Cut-price calls raise doubts

By PETER GRIFFIN

Is it a revolutionary scheme to slash your phone bill or an elaborate pyramid selling scam?

That's the question telephone users have to ask themselves before handing their credit card details to 1Cellnet (www.1cellnet.com), a company just rearing its head in New Zealand and touting bargain-basement international calling rates.

On the face of it, the deals are too good to be true - a good quality call from your PC to a land line in one of dozens of countries for 9c a minute, any time of day. Or a call from your mobile to another mobile or land line in those same countries from 15c a minute.

In some cases the deals undercut those of CallPlus, Slingshot, ihug and WorldxChange and TelstraClear, the telco players which in turn undercut the toll call rates of Telecom.

But 1Cellnet's company structure and use of multi-level marketing, where customers become resellers of the service and earn bonus credits as new members are recruited, has raised questions about its legitimacy.

For Auckland-based 1Cellnet affiliate John Wadsworth, the proof is in the calling.

"To my mind a scam is a whole lot of words with nothing at the end of it," said Wadsworth, who was able to demonstrate the calling service to the Herald and offered proof of the charging structure.

In the 1Cellnet world, calls can be made a couple of ways. A user can send a text message from their Vodafone mobile to the 1Cellnet gateway in Australia with the body of the text carrying a code representing a number the user has pre-programmed into their web-based 1Cellnet contact list.

The gateway then calls the mobile patching the user through to the other phone which could be anywhere in the world. Users pay a one-off charge for sending the text message (20c standard) with 1Cellnet per-minute charges then taking effect.

As an alternative to avoid the 20c text message charge, users can contact the gateway from their PC, with the call routed back to their mobile.

More tech savvy 1Cellnet users can make the call from their PC at a cheaper rate using dialler software and a headset. The call is cheaper because more of its path is routed over the internet. Calling quality is similar for both methods.

After a set fee for 30 seconds, airtime is charged in six-second intervals.

A calling card option allowing users to enter a code via a regular telephone is apparently coming soon.

New users pay US$70 ($107) with US$50 of talk time to join as a regular "customer".

It costs US$99 including US$50 of credit to join as a "consultant" or US$199 with US$150 of credit to become an "affiliate".

The latter two categories relate to customers willing to join the marketing scheme which underpins the business model.

Wadsworth, an electrical engineer and former managing director at Honeywell, said users were able to use their regular toll call provider where it suited them and cherrypick the best deals from 1Cellnet.

"There's nothing to stop you shopping around for the best land-to-mobile rate, for example, and do everything else [through 1Cellnet]."

And does the service actually work? Well, mostly.

A connection problem ruined an initial attempt to test the technology behind 1Cellnet. But a second attempt had impressive results.

The Herald made a 30-second call from a PC in Auckland to a cellphone in Budapest for US16c. A two-minute 50-second PC call to a mobile in London cost US93c while a two-minute mobile to landline call in Auckland cost US21c. A 27-minute call to Perth by Wadsworth cost US$1.68.

The calls had a slight delay and degraded voice quality, but no worse than a regular long-distance call.

But as affiliates of 1Cellnet spread the company gospel around the world via internet message boards, questions remain as to its legitimacy.

The signs are ominous. The Herald could not reach 1Cellnet for comment. The trail comes to dead ends in the form of forever engaged phones, voice mailboxes and auto-reply email addresses.

1Cellnet founder Mark Cook remains elusive, as does Lai Fai Sung, a company "foundation member", who is quoted talking up the service all over the web.

1Cellnet is registered in Wilmington, Delaware, in the US but was incorporated there only in early February. The www.1cellnet.com domain name is registered to Cook at an address in Queensland.

The main line into its headquarters in Brisbane is constantly engaged or off the hook - no voice messaging or call queuing.

And 1Cellnet's tantalising "affiliate" programme that allows users to recruit other members to generate bonuses that can be converted to cash has attracted the attention of internet scam spotters www.worldwidescam.com.

The watchdog compares 1Cellnet's structure to that of SkyBiz, a 90s pyramid scam that fleeced its members of millions.

"It is not for me to suggest that there is a specific intent to run a pyramid scheme as opposed to a legal MLM [multi-level marketing scheme], but there are some other issues which do not inspire confidence in the diligence of the operation," writes a worldwidescam.com researcher.

There are no advertising, no retail outlets, no helpline and pretty much nowhere to turn when the 1Cellnet system goes down.

But Australian affiliates sing the service's praises.

"The service is very reliable except for the occasional downtime as new gateways are added," said Jing Wei, an affiliate recruiting via the internet.

"I doubt that it is a pyramid selling scheme, but, even if it was, I would still stay with the company as the mobile phone rates are much cheaper then my present carrier, Optus prepaid."

Wei had never contacted 1Cellnet's headquarters but believed the company was legitimate.

Another Australian affiliate, Lee Harley, said the company took advantage of its low overheads to offer good calling deals.

"They don't have retail outlets or spend hundreds of millions on advertising like the big telcos do," Harley told the Herald.

As an affiliate, Wadsworth is allowed to start two "cells" below him. He gains 150 points for every person who joins. So far he has amassed 1200 points, which he can convert to phone credit or even cash if he recruits two new members.

"It's a chain not a pyramid," said Wadsworth, who believed there were around 200 users in New Zealand and thousands in Australia. "It's definitely multi-level marketing but it's limited in how it can grow. The policies and procedures are straight up."

In theory, cut-price services such as 1Cellnet can run, using a mix of routing calls via the internet - voice over internet protocol - and negotiating bulk deals with international carriers on telecoms capacity.

Cecil Alexander, director of WorldxChange a local toll-call operator, said 1Cellnet had some competitive deals but he was suspicious of the company and said he could still undercut 1Cellnet on certain deals.

"New Zealand's experience with call back schemes in the 90s was the operator debited your credit card and you were in 'too bad' mode if anything went wrong," says Alexander.

"You've got to have a local presence or people don't trust it."

To what extent the service uses VoIP, which is criticised for its often flaky call quality, is unclear as the company would not respond to Herald queries.

In conclusion it would seem that in the Wild West that is the web 1Cellnet still has a lot of work to do to gain the credibility it will need to lure customers from more expensive but locally established telecoms.

The hard questions

Is 1Cellnet cheaper than other toll call operators?

Yes, in some cases, especially for international mobile calls and calls to Western countries. But for destinations such as Australia and Britain, many capped plans are available which make longer calls more affordable than using 1Cellnet.

Does 1Cellnet work?

Affiliates claim the service is reliable, but it was down the first time the Herald tried it. Call quality from mobile and PC is good, but we were also alarmed that there's no one to phone if things go wrong.

Is it a pyramid scheme?

1Cellnet has the characteristics of multi-level marketing, which is not illegal. Users do not have to become affiliates and promote the service, but people who are affiliates claim that recruiting other users can produce large sums in bonus payments.

* Email Peter Griffin