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What's With the 712 Area Code?

Ever wonder why it is that FuturePhone, Radio Handi, FreeConferenceCall, and PartyLine Connect all have access numbers in the 712 area code?  These services all provide “free” services to you.  There’s “no catch”. You just have to make a long distance call to get them.

So how do these services get paid, and why are the access numbers all in Iowa?

The short answer is tax subsidies. The 712 model, as I refer to it, is really a variation on the 900 number model, but financed by taxpayers. Take a low cost call, terminate on a high cost carrier, and pocket the difference.

The first of these subsidies is the Universal Service Fund.  Tiny Iowa, with just under 3 million residents last year, was the recipient of $86.5 million from the USF.  The USF pays for maintenance and improvements to those local telephone plants, in addition to subsidizing user fees for local residents. The cost basis to provide service in those communities is dramatically lowered.

The second subsidy is the tarrif itself.  Most Iowa telephone companies (and there are a lot!) participate in the NECA Access Fee Pool.  The NECA publishes a tarrif, which each company participating agrees to use, and then they split the revenues.  The termination charges for those tarrifs are a significant source of revenue for the local phone companies.  And, because they’re rural, the charges are often steeply higher than to terminate in an urban setting.  In the “NFL” cities, you might expect to pay 6 to 8 tenths of a cent per minute for termination.  The NECA tarrif is closer to 3 whole cents.  Arbitrage the subsidized rural rate against your costs and, presto, you’ve got a winner!

Let’s take FuturePhone as an example.  Yesterday they announced free long distance calling to some 50 odd countries world wide.  All you have to do is call 712 858 8883 (a number provided by the tiny Superior Telephone Coop in Estherville, Iowa), and then enter the international call you want to make using the standard 011 prefix.  Easy peasy!

So how do they make money?  Since we don’t know know what FuturePhone’s actual termination costs are, let’s make an estimate. We do know that Jajah provides services to the same 50 odd countries for a retail rate of 2.5 cents per minute. So, let’s assume a 50% cost, and say that FuturePhone’s cost to terminate the call is 1.25 cents. That leaves 1.75 cents per minute to split with the folks at Superior Telephone Coop.  Give them half, which leaves you 0.875 cents per minute, and you’ve got a pretty attractive proposition!  It’s certainly a lot more profitable than SipPhone, charging 1 cent per minute, and probably about as profitable as Skype at 2 cents per minute.  It’ll definitely keep bread on the table.

Sounds great doesn’t it?  Everybody wins!  The good citizens of Iowa win (they’ve now got a fibre network joining up 150 of their independently owned telco’s), FuturePhone has a seemingly profitable business model, and you win by getting to make cheap overseas calls.

Or do you?

Well, you’re not really getting that call for free, are you…  You’re still paying long distance charges, which are at minimum going to be the 1 or 2 cents per minute that Gizmo or Skype are charging.  And, should you choose to make the call from a landline, you may be paying up to 10 cents per minute, depending on where you’re calling from, and what LD plan you have with your carrier. Or, you’re burning air time on your cellular phone.  No matter how you cut it, it’s costing you.

Makes you wonder what FuturePhone’s real value is, doesn’t it?  After all, if calls are free using Skype, or Jajah, and you don’t have to make a long distance call to do it, then why bother with FuturePhone?

The 712 model is a creative way to run a business, no doubt. FreeConference is a very successful example of a business using it.  Today’s lesson, kids, is that even with a model as creative as the 712 model, you still have to provide real value to the customer. FuturePhone’s cheap long distance call may not be enough.

{ 80 comments… add one }

  • Toney October 13, 2006, 7:40 am

    "Well, you’re not really getting that call for free, are you… You’re still paying long distance charges, which are at minimum going to be the 1 or 2 cents per minute that Gizmo or Skype are charging. And, should you choose to make the call from a landline, you may be paying up to 10 cents per minute, depending on where you’re calling from, and what LD plan you have with your carrier. Or, you’re burning air time on your cellular phone. No matter how you cut it, it’s costing you."

    This is a wrong assumption. The use of unlimited calling plans is increasing witht he advent of VOIP phone services. This means, if I call from my landline, I am not paying anything extra to my monthly phone bill for the long distance call to 712. And cell phone services provide free air time. Thus, the end user really gets free calls!

    • Guest July 16, 2011, 3:36 am

      The savings are a thing of the past due to the regulating bodies. You now pay the long distance…No matter who the carrier is that you use….Grrrrr

      • Guest February 9, 2012, 8:00 pm

        Even with unlimited plans, they are still charging back carriers who are passing that charge along to you. It's a scam. Don't fall for it. I will be contacting the Better Business Bureau over our last phone bill — which allows us unlimited calls — that charged us $30 for using FreeConferenceCalling.com because they backcharged Windstream for us using this supposedly free service.

  • Owen October 13, 2006, 2:53 pm

    Alec – that's a very neat argument but it doesn't quite hold water. Many of my family are in the UK. If I wait until near the end of the month and have say 80 extra minutes to use on my cell plan, then I can call futurephone and catch up with my family for free – really for free.

    Instead, where this scheme is costing me is in the continued existence of the USF fee on all my other telephony accounts – I still get a deal because everybody else is subsidising my calls but I am in fact paying that way.

    But it is a bit disingenuous to argue that the call actually costs me. I don't pay LD on any call any more. In fact I don't pay for calls to the UK either – but now I can call the UK from my cell for free too.

