AARP Partnership with Cell Provider Raises Questions

An article in the trade publication Communications Daily revives the issue of organizations, in this case AARP, partnering with businesses to market products to members in areas in which they also engage in public policy advocacy.

In this instance, the issue is a proposed New Jersey law AB-2459, which would bar Verizon from being able to switch customers from costly-to-maintain landline to Voice Link wireless service, unless a customer requests the change unsolicited by the company.

According to the Communications Daily article, political watchdog groups say the dispute points to the potential appearance of impropriety that can arise from business partnerships that generate a significant portion of AARP’s revenue.

Verizon says AARP markets Consumer Cellular, which it says would benefit from the proposed legislation. Similar concerns have been raised in the past over AARP’s support of a Medicare prescription drug plan that the watchdogs said would benefit AARP’s insurance ventures.

The entire article is reproduced below by permission of Warren Communications News, Inc., 800-771-9202, www.warren-news.com<http://www.warren-news.com>
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Questions are being raised about AARP’s support for a New Jersey bill that, while consistent with other positions it has taken on the IP transition, would benefit a cellphone company that pays the organization royalties. Verizon, in a statement to us last week, singled out Consumer Cellular, “which is promoted by AARP to its members,” as a company that would receive “an unfair competitive advantage” from the passage of AB-2459 which the telco opposes (CD May 14 p8).

AARP acknowledged to us it receives royalties from Consumer Cellular to use AARP’s name and logo in marketing materials, a fact confirmed by the company. Consumer Cellular also offers AARP members a discount, and a link to sign up with the company is on the AARP website. AARP and Consumer Cellular denied AARP’s position on the bill is related to any benefit the company would gain. “AARP’s advocacy efforts are not related to the separate products arm of AARP,” the organization said.

To political watchdog groups, the dispute points to the potential appearance questions that can arise from the business partnerships that generate a significant portion of AARP’s revenue. “This isn’t the only issue where people have questioned whether their priority is to provide advocacy for senior citizens or to promote its business interests,” said Bill Allison, Sunlight Foundation editorial director. He cited a 2003 Public Citizen analysis (http://bit.ly/1n9xL0j) that said AARP had “strong financial in incentives” to support a Republican Medicare prescription bill proposal, because it would benefit a number of AARP’s insurance ventures. “They are invested with so many business interests the question is, ‘Are they representing the elderly or are they bending over backwards to promote the interests of their partners?'” Allison said.

At issue is New Jersey AB-2459, which stems from concerns Verizon is trying to push customers from costly-to-maintain landlines to its wireless Voice Link product. The measure would create a one-year moratorium barring Verizon from being able to switch customers from landline to Voice Link, unless a customer requests the change unsolicited by the company. “A potential customer could go to the AARP website, read about the AARP discount for Consumer Cellular and purchase that company’s” product, said Verizon. “However that same consumer would be effectively banned from purchasing a similar product from Verizon.”

AARP and Consumer Cellular wouldn’t say how much the company pays the AARP. The largest source of revenue for AARP is royalties, with $723.8 million in 2012 revenue, or just over half of AARP’s total $1.4 billion, show AARP financial statements for that year (http://bit.ly/1oJ6fpV), the latest posted on its website. Royalty income was more than twice the $281 million raised from membership dues, which accounted for a fifth of AARP 2012 revenue. The results exclude almost 1,500 local AARP chapters that are organized and operated as separate entities.

AARP and Consumer Cellular deny the organization’s legislative positions are based on business relationships. AARP selectively chooses who it partners with, AARP said. “By lending the AARP brand to high-quality, consumer friendly products and services, we seek to influence a variety of industries and thereby better serve the needs of our members and all older Americans,” said AARP. It said the group’s positions “to protect our members’ access to reliable, affordable phone service” are “driven not by a provider’s marketing efforts, but by our research that shows older Americans want the safety and security of knowing they have access to reliable home phone service.” In “replacing reliable, affordable landline service,” any “new technology must be as good or better than the current product, and it must include a robust set of consumer protections,” said AARP. “Wireless service as a replacement for landline service does not meet these needs” now, it said.

AARP’s position on the measure is consistent with its opposition to measures in other states against allowing companies to get out of carrier of last resort (COLR) obligations (CD March 19 p12)). AB-2459 sponsor Assemblyman Daniel Benson, a Democrat, called Verizon’s statements about Consumer Cellular “a misdirection by Verizon. … What our bill does and what AARP supports is preventing Verizon from removing wireline service as an option for customers and replacing it with an inferior fixed wireless service.”

AARP’s positions point to the dangers of non-profits partnering with businesses in areas in which they advocate, said Sunlight’s Allison. Public Citizen said it does not take corporate sponsorships, because that could pose conflicts. “Though it doesn’t explicitly violate any ethics, or laws, we don’t accept sponsorships from corporations because of the potential impacts on choices made based on donor relations,” said Susan Harley, deputy director of Public Citizen’s Congress Watch. “We want to remain independent.”

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