The End of Free Conference Calls

New FCC regulations will make for new winners and losers

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Steven Cherry: Hi, this is Steven Cherry for IEEE Spectrum’s “Techwise Conversations.”

Have you ever wondered how those free phone-conferencing systems work? I don’t mean how phone conferencing works, although that’s probably pretty interesting too, but the free part—a dialed telephone call is pretty cheap nowadays, but these aren’t just cheap, they’re free. And on top of that, there’s a service being provided. How do companies like FreeConference make any money?

The answer is a weird mix of U.S. Federal Communications Commission regulations, federal phone tariffs, and the history of toll rates. For decades, residential service was subsidized by high long-distance rates, which were largely borne by businesses. A similar subsidy continued after the breakup of Ma Bell, when about half the cost of a long-distance call went to the local carriers that completed the circuit.

In the 1990s, when Internet access from homes was mostly by dial-up, those lucrative “termination fees,” as they’re called, led to a proliferation of Internet service providers. Yet another somewhat similar fee, created by a provision of the 1996 Telecommunications Act designed to support rural telephone carriers, has given us the hundreds of free conference call services we see nowadays. But in a final twist, a recent FCC decision is closing the door to many of those special rural termination fees, and with them, the unique business model that underlies services like FreeConference. That will benefit a new generation of conference call services, such as the start-up Speek—that’s s-p-e-e-k—dot-com.

My guest today, to help us sort out the business model and tell us about how the new conference call services work, is a cofounder of Speek and a veteran of the software world, Danny Boice. Danny, welcome to the podcast.

Danny Boice: Thanks for having me. It’s great to be here.

Steven Cherry: Danny, I simplified things a little, so lets try to understand the current business model that’s going away. Right now, the government collects a tax on our phone bills that goes to something called the Universal Service Fund, and some of that money goes to rural telephone companies when they terminate calls from outside their area—that is, when they’re the end point of a phone call. So how did that lead to the free conference call services?

Danny Boice: So essentially—and I’m sure everyone’s been on a traditional business conference call—the way it typically works is you dial a 10-digit phone number, and then you dial a PIN and then maybe a conference ID on top of that. So essentially, businesses have cropped up over the years like FreeConference that make money by driving phone calls to relatively rural or local exchange carriers. So you’ll notice that when you use some of these services, you’re often dialing an area code that looks kind of strange because it’s in a small rural town in Nevada or Georgia or Ohio, and that’s how it works. So essentially, these local exchange carriers are getting money back through the Universal Service Fund; they’re splitting it in some percentage with the conference call companies. They call this “traffic pumping.”

Steven Cherry: Yeah. The FCC uses a nicer phrase; I guess they call it “access stimulation.” So what’s new is that the FCC is making changes in how it uses money from that Universal Service Fund. What is the FCC doing?

Danny Boice: So essentially, legislation has passed recently that’s now requiring that these local exchange carriers and telecoms in rural towns use this money for broadband deployments and not use it for what’s known as traffic pumping, for splitting with people like teleconference providers who are driving traffic to these telecoms.

Steven Cherry: So, I guess they have some new rules, such as if one of these local carriers is receiving more than three times as many calls as are being placed from it then they say, “That’s a dumping thing or a pumping thing, and no more subsidies.” And I guess that opens the door to this crop of new services, such as yours. So let’s get an idea of how Speek works. I signed up for it last week, and I used the account name the word metaphor because that’s my personal address at Gmail. So my Speek link, as you call it, is www.speek.com/metaphor. So how do I use that URL when I want to make a conference call?

