Oct. 13, 2006 — -- IMPORTANT NOTE: As of February, 2007, Futurephone, the service we described in this piece, was discontinued. It was named in a lawsuit by AT&T, which argued that it had to pay so-called "termination fees" on calls that went to rural Iowa, even though the calls were ultimately routed to other countries.
The first question most people seem to ask when they hear about Futurephone.com is: What's the catch?
It turns out there really isn't much of one. Eventually -- though not yet -- you'll have to listen to a short commercial before your call goes through.
Futurephone, a California startup company, has, for the last three weeks, been offering you the chance to call a number in Iowa, then enter a number you're trying to reach in any of 50 other countries, and -- bingo -- you're on the phone to Shanghai. Or Warsaw. Or Christmas Island.
We tried it, and it works. You call 712-858-8883, and a recorded voice answers, inviting you to hear brief instructions in English, Spanish or Chinese. Then you dial 011, the country code (51 for Peru, for instance, or 359 for Bulgaria) and the local number. If someone is there and awake to answer at the other end, you can talk to the other side of the planet -- for whatever it cost you to make a call to Iowa.
"The cost of a call has gone down so dramatically," says Tom Doolin, a principal in Futurephone. The firm, which has about 30 employees to start, uses Voice over Internet Protocol (VoIP) to route the calls for next to nothing. The consumer does not need new software or telephone hookups. Futurephone has made deals with telecom operations in the countries where calls can "terminate."
Technically, the call the consumer makes is not entirely free; one does have to have domestic long-distance service. But millions of Americans pay monthly fees that allow them unlimited long-distance calls.
Where, by the way, are you calling when you reach 712-858-8883? It turns out to be an exchange in Superior, Iowa, a town of 142 people on the Iowa-Minnesota border. But Doolin says that's simply a number his firm was able to use to route calls inexpensively.
The next obvious question is how the company hopes to make money without charging anything, and the answer is simple. Like many other Internet-based firms, they plan to work on an advertising model.
"It's free, and people like free. They'll listen to a 10-second commercial if they can make a free call," Doolin says. "In the middle of next year you might see something like that."
"I certainly think most people are willing to make those types of tradeoffs," says Michael Gartenberg, a technology analyst at New York-based Jupiter Research.
Gartenberg has often commented on the threat conventional phone companies, among many others, face if they do not respond to new technology.
"We're really entering into a whole new era of very disruptive business models," he says.
Gartenberg says he received an e-mail about Futurephone, gave it a try, and posted a brief mention on his blog.
Word is spreading -- quickly enough that Doolin's computer programmers are worried their nascent system will crash if there's too much traffic. In the meantime, though, they hope to build a "captive audience" of people who like the service, and won't mind when ads start to pop up.
Any surprises so far?
Yes, says Doolin, though it's still too early to plot meaningful trends. He expected people to call China and Mexico; instead, there have been a surprising number of calls to Canada, which is not that expensive to begin with.
The one threat to Futurephone's business plan is that the cost of long distance communication is dropping so quickly. Twenty years ago the science-fiction writer Arthur C. Clarke ("2001: A Space Odyssey" and other books) predicted that by now, long distance would be free.
Michael Gartenberg laughed. "We're certainly getting very, very close to that."