country besieged the Commission and this Committee about that short 
deadline. I know staffers besieged most of our publishers' offices as 
our marketing departments envisioned their summer turning into a futile 
scramble to obtain these consent forms in time. Fortunately, the 
Commission relented and extended the deadline, and then extended it 
again.
    Now we are staring down the barrel of a July 1 compliance date. And 
again, unless we set up costly database and compliance systems, we will 
see our use of the fax come to a halt this summer.
    This is why we need Congress to pass S. 714--and to move as 
urgently as possible. The expense will settle on our balance sheets 
this spring, within a matter of days, if action is not taken.

3. The Truth About Junk Fax
    All of us have seen our paper and ink go to waste from junk fax, 
for things ranging from cruises to low rate mortgages to health 
regimens for body parts that we don't all necessarily have. None of us 
like it. We may differ in our tolerance for other people using our 
machines to convey their commercial messages. But I hear complaints, 
and I complain myself from time to time.
    However, it is important to remember that the newspapers I 
represent, and most of America's small businesses, are not producing 
this blitz of fax ads that so irritate us. We use the fax machine as a 
convenience and an efficient and urgent tool to communicate information 
to people who want it. The FCC's signed consent rule trips us up 
without presenting much of a barrier to those irritating blast faxers.
    I assume that most of what we are complaining about already falls 
into the category of illegal faxes. Certainly, most of what I get comes 
from places I never heard of, and certainly not from companies with 
which I have an established business relationship. They were illegal 
before the FCC acted. They will be illegal after July 1. And they will 
continue to flow illegally after July 1, while legitimate commerce 
either abandons fax communication or absorbs a major and wasteful cost. 
Meanwhile, the junk faxers will continue to pursue their trade.

4. How Newspapers use Faxes
    I would like to give this Committee a better sense of how we use 
the facsimile machine.

A. Rate Cards and Market Information Requests
    We send information about the newspaper and website ad rates to 
those who request them every day. These are business requests for 
information about our newspaper and website advertising rates, 
information about upcoming special sections, market information about 
circulation numbers and distribution zones, and more. The signed 
consent fax rule would stop our advertising department in its tracks 
every day. Maybe every hour. Since more than 80 percent of our revenue 
is generated by that department, it's pretty important.
    In the past year we ran advertisements for 5,225 different 
customers. Some ran only one ad in that year; some ran several each 
week. Many times that number of potential customers telephone for 
information because they are considering running ads in our market. 
Also, many of our customers have multiple decision makers from a local 
store, regional headquarters, national headquarters, buying service, 
advertising agency, etc. It is no exaggeration to suggest that our 
small company would be required to maintain a FAX approval file with 
nearly 20,000 FAX numbers if we had to comply with this rule.
    These requests require the fax machine. Most advertising decisions 
are very time-sensitive. Since customers and potential customers need 
information quickly, they routinely ask us to FAX information to them 
rather than mail it. That information might be a rate card, information 
on a special edition, market demographics, deadline reminders or credit 
forms. E-mails sometimes are a nice substitute, but there are many 
problems with e-mail attachments. Many businesses still don't have e-
mail, but they all have fax machines. When people request information, 
they want a hard copy now, without having to figure out e-mail 
attachments.

B. Special Sections
    The bread and butter of a community newspaper is its special 
section calendar. In that sense, we may be a little like magazines. We 
cover the routine city council and school board news, but we also 
publish special sections that interest particular segments of our 
advertising clients and our subscribers. Our subjects range from bridal 
guides to sports reviews, from back-to-school to holiday gifts, from 
health and fitness to home and gardens, from economic development to 
community heritage.
    Among our 5,000-plus customers, many advertise with us only when 
one of these sections is available. A bridal shop, for example, could 
miss the single best marketing week of the season if it misses out on 
our special section announcement. Why do we fax it? Because the 
advertisers prefer to receive it that way. They don't have time to 
scroll through a hundred e-mails a day, and the mailbox contains a 
similar amount of material they don't want. The fax gets to them 
quickly and gives them what they need.

C. Advertising Proofs
    I know that in Washington, DC, most advertising is created by fancy 
agencies that do the work for a fee. In McMinnville, the advertising 
agency for most small businesses is the News-Register. A business may 
phone and talk out an ad concept by phone, but the owner wants to see 
it before it is published--to make changes, sign off, have time to 
prepare point of purchase materials that may be integrated with the 
newspaper piece.
    The fax machine is the only realistic way to get that proof to a 
small business. The e-mail route creates many problems with 
applications and attachments. We use a sophisticated design program 
that few non-advertising businesses keep on their own machines. If we 
send them the proof in the native application, they can't open it. If 
we send it in Adobe Acrobat, they usually can't edit it, and sometimes 
they can't even open it. If they don't have a computer, or their 
computer is on the blink, or the guy who usually runs it is gone that 
day, they are sunk. So they want a fax. The other choice is for someone 
to drive the proof to a customer, but that creates tremendous costs in 
manpower and fuel, as in pre-FAX days.

D. Invoices and Bookkeeping
    We send monthly statements to our advertisers. Those travel by 
mail. Often, however, advertisers call with questions, requests for 
adjustments, extra copies and so forth. Those often travel by fax. And 
since they concern advertising, I would assume the Commission would 
expect us to have consent forms before we sent them.

E. Other Uses
    A host of other creative ways are used in small towns to keep 
people informed. For example, NNA's member, the semi-weekly Wise County 
Messenger in Decatur, TX, has a daily fax newspaper ``Update'' that is 
distributed to about 1,000 of its business and residential subscribers, 
with news and advertising promotions that break between weekly 
editions.
    Finally, many of our members provide a public fax service. By that 
I mean that they may own the only fax machine in town that is available 
for public use. That is critical, particularly for senior citizens who 
may not have an office where a fax machine is available. These 
newspapers--usually in small towns--permit citizens to come in and use 
it as needed. This is a practice that would surely come to an end under 
the FCC rule because citizens would not commonly possess the signed 
consent forms. The publishers could not risk the liability of improper 
use, and they would not want to generate ill will with their customers 
by trying to explain all the new rules of faxing.

5. The Compliance Cost
    The principal concern with the signed consent rule is the 
Compliance cost. I mentioned the size of database we would need to set 
up as a tracking system for our group of businesses. While my company 
is among the larger ones in the community newspaper industry with about 
120 employees, many of NNA's members have fewer than 10 employees.
    The Commission has asked us to set up an entire system to interfere 
with our busy customers' lives so we can get these forms, and to 
repeatedly bother them to keep the forms up to date. I'm going to 
borrow from my colleague, Cheryl Kaechele, who described the burden of 
compliance last summer when she testified before the House of 
Representatives about this rule.

        ``Here is what I believe most of my publisher colleagues would 
        have to do, in order to comply with this rule:

        1) Acquire or upgrade a database program;

        2) Mail out, or hand carry, several thousand consent forms;

        3) Explain over and over, at the post office, at the golf 
        course, at church, standing in the school parking lot, that, 
        yes, we really must have these forms back;

        4) Send someone out again to get some of them back;

        5) Send someone out yet again to get some of them back;

        6) Explain over and over on the phone, `no, we can't fax you 
        the ad rates, because you forgot to send your form back;'

        7) Apologize to an irate customer, while standing in the post 
        office or in the school parking lot;

        8) Send someone out still again to get some of them back;

        9) Hire someone to file them, make a note of them in the 
        database, and remember to check them periodically to make sure 
        nothing has changed; and then . . .

        10) Send someone out again to get new forms back.

        ``You get the picture. It is going to require, in all 
        probability, hiring someone to do this work. Or it will require 
        shifting someone from selling ads or writing stories to take on 
        this new task.'' (Testimony of Cheryl Kaechele, Publisher of 
        Allegan County (MI) News, before the House Subcommittee on 
        Telecommunications and the Internet, June 15, 2004.)

    Really, what Cheryl is saying, is that the FCC is requiring us to 
spend a lot of time and money, and our customers' time and money, 
getting customers to do what they don't want to do--drop everything to 
sign yet another form. And for what? To stop junk fax? It won't stop 
junk fax. But it would hurt a lot of small businesses.
    NNA doesn't do a lot of survey work. Our association is small, and 
surveys can be quite costly. But we did ask members to give us a sense 
in 2003 of the cost they anticipated for compliance. Most of them told 
us they would be spending the equivalent of a half-time staff position 
to comply. This is a cost, for many small weeklies, that makes the 
difference between a profitable year and a loss.

