6. Comments on Draft Decision

The draft decision in this matter was mailed to the parties in accordance with Pub. Util. Code § 311(g)(1) and Rule 77.7 of the Rules of Practice and Procedure.

Most of the industry comments criticized the initial definition of "error" as a call made by a predictive dialer and answered by a live person in which no agent responds to the called party within two seconds of the called party's phone going off-hook. DMA, the industry trade association, submits technical data showing that the detection that a live person instead of an answering machines has answered the call takes between 150-400 milliseconds (thousandths of a second) from the time the called party's phone goes off-hook. If the equipment detects that a live person has answered the phone, transfer of the call to an agent takes from 600 milliseconds to 1.4 seconds. In other words, an agent typically responds to the answered call in one to two seconds following a called party's greeting of "Hello."

WorldCom performed an informal sampling that showed that the average length of time between the consumer picking up the phone and initiating his or her greeting was 1.44 seconds. Further, WorldCom states, the time that it takes for a called party to answer the phone can vary greatly (i.e., from "Hello" to "Smith residence. John Smith speaking.") Thus, according to WorldCom, the "off-hook" and completed greeting are not always accomplished in two seconds. AT&T states that telemarketers are likely to set their predictive dialers at less than two seconds to avoid registering an error. According to AT&T, this even shorter time between a phone going off-hook and an agent responding may mean that the predictive dialer will register an error in the middle of the called party's greeting. The industry argues that a two-second off-hook measure of an error is insufficient for "live person" detection. Sufficient time for detection is necessary because the error rate denominator requires detection of "calls that are answered by a live person."

MCI stated in an affidavit that its predictive dialer equipment is not capable of measuring performance from the off-hook condition. MCI and others suggest that the definition of error be changed to provide for two to four seconds after a called party completes his or her greeting, instead of after the phone goes off-hook. Another party states that its equipment is not programmed to measure the time between a called party's greeting and an agent's response. Other parties urge that if our measure is tied to the phone going off-hook, the amount of time between off-hook and agent's response should be four or five seconds to account for the time it takes a predictive dialer to detect a live person and transfer the call to a waiting agent.

In view of the technical data submitted by the parties, we are persuaded that changing the two-second off-hook standard is justified. Instead, we adopt a standard whereby an agent or telemarketer must respond to a called party within two seconds of the called party ending or clearly pausing the spoken greeting. For a transition period of six months, we will permit an alternative standard by which an agent or telemarketer must respond to a called party within four seconds of the called party's phone going off-hook. As of January 1, 2003, the four-second off-hook standard will sunset, and we will require that an error be measured by the two-second response to a completed greeting.

In summary, our revised decision defines an error 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, or, alternatively, no agent or telemarketer is available within four seconds of the called party's telephone going off-hook.

As to an "acceptable error rate," WorldCom supports a rate of 3% of all predictive dialer calls that are answered by a live person. However, WorldCom and most other telecommunications companies argue that the 1% error rate that would go into effect on January 1, 2002, will require additional staffing and additional costs that likely will be borne by consumers. MNBA America Bank, N.A., commenting for the first time,1 states that its internal statistical study shows that it now meets a 5% error rate on predictive dialer calls and that further reduction in the error rate will be difficult. Cox California Telcom, L.L.C. (Cox California) argues that a 1% standard "is simply too low and would result in too many enforcement proceedings to make the standard or the Commission effective." (Cox California comments, at 7.) Pacific expresses concerns that a 1% error rate is so restrictive that it would generate abusive practices by others in an effort to get around it.

We realize that the 1% error rate that would go into effect January 1 is restrictive. Nevertheless, the data submitted by the industry shows that it is attainable with proper allocation of resources. Responsible telemarketers can meet that standard by reducing the number of calls that predictive dialers are programmed to make, or by increasing the number of agents available to respond to calls that are answered by a live person. At this time, we are not convinced that the laudable objectives of AB 870 and Section 2875.5 can be met if the error rate after a six-month phase-in period is higher than 1%. However, since we have scheduled a staff workshop to deal with record-keeping and consumer education issues, we are willing to receive additional data during the workshop on the issues of a 1% error rate and the effective date of January 1, 2003. Based on findings in the staff workshop regarding industry compliance, record-keeping requirements and implementation of the state's do-not-call legislation, we also will confirm by subsequent decision whether the 1% error rate should take effect on January 1, 2003.

