Speakeasy The Latest VoIP Provider To Block Certain Calls

from the this-is-going-to-get-messy dept

A few weeks back, we noted that VoIP provider MagicJack had begun blocking calls to certain numbers it didn't like -- specifically free conference numbers that were using a regulatory arbitrage loophole that required the networks of incoming calls to certain rural telcos to pay huge connection fees, creating incentives for those telcos to develop cheap or free services that brought in lots of calls. Then, a few weeks ago, it came out that Google was blocking similar calls via its Google Voice offering. I still believe that offering a telephone service that connects to POTS requires that you complete all non-fee-based (i.e., 900 number) calls, according to an FCC order in 2007 on this particular subject. Google and MagicJack disagree.

However, with more and more people switching to VoIP services, combined with more and more VoIP providers going down this route, it's becoming a big issue, quickly. Harold Feld notes that Speakeasy is the latest VoIP provider to go down this route, blocking similar calls. To Speakeasy's credit, however, unlike both MagicJack and Google, it at least clearly alerted customers to this change, and also publicly lists out the blocked numbers. It's amazing that Google and MagicJack did not do either of these things.

Still, as Feld notes, this is becoming a big deal. It's likely that more and more VoIP providers are going to quickly go down this same path, and the phone system will start to splinter. This is bad. For a phone system to work, you shouldn't have a situation where the service you use can arbitrarily refuse to complete certain phone calls. The real answer is to get rid of the arbitrage loopholes. The rural telcos are clearly abusing the rules. Yes, this could seriously curtail various free conference calling solutions, but that's better than the alternative.

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Can A Phone Service Provider Block Calls To Numbers It Doesn't Like?

from the that-seems-like-an-fcc-violation dept

About four years ago, I signed up for AT&T CallVantage VoIP service and ditched my traditional POTS landline phone service. This was back when AT&T was actually betting on CallVantage and using it as a (many reviews claimed) better alternative to Vonage. Then, of course, SBC bought AT&T and wanted nothing whatsoever to do with CallVantage. It neglected the service, and quality got worse and worse until it announced a few months ago that it was shutting the service down completely. Fair enough. I contemplated going strictly with a combination of Skype and my cell phone for phone service, but I've found both to be somewhat unreliable at times -- and for unexplained reasons my new laptop has terrible microphone inputs -- so everyone I've called via Skype insists they can't hear me at all (and I've tried both USB and the mic inputs, and multiple microphones -- no luck).

So, after hearing about some friends who were using it and doing some online research, I decided to try "MagicJack." You may have seen their late night commercials that are hard to avoid (even if you use a DVR). It's basically a much cheaper VoIP option that's not that unlike Vonage/CallVantage, except that instead of getting a VoIP router to hook up to your broadband modem directly, it's just a USB dongle that connects directly to your computer. I read some reviews online, and they all basically said the same thing: when it works, it works great, but don't expect any customer support if things go wrong. And, oh yes, hold your nose at the infomercial sales process and the constant upsell attempts. Still, I figured it was worth a shot and ordered a free trial (you have 30 days). Of course, to get through the process, you have to decline something like 30 upsell attempts (my favorite: $4 to have them ship it faster -- I declined and the thing still showed up in two days).

I've been using it for about a week, and it's not too bad. There are some annoyances, but the call quality works fine. I think there's a slight delay, which gives calls that old long distance pause between people speaking that used to be common, but I can live with that. The actual call quality seems better than my old CallVantage.

But today, MagicJack appears to be breaking the law. Every Friday we have a staff call at Floor64. Since not everyone here works locally or in the office every day, we have a conference call using every startup's favorite: FreeConference.com. So I called in this morning, and MagicJack refused. Instead, it gave me a recording telling me that I needed to use MagicJack's own free conferencing solution. That might be fine for setting up conference calls, but this was a call that was already going on, and which people were waiting for me to dial into. And there was no way to get around it. MagicJack simply refuses to let you call FreeConference.com.