6. The Threat of Litigation
    One of the most awesome and harmful aspects of the signed consent 
rule is the obvious threat that it leaves hanging over every small 
business. Fax numbers change. We may forget to file a form, or lose it. 
Someone with apparent authority to sign a form might never tell the 
boss, and then resign without our knowing the situation has changed. 
What is probably most worrisome to those of us in the journalism 
business is that people can change their minds about us overnight 
because of something we wrote.
    Certainly, we comply today with do-not-call and do-not-send 
requests. We get very few. And 99 percent of the time, we know for a 
fact that the faxes we send are going to people who want them. But in 
that troubling 1 percent margin of error may lurk the angry politician 
or community activist who disagreed with something I wrote in an 
editorial--and suddenly spies a fax from our marketing department on 
the table. Aha! Maybe we don't have the signed consent form. And here 
comes a lawsuit. Will we have the form? Will we find it in time? Will I 
have to pull Marketing off their campaign of the week to prepare a 
defense? And if we've messed up that time, will we pay, even though we 
know--and the recipient in all honesty knows--the issue isn't about the 
fax at all? If you think that doesn't happen to newspapers, come sit in 
my office for a day when there is a local zoning dispute or 
controversial referendum on the table.

7. S. 714 Takes a Sensible Approach.
    This bill gives us some breathing room and restores the sensible 
flow of commerce on the fax machine.
    It recognizes the importance of established business relationships.
    It requires us to tell customers how to stop future faxes from 
coming.
    It makes us responsible to demonstrate that we had the consent to 
send, should a dispute arise--as we have that responsibility today.
    It tasks the regulators with looking closely at where the real 
problem comes from. I don't think the FCC will decide, if it looks 
closely, that most of the junk fax is coming from us, or any other 
business that expects to maintain a solid relationship with its 
customers. Like spam, it comes from those who use the new technologies 
of our age to latch onto the low barriers to entry in business. They 
are trying to make a buck without going to the trouble of building a 
respectable business around respectable business practices.
    As an Internet company owner, I can assure you that efforts to stop 
spam by regulating our responsible use haven't made a dent in that 
practice. The signed consent rule will do no better with faxes. The 
solutions are found in transparency, sound enforcement, and education 
of consumers on how to do business with people they can trust. When 
spam and junk fax cease to be profitable, they will cease to exist.
    Congress can do a lot to improve the transparency and sound 
enforcement. S. 714 takes a solid and sound step in that direction, and 
I am delighted to declare the support of our organization for it. We 
look forward to working with this Committee for quick passage of this 
legislation.

    Senator Smith. Thank you.
    I notice that a vote has started, so we can either try and 
finish with our witnesses----
    Senator Boxer. Let's try to finish.
    Senator Smith. OK.
    Mr. ``Fakeen''--did I pronounce that correctly?
    Mr. Feeken. ``Feeken.''
    Senator Smith. ``Feeken,'' I'm sorry.

  STATEMENT OF DAVE FEEKEN, BROKER, RE/MAX; ON BEHALF OF THE 
      NATIONAL ASSOCIATION OF REALTORS ' (NAR)

    Mr. Feeken. Thank you.
    Senator Smith and Members of the Committee, my name is Dave 
Feeken. I'm a broker of a RE/MAX real-estate office in Kenai, 
Alaska. Our office is both a residential and commercial office. 
I am here representing the National Association of Realtors.
    NAR is the Nation's largest trade association, with 1.2 
million members. Our members include brokers, sales people, 
property managers, and other professionals engaged in every 
aspect of the real-estate industry.
    I appreciate the opportunity to share our thoughts 
regarding The Junk Fax Prevention Act of 2005, and commend the 
Committee for its leadership in recognizing that the Federal 
Communications Commission's revised rules governing the use of 
facsimile transmissions are a radical departure from current 
practices, and would significantly interfere with day-to-day 
business activities.
    First, let me say that NAR's members understand and 
strongly support the goals of the Telephone Consumer Protection 
Act. Realtors, themselves, are the recipient of unsolicited 
faxes that tie up our business fax machines. We understand the 
problem this legislation is intending to address. NAR does, 
however, question the need for the change that the FCC has made 
to the TCPA rules.
    The prior rules, with its established business relationship 
exception, has worked well over the past 12 years. In reversing 
its rule, the Commission could not measure the extent to which 
consumer complaints received were, in fact, the result of faxes 
sent as the result of the established business relationship, 
except as opposed to those sent in violation of the underlying 
ban on faxes sent outside of an EBR. However, it is clear that 
the Commission's revised rules to address unsolicited faxes 
would have the unintended consequences of interfering with 
solicited faxes.
    Despite all the advances in technology, the process of 
buying and selling real estate is still dependent upon faxes. 
And while faxes most commonly used today are to facilitate the 
paperwork associated with a home sale, faxes are also used in 
ways that could be construed as advertisement or solicitation, 
and would, therefore, meet the FCC's definition of an 
unsolicited fax.
    Let me give you an example or two. Real-estate 
professionals use faxes to communicate quickly and 
inexpensively with consumers who have contacted them. Take the 
case of a homeowner looking for an agent to help them sell 
their home. After an initial phone call, an agent could offer 
to prepare a comparative market analysis for a seller's review. 
This CMA provides comparative listing data on other homes on 
the market, describes what the agent will do to market the 
home, and proactively solicits the listing. These CMAs are most 
often faxed prior to a face-to-face meeting. Under the revised 
rules, faxing this presentation would not be permissible 
without prior signed permission.
    Real-estate brokers and agents also use faxes to send home 
listing information directly to potential buyers who request 
it. Under the revised rules, the real-estate agent could no 
longer followup on callers' requests for information on homes 
on the market with a fax of available properties. In a tight 
housing market, and those of you who live in this market know 
what a tight housing market is, the delay caused could have--in 
obtaining the written permission or mailing the information, 
could mean the difference between a buyer successfully 
purchasing a home, or not.
    Consider, too, how awkward this scenario would be when a 
potential customer calls and asks for information on a home for 
sale. As I've said, under the revised rules the agent would not 
be able to fax the information requested. Instead, the agent 
would have to explain why they can't fax the info, direct the 
consumer to a Website where they can provide there required 
written consent, or ask for an address so the agent can mail or 
courier the information, along with the consent form for future 
use. This will create frustration, suspicion, and, in some 
cases, ill will. This will be a giant step backwards in a 
business where good customer service depends on quick 
turnaround.
    And while I was asked to speak to the use of faxes in 
communications with consumers, I also must point out that 
organizations like NAR and its state and local associations 
routinely use faxes to communicate with members. Those faxes 
inform members about classes, products and services available 
to them, often at the member's preferred price. Once again, 
since these opportunities are available for a fee, these faxes 
would meet the definition of an unsolicited fax.
    The FCC has argued that obtaining written permission to 
faxes is not difficult. We disagree. Each of the means provided 
by the FCC for obtaining written permission--face-to-face 
meetings, direct mail, and e-mail with electronic signature--
presents a challenge for the consumers and the real-estate 
professionals. Interestingly enough, the one technology which 
is fast, inexpensive, and widely available is not an allowed 
means of distributing or returning permission forms. That 
technology is fax. In discussing the FCC, staff has indicated 
that faxing the permission form would not be allowed, since the 
form could be construed as a solicitation for which written 
permission is needed.
    Finally, we would like to have been able to quantify for 
you the likely cost of compliance with the revised FCC rule. 
Unfortunately, though, we are unable to predict how more than 
1.2 million Realtors, approximately 12 million home sellers and 
home buyers, would have interacted if the revised rules had 
been in place last year. In our written testimony, however, we 
presented some conservative, simple assumptions. We estimate 
that a minimum of over 66 million written permissions would 
have been required to sustain last year's roughly six million 
home sales, 66 million forms that would have had to have been 
printed, sent, collected, and stored on the residential side of 
the real-estate business, alone. Obviously, the dollar costs 
involved in the preparation, distribution, and management of 66 
million forms would be sizable. As a result, NAR believes that 
it is critical that the established business-relationship 
exemption, which has functioned well since the FCC first issued 
rulings to implement the TCPA some 12 years ago, be 
reestablished, and that alternative means of giving consent be 
allowed. We believe that narrowly crafted technical-correction 
language of The Junk Fax Act can rectify the problems created 
by the new rules and continue protecting consumers from 
unwanted faxes that are already prohibited by the TCPA.
    We look forward to working with you and achieving this end 
and thank you for the opportunity to testify.
    [The prepared statement of Mr. Feeken follows:]

  Prepared Statement of Dave Feeken, Broker, RE/MAX; on Behalf of the 
          National Association of REALTORS ' (NAR)

