Telemarketing: Implementation of the National Do-Not-Call Registry
Published: 2005-01-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In response to consumer frustration and dissatisfaction with unwanted telemarketing calls, Congress has passed several statutes directing the Federal Trade Commission (FTC) and Federal Communications Commission (FCC) to regulate intrusive and deceptive telemarketing practices, authorizing both agencies to establish the National Do-Not-Call Registry (the national registry), and authorizing FTC to collect fees to fund this national registry. The objective of the national registry is to limit the numbers of unwanted telemarketing calls that registered consumers receive. The Conference Report for the Consolidated Appropriations Act, 2004, mandated that GAO evaluate the implementation of the national registry. Specifically, this report addresses (1) how FTC and FCC have implemented and operated the national registry, (2) fees collected to cover costs to operate the national registry, and (3) how FTC has measured the success of the national registry.
section_title: What GAO Found
paragraphs: FTC and FCC have done several things to implement the national registry, including issuing regulations and coordinating with each other on the development of regulations and enforcement efforts. FTC has contracted out management of the operational aspects of the registry. Fees for the national registry were less than costs incurred in fiscal year 2003 but covered costs in fiscal year 2004, the first full year of operation. Fees collected by FTC in fiscal year 2003 fell short of actual costs incurred by about $9.4 million. However, fees collected in fiscal year 2004 covered FTC's $14 million in costs incurred. FTC uses appropriated funds to cover costs associated with the national registry and, as required, reduces its appropriations by the amount of fees collected. FCC uses appropriated funds to cover its costs associated with the national registry. FTC established three objectives to measure whether the national registry was successful--(1) having the system operational in calendar year 2003, (2) having the system capable of enrolling about 60 million telephone numbers within the first 12 months of operation, and (3) reducing by 80 percent unwanted calls to consumers who sign up for the registry. The national registry was operational in calendar year 2003, and 62 million telephone numbers had been registered by consumers as of June 2004, within 12 months after registration opened. FTC cannot measure how much unwanted calls have been reduced because it does not know how many calls were being received before the establishment of the registry. However, as an alternative, FTC relied upon two surveys. The results of one survey showed that respondents had an 80 percent reduction in unwanted telemarketing calls since registering on the national registry. However, this result is questionable because, among other problems, the survey relied on respondents' recall of the number of telemarketing calls received at least three months prior. The two surveys found that about 90 percent and 87 percent of registered consumers surveyed reported receiving fewer calls. The surveys may provide indications of the national registry's overall performance; however, GAO is uncertain how representative the results are because, for example, one survey did not use a probability sample that can be projected nationwide. FTC and FCC provided informal technical comments to our report, which we incorporated where appropriate. According to FTC, there is no evidence that the national registry is not working.

section_title: Letter
paragraphs: The Federal Trade Commission (FTC) and Federal Communications  Commission (FCC) have promulgated regulations governing the $720  billion telemarketing industry pursuant to a number of statutory mandates  to regulate telephone solicitations. In response to consumer frustration  and dissatisfaction with unwanted telemarketing calls, Congress has  passed several statutes directing the FTC and FCC to regulate intrusive  and deceptive telemarketing practices, authorizing both agencies to  establish the National Do-Not-Call Registry (the national registry), and  authorizing the FTC to collect fees to fund the national registry.  In  general, the national registry is a listing of telephone numbers received  from consumers, who registered with the FTC to prevent unwanted  telemarketing calls. Telemarketers are required to access the national  registry to remove registered consumers from their telephone call lists and  violators may be subject to enforcement actions. The objective of this  national registry is to limit the number of unwanted telemarketing calls  that registered consumers receive.
The Conference Report for the Consolidated Appropriations Act of 2004  directed that we evaluate FTC’s and FCC’s implementation of the national  registry and determine whether FTC has achieved its goal of reducing by  80 percent the number of telemarketing calls received by registered  consumers. Accordingly, taking into consideration our consultation with  your staff, this report addresses (1) how FTC and FCC have implemented  and operated the national registry, (2) fees collected to cover the costs to  operate the registry, and (3) how FTC has measured the success of the  national registry, including its assessment of whether telemarketing calls  received by registered consumers have been reduced by 80 percent.
To respond to the first objective, we reviewed laws, regulations, and rules  related to the national registry and FTC and FCC documents describing  the roles and responsibilities of each commission with respect to the  implementation, operation, and enforcement of the national registry. We  obtained and reviewed FTC’s contract with AT&T Government Solutions,  which is managing the operational aspects of the national registry  database that contains telephone numbers of consumers who have  registered and information about alleged violations of the national  registry’s provisions reported by registered consumers (e.g., consumer  complaint data). For the second objective, we reviewed FTC’s Federal  Register notices of proposed rulemaking and final rules to establish the  national registry fees and obtained information from FTC about its  estimation of the national registry fees to be paid by telemarketers, actual  fees collected, and actual costs incurred to implement, operate, and  enforce the national registry. To assess the reliability of FTC’s cost and fee  collection data, we talked with agency staff about data quality control  procedures and reviewed relevant documentation. We determined the data  were sufficiently reliable for the purposes of this report.
