There are a number of bright spots in the IP communications space as evidenced by the last ITEXPO in Miami but the consumer market is not one which you would imagine tops the list. Sure, there is massive growth in the space but unless you are a telco, Skype or a cable company it is tough to make money in the space.

But that hasn’t stopped thousands of companies from trying. One such example is ooma, a company which started out making consumer devices which bundle in free phone service. For about $199 you get what is more or less an answering machine/ATA combo. The company made a huge splash in the blogoshere in the summer of 2007 when it told the world it had a way to securely allow these devices to terminate calls over the PSTN from other users of the network. Many bloggers including me questioned how this was possible as anyone we thought could tap into calls made by others.

The company agreed and changed the way their devices work – now using a new network they have developed. There are no longer security issues I was told during a dinner meeting with CMO Rich Buchanan and VP Corporate Marketing Tami Bhaumik.

A topic of note is the fact the company is looking to launch an SMB VoIP solution in the near future which will support 1-10 users and include features such as an auto-attendant, call forwarding and more. The pricing model will be different as well.

But the biggest news the company may have is a product called Telo, a super-slick phone system which Bang & Olufsen could have designed. Between courses they wowed me with a prototype of the new capacitive–touch device. Oh and let me take a moment to apologize to the ooma design folks for getting butter on it – I didn’t know it was the only prototype.

Although I didn’t see the unit powered they told me the ooma logo glows blue when you are on the phone. The new device is slick on the outside and a powerful Linux-based computer on the inside. The goal of the company is to infiltrate your home with these devices and then entice you with add-on services such as home automation, network monitoring, etc.

As you can imagine I had to ask about how the competition is between ooma and magicJack – after all the night before the meeting I was up late and somehow got hooked on watching the magicJack infomercial in its entirety (again). Buchanan told me that many customers start with magicJack and then upgrade to ooma.

I then asked about the patent situation as we all know telcos took advantage of monopoly revenues to hire engineers who developed a number of patents (no products or services based on them of course) which could be used to stop any competitive innovation in the future. Vonage was obviously stung hard by the telcos and if ooma gets to become a household name, it is a certainty that ILEC lawyers will be meeting them in court.

Buchanan told me the company has its own patents and they have further vetted their products to ensure they don’t infringe on any of the patents used against Vonage.

In addition he mentioned one of the company’s investors is the FCC or more specifically the TD Fund, which is backed by funds from FCC auctions. Oh and by the way, the chairman of the FCC sits on the company’s board. I imagine if a telco were to sue, it would make for some less than cordial FCC interactions in the future. Oh and while on the topic, you can submit your very own business plan and potentially have an FCC chairman on your board as well by visiting this page.

But where was I – oh yes, the company also has a nice-looking DECT 6.0 cordless phone they will release with Telo. The phone allows call screening, MP3 ringtones, 12-hour talk time, HD voice, speakerphone, two-line support, intercom and a number of other useful features.

The system supports up to eight phone numbers and six phones – which I am told is more of a limit of home broadband upload speeds than of the ooma box. There is the option called Premier which allows an instant second line when a phone rings. This means you don’t need to put the current caller on hold to take the call… You just pick up another phone. Likewise you pick up a second phone and get dial tone when the first line is occupied.

I am impressed. I must say these guys seem to be on top of things. What I like most about Telo is that it will save consumers money while giving them what they will perceive to be state of the art consumer electronics. Buchanan and Bhaumik have worked together in the past and seem to have the requisite experience to get these boxes in the appropriate retailers. They seem to be doing this well so far. I also think they know how to work the relationships as they have been in the business for a while. Obviously it does not hurt to have an affiliation with the FCC in any business – this one included.

I am told sales in January were up which tells me the world seems to finally waking up to how VoIP can save them money. In the future there is a picture frame, in-house sensors and cameras on the product road map.

Now it is time for the disclaimer. I don’t have access to the company’s finances and didn’t do an audit. The two people in marketing are the only representatives of the company I have met. In case you aren’t aware, marketers are generally great promoters of products so you don’t usually walk away from meetings with a seasoned marketer and say, that product really stinks.

Having said that, I really like Telo and I sincerely believe Bhaumik and Buchanan have a tremendous understanding of the telecom space, marketing and retail. The move into the SMB market is really smart.

My only concern is in the area of product-line extension. I see the jump from IP communications to home automation as extremely challenging. This is because to most people ooma will be their phone company and they will have a difficult time understanding why they should buy non-telecom services from them. Generally companies fail at brand extensions. It is one of the most challenging things you can do. The best example may be buying a salad at McDonalds – obviously people do this but the McDonalds brand is firmly entrenched in our minds as purveyors of artery-clogging convenience-food, not something which is considered to be good for you.

I am glad I met with these ooma execs. I wish them well. The new Telo is one of the slickest telecom appliances I have seen in a while and I am very much looking forward to watching how the market reacts to it.

Various photos of Telo and the DECT cordless phone