Tech Industry

Hanging up on telemarketers

As it celebrates its first anniversary, the Do Not Call list seems to be a winner for consumers. Are there lessons for e-mail?

If you've noticed that the phone isn't ringing so much around dinner time these days, thank the U.S. Federal Trade Commission.

A year ago this Friday, the agency effectively gave millions of Americans the ability to hang up forever on telemarketers with the inauguration of a national Do Not Call list.

The groundbreaking measure continues to draw accusations of free speech abuses, as well as dire economic predictions, from the direct marketing industry. But, as of its first anniversary, the list has won a standing ovation from nearly everyone else.


What's new:
It's the first anniversary of the Do Not Call list, the telemarketing opt-out program that's one of the most popular services offered by the federal government in some time.

Bottom line:
Telemarketers say the list has hurt many Americans by causing layoffs in the industry. Others say similar lists should be put in place for e-mail and instant messaging. The Supreme Court hasn't said yet whether it will review the constitutionality of the program.

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"It's been the most popular service offered to the public by the federal government in quite some time," said Eileen Harrington, the FTC's associate director for marketing practices. "It would appear that the extreme doom and gloom forecasts that were made prior to the implementation of Do Not Call have not necessarily come to pass...It has not seemed to have had an extremely disruptive effect on the economy."

The Do Not Call list consists primarily of a national, federally run database and a Web site for Americans to register their phone numbers. Telemarketers face fines if they call a number on the list and the recipient complains. Registration lasts for five years.

The public response to the list has been overwhelming. Before it took effect on Oct. 1, 2003, the deluge of those hoping to sign on nearly brought down the system. The list now boasts more than 64 million telephone numbers, and the program has proven so popular that Congress is considering whether to extend the same concept to e-mail, and the Federal Communications Commission has adopted a similar approach with wireless devices.

To be sure, there are a number of exemptions, and it's estimated that millions of calls still take place. For example, the list doesn't cover nonprofit organizations, political campaigns or companies that have an existing business relationship with a call recipient. Although solid numbers are hard to find, one commonly accepted estimate says the regulation has cut the number of telemarketing calls by half.

Telemarketers keep fighting
The list appears to have just one intractable critic: the direct marketing industry. Telemarketers have insisted all along that the Do Not Call list improperly limits free speech rights and is therefore unconstitutional. A federal judge in Colorado initially blocked the list on First Amendment grounds last year, but the 10th Circuit eventually upheld the list as constitutional.

One last hope for embattled telemarketers is the U.S. Supreme Court, which is expected to decide as early as next week whether it will hear a constitutional challenge to Do Not Call.

"We might be on a real short trip," says Robert Corn-Revere, a well-known First Amendment attorney at Davis Wright Tremaine who is representing telemarketers in their court challenge to Do Not Call. "If they deny (our request), that's the end of it."

On the other hand, if the justices do accept the case, a decision would be made by early July 2005.

A centerpiece of Corn-Revere's attack on the Do Not Call list on free speech grounds is how it treats commercial firms differently from noncommercial enterprises--even though the recipient of an unsolicited phone call may find either call equally nettlesome. A brief he filed before the Supreme Court in July says: "There is zero difference in the nature of an intrusion caused by different types of calls...The rules permit nonprofit entities to make sales calls but prohibit commercial speakers from making calls that do nothing more than promote their corporate image."

Telemarketers have also predicted economic shock, not only for frequently reviled telemarketing companies, but for the millions of Americans they employ--claims that have few facts to back them up so far.

"It has had a significant impact," said Louis Mastria, director of public and international relations at the Direct Marketing Association. "It ate substantially into the bottom line of people in the (marketing and services sectors). It's eaten enough to make them change the way they do business, whether it's that they become consolidated or move into other areas."

Mastria said the DMA is conducting an economic analysis of the Do Not Call list that is expected to be finished later this year.

U.S. Bureau of Labor Statistics figures from 2001 estimate that more than 437,000 Americans work as telemarketers. The DMA argues that the category is narrowly defined--it doesn't cover people who might do telephone sales as part of their job--and last year put the figure at closer to 4.1 million Americans.

New employment options?
Early indications are that the industry is evolving, rather than facing extinction: Many telemarketers appear to have survived by broadening their businesses and exploring new ways to use smooth-talking telephone skills honed over the course of billions of calls.