  • Alec October 13, 2006, 4:10 pm

    Toney and Owen — you've been seduced by really good marketing.

    Example: I used to have a Vonage account. But I cancelled it, in favour of Asterisk and NuFone. I rarely spend more than $10 per month on calls. It's a rare person that will use enough minutes on one of the very inexpensive calling plans to exceed the inflated prices charged on an unlimited bucket.

    Similarly, even one of the big bucket plans on a cell phone is really just a prepaid account with a whack of minutes. Owen, your argument is "I am paying for them anyway, so I might as well use them up."

    In no way are the minutes free, though.

  • tycoman October 13, 2006, 4:58 pm

    Are there any more states apart from Iowa where this is applicable ? how about North Dakota, Alaska ?? all these should be under the neca umbrella too ?

  • Alec October 13, 2006, 5:11 pm

    Tyco – certainly there are other states doing this. FreeConference.com, for instance, uses 605 and 218 numbers as well. Michael Robertson's free DID program, AreaCode 775, uses the 775 area code in Nevada.

    I am speculating, but Iowa may be the preferred choice because it has a very advanced fibre network that connects all of the independent telcos.

  • Paul October 14, 2006, 8:42 am

    I can't get futurephone to work properly, but others have, and if it worked the way it should, It would save me a lot of money. I use cingular, and have XXX amount of minutes a month, and then the rollover minutes. My girlfriend uses cingular, as does my family, so none of those calls detract from my minutes. I'm going to pay $60/month regardless to cingular. Anyways, my girlfriend is now studying abroad in spain, and has a mobile phone there. Using JaJah it costs $.18 to call her.. Jajah offering the cheapest rates I've found. If Futurephone were to work properly for me, I'd essentially be calling her for free.

    I know my cingular minutes aren't 'free', per say.. they're paid for monthly and are just accumulating.. futurephone and the like simply allow me to utilize more of my minutes at no increase in cost to me.

    I think futurephone might be experiencing some problems or something; I tried placing a domestic call to my own cell phone with it (via skype out), and it couldn't complete the call, nor could it complete calls to any of my friends in Europe today.

    oh well

  • Alec October 14, 2006, 9:24 am

    Hi Paul, I think you'll find that the futurephone service can't terminate on cell phones in a lot of countries. Cell phone terminations are very costly, as you've found out via your experience with Jajah. Terminate the call on a landline, though, and it can be very inexpensive.

  • Sim October 16, 2006, 4:24 am

    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 do the freeness and still-good-ness of the offer rely on the fact that you pay a standard termination tax/fee/rate per month and your carrier picks up the difference because it's all averaged out?

    any explanations would be much appreciated.

    (i'd be using vonage to call iowa, if that makes any difference.)

  • Alec October 16, 2006, 4:48 am

    The reason it works, Sim, is that you are paying for a bucket of minutes, but your carrier is still paying by the minute.

  • b schwill October 16, 2006, 4:52 am

    To the people that think the calls are free, think again. You may not pay any extra on your particular plan, but everyone is helping you make that call by paying thier respective long distance charges, whatever they may be. See, access charges are like telephone socialism. Futurephone is just taking a little off the top.

  • P Stein October 19, 2006, 8:29 am

    Forgive my denseness but I seek some clarification. In your blog example, where does FuturePhone get its revenue –assumed at $.03/min? Is that what the originating call carrier must pay? To the next carrier the call is routed through? Please explain for this more dense reader EXACTLY how the tarrif/payment charge system works in regard to these "free" calls. Thanks.

  • Mr. Cheap October 19, 2006, 10:13 am

    You can use FuturePhone for free without paying for long distance call. Use Skype if you are from USCanada or Jajah if you are from Zone 1 or 2 to call FuturePhone access number. This call will be free!
    The process described at: http://ilikeitfree.blogspot.com/

  • Alec October 19, 2006, 1:58 pm

    P Stein, it's a little arcane, but here's how it works. When you buy a bucket of minutes from your cellular carrier, or for that matter from a land line carrier on a nationwide LD plan, the carrier is assuming that the average price they will pay for terminations is some amount –> say 0.6 cents per minute. It's pretty low in most jurisdictions, but in a few places it's higher. So, on average, they can offer a plan with unlimited calling to anywhere in the country, knowing that they'll pay around 0.6 cents per minute, including all of the high tarrif areas, and maybe a few that are even cheaper.

    Superior Iowa, hypothetically, is a place that charges 3 cents per minute (actually, it may be more than 10!). To terminate calls in Superior, the carrier is actually losing a little money. If the budget is 0.6 cents, then they're losing 2.4 cents. But that's OK, on average, they're paying 0.6 cents per minute, and there aren't that many calls to Superior anyway. There are only about 4,000 lines there, out of 150 million nationwide.

    The call comes in to Superior, and then gets routed to some other destination. In the old days, those calls went out on Qwest, the same provider they came in on. And the origination charges were high, just as were the termination charges. HOWEVER, in recent years Iowa Network Services has been replacing QWest. INS is a fiber network among all 152 Iowa phone companies that operates as a coop. They can get calls out of iowa for almost nothing. So, the same math as before applies again. The Superior Telco forwards the call on to London UK for probably under a penny per minute, and keeps the difference between the 2.4 cents and the termination charge as profit, which they split according to some business agreement with FuturePhone.

    Clear as mud?

  • Rob Frieden October 19, 2006, 3:45 pm

    Hello All:

    The real scam/arbitrage play lies in the Universal Service Fund as Alec mentioned in passing. The Superior telco not only receives 3 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 Alec estimates!

