The FCC's Offshore Call Center Crackdown Could Be the Shock That Fixes a Broken Industry

Zeus Keravala breaks down why the FCC's bold new ruling is less of a compliance headache and more of a long-overdue wake-up call for enterprise CX.

In this discussion, Associate Editor Rhys Fisher sits down with Zeus Keravala, Principal Analyst at ZK Research, to unpack the FCC's proposed rules targeting offshore call center operations. 

The new regulation would require companies to disclose when calls are handled offshore, mandate domestic agent transfer options upon request, and introduce tighter data accountability standards. 

With 8x8 CEO Sam Wilson already weighing in publicly, the industry is paying close attention — and Keravala doesn't hold back on what it really means for CX leaders, IT teams, and the global BPO economy. 

The FCC's new offshore call center proposal isa labor, data security, national security, and customer experience story all rolled into one. 

Zeus Keravala rates its significance an 8 or 9 out of 10, and here's why: 

🔴 AI as the great equalizer: Re-onshoring raises costs, but AI-powered tools — from real-time language translation to virtual agents handling high-volume, low-complexity calls — could offset those costs significantly, potentially making domestic operations economically viable. 
🔴 Compliance belongs to IT now: Keravala argues that IT pros, not legal teams, are best positioned to own compliance here — using AI-driven PII redaction, automated call volume tracking, and smart routing to hit regulatory caps without the manual overhead. 
🔴 Unified stacks get a tailwind: Vendors like 8x8 have been pitching integrated UCaaS/CCaaS platforms as the cleaner architectural answer, and this regulation could accelerate that consolidation — particularly for mid-market contact centers. 
🔴 Global economic ripple effects: Countries that rely heavily on BPO contracts as a primary economic driver stand to feel the impact, though Keravala notes that the rise of AI-handled interactions may have been shifting that landscape regardless.

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Transcript

SPEAKER_01 0:08

Hello and welcome to CX Today. I'm Reese Fisher, Associate Editor, and today I'm joined by Zayas Caravala, the principal analyst at CK Research. Zayas, thanks for joining me. How are you doing?

SPEAKER_00 0:20

Yeah, how are you, Reese? How are you doing?

SPEAKER_01 0:23

Yeah, yeah, all good, all good. Looking forward to picking your brain because there's obviously there's been some big news in the last two days. We're going to try and jump into it a little bit today. You know, the new FTC regulation, which I suppose for those of you who may not have seen it yet, uh it's going to require companies operating customer-facing call centres to disclose when calls are handled offshore, mandate that customers can request transfer to a domestic agent and introduce tightrountability measures around data handling and third-party outsourcing arrangements. So obviously, like I said, it's big news in the space. And I know Samuel Wilson, CEO 8x8, is one of a lot of people who took to LinkedIn to share their thoughts about it. So, first of all, could you just give me your initial response to this news?

SPEAKER_00 1:13

Yeah, so FCC Chair Brendan Carr, right? This is part of his Build America agenda. And the proposed rules, uh, I think at the surface you can look at them as labor economics, right? Bringing jobs back to America. But they're also about uh data security, national security, um uh, you know, customer service. And when you look at your side of the pond, Reese, um, everyone's got you know data sovereignty rules in place, so I don't think this should be really that big a surprise. As far as the mechanics go, it's not clear what the cap is, so there's it's still in debate. And it's anywhere from 30 to 75 percent of calls must be brought back to the U.S. I think there's a lot of transparency requirements now where um companies don't have to disclose whether calls are being handled outside the U.S. Uh also they're trying to mandate that the um uh the the people making the calls or answering the calls also have um be proficient in English language, right? So, which I know is a frustrating part for everybody. So it's it there's a a lot to this. I think for obviously for the contact center industry, offshoring and you know, BPOs have been a major part of strategy for a long, long time. And so this is gonna cause companies to have to rethink you know how they do things. And um uh I I think there's a lot of call routing, you know, updates are gonna have to happen. I do think the implications for for AI, this could actually see some acceleration in Reese. I think one of the the challenges we have in the US is people don't want to onshore because it's expensive, right? So labor costs are high, turnover is high, and so the cost of churn is high. And so if AI can actually help create better environments for agents, uh, and then also use AI to offload a lot of the mundane password resets and things, now all of a sudden the actual call volume that the people are gonna do are lessened, right? So you don't need as many agents, and then also uh from an onboarding perspective, even if the churn stays where it is, uh that should be faster because the tools are better for agents, right? You can give suggested answers, things like that. And then also, if you look at the work that companies like Eleven Labs and you know do where they can translate real time, it's possible you could actually have a non-proficient English language speaker coming across like their English language speaking because of AI. And so this this could actually accelerate companies uh migrating to a to to a more modern platform.

