USTelecom Chief Argues the Case for ‘Retention Marketing’

From soaring gas prices to sagging home values, Americans are feeling the pinch of a challenging economy. In yet another kick to the pocketbook, a recent decision by the Federal Communications Communication will make it harder for consumers to learn about competitive deals on their phone bills.

In today’s intensely competitive market for voice, video and broadband services, consumers regularly reap windfalls by playing one provider off another to get the best deal. If customers call to cancel their service in order to switch to another provider, often they receive a persuasive counter-offer. In the industry, we call this “retention marketing.” To consumers, it’s simply competition.

Cable providers, in the face of intense video competition from telecoms and others, routinely engage in retention marketing. Now, in a curious ruling, the commission —over the vigorous objections of its chairman — has ruled that telecoms can’t return competitive fire when seeking to retain voice customers.

FCC Issues 'Gag Order'

In what essentially amounts to a gag order on the free-flow of information between telecoms and their customers, the commission has prohibited local exchange carriers from offering bargains to consumers switching voice providers.

This decision transforms a level playing field into a sharp grade because customers switching video providers must speak directly to their existing cable company to cancel service, whereas in the number-porting process, the competing voice provider handles the transfer request. The reason is that cable companies won’t accept a change order from a competitor acting as the customer’s agent while telecoms routinely do so for departing customers as part of the number porting process. The net effect? Cable incumbents have the opportunity to speak to their departing customers while the commission is now denying telecoms the same chance to sweeten the deal for voice customers.

It’s hardly a hypothetical issue. Cable customers cancel upwards of 10,000 orders of AT&T’s U-Verse video offering each month — most citing a counter-offer from their incumbent provider. Why would federal policy not allow consumers the same opportunity to get a more attractive price or service package for voice?

The FCC’s throttling of accurate, timely consumer information is further compounded by the refusal of many cable operators to permit market rivals from advertising competing services on their local cable networks. This active censorship — blocking consumers’ ability to learn about available service options in local TV ads — underscores the importance of ensuring consumers have access to price and service information in discussions with their current providers. In his dissenting view, Chairman Kevin Martin expressed specific concern for rural telecoms and customers, who are particularly isolated and left vulnerable by this unfair decision.

Reversing Regulatory Parity

With its adverse impact on everything from market parity to consumer’s wallets to free speech, this decision is a stark reversal of the FCC’s longstanding efforts to promote regulatory parity among market competitors as a cornerstone of modern communications policy. And cable incumbents hardly require the unfair edge. Comcast is the nation’s fourth largest of hundreds of voice providers. Time Warner Cable is sixth.

In a competitive marketplace, the ability of consumers to take their business elsewhere is one of their most potent and lucrative weapons. Keeping consumers in the dark by restricting communications at precisely the moment when they stand to gain the most from sunshine is not constructive policy.

The interests of consumers and the marketplace are one and the same: A level playing field ensures that consumer decisions, not regulatory favoritism, shape the future of this vital marketplace. With so many companies competing for their business, consumers deserve access to information that helps them make the most of their powerful position.

Home values and gas prices might take some time. But this fix is a “gimme.” It’s time to restore American consumers’ market-given right to make a deal.

Walter B. McCormick Jr. is the president and CEO of the United States Telecom Association (USTelecom), a broadband trade association representing service providers and suppliers in the U.S. telecommunications marketplace.

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