

How Can A Free Conference Call Be Free? - startupstella
http://feefighters.com/blog/how-are-free-conference-calls-free/

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soult
Reminds me of a very similar story from Austria.

Back story: Austria is one of the most competitive countries as far as mobile
phone plans go. There were three big companies, A1 (previously state-owned, a
bit similar to AT&T), One (now Orange, owned by French Telecom) and Max (now
T-Mobile, owned by German Telecom). In 2003 a new company, Hutchinson 3
(branded as "Drei") emerged. Backed by (for a small country like Austria)
seemingly unlimited money from Hutchison Whampoa they built a completely new
network (again: Austria is pretty small). They only cared about getting
customers and started a price dumping war with the other three players.

In 2007 Hutchison 3G introduced a new kind of mobile plan called Sixback.
Because of the - in their opinion - high termination fees they offered 6
(Euro-)cents per minute on incoming calls from the three other providers. In
Europe you don't pay for incoming calls like you do in America, but getting
paid for incoming calls was new. The plan became quite popular, there have
been reports of peoply having over two dozen SIM cards from other providers
just so they could "load" their Sixback plan using the free minutes from the
other plans and then transferring the money via a 0900 number. (0900 is the
area code for phone sex and similar numbers where you pay a lot of money per
minute and the receiver of the call receives most of that money).

Of course the other providers hated Hutchison 3 for that plan, but that
quickly turned around when the regulation body lowered the termination fee, so
that every Sixback call now loses money for Hutchison 3. They don't offer that
plan anymore, but there are lots of customers who still have that plan and
obviously refuse to be switched to a newer plan.

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shad0wfax
Interesting, I dint know that.

I had an interesting experience with ATT. I was into the 6 month of a 2year
contract back in 2007. I wasn't using my phone much (non-iphone). But then I
went on a road trip to Yellowstone, which included driving through ND, SD, MT
and WY. During this 7 day trip, I was using my phone a lot (work + personal).
The total amount of minutes I spent in those 7 days were way more than my
usual monthly usage (in fact it ate into my rollover minutes as well).

After a few days from returning, I received a letter from ATT telling me that
they could not afford me on their network for using so many minutes, as they
had to pay their _partner_ n/w in those states (not just major cities in those
states). They wanted me to leave their network, in return they would let me
have the phone (under contract for free).

I was happy to oblige as I wanted an iphone. I switched to Tmobile for a week
and then went back to ATT again (iphone plan).

~~~
chadgeidel
FWIW - AT&T is now in SD. (grew up there, and still have family in the state).

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trafficlight
And in Montana as well when they purchased Alltel in 2009.

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EvanKelly
I was getting ready to correct you, when I researched the Alltel acquistion.

Verizon purchased Alltel, but was required by the FCC to sell off 105 of the
markets, which is where ATT stepped in and bought a bunch of those markets.

FWIW, my Alltel account was switched over to Verizon in 2009.

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zr52002
This type of scam is big business in rural Iowa (and I'm sure other areas).

I used to work in rural northwest Iowa. We had a "programmer" (to use it
loosely) quit to work for a company who's sole purpose was to abuse this
system.

They ran a "phone company" in a small town and then connected a big asterisk
box at their local exchange to accept free conference calls. They then
installed smaller asterisk boxes in other businesses that were a long-distance
call away with for the sole purpose of keeping the lines coming into their
conference box 95% full 24x7 with bogus calls from 5-45 minutes long.

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paulhauggis
phone line arbitrage. brilliant!

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jballanc
Bear with me here, but it seems to me like this is a good argument for
socialism.

Consider: why do termination fees exist? Clearly, as America was being wired
with telephone service, the cost to run lines to rural areas was prohibitively
expensive. So what's the capitalist/Randian thing to do? Well, charge more for
phone service out there. If people can't afford it, then they'll move to where
it is cheaper to have a phone line, right?

Except you have to consider _why_ people would live in these rural areas to
begin with. For a large number of individuals, they are probably farmers (or
involved in food production). If they have to pay higher rates for phone
lines, then they would have to raise the price of food to make living in rural
areas viable. But there's obviously a _really big_ incentive to the government
and everyone that's not living in rural areas to _not_ have the cost of food
increase. So what does America do?

To remain somewhat loyal to pristine capitalist ideas, America decides that
it's going to let competition and corporate interests resolve the issue, but
to make things "fair", the government will put its finger on the scales, just
a bit. Unfortunately, when you forget to take your finger off the scales, then
you end up with AT&T spending $250mil unnecessarily!

Efficiency of the market, eh?

Of course, a more socialist-leaning country would've just had the government
pay to install rural phone lines.