Now, it's not hard to figure out why. This issue cropped up two years ago, when a bunch of small telcos started blocking calls to FreeConference.com, because FreeConference is actually a big regulatory arbitrage scam. MagicJack itself is a CLEC that most likely benefits from some kind of regulatory arbitrage, so it's just another small telco blocking FreeConference to push its own services. But, just because telcos don't like competition, it doesn't mean it's legal for them to block others' services. After widespread complaints in 2007, most telcos backed down and stopped blocking calls to FreeConference, and the FCC started looking into the matter -- though I don't believe it ever came out with a ruling on the matter. I'm pretty sure there are still a smattering of lawsuits out there about the whole thing.

But, considering how many conference call invites I get these days that use FreeConference, it's quite a pain to find out that my own phone line can't dial into it. Other MagicJack users have been discovering the same thing, and MagicJack's customer service response has been hopelessly inept. They just keep repeating that you need to use their own free conferencing service, and if you finally find someone who understands that you're trying to call into someone else's conference they just say sorry, you can't do that.

In the past, of course, the FCC has indicated that it's a violation of federal rules to disallow phone calls to get through just because you don't like the numbers being dialed, and it seems that when you promise people free unlimited local and long distance phone calls throughout the US, then you need to live up to that promise. I'm not sure if I'm going to keep the MagicJack after this trial period, but this is a huge strike against it. Who knows what other numbers they might not let me call next week?

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Yak4Ever May Not Be Around 4Ever

from the regulatory-arbitrage dept

TechCrunch is reporting on the demise of Yak4Ever, a startup company that exploited a regulatory loophole to allow them to offer free international calls. The bill was being paid by large telephone companies like AT&T and Verizon, which were forced to pay exorbitant rates to connect the calls under the FCC's byzantine long distance regulations. Apparently, the Baby Bells got fed up and simply stopped paying the bills, and the FCC hasn't ruled on the issue quickly enough to keep Yak4Ever in business. We wrote about a similar company, called FreeConference.com, back in January. That one offered free conference calling services, again subsidized by exorbitant interconnection charges. In that case, we criticized AT&T for blocking the calls instead of appealing the fees to the FCC. But regardless of the legal details, it's awfully hard to have much sympathy for either Yak4Ever or FreeConference. It seems pretty clear that they're not creating new wealth; they're just taking advantage of poorly-thought-out FCC regulations to make a buck at the expense of other phone companies. This is one of the reasons regulators should leave interconnection rates to market forces whenever possible. If long-distance interconnection rates were determined in competitive markets the way transit agreements are negotiated between Internet carriers, this sort of regulatory arbitrage wouldn't be a problem. It's only when the FCC is setting rates by fiat that these kinds of opportunities crop up.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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Exploiting Telco Regulations For Free Calls And For Profit (Lots And Lots Of Profit)

from the so-easy,-it's-almost-criminal... dept

Earlier this year, we wrote about how suddenly a bunch of "free" calling services were popping up that all seemed to use phone numbers in Iowa. This included a service that would let you call an Iowa number and from there call anywhere in the world for free as well as a variety of "free conference calling" services. All of these systems were actually exploiting some legacy telco regulations, that were officially designed to help rural telcos get extra money to build out more rural service. Basically, the government allowed rural telcos to charge high termination fees to other telcos when calls from their lines terminated on one of the rural telco's lines. So, if you had AT&T and called your cousin in Iowa who had some small rural telco, AT&T would actually have to pay that telco some charge per minute, with the idea being that the telcos would use that money to invest in infrastructure. Of course, the infrastructure they invested in wasn't exactly building more lines to wire up others in the town, but in VoIP systems so they could reroute calls in to anywhere else, and then team up with various online sites to get as many calls as possible routed through those systems. Then they could just sit back and collect the millions of dollars rolling in from telcos. Broadband Reports points us to an article at the Wall Street Journal going into more details about how this happened -- and how the FCC is now scrambling a bit to see if there's a way they can stop it. In the meantime, the WSJ piece notes that while the telcos have been told by the FCC that they have to keep connecting these calls, they've simply stopped paying any of the termination fees as they await the results of the various lawsuits. Of course, all that's done for now is made the various free conference call services switch to other rural telcos in other states. Eventually, though, they'll run out of other states to go to (or the regulators will finally realize how their regulations are being exploited) and the little regulatory exploit will go away.

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