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Ooma? Oh my…

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. 

{ 8 comments… add one }

  • Jeff Pulver July 19, 2007, 6:29 am

    Sort of reminds me of both Bellster and the original concept for FWD, married with what we were selling back in 2003 – the "Internet Phone Patch."

  • Alec July 19, 2007, 6:39 am

    Yah. I think you've built all the pieces at various times, Jeff.

  • Andrew July 19, 2007, 6:49 am

    I just copied my Techcrunch comment here – with the following, this is essentially a 400$ Phonegnome with a shinier cabinet.

    $400.00 is a massive price point – and one that takes them out of every retail chain in the US (if not worldwide). So – unless they have plans to open 100’s of Ooma stores (and more worldwide) their business model is dead before it even starts. They have no way to get this product into mass distribution, without spending like Vonage.

    The concept of Scouts are redundant when I have a 4 handset $150.00 5.8ghz Phone, that I purchased at Costco and can put a phone in every room of my house, and ring tones for where? the base station? I want my phone to ring, so I can FIND it.

    The hardware is a very nice ID, no argument there, but they have no chance at getting the required number of users to even coming close to ever turning a profit.

    They have a great management team, but either they are drinking Oomaid, or I am missing something.

  • David Beckemeyer July 19, 2007, 9:59 am

    Minor correction. PhoneGnome does in fact support "peer-to-peer terminations" through our services/features called MobileGnome, SoftGnome, our Mobile Plug-in, and others. MobileGnome, for instance, would permit users you specifcy from placing calls via your home-landline. We do not, at this time, offer a "routecalls automatically through other peoples phone lines" product, because we are not confortable with the legal aspects of doing so (and we don't think the market is that significant) but the platform could do that, and any third party could build such an application on our platform, using our APIs and third-party integration capabilities, and be delivering service in a matter of weeks, at a lot less than $27 million :)

  • Gene July 19, 2007, 10:57 am

    $400 sounds quite high. There's another P2P system called FreePP that should be a lot less. Check out http://www.freepp.com for the FreePP box which should be alot less than $100.

  • Alec July 19, 2007, 11:16 am

    thanks for the correction David. I'm going to dig out my Gnome and hook it up tonight again. It's been a while since I've looked at it.

  • Shai Berger July 19, 2007, 11:49 am

    Price point of the box is certainly an issue. But, if units don't move, they can lower the price. They have enough money to subsidize the box for a while.

    Legal aspects might be the real achiles heel. The service agreement I have with Bell (in Toronto) explicitly says the line is for my own personal and non-commercial use. I wonder if Ooma is in for a battle similar to TruPhone vs T-Mobile.

  • Jerry Kindall July 20, 2007, 1:51 pm

    The idea that your call might be terminated at another subscriber's home gives me the heebie-jeebies.

    First, it'll never work as a business model. The whole point of VOIP is to get rid of the land line. So very few people will even have this ability. Even if I did have a landline, I wouldn't let Ooma use it because it would make me liable for harassing and criminal calls. A business model that relies on subscribers doing this in large numbers is ridiculous.

    Second, I most assuredly do not want random people to be able to listen in on my calls, which becomes a real possibility (actually, an inevitability) if my call is entering the POTS network at someone's house.

    Third, the caller ID and ANI on a call routed this way will be the local phone line's number, not mine, making it impossible to (for example) activate credit cards with the line. Not that I'd want to because of the preceding point.

    So basically, I can get a free service that is worth exactly what I'm paying for it, and all I need to do is fork over $400 for the hardware? No thanks.

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