An ambitious and long awaited new consumer VOIP startup - Ooma - launches on Thursday morning. Much like Vonage and the ill-fated SunRocket, Ooma allows consumers to use their normal phones to make and receive telephone calls, but at drastically reduced prices.
Vonage provides unlimited calling in the U.S. and Canada for a flat $25/month. Ooma, however, is using an innovative peer-to-peer architecture to significantly reduce their cost overhead. Because of that cost reduction, they’re charging for hardware only. Calls in the U.S. are free, and will be forever.
That doesn’t mean there’s no cost to the consumer, though. You still have to get your hands on the hardware, which starts at $399, and have a broadband Internet connection. That buys you a base hub. You plug broadband ethernet into one end, and a normal phone into the other, and you’re all set.
If you buy additional units, called Scouts, you can wire your entire house with Ooma. That is another distinct advantage over Vonage, which only allows a single phone to be plugged into the device. Spread the Ooma Scouts around the house, plugging one end into a normal phone jack and connecting it with a normal phone. It’s then part of the Ooma system and all calls will be free.
Instead of using normal exchanges to terminate calls like Vonage does, Ooma routes calls through the phone lines of other users if it can. That saves them the termination fee on the call and eliminates their largest marginal cost. That does mean that if you have a normal phone line (its not required to use Ooma) it will be used by other Ooma users, but it isn’t something you’d ever notice because your inbound and outbound calls are routed around it. And in the event you call 911, any phone call using your line is immediately broken and you are put right through. If there are no Ooma user within twelve miles of where your call is being terminated, Ooma uses the normal phone system. From the caller’s perspective, its all invisible.
The Ooma hardware is both beautiful and functional. Answering machine functionality is built in to the Hub and Scout devices via physical buttons. Every Ooma account also includes two lines, and either can be accessed from either phone. A speaker phone is also built in.
Ooma isn’t just making money on the hardware. They’ll be adding additional for-pay features over time. One of the most interesting is ringtones, allowing people to have customized tones for incoming calls. That’s generally considered a cell-phone only feature. I can imagine other cell-phone type services being added over time as well, and possible Ooma branded handsets.
If you choose to keep your normal phone line, I’d recommend changing your calling plan to the most basic, least cost choice. It’s basically a 911 backup in the event of an emergency.
Ooma has a very deep management team and board of directors, and has raised $27 million over two rounds of financing.
I had the opportunity to interview founder and CEO Andrew Frame and Creative Director Ashton Kutcher (yeah, the actor) a couple of days ago. Kutcher is actively engaged in the business - part of his work will consist of creating a viral video series to promote the product. The podcast is up at TalkCrunch. In addition to Ooma, Ashton and I go on a brief detour and talk about the iPhone (he likes it, mostly) and his upcoming movie with Cameron Diaz.
The product is in private beta currently and we’ll be giving away a few Oooma’s tomorrow. They go on sale in September.
and like any p2p service, its useless if you are the first user
seriously, how will the first beta user route calls?
Whoopee - no, not at all. If it can use another user to terminate a call it will. Otherwise it use the normal phone lines to terminate calls. This is all invisible to the user.
Completely free phone service is fast approaching. I personally wouldn’t invest in advanced hardware like this because I’m sure that in the next ten years we’ll all be making free calls.
Now for cell phones… that’d be great.
-Chris
http://www.nerdcouncil.com
$399 amortized over a year is $33.25. After a 25% discount that gets you pretty close to the $25/mo rate charged by Vonage.
Now plug in the typical turnover rate for most VOIP users (est. less than 12 mos) and there you go…
No responsiblity (or very little) for QoS or the infrastructure. Sweet!
I guess my initial reaction is “$399 for some hardware?” And then how much are the “scouts”? So if this company goes bust in a year, then we have loads of hardware with no use. Cuecat comes to mind
You mention Sunrocket who took $199 from many customers for 2 yrs service and then went out of biz.
If I do the math and compare it to Vonage at $20/month, free hardware, that’s nearly 2 years of service to equal the price of this one hardware unit.
The ringtones sounds interesting, I do have customizable (8 or something) on my Uniden phone. I think ringtone sales work on cell because users like the idea of showing off the latest xyz song or theme on their phone outside. No idea if people want those rings at home. Perhaps the younger set.
