Full Committee hearing scheduled for Tuesday, September 21, at 2:30 p.m. in room 253 of the Russell Senate Office Building. Members will hear testimony examining the effect of wireless directory assistance services, also known as wireless “411” services, on consumers and businesses. Senator McCain will preside. Following is a tentative witness list (not necessarily in order of appearance):
The Honorable Arlen SpecterUnited States SenatorPennsylvania
Witness Panel 1
Mr Dennis Strigl
Mr. Chairman, thank you for giving me the opportunity to testify here today and for your interest in this very important privacy issue. I also want to acknowledge Senator Boxer's strong interest in wireless privacy issues as well as my colleagues here at the table with me. I believe that the competitive culture of the wireless industry drives the decisions our industry and my company make, and warns us of the dangers of unnecessary and counterproductive government regulation of a highly competitive market such as ours. The wireless industry is intensely competitive, and that competition continues to bring extraordinary benefits to consumers. In addition to the six national carriers, several regional carriers as well as countless local providers compete head-to-head every day. Ninety seven percent of mobile customers can choose between at least three wireless carriers, and thirty percent of the population has a choice of 7 or more providers. The wireless industry continues to introduce innovative pricing plans and service offerings, invest in and upgrade network performance and add new capabilities. Subscriptions are up, airtime use is up, and consumers have found text messaging and mobile entertainment applications to be quite popular. This Committee can take much of the credit for this level of competition, because in 1993 and again in 1996, you decided that our industry should be a model for deregulation and you prevented others from applying traditional rules and regulations to our operations. Coupled with advances in technology, and additional spectrum availability, your decisions have led to a resounding competitive success story. The industry’s implementation of Local Number Portability or LNP last year has facilitated the choices our customers now have. In effect, LNP has become the ultimate form of wireless consumer protection, because it has removed the major deterrent to changing companies. If a consumer is unhappy, he or she can take their phone number and their wallet and go elsewhere. If anybody needs proof of that, look no further than the losses some carriers experienced after Nov. 24 of last year, when LNP took effect. Within the last year, LNP took an already competitive market and made it hyper-competitive. Companies are under a brand new microscope and must compete as never before. Differentiation has been magnified, and pricing, network quality, handset selection, customer service, new features like camera phones, and billing practices are central to a customer's carrier selection decision. With carriers now focused on differentiation—because that is the best way to respond to customer demands—it would be counterproductive to inject a governmentally mandated "sameness." Instead we must trust the market to do its job and encourage choice, differences and innovation, and capital investment. In all, I believe the wireless industry is a great American success story – for consumers and the economy. In just two decades: · wireless consumer prices have dropped like a rock · choices in carriers, services have burgeoned · we’ve built a brand new industry, from scratch, into one of the drivers of the American economy. But against that backdrop, I think we’re missing the boat on creating a Wireless Telephone Directory. It’s a subject that’s controversial not just with customers, but within the wireless industry. We at Verizon Wireless think a Wireless Telephone Directory would be a terrible idea, and we will not publish our customers cell phone numbers or otherwise participate in the plan you have heard about today. Here's why we will not participate in a directory assistance program: Since we started this business, we have not published our customers’ wireless phone numbers. We did this consciously, for the sake of preserving customers' privacy and control over their bill and discouraging interruptions from unwanted calls. We do not believe those basic reasons have changed. In fact, we see more reason today than ever to protect customers' privacy. The floodgates are open to spam, viruses, telemarketing and other unwanted, unsolicited messages on landline phones, computers and in mailboxes. We think our customers view their cell phones as one place where they don't face these intrusions, where they have control over their communications. And if there's any doubt, our customers – and some of your constituents - are reiterating loudly and clearly that they don't want their wireless phone numbers published. I have received countless letters on this subject from our customers. Typically they all say, "I find your stance to be grounded in integrity...please keep my cell phone free of telemarketers and unsolicited callers." I have not received one letter that urges me to put the customer’s number in a wireless directory. Clearly, there is not a groundswell of customer demand for a directory that would justify putting privacy in jeopardy. To date, this industry has a strong record of proactive steps to preserve customers' privacy in an intrusive world. For example: · The wireless industry fought to make auto-dial and telemarketer solicitation calls to wireless phones illegal. · My company and other carriers have been aggressively deploying and updating anti-spam