One area where ex-telemarketers have found employment is interactive chat, the industry's term for those "Click here for live help" boxes that have begun appearing on some shopping sites, Mastria said. Another employment prospect is direct response advertising, in which a toll-free number manned by human operators is plastered on Web sites, newspaper ads and billboards.

Call center industry analyst Sheila McGee-Smith, president of McGee-Smith Analytics, said that because Do Not Call regulates only live phone calls, some telemarketers have switched to recorded messages. A 1991 law imposes only mild limitations on recorded messages, such as a requirement that they identify the business calling and its phone number.

"Some of the programs have gone that way, meaning that there's a number that's left and you choose to return the call," McGee-Smith said. "You're making the calls. That's one thing we've seen an increase in...If you're a telemarketing firm, you can still stay in business. You have to redeploy your selling efforts and position yourself as someone who's a compliant outsourcer."

One saving grace of the Do Not Call rules is that they permit firms to continue to make calls as long as an existing business relationship exists--something that has lessened the blow enough to permit many telemarketers to avoid bankruptcy, said Scott Hovanyetz, who covers the telemarketing industry for the trade publication DM News. Another alternative: switching from making "outbound" telemarketing calls to handling "inbound" customer service or technical support calls.

Hovanyetz said that "certainly the jobs lost are in the thousands or tens of thousands" but it's hard to arrive at a more exact figure because call centers tend to be transient, with high turnover.

"Where you're seeing a lot of the suffering is the midlevel to small call center operations, where typically they don't have that many clients," Hovanyetz said. "They lose one, and the company goes away. They just don't have the resources to make any sort of transition to inbound."

DM News has chronicled a smattering of call center closings and layoffs that took place after Do Not Call became effective last fall. Among others, FutureCall slashed 137 of 200 jobs in its Colorado Springs office; a Teleperformance USA center in Mutte, Mont. closed; MCI laid off 7 percent of its work force by shuttering call centers in Ohio, Colorado and Phoenix.

The American Teleservices Association, a trade group that represents only telemarketers, said in a letter to the FCC that: "The reduction in telemarketing will mean sacrificing 40 (percent) to 60 percent of the industry, accounting for over 2 million jobs, (and could cause the ) imminent devastation of teleservices businesses that will inevitably result as telemarketers are forced to engage in wholesale layoffs and, in some cases, to shut down completely." (Representatives of the association were in transit to its annual convention and could not be reached for comment.)

Future steps
If the list is upheld by the courts, its unprecedented popularity could engender the political equivalent of a sequel or two. Sen. Chuck Schumer, D-N.Y., has pushed for the immediate creation of a "Do Not Spam" registry of e-mail addresses, and last year's Can-Spam Act directed the FTC to report back on the feasibility of one.

But the FTC raised eyebrows in June when it announced that the idea would be useless in fighting spam because unscrupulous marketers would use it as a source of valid e-mail addresses.

"What you would be doing is giving spammers a great tool," said Harrington, the FTC's associate director. The matter is now in the hands of Congress, which conceivably could consider other variants such as a list of instant messaging users who do not want commercial solicitations.

The FCC, on the other hand, has taken the Do Not Call concept and extended it to wireless e-mail. In August, the commissioners voted 5-0 to create a master list of spam-free Internet domain names--such as and spammers are supposed to honor. Individual e-mail address of mobile users will not appear in the database, and politicians, charities and nonprofits are not required to comply.

One growing concern is the unpalatable prospect of an avalanche of solicitations delivered through voice over Internet Protocol services. Do Not Call regulations cover only "telephone numbers" included in the "national registry"--which does not encompass the type of VoIP services in which an Internet address becomes your phone number.

But the Direct Marketing Association's Mastria said he hasn't heard of desperate telemarketers trying their hand at e-mail or VoIP communications. "There's been a fairly fine line between the teleservices folks and the e-mail folks within the industry for some time," Mastria said. "Might that blur over time? Maybe. But today I'm not seeing a lot of that."

"The big question is, What happens next?" said Marc Rotenberg, director of the Electronic Privacy Information Center, who backed the Do Not Call list but is skeptical of applying it to e-mail.

Rotenberg said the lesson from Do Not Call is that it's possible to create a workable "opt-out" system. "The level of public involvement's really quite extraordinary," he said. "More people have expressed a preference in telemarketing than voted for the last president of the United States."