And while I have been out of the telecom arena after my punchdown days in 94, I am confused Mike by how it works. Are you saying that my mother’s home phone line might be used to connect calls on Ooma?
The device does look “mac-like”.
Yeah- Why is this any better than Skype? For less than $80 bucks/year, I can get all the incoming and outgoing calls I want, and all I need is a cheapo usb phone or a mic/headset. I can’t justify the $399, especially since that is the same cost as 16 months of Vonage service, and who knows what technology will exist 16 months from now when it comes to p2p and voip?
And on a side note, here is a hint for Vonage customers- When I called the cancel, they offered me three months of service for free, plus they reduced my rate after that to $19/month. Clearly, the voip market is extremely competitive.
Allen - I compare this to vonage mostly to give people a frame of reference. You get two lines with Ooma and it works throughout your house on normal phone lines. It’s completely different and better. And If you keep it for years, like I have with Vonage, its hard to argue that the cost isn’t much lower.
Jeff - see my comment about vonage above. Skype is great, but Ooma is a home line replacement. Skype doesn’t go there.
Dude, I can’t believe you got Ashton to do a podcast with you. WHY didn’t you video it too???
Startup are planning to create Creative distruction. Ughh!!!
Punk’d!
Thanks Mike. I still think investing $400 is going to be a killer for them and I will bet that the price will drop quickly. It’s hard to compare leasing to buying.
So you can hook this up to a local phone line (ATT) without having any local service? For example, when I disconnected my local phone line, they completely cut the service off. Would it still work?
I assume they will also be able to transfer did’s?
11 comments thus far, and not ONE Demi Moore joke? Wake up, people!
Allen - I believe you can still use your normal phone jacks even without phone service to those jacks.
You can use your existing phone wiring with Vonage the very same way that the Scouts appear to use it:
http://www.vonage.com/help.php.....&nav=3
Oh and thanks for the reply, Michael. Sykpe does work for 5 phones in my house. I just get a weird sounding dial tone, and i really don’t like Skype’s lack of outgoing caller ID service. Does Ooma have the same problem?
It looks like a very promising concept but they are asking for too much of a leap of faith. I dont know how many people are going to spend that kind of money on a company that has no track record. If they allowed you to spread the $399 cost over the first year, that might relax some people.
Neat concept, but the startup price is too high…
#14 - that’s how my sister has it setup
#16 - Adam - but it has a major tv star behind it
Thanks for the clarification Mike - that helps.
This reminds me of “CallBack” services which were very popular up until voip and skype took over. They are still semi-popular in 3rd world countries.
Very pretty, but it looks expensive (B&O look). They’re going to sell it as being cheaper. Isn’t that a no-no?
Maybe they should get someone akin to Martha Stewart to market this, whoever that may be.
$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.
Huh? I have my Vonage plugged into my home phone wiring. All my original phone outlets work. Even the ones on the other side of the house.
Ladies do love the Kutchster! Do they love him $400 dollars worth when that gets them a nice pair of shoes or a bedazzled cell phone, is the question? Probably should offer more of a choice like $400 dollars for free calls for life or $200 + 9 a month. People might eat the $200 cost because it is closer to so many other technology gizmos. At $9 month for calls who wouldnt do that.
Quality of service is a definite concern with this p2p network. Need Custom Software Development?
Well-written article. Thanks, Mike.
Man…that hardware is just way too expensive. It’s nice, but they’ve created a barrier to entry for most people. Something like vonage (which I don’t like personally) is easy to adopt since you don’t have a big out of pocket expense.
Personally, I don’t have a land line and haven’t for years. Many 30 and under people are in the same boat. And I also pay no long distance nationwide with my mobile phone..it’s pretty standard these days. International is cheaper with calling cards. Frankly voip for the consumer isn’t a big advantage…there isn’t much cost savings if any and the reliability/quality isn’t as good, not to mention it’s not mobile. Now, commercial voip on the other hand can be a huge benefit to businesses.
sorry. sunrocket out of business?
thats news to me since as of this morning it worked just fine at home. there are no news on the site or email of any impending doom, so care to elaborate?
smash - http://www.washingtonpost.com/.....02466.html
Wait — so my calls are routed through someone else’s private home? Even if regular phones aren’t inherently secure, and wiretapping laws are well in place… it seems like the barrier for abuse would be all too low.
