What do Ashton Kutcher and voice over IP technology have in common?
Kutcher, best known for his role on That '70s Show and MTV's reality show Punk'd, is "creative director" for a Silicon Valley start-up called Ooma, which has developed a device that will allow users to make free VoIP calls to any phone in the U.S.
The company, which has $27 million in funding, officially announced itself Thursday.
Unlike Vonage, which requires users pay a monthly flat rate for domestic calling, or Skype, which charges users a low-cost fee to make or accept calls from regular phones, Ooma charges a one-time fee of $399 for the Ooma device. After that, all domestic local and long distance calling is free.
Exactly what Kutcher knows about Internet telephony or the communications market in general is a mystery to me. But apparently, the actor/husband of Demi Moore helped design the company's logo and the viral marketing campaign called "White Rabbit," which the company will launch this fall. As part of the campaign, Ooma will give away roughly 2,000 Ooma boxes to participants, who will then be able to invite three friends to also get a free Ooma box in exchange for deploying the box and trying the service.
The viral campaign is designed to create buzz for the product, but it's also necessary in order to ensure the service actually works. Ooma relies on a peer-to-peer network, much like the PC-to-PC calling service available through Skype. And it needs to seed the market with devices.
Through this model calls are connected directly to customers rather than through a central server owned and operated by a service provider. Ooma uses this peer-to-peer network to avoid paying phone companies for terminating calls when Ooma users make long distance calls to non-Ooma users. So if I'm an Ooma user in New York City, and I call my dad in Delaware, who is not an Ooma user, the Ooma network will find an Ooma user in my dad's local calling area and mooch off that stranger's local phone line to complete the phone call between my dad and me.
Andrew Frame, CEO of the company, claims that with strategically placed Ooma devices, the company can cover 95 percent of the population. (Of course, this also requires that most Ooma users also keep their regular phone lines so that calls can connect to the public switched telephone network.) And for regions where there is no Ooma box, Frame said the company will eat the cost of interconnecting to the local telephone network.
I have to admit I'm skeptical that Ooma will actually get enough people to buy one of these devices, which looks like an answering machine. The $399 price tag is not trivial, especially when you consider that Ooma may not be around very long. Several other pure play VoIP providers are struggling to stay afloat. Earlier this week, SunRocket closed its doors, leaving some 200,000 subscribers in the lurch. And Vonage, saddled with a huge headache of a lawsuit from Verizon, is also bleeding subscribers.
The service also has a few catches. For one, international calling is not free. Frame said the rates will be similar to other VoIP services like Skype or Vonage. What's more, the Ooma box provides one jack per phone. If users want to hook up additional phones, they'll have to buy a separate adapter called a Scout for each phone at a cost of $39 a pop.
And the final catch is that, like many other VoIP offerings, Ooma doesn't fully comply with enhanced 911, which means if you want the fire department or ambulance driver to actually find your house when you call 911 then you'd better keep your $20 a month regular phone line.
I'm sure some users will find the Ooma device economical and very useful. But I doubt it will take the telephony world by storm. Of course that could change, if a phone company like AT&T or Verizon were to buy Ooma or partner with the company to deploy the device in their traditional telephony markets. But if history is any indication, I don't see the stodgy U.S. operators touching Ooma with a 10-foot pole.
SunRocket, a voice over IP provider, told employees on Monday that it's shutting down, according to several reports from former employees.
The company's Web site is still up, but its customer service line has this recording: "We are no longer taking customer service or sales calls. Goodbye." An internal memo from Sonya Jefferson, director of routing and carrier services for SunRocket was posted on the GigaOm blog earlier Monday.
"Unfortunately this email contains very bad news. We have just been informed that any and all last ditch efforts to keep operations running as well as a potential sale of the company have not gone through and that SunRocket will cease operations at COB today. As such, today is my last day and everyone else you may have worked with at SunRocket. Regarding outstanding and future invoices: Sherwood Partners out of Palo Alto will be handling the close down of all invoices, current and outstanding."
SunRocket, which claimed it had 200,000 customers as of April, was one of several companies to offer an inexpensive telephony service that competed against the traditional phone companies. SunRocket's demise is not surprising. Thanks to IP, voice has become just another software application with companies like AOL, Google, Yahoo, and EarthLink incorporating it into other Web services.
Analysts have been predicting that it would be difficult for companies, like SunRocket and the more popular Vonage, to base an entire business around a VoIP service. While VoIP makes it relatively cheap to serve customers, it's still expensive to acquire them. And that is just the problem that Vonage faces.
Vonage, the most well known VoIP company, last reported it had about 2.2 million subscribers. But the company has also been struggling. Earlier this year a jury in Virginia found the company had infringed on three Verizon patents. Vonage is currently appealing the decision, but the legal battle is taking a toll on the company. In court in April, it said that it has been losing about 50,000 customers a month.
The trouble that SunRocket and Vonage is having is a clear indication how hard it is for a start-up to compete head-to-head with the traditional phone companies. Some of the newer VoIP companies, like JaJah, have learned this lesson. And they're designing services that work alongside traditional phone services, instead of simply replacing them.
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