A Conspiracy of One

I like the pic Doug Mohney runs next to his FierceVoip column because he looks just like my dad.

ooma, but definitely no Thurman

ooma, but definitely no Thurman

He sounds just like my dad too. Both men seem to function under the assumption that facts and logic should just not stand in the way of the story they want us to believe.

For my dad, it was constantly repeating that Reagan was the greatest president in all of time because he “he had the cajones to bring down that wall and the Soviets too,” as though Pepsi, Levis, the Stones, the bald guy with the red state of California on his forehead that ran the politburo for 15 minutes — not to mention the Germans and the Russians — had nothing to do with it.

For Mohney, the story is perhaps less of a historical (even hysterical, given that dresser drawers — what the Spanish cajones means — hardly seem to endow any special powers) whopper, but definitely a tall tale in the context of the teeny tiny world of VoIP communications. The headline kinda gets it started: “The ooma conspiracy — or why Vonage is ultimately doomed.

As Jon Stewart, my favorite news anchor, likes to say as he lowers his bottom lip and slowly flicks his right hand at the camera: “Go ooooonnnnn.”

It turns out that Mohney had a phone conversation with the CMO (yes, my dad is also impressed with three-letter acronyms, even if he doesn’t know what the letters stand for; Chief Malarkey Officer?) of ooma, and came out convinced that the company’s model would soon put Vonage out of business. 

You may have heard of ooma, and if you have it’s probably because, for some reason, Demi Moore’s boy-toy hubby is a big part of the company’s business plan (or at least he shows up in a lot of the company’s photos). The company story is (at least this week, because it’s changed a few times since hoisting itself on dozens of tech journalists and few yawning others a couple of years ago) that you go to Best Buy, put down $250 for a box with wires and tubes (and, yes, Asterisk, which you can put on that old computer in the garage for $0) inside, and make phone calls for the rest of your life for free.

Now, I don’t know about Vonage’s long term viability. I’ve been reading the company has been going out of business since I was fresh out of high school, and it still has a pulse. What I’m relatively certain of is that if Vonage does the Circuit City dance, it ain’t going to be because of ooma, no matter what Ashton and company conspire to do.

Mohney’s logic goes something like this: Vonage will fail because they don’t collect for calls until they are made. ooma’s biz plan rocks, Mohney tries to convince us, because we are going to pay for five years worth of phone calls before we make them. At an average of 300 minutes of outgoing calls per month, the ooma flack told Mohney and Mohney dutifully reported, even if the box lasts five years, the company can do no worse than break even.

Aha!  And if I trade in 40 quarters for 100 dimes, even I could do no worse than break even, which in this economy is a really good margin.

In Mohney’s analysis, this is a “simple — yet game changing — business concept,” which is like saying a little league pitcher who can strike out 10-year-olds with both his right and left arm is changing the entire game of baseball.

ooma is banking on being a sort of hardware version of Skype, where ooma users calls that go over other ooma users hardware are basically of no cost to anyone. And here’s the clincher: Mohney reports that ooma has “sold ‘north’ “of 20,000 units to date.”

If you’re keeping count, that’s fewer than 1,000 units a month since the device first got blogging ink in July, 2007. Which roughly means that the chances of any single ooma user arbitrarily phoning through another ooma user is probably somewhere “north” of one in 50 million.

Now, if you’re gamey enough to battle these odds, and to spend $250 believing a machine manufactured by a company made famous to tens of people by a sitcom actor who married a really hot strip-teasing mom is actually going to deliver a lifetime of free calling, let my dad tell you all about the Berlin Wall and how the Gipper kicked Commie butt. 

Vonage, it’s fair to say, has real conspiracies to worry about .


  1. Hi Chuck,

    I always appreciate thoughtful analysis, but you really need to get the facts right. Here are some important details you are obviously not familiar with.
    1. Ashton is not involved with the company at all now and has not been for a year.
    2. The entire executive staff has changed as has the entire sales and marketing team over the past year.
    3. Distributed termination of calls was turned off in January of 2008, you’re right it was a bad idea.
    4. The Vonage point is that they go into a hole of approximately $400 with customer acquisition costs, hardware subsidy, and network infrastructure with each new customer they turn on. Ooma’s costs are wildly lower than that because the consumer is buying an important piece of the network infrastructure up front.
    5. Sales of the Ooma Hub did not really start in earnest until November of 2008 after a 5 month trial with Best Buy (that’s why there’s a whole new Exec and Sales team – sales from 2007 to early 2008 were abismal and the box was priced at $399 not $249). The ooma Hub is now sold through all major e-commerce vendors as well as 1,100 retail locations across the country.

    I hope this helps you understand that a lot has changed here at ooma over the last year. There were a lot of mistakes made in the sales and marketing of this product, but the engineering and network execution of the technology is nothing short of amazing. If you’d like to discuss this in more detail, I’m happy to buy you a cup of coffee while you digest the details.

    Rich Buchanan
    Chief “Malarkey” Officer

  2. Rick Wyffels says:

    I can tell you this. I have helped OOMA sell many units. All my family have them. Many friends have them. I have not heard of any complaints. The basic math is this to me. Spend a couple hundered bucks and be done with paying for phone service. Was going to dumb my land line all togehter, but this solution was what I am looking for. I was one of those that paid 349.00. Seems high and it is, but I got my money back and I havent been disappointed. I strongly encourage users to puchase your ooma for 200 bucks at Amazon. It will take but about 4 to 5 months to get your money back and from then on free is free forever. Thanks OOMA.

  3. Tim L says:

    I’ve been a Vonage user for all of the years that they’ve been on the verge of going out of business.

    It works fine, it doesn’t cost very much, and I’m not likely to switch to another service that wants $250 up front.

  4. Chad Fisher says:

    Been with Vonage for 4 years like the service as long as Comcast was working.

    Just switched to Ooma 2 weeks ago (amazon.com $200). So far it is very comparable to Vonage except the cost will be much less over the long run. I didn’t have a problem paying $200 for ooma hardware. Vonage wants you to pay $30 activation fee and some purchase the hardware for $70. So for a $100 more you get no monthly bill. Also Vonage charges you a cancellation fee if you have been with them less than 2 years.

    I hooked ooma up and it worked after activation. Called 911 to verify that the e911 worked the following day and I was surprised it worked. They may be running on open source software but it so far is kicking Vonages butt. With the announcement of Skype and Google Voice working with their hardware in the near future it makes me even happier to be with ooma. I have a Google Voice number and love it!

    Gave ooma a week to preform before requesting my number port from Vonage to ooma. After two days I disconnect my Vonage router completely and told Vonage to forward all my calls to the temporary ooma numbers.

    So get ur oooma today!

  5. Brandon C says:

    I have been using Ooma now for 3 weeks, and I extremely happy with the service. I have used Vonage, and skype regularly for years now, and the quality of Ooma is as good or better than Vonage. I installed the hub device in front of my wireless router, and the QoS implementation on their Hub device has been flawless. I configured my upstream and downstream bandwidth limitations in the hub QoS configuration, and have never been able to disrupt or degrade the voice quality. This was a big deal for me since I have many other devices, such as Vudu, Tivo, etc competing for bandwidth.

    Thank you Ooma! I will be recommending your service to everyone.

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