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February 17, 2007

AT&T shuts down Iowa free international phone call services


Back in October, I mentioned a phone service called Futurephone that used a loophole in the heavily regulated US long distance telephone rate structure plus cheap Internet bandwidth to provide “free” ad-supported phone calls to numerous foreign countries via a rural telephone company in Iowa. Soon other entrepreneurs jumped on board and there were a number of “712″ (the rural Iowa area code) calling services, but it all came crashing to halt this month when AT&T got a phone bill for $2 million dollars and sued:

Guess who got stuck with a big bill for all those “free” international calls touted by outfits like FuturePhone? None other than AT&T, which has filed a lawsuit in Iowa claiming that “deceitful and unlawful schemes” like FuturePhone’s caused a jump from $2,000 per month to $2 million per month in the fees billed AT&T by an Iowa rural telco.

Filed in the U.S. District Court for the Southern District of Iowa, Central Division, AT&T’s lawsuit seeks to stop FuturePhone as well as the telcos who provide local infrastructure from continuing with their operations that use regulatory-fee arbitrage and VoIP to provide international calls for only the price of a long-distance call to Iowa. Though the case was just filed on Jan. 29, it has already apparently caused FuturePhone to shutter its service, and has produced nothing but “no comment” replies from the Iowa LECs we contacted who were also named in the suit.

Boiled down, AT&T’s main argument is that because the calls are not actually “terminated” in Iowa — AT&T says Iowa is just a midpoint in what is really an international call — AT&T shouldn’t have to pay the LECs the termination fees.

While it’s certainly satisfying to see AT&T get a big phone bill, it’s now clear that beyond advertising revenues, an essential element of the business model was the receipt of cash subsidy payments from AT&T. The lawsuit will delay those indefinitely while litigation proceeds and this effectively shuts down the “free call” companies. Futurephone has now closed and it’s likely just a matter of time until the others follow, although Pat Phelan, the founder of allfreecalls.net, claims on his weblog that he plans a workaround. He surely gets points for trying, but I suspect that the ultimate conclusion is that it was fun while it lasted.


Posted at 10:56 am. Filed under AllFreeCalls, Bargains, Brands, Cheap calling, Companies, Futurephone, Telephone

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October 14, 2006

"Free" international phone calls with Futurephone


Cheap phone calls are a little off my beaten path, but I was interested in the story of Futurephone:

The first question most people seem to ask when they hear about Futurephone.com is: What’s the catch?

It turns out there really isn’t much of one. Eventually — though not yet — you’ll have to listen to a short commercial before your call goes through.

Futurephone, a California startup company, has, for the last three weeks, been offering you the chance to call a number in Iowa, then enter a number you’re trying to reach in any of 50 other countries, and — bingo — you’re on the phone to Shanghai. Or Warsaw. Or Christmas Island.

We tried it, and it works. You call 712-858-8883, and a recorded voice answers, inviting you to hear brief instructions in English, Spanish or Chinese. Then you dial 011, the country code (51 for Peru, for instance, or 359 for Bulgaria) and the local number. If someone is there and awake to answer at the other end, you can talk to the other side of the planet — for whatever it cost you to make a call to Iowa.

What makes it all work is that the price of phone calls has been dropping dramatically, particularly since Futurephone uses VoIP to route the calls. They figure that they can make enough selling 10 second ads before each call to pay for the call and make a profit.

As for the Futurephone phone number in Iowa:

Where, by the way, are you calling when you reach 712-858-8883? It turns out to be an exchange in Superior, Iowa, a town of 142 people on the Iowa-Minnesota border. But Doolin says that’s simply a number his firm was able to use to route calls inexpensively.

More details at the Futurephone website.


Posted at 8:09 pm. Filed under Brands, Cheap calling, Futurephone, Internet, Telephone, VoIP

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