Abandoned Calls

Telemarketers are expecting the impending Federal Trade Commission telemarketing regulations, which will begin taking effect March 31, to cost a lot of money.

Even though it's unclear just how expensive things could get, phone marketers believe they'll have to pay fees running into the millions for such things as new equipment, training sales reps and purchasing the FTC list as well as 27 state files for each client (which is still required, even with a national list).

Part of the problem is that, at press time, the FTC had not come out with a final ruling that would set fees for telemarketers to comply with the new regulations, says Matt Mattingley, director of government affairs for the American Teleservices Association (ATA).

The amended Telemarketing Sales Rule calls for setting up a national do-not-call registry. Marketers would be required to clean their lists every three months using the registry and also to honor company-specific do-not-call requests. Fines for non-compliance could total $11,000 per day.

Other new measures include a 3% call-abandonment rate for automatic dialers and tough requirements on billing authorization. And telemarketers will be required to transmit their telephone number — and, if possible, their name — to consumers' caller-ID services starting next year.

Some call center companies also predict that these added expenses might force smaller telemarketing bureaus — those with only one or two clients — out of business. And there is real fear that the regs may end up reducing the number of telemarketing jobs available as companies find other marketing methods.

Others blasted the FTC for coming up with these rules during a deep economic recession.

“There's going to be to be an impact, particularly on the smaller companies,” says Benjamin Harris, president of Unicall International in Fairlawn, OH. Harris estimates that the cost of buying all the state do-not-call lists, the FTC list and hiring a couple of people to administer them, as well as buying equipment to deduplicate the files is likely to run as high as $250,000.

“Telemarketing companies will have to pay at least $50,000 per employee to pay for people to administer this program,” says John Crouthamel, chief operations officer of Prosodie Interactive in Fort Lauderdale, FL and chair of the Direct Marketing Association's Teleservices Council operating committee. “You can't leave this to people who make minimum wage. It's too important.”

Harris estimates the costs of buying all the state lists and the FTC file at about $1,000 per client (say $30,000 for 30 clients); $50,000 each for two employees to administer the program; and maybe another $120,000 for deduping equipment. That's as much as $250,000 annually. “So what's a company with $25,000 in annual revenue going to do?” he asks, predicting that the larger bureaus would probably be better able to absorb such costs.

Another aspect of the new rule that has telemarketers upset is the obligation to reduce the call abandon rate to 3% from the 5% currently allowed under voluntary guidelines put forth by the ATA and the DMA. This could run into the millions of dollars.

Bill Miklas, vice president of call center giant Sitel Corp., Baltimore, points to published figures that predict the new FTC rules could slash as many as 5 million jobs “at a time when the economy needs [them].”

He noted that the costs to telemarketing firms for upgrading equipment to cut abandoned calls will cost “millions of dollars, depending on how many clients a telemarketer has.”

On top of that, “There's no way the industry will be able to comply with this in 60 days [from this writing in early February] because it's going to take companies as long as a year to get software and equipment updated,” says Nancy Korzeniewski, director of inbound operations at Infocision Management Systems in Akron, OH.

“We can't really assess costs because it's too early now. Nothing is set,” says Roger Risley, CEO of TeleSpectrum Worldwide in King of Prussia, PA, a call center firm working for many financial services, insurance and telecommunications marketers.

The new regulations also will hit telemarketing firms with seemingly insignificant smaller fees that might have damaging long-term effects.

“Companies will have to pay at least $500 to $1,000 per representative for bonding and insurance,” says Prosodie's Crouthamel. It's seems a small cost, “but there's a high turnover in telemarketing companies, so it could add up over time,” he notes.

Many telemarketing bureaus worry that the restrictions could put them out of business as clients move to other forms of marketing.

“If [some of these] restrictions go into place as written, it's going to reduce productivity to the level that we won't be able to perform for our clients anymore,” says TeleSpectrum's Risley.

“Companies will have to go back to direct mail to get their messages across,” adds Mark Schmidt, vice president at Teledevelopment, a consultancy in Richfield, OH. This could help spawn what he sees as the biggest cost of these new rules: the reduction of telemarketing positions. “A lot of seniors, students, welfare recipients and others would be put out of jobs,” Schmidt warns.

The FTC's rules also raise issues about jurisdiction, says Jon Hamilton, president of JH&A Telemanagement, a Unionville, PA consultancy. He says with these regs, the FTC is claiming authority over telemarketing agencies that work, say, for banks, which aren't covered under FTC rules. “There might be suits filed by the ATA to rule on this,” he notes.

Nevertheless, products have started coming on the market designed to help telemarketers comply, says Joseph Sanscrainte, director of regulatory affairs and general counsel for Call Compliance Inc. in Glen Cove, NY.

One of them, TeleBlock, automatically screens and blocks outbound calls to state, in-house and third parties, and soon the FTC's do-not-call lists, within the network infrastructure of a participating telephone company.

Sanscrainte explains that his firm sells this product to local phone companies for less than a penny a call. In turn, they resell the services to telemarketing companies in their areas.

In separate actions in late January, the DMA and the ATA, joined by several telemarketing firms including Infocision, went to court seeking to have the do-not-call provisions of the FTC's Telemarketing Sales Rule overturned.

And so, it remains to be seen if the FTC's regs will prevail in the end.