Startup to sell $399 box that processes free Web calling

PALO ALTO, Calif. — A Silicon Valley startup will begin 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 for free 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 calls for free.

That architecture allows ooma to bypass the fees that most telephone providers pay to connect calls to landlines and cell phones.

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.