filters. · Moreover, we have aggressively investigated, disabled and prosecuted illegal spammers. We recently determined a source of illegal SPAM to our customers and obtained a permanent injunction against this Spammer. Further, the Verizon Wireless’ do-not-call, do-not-mail, do-not-email lists, and soon our do-not-SMS list, exceed requirements established by the Federal Trade Commission's do-not-call registry. Our industry has surrounded customers' information with a wall of privacy. Why would we want to tear down that wall - that unique advantage --that we have spent two decades fortifying? The old business adage that the 'customer is always right' is not some old-fashioned way of doing business that has become at odds with present-day business models. Instead it is a basic tenet that remains rooted in sound business sense. In the end, no matter what business you're in, pleasing customers is more profitable than not pleasing them. Verizon Wireless does not view the "opt-in" approach as a solution. We are concerned that customers will see opt-in as a disingenuous foot-in-the door-leading to "opt-out" clauses and fees for not publishing a number. Further, “opt-in” is an all or nothing proposition; it does not give customers any control over how and to whom their information is revealed. Our plan at Verizon Wireless is straightforward. First, we do not, and will not publish or make available our customers' wireless phone numbers for a paper directory or a directory database. Second, we will be changing our customer contracts to proactively and clearly state: "We do not provide our customers' phone numbers for listing in directories." That change will eliminate any ambiguity concerning our current practice of preserving customers' privacy and our intentions for the future. Earlier I observed that wireless has been a great American success story - for consumers and the economy. It's a brief history, punctuated by: · Consumer prices dropping like a rock · Choices going up · Building a new industry from scratch into one of the drivers of the American economy How fast and far the story continues in our third decade, depends on: The wireless industry remaining vigilant keepers of the privacy flame while building more capacity and adding more varied and better services to our wireless products; and · Regulators, especially at state and local level, allowing the vibrantly strong competitive marketplace to work. Thank you very much, Mr. Chairman. I look forward to the discussion today and I will be happy to answer any questions.
Mr. Marc RotenbergExecutive DirectorElectronic Privacy Information Center
Ms. Kathleen Pierz
Chairman McCain, Ranking Member Hollings, and other distinguished members of this Committee, thank you for inviting me to address you this afternoon. I would like to request that my full written testimony be submitted for the record. My name is Kathleen Pierz. I am the Managing Partner of The Pierz Group, an independent consulting firm serving the Information Services industry with a special focus on the very narrow niche of directory assistance. Our clients are fixed line and wireless carriers, directory assistance (DA) providers and technology companies around the world. I have been involved in this industry for 17 years, having worked in information services at Ameritech (now SBC) and IBM. I now consult to the industry and have authored more than one hundred reports and articles on the subject of directory assistance and databases. Half of all telephones in the U.S. are now mobile phones. The issue of adding cell phone numbers to directory assistance is an important one for consumers and for businesses. The message I have is simple: Better communications and privacy are not mutually exclusive; consumers can have both. What the Committee is addressing today is the fact that there are no guarantees, no legal construct that give consumers the privacy protections they want (and think they have today). I was invited here today to present key findings from a recent independent national consumer survey of 1,503 cell phone subscribers conducted by The Pierz Group in July and August of this year. The purpose of this independent research was to establish consumers’ willingness to list their wireless phone numbers in directory assistance and under what specific conditions. In addition, I have published three other major reports in the past 18 months about the opportunity to add mobile numbers to the DA database in countries where they are not included today. As an analyst, I write regularly about the fact that U.S. information services, whether from 411, print phone books or online services have lagged well behind our communications infrastructure. DA in the U.S. today has changed little since the 1950s, but the ways in which we communicate have changed dramatically. DA databases contain a single fixed-line phone number and a billing address. Mobile phones as well as many other methods of communication now play a major role in our daily lives, yet there is no way today to reach a mobile subscriber without knowing the number, through DA or any type of directory. In addition, e-mail addresses, Instant Message (IM) addresses, SMS codes, fax numbers, pagers, website URLs etc, like mobile numbers, are all unavailable unless the owner gives them to you, and you have them when you need them. Nearly 53 percent of all phones in the U.S. are now unlisted. That figure includes the roughly 20 percent of all fixed-line numbers that are unlisted (roughly 33 percent of residential numbers are unlisted) and the 97 percent of wireless numbers. (Some cell phone numbers are listed because incumbent wireline carriers permit them to appear in their white pages -- for a