Danny Boice: Sure. So you simply give out speek.com/metaphor to anybody you want to do a conference call with. So for example, a lot of people will send out a calendar invite through Outlook or Google Calendar, and in the “where” field, the old way of doing it was you’d put your conference bridge phone number, and then you’d put your conference bridge ID and the PIN, kind of as a string of numbers in the “where” field. People would just dial that at the time and day of the call. Instead, with us you just put speek.com/metaphor in the “where” field, or you tell it verbally to someone—it’s simple enough. You go there—you can go there from your computer’s browser; you can go there from a phone browser; and from the phone call, you literally hit a button, and it makes it into the conference bridge for you. From your computer, we ask you for your phone number, and we’ll call you to put you on. But either way, it’s literally the click of a button and you’re on the bridge, instead of having to dial a long phone number, an ID, and possibly other digits beyond that.

Steven Cherry: It definitely seemed easier, and we tried the computer-based one here in the office with a couple of our other editors. So I’m wondering: How does Speek make money? When you do it from the computer, all the calls end up being outbound, that is, from Speek to the callers. By the way, the callers aren’t even callers anymore. But anyway, don’t those calls still cost Speek money?

Danny Boice: They do. So one of the interesting things that’s starting to emerge in this industry right now is—Speek is one example—there’s a couple what I’d call fairly heavy hitters from the Internet entrepreneur world, they don’t necessarily come from the telecom world, but they’re all trying to tackle what’s perceived as this teleconferencing problem. I think beyond the changes with the Universal Service Fund, even before that was announced, I think it was starting to become commonly perceived that the conference call experience was just ready for improvement; it was just a bad experience. I mean, it’s dialing a phone number; it’s dialing a PIN; it’s really hard to do when you’re on the road or traveling or not sitting necessarily at your desk with a phone; there’s bad hold music; you can never tell who’s on the call; there’s just all these things that are inherently wrong with it. And I think some really smart Internet entrepreneurs are out there with a couple of new emerging companies taking different approaches in solving this problem. And they’re not necessarily using telecom best practice to do this but kind of viral software product best practices to do this. So, for example, we use a freemium model. The freemium model means that it’s free for people to use Speek and get their Speek link, and they can even use it up to a certain amount, a certain threshold of minutes, but at some point they’ve got to go pro and start paying in order to access some more premium features or get more minutes for their conference calls.

Steven Cherry: What’s the most popular premium feature?

Danny Boice: So, we’re actually working on a couple: One is the ability to share files. I think that’s becoming superpopular.

Steven Cherry: So that would be a little bit like when you share a file, say, in IM—instant message—chat with somebody. Instead, this is the sort of conference version of that?

Danny Boice: Yeah, exactly. I think one of the interesting things about what we’re doing and what other of the teleconferencing start-ups are doing is we’re marrying telephony with a very clean, easy-to-use Web and mobile user interface, and I think that makes things really interesting. You can now do things like just drag a file on your screen and have it appear—things that have been fairly common in more inherently Internet applications like instant messaging. But for some reason, the joining of telephony with those Internet applications really hasn’t been done all that well yet. I mean, you’ve got companies like WebEx and companies that are doing these big-enterprise, heavy installed applications, but they’re still making you dial a conference group, and it’s not truly what I would say married together, whereas I think that’s where it’s starting to head.

Steven Cherry: So, you’ve mentioned that you’re not the only game in town. One of the other new services is ÜberConference, which is founded by Craig Walker, who founded the phone service GrandCentral, which is now Google’s Google Voice service. ÜberConference uses a telephone number, not a Web address. Is that the only difference between you guys, or what are the others?

Danny Boice: Yeah, the main difference is they’re still a closed beta, but I’ve been able to ascertain from their video they’re still phone number–based which I think makes sense given the fact that Google Voice was phone number–based, another way of kind of allocating and giving people their own phone number on the fly. I think Craig Walker seems to be very knowledgeable and an expert in that, and I was a Google Voice user, so I was familiar with how that worked. So I suspect that same kind of model of getting phone numbers and assigning them to conference bridges is still part of their plan, and it seems to be that way. So in my opinion—and I guess we’re going to see how this all plays out—I still don’t think that’s the silver bullet, I don’t think that’s the best user experience.

Steven Cherry: And I guess really the Web-based experience is more easily morphed into a mobile app.

