October 2002

By: Joseph Sanscrainte, General Counsel
Call Compliance, Inc.
jws@callcompliance.com

California Sets Predictive Dialer Rules

California has always been ahead of the curve in automatic dialing services, with regulations dating to 1978. In the latest installment of this saga, The California Public Utilities Commission finalized rules regarding acceptable error rates for automatic dialing devices in June 2002.

CAPUC was not responsible to an act of the California Assembly (AB 870) from the previous year that, on one hand, outlawed any call made by an automatic dialing device "for which no person, acting as an agent or telemarketer, is available for the person called," and on the other, gave the commission the authority to establish an "acceptable error rate" for such calls.

CAPUC's initial proposal with regard to an acceptable error rate was that there really is no such thing. The commission said that since the "overriding intention of [AB 870] is to implement a prohibition on the use of specified types of automatic dialers.the proposal that we suggested for consideration is that the allowable error rate for automatic dialers within the scope of this legislation is zero."

CAPUC invited comment on this proposal. Comments from the telemarketing community were pointed, to say the least. Industry players including the American Teleservices Association, the Newspaper Publishers Association, Sprint and Verizon weighed into the effect that a zero error rate is technically impossible if predictive dialers are to be used. Predictive dialers, these commenters asserted, are critical in insuring efficiencies across many industries; a zero error rate would effectively require that predictive dialers no longer be used, and these efficiencies would evaporate.

Consumer advocacy groups Private Citizen and the Consumer Coalition focused on the annoyance of abandoned calls and argued that the telemarketing industry could function at a zero error rate. Other areas addressed by commenters included the definition of "error," the time during which an "error rate" is measured, the framework for measuring the percentage of call that are in "error," as well as comments seeking to clarify the rules being considered affect "predictive" rather than automated dialers.

CAPUC addressed all of these concerns in its interim opinion published June 27. It first determined that no hearings were necessary for the rulemaking and that the rules promulgated pursuant to the proceeding would apply only to predictive dialers. California has other rules that apply specifically to automatic dialers that randomly generated or sequential numbers.

On the topic of how to measure the percentage of the error rate, CAPUC determined that it would be based on the number of completed live calls rather than the number of all calls made and that the time frame for measurement would be one month. "Error" was defined as "a call made by predictive dialing equipment and answered by a live person in which (1) the predictive dialer disconnects the call after the called party has answered, or (2) the called party does not receive a response from the calling agent or telemarketer within two seconds of the called party's completed greeting." (CAPUC also included a transitional four-second "off hook" standard that would be phased out by Jan.1, 2003.)

After weighing the comments with regard to setting an acceptable error rate, CAPUC determined that a 3 percent standard would apply from July 1 until Jan. 1, 2003, when a 1 percent standard would take effect. The commission said that "most responsible users of predictive dialing equipment are either already at or near a 3 percent error rate.the 1 percent error rate will require more extensive changes in programming and personnel.and we believe a six-month phase-in period is reasonable to accomplish that.

CAPUC also ruled that telemarketers subject to these standards have to maintain summary records tracking connected and abandoned calls. It is important to note that the commission may have implicitly acknowledged in its interim opinion that its predictive dialer rules apply only to calls originating and terminating in California; also, the fine for violating these rules is $500 per instance.

Since the interim opinion, the companies that manufacture predictive dialing devices have scrambled to develop the technological means to achieve CAPUC's end. They appear to have devised solutions that will enable telemarketers that use predictive dialers to comply with the California rules, both on abandoned calls and the reporting. However, with the lower 1 percent rate looming, many industry observers question whether such a rate is attainable and, if so, whether a rate that low nullifies whatever benefits predictive dialers offer.Other activity by states on the predictive dialer issue has been limited. So far, only Oklahoma (in June) has enacted a law that mandates an acceptable abandoned call rate. Oklahoma chose 5 percent.

At the federal level, the Federal Trade Commission is considering major changes to its telemarketing regulations (the Telemarketing Sales Rule), including creating new predictive dialer rules. Topics under consideration include whether alternatives exist to predictive dialing technology, acceptable abandonment rates, use of tape-recorded messages to fill dead air and limiting use of predictive dialers to those telemarketers who transmit "meaningful" Caller ID information. The FTC's determination regarding these and other issues is expected in October.

Most telemarketing entities and the trade groups that represent them agree that a 1 percent error or abandonment rate is too restrictive and will be extremely difficult, if not impossible, to achieve. Telemarketers had one more chance to influence CAPUC during an all day workshop Sept. 26. Topics discussed included whether accomplishing a 1 percent acceptable error rate in predictive dialer use, effective Jan. 1,is feasible and, if not, whether the 1 percent rate should be made effective sometime after Jan. 1 or another rate be made effective on or after that date.

Commission staff will file recommendations based on the workshop to CAPUC by Oct. 16. Interested parties will have 10 days to comment on these recommendations. The commission anticipates issuing a decision on this by the end of the year