<><>Dial telephoneA Bay Area startup, OOMA, announced free calls at no cost for buyers of its $399 ‘OOMA hub.’ But, unless pricing changes after early adopters buy in, it looks to me like Walt Mossberg drank their Kool-Aid, for I do not see how this VoIP startup can stay in business.

At first blush, it looks like a boon for VoIP users. The ‘OOMA hub‘ connects your internal phones to your broadband and your landline. Long distance calls go via VoIP to another OOMA hub, peer-to-peer, for the far-end OOMA hub to put the call onto PSTN (Public Switched Telephone Network, i.e., the traditional phone company system) for the last mile. It diverts outbound 9-1-1 calls to the landline, which should maks a lot of PSAPs (Public Safety Answering Points, AKA 9-1-1 call centers) happy, compared to VoIP company problems with 9-1-1 calls.

Eventually, OOMA will run out of the cash surge from selling the $399 boxes. Then it must support and run the VoIP-to-PSTN interface (or pay to outsource it) and also pay carriage charges or termination fees to the telephone companies. (See this discussion of how charges work in Europe).

They won’t have OOMA customers everywhere. If they can’t piggyback on customer landlines, they have to use the PSTN to complete the call. Then, where does their revenue stream come from? Will new OOMA customers pay for old customers’ service? That’s not a very stable revenue stream, as the last guy to the table eventually notices he’s not getting much dessert.

Telcos also may be less than thrilled about Yet Another VoIP Competitor entering the market, and telcos have lawyers. As with the small telcos profiting from free-to-user conference calls (because regulatory tariffs and contracts with other telcos allowed them more money in fees from the telcos connecting the incoming calls than the costs of operation and capital cost recovery), my crystal ball foresees litigation ahead.

Do you see how OOMA’s reliable in the long term?


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