Ooma? Oh my…

by alec on July 19, 2007

People have been pinging me all morning about Ooma, the new hardware based peer-to-peer VoIP solution that was announced today.  Caveat: I haven't yet used the product, or talked with the founders, so folks like Walt Mossberg, Om Malik, and Michael Arrington have an advantage over me. 

Ooma is a line of innovative new hardware products which consumers plug into their home broadband connections that gives free telephone service.  The Ooma hub is a $399 box which you plug into your broadband connection and hosts the Ooma services. You may also plug the Ooma into a traditional phone line for 911 services. Additional lines can be added by purchasing the $39 Ooma scout, which you then plug into phone jacks in your house. 

When you make a phone call the Ooma routes the call appropriately — either to another Ooma subscriber, or to a land line.  It sounds a lot like Skype hardware, just more expensive.  It's different in two ways:

  • it distributes the terminations. Rather than pay per minute termination fees (a la Skype-Out), Ooma uses the outgoing landline of another Ooma subscriber to terminate the call.  In theory, that makes long distance free as well.  In the beginning, the Ooma team will supplement this with some terminations of their own, in order to ensure adequate service coverage.  No doubt Ooma will pay for these.  It isn't clear if the customer will.
  • it's a platform for new services.  Ooma founder Andrew Frame is very clear that there will be new services that roll out on this platform in the future.  And right now, multi-line, voice mail, and the other services that Ooma will roll out with are initially a pretty rich offering.

The two potential flaws that I see in Ooma's plans are

  1. the price of the device. A $399 price point, even for unlimited calling for the rest of your life, is not an impulse purchase.  The traditional method of reducing price (phone company subsidies in exchange for a contract) won't work here either.  They're attacking the incumbents. 
  2. the quality of the consumers broadband connection.  At our home we have tried numerous broadband telephony solutions over the years, and it's always been a lot of work to keep the call quality consistent. 

Certainly the idea of Ooma is something that has intrigued me for a very long time.  The origins of my company's name — iotum — date back to the 2003 when our business plan was to build a small piece of VoIP hardware for people's homes that would be a platform for innovative VoIP telephony services, including peer-to-peer terminations. 

Nor is Ooma the first to try this play.  David Beckemeyer's PhoneGnome, for example, is also a platform for new services that can be plugged into your home phone lines, albeit without peer-to-peer terminations.  Nimcat Networks, acquired by Avaya, delivered a peer-to-peer PBX solution built into handsets.  And Jeff Pulver, several years ago, announced a peer-to-peer termination startup interconnecting Asterisk boxes.   

However, Ooma may be off to a better start than previous startups — with $27 million in funding, and what (judging by what others have said) appears to be a well thought out product, maybe they can finally scale his mountain. 

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