    Chairman Stevens, Ranking Member Inouye, Senator Smith and Members 
of the Committee, the National Association of REALTORS ' 
(NAR) appreciates the opportunity to share its thoughts regarding S. 
714, the Junk Fax Prevention Act of 2005. NAR is the Nation's largest 
professional trade association with over a million members who belong 
to over 1,500 REALTOR ' associations and boards at the state 
and local levels. NAR membership includes brokers, salespeople, 
property managers, appraisers and counselors as well as others engaged 
in every aspect of the real estate industry.
    NAR commends the Committee for its leadership in recognizing that 
the Federal Communication Commission's (FCC) revised rules governing 
the use of facsimile transmissions are a radical departure from current 
practice and would significantly interfere with day-to-day businesses' 
activities and impose a costly new compliance burden on business of all 
types.
    NAR understands the goal of Congress in enacting the Telephone 
Consumer Protection Act (TCPA) was to protect consumers' privacy 
expectations to not be bothered by unwanted faxes. As business people 
and consumers, REALTORS ' are often the recipients of 
unsolicited faxes that tie up the fax machines vital to their real 
estate practices. We strongly support, therefore, the goals of the TCPA 
and believe that the law's provisions banning unsolicited faxes are 
appropriate. We also appreciate the FCC's efforts to craft rules to 
effectively implement the law and the Commission's willingness to meet 
with NAR leaders as we have worked to understand the new fax 
requirements.
    We do, however, question the need for the changes that the FCC has 
made to the rules governing the fax provisions of the law. The prior 
rules, with an established business relationship (EBR) exception for 
faxes sent by firms to established clients and allowances for 
alternative forms of permission, have worked well over the past 12 
years since implementation. The prior ruling created settled 
expectations among consumers and businesses alike.
    Now, however, it is also very clear to us that the Commission's new 
rules intended to stop unsolicited junk faxes will have the unintended 
consequences of interfering with solicited faxes. In the case of the 
real estate industry, for example, faxes sent in response to a consumer 
inquiry or in the course of normal business and desired by the 
recipient (consumer, agent or firm) will no longer be allowed. In 
addition, these new rules will also interfere with the NAR's and its 
state and local associations' abilities to satisfy members' 
expectations regarding communications and service.
    As a result, we believe that it is critical that (1) the 
established business relationship (EBR) exception which has functioned 
well since the FCC first issued rules to implement of the TCPA some 12 
years ago be reestablished and (2) alternative means of giving consent 
be allowed. These two actions are necessary so that communication with 
existing clients and those who have inquired about a good or service is 
not subject to overly burdensome and disruptive regulation.
    We believe that narrowly crafted, technical correction language 
such as is being considered by the Committee in the Junk Fax Prevention 
Act of 2005, can rectify the problems created by the new FCC rules 
while at the same time continuing to protect consumers and businesses 
from unwanted faxes that are already prohibited by the TCPA.
Background
    The Telephone Consumer Protection Act (TCPA) of 1991 prohibits the 
use of any telephone facsimile machine, computer or other device to 
send an ``unsolicited advertisement'' to a telephone facsimile machine. 
An unsolicited advertisement is defined ``as 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.'' \1\
---------------------------------------------------------------------------
    \1\ 47 CFR Sec. 64.1200(f)(10).
---------------------------------------------------------------------------
    When first implementing the new law in 1992, the Federal 
Communications Commission determined that an established business 
relationship constituted express invitation or permission to receive an 
unsolicited fax. As part of its July 2003 Do-Not-Call (DNC) rulemaking, 
the FCC revised that interpretation.
    In reversing its long-standing rule, the FCC determined that the 
TCPA requires a person or entity to obtain the express invitation or 
permission from the recipient before transmitting any unsolicited fax 
advertisement. This express invitation or permission must be in writing 
and include the recipient's signature. The recipient must clearly 
indicate that he or she consents to receiving such faxed advertisements 
from the company and the individual within the company to which 
permission is given. Furthermore, the consent form must specify the 
individual and the fax number to which faxes may be sent. The 
permission form cannot be faxed to the recipient or submitted via fax 
to the entity to whom permission to fax is granted. \2\
---------------------------------------------------------------------------
    \2\ 2003 Report and Order, In the Matter of Rules and Regulations 
Implementing the Telephone Consumer Protection Act of 1991, CG Docket 
No. 02-278 para.191 (rel. July 3, 2003) (``2003 Report and Order'').
---------------------------------------------------------------------------
The Importance of Faxed Information to the Real Estate Industry
    Despite all the advances in communication technology, the process 
of buying and selling a home is still heavily dependent on the ability 
to send and receive faxed information. Consequently, real estate 
brokers and agents use facsimiles regularly to communicate with other 
real estate professionals, settlement and other service firms, as well 
as with both home buyers and sellers.
    The most common use of fax by the real estate sales industry today 
is to facilitate the completion of the paperwork associated with the 
sales transaction, i.e. offers to purchase, counteroffers, disclosure 
forms, etc. While these transactional faxes seemingly would be exempt 
from the new rules, faxes are also routinely used for purposes that 
would unfortunately meet the current definition of an ``unsolicited'' 
fax.
    Business to Business Faxes. Real estate sales agents and brokers 
commonly use facsimiles to quickly share new property listings with 
other real estate professionals who are active in a given market and 
may have clients interested in purchasing a newly listed property. In a 
survey of members of NAR, REALTORS ' also indicated that 
faxes are commonly used to inform other real estate professionals of 
price reductions on a property that had been viewed by that agent's 
clients or the time and date of open houses for newly listed homes. 
Such faxes communicate valuable market information that benefits 
recipients and their clients in a manner that is both timely and cost-
effective.
    Business to Consumer Faxes. Real estate sales professionals also 
use faxes to communicate in a quick and cost-effective manner with 
consumers who are looking to sell or buy a home.
    When selling their home, most homeowners contact a real estate 
professional or a number of agents about listing the house. In response 
to the inquiry, an agent will typically prepare a comparative market 
analysis which (1) describes what the agent would do to market the 
home, (2) provides comparable listing data on homes currently on the 
market so as to begin discussion about a possible listing price and (3) 
proactively solicits the listing.
    In those situations where time is of the essence, this comparative 
analysis is faxed to the seller for review prior to any face-to-face 
meeting. In some cases, such as the sale of a resort or inherited 
property, a face-to-face meeting may not even occur due to time or 
distance constraints. In all cases, this informational exchange takes 
place prior to any formal business agreement, i.e. listing agreement, 
which could provide a vehicle for the necessary written permission to 
fax. Under the new rules, faxing this listing presentation or even 
comparative listing information would not be permissible without prior 
signed permission.
    Real estate brokers and agents also routinely use faxes to send 
house listing information directly to potential buyers who may request 
it by telephone, but with whom the agent has not yet entered into a 
formal representation agreement. Under the new rules, a real estate 
professional could no longer share new listings or follow-up a 
telephone, personal or even Internet-delivered inquiry with targeted 
research via fax. Consequently, the new rules meant to deal with 
unsolicited faxes would have the unintended effect of interfering with 
solicited faxes.
    In a tight housing market, the delay caused by having to obtain 
written permission from a potential client or another real estate 
professional before the relevant house listing information is sent 
could mean the difference between a buyer getting a house they want or 
losing it.
    Consider too how awkward this scenario would be when a potential 
customer calls and asks for information on a home for sale. Under the 
new rule, the real estate professional would not be able to fax the 
information requested. Instead the agent or broker will have to explain 
why they can't fax the information, direct the consumer to a website 
where they can obtain a form to provide the required written consent or 
ask for an address so the real estate professional can mail or courier 
the information along with a consent form for future use. This will 
create frustration, suspicion and, in some cases, ill-will. This would 
be a giant step backwards in a business where good customer service 
depends on quick turnaround.
    REALTOR ' Association to Member Fax. Similarly, NAR and 
its state and local associations routinely use facsimiles to 
communicate quickly and efficiently with members. These faxes inform 
members about upcoming continuing education classes, meetings, 
seminars, products, services, and membership renewal. This is 
information that members not only expect, but for which they have paid 
NAR, state and local associations dues to receive. Once again, many of 
these faxes will meet the definition of unsolicited fax advertisements 
and could not be sent under the new FCC rules.
The Feasibility of FCC-Suggested Means of Obtaining Permission
    The FCC has argued that obtaining written permission is not a 
difficult thing to do. We disagree. A close examination of the methods 
proposed by the FCC for business to obtain consent--``direct mail, 
websites and interaction with their customers in their stores''--points 
out the hurdles unanticipated by the FCC that will be encountered by 
the real estate professional.
    Face-to-Face Meetings. As our previous examples indicate, face-to-
face meetings are not the norm and are sometimes impracticable prior to 
the need/desire to fax. Unlike the corner grocery or neighborhood 
restaurant, consumers do not regularly visit their local real estate 
firms' offices. (Most consumers engage in a real estate transaction 
every 7 years.) Consequently, most real estate practitioners will not 
have a consumer's permission to fax on file when a request for 
information is received.
    A face-to-face meeting will require a special trip that takes time 
and incurs some travel expenses. At a minimum, these costs will 
increase the cost of a transaction that will be absorbed by the agent, 
real estate firm or consumer. At its worst, a face-to-face meeting will 
be impossible, e.g. where an owner lives out of the area as is commonly 
the case in a resort market or when property is inherited.
    Courier. A permission form could be hand-delivered to a potential 
fax recipient via courier or messenger service. This is an expensive 
means of delivery and would be impracticable from a cost perspective 
for all but a very small number of transactions or those transactions 
with an assured outcome. Real estate professionals commonly respond to 
large numbers of customer requests for information--only one in twelve 
contacts eventually results in a home sale and compensation. Delivering 
and collecting permission via courier or messenger would be cost 
prohibitive for most real estate practitioners.
    Mail/Overnight Delivery. Using an overnight service will have the 
same cost drawbacks as a courier service. Both regular and overnight 
mail will suffer from the additional problem that an interested 
customer will have to wait 24 hours or more before the information that 
they requested can be delivered. In our ``instant gratification'' 
world--and an industry where quick customer service can be the 
difference between gaining a new customer or not--the inherent delayed 
delivery of materials would make this a very unattractive approach.
    Internet/E-Mail/Electronic Signature. Despite the rapid adoption of 
the Internet and e-mail, there are still significant numbers of 
households--including underserved minority, immigrant and low-income 
populations, etc.--with limited or no access to the Internet, e-mail or 
the technology which would allow them to access, let alone sign, an 
electronic document. Additionally, not all states have enacted 
legislation that allows for the electronic signature of documents. 
Electronic delivery, therefore, is seriously limited in those markets 
where real estate professionals serve a population with limited access 
to this means of access or without the appropriate state enabling 
legislation.
    Fax. We would point out that faxing a permission form to a consumer 
would be a quick and inexpensive way to disseminate the form and 
receive permission. However, in discussions held with the FCC staff on 
this matter and in its written guidance, the FCC has indicated that 
faxing a permission form would not be allowed since the form itself 
could be construed as a solicitation or advertisement. \3\ Likewise, a 
faxed permission form with a signature would not provide the necessary 
written permission because the signature is not considered a valid, 
original signature in some jurisdictions.
---------------------------------------------------------------------------
    \3\ 2003 Report and Order, para. 191.
---------------------------------------------------------------------------
    Faxes have been used by the real estate industry to deliver 
information to consumers and other real estate professionals because of 
(1) the speed of delivery and (2) the minimal cost associated with that 
speedy transmission. While it is possible to use one of the FCC 
recommended means to obtain written permission, doing so will result in 
delay, increased costs and the very real possibility that the window of 
opportunity to purchase a given property will be lost. It is hard to 
imagine that these new rules will not impede the ability of real estate 
professionals to quickly and efficiently help homebuyers and seller 
complete a real estate transaction.
The Magnitude of the Resources Needed for Compliance Purposes
    While the cost of obtaining a signed permission in any one instance 
may not seem significant, in the aggregate, the magnitude of the new 
paperwork required to obtain written permission and the cost of 
delivery (e.g. courier, overnight, or mail) required by the new rules 
are sizable. For example, if the new rules had been in place for 2004, 
NAR estimates that roughly 66 million permission forms would have to be 
printed, circulated, processed and stored in the first year by the real 
estate sales industry in order to comply with the new written 
permission requirements. This total breaks down as follows:
    Agent to a Consumer. Last year, approximately 6 million homes 
changed hands. If we make a conservative assumption that each seller 
requested information from two potential listing agents that would 
typically be faxed today and each buyer received two faxes from two 
different agents during their home search that were subject to the new 
rules, then approximately 24 million faxes would have been sent and 24 
million signed permission forms would have been required before those 
faxes could be sent. Those 24 million permission forms would have to be 
printed, delivered to the consumer by some means at a cost, returned to 
the agent also at a cost, filed and stored.
    This estimate does not account for the fact that many families shop 
for a new home each year without purchasing a home. Consequently, the 
estimate of 24 million permissions required is a significant 
underestimate of the volume of permission forms that would in fact be 
generated by the industry acting to comply with the new rules.
    Agent to Agent/Real Estate Firms. According to our surveys, faxes 
are typically used by real estate professionals to advertise open 
houses, announce new property listings and changes in asking prices for 
listed homes. To estimate the number of permissions needed to 
facilitate faxes for these purposes, we can conservatively assume that 
each of our 1.2 million, self-employed members will want to fax, at one 
time or another, to at least ten real estate firms/offices, ten 
individual agents home offices, five settlement service providers and 
five general business service providers. Thirty million six hundred 
thousand permissions, therefore, would need to be gathered to allow for 
unfettered faxing between real estate professionals and the other real 
estate professionals and firms with which they work.
    Given that the real estate sales population changes significantly 
from year to year as new agents enter the industry, others leave the 
business, and fax numbers are changed and added, the need to seek 
permissions will be an ongoing yearly effort. Consequently, the 30.6 
million estimate will be a first year figure that will be added to each 
year as new permissions are needed to stay current of all the changes 
that have ensued.
    Real Estate Firms to Agents/Other Firms. In addition, the Nation's 
93,000 real estate firms, as legal entities distinct from their 
independent contractor agent sales force, would also need to obtain 
permission to fax to real estate professionals and other firms. 
Assuming that each firm will have the need to fax to ten other real 
estate firms, thirty agents, twenty settlement service providers and 
twenty other general business service firms, the number of permissions 
required to support the current level of fax activity that is accepted 
as common practice would total 7,440,000. Again, this figure is a first 
year estimate that will need constant updating to account for changes 
in the industry players and fax numbers.
    REALTOR ' Association to Member. In order for NAR and 
its state and local associations to continue to fax their 1.2 million 
members, an additional 3,600,000 signed written permission forms would 
be generated. REALTORS ' do not join just the national 
association but join their state associations as well as their local 
associations. Hence, the need for 3.6 million separate permission forms 
to be circulated, complied, maintained and checked prior to any 
communications via fax would be created. We would anticipate that this 
would be an annual exercise in which each of our associations would 
engage.
    A Final Thought. It is important to recognize that each of the 
forgoing estimates of numbers of permissions to fax that would be 
required to comply with the FCC's new fax rules are only one part of 
the cost equation. We have not attempted to estimate the dollar cost of 
obtaining each of these permissions and maintaining the resulting 
records since to do so would require a level of detail that we do not 
have available to us. However, it is clear that given the shear 
magnitude of the numbers involved and the costs of preparation, 
distribution, and management of the resulting paperwork that the costs 
will be substantial.