For the third objective, we obtained information on FTC’s objectives for  assessing the national registry’s success. FTC included in its assessment of  the national registry’s success surveys conducted by two private  companies addressing the effectiveness of the national registry. We  reviewed these surveys to determine whether they could be used to  measure the success of the national registry. We also met with FTC and  FCC staff to discuss all three objectives. We conducted our review from  April through December 2004 in accordance with generally accepted  government auditing standards.
subsections: section_title: Background
paragraphs: The Telephone Consumer Protection Act of 1991 (FCC’s basic statutory  mandate with respect to telemarketers) required FCC to issue regulations  to protect consumers’ privacy by preventing unwanted telemarketing calls  and authorized, but did not require, FCC to fulfill this requirement by  creating a national do-not-call database. The Telemarketing and  Consumer Fraud and Abuse Prevention Act of 1994 (FTC’s specific  statutory mandate regarding telemarketing) required FTC to issue rules  prohibiting deceptive telemarketing acts or practices and other abusive  telemarketing acts or practices  but did not specifically mention a national  registry. Both commissions have promulgated regulations imposing  requirements on telemarketing practices, ranging from restrictions on the  hours when unsolicited calls may be made to provisions prohibiting calls  under certain circumstances. FTC’s regulations are known as the  Telemarketing Sales Rule, and FCC’s as the Rules and Regulations  Implementing the Telephone Consumer Protection Act of 1991.
The two commissions have different but overlapping jurisdiction over the  activities of entities that make telemarketing calls: thus, telemarketers  may have to comply with one or both sets of regulations. FCC’s authority  covers entities that use the telephone to advertise, including those making  intrastate telephone solicitations, while FTC’s authority under its  telemarketing law is limited to entities engaged in interstate telemarketing.  In addition, by statute, certain entities are wholly or partially exempt from  FTC jurisdiction but remain subject to FCC jurisdiction. These include  common carriers, banks, credit unions, savings and loan institutions,  airlines, nonprofit organizations, and insurance companies.
FTC and FCC initially responded to the statutory mandate to address  unwanted telemarketing by prohibiting calls to individuals who previously  had stated to telemarketers that they did not wish to receive calls made by  or on behalf of a particular seller. These regulatory provisions are called  “entity-specific” do-not-call provisions, and they remain in effect as a  complement to the national registry. Telemarketers are required to  maintain lists of consumers who have specifically requested to have their  names placed on the company-specific do-not-call list, and it is a violation  of law for them to call a consumer who has asked to be placed on the  company’s list. Thus, those consumers who have not placed their  telephone numbers on the national registry still can instruct telemarketers  to place them on an entity-specific do-not-call list. In addition to FTC’s and  FCC’s entity-specific do-not-call provisions, consumers can register their  telephone numbers on state do-not-call lists. FCC stated in a July 2003  Report and Order that 36 states had established their own statewide do- not-call lists to respond to the growing consumer frustration with  unsolicited telemarketing calls.
Entering one’s telephone number on the national registry will not stop all  unwanted solicitations. There are several exemptions in the law that allow  organizations to call consumers, even if their telephone numbers are on  the national registry. Exempt organizations include charities,  organizations conducting surveys, political fundraisers, those calling on  behalf of tax exempt organizations, and those calling under an  “established business relationship” or with the consumer’s written  permission. Under an established business relationship, a telemarketer can  call a consumer for a period of up to 18 months after the consumer’s last  purchase or financial transaction with the business or up to 3 months after  the consumer’s last inquiry or application to the business. However, even  if a business relationship was established, the company is required to  comply with a request under the previously mentioned entity-specific do- not-call provision.  Thus, if the consumer tells the company they do not  want to be solicited by telephone, the company is prohibited from calling  again. Similarly, the consumer can use the entity-specific option to ask a  paid fundraiser for a charitable organization to stop soliciting them for a  specific charity by telephone.
section_title: Implementation and Operation of the National Registry
paragraphs: On the basis of its experience and growing evidence that the entity- specific provisions were ineffective and overly burdensome on consumers,  in January 2002, FTC proposed a national do-not-call registry and 1 year  later adopted its proposal to amend its Telemarketing Sales Rule to create  the national registry and prohibit telemarketing calls to consumers who  registered their telephone numbers. FTC also allowed states to transfer to  the national registry those consumer telephone numbers on their state  registries. As of December 2004, 17 states have transferred their state list  and adopted the national registry as the state registry.
FCC revised its regulations pursuant to the Telephone Consumer  Protection Act, in June 2003, to require telemarketers under its jurisdiction  to comply with the requirements of the national registry. In addition, in  accordance with the Telephone Consumer Protection Act, FCC required  states with their own state registries to include on the state registry those  telephone numbers registered on the national registry from their  respective states. FCC required this to reduce the potential for consumer  confusion and reduce regulatory burdens on the telemarketing industry.  FCC allowed an 18-month transition period for states to download  information from the national registry to their state registry.
