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Free International Calls! NOT Too Good to be True

Update:  As you will see if you go to the Future Phone website, Future Phone has been at least temporarily prevented from providing its service by the major carriers who are upset by the access charges they pay the local telco for these calls (which is what makes the “free” calling service possible). However, there is at least one free international calling service operating at this time: www.yak4ever.com. More about that service in this post.

NY Times technology blogger David Pogue posted about a company called Future Phone which offer free international calls to landlines in 54 countries around the world.  I think I understand the arbitrage play which makes this profitable for Future Phone.

You don’t use a computer to call, don’t need special equipment, don’t listen to ads, don’t even register with them.  You just call their number in Iowa (which may be a toll call for you), then dial the international number you want to reach. You can do this from your home or cellular phone (or from Skype or Vonage if you want).

David’s readers are skeptical saying this sounds too good to be true.  Many have tried it and most report that they did get through as advertised. None report being solicited for anything else.

Future Phone says it plans to make money by selling future services.  They say that they’ll be offering these free calls until 2010.  What they don’t say is why this service doesn’t bankrupt them in the meantime.  But I think I know.

The cost side is straightforward.  Calls to landlines in these companies are dirt cheap at the wholesale level because last mile service has been deregulated.  I suspect that VoIP is being used for lots of these calls but even traditional wholesalers of international calls have had to lower their rates for calling landlines in places like the UK to the penny/minute range. 

Because mobile phone operators have a monopoly on reaching their own subscribers and, outside of North America, charge the CALLING party for reaching one of their numbers, the cost to a carrier to reach a mobile phone is high.  That’s why Future Phone doesn’t offer calls to cell phones outside the US and Canada and why Vonage excludes calls to European mobile phones from its unlimited free calls to the US, UK and some other European countries option.

OK, losing even a penny/minute on something which will get widely used still isn’t a very good business.  How does Future Phone do it?

Here’s my guess; it’s how I would run this arbitrage business. When you make a domestic long distance call in the US, you indirectly pay a terminating “access charge” to the carrier who owns the last mile connection to whomever you are calling.  For the vast majority of the US, these terminating access charges are much less than a penny/minute (and still exorbitant at that price and very profitable for the local phone company).

However, some rural carriers have been allowed by the local regulators to charge much higher terminating access charges.  When I was last running ITXC in 2004, some areas still cost $.08/minute for termination.  The stated reason is that the rural carriers need this indirect subsidy.  The politics of this is that all politics are local and the extra cost is born by the callers, not the locals.  In fact, since almost all carriers offer a fixed or flat rate for calling the US, the cost of reaching these rural areas is spread over all callers even though the wholesale carrier does have to pay it per actual minute to the rural carrier who has the lucrative franchise.

The number given on the Future Phone website is in Superior, Iowa and belongs to something called the Superior Telephone Cooperative according to www.411.com. A footnote says that ownership of some of these numbers has been transferred due to local number portability.  It’s a very good guess (but I don’t know that it’s true) that Superior, IA is one of the places with very high termination rates.  I’d further guess that Future Phone either is the carrier receiving the calls or that it has a deal to get a good share of the terminating access charge revenue.

Net it out:  If Future Phone gets even four cents for each minute inbound to them and pays one or two cents for each outbound minute to the international destinations, they have a very good arbitrage business going indeed. In fact, they’ll get paid for the dial time and ring time on the outbound leg and’ll get paid for the inbound leg even when the outbound leg is busy, doesn’t answer, or is “call can’t be completed”.

What’s this mean to you?  I’d say use Future Phone if you want to save money calling these countries.  It’s NOT to good to be true.

What’s the global lesson?  Stupid, uneconomic structures like artificially high terminating access charges invite arbitrage.  Someone’ll always figure it out.

Previously posted more on access charges and who I think should collect them in the future.

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Listed below are links to weblogs that reference Free International Calls! NOT Too Good to be True:

» Intramural Disagreements from Aswath Weblog
Only recently both Tom Evslin and Alec Saunders wrote about the anomalies of Inter-carrier compensation scheme in US, when they talked about FuturePhone. Readers of these pages may remember that many “virtual number” offerings are based on the ICC regi... [Read More]

» Free International calls? from Dawnsblood
Tom Evslin explains how they do it. Hint: Government regulation plays a part.OK, losing even a penny/minute on something which will get widely used still isn’t a very good business. How does Future Phone do it? Here’s my guess; it’s how I...... [Read More]

» http://herot.typepad.com/cherot/2007/01/mike_arrington_.html from Christopher Herot's Weblog
Mike Arrington has pushed the otherwise obscure issue of Intercarrier Compensation into the mainstream with his inquiry into the business model of AllFreeCalls, a company that will let you call almost anywhere in the world for the cost of a [Read More]

» AT&T's 'Free Call' Bill: $2 Million from Digifonica
Guess who got stuck with a big bill for all those “free” international calls touted by outfits like FuturePhone? None other than ATT, which has filed a lawsuit in Iowa claiming that “deceitful and unlawful schemes” like FuturePhone’s ... [Read More]

Comments

Cheap International Calls

There is a new service called FooCall who offer cheap international calls. Their iPhone and Android apps offer easy ways to make cheap calls abroad from your smartphone - check out their call rates here http://www.foocall.com/cheap-international-phone-calls.