Compliance Cost vs. Benefits Achieved
    As we have illustrated, the costs associated with the elimination 
of the EBR and alternative means of granting permission to fax are 
enormous. This new burden is created despite the fact that the 
Commission's do-not-fax rules have worked for over a decade. In 
reversing the 1992 decision, the Commission did not note any consumer 
complaints that were a result of the established business relationship 
rule. Indeed, there is scant evidence of harm to justify the 
Commission's abrupt change.
    Though there is not evidence of harm that needed to be fixed by 
eliminating the EBR exception or alternative means of giving permission 
to fax, there is evidence of over 10 years of business expectations in 
reliance on that exception. NAR, real estate professionals, and 
entities in countless other industries implemented a practice of 
routinely faxing information regarding products and services to other 
entities with which they have an established business relationship.
    Accordingly, while the compliance costs of the new rule in the 
aggregate would be quite high, the benefits would be minimal. The faxes 
sent by and received by real estate agents are faxes which facilitate a 
business transaction. These are not the type of ``junk'' faxes that the 
TCPA and Commission rule were designed to prohibit. But the 
Commissions' revised rule for the first time covers all faxes, 
including those integral to existing and new business relationships in 
the real estate market.

A Solution to the Problems Created by the New Fax Rules
    NAR believes that the established business relationship exception 
to the TCPA rules should be reestablished and that other forms of 
consent should be allowed.
    In the matter of the EBR exception, NAR believes that the 
Commission correctly analyzed consumer expectations and the affect 
privacy interests in its 1992 rulemaking: ``a solicitation to someone 
with whom a prior business relationship exists does not adversely 
affect subscriber privacy interests.'' \4\ Also, the Commission 
prudently found that the standards for a telephone solicitation and 
faxed advertisement should be the same and thus exempted established 
business relationships from both sets of rules.
---------------------------------------------------------------------------
    \4\ 1992 Report and Order, In the Matter of Rules and Regulations 
Implementing the Telephone Consumer Protection Act of 1991, 7 FCC Rcd 
8752, para. 34 (rel. Oct. 16, 1992)(CC Docket No. 92-90) (``1992 
Report'')
---------------------------------------------------------------------------
    With respect to the allowance for means of permission beyond 
express written permission, NAR believes that consent should be allowed 
that is:

   faxed;

   provided electronically (whether by a web-based ``click-
        through'': or in an e-mail);

   orally (in person, by telephone, or in a telephone message); 
        or

   by automated means (in response to an automated fax-on-
        demand phone system by which the caller can request faxed 
        information).

