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August 2003

Rich Tehrani Putting The TSR And Dialer Controversy In Perspective

By Rich Tehrani
Group Editor-In-Chief, Technology Marketing Corporation

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If your company places phone calls to consumers to sell them anything, or if you sell office or cleaning supplies to businesses, I urge you to read this entire column, including the Q&A section that follows. I begin this article with a disclaimer. You will likely want to use this column as a guide, however, this is not designed to be a legal document nor a complete summary of the amendment to the TSR legislation, otherwise known as the FTC Telemarketing Sales Rule. I strongly urge you to consult legal counsel before making any decisions on how to deal with these new regulations.

As of October 1, 2003, new predictive dialing rules, which are part of the latest amendment to the TSR, will take effect. We have been writing about the do-not-call list portion of the legislation for over six months, but many people in the industry feel the dialer rules are being overlooked altogether. This article will help you understand how these rules will affect you and highlight the controversy among dialer products vendors regarding their ability to comply with these new rules.

I further urge you to forward this column to as many people in the industry as possible. The article can be accessed on the Web at www.cismag.com. A link can be sent to everyone you know who will be affected by the regulations.

The new predictive dialer rules, which are part of the amended TSR, are as follows:

1)       You must allow each called consumer's telephone to ring for at least 15 seconds or four rings before disconnecting.

2)       You must have a live agent on the call within two seconds after the called party completes their greeting.

3)       If you fail to do that, it is considered an abandoned call.

4)       You must not have more than three percent of calls abandoned per campaign, per day, where the denominator is completed calls, not attempted calls.

5)       You must play a recording if you abandon a call.

6)       You must maintain records showing compliance with the requirements for abandonment rate, ring time and recorded message.

As of January 9, 2004:  

7)       You are required to transmit your telephone number to a consumer's caller I.D. service.

8)       If your telecommunications carrier makes it possible to transmit the calling company's name, the telemarketer will have to transmit this information as well.

Perhaps one of the most ironic aspects of the above is in stipulation number three. The definition of an abandoned call is illogical and some in the industry say ridiculous. They say this because it is possible to technically abandon a called party and then connect them to a live agent, at which point they make a purchase. This is definitely not your father's 'abandoned call.'

These rules are severe, as they can dramatically reduce the productivity of an outbound calling center, depending on how the center currently does business. There is no doubt in my mind that the increased cost of complying with these rules will exacerbate the push to hire offshore call center workers, especially when the cost of complying with this rule is added to the cost of managing the do-not-call list regulations.

There seems to be no clear-cut penalty for breaking the dialer rules, but sources tell me the FTC and FCC will likely force a company to sign a consent decree promising not to repeat the rule-breaking action and promise to pay a fine if the company repeats the violation. There are currently lists of consent decrees on the FTC and FCC Web sites.

There is also an interesting twist in that collection calls are exempt from the TSR altogether, which means the dialer rules have no effect on collection calls. This, however, may make it difficult for consumers and the government to enforce the above rules and the do-not-call list. After all, if a consumer on the do-not-call list receives a call that he or she doesn't answer, and only the telephone number shows up on the consumer's caller I.D. device, he or she will likely report this to the FTC/FCC without being aware that it may be a collection call and thus exempt from the DNC list rules. Expect much confusion on this issue. I predict the general news media will finally pick up this story in the last quarter of the year.

There is a great deal more to the TSR than I have room to discuss in these pages, so I urge you to read the details for yourself by visiting www.ftc.gov and downloading the details. There are rules regarding keeping records on transactions, keeping records on past employees and keeping records on alias names past employees may have used on the phone. I believe the anti-fraud laws in this document are excellent, but I still wholeheartedly believe the government has crossed the line and is telling companies how they can do business. I don't believe this should be the role of our government. Furthermore, government intervention often increases inefficiency quite dramatically. I have yet to hear of a government entity that makes people exclaim, 'Oh my! How efficient' What a great job that government of ours is doing!' I certainly don't hear this when people call the IRS or go to renew their driver's licenses or passports. I will get off my soapbox now because there are a great deal of important topics to be discussed within these pages, including a company with which some of you are familiar, Castel.

