• by Frank Saxe , December 10, 2002

After several months of taking comments from newspapers and magazine publishers, as well as the scores of other companies that count on telemarketing, the Federal Trade Commission is expected to announce within the next several weeks new regulations regarding the use of the telephone as a sales tool. Consumer groups want tougher rules while against credit card companies and charities alike. For newspaper publishers the issue is circulation, since 60% subscriptions are sold over the phone.

“Half of all new subs are from telemarketing, and the smaller the paper the higher that number is because they don’t have the resources for other efforts,” says Bill Johnson, director of circulation marketing for the Newspaper Association of America. “That’s ironic, because the small papers are the least likely to do calls of harassment.” Imagine the small newspaper group in the Rockies that uses the local Elks lodge to conduct its biannual telemarketing drive, which amounts to half telemarketing, half fundraising.

“Telemarketing is central to our fiscal health. We rely on telemarketing as our primary source of new readers,” says Robert Kazeangin, group circulation director for Greater Niagara Newspapers, which operates several small newspapers in western New York State. Kazeangin says they have already felt the impact tough guidelines that have been approved in New York. “These regulations are making it extremely difficult for newspapers to provide to present prospective readers the opportunity to subscribe to our newspapers immediately. We are small newspapers that cannot afford to operate in house telemarketing rooms and look to these companies as partners in increasing our readership. These new rulings will only drive the cost of telemarketing up which in return will cost us additional unnecessary costs.”

The major groups are just as dependent on telephone sales. Cox Enterprises, which not only uses telemarketing for newspapers like its Atlanta Journal Constitution, but also for its cable MSO and its television and radio stations. In comments made to the FTC earlier this year, Cox argues that a company’s right to contact its customers is protected by the First Amendment free speech clauses. “The Commission should create an exemption from the proposed national do-not-call requirements for telemarketing calls to persons with whom the seller has formed an established business relationship,” writes Cox.

It is an argument that many companies and associations are making to federal regulators. “The sale of newspapers should be distinguished from the sale of almost all other commercial items,” argues Tribune president Jack Fuller. Six states have so far agreed with Fuller’s freedom of the press argument, and have exempted newspapers from their intrastate do-not-call lists. Tribune, owner of 11 newspapers including the Los Angeles Times and the Chicago Tribune, also believes that companies with an existing relationship with a customer should be unregulated. Fuller says Tribune frequently contacts customers for quality surveys and to upsell customers who only receive Sunday subscriptions. “Such calls as unobtrusive and there is no hard sell,” says Fuller.

Magazine publishers are also wary of changes being proposed in Washington. The Magazine Publishers of America (MPA) says independent contractors frequently count on telemarketing to sell magazine subscriptions. One contractor, for example, generated seven million subscriptions in 2000 through telemarketing, for $175 million in revenues. MPA says publishers are also increasingly using telemarketing to existing consumers for renewals. “If legitimate, established telemarketing sales practices were to be substantially restricted or curtailed,” writes the MPA, “The economic impact on the telemarketing industry and on MPA members in particular, would be severe.”

Time Inc. senior VP Robert McCarthy even goes so far as to say that customers “respond favorably” to telemarketing, pointing out that $275 billion is spent annually over the phone. “Particularly with respect to our rural customers, telemarketing affords unique opportunities to obtain products such as magazine and book sales and renewals that may not otherwise be available, maximizing consumer choice.”

Conceding that some regulation is inevitable, Gannett is asking the federal government for some national regulation. “The increasingly far-reaching and overly restrictive state regulations offer limited (if any) additional benefit to consumers, and impose extreme burdens on legitimate telemarketers,” Gannett attorney Christopher Cihon wrote in a letter to the FTC.

McCarthy agrees that a national do-not-call list would be easier to work with than dozens of individual state laws, but he argues that the FTC’s current plan would simply add a layer of federal regulation instead of replacing state-by-state rules. Complying with two so many different regulations would hit companies with “significant” costs, says McCarthy.

The changes come at a time when newspapers are already having a difficult time reaching the consumer due to technologic advances such as caller ID, call blocking, and answering machines. Analysts compare the impending regulatory changes to the challenge faced by magazine publishers when they lost the circulation gold mine associated with sweepstakes.

“I don’t think newspapers have a viable substitute,” says Johnson. “You will see more direct mail, and they are experimenting with email, more store front operations, as they try to diversify their sales efforts. This might accelerate the pace.” Yet telemarketing remains one of the least expensive ways to reach consumers, so its loss may be more than just circulation – it will be to the bottom line as well. Johnson says advertising dollars could also be lost. “Advertisers ought to be concerned. If they see newspapers lose readers or circulation, it concerns them because they have got something that works right now and there is no viable alternative.”

So far, nearly two dozen states already have adopted laws limiting what telemarketers are able to do. The Federal Communications Commission may also get into the business of restricting telemarketing. It is closing its comment period for how the FCC should regulate businesses’ contact today. Although the FTC has already delayed the release of its telemarketing rules more than once, Washington insiders expect to see something from the Commission by the end of the year.