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Processors Drop Dialers

Processors Drop Dialers

April 27, 2005
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" The abuse of dialers played no small part in conditioning surfers to eye with distrust any popup window "

The use of dialers as a revenue-generating mechanism isn't as profitable as it once was because of compounding negative business factors, including growing consumer distrust because of industry abuses and a resulting wave of increasingly restrictive legislation that has forced the altering of some companies' business models.

Billing companies are now shying away from dialer support, dropping services that they once offered and canceling any plans to enter that market space while at the same time rolling out new billing options to fill the void. In the face of these challenges, however, market leaders are showing innovation in their latest service offerings and evolving their technology and approach in order to cope with shifting consumer demands and legal operating requirements.

Consumer Distrust
While a nonrecurring, anonymous, secure and chargeback-proof billing option that allows consumers access to premium online content for as long as they wish to view it might seem to be an ideal solution for consumers and web-based content providers alike, the blatant misuse of dialers by unscrupulous webmasters has forever tarnished their image in the public's eye and caused a number of countries to enact legislation regulating their use.

For those new enough to the industry to have missed the dialer's heyday, the misuse that most often cited was typically carried out when a dialer script, embedded into a webpage, would, with or without the surfer's knowledge or approval, disconnect their dial-up Internet connection and reconnect his computer to a private Bulletin Board System attached to a premium-rate telephone number — often located in a remote, Third World country. The fees for these dialer-initiated data calls could be astronomical; and in the worst cases, when the surfer next tried to access the Internet, he was routed back to these premium rate numbers, unbeknownst to him.

The abuse of dialers played no small part in conditioning surfers to eye with distrust any popup window prompting him to install a piece of software onto his computer — especially a window that was displayed as a result of his visiting an adult website — and has greatly fueled the fear of unauthorized and excessive charges for viewing premium adult content online. "People are simply afraid to download an .exe file," Walter Toifl, CEO of Studio Opera, told XBiz.

Restrictive Laws
The resulting wave of ever-restrictive legislation induced by consumer complaints has caused the use of dialer software to be forbidden in Switzerland and relegated to opt-in users in Austria and Spain, causing significantly reduced demand in Germany, the United Kingdom and other countries where they once thrived.

"The new German dialer law — the law to combat abuse of premium-rate numbers — requires that every single dialer must be registered with the RegTP [German telecommunication commission] and that users can easily obtain contact information about the dialer company," Toifl said. "Other countries are strongly affected in a similar way."

Even beyond the pressures induced by legislators, dialer providers face hurdles from telephone carriers themselves. In June of last year, British Telecom responded to complaints from nearly 20,000 of its customers who felt victimized by dialer fraud by proactively blocking premium-rate numbers that the company suspected of employing rogue dialers. More than 1,000 such numbers were blocked by BT during the first four months of their initiative. In that same timeframe, BT dealt with 45,000 instances of consumer complaints over unauthorized dialer charges.

While BT has reportedly abandoned its "block now, ask questions later" policy for reasons only known to the company, the message is clear: businesses and governments are attempting to squelch the use of automated dialer software as a result of consumer complaints against fraudulent webmasters.

Market leader Goodthinxx.com's Voice Call Service is an example of how some dialer providers have developed and deployed alternative technological solutions that provide the traditional benefits of dialer-based billing solutions.

Using Goodthinxx's Voice Call system, a surfer calls a premium rate number (which is listed on the content provider's website) and then receives a short numeric code.

Once the surfer enters this code into his telephone, he will be billed for access on a pay-per-minute basis — access he will enjoy as long as he stays connected to the number he called. Available in 236 countries and in 21 languages, this solution works with all types of Internet connections.

While the Voice Call connection will automatically terminate after a specified time in line with the current regulations in each particular country, users of the service have the option to continue viewing the website's content simply by establishing a new Voice Call connection.

The Future Of Dialers
In the final analysis, the future of dialers looks bleak. According to Toifl, "The future of dialers will be in countries where there is a big percentage of modem or ISDN users," signaling continued opportunity in emerging markets. Despite the opportunity in these vast markets, many of which are in localities where credit card usage is not commonplace, the market may be better served by other options.

Innovative services now supplant traditional dialers while extending their reach into the broadband market, while premium rate SMS as well as 800 and 900 number billing mechanisms (which also face increasing regulation) have all become a widely accepted option for charging website access to a user's telephone bill.

Billing companies such as CCBill have dropped dialer support altogether, while Paycom has recently made inroads into alternative billing platforms for the U.K. market, which merchants are now using to supplant their previous dialer solutions. Indeed, one of the main reasons that dialers were developed — as a mechanism for billing credit-card shy Europeans — is no longer a very compelling factor due to 2000Charge's solution for accepting the widespread Euro debit card.

Given all of these factors, the traditional dialer is an idea whose time has come and gone. This is unfortunate because, in many ways, dialers are the 'perfect' alternative billing solution, but a solution that was killed by the shortsighted greed and criminal actions of a handful of unscrupulous webmasters.


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