Ooma Starts Selling Free-Call Phone Boxes

A Silicon Valley startup began 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 1,500 beta units, which have handled 325,000 calls. The system works like to 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 the long-distance portion of calls for free.

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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 launched 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.

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 and also connects calls via the Web.

Unlike Skype, which can be used with a headset but works best when both caller and recipient have the software and they both talk through their computers' microphones, Ooma uses standard home phones.

It also comes with conference calling, voicemail and an online "lounge" where users may change their preferences or get voice mail in an e-mail format — and it creates a free second line with the Scout.

Domestic calls are free even if the recipient does not have the Ooma box.

In addition, the company — which is planning a major software announcement in January at the International Consumer Electronics Show — expects to offer more services that users can download from Ooma.com as they become available.