Ooma vs. Valleywag - Andrew Frame fired or not?

I've lost track of how many times the VoIP community has written off Ooma and I don't know what Valleywag has against the company or its founder, Andrew Frame, but man, they have hit Ooma hard since day one.

Now Valleywag declares Ooma dead - again

Their latest Ooma story, How Ashton Kutcher killed a startup guy's Hollywood dream, cites an unnamed "tipster" claiming that Frame has been fired by the board. A board member disputes this claim and there have been no official announcements.

People have lost bets over their predictions of the company's demise. Valleywag and these other VoIP pundits must be discouraged by how long Ooma has hung around (a little over a year since the initial public launch). But there are many signs that the business model is struggling. For the holiday season, they are now selling the "core Ooma system" for 199 bucks, down from the original target price of $599. At that price, it's less than the Sunrocket "annual $199 unlimited" plan, often cited as a contributing factor to that company's crash and burn in 2007.

There can't be much gross profit left over for Ooma at a $200 retail end-user price. Bestbuy et al will be taking 30% for sure, leaving $140. Of that, much will go to marketing fees (end caps, and other such), leaving maybe $100-$120 per "core system" in revenue to Ooma. So what are the real COGs of that system? It would be hard to believe they are less than $75 - there is a fair bit of hardware there and Ooma is not big enough to produce in large enough volumes to get their cost down to anything like Linksys levels. So let's say there is $50 in gross profit for Ooma on the $200 sale (I would bet that it is much less than that, if not negative). And we have not factored in any G&A, salaries, operations, support, telephony costs, or other overhead yet. Nor have we factored in other real world costs of selling at retail, like the cost of money, breakage, etc.

How far will that $50 go? It certainly won't pay for much marketing. Vonage spends $250 to acquire each customer. What about the actual cost of providing the service? Ooma is obligated to provide the customer "unlimited" domestic calling (limited to 3000 minutes per month) with no further revenue. What percentage of Ooma hubs are connected to landlines (i.e. can be used to deliver calls)? What is the overall percentage of minutes terminated via another Ooma hub vs. calls terminated at Ooma's expense? Even calls delivered via a hub are not "free" to Ooma - they still have to fund the infrastructure, support, billing, pay for the phone numbers they give customers, etc. If Ooma's original math said they needed to sell the hardware at $500 to make money, it must be hard to make the business work selling it for just $200.

Who knows. Maybe Ooma will prove all its detractors wrong again, although it is hard to see how. But they've done it so far, even with so many pundits lined up against them.

Ooma quietly adds a 3,000 minutes per month limit on their "unlimited" calling

I didn't see any announcements of this, but it was recently pointed out to me that the Ooma terms of use now includes a limit on "unlimited" calls of 3,000 minutes per month:

In addition you agree that any usage of more than 3,000 minutes per month will be deemed dispositive proof of Prohibited Use. In the event you engage in Prohibited Use, ooma reserves the right to terminate service without notice or, at ooma's sole discretion, to charge you at a rate specified on our Web site for calls that exceed the 3,000-minute per month limitation. This rate may be modified on our Web site from time to time.

That's probably more minutes than most people use. But if you're using less than 3,000 minutes per month, maybe you don't want an unlimited plan at all. You might be better off with a cheap pay as you go, per minute plan, depending on how long you think the Ooma box will last (service is for the life of the box, not the life of the purchaser). Most people will spend less than $20 per month, often far less, paying only for the calls they make. Think about how many calls you make on your cell phone instead your home phone - Ooma won't help you there. Or there are always annual plans like those from Skype and Magicjack to think about ($20-$40 per year - and also have similar monthly usage limits). Such plans equate to 8-10 years of Ooma service, and you don't have to pay so much up front. Will the Ooma hardware (and the company) last 8-10 years? Maybe, but it's something to think about, especially with these new 3000 minute per month limitations.

Is 100K skypephones really a "success"

UK mobile operator 3 is coming out with the second generation of it's Skypephone. Recently several news stories spoke about the "success" of the 1st gen skypephone, reporting "over 100,000" sold. Since when is 100K handsets a "success"? Perhaps 3 is a very small operator, but certainly Nokia or Apple would not consider that amount sold a "success".

Apple announced during the Macworld 2008 keynote that it sold 4 million iPhones during its first 200 days on sale.

Unlimited mobile calls with PhoneGnome and magicJack

Here's a nifty way to make (almost) free unlimited calls with your mobile phone using two inexpensive pieces of hardware and your MyFaves (or similar calling circle) service.

There have been mixed reviews of magicJack but a lot of people love their prices - the service provides unlimited domestic calls for $20 a year (that's right, per year) and you can get the first year of service and the USB hardware dongle for $50 (possibly less with a discount code).

This gives you free domestic calls for $20 at home, but how does this help my mobile phone? Well that's where a second VoIP gadget and service, PhoneGnome, comes in. This box is $99 and includes lifetime service.

Normally, one connects an ordinary home phone directly to the magicJack hardware. In this case, instead we will connect the phone through the PhoneGnome box, as shown below:

With this setup, you can use the phone normally for magicJack calls when at home - nothing changes about that - free long distance at home.

But now, here's the mobile trick. PhoneGnome comes with a free cell phone interface for the service called PhoneGnome Mobile Web. It's got a really slick interface on the iPhone but it also works on ordinary mobile phones (you need elemental web browsing, WAP works too).