Who Is Castel Anyway?
In the last 21 years of covering the contact center/CRM space, I have come across no other company that has stirred up more controversy than Castel, a Massachusetts-based corporation specializing in CRM and dialing equipment.

I first encountered the company when I learned they had announced a new product that bypasses the Telezapper, which is a device that minimizes telemarketing calls by playing a SIT or special information tone when the phone is answered. You know these tones as the very annoying, three high-pitched tones you hear when you dial a number that is not in service. While dialers can be programmed to ignore these codes, the Telezapper has been shown to minimize, if not eliminate, telemarketing calls.

I had been barraged with complaints about this company as people were aghast that anyone would have the audacity to manufacture a product that bypasses this device. Actually, this premise is flawed as the credit/collection industry needs to get around products like the Telezapper because people use them to avoid receiving calls on debts that they owe.

I have recently come to know the people at Castel and have had many hours of meetings with them to get a handle on what their product does and doesn't do. As it turns out, the Associated Press picked up the story about Castel from an article in a direct marketing trade publication. The editor at the trade publication happened upon a brochure targeting the collections industry. In that article, Castel allegedly claimed their dialer could get around the Telezapper. I don't believe Castel would really put out such a release as I can't fathom what constructive purpose this would have served.

Castel explained to me that their dialer, named DirectQuest, doesn't realize it is calling a Telezapper-enhanced phone line as it doesn't use the same technology as other dialers to discern when a phone is answered. In fact, using ISDN, DirectQuest is able to use the D or data channel to ascertain when a phone goes off-hook. Most other dialers use a DSP or digital signal processing board to listen for a 'hello,' a SIT tone, a fax, etc.

Castel explained that they invented DirectQuest and customers were using this technology prior to the invention of the Telezapper. If that's all there was to the controversy, this would be an open-and-shut case. (Castel presents a logical case regarding the misunderstanding and there seems to be no reason for them to intentionally seek so much negative press.)

The story, however, gets more interesting. Castel states that by using their technology, on which they have either patents or patents pending, users are able to comply with the FTC dialing regulations because of the product's use of data channel technology. They assert that there is no way a dialer that uses its DSP for answer detection can match this claim because using DSPs will yield a margin of error outside the three percent abandon rate stipulated by the government. Of course, Castel says if you turn down the efficiency of other dialers you can comply, but Castel believes only their technology allows full compliance with the new rules with no loss in productivity.

Castel is working to partner with dialer vendors so they can bolt on an upgrade that will make all vendors compliant. They realize they can't be the world's sole dialer vendor. If you are interested in more information on the topic, visit www.castel.com.

This story got very interesting when I spoke to other vendors in the industry, including SER, Stratasoft, Concerto, TeleDirect International and Genesys. I have been told by some of these vendors that Castel is not accurate in its claims and that their technology is no different than anyone else's. Based on conversations with some of these vendors, my sense is that most other dialer vendors really don't fully understand what Castel is doing. I am not taking a position on this topic as there is not enough supporting evidence for me to make a decision I can back up with facts. So, instead, I decided to present Castel's case objectively and ask a number of industry leaders for their views on this topic through a question-and-answer section. I hope you enjoy the following section and find it as entertaining as I have done. In the event that you want to respond to this column, I ask you to please post your comments to the new TMC Forums section by typing forums.tmcnet.com. Please look for the Castel topic under FTC Rules. To be honest, I have received hundreds of e-mails on the do-not-call list and I can't begin to do justice to them all. Please respond in this public forum so we may all benefit from your thoughts. With that, I bring you the most controversial question-and-answer section I have ever seen in a publication that doesn't focus on politics.

PS: We have been told that Customer Inter@ction Solutions is the primary resource readers turn to when looking for issues on complying with the latest government regulations As such, you will see even more coverage on this topic as the penalties for non-compliance are so severe, you may be shut down for making a minor mistake!


Rich Tehrani
Group Publisher,
Group Editor-In-Chief
[email protected]

Comment on this article in our forums! 

