The dynamics of "Free"

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The business model du jour in VoIP seems to have become “free”.  Skype pioneered it by giving away terminations in North America, but rumour has it that this will go away soon.  But even when (or if) Skype’s program dies, there will still be plenty of other ways to make free calls:

• Gizmo Project has been giving away free terminations between members for some time. Starting in January, they’ll also have launched GizmoWeb, which is a web based service that doesn’t require the downloadable Gizmo Project PC client.
• Jajah was the first with a web based solution.  Just visit their site, put in two phone numbers, and make the call.  Super easy.  Calls between members are free, which gives you an incentive to get your buddies to join up.
• PhoneGnome also has a free calling service between any two members.  In fact, you don’t even need to buy the PhoneGnome box anymore — just join the service.  Once a member, of course, you can start to take advantage of all the other services they offer.

Are there any others that I’ve missed?

Most of the free services (with the exception of Jajah) offer you the ability to buy a phone number.  With this number, not only can you get free outbound calls on the service, you can now also be reachable.  A couple of companies have turned this model on it’s head, offering free phone numbers, but not terminations. 

• AOL’s AIM Phoneline offers a free phone number that terminates on the AIM client on your PC.  Add iotum to it (Q1 next year) and you will be able to redirect those calls to a traditional landline if that’s your preference.
• Grand Central offers a free phone number terminating on their unified communications system.  In actual fact, Grand Central is totally free.  They will offer paid services in the future, but for now it’s … free.

Free terminations puts a business in competition with the long distance carrier.  Indeed, historically most of Skype’s traffic has been international.  Free originations (the free phone number model) puts you in competition with the local carrier.  It says “don’t pay for a line.  Just get it from us for free”.  A number of small businesses I know of have chosen to dump the traditional land line, and replace it with a free service from AIM Phoneline, or Grand Central.

All of this would be moot if there was no requirement to connect to public telephone network.  There’s a certain degree of irony in the fact that all the popular business models are based on metering access to that old beast, isn’t there?

Alec Saunders is the Vice President of Developer Relations for BlackBerry make Research in Motion. This is his personal blog, with his personal viewpoints. Prior to this Alec was the CEO and co-founder of Calliflower — the easiest way to hold a meeting, online, on a conference call, or on the go. A double-decade veteran of product management and marketing, he spent nine years at Microsoft where he helped launch Windows 95, the first two versions of Internet Explorer, the Universal Plug and Play initiative, the push into home markets, opt-in email marketing and what might well go down in history as the very first direct email list ever.