So how does this give us free calls? We're getting there. You can use the PhoneGnome Moile Web application to place calls using your PhoneGnome account. When you do this, what really happens is PhoneGnome dials a "special" phone number that connects through the PhoneGnome service to the final destination (this is why you can call SIP addresses and IM users etc.) To get that number, make one of these calls (such as to **3 to check your number or some other free ** code) and write down the number that the PhoneGnome app calls - it should appear on your phone when the call is made (and will probably also be in the outgoing calls history on your cell phone). Add this number to your MyFaves plan. Now you can make unlimited US calls for $20 per year. And there's no "two stage" dialing. You just enter the number you want to call on your cell phone in the PhoneGnome Mobile Web application and click the 'Call' button. That's faster and eaiser than some of the other schemes for this kind of thing I've seen (like the allcallsfree/yak4ever hack, before they went out of business).

Now when you make that call from your mobile phone, the PhoneGnome Mobile Web app will dial the "special" number, which is now free because it's in your MyFaves. That call goes to PhoneGnome, which connects through your PhoneGnome box to magicJack and viola - free unlimited domestic minutes on your cell phone.

David Isenberg promotes magicJack

David Isenberg, a former AT&T scientist who was excommunicated for his radical ideas about the Internet, appears in this magicJack infomercial.

The company also sponsored Isenberg's F2C conference.

F2C's newest sponsor is MagicJack, a clever little device that lets you use any plain old phone as a VOIP phone with no software . . . one of the conference freebies will be a MagicJack plus one year of service.

The "no software" statement is a little misleading. The magicJack is a USB device and while one doesn't have to install software per se, magicJack connects to a PC and is in fact a software application that is running on your PC. Your PC must be powered up and running the magicJack software to receive or place calls.

magicJack appears to be an incredible deal, perhaps not to replace phone service as the company claims (since you have to leave a PC on all the time to use it), but certainly to save money on outbound long-distance calls (in competition with the Skype unlimited plans, for instance). But recently, Boing Boing and others raised red flags on privacy issues and still others question the viability of the company and wonder what's going to happen once they start delivering advertisements, which is apparently the "catch" with this service.

magicJack EULA up to no good?

Boing Boing first pointed out some concerns with the magicJack end-user license agreement (EULA) which they say requires customers to agree to ads, even with its paid service. This is not uncommon for free phone services, but pretty strange for s service where the customer is paying for the service (and buying the hardware).

In short, it not only has one agree to ads with its paid-for system, but claims that the ads are necessary for it to work. It will also snoop on your calls to target ads more accurately, and has you sign away your legal right to take it to court if it defrauds or otherwise harms you. Delightful.

Neither the EULA itself, nor any other privacy or legal information, can be easily found at its homepage. It's not even provided at the point of sale, where one enters credit card info, email and street addresses as such, so as to gain access to the service and have your MagicJack dongle delivered. I found the EULA's URL through Google.

They also noted something I find really sleazy, a "free trial" counter on the majicJack homepage that is a fake, a javascript applet that increments itself automatically:

// the interval (ms) between new visitors
var interval = Math.round(86400000/perday);

Others have pointed out other potential problems with the "too good to be true" cost of magicJack, such as the savings might be overshadowed by the increase in your electric bill as a result of leaving a heat and power sucking Windows PC on 24 hours a day in order to have phone service.

ooma hanging on

Om Malik reports: Ooma not dead, yet, the keyword being "yet"

The price of their device + domestic calling plan was supposed to go up in 2008. Those that paid $399 last year, were told they were getting a special price, saving $200 over the "real" $599 price.

Instead, now they learn that they paid $150 MORE.

Om suggests the $99 PhoneGnome as an alternative. It doesn't include unlimited domestic calling, but does offer free calls to 20 something countries, and things like support for mobile phones, voicemail to email, softphone, Asterisk, Skype, and other stuff that ooma doesn't have.

Just because it's black, doesn't mean it's really the same as iPhone

According to a survey released recently by ChangeWave Research, cell phone users are moving more and more toward Blackberry and iPhone smartphones.

One of the charts from the ChangeWave survey shows that Apple has come closer to hitting customers wants with their first cell phone than all the other phone manufacturers who have been making phones for years.



Since the introduction of the iPhone last year, every phone maker has come out with a copycat phone that looks like the iPhone. But just because a phone looks like an iPhone doesn't mean that it is an IPhone or that it works like the iPhone.

It is just like LG, Motorola, Nokia and the rest of the old-guard of the cell phone business to superficially copy the look of an iPhone and think they have copied the important aspects of it. They are so clueless. They have no idea why people even like the iPhone. It's not because it's black and has nifty icons on a touchscreen (which is all they have copied in their lame copycat phones). It's because the buttons actually work and provide features and functions people actually want in a way that ordinary non-technical people can figure out and use.

The hardcore phone geeks argue why their phone is better by providing a long list of technical specifications and jargon like H264, megapixels, and CPU speeds, but these are't the things that satisfy users. What satisfies users is the overall experience - not what the phone says it does on paper, but what can I do with it, in real life.

And in that regard, Nokia, Motorola, and the rest are light years behind Apple and the iPhone. High-end phones like the $750 Nokia N95 may win on technical specifications but tech. specs. only matter if users can apply them to real world problems and what the research shows is that Apple has done a much better job with that with their first phone than all the existing cell phone makers did with twenty years of experience behind them.

And superficially copying the iPhone is not going to cut it. They are going to have to copy the ease of use, the easy access to all those powerful features to solve real problems, and the highly effective integration that iPhone offers (meaning usable by real mainstream users, not just tech geeks).

Among tech geeks, the attitude is that only people too dumb to figure out a phone like the N95 get an iPhone - so I risk being called a "noob" for praising the iPhone - but the irony is that is groupthink at its worst, supposedly the opposite of what "smart people" do.

It's time for Nokia, Motorola, and also the carriers, Verizon, T-Mobile and the rest to wake up and realize that Apple is on to something - and painting your phone black and giving it a touchscreen is not an effective response.