Monday, May 19, 2003

New rules likely to slow sales calls

By Mike Boyer
The Cincinnati Enquirer

Those annoying, meal-interrupting telemarketing phone calls could soon be far fewer and farther between.A national registry of consumers who don't want to receive telemarketing calls will be established in July under new Federal Trade Commission rules for interstate telemarketing.

In addition, many states - including Kentucky and Indiana - have enacted laws covering intrastate calls. The Ohio Legislature also is currently debating a bill.

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The amended telemarketing sales rules, announced in December and taking effect in October, will allow consumers to include their phone numbers on the national list, which will ban most - but not all - telemarketing sales calls.

Excluded from the do-not-call list are:

• Political solicitations.

• Charitable solicitations.

• Calls from firms where the consumer has an existing relationship, such as a credit card.

• Calls from telecommunications providers, banks and other financial institutions and insurance companies.

Those companies aren't regulated by the FTC, but by the Federal Communications Commission, which is developing its own rules.

The federal rules apply to only interstate calls - those that cross state lines. To fill gaps in the federal regulations and include calls from in-state telemarketers, 27 states, including Kentucky and Indiana, have created their own "do not call" lists, with varying provisions and fines.

Telemarketers who call a consumer whose number is on the planned FTC list could face federal fines of up to $11,000 a call.

Bill in Ohio House

This month, the Ohio Senate voted 32-1 to establish a "do not call" list which would piggyback on, and fill gaps in, the federal law. The bill has been referred to the Ohio House.

"The bottom line is the public is screaming for this kind of protection,'' Rob Tongren, Ohio consumers' counsel, said. He said he hopes the Ohio House will adopt the legislation later this summer.

But the growth of government regulation has triggered a counterattack by the telemarketing industry, which generated an estimated $300 billion in telemarketer-originated sales last year and employs several million U.S. workers.

The American Teleservices Association, an industry trade group, has filed suit to block the FTC rules, arguing that the agency is overstepping its authority and interfering with legitimate business.

"This is a role the federal government doesn't have to play,'' Tim Searcy, ATA spokesman, said. He said the public is protected by a 5-year-old FTC rule that requires telemarketers to exclude consumers who ask not to be called.

Despite the company-specific requirement, the FTC's David Torok said: "We're still getting complaints. People don't want these calls."

Balancing rights

The legal fight might boil down to a question of balancing business' right of commercial speech against an individual's right to privacy.

Tel-A-Sell Marketing, a Groesbeck firm, specializes in so-called outbound, or telemarketer-originated, calls. It said it is already feeling the impact of the "do not call" groundswell.

Edd O'Connor, Tele-A-Sell president, said his company employed 70 agents a year ago but now employs 30.

"Why? I lost a client to India, a major publishing company, which decided to go overseas and cut out a lot of my business," he said.

Moving operations overseas doesn't absolve telemarketers from complying with U.S. "do not call" laws, but the lower costs of operations make compliance more affordable. Those companies can pass the savings on to clients.

O'Connor's company has lost about $50,000 a month in revenue as a result. He said his company is focusing on business-to-business telemarketing and doing opinion research, which aren't covered by the telemarketing sales rules.

O'Connor said telemarketers in India are paid about $10 less an hour less than the same agent would cost in the U.S.

A growing number of telemarketing firms, including Cincinnati's Convergys Corp., are establishing call centers in India.

Convergys, the largest provider of call center services to other large corporations, recently announced plans to open a second facility in Bangalore, India, and expects to employ more than 6,000 agents in India within a year.

Forrester Research of Cambridge, Mass., has estimated that up to 3.3 million U.S. jobs in customer service and other knowledge-intensive areas could move overseas by 2015, according to the New York Times.

Industry impact

Do-not-call advocates say the industry's complaints are disingenuous because telemarketers have maintained for years that they don't want to call people who don't want what they're selling.

Because "do not call" lists eliminate those who don't want calls, the lists help, not hurt the industry, proponents say.

"The 'do not call' list itself isn't a major issue to a lot of people," said O'Connor, who is also Great Lakes chapter president of the ATA. "I don't want to call you, if you don't want to be called."

But he says the Ohio Senate bill has a number of attachments that make it difficult for small telemarketers like himself to compete.

"Reality is most call centers are in smaller communities. Sixty percent in towns of fewer than 25,000 people," said Louis Mastria, spokesman for the Direct Marketing Association, another industry trade group. To the extent that the rules limit the industry, it will hurt smaller communities, he said.

The Cincinnati area has become a focal point for a number of corporate call centers. John Fonner, director of technology adoption at CincyTechUSA, the Greater Cincinnati Chamber of Commerce's technology promotion arm, estimates that call centers employ about 25,000 in the area.

They range from LaRosa's, which operates a telephone pizza delivery service, to major corporations such as Procter & Gamble Co., Citicorp Credit Services in Florence and Delta Air Lines in downtown Cincinnati.

The vast majority of those call centers handle so-called inbound, or customer-originated, calls.

He doesn't know how many of those call centers have some employees dedicated to outbound telemarketing calls, which are sometimes embedded in larger facilities.

Fonner says telemarketing abuses are a real issue, but so are costs for larger companies.

"Big companies look at all their options. They aren't intimidated by distance," he said of the trend by large telemarketers to move jobs overseas.

Convergys, whose 40,000 call-center agents worldwide handle an estimated 1.7 million customer contacts - via phone and the Internet - daily, says 90 percent of its calls are inbound.

Typically, customers have a product or service issue, or employees of a corporate client might have an insurance or benefits question.

Erik Kirkhorn, Convergys' manager of government relations, said, "We're not opposed to do-not-call lists."

He said the company thinks that it complies with the coming federal rules and the various state laws. In recent comments to the FTC, Convergys expressed concerns about access, structure and fees for obtaining the national list, he said.

Complaints down

One thing advocates and opponents of government "do not call" lists agree on is that the lists do reduce unwanted calls.

Officials in Kentucky and Indiana, where half the residents in each state have signed up, say telemarketing complaints have fallen dramatically.

"Our complaint volume has fallen 91 percent," said Scott Southerland, assistant attorney general who oversees Kentucky's almost year-old do-not-call list.

Likewise, Indiana Attorney General Steve Carter, who won election campaigning against telemarketer abuse, said Hoosier satisfaction with the state's 2-year-old law topped 98 percent in a recent survey.

"I don't know of any government program that can make that claim," he said.

Critics question whether government programs to reduce taxpayer annoyance around dinner time is the best use of limited tax dollars.

But Carter said the cost of Indiana's do-not-call list has been minimal.

After excluding the more than $1 million in penalties and fees collected from telemarketers, he said the list has cost residents about 20 cents a person "for privacy relief for nearly one and a half years."


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