Ooma  /  ooma
Users of the ooma system plug a white machine between their home's broadband connection and a primary telephone.
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updated 9/18/2007 8:13:41 PM ET 2007-09-19T00:13:41

A Silicon Valley startup will begin selling $399 gadgets Wednesday that consumers with broadband Internet service can use to make unlimited free domestic phone calls.

Backed by $27 million in venture capital, ooma Inc. has distributed for free 1,500 beta units, which have handled 325,000 calls. The system works like peer-to-peer and distributed computing through both cable and DSL lines.

While traditional phone switches connect a local toll call or a long-distance call through the public switched telephone network, ooma uses the Internet to connect calls for free. That architecture allows ooma to bypass the fees that most telephone providers pay to connect calls to landlines and cell phones.

Users plug a white machine smaller than a macaroni-and-cheese box between their home's broadband connection and a primary telephone. They can connect a secondary phone using an ooma "Scout," to cost $39 each. The system relies on a patent-pending software code, but executives won't provide what they consider proprietary details.

When ooma users pick up the phone, they hear a special dial tone. But they dial normally, and they retrieve voice mail by pushing a button on the ooma Hub. Users pay for international calls online with a credit card.

"Everyone is aware you can use broadband for phone service, and I think when they saw ooma it was what consumers were waiting for," CEO Andrew Frame said.

On Wednesday, ooma will launch an 80-second YouTube advertisement produced by ooma creative director Ashton Kutcher, the Iowa-born model who starred in the sitcom "That 70's Show." Kutcher wrote in an e-mail to The Associated Press that ooma "opened my eyes" to technology's power.

"Ooma is the future. I would be blind not to see that," he wrote. "We can remove the space between people and become closer to one another. That's the ultimate opportunity."

Consumers remain skittish about alternative phone providers following the July shutdown of SunRocket Inc., the No. 2 standalone Internet phone company after leader Vonage Holdings Corp. Ooma also competes against eBay Inc.'s Skype division, which has more than 220 million registered users.

Unlike Skype, which requires both caller and recipient to be using it and works best when they talk through their computers, ooma uses standard home phones. Domestic calls are free even if the recipient does not have the ooma box.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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