I just read an article about Ooma, a new VOIP phone service that's currently in beta.
According to the article, you'll have to buy a $400 hardware hub and $45 per room extension ports, but then all your phone calls will be free.
The way it's planning to do this is unique. Whenever someone sets it up with a land line as a backup, it uses the land line to help make calls cheap for everyone.
When two Ooma users want to talk, it will be entirely over the internet. But let's say you're in New York, using Ooma, and you want to call your mom in Seattle, and she's got regular telephone service from Qwest. Ooma will route the call to the Ooma box of another Qwest user who lives near your mom and has a land line plugged into their Ooma box. The Ooma box which is receiving your call from the internet, calls your mom on the land line, then ties the two calls together.
The article talks about how Ooma's big challenges will be getting enough users to buy their expensive hubs to build out a network that allows them to connect a big majority of calls this way and and avoiding being sued out of business like Verizon sued Vonage.
But there's a simple thing they overlooked, your TOS (terms of service) agreement with your local phone company. A residential line with free local calling is supposed to be for your use, not for use as a public terminal. It would be very easy for the phone companies to make a change to their TOS which says you cannot use a residential line as an intermediary point to connect calls for a third party.
One way to do this would be to limit your minutes. They wouldn't actually publish the number (much like Comcast doesn't), but if you went over a certain number of minutes of use a month, they'd claim that was proof you were violating your TOS and cut off your phone service (and your internet service if you're a DSL customer). Then you'd be required (if you wanted a land line) to sign up for a business account where you paid a per-minute fee for even local calls.
I have no doubt that the phone companies might try to sue Ooma out of business. But while they were at it, a few TOS changes would make Ooma's marketing a lot more challenging, especially when it got around that getting caught using Ooma could get you cut off with no phone and no internet, and leave you with a $400 paperweight.
But here's the real kicker. If Ooma is using your land line to make a call, you've technically got access to tap those calls. Ooma's FAQ states "ooma has been engineered to detect and thwart third-parties from being able to listen in on your phone calls. As a result, ooma is no less secure than a traditional landline."
Really. If I plug in a phone on an of the land line wiring and pick it up, how can Ooma make it so I can't listen to the call, but it's clear for both legitimate parties? To the best of my knowledge, the only thing it can really do is hang up the call if it detects monkey business on the land line. And how much will Ooma users like those dropped calls?
But, more to the point, detecting and thwarting are not infallible. Look at the iPhone. What will Ooma do when a 15-year-old kid cracks that detecting and thwarting 3 weeks after Ooma comes out of beta?
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