Hello VoIP, It’s Ooma Calling

Despite SunRocket failure and Vonage trouble, startup says it’s poised for success.

Even with SunRocket’s spectacular demise and what could be Vonage’s imminent collapse, VCs are still not convinced VoIP is a bad investment.

Exit SunRocket stage left. Enter Ooma stage right. Ooma is a new VoIP startup armed with $27 million in funding from Draper Fisher Jurvetson, an early Skype backer, and The Founders Fund.

Palo Alto, California–based Ooma launched a beta of its product on this week, and its CEO and founder, Andrew Frame, talked to Red Herring about what makes his company different.

“Comparing Ooma to SunRocket or Vonage is comparing apples to oranges,” said Mr. Frame, a former employee of Cisco Systems.

“SunRocket and Vonage offer basic phone service, which you can get from the telephone company,” he said. “And they are fighting a price battle against the telephone company, which has a better product and far more resources, as both SunRocket and Vonage found out.”

Ooma’s brain trust spent two and a half years developing a product that Mr. Frame said is significantly different from anything currently on the market.

For one thing Ooma’s business model is more akin to that of a hardware firm than the service business model used by Vonage, SunRocket, and the traditional phone companies.

Subscribers pay a onetime price of $399 for a kit that includes a box called the Ooma hub, which connects to the end user’s broadband device, usually either a DSL or cable modem.

“You don’t pay a monthly fee like Vonage users do,” Mr. Frame said. “The ongoing service is free, and you own the devices.”

In the kit is another product, called a Scout, which creates a second phone line. If one line is busy, another person can pick up any phone and make a call on the second line.

“Oftentimes people pay $40 or $50 per month for a second line,” Mr. Frame said. “Ooma gives you the second line for free.”

“We use a peer-to-peer system like Skype, and we are based on a hardware model, so we depend on gross hardware margins,” he said.

“We are profitable on each customer from day one,” Mr. Frame said. “Eventually we will deliver enhanced services that will have monthly fees associated with them, but that’s in the future.”

The name Ooma was chosen because it invokes curiosity, Mr. Frame said. Also it has four letters and the IP address was readily available.

One has predicted Vonage’s collapse since they started 4-5 years ago. Vonage is still running in spite of Ma Bell’s frivolous law suits.

Vonage customer and will remain so.

Oooh, this is cute. For $400, you get a box that allows you to call anywhere in the United States for free, so long as you let others use your phone line whenever they want. Interesting concept. If I lived in a very rural area, I might even consider such a thing. But living in a major urban area, I’m sure my phone line would be used extensively.

So in actuality, it’s keep paying the phone company for your line, and by giving them access to your line, you get access to everyone else’s line in the network.

Whereas for $40 a month, likely about $15 more a month than you’re paying for a single home line, you can have, for example, unlimited long distance calling from AT&T. You’d have to go almost three years on this plan before Ooma’s idea would make financial sense, and even then, you’d have to factor in if the FCC will decide what you’ve done is something that will fit within the common carrier doctrine, or you’re responsible and liable for everything done with your home phone...

Nifty idea, not sure it’s worth the gamble. Oh, and you have to gamble that Ooma survives three years to make back your money, which in this day and age isn’t something I’d put a lot of confidence in.

Hmmmmm....

Skype offers FREE and unlimited voice and video over internet between Skype users.

The necessary software is FREE to download and has functioned on my ThinkPad flawlessly for the past 8 or 9 months..

For a small annual free, less than $15 last year — you can call ANY phone number in the U.S. for FREE.

You can’t beat the price - FREE, and you can’t beat the reliability - FLAWLESS.

I would suggest a USB headset to get the best audio performance incoming and outgoing...
A USB-2 webcam is a good choice for video transmission..

Long distance family “conferences” are great when you can both hear and see “real time”....FREE.

For a small annual free[sic], less than $15 last year — you can call ANY phone number in the U.S. for FREE.

OK, sorry, but this is a peeve of mine--if you pay a fee--any fee--it is NOT free. The calls may be included in the fee, but they are NOT free.

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