TelEvolution hopes someday consumers will feel more excited about VOIP, for several hours at a time, by trying its little blue box.

The startup, led by one of EarthLink Inc. (Nasdaq: ELNK)'s founders, David Beckemeyer, is selling a box called the PhoneGnome, which sits between a consumer's landline phone, wall jack, and broadband connection. (See In-Stat Reports on CPE and In-Stat Reports on VOIP.)

As the consumer makes phone calls, the PhoneGnome decides if the calls can be placed as VOIP calls via the broadband connection, or if they must be sent via the regular circuit-switched infrastructure. (See Jabber Jingles All the Way.)

This technology does compete with several new items coming to market. For instance, there are scores of cordless phones that now have VOIP service capabilities built in -- usually with a pre-programmed connection to services like Vonage Holdings Corp. (NYSE: VG) or Skype (eBay Inc. (Nasdaq: EBAY)). But many of these phones require the user to decide whether a call should be VOIP or circuit-switched. (See 8X8 Intros SIP Softphone.)

But TelEvolution's appeal won't be limited to a single device, CEO Beckemeyer says. “We don’t see PhoneGnome as a little blue box, we see it as a technology that in the future will be embedded in routers and phones and all kinds of devices,” Beckemeyer says. “We almost want to be out of that hardware business... "

But Beckemeyer says explaining the PhoneGnome approach to device makers has been a challenge. “Already, as young as VOIP is, there is already a lot of presumptions about how it is supposed to work.”

“Ours is a completely different model, where the edge device really is a computer and a proxy and a server,” Beckemeyer says. “It’s a much more key ingredient of the overall architecture.”

Vonage and Skype did not wish to comment on PhoneGnome and its approach. SunRocket Inc. and Nuvio Corp. did not immediately return calls.

To date, consumers can buy the PhoneGnome only through one major retail outlet: Staples. (See The New New Telcos .)

VOIP analyst Jon Arnold points out that because the device embraces the land line, the RBOCs might be natural distribution partners. Beckemeyer doesn't know if the RBOCs consider his product friend or foe. (See Folks Getting Hip to VOIP.)

"They [TelEvolution] are friend because they perpetuate the POTS environment, and they're foe because they enable you to siphon long distance minutes away from the RBOCs," Arnold says.

But the PhoneGnome does have some advantages over VOIP-only services. For example, one of the loudest complaints against replacement VOIP services is the hassle of getting a new phone number or transferring the existing one over from a landline carrier. PhoneGnome’s approach sidesteps those issues entirely.

The downside may be that the user is still paying for a landline, but that may not be a bad thing, either. Beckemeyer points out that many people want to keep the land line around for E911, or in case the power goes out.

TelEvolution is still a small, privately held, company and Beckemeyer says he and his family are the largest shareholders. The company won't disclose who else has invested in it, but it does list its "advisors." These include LinkedIn CEO Reid Hoffman, Packeteer Inc. (Nasdaq: PKTR) founder Robert Packer, and Six Apart Japan chairman Joi Ito. (See Telecom IPOs Rare in 2005.)

Beckemeyer says talks are under way for an institutional round of funding. “We’ve had a flurry of interest in the last couple of months.”

— Mark Sullivan, Reporter, Light Reading