In contrast to the position of the industry, the Attorney General, DCA, TURN and UCAN continue to support the 0% error rate proposed in the OIR, stating that anything more than that undermines the goal of the statute, which is to reduce the number of hang-up calls caused by predictive dialers. TURN and UCAN would accept a de minimus error rate, but they believe that rate should be significantly less than 1%. However, none of these parties support their position with data showing that a 1% error rate will result in a significant number of hang-up calls, and none address the concern expressed earlier that an overly restrictive rule will cause California employers to move to another state and place their calls to California under interstate rules and jurisdiction. DCA comments at length that a 1% error rate may violate the constitutional right to privacy under Cal. Const. Art. I, § 1, citing the drug-testing case of Hill v. National Collegiate Athletic Association (1994) 7 Cal.4th 1, 47. DCA's objection, however, appears aimed at unwanted telemarketing calls in general, and that is a topic beyond the scope of this rulemaking proceeding.

Sytel commends the draft decision for seeking to fairly balance the interests of consumers with those of business, but it raises the valid point that a low error rate may have unintended and unwanted consequences. One result, it states, may be that less-responsible dialers will program their devices to make multiple calls, then hang up on all other calls when one of the calls is answered by a live person. We acknowledge the risk of early hang-ups on ringing calls, although the time it takes a dialer to identify a live answerer (and the number of calls answered during that time by others) may tend to discourage this ploy. In any event, AB 870 limits our role in addressing predictive dialer rules to establishing an error rate and adopting certain record-keeping requirements. We have insufficient data at this time to establish a minimum-ring time for telemarketing calls.

Those commenting on the draft decision raise other valid points and corrections. Among them:

We have carefully considered all other suggested modifications to the decision, and we have made changes in the text that we deemed appropriate.

Findings of Fact

1. The Commission issued this OIR for the purposes of (i) establishing an acceptable error rate for connections made by automatic dialing devices for which no agent or telemarketer is available for the person called, and (ii) establishing record-keeping procedures applicable to those who use automatic dialing devices.

2. The OIR was prompted by AB 870, which added Section 2875.5 to the Public Utilities Code.

3. Effective July 1, 2002, Section 2875.5(a) prohibits the use of predictive dialing equipment from making a telephone connection for which no person, acting as an agent or telemarketer, is available for the person called.

4. Section 2875.5(b) directs the Commission to establish an "acceptable error rate" for telephone connections made in violation of Section 2875.5(a).

5. The Commission is required to determine the error rate, if any, before July 1, 2002.

6. The type of dialing equipment at issue is known as "predictive dialing equipment" or "predictive dialers."

7. Predictive dialers may be programmed in a way that allows the operator to predict the number of calls that must be dialed before an actual person is contacted.

8. When a number is automatically dialed but answered before an agent is available to respond, generally the predictive dialing equipment after a few moments of dead air will disconnect the call.

9. The proposal that the OIR suggests for consideration is that the acceptable error rate for automatic dialers within the scope of this legislation be set at zero.

10. AB 870 also grants the Commission 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.

11. Opening comments in this proceeding were required by March 14, 2002, with reply comments required by March 25, 2002.

12. On April 11, 2002, the Assigned Commissioner's Scoping Memo and Ruling categorized this proceeding as "quasi-legislative" and determined that formal hearings would not be required.

13. The Attorney General, the Consumer Coalition, DCA and PCI support the proposed acceptable error rate of zero, stating that only this accomplishes the goals of the legislation.

14. Most of the users of predictive dialing equipment who filed comments urge that the acceptable error rate be as close to 0% as possible but in no case exceeding 5% of answered calls.

15. The Consumer Coalition in its reply comments would support a proposal for a greater than zero error rate provided that departures from zero are de minimus.

Conclusions of Law

1. The OIR's conclusion not to hold hearings in this quasi-legislative proceeding is consistent with due process, public policy and statutory requirements.