    Written signed consent is unnecessary and imposes a requirement far 
out of proportion to the harm it seeks to address, and thus contradicts 
the intent of Congress in adopting the TCPA. The legislative history 
shows that Congress considered imposing a written requirement and 
decided against that high threshold of consent. The House Report 
accompanying the TCPA states that Congress ``did not see a compelling 
need for consent to be in written form. Requiring written consent 
would, in the Committee's view, unreasonably restrict the subscriber's 
rights to accept solicitations of interest and unfairly expose 
businesses to unwarranted risk from accepting permissions or 
invitations from subscribers.'' \5\
---------------------------------------------------------------------------
    \5\ H.R. 102-317, at 13 (1991). Though this statement was made in 
the context of telephone solicitations, the same rationale applies 
equally to the fax context.
---------------------------------------------------------------------------
    The Senate Report is equally on point. The Senate bill as 
introduced contained the phase ``express written consent'' in the 
context of telemarketing, but dropping the requirement that consent be 
written was one of three changes the Senate Committee made before 
favorably reporting the bill. The Committee justified its decision to 
drop the written requirement because the Committee found that mandatory 
written consent was ill-suited to the interests of consumers and 
sellers. \6\
---------------------------------------------------------------------------
    \6\ S.R. 102-178, at 5 (1991).
---------------------------------------------------------------------------
    A written consent requirement also is contrary to the Commission's 
telemarketing rules. Those regulations exclude from the definition of a 
telephone solicitation any call concerning the sale of goods or 
services in response to an individual's inquiry, when the individual 
would be expecting such a call. \7\ In contrast, the fax advertising 
rules not only specify that a fax sent in the same situation is an 
``unsolicited advertisement,'' but actually prohibit such a fax.
---------------------------------------------------------------------------
    \7\ 2003 Report and Order para. 114.
---------------------------------------------------------------------------
    This is problematic for two reasons. First, classifying a telephone 
call made in response to an inquiry as not a solicitation, but a fax 
sent in exactly the same circumstances as an unsolicited advertisement 
is confusing, contradictory, and arbitrary since the terms 
``solicitation'' and ``advertisement'' have the same meaning. This is 
particularly the case since, under the plain meaning of the term, a fax 
is not unsolicited if the recipient has made a request for the 
information and there are numerous other ways to invite or permit a fax 
other than by providing prior written and signed consent.

Conclusion
    In conclusion, we want to thank the leadership of the Commerce 
Committee for the opportunity to share the views of the National 
Association of REALTORS ' on the need for Congressional 
attention to the problems faced by the real estate industry as the 
result of the new fax regulations that will take effect January 1, 
2005. We strongly believe that consumers looking for new homes and 
rental units will be disadvantaged by the new regime as will real 
estate professionals and firms. We urge you to take action to create 
the statutory authority for an established business relationship 
exception needed by the FCC to allow the EBR exception that has served 
consumers and businesses well for over a decade and clarify once again 
that permission can and should be allowed to be granted by means other 
than express written permission.

    Senator Smith. Thank you, Mr. Feeken.
    Steven Kirsch?

    STATEMENT OF STEVEN T. KIRSCH, FOUNDER/CHAIRMAN, PROPEL 
                      SOFTWARE CORPORATION

    Mr. Kirsch. Thank you, Mr. Chairman, for allowing me to 
speak with the Committee on my perspective on this very 
important piece of legislation.
    I'm here representing the people who hate junk faxes, and 
there are over 200 million of us. There's only one real point 
of contention here, and that's whether to add an EBR exemption 
to the junk fax statute. The other witnesses have testified on 
the written consent issues, and we totally agree, that's not a 
problem, we should do that. But I'm here to talk about that 
EBR. And I'd like to give you compelling evidence, contrary to 
what you've heard from others, that adding an EBR exemption for 
junk faxes is something that should not, and must not, be done; 
not for my sake, but for everyone's sake, including the 
sponsors and including the gentlemen here.
    For example, I get a ton of unwanted junk mail in my 
mailbox every day from companies I've done business with in the 
past. You probably do, too. You know, suppose you write a law 
that forced me to pay both postage and printing costs for this 
advertising until such time as I notified each one of these 
businesses to stop? That way, all of these businesses could 
send me stuff that I don't want at virtually no cost to them, 
and force me to pay for it until such time as I got mad enough 
to write them each a letter to stop. How many of you would vote 
for such a bill? Well, I hope that nobody would, but that's 
exactly what you're being asked to do here today.
    Never before in the history of this country has it been 
legal to use another man's printing press and ink to print your 
advertising at the other man's expense and without his 
permission. But that is exactly what this bill proposes to do.
    The sponsors have proposed putting the EBR exception, 
``back into the TCPA'' in order to, ``restore the status quo,'' 
and, ``avoid a harsh impact on business communication without 
providing any tangible benefit to consumers.'' That's plain 
nonsense. It's utterly false. And the facts unambiguously show 
that exactly the opposite is true. An EBR exemption is 
completely unnecessary. And if you do put an EBR exemption in, 
you will impose a harsh impact without any benefit.
    The facts and the record show the following. Number 1, 
there never was, and there never has been, an EBR exemption for 
junk faxes. The EBR was deliberately removed from the TCPA 
before its passage in 1991. Number 2, there are no court cases 
that I'm aware of that have determined that there ever was a 
legal EBR exemption. Number 3, it's an undisputed fact that 
there never was, and never has been, an FCC regulation 
authorizing EBR for junk faxes. It's simply ain't there, folks. 
It's a matter of public record.
    There is no evidence that the TCPA, which never had an EBR, 
is not working well. This was admitted by the Fax Ban Coalition 
and in the testimony of NAR given today. For example, NAR has 
over one million members. They admit that they fax their 
members all the time. Their members fax other members. Their 
members fax their clients. Yet there are no known cases of the 
NAR or a real-estate agent having been sued for any legitimate 
business-related faxes.
    So your primary witnesses, the country's leading trade 
organization, which extensively uses faxes, is telling you it 
hasn't been a problem. It's only the written part that's been a 
problem. So if it hasn't been a problem, why do we need to fix 
it? In fact, we know the EBR exemption has never been necessary 
for the smooth functioning of business, because it's been there 
for 14 years, and nobody ever complained. In fact, hardly 
anybody even noticed. Furthermore, there's not a single company 
in the world that requires an EBR exemption to do legitimate 
business. Can you name one?
    The only use of an EBR exemption is to allow advertisers to 
send junk mail that people don't ask for. For example, NFIB has 
never been sued for sending legislative updates to their 
members by fax. That's why their members joined. But then NFIB 
faxed a five-page unsolicited ad to sell insurance to their 
members, they were sued, and they had to pay a whole $575 fee. 
The court said, in no uncertain terms, that there was no EBR 
for faxes. NFIB broke the law, because they broke their 
covenant with their members, who wanted legislative updates and 
not advertising. They can still fax their legislative updates 
to their members. That has never been regulated under the TCPA. 
Mr. Bladine's communications have not been regulated. Mr. 
Feeken, his--faxing of his presentation would not be permitted? 
That's not true. It's not even regulated under the TCPA. The 
point is--I mean, they just can't send ads by fax without 
asking first. It's simply good business practice. And it's also 
something that's very easy to do.
    Let me give you another scenario. I can call a RE/MAX 
realty office and ask for information on listings and other 
services. That creates an EBR with me and RE/MAX. If this bill 
passes, I would legally be able to send junk faxes to every RE/
MAX fax machine in the country advertising my anti-spam 
products, or anything else, for that matter. And I'd do so 
until each individual RE/MAX office tells me to stop. That's 
not cost free. That's not opt out at no cost. There's a lot of 
effort involved in opting out. That is what this EBR exemption 
in this bill will permit.
    In addition, if you institute an EBR you're going to cause 
everyone a lot of work for no benefit, and you're going to open 
the flood gates for adverse consequences. I've surveyed many 
people, and every single one of them would opt out of virtually 
all unsolicited advertising sent to them by fax, whether it is 
from businesses they know or don't know. And I would encourage 
you all to go do the survey yourself. Why force everyone to 
jump through a hoop to get rid of something that they never 
wanted in the first place? I mean, why force businesses to have 
to create 800-numbers and data bases and all those opt-outs 
that they don't have to do today? What's the point of that?
    In conclusion, everyone agrees that TCPA has generally been 
an extremely fine piece of legislation, because it succeeded in 
striking a reasonable balance between the wanted content and 
allowing that, or restricting the unwanted content. We all 
recognize the need to relax the in-writing requirement that the 
FCC has attempted to add to the regulations, and I agree with 
my fellow witnesses here, but there is no need for a new EBR 
exemption to be added. Any changes that you do to the TCPA 
should be done very carefully, and only if they're absolutely 
necessary. No company in the world needs an EBR exemption to 
send legitimate faxes to do business; however, it is 
reasonable, but it is not required, to add a special opt-out 
for membership organizations to send faxes to their members. 
And I have suggested suitable language in my written comments.
    Thank you, and I would be delighted to take any questions.
    [The prepared statement of Mr. Kirsch follows:]