With such services on the market it, these days it is the consumer who is the real winner, with accessible call rates now the norm. Gone are the days of sky high calls abroad, with the advent of VOIP technology.

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It proves me that great minds think great ideas. It wakes my senses especially in dealing with telecommunication companies and phone manufacturers. I can relate to this since I just got great service from my recent service provider which allows me to call in any location worldwide, including landlines, mobile numbers, and internet phones.Unlike other plans I signed up before, it requires no dial-in numbers, PIN or other additional numbers to dial and of course no monthly or other hidden charges yet gives cheap calls abroad. Just like what you have mentioned, there is no free minutes. But I'm very much sure that there is cheap call. Thanks for being real in your blog.

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Actually i have learned that there some telecommunication company really offers some lowest rate of their calls because of this international calls competitors. Thanks a lot.

Cheap International Calls

Most of the international calls usually get their priced low because also of some competitors nationwide. So this is their basic strategy to be able to gain more users to their phones. and actually some f the international call usually a failure because they are not too good for calling internationally. So better choose the best one for the best international calling. Good luck.

Ivo Reklama

Totally agree with you guys. Calling cards are so obsolete... there are all sorts of applications that you can use on your mobile or your laptop to make cheap calls

I want cheap calls

Ah, tired of those calling cards. VoIP is much better, but the problem there is that providers keep rates high with almost 100% overprice.

Daniel

Anyone interested in making Free International Calls may want to check out http://www.callarc.com , great up and coming site!

Ruchi

I used this site to make free calls
Use gift code FREE_CALLS while signing up on http://www.dialsimple.com/?joinForm=1
On home page there will be link "Make All Your Calls FREE!" Click on it!
Try and share your further findings.

Ruchi

I have been making all my calls to India absolutely Free for past 2 weeks. Here are the steps:

Use gift code FREE10 while signing up on http://www.dialsimple.com/?joinForm=1
On home page you will see a link "Make All Your Calls FREE!" Click on it and choose any of the options.

Share your findings if you find anything more.

adem

Now you can change your life style to save your much money on International calls with use BT landlines calling plans that allows you to free International calls for a full list of destination visit: www.briing.com/free-calls/0870.php

Jbraggs

Here is another resource that may be helpful to someone, they allow you to make Unlimited International calls from your Cellular and Landline, all calls are free within the network (for countries that are not included in the unlimited plan) see link Unlimited Cellular and Landine Intl

international cheap calls

Thanks for the info, now i know how some telecom companies are able to provide cheap international calls.
I was under the assumption there might be some hidden charges, now it is clear to me. Thanks again!

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I found a site, juvino, which provides a unique and innovative way to make low cost international calls to hundreds of countries worldwide from UK. Like, you don't need to open an account to make a cheap international call and many more. Visit the site regularly to get the latest updates, offers and deals...

:)

Pam Lewis

Tom and Mary,
Just in case this gets to you in time, and you happen to be around, I'll be reading from new novel PERFECT FAMILY at the Church Street Borders in Burlington at 2 tomorrow, April 12, 2008. It would be very cool to see you guys again.Love to you both,
Pam

sunil

Another option till you setup
- What if you want to call somebody temporary to your friend or somebody?
- VOIP solution provides solution where you can keep in touch with only those who have VOIP phone. It is best solution if you want to talk somebody at fixed location right?

I think you will still need calling card. I have found by experience that Stana card is one of the good ones. https://www.stanacard.com . No pins to enter and no numbers to push after dialing you will get one US number for each India number...I really liked it. I will cost just 7 cent per min for india call and first 20$ it is even cheaper with doubled credit ( half of it )

You can sign up for free account and if you have referral id you can double your first sign up credit.

You can use my referral code: 247040

You can also recommend StanaCard to your friend and both of you will receive up to$20 of Bonus Credit for FREE! I think if you have good network of friends you should try this...

