FuturePhone and the 712 Area Code

Alec Saunders explains how FuturePhone makes money.

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. …

Most Iowa telephone companies (and there are a lot!) participate in the NECA Access Fee Pool [about 3 cents/minute]. [To make an international call using FuturePhone, 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. …

So how [does FuturePhone] 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.