In March 2003, Congress passed the Do-Not-Call Implementation Act (the  Implementation Act), which authorized FTC to establish fees “sufficient to  implement and enforce” the national registry. Initial registration of  consumer telephone numbers began in late June 2003. In July 2003, FTC  set fees to be paid by telemarketers to access the national registry. In  September 2003, in response to legal challenges to the national registry  and requirements, Congress passed additional legislation expressly  authorizing FTC to implement and enforce a national do-not-call registry  under the Telemarketing and Consumer Fraud and Abuse Prevention Act  and ratifying the National Do-Not-Call Registry regulation as promulgated  by FTC in 2002. To manage the anticipated large number of consumers  who would want to register via the telephone, FTC had a two-stage  process whereby consumers west of the Mississippi could register by  telephone starting June 27, 2003, and on July 7, 2003, telephone  registration was opened to the rest of the country. FTC and FCC began  enforcement of the national registry on October 1, 2003; and FTC issued a  revised rule to increase telemarketer fees in July 2004. Figure 1 provides a  timeline of FTC and FCC actions to implement the national registry.
Under the Implementation Act, FTC and FCC were to consult and  coordinate with each other to maximize consistency between their  regulations governing the national registry.  The Implementation Act  required both FTC and FCC to provide a written report to Congress 45  days after FCC finalized its rulemaking on the national registry. Each  commission’s report was to cover their efforts to maximize consistency in  their enforcement efforts by (1) conducting an analysis of the  telemarketing rules implemented by both commissions, (2) listing any  inconsistencies between the two commissions and the effects of such  inconsistencies on consumers and on telemarketers paying for access, and  (3) providing proposals to remedy any inconsistencies. FTC and FCC  issued reports in September 2003 that analyzed differences related to  enforcement of the national registry and other areas where they had  common enforcement interests related to solicitations by telemarketers,  such as abandoned calls and calling time restrictions.
As shown in table 1, differences related specifically to the national registry  that FTC and FCC identified in their reports included (1) jurisdiction, (2)  definition of established business relationship, (3) instances where the  telemarketer caller had a personal relationship with a consumer, and (4)  instances where tax-exempt nonprofit entities use for-profit telemarketers  to solicit on their behalf. FTC and FCC consulted and coordinated to  address the inconsistencies that they identified. For example, since FCC’s  jurisdiction is broader than FTC’s, FCC decided to focus its enforcement  efforts on  activities over which FTC does not have jurisdiction, such as  common carrier and intrastate telemarketing. In other cases, the two  agencies proposed monitoring the impact of the inconsistencies to  determine whether any action was needed. Table 1 summarizes FTC’s and  FCC’s inconsistencies with respect to the national registry and decisions  made to address the differences.
In addition to the above, FTC noted minor differences related to  monitoring and enforcement with respect to safe harbor provisions and  differences regarding entities that can be held liable for violations. FTC  did not believe differences for these two issues were significant enough to  warrant any action, and FCC had not identified these as inconsistencies in  its report.
FTC and FCC entered into a Memorandum of Understanding that further  established both commissions’ intent to work together in a cooperative  and coordinated fashion to implement consistent, comprehensive,  efficient, and nonredundant enforcement of federal telemarketing statutes  and rules. FTC and FCC agreed that (1) the commissions would meet at  least quarterly to discuss matters of mutual interest; (2) FTC would  provide FCC with national registry information through the Consumer  Sentinel system; (3) the commissions would make available to each other  consumer complaints regarding possible violations of federal  telemarketing rules; (4) the commissions would endeavor to avoid  unnecessarily duplicative enforcement actions; (5) the commissions would  engage in joint enforcement actions, when necessary, that are appropriate  and consistent with their respective jurisdictions; (6) the commissions  would coordinate public statements on joint cases; and (7) the  Memorandum of Understanding was to remain in effect until modified by  mutual consent of both parties or terminated by either party upon 30 days  advance written notice. FTC and FCC staff said that they tend to meet  more frequently than quarterly to discuss matters of mutual interest.
subsections: section_title: Operation of the National Registry
paragraphs: FTC’s December 2002 regulation establishing the national registry set forth  a process for consumers to register their telephone numbers and for  telemarketers to obtain these numbers to remove them from their call  lists. Consumers who want to place their telephone number(s) on the  national registry can register either on FTC’s Web site  (www.donotcall.gov) or by telephone (1-888-382-1222).  A consumer  can  enter up to three telephone numbers at one time by registering online. The  consumer must also enter their e-mail address, which is used for  confirmation and completion of the registration process. Consumers are to  receive an e-mail of the Web site registration, which they must respond to  within 72 hours in order to confirm registration. To register a number by  telephone, a consumer must call the national registry from the telephone  he or she wants to register.  The consumer’s telephone number is  confirmed at the time the call is made, and registration is completed at  that time. A registered telephone number remains on the national registry  for 5 years before expiration at which time the consumer may re-register  it. A consumer can use FTC’s national registry Web site or toll free number  to verify the registration’s expiration date. According to FTC, of the  approximately 62 million registered consumer telephone numbers as of  August 2004, 61 percent registered on FTC’s Web site, 22 percent  registered using the toll-free telephone number, and 17 percent came from  state downloads.