    Regards,

    Rob Frieden

  • B. October 22, 2006, 10:50 pm

    Alec, thanks for your insight in to this age old practice.

    I was reading your reply to Paul above and it made sense, because I have made numerous calls to mobile phones in various countries in Europe but none have terminated. Yet, all landline based calls connected right away. But, is this something that is necessarily reflected with the added cost of connecting mobile calls? Or is it more because Futurephone's system seems to be increasingly flooded due to the publicity they're receiving? Because no where on their site do they mention the inability to make landline-to-mobile calls. I've made inquiries to Futurephone but haven't heard back from them.

    I know people who have certain MTS plans in Canada whose plans include dialing numbers within North America – meaning they can readily utilize this service which is great! But, they'll be charged still, but the plan caps out at $15.95/month. Is there a cheaper alternative?

  • Alec October 23, 2006, 2:48 am

    B.. the wholesale cost of connecting calls to European cell phones is quite high — sometimes 25 cents / minute. That cost has to get passed on to the user. It's not something that a service like FuturePhone could just absorb.

  • Kanti Purohit October 23, 2006, 4:12 pm

    Alec:

    1. Hypothetically, if FuturePhone and others like FuturePhone become WILDLY popular, then my LD carrier (Vonage) may start loosing money!

    2. A bit unrelated to the topic, I have wondered for a long time that cell carriers of Europe are a big racket.

    In general, as we know, termination to less developed countries costs more becuase the governments in those countries impose higher tariffs. For example, I have watched rates for land lines to India (from US) plummet from almost $1.00 per minute to under 10 cents/minute. And, termination to mobile phones to India have have also dropped to about 16 cents. I guess, over the years, India became less of "less developed countries". But what about the European countries??? They are among the "developed" countries and rates to landlines have been low (2 cents or less) for quite some time. So, in this case, it is the mobile carrier – and not the local government – that is pocketing all the money!!!

    In case you argue that the callers (all of us) are paying for the high rates of European mobiles phones becuase most mobile phones have free incoming, I woud argue that the same is true India.

    I am looking forward to your comments. Thanks.

  • B. October 23, 2006, 4:55 pm

    Thanks again Alec.

    I know what you mean, because even when using a calling card to call mobile phones in Europe my minutes drastically decrease. However, when I recieve calls on my mobile (cell) phone from Europe they're charged just the same – whether they call my cell or call at a landline number. Do you know whether the discrepancy here has to do with specific tariffs or other regulations? The system in the States seems to be that the cost of terminating calls to cells in the States is interchangeable with terminating calls to landline numbers w/in the States. I wonder if the same could be said of European, and other countries in the near forseeable future.

    And anyone have any insight as to a cheaper method (than the MTS one I mentioned above) to calling to the States from Canada?

  • Alec October 23, 2006, 6:43 pm

    Kanti and B.,

    The high cost of terminations in Europe is as a result of the model. In Europe, the caller pays for the cost of the termination of the call on a cellular phone. Incoming calls are free. Effectively, this transfer the cost of making that call to the incumbent telco monopoly, or to another cellular carrier's network. In addition, in order to lock customers in, many European cell carriers offer discount calling plans amongst members. For instance, it might cost less to call another orange subscriber if you are also an orange subscriber.

    There is no economic incentive for the recipient of the call to seek out a cheaper carrier, since they don't pay to receive the call.

    In North America, because the cellular owner pays to both make and receive calls, the termination charges for the cell phone network have approximated those of the fixed line network.

    More information here:
    http://blogs.nmss.com/communications/2006/04/eu_r

    Kanti — the reason calls to India have plummetted so steeply is that the Indian market is only recently deregulated. I remember seeing a press release less than 5 years ago about the first competitive carriers being launched in India. Apparently competition is having an effect!

  • Michael October 25, 2006, 6:46 pm

    Alec, you're giving a Canadian approach where there still is such thing as "domestic long distance calls".

    If you ask any American they will answer, There is no "domestic long distance calls" anymore and they're local calling area is 48 United States and Canada.

  • David October 26, 2006, 6:53 am

    From reading the above comments and test it myself, many calls don't get thru. That could be the key of making money.

  • peter veazey October 27, 2006, 8:00 pm

    was pleased to hear about futurephone, when i tried it to call our london uk office it went thru' almost immediately but later that day ( about a week ago ) i could not get thru' . perhaps the level of traffic made the call drop out !

  • George October 29, 2006, 5:10 pm

    I had luck calling a landline in the UK – but no mobile phones and the cennection was terrible (i don't think they use premium lines). Have you checked out a small start-up called Switch-Mobile? They have this Globe Dialer Java VoIP product in the USA and Canada which is very inexpensive for international calls and you can add your contacts to your phone for added ease. I also tried Jahja – but I don't like the call back feature.

  • Alekos November 1, 2006, 12:09 am

    Nice article…

    BUT

    I don't want to but stocks of Futurecals.com or Futurephones.oorg or whatever.

    I want to call home from my national plan cell phone during the night (using my 4000night/weekend minutes) and talk with my family at the other side of the Earth for FREE. And thats what I get!!!!!

    I don't care how often it works. If it doesn't connect I use my standard phone card but if it works,

    its PURE profit for Me!

  • Alec November 1, 2006, 3:21 am

    Granted, Alekos, and I think that's the point a lot of people have been making. My interest was primarily in understanding how they can offer 'free' calls.