   Prepared Statement of Steven T. Kirsch, Founder/Chairman, Propel 
                          Software Corporation

    Thank you Mr. Chairman for allowing me to speak with the Committee 
on my perspective on this very important piece of legislation.
    Everyone recognizes the need for legitimate businesses to send 
legitimate business communications to their customers without fear of 
being sued. With recent contemplated rule changes by the FCC, this 
ability has been placed in jeopardy and needs to be fixed.
    This bill seeks to solve that problem by doing two things: (1) 
clarifying that permission to send unsolicited advertisements can be 
granted verbally and (2) adding a new exemption to the law to allow 
businesses that I have an Established Business Relationship (EBR) with 
to send me junk faxes without my consent until I tell them to stop.
    The first thing is an excellent solution. The second is not.
    Unfortunately, adding an EBR exemption, while well intentioned and 
while solving one aspect of the problem, is completely unnecessary. It 
will actually hurt legitimate use of the fax machine for businesses 
because as written, the bill is so broad that it permits fax 
advertising practices that legitimate businesses don't use and thus 
permits abuses that will make legitimate faxes less useful the way spam 
e-mail makes legitimate e-mail less attractive. It creates a whole host 
of new problems and adds new burdens and costs. It's like ``whack-a-
mole''. . . solve one problem, create 10 or 20 more. Congress has 
better things to do than solve the same problem over and over and over 
again.
    A better approach is simply to clarify the terms in the TCPA to 
reflect the original intent and current business practice. This solves 
the problem and restores the status quo without imposing new burdens or 
introducing any unintended consequences.
Adding a new EBR Exemption Solves one Problem but Creates Many More
    Contrary to popular belief, there has never been an EBR exemption 
to the TCPA.
    Although the FCC did erroneously interpret the law this way, the 
courts have never adopted this interpretation and Congress never 
intended such an exemption. Since the enactment of the TCPA, I have not 
been able to locate a single court case where such an exemption has 
been upheld. In addition, businesses have been acting consistent with 
Congress' intent and the court's interpretation as well. For example, 
there is not a single public company that I am aware of that sends junk 
faxes to their customer base. And there is certainly no company in the 
United States that needs to have an EBR exemption to send junk faxes in 
order to conduct business.
    Therefore, adding a new EBR exemption to the TCPA as currently 
proposed in this bill, is not only completely unnecessary, but it is 
also counterproductive for the following reasons:

   It would dramatically increase the amount of junk faxes I 
        get by an unpredictable amount. NOBODY I know wants to get more 
        junk faxes.

   It would increase my costs since I would bear the cost 
        having to opt out of each and every junk fax and keep records 
        and receipts of each request. In short, Congress would be 
        imposing a huge, unwanted cost burden on all recipients of this 
        advertising. All the recipients would be forced to incur costs 
        for something that they never wanted in the first place.

   It would also increase the burden on every sender who would 
        then be responsible for setting up a toll free opt out number 
        and keeping track of all opt out requests. The record keeping 
        burden of the advertiser would actually increase under this 
        proposal as the sender would now have to track both opt in and 
        opt out requests.

   It would increase the legal liability of the sender since 
        the database of opt out numbers would be close to 100 times 
        larger than having to maintain an opt in database. Any typo, 
        omission, or mistake in the opt out database required by this 
        law could generate a lawsuit. So lawsuits against businesses 
        are 100 times more likely under the opt out rules required by 
        this legislation. That's not a guess; it's a mathematical 
        certainty.

   It opens up the door for legalized abuse via the 
        ``unintentional EBR'' that I describe below creating an 
        unpredictable torrent of junk faxes that would then be legal 
        but completely unexpected and unwanted.

   I've surveyed many people chosen at random and every single 
        one of them would opt-out of virtually all unsolicited 
        advertising, whether it is from businesses they know or do not 
        know.

    The bottom line is this: adding a new EBR exemption to the TCPA 
would create needless amounts of work for both sender and recipient, 
impose new costs on the recipients without their consent, and 
accomplish NOTHING of any economic value.
    Huge burden on everyone, no value. What's the point of that?
    But there is a better way.

A Better Approach: Clarify the Original Intent
    I spoke with Jeb Bladine who is testifying here today. In the 30 
years he's been in business, his firm has never been sued for the 
business communications he's sent via fax. Nor is he aware of anyone in 
his local community that has been sued for sending junk faxes. They all 
use faxes responsibly and the existing law has worked for them as 
written and interpreted by the courts.
    Because the law has been working to everyone's satisfaction until 
the recent rule changes, it is clear that the best way to fix the 
problem without introducing new ones is to clarify the existing law as 
it has been interpreted by the courts over the last 14 years since the 
TCPA was enacted.
    The best way to restore the status quo is by doing two simple 
things:

   Clarify that permission does not need to be in writing.

   Modify the definition of ``unsolicited advertisement'' so 
        that all requested business communications are clearly 
        permitted.

    Normal request-response business communication then works as 
expected without fear of litigation. All such communication, such as 
asking your favorite restaurant to fax a menu or asking your real 
estate agent to send you house information, a purchase contract, or 
counter-offer, etc., would be exempt. These are normal business 
communications where the recipient has requested the material being 
transmitted and should not be considered ``unsolicited advertisements'' 
that should be regulated by the TCPA.
    Even if no records of the request whatsoever are kept by the 
sender, the very nature of the material being sent and the number of 
telephone calls made to fax machines by the sender are evidence that 
would provide an affirmative defense available to any business that 
might be sued by an unscrupulous recipient. For example, a restaurant 
that faxes an occasional menu to people who call in requesting it is a 
legitimate purpose. It is far different than a restaurant who blindly 
sends out their menu to every fax number in the local Chamber of 
Commerce directory.
    In short, judges determine whether the material in question 
constitutes an unsolicited advertisement or legitimate business 
communication by looking at a number of factors in order to determine 
whether express consent was given or not:

   examination of the material being faxed,
   the past behavior of the sender (including phone records),
   the nature of the relationship between the sender and the 
        recipient.

    Non-profit membership organizations such as the National Federation 
of Independent Businesses (NFIB) or the local Chamber of Commerce can 
still communicate by fax with their members under this proposal. They 
should just include a statement in their membership forms that by 
joining and providing your fax number, that you are allowing broadcast 
communications related to the organization to be sent to you via fax. 
Or even better, they could have a check box as to whether the member 
wants to receive official communications by fax, e-mail, etc. This is 
simply good business practice and any legitimate business already does 
this.

Further Protections
    If Congress wishes to further protect the fax communications of 
non-profit business to communicate with their membership, then it is 
reasonable to authorize the FCC to add a special carve out for non-
profit membership organizations communicating to their membership based 
on subjects that are consistent with the mission of the organization, 
e.g., the Chamber of Commerce could fax a notice about a small business 
seminar the Chamber is putting on, but could not fax discount coupons 
to the local cash wash to members without their consent.
    Another important change to protect recipients would be to require 
that professional ``fax broadcasting'' companies always identify 
themselves on the fax regardless of whether they have a high level of 
involvement or not in the sending of the fax. This would expose the 
identity of a small handful of illegal fax broadcasters who are 
responsible for a large portion of the junk faxes sent today.

Summary
    Because the recipient bears the brunt of the costs on a fax 
transmission, fax machines always have to be a request/response 
mechanism for business communications, not a low-cost mass advertising 
medium for businesses. We need to keep it that way.
    The proposed clarifications to the definitions would maintain the 
status quo; ensuring that legitimate communications are protected 
without opening the door to abuse. That benefits everyone: consumers, 
big business, and small business, whether they are recipients or 
senders.
    If these clarifications are not acceptable, a widely accepted 
alternative is for Congress to remove the written permission 
requirements and order the GAO study. That way, any additional changes 
can be reviewed with the benefit of the GAO study results for guidance.
    The following sections provide more detail to the concepts 
presented above.