FTC entered into a contract, dated March 1, 2003, with AT&T Government  Solutions to provide services necessary to develop, implement, and  operate the national registry. The contract provided that the contractor  was to develop and provide a secure database that included the telephone  numbers collected from consumers during the registration process as well  as receive telephone numbers from states that decided to include  consumer telephone numbers from their do-not-call registries in the  national registry. The database was also to include information on the date  the registration was made and the expiration date of the registration. The  automated database was to, among other things, permit consumers to  confirm or alter their registration; provide reports and access to  information regarding registration to FTC personnel; provide a system to  allow telemarketers to access consumer telephone numbers and pay fees,  when required; provide for a system to gather consumer complaint  information concerning alleged violations of the national registry; provide  a system that transferred all valid processed consumer complaints to the  FTC in a format that would be compatible with the FTC’s Consumer  Sentinel system;  and allow appropriate federal, state, and other law  enforcement personnel access to consumer registration and telemarketer  information maintained in the national registry.
Until December 31, 2004, covered telemarketers are to access the national  registry within 3 months of making a call to drop from their call lists the  telephone numbers of consumers who have registered. However, Congress  directed FTC to amend its regulation to require telemarketers to access  information at least once a month. FTC issued a notice of proposed  rulemaking February 13, 2004, and a final rule on March 29, 2004, to  require, effective January 1, 2005, that telemarketers must obtain national  registry telephone numbers and purge registered telephone numbers from  their call lists at least every 31 days. In promulgating the final rule, FTC  explained that 31 days was used to define the statutory monthly  requirement in order to provide a set interval at which telemarketers must  access the telephone numbers in the national registry. An interval of 31  days rather than 30 days was used to mirror the length of the most  frequently occurring and longest month. The FCC rule was also amended  to require that telemarketers download the registry every 31 days. FTC  also explained in promulgating the final rule that it had set the effective  date as January 2005 to allow businesses 9 months to ready their systems  and procedures and to enable FTC and its contractor sufficient time to  implement necessary changes to the national registry system to  accommodate the increased usage.
FTC and FCC have mechanisms in place to handle consumer complaints.  Both commissions provide numerous ways for consumers to file  complaints. These include by mail, over the telephone, by facsimile, by e- mail directly to the agency and through their Web sites for the national  registry. In filing a complaint, both FTC and FCC require that the  consumer have been on the national registry for 3 months, but differ in the  information consumers are to provide.  For example, FTC requires  consumers to provide their telephone number, the company name or  telephone number, and the date of the violation. FCC requires consumers  to provide their name and telephone number, the telemarketer’s name or  telephone number, any specific information about the complaint, and the  date of the violation.
According to FTC and FCC, the requirement that consumers have been on  the national registry for 3 months will be revised to 31 days on January 1,  2005, when telemarketers are required to remove registered telephone  numbers from their call lists every 31 days. As of December 11, 2004,  consumers had filed 557,727 complaints through the national registry’s  Web site and 117,610 complaints via the telephone. According to FCC staff,  FCC has established a process for handling complaints against common  carriers that differs from those used for noncommon carriers.  Under  this process, FCC serves a common carrier with a notice of complaint that  includes a copy of the complaint and a specified time in which to respond.  With respect to noncommon carriers, FCC and FTC may initiate an  investigation of the complaint depending on the number of complaints  they have received against the company and other factors.
FTC and FCC do not take action on all consumer complaints. Rather, FTC  and FCC said that they consider a number of factors when determining  which alleged violations to pursue that include the type of violation  alleged, the nature and amount of harm to consumers (e.g. invasion of  privacy or financial harm), the potential that telemarketers will make  future unlawful calls, and securing meaningful relief for affected  consumers. FTC’s enforcement actions generally are accomplished by  seeking injunctive relief and sometimes consumer redress in federal court;  actions for civil penalties (up to $11,000 per violation) are filed by the  Department of Justice on behalf of FTC and are less common. FCC’s  enforcement efforts are generally accomplished through an administrative  process whereby FCC first issues citations against entities not otherwise  regulated by FCC for violations of laws it enforces. For subsequent  violations by such entities, or for initial violations by FCC regulated  entities (such as common carriers, broadcasters, or other licensees), FCC  may impose a civil penalty through forfeiture proceedings or take  additional enforcement actions that include, for example, cease and desist  proceedings, injunctions, and revocation of common carrier license  operating authority for violations of the requirements of the national  registry. Enforcement of a forfeiture order is done in federal court  through the Department of Justice, which handles violations of statutes  that FCC enforces. Fines collected through civil penalties go to the U.S.  Treasury’s general fund and are not retained in either commission’s  accounts for their use.
As of December 2004, FTC filed 9 lawsuits for injunctive relief, and in  some cases, consumer redress, and the Department of Justice had filed  one lawsuit on behalf of FTC for violations of the national registry. As of  December 2004, FCC reported that it had initiated 99 investigations against  companies that allegedly made calls to consumers on the national registry.