- www.sunilparmar.com

Pradeep

Try Pingo.I have used many prepaid cards for making International calls and I found Pingo is quite cheaper than others.Clarity is also very good. account maintenance fee is just 98 cents US$ per month .You will get $5.00 free for sign up and can also avail 10% with 10off coupon code.Try using this coupon “10off” to get 10% off. Enter it on the 2nd page of the sign up and it will work. so u can save those extra bucks!!! so what r u waiting for....click on https://www1.pingo.com/en/secure/signup/landing.do to sign up and use Pingo.

Pradeep

(not weekly) maintenance fee. $5.00 USD worth of FREE calling for sign up and further 10% off with 10off coupon code. Try using this coupon “10off”(enter it on the 2nd page of the sign up form) to get an extra 10% off on Pingo’s rate. Check http://www.pingo.com/ for more offers from Pingo. You can earn extra bucks by referring your pals to Pingo Sign up and start calling for free now!!!!

Jack Thomas

We are proud to announce our Expanded 7 Day Unlimited Calling Program.
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Our Complete list of Destinations is on our website www.usaunlimited.s5.com
Again we want you to sample our Expanded Program; all you need to do is an email and say YES I want to try. We will then send you a 7 day Pin right away!
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Marcus Aurelius

Yes that is pretty much what is going on.

Wiring up for phone service is much more profitable downtown Chicago than in corn country Iowa. There is a national "alliance" (if you will) setup for the rural telcos and generally they charge a more expensive connection fee, but not an abusive one. However, individual telcos who belong to this association may at their option withdraw & set their own connection fees and the like.

So, what is happening is some rural telcos are setting up free services such as teleconferencing, international dialing, or what-have-you and make their money off of the connection fees they set (which the bigs claim is abusive & in fact some of the rural telcos do take the same view the racket is abusive of the system set up to help small telcos and will ruin it for all).

The bigs when they catch on attempt to block calls to the small telco offering the free service and the small ones file a complaint with the FCC saying the bigs are in violation of the rules. They are.

When and how will the rules change? Hmmm, this comment is almost a year since the last comment on this post and Future Phone is still shut down.

My wife and I do a lot of international dialing, I hope future phone opens its doors soon and allows calls to our most common phone destinations.

Winterwarmer

Hi Guys,
Reading through all the above discussion regarding Futurephone and methods used sure is interesting reading.
Now that it is no longer available and AT&T are taking legal action with their big gun lawyers it seems that it will be a long time in settling.

Many people have misconceptions about ‘free’ minutes many have. Nothing is free. You buy your ‘free’ minutes in your call plan. All these companies like Futurephone means that you do eat up those so called ‘free’ minutes.

Now I am going to tell you about a new patent pending VoIP by Global1touch. Their call back DOES NOT USE YOUR FREE MINUTES. Hey! I hear you say - “That’s great”. You can actually REDUCE your call plan cost this way - saving money.

Global1touch launched only a couple of months ago and is expanding it’s services rapidly. It is very low cost and has the availability to give you free calls, or very low cost calls.

The quality of service is excellent in clarity with no ‘packet’ lags. I recommend everyone to give it a try. The service package is free. You just pre- pay $10.00 for the call minutes.

Have a look here and watch the video: http://www.global1touch.com/world

Any questions just contact me.

Winterwarmer

kalis

International calling cards!!!!!. I'm not interested in these calling cards!!!!!. I have been using skype for a long period of time.Skype is quick,easily reliable,pretty cheap.I like skype!!!! If you want to know more about skype visit www.skype.com.

eliza

Oh these is the first time that I m hearing about something called"automated data system for termination of a call"..I have been using skype for making calls to my brother in california.and while on phone v have never come arcross such automated termination or disconnection of call...so i think people can try out skype and see the difference in the services provided by them..website(www.skype.com)

anada

Oh these is the first time that I m hearing about something called"automated data system for termination of a call"..I have been using skype for making calls to my brother in california.and while on phone v have never come arcross such automated termination or disconnection of call...so i think people can try out skype and see the difference in the services provided by them..website(www.skype.com)

Brouhaha

Tom, fyi, they took this service offline yesterday... the site is still there, but with a big red banner on it saying "THIS SERVICE IS NO LONGER AVAILABLE." Any idea why?

hmatura

Interesting…Worth mentioning for those not so keen in new technologies that "10-10" long distance services are also a very popular an easy alternative to enjoy cheap long distance calls. How it works? You simply dial the "10-10" plan's 7-digit access code, and then the area code and number you wish to call - and receive the discounted rates offered by the "10-10" company. This is an easy way to take advantage of lower rates - without having to sign-up, internet or switching your long distance company. The Internet is a great resource for finding the rates and numbers of "10-10" companies in your area.

