Telemarketing companies brace for layoffs

Monday, September 29, 2003

KANSAS CITY, Mo. -- Losing millions of potential customers to a "do-not-call" list will almost certainly mean big layoffs at telemarketing companies, where employees already hang from one of the working world's lower rungs.

Some 2 million of the 6.5 million people who work in the industry will lose their jobs, according to the American Teleservices Association. It based its estimate on the Federal Trade Commission's prediction that 60 million Americans will eventually add their home telephone numbers to the national do-not-call list.

According to the association, 64 percent of telemarketers are minorities, 30 percent are recent recipients of some kind of public assistance, 26 percent are single mothers and 5 percent are physically disabled.

"These are folks who are not gonna find it easy to find a job," said Tim Searcy, the group's executive director.

The association asked its member companies to stop calling households on the list starting next Wednesday, even though a court battle over its legality may not be resolved by then.

A U.S. District Court judge in Denver on Thursday blocked the list on free speech grounds, saying it treated some kinds of commercial speech differently than other types. But Congress also has rammed through a bill that may boost the law's chances of going into effect quickly. President Bush was to sign the bill today.

There are about 166 million residential phone numbers in the United States, and telemarketers attempt up to 104 million calls to consumers and businesses every day, according to the Federal Communications Commission.

The reason the telemarketing industry finds itself in hot water -- folks are long tired of annoying, unsolicited calls -- is the key ingredient for the industry's success. Experts say that if just 2 or 3 percent of the people called buy the product being pitched, the effort is profitable.

Some telemarketing companies, such as Atlantic Tele Center, which operates in Guyana, already have laid off employees in anticipation of the registry.

ICT Group, based in Newtown, Pa., said client concerns about the registry already have contributed to losses. The company, with 11,000 employees worldwide, handles telemarketing for clients that include banking and telecommunications firms.

Smaller firms that make calls on a contract basis for other businesses have said they'll close down rather than spend the thousands of dollars necessary to upgrade systems so they can comply with the new federal regulations.

"I think it probably will hurt some companies, and particularly the smaller operations would have a harder time absorbing the economics of adjusting to the latest regulations," said Brian M. McCutcheon, founder of SoftReach Services, Gilroy, Calif., an independent consulting practice that has helped some companies satisfy the latest government regulations.

He noted that some experts think the lists may actually help telemarketers do business more efficiently. "There's another school of thought that says these are people who are predisposed to decline any offer that you'd make on the telephone ... or to not even answer the phone, so you're actually improving to the extent that you're dealing with a pool of people who are more likely to be open to be purchasing something through a phone call."

Some companies insist the effects will be slight. They say most of their business comes from inbound calls, or from outbound calls that aren't targeted by the regulations, including existing or former customers. Companies may continue to call people on the list if they've done business with them in the last 1 1/2 years.

Tom Davis, the head of the nation's largest employee-owned teleservices company, Kansas City-based USA 800, said his firm, which takes mostly inbound calls, is feeling the effects of the registry already as other subcontractors that make outbound calls seek his company's business. With competition increasing, he said, some subcontractors have started offering unusually low prices.

"We're seeing some price competition that we haven't seen in the past, and I attribute it to everybody really anticipating what's gonna happen here," said Davis, whose company has calling centers in suburban Kansas City, St. Joseph, Mo., and Chicago.

Telemarketers must check the federal do-not-call list every three months to determine who does not want to be called. Those who call households in the register could be fined up to $11,000 per violation.

These are not new hurdles for many telemarketing companies. Already, more than two dozen states have implemented their own do-not-call lists -- some of which offer more stringent guidelines than the FTC's.

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