Question And Answer Session

RT: Is it true that dialers using DSPs for answer detection are incapable of complying with the latest predictive dialing legislation?

SER: No. Our outbound dialers use a combination of network signaling and digital signal processing (DSP) and comply with the current legislation. Recently, however, some companies that use only network signaling have claimed that systems that use DSP are unable to detect a live voice and transfer a call to an agent within the FTC and FCC two-second time frame. This is incorrect. In fact, outbound dialing systems that use only network signaling are relying on pre-1989 technology and are the most expensive method to ensure regulatory compliance. For example, outbound dialing systems that rely only on network signaling from the telephone carrier cannot perform answering machine detection, which is an essential feature required by today's contact center operators. As a result, these types of systems force agents to waste their valuable time handling answering machines, fax machines, pagers, voice mail and operator intercepts. As you can imagine, the cost to contact centers is tremendous with the drop in agent productivity.

Stratasoft: The most efficient technologies used to identify an answering machine or a disconnected number are DSP-based. It takes less than one second for a DSP device to identify an answering machine and if the called party is a live voice, connect the call to an agent. Under the new rule, those companies that cannot detect an answering machine will lose productivity because the pacing algorithm will be based on all connects, not just the live answers.

Concerto: No. Most dialing solutions use open system DSP cards from companies like Dialogic or NMS. These dialer manufacturers use DSP technology to be able to provide solutions that can help customers to comply. The challenge is to get the messaging information and operating modes to comply, which can be time-consuming.

All Concerto Software solutions have the option to use our own DSP, which alleviates the dependency on an outside vendor. We use DSPs for call progress detection. In fact, when a customer turns answer machine detect (AMD) on, we use DSP to determine if it's an answering machine or not and then route to an agent in under two seconds. 

TeleDirect: No. This is a sweeping, untrue statement being propagated by a particular vendor in an attempt to drive their specific agenda. Unfortunately, it is causing a great deal of confusion in the marketplace. Prior to answering your question, it is imperative that we clarify what types of answer detection, including DSP, exist in the market, and at what stage in the call-detection process DSP is used by predictive dialers. When a call is placed to a contact, there are two unique stages of call detection: pre-connect analysis and post-connect analysis. To meet the FTC/FCC regulations, while at the same time sustaining high levels of contact center productivity, it is critical that both of these stages of answer detection occur:

Pre-connect analysis. This is the analysis that occurs after a number is dialed, but before the call is answered.  During this stage, the dialer is searching for a signal that a phone has gone 'off hook.' It is critical to understand that DSP technology has nothing to with this stage of call detection. The manner in which this initial signal is detected is solely dependent upon the type of line (T1 or ISDN) that is being used to deliver the call. ISDN lines will deliver this initial 'off hook' signal slightly faster than calls placed via traditional T1 lines, but at less than a few milliseconds faster, the difference is negligible. Types of calls detected in pre-connect stage include: busy, no answer, operator intercept (tri-tone, SIT), TeleBlocker, answer/off-hook (a person, answering machine/voice mail, fax, etc.)

Post-connect analysis. This is the analysis that occurs after a call has been answered. It is during this post-connect analysis stage that DSP technology is used to discern whether the call is a live person, an answering machine, a fax machine, a Telezapper, or some other device. If this key stage is not implemented by the predictive dialer, all calls will be passed to the agent, regardless of whether they are a live person or an answering machine, thus reducing the live contacts per hour and negatively impacting call center productivity.    

Now, back to your  question, 'Is it true that dialers using DSPs for answer detection are incapable of complying with the latest predictive dialing legislation?' Absolutely not. Reputable predictive dialers:

  •       Complete pre- and post- (DSP) connect detection and deliver live contacts to agents in less than two seconds from the completed greeting,

  •       Play a prerecorded announcement to live contacts if there is no agent available to take the call,

  •       Provide users the ability to set the maximum abandoned     call rate not to exceed three percent of contacts,

  •       Provide users the ability to set the rings to at least 15 seconds or 4 rings before hanging up and determining that it was a 'no answer,' and

  •       Send the name of the company and phone number to the consumer's caller I.D. This can be configurable by campaign by most reputable dialers if users are calling on ISDN lines.