Hahaha, watching this flame out is going to be fun. Where’s Uncov when you need them?
Thank you for everyone’s feedback. I’d like to take this opportunity to address some of the points that have been raised here.
The price of the hardware seems to be a common objection, so let me lay down some context for the Total Cost of Ownership for some competing services. Vonage currently costs around $28/month (after you include all of the fees). Over a 3 year timeframe (their average lifetime of a subscriber was last reported at around 3.5 years), a subscriber would pay them just over $1,000. Comcast runs different promotions on their Digital Voice offering, but their base price (assuming you buy all of their other services) is $40/month. If you got in on one of their most aggressive promotions and got 6 months free, that’s still $1,200 over the course of 3 years. An unlimited calling plan from AT&T is $40/month, but throw in all the taxes and fees, and you are looking at over $50/month, for a 3-year cost of more than $1,800. In comparison, $399 for the ooma hardware should look a little more palatable. It is an investment, but we believe it is one that will pay off quickly for our customers. In the future, we will be looking at ways to reduce the barrier of the up-front cost of the hardware.
Statistics vary widely (40%-90%) about what percentage of people keep their landline when subscribing to a VoIP service, but clearly there is a significant market of consumers out there who have kept or are planning to keep their landline and use VoIP (and even cell phones) as complementary services. Instead of running ships-in-the-night, our product was built from the ground-up to integrate with an existing landline, allowing you to keep your phone number (without enduring the painful LNP process), retain real 911 service, and enable a seamless fallback in case your power or Internet goes out. If cost-savings is your primary concern, run the ooma system without a phone line, we’ll give you a new phone number, and eliminate the cost of the basic landline.
It is true that there are ways to light up the whole house with VoIP services like Vonage. Although straight-forward for someone comfortable with wiring and technology, it is still a somewhat intimidating procedure for the mass consumer market. In addition, it retains one of the limitations of in-home wiring which is that it is, for the most part, a bus architecture. Another way to solve the problem is to buy a multi-handset cordless phone system. They are cheap enough that many people have used this as a solution. Still, unless you get a more expensive 2-line phone system, you’re still on the party line when two handsets are off-hook at the same time.
We have approached the problem of extending phone service to other phones within the house through the creation of a satellite device called the ooma Scout. Each ooma Scout is individually addressable, allowing us to “virtually” break the bus architecture of the home phone wiring (converting it to a PBX-like architecture) and introduce unique features such as the Instant Second Line. While multiplexing multiple voice conversations over the same copper pair is an old idea, we have focused on ease and simplicity of the user interaction to create a better solution to a familiar problem - contention of the phone line. The ooma devices convert every one-line phone in the house to a two-line phone, and you get the second line on the same phone number you already have (along with all the calling features you’d normally have to pay separately for). No need for others to remember another phone number.
Now that minutes are free, like so many have predicted over the years, we hope to shift the attention to services. We’ve started off with the creation of the Instant Second Line and the Broadband Answering Machine - which solve familiar problems in unique (and hopefully better) ways. Look for more in the future.
Dennis Peng
Director of Product Management
ooma, Inc
When are the 25 units being given away?
Congrats to Frame, Peng, and the rest of the crew for getting this technically very impressive product out the door. The technology sounds quite innovative and they seem to have borrowed a page from the Apple playbook on the beautiful design.
Although I see the logic behind Dennis’ calculations, I think it will be the rare potential customer that will actually run through the numbers to justify the relatively large upfront investment. In the end, I’d bet that Ooma will have to push that price down to recoup its initial upfront investment in technology. My guess is that the cost of the unit and the service are so low that most of the $399 is flowing to the bottom line and hence they have a good degree of slack in pushing down the price (or being forced to by the market).
I’m a VoIP novice, but am curious whether Ooma can be used to make international calls and how that works.
Great post Mike.
That’s a really sweet concept that will be around for awhile. I would like to see the GUI first, because that is the only thing I like about bon vonage where its at the point I use Skype for outgoing calls.
I’d also like to hear what the telecommunications lawyers think. That’s revenue, especially in Canada with our broadband density.
let’s hear the podcast…
This definitely looks like an industry disruptor. This leads me to believe that we are not as far from free landline calls as some might imagine.