special fee.) By contrast, in Scandinavian countries between 85 percent and 95 percent of all phone numbers (wireline plus wireless) are listed. In these countries, between 20 percent and 25 percent of DA calls request a mobile number. In the U.S., mobile phone numbers are not available through DA; in fact, wireless numbers are not even available to emergency workers in life-and-death situations. Mobile numbers are not private It may come as a surprise to the Committee -- and to many consumers, I’m sure -- that today there is no specific privacy protection in place for mobile numbers. The only reason your cell phone number is not publicly available today is because that has been the industry practice for the past 20 years. One must also consider the fact that nearly all mobile subscribers, with the exception of Cingular Wireless customers, have already signed a contract that includes their express permission to have their mobile number listed in any type of directory the carrier may choose. Consumers are not aware of this stipulation in their contracts. LNP: An additional factor The need for consumer privacy protections becomes more significant in the wake of the new Local Number Portability plan. LNP means that cell phone users can keep their numbers when they change carriers -- indeed, one number for the rest of their lives. Think of the difficulties consumers would face if these “lifetime number” were divulged without their consent. So, LNP makes it more important to protect consumers’ expectations of the privacy of their cell phone numbers. To translate these broad concepts into actual consumer experience, we surveyed more than 1,500 consumers in July and August. We asked them detailed questions about their privacy expectations on cellphones and what they want, and don’t want, from a cellphone listing in directory assistance. I would like to summarize those findings for the Committee. What consumers told us: Many consumers want to be able to contact each other on their mobile phones. Nearly all consumers want to have some privacy protection built into that contact process. Because mobile phones are considered to be more personal, they are more likely to be answered any time or anywhere. For these reasons -- and because they have been unlisted in the past - consumers expect a higher level of privacy for their cell phone number. · With privacy protections, a majority of consumers will list their cell phone numbers. ; The stronger these privacy protections, the more willing consumers are to list: o Eleven percent of consumers (about 18 million wireless subscribers) will list their cell phone numbers without any type of privacy protection at all. This number is up 500 percent over the number of consumers who said they would list (2 percent) under these circumstances in July of 2003. o Fifty-two percent of mobile subscribers (about 84 million wireless subscribers) will list their numbers if at least some type of privacy protection is provided. o With the most comprehensive privacy protections, up to 62 percent of consumers (over 100 million wireless subscribers) would be willing to list the cell phone numbers. Given the fact that roughly 67 percent of residential numbers are listed today, this is a very high number. o Creating a process to easily add cell phone numbers to the National Do Not Call Registry in conjunction with privacy protections would make 47 percent of consumers more willing to list their cell phone numbers. This, of course, is easily accomplished. o Our research shows that consumers could expect an average of three to five additional calls per year to their cell phones as a result of having their wireless number listed. This is of course an average. Many will get no calls from DA, some will get more. o If consumers had to pay for the incoming calls (and some carriers may not require that), an additional three to five calls per year would have little cost impact to consumers. These new calls would generate an additional average expense of $0.45 per month, or 1/100th of a typical monthly wireless phone bill. o Consumers are not aware of the provisions in their current wireless contracts that gives express permission to list their numbers in a directory. o Caller ID functions do not necessarily identify a calling party. If a phone number is unrecognized by a consumer, there is no way to know who is calling. In addition, a significant percentage of calls to mobile phones today are shown as “incoming call” with no number or name available. · Why do consumers want to have cell phone numbers available through DA? o These answers were very concentrated and consistent. Seventy-six percent said, “I can find people when I need them or in an emergency.” o Other popular answers were, “people can find me” and “it would help me do my job.” o 9.6 percent of all mobile subscribers (almost 16 million people) report having no home phone; only a mobile phone o More than twice as many (21.8 percent) people between 18 and 24 years old have only a mobile phone. · What worries consumers about listing their cell phone numbers? Twenty-eight percent said, “overall privacy.” o Twenty-eight percent said, “calls from people I don’t want to talk to.” o Twenty-five percent want to avoid telemarketing (which is already prohibited, although consumers are not aware of this). It should be noted that in a 2002 study conducted by privacy expert Dr. Allan Westin, 88 percent of consumers said the number one reason not to list their mobile number was fear of telemarketing calls. It is clear that consumers believe that the Do Not Call Registry works and could protect their mobile numbers as well. What privacy protections do consumers want? Our consumer research project tested