TeleDirect has invested significant resources over the years to perfect answer detection. When we combine our pre- and post-connect analysis, we detect and deliver live contacts to agents in less than a half a second and usually at the completion of the first 'hello' by the consumer. 

Preview dialers use pre-connect analysis exclusively and cannot distinguish the difference between answering machines, live calls, fax machines, etc. Since they do not detect the type of answered call, they pass all calls to the agent as soon as an 'off-hook' signal is detected from the telephone network. Predictive dialers use pre-connect analysis in conjunction with post-connect analysis (DSP technology) to further identify calls prior to routing them to the agents, while still meeting the latest legislative initiatives. Outbound agents are accustomed to the productivity associated with predictive dialers screening out most answering machines and other non-productive calls.

Genesys: It is not true that all DSPs are incapable of complying with the latest predictive dialing legislation. Some DSP technology allows companies to specify the accuracy of answering machine detection. If the technology supports lowering the detection threshold, thus shortening the detection time and allowing the flexibility of sending uncertain answering machine calls to an agent, then the FTC ruling can be met.

Also, it is important to note that DSP technologies are not static and do improve with time. The FTC two-second delay may, in fact, force the use of more powerful DSPs, which can run more complicated algorithms for detecting answering machines faster and more accurately.

RT: How does your system deal with the new legislation? Can your dialer be used legally with these new rules?

SER: As you know, SER (formerly EIS International) has been a leader in outbound contact center systems for the past 14 years ' delivering  comprehensive solutions that ensure compliance while maximizing productivity. Our outbound dialers use a combination of network signaling and Digital Signal Processing (DSP) to provide contact center operators with one of the most accurate answer detection systems on the market today.

The instant SER's switch detects a live answer, it connects the call to an available agent. At the same time, SER's Call Manager displays database information about the customer on the agent's terminal. The switch and Call Manager are synchronized so the agent hears the customer saying 'hello' at the same time the customer's information is displayed on the agent's screen.

In addition, a key safe harbor provision of the abandon rate legislation is that 'the seller or telemarketer employs technology that ensures abandonment of no more than three percent of all calls answered by a person, measured per day per calling campaign.' Our dialers are precisely the technology required because they allow our customers to set the applicable abandon rate. The methods employed by our dialers for implementing, however, are proprietary.

Stratasoft: Stratasoft has conscientiously designed our solutions since their inception to ensure our products meet or exceed compliancy requirements. In addition, through partnerships with Gryphon Networks, Call Compliance and DNC Solutions we offer full, comprehensive do-not-call services and our technology is plug-and-play with those services. Our StrataDial product can regulate the calls efficiently with a three percent abandonment rate and our contact center platform already has the ability to play a message if a live agent is not immediately available. These have been standard features of our platform since 1997.

Concerto: Yes! We have many features within our solutions to help customers to comply with new and emerging telemarketing regulations. Under the laws, companies are required to get live calls to live agents within two seconds, and a company can only have a three percent rate of abandoned calls. If the call is not connected within the mandated two-second timeframe, it is considered abandoned. AMD is a critical part of detecting live connects and transferring them to live agents within two seconds. Most dialers can detect some kind of an answer within two seconds, but they will not be able to detect answering machines and still comply with the two-second rule. Using open system cards from external switches makes this even more difficult.

When Concerto Software solutions are configured correctly, companies can comply with the two-second rule, even with AMD on. In addition, we have various features -- such as caller I.D. transmission capability, preview dialing, verification agents and sophisticated pacing algorithms -- to help customers manage their contact centers, maintain productivity and to comply with FTC regulations. Customers should ask their dialer provider about compliance with the various components of the new FTC regulation.

