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FuturePhone, a Thing of the Past?

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After getting some New York Times recognition for its free international calling plan, it looks like FuturePhone is no more. A visit to the company’s website pulls up a red banner announcing This Service is No Longer Available, and a call to the company’s international access number, 712-858-8883, gets you a message saying “we’re sorry, this service has been disconnected.”

Our pal Alec Saunders had previously explained how FuturePhone’s VoIP-based telecom arbitrage game might have worked (Tom Evslin also explained it well) — simply, FuturePhone was probably taking advantage of a regulatory loophole that allowed it to earn more money for terminating long-distance calls to Iowa (where the 712 area code is located) than it was paying to connect international calls.

One thing you can count on — when such loopholes exist, it’s a good bet that the team with more lawyers and lobbyists is going to win in the end. And as we keep digging to find out why the company’s service was yanked, we wonder if this isn’t another warning to the VoIP disruptors that they need to do more than find fancy ways to cut costs. Because sometimes those loopholes can close with a noose.

14 Responses to “FuturePhone, a Thing of the Past?”

  1. Charlie: You’re missing the point. This is not an issue of FuturePhone being regulated out of business.

    In order to make sure that tiny rural communities have phone service, the companies in those areas are allowed to charge other phone companies high rates for inbound calls. For example, when you call New York City, Verizon might charge your phone company $0.0025/minute (one quarter cent) to complete the call. But when you call Podunk, Iowa, PodunkTel is charging your phone company $0.12/minute – almost 50 times as much.

    Meanwhile, your phone company is still charging you the normal $0.02/minute rate that it sets for all calls to USA numbers, because it’s too complicated to have a separate rate for some obscure towns in Iowa (they might not even be allowed to charge a higher rate for calling those towns, I’m not sure about the regs). They just lose money when you happen to call those towns, and hope that you won’t do it too much.

    This margin is what paid for the international call service.

    Ben: No, UK cell phones are too expensive to call, nobody can provide “free” service to them except for the operators themselves.

  2. Why make the ld call for free international calls when all those countries with us cost the same as the ld call they made. (unless they are using a voip all you can talk plan)

    These companies should advertise a free calling card platform for those 50 countries. ATT must pay the access fee’s, the calls were made to the IA ILEC.

    The issue is with the NECA rates for access fee’s.

  3. I’m severely bummed about the demise of I’ve tried a bunch of these services to make calls to Asia and FP was the best of the bunch. I keep an eye on this list to see what else is new, dying, and changing with these Iowatastic services.

  4. Rural LEC termination has been around for a long time, and has been quietly tolerated by the big carriers as a way for small companies like mine to provide enhanced services without charging customers via credit card etc.

    FuturePhone and its brethren got shut down because they went after carrier’s primary business, phone calls. It doesn’t surprise me that these guys got shut down pretty promptly.

    One of the rural LECs we use does not allow international calling services like this, so he shuts them down proactively, to avoid attracting litigation from the carriers.

    Rural LEC termination is an attractive way to offer a low cost service to users, but it’s risky, and therefore wise to have other ways to generate revenue in case you do get cut off, have to relocate, etc.

  5. John Thacker

    I am surprised that a regulatory loophole like this is allowed to exist.

    Basically, it’s part of the various efforts (such as the Universal Service Fund) to subsidize rural phone network costs. Subsidies often create arbitrage opportunities. (Or, if you like, “waste, fraud, and abuse.”)

    It’s not extremely different from, say, a high school getting subsidized to buy computers at less than cost, and then selling those computers. The difference is that the ephemeral nature of the phone calls meant that the plan could scale up much greater– at least until the subsidizing phone companies and regulators noticed.

  6. Alaskan Carnivore

    “pstn termination isn’t free regardless of the loopholes…”

    hmm… What about Google Maps Click2Call?? Who pays that termination bill? Anyone??

    Does GOOG have an official telco partner? Maps ClicktoCall is powered by MCI aka Verizon according to past PR. Perhaps today it may be mixed with a sprinkle of Nortel via the platform..?