  • Brian November 13, 2006, 7:44 pm

    All thsi is academic. The sound quality is terrible on the 712 numbers.
    All VOIP providers provide much better quality.

  • Jack December 30, 2006, 9:04 pm

    Alec, Thanks for all your explanation on the business model of futurephone.com. I am from China, here I am little confused about the word 'termination' in your post "As best anyone can determine, there must be some quirk in Iowa telecommunications law that allows them to charge higher than normal termination charges on connected calls".

    is it refered to "receiving party'', 'receiving service' or 'cancellation of an account' ?

    would appreciate your time for this matter.

  • tangseng January 9, 2007, 8:29 pm

    Jack
    termination charge = access charge
    odd, isn't it?

  • box January 13, 2007, 12:48 pm

    so there may be termination charges etc…taxes..even rip-offs
    if you use any softphone software (www.internetcalls.com), then call the
    712 number, follow instructions, who gains?looses?

    for thousands of people who use the 712 system, it is time that thay
    come out ahead. and if the developer/owner of the 712 system makes
    some money, great also. we have been subsidizing the big tele companies
    for years, and yet been getting ripped off.

    i use the 712 system, and i like it

  • Aaron January 13, 2007, 2:06 pm

    I believe Google will connect a long distance call at no charge to the user, thus circumventing the long distance charge. Does FuturePhone show up in business listings?
    http://www.google.com/help/faq_clicktocall.html

    Might be an interesting experiment…

  • Rob January 13, 2007, 5:43 pm

    Jaxtr (http://www.jaxtr.com) is another phone service that uses 712 numbers for the same reasons mentioned here probably. How sustainable is all of this?

  • Joe January 14, 2007, 12:01 pm

    Poltically, it's not very sustainable at all. I just imagine the headlines on FOX News:

    * "Illegal aliens calling home on your dime"

    or

    "Illegal aliens calling home using taxpayer money"

  • Billy January 14, 2007, 4:03 pm

    calling a 712 # for an illegal is no easy feat my friend!

  • retwann January 18, 2007, 12:47 am

    Add yet another gateway to the free internation phone calls business model. http://www.freephonecallz.com
    Must be new as I tried it a few times with no busy signal. I think their model will be to upsell other services.

  • K January 29, 2007, 11:53 pm

    I dunno about anywhere else, but Qwest offers an unlimited long distance landline package.

  • Eric January 31, 2007, 7:15 pm

    Looks like Futurephone.com's service is no longer available. Check it out — http://www.futurephone.com
    So much for their 3 year gurantee LOL
    http://www.Freecalltheworld.com still works great, though.

  • Bill February 2, 2007, 7:37 am

    They had to many busy signals, I use this one from a FREE call website the number is 218-339-1986 simple quick and no busy

  • Patrick Townson February 3, 2007, 6:14 pm

    Thanks for the really good discussion about telecom arbitrage. And it is sort of like a '900 number line' in terms of how it works. There is also a fellow in Washington State who gives free 'incoming only' lines to anyone who wants one for whatever use. He also gives you voicemail on your account if desired. Absolutely no charge. He makes all his money from arbitrage, or call termination fees. And there is another service on the web called 'Personal Call' which provides free numbers to voice mail systems. You use these to give the impression to aquaintences that you are located somewhere (where you are not). Someone asks for your phone number but you do not wish to give it out, at the same time you do not wish to be rude. So you give the person this number (in various cities) to reach you, but the catch is, they never actually reach _you_, they only reach voicemail. Two ways of collecting your messages: you can either call the number yourself and insert a passcode, or you can look at your (also free) account on his web site.

    Likewise, he makes his money from arbitrage; he says to telco "you receive X cents per minute in termination fees from other telcos; I agree to take Z number of lines for incoming calls to stir up inbound traffic for you a little if you will give me half of X cents for each line." Or words to that effect.

    The smart players install conference bridge circuits for specialized audiences, then encourage everyone and his brother to call in. For example, a business man in Los Vegas (a/c 702) where termination rates are a good price cut a deal with AT&T that all calls to his number would be routed instead through T-1 circuits; a type of telephone line. Then the business person advertises far and wide, "if you are gay and want a really hot phone call, dial 702-xxx-xxxx and chat with other guys". And the best part of all, "this is a FREE call; no premium charges; all you pay is toll … " so to guys who are quite accustomed to getting ripped off at four or five dollars per minute on gay chat lines, now they suddenly have a new hero; this guy is offering them free chat if they pay the cost of a toll call … what is that, ten cents per minute these days. or less? So everyone wins … or do they?

    People call this hypothetical Nevada gay chat line; when they dial 702-whatever, their telco switches the call out to somewhere in that area, but when it reaches 702's main point of entry, AT&T plucks off the call and funnels it into a T-1 line. Mr. Business Man could be sitting in Chicago or New York for all they care, wherever tne T-1 line terminates is his business. In the 1980's, AT&T was doing the same thing, i.e. selling sex phone calls to gay guys in the USA who wished to 'Reach Out and Touch a New Friend' but could not afford to do so 900-number style. And AT&T was always quick to point out, "NO PREMIUM CHARGE FOR THESE CALLS. YOU ONLY PAY INTERNATIONAL TOLL RATES", to Guyana, South America, Brazil, or Africa or wherever the balance of payments on telephone arbitrage was the most out of whack (in AT&T's favor). Everyone wins except the American rate payer who has to pay several dollars per month on his phone bill for 'access and network fees'. But then, you never really expected telco to lose anything in the deal, did you?