TeleDirect: Yes, TeleDirect's solution, called Liberation 6000, can absolutely be used legally within the boundaries set by the new regulations. Liberation 6000 includes a number of standard features to ensure compliance with all FTC/FCC telemarketing regulations, including flexible and accurate DNC list management, campaign selectable abandonment rate and variable, a minimum of 15 seconds (four rings), call detection and connection within two seconds of completed greeting, automated pre-disconnect recorded announcement, campaign configurable ANI/caller I.D. and a compliance reporting package.  

Genesys: Genesys is a member of the Direct Marketing Association (DMA), which allows us to receive updated information on new FTC regulations and anticipate necessary product updates. Genesys Outbound Contact version 6.5.1 meets the FTC's new Telemarketing Sales Rule amendments and can be used legally within the new rules.  Specifically:

  • National do-not-call registry. Genesys Outbound Contact allows contact center managers to import existing DNC registries from any source.
  • Call abandonment restriction. Genesys Outbound Contact enables companies to meet the two-second maximum delay to connect an answered call to a live agent.
  • Transmission of caller I.D. information. Genesys Outbound Contact supports full transmission of telemarketer's identifying information.

Genesys recommends the following to businesses running telemarketing campaigns: subscribe to the national DNC registry and pay any associated fees to obtain the registry information, download the national registry database and update calling lists every three months, train personnel and establish a written process to maintain and record DNC lists and archive calling lists with corresponding dial results and DNC list used after each campaign.

RT: If your dialer does comply, is there any loss of productivity that will be experienced in order to be compliant? If so, exactly what amount of productivity will be lost in an average call center?

SER: SER has always been sensitive to the issue of call abandon. For example, CPS provides the capability to change the abandon rate by campaign, as needed, to conform to specific calling requirements. Other dialer technologies may require an abandon rate of up to 15 percent or 25 percent to reach the same level of productivity as the CPS system. In fact, we have many customers who have always configured their SER system at a three percent or less abandon rate, even before the new abandon rate legislation. Complying with the new FTC/FCC mandates will have no effect on their contact center's productivity. 

For other customers who have historically operated at higher abandon rate percentages, SER has developed several new and innovative solutions that allow contact center operators to recoup the compliance-related productivity losses they may experience. This includes SERmonitor and SERvalidate, automated quality monitoring and call validation solutions which enable contact center operators to dramatically reduce the costs and resources associated with manually monitoring agent activities such as script adherence and order validation. In addition, we are introducing a new outbound dialing switch, which allows users to dramatically reduce operating costs and, because it uses our patented dialing algorithm, to increase the number of connects per hour.

Stratasoft: If you measure productivity by the quality of the contacts, then there should be an increase. If you measure productivity based upon the number of contacts per hour, then the quality of the list becomes part of the equation. Our customers should see an increase in productivity only because our superior technology will allow them to outpace the competition.

Concerto: Not usually. Using ethical dialing practices and under standard operating conditions, there should not be a loss in agent productivity. In fact, quite the opposite. There are two ways to look at productivity ' the number of calls an agent handles and how effective each call is. Agent productivity can be positively impacted due to the fact that under the do-not-call law, only those customers who wish to be contacted will be contacted. That alone will achieve several things: it will improve overall agent effectiveness by the simple fact that the people and technology resources are not investing time and energy into consumers who do not want to be contacted, and abandonment rates go down due to the fact that those being called have theoretically agreed to remain on the call list and the contact center can dial at lower ratios.

Concerto uses advanced pacing algorithms to determine how fast or slow the solution dials. We provide our users with the tools that, when configured correctly, can help minimize agent idle time and improve agent productivity within the boundaries of the new and emerging regulations.

TeleDirect: To minimize the impact of these new regulations on call center productivity, TeleDirect invested significant time and resources over the past year to optimize our pacing algorithm for this new outbound calling environment. The primary reason for concern over the loss of productivity has resulted from the definition of 'abandoned calls' by most predictive dialers, which measured abandoned calls as a percentage of total dials, not as a percentage of live connects. For example, if 100 calls were abandoned out of 3,000 dials, this would result in a three percent abandonment rate under the 'traditional' method of measurement. However, of those 3,000 dials, if only 1,000 consumers actually answered their phones, the abandoned calls would actually be 10 percent using the FTC/FCC's definition.