five different privacy options, all of which could in theory be implemented today – I say in theory because some would require that all telephone services providers, both fixed and wireless, adopt appropriate technologies and standards and privacy protections to achieve this end. This would obviously generate costs for carriers, but more importantly it means that all carriers would need to agree to and implement these privacy protections. It is these difficult coordination problems that have stymied parties on all sides. The CTIA Plan The CTIA, which is working to assemble a national wireless database, holds some sway with its membership and can ask them to cooperate – but “ask” is the operative word here. The CTIA cannot obligate anyone – especially fixed line carriers. The CTIA plan includes what might be called a least common denominator for privacy protection; it covers those aspects the organization can ensure within the process. Under the CTIA plan, wireless numbers will be put into a DA database. This national database won’t be sold to anyone, won’t be published in a print directory and will not appear on the Internet. Some consumers will list under this plan. Our research shows that 26 percent would list right away and an additional 27 percent would list once they had an opportunity to see this plan in place and be convinced that it works. This provides for 53 percent of consumers to eventually list their wireless numbers. That is certainly a good start but is still somewhat short of critical mass (0ver 60 percent listed) in order to create a robust and effective service. As explained below, two of the five privacy protection plans (“Preannouncement” and “Listed for Messages Only”) did test better with consumers than the CTIA plan. Both involve more aggressive privacy plans and actually allow consumers to control, to a caller, who can reach them. Our research shows that these additional privacy protections increase the number of subscribers who would list their mobile numbers right away by 61 percent. Preannouncement This option refers to the practice of the call recipient hearing some sort of announcement that a call is coming in from a wireless DA user. Callers wishing to reach a mobile subscriber would record their names at the prompt and would be connected to the mobile subscriber. The cellular customer would hear the name and could say “accept,” “reject” or “voice mail” to manage a call from directory assistance. This option tested well because under this plan the phone number would not be given out and subscribers would have control over who could reach them on the mobile phone. Under this plan, 36 percent would list immediately and an additional 23 percent would list later. This option would allow almost 60 percent of cellular subscribers to list their numbers with confidence. Listed / Not Listed /Listed for Messages Only A listed/ not listed / listed for messages only option also tested very well. This scenario gives wireless subscribers a third option. If they were listed for messages only, they would not get any calls from directory assistance, but would have a message sent to them with the name and number of the person trying to reach them. They could then return the call or not, as they chose. Like the preannouncement option, this privacy protection option gives consumers control over who can reach them. Thirty-eight percent would list now, with an additional 24 percent would be willing to list later, allowing 62 percent to eventually list their numbers. This is consistent with the roughly 67 percent of listed residential numbers today. Source: The Pierz Group, 2004 Consumers want to use DA to get mobile numbers and are, in large part, willing to list their wireless numbers - but only if they can control who can reach them. In the simplest terms, consumers want to receive the calls they want, and don’t want to receive calls they don’t want. They want and expect to be able to maintain some level of privacy. The wireless industry and fixed line DA providers stand to earn a projected $2 to $3 billion a year in additional revenues from incremental DA calls and additional minutes of wireless usage. Putting mobile numbers in the DA data base is good for consumers and good for the industry, but only if done right. “Right” is what consumers say it is, the vast majority do not want their number given out (they want calls forwarded directly) and they want to maintain some control over who can reach them. If everyone wins, what are the key obstacles? o Consumers do not have key information: § Wireless subscribers do not know they have signed a contract allowing their number to be put in a directory. § There is no additional, specific legislation or regulation that dictates how mobile numbers can be used or listed. § Consumers do not know what types of privacy protections are planned or could be put in place. § Wireless subscribers do not know that they are already protected from unwanted commercial contact (telemarketing) on their cell phones (see FCC Report & Order 47 CFR, section 64.1200, Subpart L). o Consumers use their mobile phones in different ways and have different expectations. Many will list, some will not. For some consumers the mobile phone is a safety device kept in the glove box; for others it is a vital communications tool and the only phone they have. o It is extremely difficult for fierce competitors, particularly across wireless and fixed line industries, to agree to a plan to protect privacy of cell phone numbers without some requirement to do so. They have different incentives, business strategies and models, and they have different systems and technologies in place to manage their businesses. o Carriers have a broad