Danny Boice: I think so. I agree. And I saw a release that ÜberConference is working on their mobile apps—we’ve already got mobile browser application better in production and live today; we’re getting ready to start releasing native Android and iPhone applications. I also think that makes a lot of sense; inherently, the old-style conference bridges will not play well on a mobile phone. You’ve got to dial a phone number, then a bunch of digits after that, whereas with a smartphone application or something that’s inherently Internet-enabled and -based like ours, it should make that experience just a lot simpler. I know for a fact I personally almost caused multiple car accidents years ago trying to dial into conference calls the old way, from the road, from my phone, which is just a really bad idea in the first place on my part. But [in] this day and age, you should be able to just hit a button and join it, whether you’re in the airport waiting for your plane, using your iPhone, or driving, if there’s a safe way to do that. I just think there’s a better way of using, especially with mobile apps where we are today.

Steven Cherry: Now, what do you think is going to happen to the current services like FreeConference? Are they going to have to change their business model to be more like yours?

Danny Boice: I’m expecting yes, and it will be really interesting to see what happens. I just don’t see how they can continue operating the way they are today. I do think it will probably be kind of a slower change, however. I’ve already started to notice—I mean, they were doing very anti-Internet things like advertising on TV, on billboards, on radio, as opposed to trying to build in virality to their products. They’re starting to do less of that traditional advertising, I’ve noticed; they’re starting to really push hard now for people to pay for premium services. But I kind of think it’s too little, too late. But I am really interested to see how this all plays out for them.

Steven Cherry: Now, one other big change for them, I guess, is that right now free conference calls are almost unique to the U.S. because they rely on that whole traffic-pumping thing, and services like yours don’t. And so they can be used worldwide in a way that the current crop can’t.

Danny Boice: I believe that’s true. I think there’s some really interesting markets, especially as we start to roll out voice over IP, or VOIP, clients kind of built into the Web browser or built into the mobile experience, so that we don’t even rely on dialing a phone number or having a phone number dialed into us. I think that especially opens up international markets. If you look at Skype, which was really one of the first ones to let people talk without using a phone number, you still have to have a Skype account to talk to people, and I think that’s a problem. And I’m not sure how Microsoft is looking at potentially changing it, but it’s still—in this day and age, it’s still kind of difficult to do a call on Skype when somebody’s not a power user on Skype: They’ve got to go set up their Skype account, connect with you, download and install something. I think all of those things are things that make it not ideal and things that we don’t do and won’t do.

Steven Cherry: So I guess we should make that clear to people: The e-mail that they get when they’re invited to that conference, that button that you said all you have to do is click on it, that becomes a sort of token that lets you join this sort of conference call without being a member of anything.

Danny Boice: Yeah. So you can literally join a conference call without being registered for Speek, without installing anything; it’s completely browser-based. And that was really our goal from the start, was, how do we make this just fast and easy, no installation—what’s the fastest possible way to get multiple people on a conference call together? That was the problem we set out to fix.

Steven Cherry: Well, very good. Danny, the Internet is always a fast-changing world, that’s always been the case; and changes in tax models can change the viability of a business in an instant, too. So, good luck with Speek, and thanks for joining us today.

Danny Boice: Thanks so much. It’s been a pleasure.

Steven Cherry: We’ve been speaking with Danny Boice, cofounder of Speek.com, about some big changes to the free conference-calling services we’ve become accustomed to. For IEEE Spectrum’s “Techwise Conversations,” I’m Steven Cherry.

Announcer: “Techwise Conversations” is sponsored by National Instruments.

This interview was recorded 3 July 2012.
Audio engineer: Francesco Ferorelli.
Read more Techwise Conversations or follow us on Twitter.

NOTE: Transcripts are created for the convenience of our readers and listeners and may not perfectly match their associated interviews and narratives. The authoritative record of IEEE Spectrum’s audio programming is the audio version.

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