Adding a New EBR Exemption to the TCPA Would Be Unprecedented
    When the original TCPA was debated in 1989, unsolicited faxes were 
recognized as the equivalent of ``getting junk mail with the postage 
due''--except that you have no chance to decline the charges. 
Telemarketing Practices: Hearings on H.R. 628, 2131, and 2184 Before 
the Subcommittee on Telecommunications and Finance of the House 
Committee on Energy and Commerce, 101st Congress, 1st Session (1989) 
Sup. Docs. No. Y4.En2/3:101-43 (U.S. Government Printing Office). 
Unsolicited faxes are no different that using another man's printing 
press and ink to print your advertising, at the other man's expense and 
without his permission. This conduct has never been legal--even before 
the TCPA was enacted, common law cases recognized this as trespass to 
chattels and some brave souls actually brought junk faxers to court and 
won. See Fax Weighed, 22 Cents Won in ``Junk Mail'' Suit, L.A. Times, 
July 4, 1991, p. 4.
    Let me give you an example. I get a ton of unwanted mail every day 
from companies I've done business with in the past. How about you?
    Suppose we create a law that forced recipients to pay both postage 
and printing costs for this advertising until such time as they 
notified each business to stop sending the ads? That way, all of these 
businesses could send me stuff that I don't want at virtually no cost 
to them and force me to pay for it. How many of you would vote for such 
a bill?
    I hope no one would.
    And ironically, the same business that would love to do that to 
their customers would oppose having their customers do it back to them! 
In short, it'd be great if I could do it to others, but I'd sure hate 
it if someone did it to me.
    Let me ask you another question. How about we pass a law that would 
permit these same business to send me all this stuff that I now get in 
the mail to my fax machine?
    Businesses would LOVE that because it would reduce their 
advertising costs. Virtually every single one of these pieces could be 
sent via fax at a much lower cost than mailing it because faxing shifts 
virtually all of the costs of the advertising on to the recipient.
    Should we do that? Should we legalize it so advertisers can send 
you ads you never asked for at your expense until you tell them to 
stop?
    I don't think you should. But that's exactly what you're being 
asked to do here!
    It would be like telling Mr. Bladine that anyone who calls his 
newspaper is entitled to a full page ad in his paper for free, until he 
explicitly asks them to stop.
    Some people dismiss junk faxes as a de minimus part of owning a fax 
machine. But ask yourself who is more harmful to society--a man who 
steals one dollar from a million people, or a man who steals a million 
dollars from one person? In both cases a million dollars is stolen. But 
the former miscreant is more harmful because he can fly under the radar 
and the million dollars is never recovered because it isn't worth it to 
any single victim. That's true with junk faxes. According to experts 
and published reports, there are over 2 billion junk faxes sent each 
year and that number is growing. That practice steals hundreds of 
millions of dollars from American's pockets--a few cents at a time.
    In 1991, Congress considered and explicitly rejected allowing a 
business to send faxes to someone with whom it had an ``established 
business relationship.'' The FCC admits that it was in error in 1995 to 
pencil back in what Congress took out, and now has taken steps to 
correct that error.
    Before rushing to do this however, we must remember--you are 
creating a legal right for one person to use another person's property 
and to take the other person's paper and ink for their own use, all 
without consent. No one would argue that a merchant has the right to 
come into my house or office (at any time of the day or night), drop 
off an advertisement, and take three to forty cents off of my night 
stand in order to offset his advertising costs. Yet that is precisely 
what you will do if you create any exemptions to the junk fax 
prohibitions in the TCPA.
    So even if we disagree in the details or scope of any exemptions to 
be added to the TCPA, we all have to agree that because we are shifting 
the costs for billions of unsolicited faxes onto recipients, we must 
craft such exemptions carefully and conservatively.
    Several portions of this bill are not controversial. The annual 
report and GAO study are certainly in that category. Relaxing the FCC's 
proposed new rule requiring express consent for junk faxes to be in 
writing is also not controversial. The sticking point is whether or not 
to create an exemption in the statute for anyone you have an 
``established business relationship'' with to send you junk faxes until 
you tell them to stop.
    There is only one major point of contention on this bill: whether 
or not to add new language to the TCPA to allow any business that you 
have a relationship with to send advertising to your fax machine 
without your consent until you tell them to stop.
    I'd like to explain why this is a bad idea and suggest a more 
appropriate alternative that accomplishes all the stated objectives of 
the author and sponsors of this bill and does so without any unintended 
consequences.

The ``Unintentional EBR''
    I'd like to give you two examples. Suppose Joe's Office Supply 
decides to take it's in-house customer list, and for those customers 
who have provided Joe a fax number and bought something in the last 
year Joe wants to send them an advertising flyer by fax. Now suppose 
Bill's Office Supply wants to send advertising faxes, so he buys the 
list of local fax numbers from the Chamber of Commerce and sends out 
fax ads.
    In this example, I have received both faxes, and in the past, I 
have bought something from both Bill and Joe. But I gave Joe my fax 
numbers, and intentionally withheld it from Bill since I suspected he 
might misuse it. What Joe did, was what I think most people think of 
when they talk about sending fax ads within an ``established business 
relationship'' exemption. That is an example of a ``legitimate'' 
established business relationship fax. But Bill's example is not. No 
one thinks that indiscriminate junk faxing should be permitted or 
rewarded. Yet in the above example, using the language of the bill as 
it stands today, the indiscriminate junk fax I received from Bill, at a 
fax number I did not give to Bill, will be exempted from the statute. 
How do we create an ``established business relationship'' exemption for 
``legitimate'' fax uses, but not create a loophole for exploiting by 
illegitimate uses?
    This problem is exacerbated by how broadly the term ``established 
business relationship'' is defined. Merely making an inquiry of a 
business, such as calling and asking the price of an item or if they 
carry a particular brand will create an ``established business 
relationship'' as that term is defined. Using that definition, who does 
not have an ``established business relationship'' with large retailers 
like Wal-Mart or Staples? And before you think that ``legitimate'' 
businesses such as these would not do junk faxing in violation of the 
TCPA, both of them have in recent years.
    In the last session of Congress, this problem was addressed with 
compromise language that stated the ``established business 
relationship'' exemption only was available as a defense if the faxes 
were sent ``based on'' an existing ``established business 
relationship.'' In the example above, this would permit Joe's faxes, 
but prohibit Bill's faxes. This way, faxes sent when a business was 
legitimately trying to send faxes to people it knew were its bona fide 
customers would qualify for the exemption, but faxes ``blasted'' out 
indiscriminately would not be permitted, even if they ``accidentally'' 
were received by someone who had done business with the sender.
    I share the same goals as the author and sponsors of this bill: we 
all want to allow legitimate faxes and stop the junk faxes.
    I also share the same approach to address some unintended 
consequences of recent FCC rule changes. We certainly do not want to 
turn back the clock on a wholesale basis.
    Many of the rule changes were clearly needed due to continued 
evasions of illegitimate telemarketers and fax advertisers. Reasonable 
businesses who send legitimate faxes do not want to create loopholes 
that will be exploited by other businesses that are not so legitimate. 
Those businesses who want to make legitimate use of fax as a 
communications medium are certainly in favor of protecting that medium 
from abuse. If they don't their legitimate use of faxes gets tarred and 
feathered with the illegitimate uses.
    The current bill attempts to do two things:

   that express consent may be given in any manner;
   that an EBR should be interpreted as providing express 
        consent.

    The first change is not controversial. While many people still 
believe that in some circumstances requiring written permission is an 
appropriate safeguard, there is also a consensus that there are many 
situations where verbal permission is acceptable. However, we know the 
use of alleged ``verbal'' permission has been abused by miscreants in 
the past, so future abuses in this are a need to be closely watched.
    But I disagree with the second change because there never has been 
an EBR for fax advertisements, not legally and not in reality. I have 
reviewed literally hundreds of TCPA cases, particularly those reported 
by the TCPA slip service TCPALaw.com, and I have not located a single 
court decision where the court agreed with the FCC's original 
interpretation.

Adding an EBR Would Change the Status Quo, Not Restore It
    Therefore, restoring what was never there in the first place, is 
not restoring the status quo. It is changing the status quo!!! In this 
particular case, it creates a large number of very bad, unintended 
consequences that I've documented in my written materials.
    Legitimate fax advertising is sending what someone requested to be 
sent to them, and sending it to them at the phone number they have 
provided to you. It does not include ``mining'' for fax numbers or 
sending a fax to any indiscriminate fax number you can buy or find. It 
does not include sending 5 pages of ads for life insurance to someone 
who merely asked for a quote on car insurance and nothing else. It does 
not mean giving carte blanche to any business you have made an inquiry 
to, for them to send you junk mail that you have to pay for.

