Exclusive: Campaign donations by text? Not so fast, wireless carriers say
WASHINGTON (Reuters) - Wireless carriers are balking at U.S. regulators' move to allow political donations by text message, a plan that could reshape the nation's campaign finance system by giving cell-phone users the ability to make instant contributions.
The proposal to allow text contributions - which has been backed by the campaigns of Democratic President Barack Obama and Republican presidential candidate Mitt Romney - was approved last month by the Federal Election Commission.
It also has the support of fundraisers and campaign finance reform groups, which told the FEC that text donations would help "empower" those who can give only a few dollars to campaigns.
This year's campaign season has been marked by six- and seven-figure contributions from wealthy donors to groups known as "Super PACs," or political action committees, which have no limits on donations and spending.
But the wireless carriers who would oversee the donations-by-text service - including the four U.S. giants Sprint Nextel Corp, Verizon Wireless, AT&T Inc. and T-Mobile USA - have yet to get on board with the plan.
The carriers - who account for about 90 percent of the more than 330 million wireless subscriptions in the United States - are worried about an array of liability and regulatory issues they could face in handling contributions to presidential and congressional candidates.
The carriers are asking the FEC for more guidance on how they should implement a donations-by-text program, according to four industry sources.
One sticking point is that the carriers want to make sure they will not be held liable for determining donors' eligibility to contribute to a campaign, industry sources said.
That means ruling out that a donor is a corporation, foreign citizen or underaged American who is not allowed to contribute, or whether the donor has met various limits for donations to a campaign.
Through CTIA, the wireless industry's trade association, mobile carriers have sent a request to the FEC asking for more information on the amount of liability and control they would have if they do offer the donations service, according to three of the industry sources who spoke on condition of anonymity because the July 3 letter to the FEC is not yet public.
One industry executive said it is not certain that all the issues will be ironed out in time for text donations to be used during the 2012 campaign.
"At this stage, it's not clear that telecoms are anywhere close to coming to terms of what's going to happen here," the executive said. "I don't think this is anywhere near being resolved."
The FEC does not comment on its deliberations before they are public.
A CAP ON TEXT DONATIONS
About 88 percent of U.S. adults have at least one cell phone line and about three-quarters of those use text messaging, according to the Pew Research Center's Internet & American Life Project.
That reach has made text donations a rallying point for many groups seeking to give small donors - including those without credit cards - more ways to easily contribute to political campaigns.
Text donations, capped at $10 per text and $50 a month, according to the FEC ruling, would allow givers to remain anonymous, although campaigns would have access to the donors' phone numbers. Donations by text messages also would be limited to a total of $200 per phone number to avoid triggering a federal requirement for disclosure of that donor's identity and address.
Donating to political campaigns by text would be similar to giving to charity: A donor would send a message to a text code and then confirm his or her intention and eligibility. But in this case, carriers and aggregators processing the payment would take a significant cut from each transaction as they do with other non-charitable transactions, such as purchases of ring tones.
That cut appears to be part of the reason for tension that carriers are feeling over text donations to campaigns. The fee could reach 30 percent to 50 percent of each donation, according to FEC documents, putting wireless carriers in a potentially uncomfortable position of doing business with campaigns and their fundraising efforts.
Discounts on fees for a political campaign risk qualifying as an in-kind donation to the campaign from the wireless carrier, analysts said, a scenario that carriers want to avoid.
Presumably, if Verizon, AT&T, Sprint or T-Mobile began to offer a campaign-donation text service, the other carriers would be forced into accepting campaign donations, analysts said.
Verizon and T-Mobile declined comment. AT&T representatives did not return requests for comment and CTIA spokeswoman Amy Storey declined to comment beyond saying that individual carriers "are still reviewing the FEC's advisory opinion."
Sprint spokeswoman Crystal Davis said that "while no formal agreements or decisions have been reached ..., we want to ensure this feature adheres to all federal and state campaign laws, protects the privacy of our customers, and ensures a seamless process for the carriers, mobile aggregators and donors."
'IT'S UNCHARTED TERRITORY'
In many ways, the FEC's unanimous vote on June 11 to approve text donations caught the wireless industry by surprise, the industry sources said.
The six-member FEC often deadlocks along party lines and in 2010, the agency rejected a similar donations-by-text proposal from the CTIA.
Last month's decision came in response to a request from political consulting firms Red Blue T LLC and ArmourMedia Inc and corporate aggregator m-Qube Inc, which processed millions of dollars that Americans texted to charities aimed at helping Haiti earthquake victims.
The proposal that the FEC approved last month was more specific than the failed 2010 plan in outlining how donations would make their way from a cell phone to campaign coffers while complying with legal limits and regulations.
The plan suggested that the aggregator would monitor donations and donors' phone numbers to try to make sure that the $200 limit for anonymous contributions was not exceeded.
But wireless carriers are "not just going to take the assurances" that an aggregator would monitor text donations effectively, said Jeffrey Silva, a telecommunications policy analyst at Medley Global Advisors. "They are responsible to shareholders, and the buck stops with them."
Besides seeking to avoid liability in determining donors' eligibility, wireless companies do not want to be blamed for allowing donors to exceed contribution limits.
Other questions that concern wireless carriers include whether the carriers should decide which campaigns should be allowed to use text donations, or whether carriers would be required to serve all campaigns, despite any risks to the carriers' reputations.
"It's uncharted territory and I imagine that lawyers at all these carriers are just looking at this from every single angle," Silva said. "Fundamentally, there's just so much more involved with political donations over charitable donations."