FCC’s investigations have resulted in 16 citations for violations of the  national registry.  In addition, 2 companies have entered into consent  decree settlements involving substantial voluntary monetary payments  and implementation of strict compliance plans, 54 investigations have  been closed because the calls underlying the complaints were not legally  actionable, and the remaining 27 investigations are under active  consideration. In some instances, consumers had an established business  relationship but did not realize it. Also, as mentioned earlier, FTC and FCC  have various factors they consider with respect to which complaints to  pursue; therefore, not all complaints are investigated.  Appendix I provides  more information on FTC’s ten lawsuits, and FCC’s 16 citations and 2  consent decrees related to enforcement of the national registry  provisions.
section_title: Fees Collected for the National Registry Did Not Cover Costs in Fiscal Year 2003 But Did in Fiscal Year 2004
paragraphs: FTC collected about $5.2 million in fees in fiscal year 2003 and incurred  costs of about $14.6 million to implement, operate, and enforce the  national registry. This is a shortfall of about $9.4 million. In fiscal year  2004, FTC collected about $14 million in fees and incurred costs of about  $14 million to implement, operate, and enforce the national registry. FTC  attributed the FY 2003 shortfall in fees to unexpectedly short partial year  operations (less than one month) and to fees being set too low due to lack  of information about (1) the number of telemarketers that would pay to  access the registry and (2) the average number of area codes that  telemarketers would access. FTC revised the national registry access fee  effective September 1, 2004, using information on the number of  telemarketers that had actually paid to access the registry in fiscal year  2003 and the number of average area codes accessed.  FTC uses funds  from its salaries and expenses account to cover costs of implementing,  operating, and enforcing the national registry and is required to reduce its  general fund appropriations by the amount of fees collected. In fiscal years  2003 and 2004, appropriations estimates of fees to be collected for the  national registry ($18.1 million and $23.1 million, respectively) were  greater than the actual amount of fees collected and costs incurred.   Because the estimates were greater than the actual amounts of fees  collected by the national registry, the differences represented funds  available for other allowable expenses covered by the salaries and  expenses appropriation.  FCC’s costs associated with its enforcement of  the national registry are funded in its salaries and expenses account.  According to FCC staff, FCC does not distinguish costs associated with  enforcing the national registry from its other enforcement efforts.
In 2003 when FTC initiated its fee structure, it based the fee for the  national registry on the number of entities that would be required to pay  the fee and the number of area codes that a telemarketer would access  annually. FTC estimated that $18 million would be needed to implement,  operate, and enforce the national registry requirements. In two separate  notices of proposed rule making for the original national registry fee, FTC  stated that it made a number of assumptions to estimate the number of  entities that would be required to pay and the number of areas codes to be  accessed. Because of an absence of information available about the  number of companies then in the marketplace that made telemarketing  calls to consumers covered by national registry regulations, FTC sought  public comment on its assumptions and methodology but received  virtually no comments. Consequently, FTC estimated the fee based on  those assumptions and estimates and noted that the fees might need to be  reexamined periodically and adjusted to reflect actual experience with  operating the registry. FTC’s original fee rule established an annual fee of  $25 for each area code requested from the national registry, up to a  maximum of $7,375 (300 area codes or more). The first 5 area codes are  provided at no cost. FTC provided for free access to the first 5 area codes  to limit the burden that might be placed on small businesses that only  require access to a small portion of the national registry. FTC’s rule also  permits exempt organizations to have free access to the national registry  with the intent that should the exempt organizations want to purge their  calling lists as a matter of customer service, they would be able to obtain  the information necessary to do so. Once a telemarketer paid for access to  a selected number of area codes, or was granted free access, it could  access those area codes as often as it deemed appropriate for the annual  period covered.  If, during the course of the annual period, a telemarketer  needed to access telephone numbers from more area codes than those  initially selected, it would be required to pay for access to those additional  area codes. For purposes of additional payments, the annual period was  divided into two periods of 6 months each. Obtaining additional area  codes for the first 6-month period required a payment of the full year fee of  $25 for each new area code whereas for new area codes to be used for the  second 6-month period, telemarketers would be assessed a reduced $15  fee for each area code. Table 2 shows FTC’s estimation of the national  registry fee to raise approximately $18 million in fiscal year 2003.
According to FTC, it collected about $5.2 million in fiscal year 2003. FTC  said it collected fewer fees than anticipated for two reasons. First, FTC did  not begin collecting fees until September 2003 because its appropriations  funding, which provided the total estimated fees that could be collected,  was enacted later than anticipated, delaying implementation of the fee  collection process.   Second, the number of telemarketers that accessed  the national registry and the average number of area codes that they  accessed were smaller than FTC estimated. FTC estimated that 10,000  companies would pay for the national registry data and that, on average,  telemarketers would access 73 area codes. In June 2004, FTC used  information from the national registry to reexamine its estimates for  setting the fee. As figure 2 shows, about 7,100 companies had paid for  access to the national registry as of June 2004. The average number of area  codes accessed was 63.
