‘ooma’ promising home telephony revolution

A new VoIP company is bringing peer-to-peer technology and social networking to home telephony in a new way, promising to sell home phone replacement systems that enable customers to avoid paying any voice calling fees. The company, called ooma, was founded by former Cisco Systems’ executive Andrew Frame and is building its business model on the sales of devices for the home, including a hub and individual phones.

Consumers buy an ooma hub, which plugs into a broadband connection and the primary phone line, and what the company calls “Scouts,” or individual handsets that plug into existing home phone jacks. Consumers can then make unlimited calls at no charge, according to a company announcement. The service is now in the beta-testing stage with invited customers from across the U.S. but will launch commercially in the fall.

“It’s really the best of both worlds – it’s something like Skype where you don’t have to pay any monthly fees, but it also acts as a home phone replacement so you can dial E911 and make regular phone calls to anyone,” said Yankee Group analyst Patrick Monaghan, who has tried the service. “Their business model is unique in that consumers are paying for hardware up front and not having any fees on the back end.”

The company avoids paying interconnection fees for ooma calls by using peer-to-peer technology in a slightly different way, he added.

“If you are in New York and you have ooma and make a call, it will connect to another customer’s ooma hub, and then place a local call out on their line,” he said. The peer-to-peer calling is invisible to the “middleman” user and doesn’t affect their service.

Monaghan said the initial expectation is that customers will retain their existing voice line but pay for barebones service and not for long-distance, but adds that ooma will offer a broadband-only option.

“This [ooma] is the primary control for your features,” he said. “If you plug in a regular wireline telephone, it allows you to act as if you have two lines, and it also connects other ooma subscribers.”

According to the company, the advanced features include the Instant Second Line feature, a Broadband Answering Machine, which allows access to messages via the Internet, and what it calls “ooma Dial Tone” and the “ooma Lounge,” a customer portal for managing voice mail and call features.

Frame teamed up with TiVo co-founder Mike Ramsay and Napster co-founder Sean Parker to create ooma, and retained both as board members.

The technology is being introduced via what ooma calls the White Rabbit program, through which invited beta customers receive the ooma phone system free and three ooma “pass along chips” to send to friends, enabling them to register at the ooma site to receive a free ooma system as well.

This approach enables the company to create the peer-to-peer network that will ultimately support the calling program without requiring interconnection fees to access the PSTN, analyst Monaghan said.

Ooma is a venture capital-backed firm, with $27 million in funding from five different VCs. Its management includes veterans of Yahoo!, Redback Networks, Apple and Cisco, as well as actor Ashton Kutcher as “creative director.”

Monaghan thinks the company’s timing could be good. Existing VoIP subscribers – particularly those subscribing to the legally entangled Vonage service or the now-defunct SunRocket offering – could be looking for alternatives while ooma’s look and feel as a home phoneline replacement would have appeal to a broader customer base, he said.

“This is really the first company taking a stab at developing their own hardware and trying to make it appeal more so to the family,” Monaghan said. “It looks like an answering machine. You can wire your entire home for whole home service and it plays through home phone wiring.”