Freephone sounds pretty cool - Mercedes-Benz Forum

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Freephone sounds pretty cool

This sounds like a great innovation. I do like the prison reference at the end. "Captive audience", indeed. [:)]

Scottsdale firm lets callers dial for free

Ken Alltucker
The Arizona Republic
Dec. 5, 2005

A Scottsdale company believes it has an answer for the struggling pay-phone business: Let customers dial a call for free.

A start-up company called Freephone has launched what it calls the nation's only "public courtesy phone" that allows users a make a free, three-minute local call. The catch is that callers must chat on a phone connected to a video terminal that displays commercials.

Freephone won a degree of credibility by signing a deal with Verizon Public Communications to install more than 100 of its oblong video telephones at college campuses across the country. advertisement

"We wanted to put these phones where they'd get a decent amount of usage," said Peter Volny, Freephone's chief executive officer. "Students will benefit from free telephone calls and advertisers have incredible targeted marketing potential."

The main driver of the idea is that advertising can be a more lucrative way for telephone companies to make money from pay telephones, which have become irrelevant in many places because of the proliferation of cellphones and other wireless devices.

That's why regional telephone companies such as Verizon are willing to take a chance that they'll get more revenue by collecting checks from advertisers rather than pocket change from callers.

"We're always looking for ways to maximize the pay telephone locations we have in place," said Bob Kennedy, a Verizon account manager in Boston. Verizon is one of the largest pay-phone providers, with more than 320,000 phones in more than 30 states.

While Freephone declined to disclose which campuses will carry the 24-inch by 37-inch video phones, Volny said Freephone will begin to install them at campuses from January through March. There are no plans to install the phones at any Arizona colleges.

Freephone is still shopping the concept to advertisers such as car dealers and computer manufacturers, and Volny did not say which companies have agreed to advertise on the video phones.

Representatives of Verizon and Freephone declined to reveal terms of the deal other than that Verizon will not pay a dime for the video phones, but instead will get a share of the ad revenue. Campuses also will get a small percentage, Volny said.

The installation, operational and maintenance costs will be paid by Freephone, a privately held company that has raised more than $10 million so far.

The tiny company, with just 20 employees in Scottsdale, New York and Toronto, has big plans. The Verizon deal will include video phone installations at 120 to 130 campuses across the nation, and Volny expects to strike deals with up to 800 campuses by the end of 2006.

Freephone is targeting campus locations because trial runs showed that students used the phones more often than people in other public places such as malls and airports. Freephone will expand beyond college campuses if the trial proves successful.

Volny said the phones are in use on just one campus right now, Xavier University in Cincinnati. The small Jesuit school has Freephones in two locations: the student center and a sports arena, Cintas Center. Xavier spokeswoman Kelly Leon did not know how often the phones are dialed.

Some analysts question how popular the phones will be on campuses, particularly because college students are among the most wireless-savvy consumers.

"That would be a countertrend," said Mark Goldstein, of the International Research Center in Phoenix. "Especially among (college-age) kids. They'll be mobile-phone savvy."

But Goldstein said students may find the terminals to be a useful way to avoid logging expensive cellphone bills.

The concept could prove to be a desperate attempt by phone companies looking to eke out more revenue from the struggling pay phone business.

Federal Communications Commission figures show that the number of pay phones dropped from 2.6 million in 1998 to fewer than 1.5 million as consumers gravitate to cellphones, BlackBerrys and other wireless devices.

Notable exceptions are in areas with captive audiences, such as prisons, which are among the most lucrative centers for pay-phone providers.
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