SPEAKER_01 3:54

Yeah, yeah, it's a really interesting point, specifically around the language gap. Like you mentioned, there's a lot of different vendors kind of playing with that right now, aren't they? It'll be interesting to see how they respond. Uh, I also wanted to pick up on you kind of you touched on I guess the complexity of this a little bit. It's touching a lot of areas, this new regulation, you know, it's essentially, I guess, connecting customer experience, uh national security, and fraud prevention all kind of within this one proposal. Do you think that's a logical link, or do you think there's a case where maybe it's a little bit could be a bit of an overreach?

SPEAKER_00 4:29

Um well, I think that's the link, isn't it? Overreach, uh, I don't know. I think a lot of this depends on your perspective on which side of the political offense you sit on, I suppose. Um I I do think um companies have used offshoring to drive costs down for a long time, and I do think the customer has suffered in a lot of cases, right? We've heard cases where companies, I think Dell a number of years ago, brought their call centers back and then moved them back offshore, things like that, because their customer service was uh so bad. And um uh I, you know, this is an era that we live in, Reese, where customer experience dictates, you know, the winners and losers in markets, and I do think it's time companies looked at those. I also think that depending on the data that you deal with, right? We don't really when you offshore, you don't have a ton of control over how the companies on the other side are handling your your data. And you know, sure, while some interactions aren't customer sensitive, there are some that are. You're dealing with financial information, health information in some cases. And so I think you know, there's a reason why, you know, Europe, a lot of European countries are meant to better agree as sovereignty rules. It's to have better control over the data. And I think in this way the government can mandate that companies actually take a look at where their data is, and you know, at least, you know, maybe it's not more secure, but at least you have the opportunity to control it better and make it more secure if you so choose to, right?

SPEAKER_01 5:53

Yeah, yeah, absolutely. So if you are kind of one of these these enterprises that are running, you know, a significant offshore BPO right now, what how about I guess two parts. How do you think they're gonna react to this news and what steps do you think they should be taking?

SPEAKER_00 6:10

I I think the first reaction would be uh rather negative. I I think you would like there's a reason they're offshore in, right? And so all of a sudden, if they're forced to re-onshore, whatever that advantage is goes away, right? And so I think the primary one, like I said, is cost. Um, hiring somebody, you know, in in the US to man a call center is certainly more expensive than an India or vanilla or something like that. But I also think this gives companies the opportunity to look at their processes, look at the tools they use, you know, get off that old, you know, on-prem AVIA system and into something more modern, you know, one of the cloud systems that do have a lot of AI built into them that can be used to provide better service and lower costs. And so I think um, you know, what's that expression? Necessity, some other invention here. Uh I I know in the in the context center space I've been very critical of it historically because it is slow moving, and I understand why. No one wants to mess with customer service, so we tend to live with it. If it ain't broke, don't fix it mentality here. But I do think this is an opportunity where it is broke in a lot of cases, right? And if you reinforce a re-onshore, take a look at the process you do, take a look at the money you spend, and if you with the with with uh the use of AI, you can bring those costs down a lot. In fact, if you think about um, you know, all the interactions that might come into a call center, if you map them out on a two by two grid, anything high frequency, low complexity, have a virtual agent handle those, right? And so that gets rid of 60, 70, 80 percent of your calls to begin with. And so I think companies might find that they can lower their overall cost by doing this uh if they think about how to use some of these modernized tools properly.

SPEAKER_01 7:58

Yeah, yeah, again, makes a great deal of sense. It'll be it will be very interesting to see how those those kind of AI companies do react to this, because like you said, on the face of it, it looks like it's it's definitely positive news for some of those big companies. So I wonder how they will.

