How Does a Free Conference Call Make Money?

Summary:  Free Conference Calls may be free to you, but they’re costing somebody. So, who is paying for your free conference calls?


The FCC’s  Telecommunications Act of 1996  requires the big telephone companies — such as AT&T, Verizon, Qwest — to  to pay the smaller, rural, phone carriers termination fees to complete calls through their often rural networks.  These rural termination fees are typically 10 to 20 times more than normal termination fees because, presumably, rural phone companies have higher costs running wire to more rural locations such as farmhouses.  Rural termination fees paid by the large phone companies range from 0.3 cents to 20 cents per minute.

How Does a Free Conference Call Make Money?
How Does a Free Conference Call Make Money?

Conference calling is relatively cheap to set up.  Small rural phone companies started cutting deals with free conference call companies to be their “termination points.”  So, even if you’re connecting a “free” conference call with dozens of callers from all over the nation, the calls will “terminate” in a rural location so that the small rural phone company can bill a large telephone company high termination fees and share the profit with the free conference call company.

Here’s an example:  Someone places a free conference call connecting people in New York, Chicago and Los Angeles, but the calls all terminate at a small rural phone company in West Undershirt, Iowa.  The small West Undershirt phone company bills a large phone company, such as AT&T, 8-cents per minute as allowed by the FCC’s Telecommunications Act of 1996.  Of the 8-cents paid by AT&T, the West Undershirt Phone Company keeps 4-cents per minute, but kicks back 4-cents per minute to the free conference call company. West Undershirt Phone Company in Iowa and the free conference call company make a lot of money because of the high volume of minutes.

The terms for this scheme are “phantom traffic,” “”traffic pumping,” and “access stimulation”

The winners are small rural phone companies and conference call companies; In 2010 reported averaging 20 million calls per month with $23-million in annual revenues.  The losers are AT&T, Verizon, Qwest and large telephone companies.  AT&T estimated that in 2007 that they were paying an additional $250 million to connect “access stimulation” calls terminating at small rural phone companies.

By the way, Google Voice, Skype, Vonage, and other VOIP phone companies aren’t bound by the same regulations as traditional large phone companies.  To avoid paying exorbitant termination fees to rural phone companies, Google voice, Voyage, Skype, and most other VOIP companies disallow calls to free conference call services and sex chat lines.

Clearly the large phone companies aren’t happy about “traffic pumping” and “access stimulation.”   As of February 2011, the FCC was investigating changing the compensation for intercarrier compensation, which could eventually put an end to free conference calls.

References: founder helped by the perfect name

Is AT&T targeting Google Voice to stop “traffic pumping”?

Google: Sex, Conference Calls and FCC rules

FCC Considering change to compensation for intercarrier compensation


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