Changing the Definitions of the Terms Solves the Problem Without 
        Unintended Consequences
    The right way to restore balance and permit legitimate fax 
advertisements without burdening legitimate senders, is simple: just 
replace Section 2a of this bill so that instead of creating a new 
Established Business Relationship (EBR) exemption we simply redefine 
the meaning of ``unsolicited advertisement'' so that all legitimate 
faxed communications are exempted from regulation.
    That is easy:

        The term `'unsolicited advertisement'' means any material 
        advertising the commercial availability or quality of any 
        property, goods, or services, but does not include material 
        which is: (a) expressly requested, in writing or otherwise, by 
        the recipient; and (b) transmitted to a telephone number 
        voluntarily provided to the sender by the recipient.

Other Improvements
    There is one simple improvement to the law that affects only 
companies that send faxes for others (such as Vision Lab, Protus IP 
Solutions, etc.):

        Require that these professional ``fax broadcasting'' companies 
        ALWAYS identify themselves on the fax REGARDLESS of whether 
        they have a high level of involvement or not in the sending of 
        the fax.

    Currently, they are only required to do this if they have a ``high 
level of involvement'' in the transmission. Of course, all the illegal 
broadcasters I know of claim in court they do not have a high level of 
involvement. This makes suing the illegal junk fax broadcaster 
difficult since it is virtually impossible to tell where the fax was 
sent from.

Conclusion
    Junk faxes are a major problem for businesses and consumers. 
Everyone hates junk faxes.
    The FCC rulemaking has caused a great deal of consternation in the 
business community. We all agree that we need to turn the clock back.
    I'd urge this Committee not to overreact to the problem by creating 
a new EBR exemption which would generate a host of new, unanticipated 
problems.
    I'd encourage each and every one of you to poll your constituents 
and ask them how many businesses that they would like to receive 
unsolicited advertisements from via fax. I've done it and the answer is 
the same for consumers, big business, and small business: none want 
advertisements from businesses they do business with unless they 
expressly ask for it. That is consistent with the FCC findings and 
precisely why the FCC attempted to strengthen the junk fax protections.
    The good news is that there is a simple solution: clarify the 
definition of an unsolicited advertisement. This will keep the junk 
faxes at bay while permitting legitimate business communication.
    I hope that you will adopt this approach. It's the right thing to 
do as it benefits both senders and recipients without the danger of 
imposing new burdens and new legal liabilities.
    Thank you and I would be delighted to take any questions you have.

    Senator Smith. Thank you very much, Steve.
    Let me indicate, they're barely going to hold this vote 
open for Senator Boxer and myself. But, Steve, my understanding 
of the law--and I want to do this right, but--that it's already 
prohibited by law to send all the things we're talking about. I 
still get them. They're unlawful. I've got to take action, I 
guess, to stop them. I worry about the verbal consent, whether 
it will work for companies, that they'll want a legal defense 
to claims against them. And I believe our bill allows for an 
opt-out provision that is, in fact, new. So I just want to put 
that on the record.
    And, Senator Boxer, if you have a comment or a question----
    Senator Boxer. Yes, and I know we are rushing through this, 
but I think the importance was to hear from the three of you, 
and I just want to thank the three of you very much.
    Senator Smith. I join in those thanks.
    Senator Boxer. Yes, because you all presented the best 
case. And so, I want to sum up the way I feel about this. And 
since we're marking up this bill tomorrow, it's tough as we 
have to work quickly.
    But, Mr. Kirsch, my understanding is, if I were to ask you 
today, What does your business do?
    Mr. Kirsch. We make software for speeding up Internet 
access and also eliminating spam.
    Senator Boxer. OK. I think, under the Smith bill--and I 
have a lot of friends who are on it--we now have a business 
relationship.
    Mr. Kirsch. That's----
    Senator Boxer. Is that correct?
    Mr. Kirsch.--that's correct, Senator.
    Senator Boxer. So now you have the right to go to the Hill, 
to all the offices in the Hill, and get all of our fax numbers, 
and fax us.
    Mr. Kirsch. Well, actually, Senator, it goes beyond that. 
You've just given--thank you very much for asking me that 
question, because you've just given me the right to send my 
advertising for any product--not only my own products, but for 
someone else's product--to every single fax machine in the 
Federal Government.
    Senator Boxer. OK.
    Mr. Kirsch. Until they opt out.
    Senator Boxer. Right, exactly.
    Mr. Kirsch. But----
    Senator Boxer. I understand.
    Mr. Kirsch.--they'll probably have to opt out one fax 
machine at a time.
    Senator Boxer. I understand.
    Mr. Kirsch. Because if they opt out--if they just send me a 
list of all the fax machines, and say, ``Hey, opt me out,'' I'm 
going to take--you know, some--I wouldn't do this, but someone 
is going to take that list of all of the fax machines that the 
Federal Government has just given me----
    Senator Boxer. And sell them.
    Mr. Kirsch.--and sell it.
    Senator Boxer. Sure.
    Mr. Kirsch. Sell it to a fax broadcaster, who will then 
add--you know, get into a conversation with you and----
    Senator Boxer. Right.
    Mr. Kirsch.--they'll fax every machine----
    Senator Boxer. Right.
    Mr. Kirsch.--until each individual machine opts out.
    Senator Boxer. I understand. My point is made. This bill, 
just leans too far in the other direction. I don't like what 
the FCC did, and I want to say, as I did today--if I'm doing 
business with someone, Mr. Feeken, you or Mr. Bladine or Mr. 
Kirsch, and you say, ``Barbara, I think if I faxed you 
something, you'll get a better picture of it,'' and I say, 
``Absolutely fax it, fine,'' and then I get it and I'm a happy 
person. I've given you my verbal consent, and we're done. And 
you make a quick note, ``She gave a verbal consent,'' and 
that's the bottom line.
    I'll even go a little further than that, if we have to. But 
the way this bill is set up--it has serious unintended 
consequence. I mean, Senator Smith wants to cure the problem of 
junk faxes, I just think the consumer groups that are working 
with me on this thing, the people who drafted this bill missed 
the mark. And the scenario, Mr. Kirsch, that you laid out here 
is a nightmare scenario. And I don't think that it's that easy 
to opt out. I get these faxes sometimes, Gordon, and they say, 
``Call 1-800 yadda-dadda-dah if you don't want any more 
faxes.'' And I do it, and I can't get anyone. They say, ``Do 
not call now.'' And matter of fact, in your bill it says, 
``during business hours.'' It's not like you're requiring a 24-
hour hotline. That would be better. So I think there are ways 
we can work together.
    Now, the last point I'd make is, in your bill you say to 
the FCC--FTC ?
    Senator Smith. FCC.
    Senator Boxer. FCC. I've got FTC on the brain, with oil 
prices. You say to the FCC, ``You have 18 months to establish 
what the business relationship is.'' In the meantime, if I did 
business with someone 40 years ago, that's an established 
business relationship, under the way the bill is written now. 
So people who did business with me in another world, still will 
be able to fax me. So I think the FCC went too far, and I think 
we've got to rein them in. I think a verbal consent would be my 
preference, because I think what Steve Kirsch points out is the 
current situation has been working OK. You, yourself, said 
that, Mr. Feeken. You, yourself, were nodding. It works OK. 
What do we need this bill for, that goes so far the other way 
that we're going to take 2 billion faxes and turn them into 4 
billion faxes?
    So we've got a lot of work to do, because, unfortunately, 
we have the mark-up tomorrow. It's only because Senator Smith 
is such a dear friend and a fair person that we got a chance to 
hear from you today.
    Our time is short. I don't have any other questions. I just 
think there are a few things we could fix. I hope, maybe over 
the course of these next 12 hours----
    Senator Smith. Well----
    Senator Boxer.--you and I can come to some agreements here 
and----
    Senator Smith.--we've got some time, and, obviously, even 
after tomorrow on the floor----
    Senator Boxer. Right.
    Senator Smith.--we can keep working this----
    Senator Boxer. Good.
    Senator Smith. We want to get it right. It's a bedeviling 
problem to manage all of the consequences. When we grab here, 
it blows up over there. But we'll keep trying, because we 
really do need, and we will get ahead of the expiration of this 
FCC deadline.
    So, thank you all. We apologize for the truncated schedule, 
but, unfortunately, the Majority Leader does not schedule the 
Senate business around this Subcommittee.
    [Laughter.]
    Senator Boxer. Which is not fair.
    Senator Smith. Which is not right. But, anyway, that's what 
it is.
    Senator Boxer. But I think this hearing did what it had to 
do.
    Senator Smith. It did.
    Senator Boxer. We got out every point of view, and we so 
appreciate it.
    Senator Smith. You've contributed to the public record. 
We're grateful to each of you. We're adjourned.
    [Whereupon, at 3:25 p.m., the hearing was adjourned.]

                                  
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