SPEAKER_00 8:12

But I do think the the the important thing for I IT pros to understand or companies to understand here, if you simply follow the rules and do like for like, where you bring your offshore contact center back and don't change anything, you are gonna spend more, right? And uh so you know, don't figure out how to do it cheaper because there's always ways to do it cheaper.

SPEAKER_01 8:33

Yeah, yeah, definitely. I wanted to just circle back a little bit to the compliance point that you made a little bit earlier. And I was just wondering, I think maybe there's been a tradition within CX teams that compliance has sometimes been treated as someone else's problem, you know, it's the legal's problems, it's the compliance team's problem. Obviously, this regulation now it could potentially change that. How do you think that the TX teams are going to respond with compliance in mind?

SPEAKER_00 9:00

Yeah, well, compliance is a funny thing, nobody wants to deal with it, but everybody has to, right? And uh uh I think a lot of the the the comp the adherence to compliance does fall within other groups within these companies. I do think it's an opportunity to bake it in, though, right? And so even just um um I I think first of all, I'll admit that the FCC proposal creates a massive logistical headache, right? So, how do you maintain a 24 by 7 high quality service while restricting the offshore resources that currently provide it, right? And so I think if you think compliance first, uh that that can help. And so the the proposed rules are very um human-focused, right? And um uh and so this is where I think you can uh first of all, just from a very basic standpoint, you gotta look at your your cloud provider and understand where their servers are, right? They all run in some some mixture of AWS, Azure, and Google, so understand that. I think um uh for customers, shifting password resets and MFA updates to domestic AI, you satisfy the requirements of that compliance pillar without the overhead of having to have a US agent. And so, again, there's a perfect case where AI can be used to offset a very human, heavy process, right? That does violate compliance requirements in a lot of cases. So um uh and so I think also from a routing and redaction standpoint, instead of manually auditing thousands of calls, IT pros can use a lot of these um AI-driven PII redaction systems to be able to uh to mask out a lot of the sensitive information, right? So um uh and I do think that one of the things I was reading, the FCC will likely require uh automated tracking of offshore and onshore call volumes, and so uh to make sure they're hitting those percentages. And so doing that with people, I think, is very uh difficult. And so uh I think AI can automatically trigger, you know, domestic only when you hit their caps and things like that. And so uh uh I actually think and this is gonna sound weird because no one's gonna want to do this, that this is it's it's a good thing, I think I think for the IT pros to take control over this because there are a lot of tools that can help. I'm not sure that the lawyers involved in this under fully understand the scope of what AI can do. And so by taking that back and making an IT function, I think IT can have better control over that thing to make sure that the companies are adhering. Now, you wind up being responsible for it, and maybe nobody wants that, but ultimately I think this could be a good thing for companies.

SPEAKER_01 11:42

Yeah, yeah, that's where you're coming from. I guess to play Devil's Africa on it a little bit, you know, we know AI isn't quite perfect yet, we know it so hallucinates in certain situations. If you're now gonna counteract the need to have stronger compliance by introducing more AI, is there not gonna be also on top of that, is gonna be a stronger necessity to have stronger game uh guardrails with that AI? Is that not gonna potentially cause its own problem?

SPEAKER_00 12:09

Yeah, it could. I mean, and this is why you gotta you gotta train and you and I think for the short term, you gotta keep a lot of people in the loop to audit these things um, you know, on a periodic basis, right? And but uh you know people make a lot of mistakes too, right? So that that's the thing. And I I think as long as the threshold for errors tends to be less than what people do, companies are gonna be net ahead. Um I do think that this is a case of measure twice cut once. So you gotta test, test, test. The great thing about AI systems is you can run a lot of simulations, right? So you can you know you can simulate you know a year's worth of call and minutes to make sure that it's doing what it's supposed to be doing. And so this is I wouldn't rush into this uh you know by any account and try and fully automate these processes, keep some humans in the loop, but ultimately um uh I would look to use AI as a way of offloading a lot of the heavy lifting from the people that do these tasks today.

SPEAKER_01 13:06

Yeah, yeah. No, again, makes a lot of sense. Uh I suppose I mentioned uh Samuel Wilson and 8x8 at the top, you know, and vendors like 8x8. They're kind of they've already been positioning that their integrated stacks as a sort of uh as an answer to this compliance situation. Do you think that that is a genuine kind of architectural solution to the problem?