FTC published a revised fee rule for the national registry on July 30, 2004.  The revised final fee rule established the fee for each area code to be $40  per year, with the first 5 area codes provided to each telemarketer at no  charge. Exempt organizations would continue to be allowed access to the  national registry at no charge. The maximum amount that would be  charged any single telemarketer would be $11,000, which would be  charged to any telemarketer accessing 280 or more area codes. The  reduced fee charged to telemarketers requesting access to additional area  codes during the second 6 months of the semiannual period would be $20.  The fee was based on the number of telemarketers that had accessed the  national registry as of June 1, 2004, the actual average number of area  codes accessed, and FTC’s estimate that $18 million would be needed to  cover estimated costs associated with the national registry in fiscal year  2004. Table 3 shows FTC’s estimation for the national registry fee to  raise approximately $18 million in fiscal year 2004.  In fiscal year 2004,  FTC collected about $14 million in fees.
Funds collected through the national registry fees are to cover FTC costs  related to the implementation, operation, and enforcement of the national  registry. In its original fee rule dated July 31, 2003, FTC identified its costs  as falling into three broad categories. First are the actual contract costs  along with associated agency costs to develop and operate the national  registry. The second category of costs relates generally to enforcement  efforts. The third category of costs covers FTC infrastructure and  administration costs, including information technology structural  supports. Table 4 summarizes the costs incurred for the three broad  categories plus overhead costs for fiscal years 2003 and 2004, as reported  by FTC. As shown in the table 4, FTC incurred costs of about $15 million  in fiscal year 2003 and about $14 million in fiscal year 2004.
section_title: FTC Reported Three Objectives to Measure Whether the National Registry Was Successful
paragraphs: According to FTC staff, the commission had three objectives to measure  whether the national registry was successful. These were to (1) have the  system up and running during calendar year 2003, (2) to ensure that the  system could enroll about 60 million telephone numbers in the national  registry in the first year of operation, and (3) reduce unwanted calls to  consumers who sign up for the national registry, approximating Missouri’s  experience of reducing telemarketing calls by about 80 percent.
The national registry was up and running in calendar year 2003.  Performance goals were contained in FTC’s contract with AT&T  Government Solutions to develop and maintain the national registry. The  contractor was responsible for, among other things, consumer  registration, telemarketer access to the registry, law enforcement access  to the registry, and collecting consumer complaint information concerning  violations of the national registry provisions. The contract contained  specific performance measurements for completing various tasks  associated with the national registry. FTC considered the national registry  to be fully operational October 2003 when both commissions began  enforcing national registry provisions.
FTC also reached its expectation based on states’ experience to enroll 60  million telephone numbers in the national registry in the first year of  operation. FTC began receiving consumer registration of telephone  numbers in June 2003, and, as of June 2004, 62 million telephone numbers  had been registered on the national registry.
On the basis of the experience of certain states with do-not-call registry  laws, FTC anticipated that consumers who entered their telephone  numbers in the national registry would experience as much as an 80  percent reduction in unsolicited telemarketing calls. However, measuring  the actual reduction in telemarketing calls is not possible because baseline  data on the volume of telemarketing calls consumers received prior to the  national registry’s implementation are not available to make a comparison  and determine what change has occurred in calls received. As an  alternative, FTC has cited polls taken by Harris Interactive® and the  Customer Care Alliance as evidence that the national registry has resulted  in a reduction of unwanted telemarketing calls. Specifically, in January  2004, Harris Interactive® found that about 90 percent of those who signed  up for the national registry had fewer telemarketing calls, and 25 percent  of those registered indicated they had received no telemarketing calls  since signing up. In June 2004, a Customer Care Alliance telephone  survey reported that 87 percent of those who had signed up for the  national registry had received fewer telemarketing calls. This survey also  attempted to quantify changes in the volume of unsolicited calls registered  consumers had received since signingup, reporting an 80 percent  reduction; however, we have concerns about how this was done and the  accuracy of the results. The two surveys may provide indications of the  national registry’s overall performance; however, we are uncertain about  how representative the results of each actually are of the opinions and  experiences of adults nationwide because, for example, the Harris survey  did not use a probability sample that can be projected nationwide and the  Customer Care survey had a low response rate, among other things.   Notwithstanding these concerns about the surveys’ methodologies and  implementation problems, the FTC told us that they found no evidence,  anecdotal or otherwise, that contradicts the results of the surveys.  Furthermore, FTC considers the surveys’ results to have found that most  people know about the national registry and that most people who say  they have a telephone number on the national registry say they are getting  fewer calls, creating some confidence that the results are generally  correct.  See appendix II for a more detailed discussion of the two surveys.
FTC staff said that complaints filed also provide an alternative measure of  the success of the national registry. As of December 11, 2004, 675,337  complaints had been filed since FTC and FCC began accepting complaints  in October 2003. FTC staff noted that as a percentage of the total number  of telephone numbers registered, this is about 1 percent and is indicative  of the success of the national registry. While the number of complaints  may be an indication of the national registry’s success, few complaints  could also be the result of consumer complacency or reluctance to take  the time to file a complaint.
