Startup Ooma Readies Peer-to-Peer Phone Run

Cable may soon see an unusual competitor on the Internet-voice front: Ooma, a well-funded startup planning to sell a device that provides free long-distance phone calls anywhere in the United States.

Ooma uses peer-to-peer technology to transmit calls over the Internet via a device that plugs into a user’s broadband connection and phone line. The Ooma Hub, besides offering free long distance, also provides voicemail and a second phone line. The company expects to commercially launch service this fall, offering the hub for a retail price of $400.

Users of Ooma’s hardware can choose to either keep their existing local-phone service or just use the device solely over a broadband connection. However, Ooma’s model depends on a portion of the users retaining their local lines. The service uses those local lines to terminate calls -- sent over the Internet -- placed from other users. “If everybody gave up their local phone line, then the model wouldn’t work, but we don’t see that happening anytime soon,” Ooma CEO Andrew Frame said.

The company’s backers, with the usual panache of a Silicon Valley startup, claimed that Ooma will deliver ground-breaking features and shake up phone service. “Ooma is poised to change the telecommunications category, in much the same way that TiVo changed the landscape of broadcast television,” TiVo cofounder Mike Ramsay, who is an Ooma board member, said in a prepared statement.

First, though, Ooma will need to seed the P2P network. In an invitation-only beta-test to begin this month, the startup expects to distribute 2,000 free hubs to users across the country. In locations where it doesn’t yet have any local users, according to the company, it will provide its own call-completion equipment.

The startup was founded in 2005 by Frame, who previously worked as a consulting engineer for Cisco Systems and core-router vendor Procket Networks (now part of Cisco). Other members of the management team come from Cisco, Yahoo and Apple -- and, unexpectedly, Ooma’s “creative director” is actor Ashton Kutcher, who allegedly helped to design the company’s flowery logo.

Based in Palo Alto, Calif., the startup has raised $27 million in two rounds of venture funding from Draper Fisher Jurvetson, The Founder’s Fund, Worldview Technology Partners and other investors.

Ooma arrives on the scene right after another VoIP startup bit the dust: SunRocket, which had raised $100 million and counted some 200,000 subscribers, ceased operations this week.

On Wednesday, Sherwood Partners, the crisis-management consulting firm handling SunRocket’s liquidation, said it lined up two Internet-phone companies -- 8x8 and TeleBlend -- to be “preferred providers” offering free activation for SunRocket customers.