Why Ooma is dooma'd
At first I was loath to even join in what Uncov calls the "A-list rub and tug" on Ooma, the telecom startup launched by Andrew Frame, the entrepreneur who looks like a model, and Ashton Kutcher, the Hollywood star who actually was a model. Like its founders, Ooma is all looks, no substance. Launched late, Ooma's product, a piece of hardware that lets you place free phone calls over the Internet, looks set to flop, as insiders predicted, because its creators fundamentally misunderstand both consumers and technology. But at least the box, like Frame and Kutcher, is pretty. Read on to learn why looks don't matter in telecom — and why we're putting Ooma on immediate deathwatch.
Ooma's main attraction, of course, is that it offers free calling. Free, that is, if you don't count the $399 cost of the Ooma Hub, a pretty but ridiculously overpriced piece of technology. Plug a regular phone into the Ooma Hub, and you'll get free calls placed over the Internet — just like the free calls you get via Skype and countless other voice over Internet protocol, or VOIP, services.
The Hub does one clever thing: It lets you keep your existing wired phone line for 911 service and for backup during Internet outages. But you could do the same thing yourself by simply calling the phone company and signing up for its cheapest service. (I'm surprised, frankly, that the normally sharp Walt Mossberg didn't notice that fact.)
The problem with Ooma's business model is that no one's going to pay $399 for a device that lets you do something you can already do. If you have DSL or cable, your broadband provider has likely thrown in voice service — and equipment — essentially for free. Everyone from AT&T on down offers VOIP plans with subsidized equipment. And 20somethings — the tech-savvy early adopters who might otherwise flock to Ooma — have ditched landlines altogether. Why would they start tethering themselves? Just because Kutcher gives them a dreamy look? I don't think so.
The wireless industry has proven time and time again that people would rather pay more per month and get a cheap phone up front. The same dynamic has hobbled TiVo; faced with the choice of paying hundreds of dollars for a TiVo box, or renting a subpar digital video recorder from their cable company, they go for the rental.
We're not worried for Frame or Kutcher. We predict Kutcher will soon head back to Hollywood — and with his looks, perhaps Frame, who bears a noted resemblance to George Oscar Bluth II of "Arrested Development," will follow him there. We wish him better luck in the movies.
