VoiP Providers Push New Pricing Models

17 December 2007

Residential voice telephony has become an unlikely hotbed for clever new products and new pricing models. For example, several VoIPproviders are now promoting unlimited calling for one-time or lowannual upfront payments, notably Ooma (www.ooma.com) and YMaxsMagicJack (www.magicjack.com).

With Ooma, once users have purchased a $399 hub device that connects toa cable or DSL modem, plus additional $39.95 units for each phoneextension, they are promised unlimited local and U.S. long-distancecalling for no additional charge. Oomas business model assumes therewill be no public switched telephone network (PSTN) termination feesfor Ooma calls. How so? A call originated by an Ooma user is routed viathe Internet to the local calling area of the destination phone number;there, it finds another Ooma users hub device that completes the callvia the latter users backup phone line. These lines exist becausecustomers are advised to keep a local telco line as a backup and toretain 911 access. The terminating telco only sees a local phone call,and meanwhile there is no visible cost to the Ooma user, whoseflat-rated backup phone line was borrowed.

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