For example, you can now call Australia, Canada and most European countries for only 1¢ per minute by simply calling 1010228 before each call (e.g. 1010228 + 011 + country code + number you wish to call). http://www.1010228.com is one of the leading discount "10-10" numbers in the US for interstate and international calls.

jane

I used Future Phone for about a month but now when you call their free access number callers are being told that the number is false and that they should call a different number. After that you here a solicitation for using a website for free conferencing. I don't know if the new number is also free but when I dialed there was no ring. Just silence. And there is no info on www.futurephone.com about this new access number. So what is the truth?

Dudemeister

Very informative. We've got a similar thing over here in the UK.
There are a few websites like action telecom (www.actiontelecom.co.uk) that offer free international calls from UK mobiles (like O2).

The way it works is that the calls are made to non-geographic numbers that would cost up to 30p (about 60 cents) from landlines but are counted as free from some mobile contract packages as part of the bundled minutes.

I wouldn't be surprised if you guys in the US had something similar.

Cheers
Dudemeister (David to his friends!)

International Long Distance

International Long Distance Calling Did you know that the number of international long distance calls from the United State very high also the international long distance telephone service are going lower and lower in price.
Many companies offer Cheap International Calling Card - Long Distance unique prepaid international long distance service offers cheap calling card rates that you can use from any phone even your cell phone

Tom Evslin

Vin:

Both failure and success stories on David Pogue's blog: http://pogue.blogs.nytimes.com/2006/10/09/09pogues-posts-4/ For Canada, skip the 011 and start with 1. It's part of the North American Numbering scheme.

Vin

Has anyone successfully made a call using Futurephone?

http://futurephone.com/

You dial 712-858-8883, then 011, then the country code and number. If the country is Canada, you just dial 011, 1, the area code, and the number.

Every time I try it, I get a message that either 1) the area I called isn't serviced or 2) the number can't go thru as dialed. I've tried different numbers in different countries, all without succees.

Any success stories?

Pavel

They have a some additional sites: freecallstocanada.com and on main page you can find 8 others. I like their slogan "stop paying for phone cards" :)

Rob Frieden

The real scam/arbitrage play lies in the Universal Service Fund. The Superior telco not only receives 3-8 cents per minute and pays out less than 3 cents, but it also receives a subsidy from all U.S. wireless and wireline telephone subscribers! We pay a 10.5% surcharge (some would call this a tax) on our wireline long distance calls and a lower surcharge on our cellular bills to support telephone companies operating in rural and high cost areas. The more traffic Superior handles the more costs it incurs and the larger share of Iowa's $86.5 million subsidy it can claim. In other words Superior generates more than 3 cents per minute, so its profit margin is higher than the 0.875 cents estimate. The Universal Service Fund seeks to promote infrastructure investment and telco operations in high cost areas. It was not designed to subsidize a bridge to low international calling opportunities.

Regards,

Rob Frieden

Sim

i get most of the explanation, but at risk of seeming really stupid, i don't understand why the conclusion is that futurephone is still a viable (read: free) option. doesn't the [exorbitant] termination rate/charge/fee apply PER CALL? so that you THINK it's free, but then you eventually get charged a bomb on your monthly long distance carrier bill? or does the freeness have something to do with what you mentioned about the cost getting "spread"? any explanations would be much appreciated.

(i use vonage, if that makes any difference.)

Jacob Ner-David

But Tom, how long could this arb play be sustained? Calling standard numbers, like freeconferenceall, is OK, they still make their fraction of a cent for termination but have little marginal costs (depending on scalability of their server[s]). But here for each call there is a termination fee, however slight it may be (UK might be under a penny, but most countries on they support are over a penny a minute wholesale). It all sounds to me like the original buy.com, selling a $1 for $.85....and then trying to make it up in famous value added services. Now, if you are right, are they have situated themselves in an exotic rural telco collecting termination fees that are much higher than generally accepted, like $.10 a minute, then if traffic surges to those numbers the fine print will kick in, and the model will break.

Bottom line -- its either a short term arb play, or a ridiculous "customer acquisition strategy."

Alec Saunders

I came to the same conclusion as you did, Tom, and wrote about it independently.

http://saunderslog.com/2006/10/11/whats-with-the-712-area-code/

Just this morning one of my readers, who works for an iowa telco, confirmed the correctness of this model, and informed me that some of the very small telcos (like Superior) may be making 10 cents or more for termination. What makes this model work is Iowa Network Services, the fiber ring connecting the independent telcos. They are effectively able to step around Qwest by doing so, and access the very cheap international terminations available.

Tom Evslin

Parkite and Chris:

Thanks for the confirmation. Good to have expert readers.

I should have though thought through that the conference providers are doing the same thing. Makes sense.

Chris Yeh

This is also the same way the free conference call services make money!

Parkite

I believe your theory is correct........i am looking at something that shows me termination rates by state and Iowa has some of the highest rates.

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