    PAT

  • Patrick Townson February 3, 2007, 6:25 pm

    I should have added … AT&T in those days (1980s) at least knew there would be some objections from guys who were smart enough to know that 'ONLY PAY INTERNATIONAL TOLL' still could get to be sort of expensive, so AT&T clouded the issue a little by deliberatly parsing the phone number in the ads to look something like "area code 011" (really the international code and NOT an area code) and the remaining digits in the foreign phone number to make them look more 'American like'.

    The objective behind these games is simply to stir up more telephone traffic, where little none existed previously, and in directions favorable to the person who thinks up these schemes. It is a way, presently legal, to get the rate payers to pay for phone calls you may or may not have made to start with.

    PAT

  • wesley February 3, 2007, 9:24 pm

    if you have voip (e.g. with sunrocket or vonage, you will not be charged to call the 712 area code or anywhere else in the us or canada {or italy, spain or france with vonage}) as you pay only a flat fee monthly or annually and are not charged for individual calls regardless of where they are made in the aforesaid areas and regardless of how long the call is.

  • wesley February 3, 2007, 9:33 pm

    consequently, with voip, you can call the 712 area for free (except for your basic fee which you will be paying anyway) and then connect to many other countries through , e.g., allfreecalls.net for free. thus, you can call, e.g., estonia using voip and allfreecalls.net without paying anything. your cost as a taxpayer, incurred as a result of the govt. subsidy to the iowa companies is surely de minimis.

  • Rick Resnik February 4, 2007, 6:58 pm

    Here are two more numbers that work:

    712-338-8868
    712-338-7005

  • Patrick S. February 7, 2007, 1:01 am

    here is another 712-858-8021

  • Mike February 19, 2007, 8:25 am

    Don’t feel sorry for AT&T. There is a natural check and balance here that AT&T doesn’t discuss. As a rural LEC’s revenues increase (from ENTREPRENUERIAL effort), their state regulators will eventually lower their approved tarrifs and their portion of the universal fee.

    Let the free enterprise system work. Better rural LEC support themselves via entrepreneurial effort (like AT&T is attacking) rather than continued subsidies. How else will our rural phones be supported? Next time you travel in the countryside, count the number of telephone poles to some of those farms. Those didn’t magically sprout!

    Also, VoIP calls haven’t even begun to be regulated yet. AT&T is simply using its monopolistic muscle to kill competition. It is the nature of the beast.

  • Mike February 19, 2007, 9:00 am

    Further, we all pay for the universal phone service access we all enjoy, one way or another; through access fees and taxes. One way or another, the costs must be paid in order for us to pick up the phone and know that our calls to the mountains of Wyoming will be connected. The whole point of giving the rural companies a rate advantage is to help them support the rural environment which is, per capita, much more expensive to support. We will need to continue to support that infrastructure, either from fees the carriers pay, or from funds given to those rural companies by government subsidies. I don't know about you, but I would much prefer to see the the market cover these than bureaucrats. In this case, the market will be more efficient, and the market will reward the rural innovators. We, the people, created AT&T. Now it is time for AT&T to stop inhibiting market creativity with bullying tactics.

  • BRUCEN March 2, 2007, 7:09 am

    Re: VOIP. Interesting. I have friend who started using TOIP. He thinks he's saving about
    $30 a month on phone calls. I said that I also was going to do it.
    I called Sunrocket, went through the process, and was told, when it
    was time to pay, that if you want to keep your existing phone # you might
    have to wait one month. One month w.o. a phone! Impossible; dropped it.
    Went Verizon. Could keep my existing phone # (my carrier). Received a router which didn't work. Went to
    a Manhattan store to exchange it (J&R Music World-great store!). On the subway I thought: "How much
    does a router and adapter cost electrically ea. hour?"
    Went to ConEd's website (http://www.coned.com/customercentral/applianceguide.asp). Home entertainment system: $0.1 -$0.2 per hr. Customer service. Saw a picture of diff. electrical
    Live and learn!
    Have a great one! Love you all!
    G-d bless!
    items. CD player was about $0.1 min. Result: probably costs about $0.1 per min (or more)= (about) $0.45 per day (2 items must be kept running)=$13-$16 per mo? Plus the chance of one of these 2 gadgets burning
    out=no phone service (In a busy house, it hurts!). Should buy a back up.
    Told my friend that he's not saving $30 per mo. (he's got a lot of expenses, a few kids, tuition in religious school) "You're saving, maybe $15 per mo." I said.
    Almost not worth it bec. of poss. breakdown: the more things (man-made) you have
    the greater the chances of failure. The human body (made by G-d) can work fine for
    100 years (sometimes more: recently a Black lady passed away in NY State 114 years old.)
    Show me a mechanical device that will function, trouble free, for that long!