2. The rules adopted in this proceeding are not applicable to automatic dialing-announcing devices, as defined in Pub. Util. Code § 2874, or to exempted calls defined in Pub. Util. Code § 2872.

3. The acceptable error rate should be measured as a percentage of "live calls" rather than "all calls."

4. The acceptable error rate should be measured on a monthly basis.

5. An "error" should be defined as a call placed 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, or, alternatively, no agent or telemarketer is available within four seconds of the called party's telephone going off-hook.

6. Public utilities that violate the acceptable error rate could be subject to a penalty of $500 for each violation under Pub. Util. Code § 2876.

7. The acceptable error rate for predictive dialer hang-up calls should be set at 3% of all calls answered by an individual, measured on a monthly basis, beginning July 1, 2002.

8. The acceptable error rate for predictive dialer hang-up calls should be reduced to 1% of all calls answered by an individual, measured on a monthly basis, beginning January 1, 2003.

9. Effective July 1, 2002, telemarketers should maintain summary records tracking "connects" and "abandons" for calls made using predictive dialing equipment and such data shall be made available to the Commission upon request.

10. The Telecommunications Division should, within 90 days, conduct an industry workshop to consider and make recommendations to the Commission on (1) requirements for record-keeping; (2) methods of consumer education about do-not-call registers and other means of discouraging unwanted calls, and (3) the feasibility of accomplishing a 1% acceptable error rate effective January 1, 2003.

11. The Telecommunications Division should file and serve its workshop recommendations to the Commission within 20 days of the close of the workshop. Comments on these recommendations may be filed by other parties 10 days thereafter.

12. This proceeding should remain open to receive additional comments regarding record-keeping rules, methods of consumer education, the feasibility of a 1% acceptable error rate, and whether such error rate should be effective on January 1, 2003.

INTERIM ORDER

IT IS ORDERED that:

1. Effective July 1, 2002, the acceptable error rate for telephone calls made by automatic equipment in violation of Section 2875.5(a) of the Public Utilities Code shall be 3%, measured monthly.

2. Effective January 1, 2003, the acceptable error rate for telephone calls made by automatic equipment in violation of Section 2875.5(a) of the Public Utilities Code shall be 1%, measured monthly, subject to paragraphs 6 through 8 below.

3. As of July 1, 2002, for purposes of measuring the acceptable error rate, an error is defined as a call made by automatic telephone equipment as defined in Section 2875.5 and answered by a live person in which (1) the telephone equipment 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, or, alternatively, no agent or telemarketer is available within four seconds of the called party's telephone going off-hook.

4. As of January 1, 2003, for purposes of measuring the acceptable error rate, an error is defined as a call made by automatic telephone equipment as defined in Section 2875.5 and answered by a live person in which (1) the telephone equipment 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.

5. Effective July 1, 2002, telemarketers subject to Section 2875.5 of the Public Utilities Code shall maintain summary records tracking connected calls and abandoned calls for calls made using automatic telephone equipment as defined in Section 2875.5.

6. The Commission's Telecommunications Division shall, within 90 days of the effective date of this order, convene an industry workshop to consider and make recommendations to the Commission on (1) requirements for record-keeping; (2) methods of consumer education about do-not-call registers and other means of discouraging unwanted calls; (3) the feasibility of accomplishing a 1% acceptable error rate, and (4) whether a revised acceptable error rate should be made effective January 1, 2003, or some later date.

7. The Telecommunications Division shall file and serve its workshop recommendations to the Commission within 20 days of the close of the workshop. Comments on these recommendations may be filed and served by other parties 10 days thereafter.

8. This proceeding shall remain open to receive additional comments regarding record-keeping rules, methods of consumer education, the feasibility of a 1% acceptable error rate, and the feasibility of a January 1, 2003, effective date for a revised acceptable error rate.

This order is effective today.

Dated June 27, 2002, at San Francisco, California.

SUMMARY OF COMMENTS

1 The motion of MBNA America Bank, N.A., to intervene for the purpose of filing comments is granted. We note however, that such a motion is unnecessary in this quasi-legislative proceeding in which we receive comments from any interested party.

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