array of different and in many cases aging billing systems – these would have to be modified to avoid divulging mobile numbers and to provide accurate Caller ID information. This would require some additional investment and, again, a need for carriers to meet specific privacy requirements. o If numbers are masked but not in a manner (such as with credit cards, e.g. 202-123-XXXX) that gives consumers sufficient information, carriers are concerned that service costs could climb when consumers call to contest DA charges for numbers they can’t see. Why should Congress care about wireless DA? Based on my research with consumers and my observation of the DA sector and the telecommunications industry more generally, I see two principle reasons why Congress should care about wireless DA: 1. Protecting consumers’ privacy expectations. As my research plainly shows, consumers value the privacy of their cell phone numbers. Consumers think that they have protections today against unauthorized release of their cell phone numbers. Many consumers would be shocked to learn that there is no law or rule protecting release of their cell phone numbers. Most consumers - not all of course - are interested in getting calls through directory assistance if they can retain control over who can reach them on their wireless phones. Thus, the bill before the Committee protects twenty years of consumers’ expectations. 2. Improving the value of the network for everyone. This Committee is certainly familiar with the economic principle that additional users of the telephone network create benefits for everyone -- the marginal user as well as everyone already on the network. Indeed, this powerful theory underlies our universal service policies and has served our country very well. That same analysis, however, applies with equal force to wireless. Consumers using wireless telephone service create networks in which subscribers benefit from additional persons being accessible on the network. Policies that expand use of the network and the accessibility of additional persons yield positive and direct network effects for all consumers in the market, and in fact for carriers. As noted above, however, the wireless area is more complex because one has to factor in the privacy issue -- not everyone wants to be reached and most consumers do not want to have their cell phone numbers divulged. And that is where we see an issue. It is not at all clear that all the carriers involved in a wireless call (fixed phone to a mobile phone, or mobile phone to mobile phone) have the incentive to protect the privacy of the telephone number if a subscriber wants to keep it private. Consumers should have a choice that goes beyond simply having their cell phone numbers listed (everywhere) or not listed. Every consumer with an unlisted home number readily admits to missing calls they really want to receive, but they are willing to live with that problem to avoid calls they don’t want to receive. Likewise, consumers can readily identify situations where they needed to reach someone or to be reached themselves on a mobile phone and it was not possible. There are of course people who do not want their mobile numbers in a DA database, even if the number was not divulged to callers. They should absolutely be able to rely on this protection, and know that their numbers can remain unlisted. We can do better; this is not rocket science from a technological point of view, but it is complicated from an industry implementation point of view. We have seen this complication in the huge efforts by the CTIA to establish a wireless database that provides some level of privacy for consumers. Even so, the largest wireless carrier in the country is no longer willing to participate in this process based on what it sees as inadequate privacy protections. I do take issue with the comments of Verizon Wireless’ president in the press that adding mobile numbers to DA is a “dumb idea.” Done right, with the privacy protections and the choice consumers expect, it is a good idea and benefits consumers, carriers and many small businesses. Ultimately, whether or not legislation is required to ensure consumer privacy becomes a question of political philosophy. Adding regulation to a successful and highly competitive industry is a difficult choice. It is one, however, that will promote privacy interests by ensuring that consumers have control over their cell phone number and that this privacy decision is respected by all carriers, whether wireless or fixed line. At the heart of this decision is the fact that this issue crosses two completely separate industries, fixed line carriers and wireless carriers, who to some degree compete with each other. The wireless industry could collectively agree to mask mobile numbers and not disclose them. However, if even one fixed line carrier does not provide this same number-masking capability and prints mobile numbers on its billing statements, the numbers are not masked and not private. Similarly, one carrier could offer the more aggressive privacy options: listed for messages or preannouncement privacy protection, but that will not work unless all providers in the fixed and wireless industry agreed to provide the same privacy protection option(s). We have two industries and hundreds of carriers (fixed and wireless) that must coordinate privacy protection policy to achieve this end for the benefit of consumers. To date, these efforts have fallen short of what consumers expect. If the Committee can accomplish those two objectives -- protecting privacy and ensuring that the greatest value is derived from this process for everyone (consumers and carriers) -- then it will accomplish much.
Mr. Patrick Cox