VOIP's Little Blue Box

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

paulej 12/5/2012 | 4:08:58 AM
re: VOIP's Little Blue Box Skype does not need to discuss this box, because there is already wide support in the industry for Skype with such boxes. They're slightly different, of course, since that Skype ATAs have to interface with the PC. Nonetheless, Packetizer sells them, as do many other other USB Phone retailers.

Actually, this raises an interesting question about various VoIP devices on the market. There seems to be a big interest in having WiFi phones. The question I want to have answered is: do each of those WiFi phones get counted as a separate phone line? If so, I'd much rather keep the more traditional ATA-type devices and just plug in relatively cheap traditional cordless phones. It also allows me to use the wiring already in my house.

neillw 12/5/2012 | 4:08:52 AM
re: VOIP's Little Blue Box There's nothing radical here, just a simple one port VoIP gateway.
robpatters 12/5/2012 | 4:08:35 AM
re: VOIP's Little Blue Box Is it just me or are there other people out there who realize that Phonegnome is just a marketing gimmick with very little substance behind it?

There is absolutely nothing innovative about it. In fact this is a direct replica of the Sipura 3000, which came out a few years ago. Check it out.


The industrial design is even the same. The only difference is the addition of the Phonegnome logo and the marketing tricks intended to convince people that this is something innovative that will somehow improve the way in which they communicate.

The VoIP industry evolves on the backs of true innovators like Skype and FreeWorldDialUp, who strive to break down communication barriers, and actually have large networks of users. Looks like our friends over at PhoneGnome have instead decided to take a step back in an attempt to make a quick buck.

I would bet that there aren't more than 1000 Phonegnomes out there - a real comfort when you realize that you can only call other PhoneGnome users for free. In addition to shelling out over $120 for their appliance, I have to pay a monthly fee for my own telephone service provider. This is progress? What are they actually offering me? I guess I can buy one for my grandma, set it up, and talk to her for free - but then I realize that for her to use a PhoneGnome she'll need to have a broadband connection, which means she probably has a computer. In that case I might as well download Skype and talk to granny as much as I want, without the need for additional equipment.

There is absolutely NO VALUE ADD in PhoneGnome.
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