Cheers,
Aidan
http://www.MappingTheWeb.com
looks interesting, and while the price is a bit high for an unknown company (it’s not like we are talking apple and the iphone here), it’s nice to see some new competition come into this area and hopefully will serve to drive new innovation.
as a couple others mentioned, what’s the story with the possibility of a few of these devices being given away to loyal techcrunch readers such as my self?
I can’t decide if I think it’s really cool or super lame that Ashton Kutcher is involved with this.
Sounds great and all, but at that price they might as well start looking at Sharper Image for a shelf deal.
This service sounds great but I’ve recently had trouble with Vonage and my home security system - Vonage somehow interferes with the service’s need to connect with my house for updates and checks. I wonder if Ooma would cause a similar problem? If not, Ooma would be an option for me.
Dennis - can you share where you got the 40-90% keep a landline when moving to voip? You would be targeting the younger, iPhone set with this product and those demographics are not keeping their landline. And my mother wouldn’t ever use this, I can’t even get her past aol.
i use up about 50 bucks every month in international calls through gizmo skype and yahoo voice. for me, and many others like me, the per minute rates to a host of countries are THE point of interest. thats what i couldn’t find a hint of on their site. I’m sure it will be of some service at some point, but the site is just too full of management jargon, i.e. utter garbage at the moment. that turns me off.
Technologically, the device is very innovative, but how does Ooma deal with intercarrier compensation charges and terminating access fees?
Do they pay any at all? If so, is that why the device’s price is so high? If not, who pays?
yeah the ‘money up front’ hardware model; sucks.
- I would like to see Goog, throw some money at this;
- Also would like to see Goog; work on Wimax … (is that still coming?)
Are you sure you haven’t been Punk’d Michael? This surely isn’t going to be a “killer” of anything.
The concept is much like the original Free World Dialup from 4-5 years ago — install a router between your home Internet and POTS line, and others use it when you don’t. Not sure why that model didn’t work then, although I can see some challenges today:
- How many VOIP subs keep POTS? And of those, how many drop to the lowest service level, which often is measured or metered (i.e., past a certain monthly allotment there’s a per call charge)?
- Is P2P the best technology for latency-sensitive traffic? Perhaps Ooma’s not using the P2P I think of (e.g., caching, potential ISP mitigation), but latching on to the catchy description for the base hub function.
- How many potential users are there who have broadband + want VOIP + keep POTS + will pay $400 up front to an unknown when SunRocket just left its subs hanging? Wouldn’t these same folks use competing services such as mobile phones with included LD, Vonage, Skype, cable VOIP, etc.?
- Ringtones? At home? Maybe, but I doubt many will pony up much for this.
- Ooma-branded handsets? What can Ooma provide that the major CE companies aren’t?
More competition is good, so I hope Ooma succeeds. Good luck.
You can get a better deal with a mobile phone. Plus it fits in your pocket and takes pictures of pretty girls on the street. Take that oomy.
$399 for a wired consumer device that makes phonecalls?
And you posted about this on 4 sites?
Mike:
I ask also, when do the free units become available?
I am a former employee of a VoIP company and this is intriguing!
Mike
RE: Vonage, and only being able to plug one phone in. That’s incorrect. I’ve had Vonage from day one, and after disconnecting Qwest from my home telephone wiring, I connected the home wiring to the Vonage router. All my phone jacks work just fine with normal analog phones.
Michael
Andrew’s right. Somebody’s been drinking the Oomaid.
$400 seems pretty steep for anything that’s “free”, and the fundamental line-sharing concept is a bit creepy, too.
It looks like Ooma can’t get enough capital to build out an infrastructure, so they are hoping people will go for a kludge that means that the Ooma netowork will allow spying on people’s phone calls. Yuck!
Ooooh…..Valleywag begs to differ. If you listen to them, the two pretty boys are about to be Punk’d big time. VW makes a pretty damn good argument. Will be fun to watch who gets it right. Nothing more fun than watching bloggers with nothing better to do than battle it out in a desperate attempt to defend their egos…
(Nothing against you guys — on the contrary, I wish someone would take the time to actually consider taking my opinion seriously. This is all just envy personified
)