With the recently released version of our 'Performance Without Annoyance' solution, our customers are able to ensure compliance with all FTC/FCC regulations while maintaining their high levels of productivity that accompany the use of a predictive dialer solution.

Genesys: Because the law is not yet implemented, it is somewhat difficult to predict the overall impact on telemarketers and agent productivity. That said, Genesys expects agent productivity to be negatively impacted in two regards. First, because the number of calls in queue must be reduced, there is a greater chance that agents will have to wait for a live connection. Secondly, complying with the two-second rule means that some answering machine calls will be connected to the agent. However, Genesys also believes there will be a positive impact on telemarketing companies. As the do-not-call lists remove those consumers unlikely to purchase products and services over the phone, agents' success in closing sales may be increased. Further, as telemarketers focus more on expanding existing relationships with receptive customers, the negative perception associated with telesales will be significantly reduced, if not eliminated.

As a result, productivity should not be measured by the number of outbound calls answered by an agent, but rather on the ratio of sales closed to calls completed.

RT: What do your current customers need to do to their systems to become fully compliant with the latest dialing regulations?

SER: Ensure their systems are operating with our most current release of our software and that their systems are properly configured to meet or exceed the FTC/FCC regulatory mandates.

Stratasoft: Our customers need only to call our help desk and ask for the call compliant reports. Because not all industries are required to meet the FTC regulations, customers also may request a feature that allows the system to only default to and run settings based upon the FTC regulations. As a manufacturer of contact center products, it is our responsibility to ensure that our products comply with the most current legislation and offer the latest technology and features. Our customers are protected from obsolescence because all our new enhancements and capabilities are incorporated in new software updates, which our company releases at least twice a year. All customers who have a Stratasoft maintenance program are eligible to receive the updates at no additional charge.

Concerto: Companies need to put processes and technology in place that will help them be successful within the parameters of the regulations. The right contact center solution can help automate much of the work that is required to demonstrate compliance. By understanding the law, companies will know what technology feature-functionality they will need to comply.

Concerto Software has developed a detailed white paper describing the specific features within our solutions that can be configured to help customers to comply. For example, companies will need to pull certain reports to demonstrate compliance and Concerto Software has created standard reports to accomplish this. Therefore, companies simply need to add these new standard reports to their reporting package.

TeleDirect: In order to comply, current TeleDirect Liberation 6000 customers will need to set their call abandonment rate to not exceed three percent of live connects, set the number of rings to be 15 seconds or four rings before determining the call is a 'no answer' and disconnecting, and activate the 'pre-disconnect' message feature and pre-record a message that states the company name and phone number. Once this feature is activated, the pre-recorded message will play whenever a consumer answers the phone and no agent is available to take the call. Customers must also purchase and import the national do-not-call list into the dialer's database. Once imported, this list/registry is checked prior to every dial attempt to ensure that no one on the list is called unless it is an exception campaign such as calling existing customers, surveys, collections, charitable solicitations, etc.

Genesys: Genesys Outbound Contact 6.5.1, our current version, supports compliance with the regulations. Genesys customers using predictive dial mode will need to observe the regulation by setting the over-dial rate with less than or equal to three percent so that all answered calls are transferred to the agent in time. Outbound Contact 6.5.1 also supports full compliance for customers using other dialing modes, such as preview or progressive.

Genesys is in the process of providing a product advisory to our existing Outbound Contact customers to explain the regulation and provide best practices and recommended guidelines on using the Genesys software to be in compliance with the new FTC regulations.

Special thanks to:

Doug Smith, Vice President of Sales, Castel
Lawrence P. Mark, Chief Technology Officer, SER Solutions, Inc.
Jean-Marc Mezin, Product Marketing Manager, Genesys
William R. Hennessy, President and Chief Executive Officer, Stratasoft, Inc.
Jim Mitchell, Founder and Fellow, Concerto Software
Kathleen Kelly, CEO, TeleDirect International, Inc.

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