  • BRUCEN March 2, 2007, 7:13 am

    Hello, seems the paragraphs got transposed should read:
    Re: VOIP. Interesting. I have friend who started using TOIP. He thinks he’s saving about $30 a month on one calls. I said that I also was going to do it.
    I called Sunrocket, went through the process, and was told, when it was time to pay, that if you want to keep your existing phone # you might have to wait one month. One month w.o. a phone! Impossible; dropped it.
    Went Verizon. Could keep my existing phone # (my carrier). Received a router which didn’t work. Went to a Manhattan store to exchange it (J&R Music World-great store!). On the subway I thought: “How much does a outer and adapter cost electrically ea. hour?”
    Went to ConEd’s website (http://www.coned.com/customercentral/applianceguide.asp). Home entertainment system: $0.1 -$0.2 per hr. Customer service. Saw a picture of diff. electrical items. CD player was about $0.1 min. Result: probably costs about $0.1 per min (or more)= (about) $0.45 per day (2 items must be kept running)=$13-$16 per mo? Plus the chance of one of these 2 gadgets burning
    out=no phone service (In a busy house, it hurts!). Should buy a back up.
    Told my friend that he’s not saving $30 per mo. (he’s got a lot of expenses, a few kids, tuition in religious school) “You’re saving, maybe $15 per mo.” I said.
    Almost not worth it bec. of poss. breakdown: the more things (man-made) you have
    the greater the chances of failure. The human body (made by G-d) can work fine for
    100 years (sometimes more: recently a Black lady passed away in NY State 114 years old.)
    Show me a mechanical device that will function, trouble free, for that long!
    Live and learn! Have a great one! Love you all! G-d bless!

  • John March 27, 2007, 10:15 am

    I live in California and I recieve many calls from a recorded (712) telemarketer. It is very annoying, wouldn't you agree.

  • wayne March 31, 2007, 7:06 pm

    I think there have been a lot of posts that were mistaken about the source of the profits of the free phone services using the 712 termination scheme. Alec, either you are mistaken too or I don't understand your original reasoning.

    The Universal Service Fund does indeed subsidize the high cost rural companies such as the ones in Iowa discussed here. However, that subsidy has nothing to do with the high terminating access charges that are split with the free phone services. (The USF subsidy is paid directly to the phone companies based on their cost characteristics — it has nothing to do with the State of Iowa as a whole, as someone mistakenly suggested).

    The interstate access charges, on the other hand, are set by the Federal Communications Commission via their approval of the NECA pool tariffs. Large Bell companies have much lower access charges than small rurals like the ones in Iowa. This is true on a national level. Access charges are just a part of intercarrier compensation, which is in bad need of national reform — and this arbitrage gimmick is one symptom of that. It may be that Iowa is a prime target because for this only because it has great capacity as a result of modern fiber optic infrastructure.

    So, the common assumption on these posts — that the USF is somehow being used to fund these 712 free call service schemes, is simply wrong. The small rural companies are subsidized by the USF because of their cost structure and size – not on the basis of enhanced terminating traffic caused by these schemes. The profits for these schemes come from the willingness of the small telcos to share their high access charges with the call service providers who are funneling many extra minutes to them and greatly enhancing their access revenues. This gimmick may enrich these small phone companies but that does not add to their USF subsidy at all. Perhaps your real argument is that the USF helped these small rural companies build their high capacity network, which is now being exploited — that may be true, but the use of these free call service schemes does not affect the USF.

    If anyone wants to know how the USF is really being wasted to the tune of billions, I can tell you. And by the way, it is not a taxpayer issue either – the USF is completely funded by telephone, wireless, and VOIP ratepayers.

    The only party being hurt by these schemes are the landline and wireless companies who terminate calls there. This has nothing to do with unlimited plans versus regular plans – each minute of termination is charged to the carrier regardless of whether the caller had an unlimited plan or traditional long-distance service. The carrier needs to build this wholesale expense into its long-distance rates.

    Anyone disagree with me? Any questions about the USF?

    Wayne

  • Alec April 1, 2007, 3:23 am

    I agree Wayne, and thanks for articulating it so clearly. My, perhaps convoluted, argument in the initial post was that without the USF the plants and infrastructure to deliver these services wouldn't exist.

  • Wayne April 2, 2007, 5:31 am

    Thanks, I do see your point. I thank you because yours was the only web site that answered my initial question about how these free services make money.

    You are correct about the impact of the USF but that would have happened with or without these 712 services.

    One underlying problem is that the USF gives out lots of money irrespective of the actual earnings of the phone companies that are being subsidized. Congress will be looking to reform the USF this year but I'm not holding my breath.

    Wayne

  • Jake April 9, 2007, 3:30 pm

    So its been a couple months… do any of these free calling sites still exist?

  • Alec April 9, 2007, 3:39 pm

    All shut down, Jake. AT&T pulled the plug on the iowa rural telcos, causing a NASTY battle.

  • Wayne April 12, 2007, 2:32 pm

    But the free conference call sites are still operating via the 712 mechanism. I don't see any change on those web sites.

  • Alec April 12, 2007, 7:30 pm

    Wayne, they're back as of April 4th. I got my dates wrong. They were shut down for most of the month of March, however.

  • winterwarmer July 10, 2007, 12:30 am

    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.

    Interesting to note was the 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". 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

  • Ann August 17, 2007, 5:53 am

    Hey, just wanted to let all you COMCAST subscribers know that you are paying a "fee" to the "Federal Universal Service Fund" EVERY month on your bill! I just noticed that this charge varies per month due to the percentage rate on the total cost of your calls. Now, Comcast offers a plan that you pay $X/month with long distance and local provided. If you want to call INTERNATIONALLY, you will be paying 42/min! Follow? Whatever your costs are TOTAL for all calls (including the monthly fee for your phone service), muliplied by the percentage rate for the USF, this is YOUR COST to all those who are "scamming" the phone companies! Now, my last fee for this USF was $12.97 in addition to all the other rediculous fees I have to pay! Will I continue to pay this percentage rateon my calls to the USF so I can get international calling rates LOWER then 42 cents/minute? Maybe. I'd have to do the math! Right now my international calls to Iraq are costing me well over $100/month (plus the $45 monthly charge for Comcast then all the taxes and other fees). I have been looking into this USF thing for a few days because it seems so wrong for companies, such as Comcast, to make the consumer pay into this "Fund" that is required by the federal government for the IP PROVIDERS to pay into! I think Comcast can absorb the costs themselves! I see so many new high rises being built for Comcast and other such things that Comcast seems to have enough money for that they can pay into the Fund and not me, the consumer! If this is a Fund that the IP providers have to pay into, why do I (the consumer) not have a choice whether I want to contribute to this Fund or not? I am NOT REQUIRED by any law to pay Comcast this USF charge so why am I still seeing a charge on my bill???