SPEAKER_00 13:29

Um yeah, it's simpler. Uh, you know, that that's for sure. Because I do think in a lot of cases, uh what happens with these kind of customer interactions is they do span the different systems that you have. So very rarely might you have a call that comes in and lives on one of these platforms only. That doesn't mean if I'm using a UCAS vendor for one, a CPAS vendor for another, you know, a CCAS vendor for yet another one, and even possibly all my compliance stuff on another platform, I can't manage it. I do think Sam's point is easier if it's an all-in-one platform because all at least my data is all in one place. And frankly, you know, from an analytics standpoint, if I'm trying to understand customer behavior, having that all in one place makes that easier anyways. And so I think the industry has been trending towards um uh a more unified stack uh anyways. Um but I think this this could help accelerate that. And so I I um uh I I think there's a um if you know if you read Sam's post, I thought it was very well thought out, and and uh I I think he makes a good case for it. But that doesn't mean you know you you can't make it work with separate silos, it just takes a little more work, right?

SPEAKER_01 14:40

Yeah, yeah. No, and I agree. I think yeah, it will be it will be interesting to see if it does, like you say, if it does accelerate that that is the that's the norm up market, right?

SPEAKER_00 14:52

A lot of the larger companies have separate teams that run their call centers from their you know workforce management and uh uh their worker tools. And so um uh I don't really see this being the pivot point for the company with the 50,000 person contact center to move to a you know a single unified stack. They're likely gonna keep those tools separately and and manage them independently, but they got lots of people to do that. If you're running a higher person contact center, though, I would certainly look to go to a unified stack.

SPEAKER_01 15:22

Yeah, no, no, that's really interesting. Um, I guess my final question to you, obviously, Zayus, you've been in the industry a long time now. I imagine you've covered a lot of these regulatory shifts over the years. How significant do you think this might prove to be?

SPEAKER_00 15:39

Yeah, I think it could uh it could really, you know, on a scale of one to ten, I think it's like an eight or nine. I I I think that because it promises to really change a lot of the global economics, even, right? Like a lot of these countries that we offshore to today are heavily reliant uh on um you know on these for jobs. Uh I also think that for a lot of industries where the cost of these calls can make or break profitability. You know, I was I was talking at Gitex to a company that runs um a gambling site, and their margins are so thin, right, that they they offload everything because it's just uh you know it it helps them with profitability. But there's a good example, right? A gambling site where you deal with credit card information, payment information that probably should be on short. And so I think this could be used, like I said, as an accelerant to hit help companies bring in new ways of doing things. But make no mistake, I mean, there's a a lot of countries that operate BPOs, you know, for larger companies, uh as a primary economic driver for for them, right? And so this could dramatically you know shift that from a just a global economic standpoint. Yeah, yeah, again, thanks, thanks so much, it's uh one could argue that with AI coming and so much of the transactions being handled by virtual agents, you know, perhaps that this was that that was gonna happen anyways, right?

SPEAKER_01 17:15

Yeah, yeah, very true. Um so yeah, like I said, thanks so much, sir. So it's great to speak to you. I think, and yeah, I think it's a really I agree with you. I think it could be it's definitely a story that's gonna have legs. I think it's gonna be interesting to see how different companies adopt different strategies to deal with this role and kind of which one wins out uh yeah. So it's gonna be it's gonna be fascinating to see over the next six, twelve, eighteen months for sure.

SPEAKER_00 17:38

Yeah, and thanks to Sam Wilson for for raising that point. I wish more of the CEOs from these companies would actually give their strong opinions like that. I always appreciate that about Sam. So I don't always agree with him, but uh I certainly appreciate the fact that he he he's always willing to give an opinion.

SPEAKER_01 17:53

So yeah, yeah, as a journalist, I absolutely agree. The more CEOs want to share their thoughts with us all, absolutely. I'm all for it. Um yeah, thanks again. I also just want to quickly thank our audience uh for tuning in. If you enjoyed this, please do remember to like and subscribe to the channel, and you can head on over to cxtoday.com for more stories like these. Until next time, thanks for watching.