The Implementation Act required FTC and FCC to each provide an annual  written report for fiscal years 2003 through 2007 on the national registry to  include (1) an analysis of the effectiveness of the national registry; (2) the  number of consumers who have placed their telephone numbers on the  national registry; (3) the number of persons paying fees for access to the  national registry and the amount of such fees; (4) an analysis of the  progress of coordinating the operation and enforcement of the national  registry with similar registries established and maintained by the various  states; (5) an analysis of the progress of coordinating operation and  enforcement of the national registry with the enforcement activities of the  FCC pursuant to the Telephone Consumer Protection Act; and (6) a review  of the enforcement proceedings under the Telemarketing Sales Rule in the  case of FTC and Telephone Consumer Protection Act in the case of FCC.  The FCC issued its annual report for fiscal year 2003 on December 15,  2004.  As of December 2004, the FTC had not issued its annual report for  fiscal year 2003, but it plans to have it issued by February 2005.
section_title: Agency Comments
paragraphs: We provided FTC and FCC with draft copies of this report for their review  and comment.  FTC and FCC agreed with the contents of our report and  provided informal technical comments on the draft, which we have  incorporated where appropriate.  In addition, FTC noted that quantitative  measurement of the effectiveness of a program based on “before and  after” snapshots is difficult, particularly in situations like the national  registry where only anecdotal evidence of a baseline for the “before” figure  exists.  According to FTC, when reports from consumers, the media, and  professional surveyors consistently conclude that the national registry  effectively and successfully protects registered consumers against  invasions of their privacy by most commercial telemarketing calls, it is  reasonable to infer the program is working as intended.
We plan to provide copies of this report to Commissioners of the Federal  Trade Commission and the Federal Communications Commission and  interested congressional committees. We will make copies available to  others upon request. In addition, this report will be available at no charge  on GAO’s Web site at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  me on (202) 512-8777 or at jonespl@gao.gov. Individuals making key  contributions to this report are listed in appendix IV.
section_title: Appendix I: FTC Lawsuits and FCC Enforcement Actions Related to the National Do-Not-Call Registry
paragraphs: The Federal Trade Commission (FTC) identified ten lawsuits related to the  National Do-Not-Call Registry (the national registry) since enforcement of  the national registry became effective October 1, 2004. The Federal  Communications Commission (FCC) has issued 16 citations for violations  of the national registry and has entered into 2 consent decrees settling  investigations of alleged violations of the national registry.
The ten FTC lawsuits are as follows:    Telephone Protection Agency, Inc., was charged with falsely claiming  that it would register consumers with the FCC’s national registry,  when, in fact, FCC had no such list at the time. The charge also  included other violations of the Telemarketing Sales Rule. (Ongoing  litigation.)
National Consumer Council was charged with engaging in or causing  others to engage in initiating telephone calls to consumers on the  national registry and initiating or causing others to initiate telephone  calls to consumers within a given area code without first paying the  required access fee for the national registry data, among other  violations of the Telemarketing Sales Rule. (Preliminary injunction in  place, litigation ongoing.)
Braglia Marketing Group was charged with engaging in or causing  others to engage in initiating telephone calls to consumers on the  national registry, abandoning or causing others to abandon telephone  calls, and initiating telephone calls to consumers within a given area  code without first paying the required access fee for the national  registry data. (Filed on behalf of FTC by the Department of Justice, on- going litigation.)
Internet Marketing Group, Inc.; OnesetPrice, Inc.; First Choice  Terminal, Inc., (Louisiana and Arizona Corporations); B & C Ventures,  Inc.; RPM Marketing Group, Inc.; National Event Coordinators, Inc.;  and several individual defendants were charged with engaging in or  causing others to engage in initiating telephone calls to consumers on  the national registry, among other violations of the Telemarketing Sales  Rule. (Preliminary injunction in place; litigation ongoing.)
Free Do Not Call List.org and National Do Not Call List. US was  charged with falsely claiming that for a fee it would arrange for  consumers’ telephone numbers to be placed on the national registry.  (Stipulated permanent injunction.)
Vector Direct Marketing, LLC was charged with unauthorized billing to  consumers’ for purported do-not-call protection services and for  removal of personal information from telemarketers’ files and falsely  claiming to consumers that for a fee it would remove consumers’  personal information from telemarketers’ lists. (Stipulated permanent  injunction entered June 2004.)    4086465 Canada, Inc., a corporation doing business as International  Protection Center and Consumers Protection Center was charged with  falsely claiming to consumers inter alia, that for a fee it would arrange  for consumers’ telephone numbers to be placed on the national  registry. (Ongoing litigation.)
Debt Management Foundation Services was charged with engaging in  or causing others to engage in initiating telephone calls to consumers  on the national registry and initiating telephone calls to consumers  within a given area code without first paying the required access fee for  the national registry data, among other violations of the Telemarketing  Sales Rule. (Preliminary injunction in place; litigation ongoing.)    3R Bancorp was charged with engaging in or causing others to engage  in initiating telephone calls to consumers on the national registry and  initiating or causing others to initiate telephone calls to consumers  within a given area code without first paying the required access fee for  the national registry data, among other violations of the Telemarketing  Sales Rule. (Litigation ongoing.)
FGH International, Inc. was charged with initiating or causing  telephone calls to numbers on the national registry and calls to  consumers within a given area code without first paying the required  access fee.  (Litigation ongoing.)