~~~
VMG
So a government acts socialist, distorts the market, causes damage, and you
think this is an argument for _more_ socialism?

All starting from the unwarranted assumption that telephone access was
necessary to farmers and food prices would have risen dramatically.

~~~
burgerbrain
_"All starting from the unwarranted assumption that telephone access was
necessary to farmers and food prices would have risen dramatically."_

Yeah, that initial assumption really is weird.

How much could a phone line like that possibly cost for a company who does
phone lines? I have no idea, maybe 10 million for all I know.

But that's a one-time cost that will be spread out over _all_ the crops that
farm produces for the next however many years that telephone line lasts. With
some (admittedly ~10 years out of date) idea of some of the other costs
involved in farming, I have a hard time seeing the bump to food prices being
anything to get your undies in a twist about.

~~~
Dove
Some googling around gets me a cost of $120,000/mile to install overhead
telephone wire. So, for example, if you have a tiny town of 200 people that's
15 miles away from anywhere, running a phone line out to it will cost $9,000
per resident. Which sounds steep, but possible to self-fund.

On the other hand, if you have one guy on a farm two miles away from the next
nearest neighbor, well, adding a phone line costs as much as building a second
house.

The interesting question for society is, should these people have phone lines?
And if they should, how much of the cost should they bear themselves? And how
far should we be willing to go to run phone out to increasingly remote areas?

~~~
kemiller
This conversation goes rather differently in the age of the mobile phone.

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chronomex
Mobile phone base stations aren't free either.

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kemiller
Certainly they are not. But you have more deployment options, and while 15
miles of phone line run to a single customer benefits only the customer (and,
I suppose, everyone else who might want to reach them) a single cell tower has
potential benefits to the entire subscriber base.

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steveh73
A similar thing happened in New Zealand (and likely elsewhere) in the late
90's, before broadband became prevalent. There were a number of ISP's who
provided free dial-up internet, because they made money from termination fees
when the majority of people called from a large telco to their smaller one.
Eventually the large telco reached a commercial agreement and the service was
scrapped, but it was good while it lasted.

~~~
pbiggar
Same thing in Ireland, except that we paid for the calls. So we paid 2c per
minute, of which the ISP maybe 1c got from the telco in termination fees, so
there was a lot of "free" internet access at the time.

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zorked
Same in Brazil, where free ISPs owned by small telcos in the then-recently
deregulated market were incredibly important in making the Internet popular
during the 90's. The free ISPs became so good that they started competing with
for-pay ISP at every level, including speed.

Of course broadband made the whole thing obsolete.

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srehnborg
AT&T and Google Voice had a dispute over this a few years ago because AT&T
must terminate all calls and GV was blocking calls to the
freeconferencecall.com numbers.

[http://arstechnica.com/tech-policy/news/2009/10/att-
accused-...](http://arstechnica.com/tech-policy/news/2009/10/att-accused-of-
regulatory-capitalism-as-fcc-probes-google-voice.ars)

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jakejake
Getting rid of the regulation altogether seems like tossing out the baby with
the bathwater. It seems like it would be possible to correct by removing the
loophole of routing calls through a rural region that are not terminating at a
resident of that actual region. I don't understand telephony enough to know
whether that's a simple thing to detect or not, though.

~~~
pak
It's not a simple thing to detect. Short of broad-scale wiretapping, if I
bridge two calls on my office phone nobody will know except my in-house PBX.
The telco sees two simultaneous calls into my PBX, but unless they are
actively listening in on both lines, they can only guess whether these two
callers are also talking to each other.

~~~
jakejake
I suspected it might be something like that. Thanks for clarifying.

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stanleydrew
This is all true. One technicality though is that Google Voice is not a VOIP
solution (yet) which is why the fight with ATT over terminating rural calls is
interesting.

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sp332
_Google Voice is not a VOIP solution_

Isn't it? I can make calls from my laptop microphone. What else do you need to
be VOIP?

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untog
I think the clarification is that it is not _just_ a VOIP service. If I call
someone with my Android phone it is routed through normal voice call paths,
not as a VOIP call.

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smoody
I once read that this is how MagicJack makes most of their money as well.

