2. Background

On February 27, 2002, the Commission issued this Order Instituting Rulemaking (OIR) with two goals in mind: (1) to establish an acceptable error rate for connections made by automatic dialing devices for which no agent or telemarketer is available for the person called, and (2) to establish record-keeping procedures applicable to those who use automatic dialing devices. These objectives are mandated by Assembly Bill (AB) 870 (Ch. 696, Stats. 2001), which added Section 2875.5 to the Public Utilities Code. Section 2875.5 states:

a. On and after July 1, 2002, no person operating any automatic equipment that incorporates a storage capability of telephone numbers to be called or a random or sequential number generator capable of producing numbers to be called may make a telephone connection for which no person, acting as an agent or telemarketer, is available for the person called.

b. Notwithstanding subdivision (a), the commission shall establish an acceptable error rate for telephone connections made in violation of subdivision (a). The commission shall determine the error rate, if any, before July 1, 2002.

c. The commission may require any person operating equipment as described in subdivision (a) to maintain records of telephone connections made for which no person, acting as an agent or telemarketer, is available for the person called. The commission may require copies of those records to be submitted to the commission.

The type of dialing equipment at issue is that which "incorporates a storage capability of telephone numbers to be called or a random or sequential number generator capable of producing numbers to be called." This equipment is also known as "predictive dialing equipment," or "a predictive dialer," because it may be programmed in a way that allows the operator to estimate or "predict" the number of calls that must be dialed before an actual person is contacted. The OIR notes that such devices "are used extensively for telemarketing purposes and also by various commercial and non-commercial organizations to communicate with employees, students, customers [and] others." (OIR, at 2.)

The OIR notes that AB 870 was intended to address the problem of hang-up calls that are the product of predictive dialers. When a number is automatically dialed but answered before an agent or telemarketer is available to respond, the predictive dialing equipment typically after a few moments of dead air will disconnect the call. The called party then would not know if the source of the hang-up was an automatic dialer, a wrongly dialed number, or someone with criminal intent dialing to find homes where the telephone is not answered.

The OIR states that it is clear from paragraph (a) of Pub. Util. Code § 2875.5 that the overriding intention of the legislation is to prohibit the use of specified types of automatic dialers to "make a connection for which no person, acting as an agent or telemarketer, is available for the person called." With such a complete prohibition in place, the legislation then goes on to direct this Commission to establish an "acceptable error rate" for connections made in violation of this prohibition.

The proposal that the OIR suggests for consideration is that the allowable error rate for automatic dialers within the scope of this legislation be set at zero, that is, the dialers should not be used in such a fashion as to allow connections to occur without an agent being available for the person called. The OIR states:

Given the nature of the public concerns which this legislation was intended to address, the prevalence of "hang up" calls and the nuisance (at best) or fearful apprehension (at worst) that the called party experiences, it is very difficult to even contemplate what an acceptable "error rate" might be. Even small percentages of "errors" could well lead to thousands of Californians being pulled away from something critical, being concerned that their home is being checked out by a potential burglar, or having their privacy and desired solitude disturbed.

AB 870 also grants the Commission the authority to require that telemarketers who use predictive dialers maintain business records to indicate telephone connections where no person acting as an agent or telemarketer is available for the person called. As discussed below, this interim order establishes minimum record-keeping requirements necessary for telemarketers to monitor their acceptable error rate. We also direct our Telecommunications Division to conduct an industry workshop to further refine the technical aspects of the record-keeping requirements and to discuss other means of protecting the public from unwanted telephone calls.