Why are free conference calls free?

(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: lawrence@krubner.com, or follow me on Twitter.

Interesting:

The telecommunications act of 1996 allowed small rural phone companies to charge other larger phone companies a “termination fee” to access their lines. Basically, if you had a small phone company in Iowa or South Dakota, you could charge AT&T or Verizon when folks called into your area code. I have cell coverage via AT&T (unfortunately), so when I call a rural number in Iowa, AT&T has to pay a termination fee (which is actually billed per minute) to that provider in Iowa. The government allowed this to happen because small phone companies had high costs to throw up a line to that rural Iowa farmhouse, but they don’t make much money from it.

It used to be that you’d pay long distance rates depending on where you called, and you’d pay more to call those locations. In the past decade or so, with the onset of cellphones and flat-rate long distance plans, the phone companies just assumed that only a small percentage of people would actually call those numbers. The fees that AT&T and the larger companies pay the small companies are 10-20x more than the normal fees – termination rates range from .3 cents to 20 cents. The rural companies get a great deal – the more calls that they take, the more money they make.

Traffic Pumping

More traffic = More $$$! So, they had a brilliant idea!

Post external references

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    http://feefighters.com/blog/how-are-free-conference-calls-free/
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