    Anywho with an educated answer?
    *One more thing. If schools, libraries, and government provided medical facilities are "funded"/get their money by local taxes, state taxes and other federal taxes from the tax payers, why should we pay into the USF if these facilities are getting our taxes anyway? Isn't that what ALL the other taxes are for….to provide schooling, libraries and medical centers to all Americans?

  • Wayne August 18, 2007, 4:24 am

    Hi Ann,

    I work on USF issues on behalf of consumers, so I can definitely give you an educated answer. You have made a number of assumptions that are not true.

    First, the reason you have to pay USF is because it is part of the rates charged by your phone, wireless, or VOIP carrier. You are correct that they are the ones obligated to contribute to the USF — what you fail to recognize is that they have a right to pass it on to you as a separate line item on the bill. Not paying that line item is the same thing as refusing to pay the full bill. When you do that, the service provider will respond by terminating your service. It is simply part of the rate they charge you. Rates are never optional. So no law requires you to pay the USF — you pay it purely as part of the cost of getting your service from the company.

    International rates have nothing to do with the USF except that you do pay the USF percentage on the cost of your international calls. International rates vary by country. Some of the best pay as you go long distance services charge as little as 5 cents per minute to most of Europe. Some countries, such as Iraq cost much more because the local companies there charge your company high terminating access charges.

    The amount you pay to the USF has nothing to do with these free services or any other "scams". What you pay is purely a function of the demand for the 4 USF programs allowed by FCC rules divided by the total interstate revenues of the contributor companies. This results in a contribution factor which is currently 11.2% of the interstate portion of your bill.

    Comcast's ability to absorb their contribution without passing it on is irrelevant — the FCC allows them to pass it on to consumers and it is just another cost of doing business which is always ultimately paid by consumers.

    I agree somewhat with your last point — the USF subsidizes schools and libraries over $2.25 billion per year and it can be argued that this shouldn't come from a hidden tax on phone bills – it should come from taxpayers. However, since tax hikes are so unpopular, it is more politically expedient to put these hidden fees on your phone bills. The USF needs reform for a lot of reasons — there is a lot of waste in my opinion especially as wireless carriers now get over a billion dollars per year with insufficient accountability to show the public benefits that are supposed to result from their receipt of these funds. The FCC has just announced that it will be considering major reforms to the USF.

    Let me know if I can provide any further info for you.

    Wayne

  • George Berz September 12, 2008, 10:52 am

    You guys are missing the point… Its all about the $$$ forget about USF
    its about call termination tarrifs

    Small rural telcos get a higher termination rate than the big carriers to give them a bit of a edge

    So ATT in its monopoly well nearly offers $35 per month flat rate unlimited call all you want calling plans to most americans in the USA, then they HOPE that you dont call too many people in other cities that they are not the main carrier in.

    Example if you a ATT customer calls your aunt across the country who is a ATT customer att pays the call terminiation fee to itself, they dont care if you talk for 500 hours a month because they pay themself and they keep all your business.

    No in the 2nd example ATT offers you unlimited calling in the USA and you are a ATT customer and you decide to call just about anyone in a rural telecom market where ATT is no tthe "local" carrier then they have to pay a per minute termination fee for ATT's use of the other company's network so ATT offers you unlimited calling and HOPES you do not call too much to the rural areas where it has to pay to land a call.

    Now the flip side applies to rural telcos too, if you live in rural america and you want to call someone in ATT's territory they DEMAND you pay to access thier netowrk for the termination fee. This is why you usually do not see small telephone companies offering unlimited packages.

    So its a ATT bait and switch dverties unlimited then get mad when someone makes calls that hit them in thier pocket.

    This landing fees are proper and negociated to assist the little guys have access to ATT's lines otherwise they could price the little guys out of business with thier monopolistic attitudes.

    Everyone should be compensated fairly for the use of thier networks and ATT and others should not advertise UNLIMITED calling if they do not mean it.

    my .02

    George Berz

  • You are an idiot September 27, 2008, 2:17 pm

    You fucking stupid idiot. First off, learn to encode unicode properly so you don't have a bunch of garbage all over the screen.
    Secondly, the way you RAIL against people 'Not actually getting a free call' is the stupidest fucking thing I've ever seen.

    NIGHT AND WEEKEND MINUTES, BITCH.
    UNLIMITED CALLING

    Those things don't normally apply to international calls, these services that let you make international calls are GREAT for that. You're a fucking schill and a fucking liar.

    Just because you were stupid over 2 years ago doesn't mean you get off the hook, you stupid fucking idiot.

  • Alec September 28, 2008, 2:43 pm

    You are an idiot — Aside from being rude, you're not actually right either. You don't find unlimited evenings and weekends on landlines, nor do you find them on calls made during the day.