FCC has issued 16 citations for violations of the national registry and has  entered into 2 consent decrees settling investigations of alleged violations  of the national registry. Table 5 summarizes FCC’s enforcement actions as  of December 31, 2004.
section_title: Appendix II: Information on the Two Surveys About the National Do-Not-Call Registry
paragraphs: Two surveys have been conducted about the National Do-Not-Call Registry  (the national registry) since it went into effect in October 2003—one  survey by Harris Interactive® and one by Customer Care Alliance. The  results of these surveys may provide some indications of the national  registry’s overall performance; however, we are uncertain about how  representative the results of each actually are of the opinions and  experiences of adults nationwide, and we are uncertain of the accuracy of  the measures in the Customer Care Alliance survey.  Notwithstanding  limitations of these surveys, FTC considers the surveys’ results to have  found that most people know about the national registry and that most  people who say they have a telephone number on the national registry say  they are getting fewer calls creating some confidence that the results are  generally correct.
The Harris Interactive survey was conducted on-line within the United  States in January 2004 with a sample of nearly 3,400 adults from its  multimillion-member Harris Poll market research panel of individuals  specially recruited to participate in large surveys. In this brief survey,  respondents were asked whether they knew about the national registry;  whether they had registered for it; and, for those who had registered, an  opinion question was asked about whether they had received more, about  the same, or less telemarketing calls since registering. While respondents  were asked whether they believed survey research firms and pollsters  were exempt from calling restrictions, they were asked no further  questions about their knowledge of what types of telemarketing calls are  prohibited and what types of calls are exempt. Of all respondents,  91 percent indicated that they had heard of the national registry, and  57 percent indicated that they had signed-up for it. Of those who had  registered, 25 percent answered that they had received no telemarketing  calls since signingup, and 67 percent responded that they had received a  little or far less calls than before signingup. Two-thirds (68 percent) of  respondents who had registered answered that they did not know if survey  research firms and pollsters were allowed to call. The survey data were  weighted using both demographic and propensity score weights to be  representative of the total adult population.  However, because the survey  sample consisted of computer users in its market research panel and the  sample was selected using nonprobabilistic methods, we are uncertain  how representative the results actually are of the opinions and  experiences of adults nationwide.
Customer Care Alliance conducted a telephone survey during February  through April 2004 with about 850 adults nationwide. Among other topics  and as in the Harris survey, respondents were asked whether they were  aware of the national do-not-call legislation, and if so, whether they had  signedup for the national registry. However, unlike the Harris survey, for  those who had signed-up, this survey attempted to quantify changes in the  number of telemarketing calls the respondents had received since signing- up for the national registry compared to prior to registering. To measure  changes in telemarketing call volume, these respondents were asked to  estimate about how many telemarketing calls they had received per month  prior to registering for the national registry and in the month prior to being  interviewed for the survey. Respondents were also asked whether they  had been on the national registry for more or less than 3 months. No  questions were asked about respondents’ knowledge of what types of  telemarketing calls are prohibited and what types of calls are exempt from  the national registry. Ninety-two percent of all respondents answered that  they were aware of the national do-not-call legislation, and 60 percent of  all respondents said that they had placed their primary home telephone  number on the national registry. Respondents who had signedup for the  national registry reported receiving an average of about 30 telemarketing  calls per month prior to registering and an average of 6 calls per month  after signingup, for an 80 percent reduction.
We are uncertain how representative the results of the Customer Care  Alliance survey are of the opinions and experiences of adults nationwide  because of certain limitations. First, the reported survey response rate was  only 20 percent. Second, there appears to be a high degree of nonresponse  bias in the respondent sample that may be due to the low response rate.  The report indicates that the sample of survey respondents  overrepresented adults in the U.S. population 45 years of age and older  and underrepresented adults between the ages of 18 and 44. Additionally,  individuals with incomes of less than $35,000 were greatly  underrepresented and those with incomes of more than $50,000 were  overrepresented.
We are also uncertain about the accuracy of the measures used in the  survey because of additional limitations. First, calls from charitable  organizations were incorrectly included in a list of the types of prohibited  telemarketing calls that was read to respondents in several questions.  Second, while the approach to quantify changes in telemarketing call  volume gives the appearance of obtaining quantifiable numbers about the  national registry’s effect on the telemarketing call volume, we are  uncertain about the validity of the answers to these questions. In a  telephone interview, a month is a long time period to expect respondents  to accurately recall telemarketing call volume. This recall is even more of  a problem when respondents are asked to recollect during a telephone  interview monthly call volumes from more than 3 months in the past, and  over 80 percent of the individuals who reported signingup for the national  registry said they had done so more than 3 months prior to being  interviewed. So, given the length of time that had transpired since  registering for such a large percentage of the survey sample and the  complexities of what types of telemarketing calls are prohibited and what  types of calls are exempt, we believe that it is unlikely that respondents  could have accurately estimated the average number of calls received per  month either before or after registering.
section_title: Appendix III: Comments from the Federal Trade Commission
section_title: Appendix IV: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to those mentioned above, David Alexander, John E. Bagnulo,  Frances Cook, Katherine Davis, and Julian L. King made key contributions  to this report.