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Those farmers are smart

Chris KoehnckeChris Koehncke

How much does a long distance telephone call?

If I asked you how much it costs for a 1 minute long distance telephone call, you might answer “I don’t care” or “not very much”. Many of us have unlimited long distance plans for a fixed rate on our  home phones. For our mobile phones, a minute of usage can be for either local or long distance, doesn’t really matter. If you have to pay per minute for long distance, it’s not hard to find rates of $0.02 or $0.03!

Whoever is providing you with service has made it easy for you to understand. You, as the consumer, can call from New York to Los Angeles or New York to middle of nowhere America for the same rate. Unfortunately, for your service provider, it’s not that simple. Telephony is an old industry and constructed as a patchwork, weaved together over time, full of local politics and government regulation. When you MAKE a phone call, your telephone company must send your call to the other end and PAY that phone company to accept the call on a per minute rate. This is known as the termination rate.

Today there are over 7,500 different telephone company codes in the US alone that a long distance provider can send your call to. These telephone companies have generated 514 different termination rates that they will charge your long distance provider to accept a phone call. Rates vary dramatically
from a low of $0.003 a minute all the way up to $.76 a minute (I’m talking about sending a call someplace in the US !!). 3,400 telephone company termination rates are more than $0.01 a minute and 300 of them more than $0.05 per minute.

So how does YOUR phone company charge you $0.02 a minute for a call that may cost them $0.05 a minute? Well – the reality is your phone company actually loses money when you make those kinds of phone calls. The hope is that you don’t make many of these expensive telephone calls.If you’re calling Washington, DC YOUR phone company’s cost is likely in the $0.003 a minute and in fact most of major population lives in an area where the termination rate is quite low. But if you’re calling middle of nowhere Iowa, population 500, this is where YOUR telephone company gets screwed. The good news is that with a population of only 500, just how many phone calls can they possibly receive?

And this my friend is the beginning story of how the good ole boy rural telephone company has begun to ‘game’ the system to work in their favor. More in future postings.