Higher DNC Fees Likely Will Hit Smaller Telemarketers Hardest

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Telemarketers had long anticipated the Federal Trade Commission's increase in the proposed fee for marketers to access the national no-call registry, but some voiced concern last week about the increase's effect on their bottom lines.


Under the proposal, access to the first five area codes would be free, each additional area code would cost $29 annually and the maximum cost of access to the list would be capped at $7,250 yearly. The proposed rate is more than double what the FTC originally suggested.


Marketers who run specialized campaigns to small lists of prospects around the country stand to see substantial increases in per-call and per-acquisition cost rates, experts said. On most national campaigns, marketers will pay the maximum amount for access to the 250 existing area codes. However, for most national campaigns, the cost is spread over a high volume of calls, reducing the effect on per-call and per-acquisition costs.


"This isn't a restrictive figure, year to year," said D.J. Cannava, vice president of client services and corporate development and general counsel at Inktel Direct, Miami Lakes, FL.


Third-party telemarketing service providers -- those who sell products for clients and don't sell products on their own -- would not be required to pay a fee for access to the list. Instead, the product merchant would pay the fee, upon which the merchant would be assigned an account number that it could distribute to its telemarketing service providers and list brokers for scrubbing.


So, third-party telemarketing call center providers, who had feared the FTC would "double dip" and charge them as well as their clients for registry access, won't have to pay. However, their clients will pay, and those who don't do high-volume calling will find it harder to justify telemarketing campaigns that don't yield big margins, experts said.


"The whole idea is that it is going to remove marginal business," said Sandy Pernick, whose Chicago-based consultancy, Pernick & Associates, represents teleservices agency clients. "You're going to have to have a substantial program in order to absorb these costs."


The policy sends a message to telemarketing client companies that they are just as responsible for compliance as the call center providers who work for them, Cannava said.


"That message is in the Telemarketing Sales Rule," Cannava said. "But this is an additional message to folks that compliance is something you will be accountable for."


Though telemarketing agencies will pass the registry's cost on to clients, this likely will heighten client expectations, Cannava said, so service agencies will see indirect operations cost increases in order to meet those demands.


States that maintain their own no-call registries commonly ban the redistribution of do-not-call lists acquired by telemarketers and require a fee to be paid by each individual organization engaged in a telemarketing transaction. The practice has led to industry complaints that no-call registries are a money-making operation for government agencies.


The fee increase reflects a rise in the FTC's estimated cost of starting the national no-call registry. When it announced its intent to create the registry in January 2002, the FTC's original cost estimate was $5 million in the first year and $3 million yearly thereafter. The FTC since has revised its estimate of the first-year cost to $18.1 million.


In addition, the FTC proposal would give organizations exempt from the national list, including charities, the option of accessing it for customer service purposes. However, use of the list for purposes other than list scrubbing would be banned.


The FTC's announcement commenced a public comment period on the proposal that ends May 1, after which the commission will make a final ruling. Comments can be submitted electronically at feerule@ftc.gov.


Telemarketers would be required to access the list for the first time between Sept. 1 and Sept. 30. Enforcement would begin Oct. 1


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