PhoneFree.com drops free PC-to-phone service

(Telephony) PhoneFree.com is now charging users two cents a minute for domestic PC-to-phone calls, service the company previously provided for free. However, it will continue to provide free service for all PC-to-PC calls.

In addition to its domestic service, PhoneFree.com also provides fee-based PC-to-phone service to 238 countries.

In shifting to a fee-based strategy for its domestic PC-to-phone service, the company succumbed to financial pressures stemming from a softening of the advertising market—which has been affecting a variety of ad-supported dot-coms of late—and rising costs associated with access termination fees, according to Geoff Hatheway, senior vice president of marketing for PhoneFree.com.

“We did it in response to competitive pressure,” Hatheway explained. “The prices that we were able to get for our advertising were dropping to the point where it wasn’t economical for us to offset the significant volume we were doing in PC to phone. There is pressure on everyone in the telephony space regarding how to absorb those termination charges.”

Hatheway acknowledged that the company has received some backlash from its customers, but is confident that they will realize the company still provides a more than competitive offering.

“The ones who were using the service purely for PC to phone obviously reacted very negatively,” he said. “But we’re still providing a very efficient rate for our user base, and unlike the traditional telcos, there are no other charges along with that low rate. It’s still a pretty clean deal.”

Yes it is, says Tole Hart, senior analyst with Gartner Dataquest, who further suggests that PhoneFree.com’s users are likely to look past the modest service charges they’re now being charged.

“You have a lot of hidden costs, like monthly fees and taxes, when you get your phone service from a carrier. So two cents a minute sounds like a pretty good deal to me,” he said. “I don’t think this will cause people to stop using PhoneFree as long as the service they provide is decent.”