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October 17, 2006

Networked Citizen Journalists at Work

UPDATE: The original version of this article said that David Pogue had not contacted the subject of the story.  That’s wrong and I shouldn’t have said it without checking with David.  See his comment correcting me here.

Dan Gillmor, who wrote the definitive book on the subject, calls it “citizen journalism”. Jeff Jarvis, also an expert on media of all kinds, prefers “networked journalism” on the grounds that even traditional reporters are citizens. Ethan Zuckerman blogged:

“Increasingly, it strikes me that there are three types of netizens I want to hear from:
- folks who are in the right (wrong) place at the right (wrong) time: the commuter in the London underground when the bombs go off;
Gnarlkitty, as she visits demonstrations surrounding the coup in Thailand.
- folks who have an insight or perspective I can’t easily find in mainstream media:
TheMalau writing about Congolese politics; Russell Southwood writing about African telecoms; Roland Soong writing about, well, almost anything.
- folks who make themselves part of a distributed effort to create new knowledge: the researchers who pick apart records of Congressional pay for the
Sunlight Foundation, the bloggers who cover the Kenyan parliament for Mzalendo.” (hat tip to the Center for Citizen Media blog)

Recently there was an example of Ethan’s second type, the citizen expert, in which Fractals of Change was involved.  The subject wasn’t earth-shattering; no mighty will be toppled by these revelations; no regimes will change; but the process was interesting.  In this case not only bloggers but also commenters were key participants in unraveling a small mystery.

David Pogue write a column for the New York Times and also blogs on their behalf. He’s also an Emmy-winning correspondent for CBS News and a contributor to “Morning Edition on NPR”.  Last week David posted an article about something which seemed too good to be true: a company called Future Phone which offers free calls to landline phones in over 50 countries with no registration, no ads, and seemingly no hooks or revenue model.  You just have to call their number in Iowa and then redial the overseas number you want to reach.

David didn’t drill down hard on the company’s business model. “Truth is, I don’t know what Futurephone’s game is here. They say they’re giving away the calls in order to ‘build up the company’s brand-name recognition. Our plan is to offer additional services in the future.’ And they promise that this freebie will be in place for at least three years, through 2010.” The quote he used is from the FAQs on the company’s website.

David’s readers were more curious about something for nothing.  There was speculation that the company might be harvesting phone numbers and then reselling them to telemarketers or even listening in conversations. One commenter wondered if the National Security Agency might be sponsoring this.  On reader complained that David hadn’t really followed up on the story: “I’m a bit surprised you did not contact the company to report on who they are and what they are really doing. Isn’t that what reporters do?”

A friend pointed me to David’s post and I was curious enough to do a little (but not much) investigation and posted the results on my blog.  Was easy to find out that the calls terminate through a small rural phone company in Iowa.  I know that a quirk of US phone policy allows some rural carriers to collect relatively huge - $.04 to $.10 per minute – terminating access charges on calls to their exchanges.  These charges are paid by the long distance company which delivers the call but are typically not passed along to consumers directly because most of us either buy buckets of US calls or pay a fixed fee per minute for calling the US. Instead, the cost of this relatively small proportion of calls is spread by the carrier over all US-terminated calls.

Calls to landlines in the countries served by Future Phone are almost all less than $.02/minute at wholesale, some less than a penny.  I speculated that  there might be sufficient margin between what Future Phone might get from the rural telco for attracting the inbound calls and the cost of the outbound international calls to make this a profitable arbitrage business.  But this was just speculation and I dropped it there.

Very quickly, reader Parkite, who knows the telephone business, commented that he was looking at data which showed that Iowa has some of the highest call termination rates in the country.  In private correspondence, he could see that the particular exchange to which Future Phone calls are placed is in the most expensive tier of exchanges.

Reader Chris Yeh, also knowledgeable, pointed out what I should have realized: “This is also the same way the free conference call services make money!”

Blogger Alec Saunders, who posted independently on the same mystery, commented on Fractals of Change: “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.”

In Alex’ post he points out that other “free” services including Radio Handi, FreeConferenceCall, and PartyLine Connect all have numbers in the 712 area code, presumably so that they can also harvest the access charge bonanza.

OK, this probably much more than you wanted to know about access charges and telco arbitrage unless you are or used to be in the business.  What’s interesting is that the business model left unexposed in David Pogue’s post was successively peeled back by bloggers with subject matter expertise AND THEIR READERS.  And all three bogs ended up linked together through their comments so those who were interested could learn or contribute to the story.

But note that this isn’t all you should expect from journalism.  There’s a strong circumstantial case for how the company makes money (which is not a crime although somewhat deceptive).  But none of us, professional or amateur, has[I haven’t] pressed the company itself for a reply.

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