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hsshah
It's interesting that you bring you MagicJack. I have always wondered how they
made money. Now it is starting to make some sense. Can you share the link to
that article?

~~~
chalmerj
This article ([http://www.telecomlawmonitor.com/2011/04/articles/access-
cha...](http://www.telecomlawmonitor.com/2011/04/articles/access-charges/fcc-
rules-voip-provider-may-not-collect-access-charges/)) explains th FCC decision
against the company for trying to exploit this model.

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eli
This seems like a good example of SEO-driven linkbait.

It's not quite spam -- the story is interesting, if not exactly breaking news
-- but I'm pretty sure the main goal is to get inbound links to
feefighters.com

~~~
dangero
Inbound links are the indirect goal of every blogger. I found the article to
be very informative about the details of a business segment I wasn't familiar
with. What makes this article different than others?

~~~
eli
People blog for many different reasons. I would argue that posts written to
generate linkbacks and boost page rank are actually relatively unusual. I
think most blog posts are either written to directly promote something on-site
or to bring in direct revenue through ad impressions or because, ya know, the
person just has a story to tell or an ego to stroke.

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MichaelApproved
Even though the high cost to setup the lines have been collected, it's still
expensive to maintain these lines so some version of this needs to be in
place.

My solution would be to figure out what it costs annually to maintain this and
limit the fees imposed on other companies to this fee. At the end of the year
you calculate the percentage of calls your company terminated to the area and
pay that percentage of the fixed fee.

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8ig8
That explains why I can never connect using Vonage.

Thanks. I always wondered about this, but not enough to dig into the details.
Interesting.

~~~
ShabbyDoo
It bothers me that the VOIP providers don't, say, play a special message
explaining the issue. If it's not illegal for them to block these numbers,
then why not at least explain themselves? Perhaps they could offer at-cost
connections? "Press 1 if you are willing to pay $0.08/minute for this call"

~~~
8ig8
I agree that a message would be helpful. I've learned to blindly accept it as
an isolated technical issue. I'm accustomed to grabbing my cell for conference
calls now.

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timbre
As VOIP becomes more common, I've found that some people consider it rude to
use these free services. Things have shifted from a VOIP setup not being a
proper phone because it can't connect with these numbers, to these numbers not
being proper conferencing because VOIP users can't call them.

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GigabyteCoin
So... AT&T is suing Google to force them to pay these antiquated fees as well?

Why wouldn't they use their combined legal power to abolish the fees together,
instead of fighting each other?

Because sure, at some point, Google may easily be forced to pay them too.

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danso
Pretty fascinating...the OP describes the regulation as "outdated"...but are
there rural companies that depend on it? Or is it truly outdated and due for a
change?

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FfejL
It's outdated in the sense that the original reason for the high fees was to
make it economically viable to provide service to people in rural areas. But
the original sunk costs of wiring every home and business have long been paid
off, and the digital-ization of the phone network has drastically reduced the
ongoing costs of providing service to those folks. So it's outdated.

On the other hand, there are plenty of local CLECs in rural areas that make
money from these fees, and they continue to lobby hard to keep the tarriffs
and fees as they are.

So it's both, really.

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BrandonSmith
Further, the phone call itself does not have to physically terminate in the
locality the rate center represents. For instance, a free conference calling
service's VoIP servers may be hosted anywhere (e.g. AWS), not necessarily in
Iowa. Thus, the reason the Telecommunications Act of 1996 provided for this
type of compensation is non-existant in this type of VoIP scenario.

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biot
Here's a 2007 article explaining this:

[http://pcworld.about.net/od/webtelephonyconferencing/FCC-
ref...](http://pcworld.about.net/od/webtelephonyconferencing/FCC-referees-
dispute-over-free.htm)

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hiroprot
So, given all this, why wouldn't AT&T offer a competing free conference
service where they keep the termination fee?

~~~
wmf
AT&T already has a conferencing business; why should they jeopardize it when
they can just crush their "illegal" competitors? It's just like why Hollywood
won't fight piracy by lowering prices.

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danielson
Related: Cameras May Open Up the Board Room to Hackers — NYTimes

< [http://www.nytimes.com/2012/01/23/technology/flaws-in-
videoc...](http://www.nytimes.com/2012/01/23/technology/flaws-in-
videoconferencing-systems-put-boardrooms-at-risk.html) >

~~~
danielson
_Un_ related?