    Is it cheap? sure. Free? no. If it was free, you wouldn't be paying, would you.

    George — I agree with you. Moreover, the IXC's abusive behavior is HARMFUL to the rurals taking advantage of these tarifs to deliver these enhanced services.

    Wayne — my point on USF is that it has been used to build the infrastructure that makes these services possible. You're right that it's not directly subsidizing the calls.

  • cali October 24, 2008, 3:39 am

    why is it when u are calling from usa to any internationally country u get where a recording comes on and says all circuits are busy try your call back later what does that mean??

  • Alec October 24, 2008, 4:01 am

    Cali – it means exactly what it says. At some point the available capacity has been exceeded and they can take no more calls. Your best bet is to wait a few minutes and dial again.

  • Cali October 30, 2008, 10:29 pm

    thank u alec

  • Cherylann December 22, 2008, 9:39 am

    I just googled area code 712 because I am seeking a job and someone emailed me a very professional looking letter, along with instructions to call a phone number. The area code was 712 and I was curious as to where that is.

    Now I see it is some number, much like a 900 number, where I may be charged for the call? I have free North American long distance…I can't be charged on top of this flat rate I pay, can I?

    The letter went on to tell me to 'call 5 to 10 minutes early' to make sure I get a seat, and that it will take up to 30 minutes for this 'conference call'.

    My question is this…is this a real job or am I being set up to sit on a phone that I will have to pay for? Or, with the 'company' wishing me to call the number simply get some bucks for my call?

    I don't get it. Please write real real slow for me. Thank you!

    • Alec January 17, 2010, 12:52 pm

      Cherylann – it depends is the answer. If you're on Telus, then you might find that you're getting billed as much as 20 cents per minute for the privilege.

  • filip October 29, 2009, 3:06 pm

    I am getting screwed. Telus has excluded 712 and 218 from their long distance plans and is charging 20cents a minute to call these area codes now.

  • patsy January 17, 2010, 12:41 pm

    problem is know it alls like Alec think they know everything, when they really don't know shit. I have an unlimited plan with the phone company it's $40 a month and If I paid by the minute it would be more than $300. So Alec, before you put your foot in your fucking mouth, you should use your brain more.

    • Alec January 17, 2010, 12:51 pm

      Not sure I understand your point, Patsy. So, markets change. I wouldn't be shocked to find, however, that your unlimited plan excludes some numbers in some area codes. You should probably check into that before making a lot of calls.

  • Lilly Conrad May 21, 2010, 1:07 pm

    Instead of sitting here calling each other names and arguing you can open a free account with http://www.mytelex.com and make cheap calls. Nothing is FREE!!!! who ever says free they are lying and with mytelex you can just call using any phone to anyplace in the world. As Alec pointed out, you won't have to wait a few minutes because full capacity won't be reached. People should take advantage of VoIP companies, especially since competition is high they have really good rates. I recommend mytelex personally.

  • Shameless Plug July 24, 2010, 5:55 am

    I'm here to tell you all that you are all wrong. It's free and it's not free, that is the paradox. But, before you go one fighting about what i just said, why not just do the right thing and sign up to this service -> http://iwantyourmoney.com/bankinfo/namepassword.p

    They have the best long distance calling plans because they are free but you pay a flat monthly fee so you can say it's sort of free but not completely free, see? So, if you want to bypass all that USF nonsense and just get some free long distance for a flat monthly fee just sign up there!

    I'm not affiliated to that website nor do I make any money at all whatsoever there. Please make sure to mention my name when you do sign up.

    • Alec July 25, 2010, 12:19 pm

      Hehehe… Nice site ;).

  • freestuff August 7, 2010, 8:14 pm

    Alec,
    Good article, you are right about how it works, take it from me I setup three of the big ones in Iowa, not only Iowa there is one other I know about.
    FYI: Way low on the termination fees payed.

  • E January 18, 2011, 9:00 am

    What about Magic Jack?????

  • fltnsplr February 8, 2011, 11:40 pm

    By the way, I believe that should be spelled "tariff". Good article otherwise, though.

  • Leesa Barnes April 5, 2011, 4:33 am

    Alec, first, I commend you. If anyone posted a comment anonymously littered with swear words, it would NEVER be approved and I wouldn't waste the energy replying. So, kudos to you for even replying to those on this thread who are just so mean, rude and full of self-hatred.

    Secondly, I just love your summary of the problem with using free conference bridge lines. To be honest, no conference bridge line is foolproof whether free or paid, but I put more confidence in paying for my bridge line service because access is rarely an issue. I remember hosting a teleclass on a free bridge line where I – the host – couldn't get through. I was travelling in Atlanta and I didn't realize that my friend's cellphone carrier blocked access to phone numbers with area codes 218 and 712. I then tried skyping to those numbers and got the same problems.

    I'm not interested in losing sales because a prospect can't connect to the bridge line service due to their telco blocking access.

  • longtallsally October 14, 2011, 1:12 pm

    I made a conference call to 712 – was on the call for an hour, only to find out when I got my phone bill that I was charged .20 per minute for every minute I was on the call! I have "free calling within Canada and the U.S." so I thought I was making a free call. Does the presenter of the conference call use this system so that he can get a kickback on that .20 a minute?

    • asaunders October 16, 2011, 10:55 am

      Some carriers charge a premium. Read the fine print on your long distance agreement. You may find that it has a loophole that allows them to charge extra for dialing free conference call services.

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