Frame, a high-school dropout who'd nevertheless managed to get a job at Cisco, the networking-equipment maker, could have been at least a TV star himself; he looks eerily like Will Arnett's G.O.B. character on Arrested Development. And Ooma's products, the Hub and the Scout, are pleasant enough to look at, too. As if there wasn't enough of a Hollywood connection, Frame lied about the Palo Alto-based startup's age.

But a pretty face is not enough. Ooma's problem, minus the technical analysis, amounted to this: It was never as simple as a Hollywood pitch. Try as he might, Kutcher could never turn it into a movie trailer. (Perhaps if he'd hired the late voiceover artist Don LaFontaine to intone "In a world without phone bills ...", it might have had a chance.)

Cell-phone carriers long ago figured out that making phones cheap and charging more for monthly service helped win subscribers. Ooma tried to flip that around, charging $399.99 for a Hub device and offering phone service for free. It has since slashed the price to $249.99 — but enrolled all new customers in a $99.99/year service plan for extra voicemail features. (You have to cancel the service to after a 60-day free trial to avoid being charged for it.)

Frame tried to compensate for these flaws in his business plan with a crush of PR. Servile tech blogs like TechCrunch, eager to talk up the Kutcher connection, played along without asking hard questions about Ooma's product. Ultimately, that's what undid him. Our tipster tells us the board "is done with Frame's lack of integrity and moneywasting PR trips and took him out." Other executives have been reshuffled, and a former president of Vonage — a more conventional Internet-phone service that's also losing money — is trying to help the company raise money.

If this were a movie script, it would be time for the third act and a happy ending. But I don't think Ooma will go Hollywood in that way, either.

Update: Tim Weingarten, an Ooma board member and investor, has sent the following response:

I read your article today about Andrew Frame, and as an investor and ooma board member from when I first seed-funded ooma, I feel compelled to correct several inaccuracies. I think it's important you hear this directly from someone who is both a board member and also the largest investor in the company.

1. Andrew has not been fired from the company. The company has made substantial progress with Andrew as CEO. It has been Andrew's vision, leadership and guidance that made it clear to me and the other ooma investors to invest the $45m of capital that has gone into the company over the last 4 years. Andrew's involvement and vision for the future product direction is a critical aspect of the board's intent to invest more in ooma in the future.

2. Andrew's success and contribution at Cisco was the foundation for the original bet we placed on ooma. He joined Cisco at a very young age and excelled quickly to be a top respected technical expert and contributor throughout the organization. We place our bets on people and we performed significant due diligence on Andrew's accomplishments at Cisco and elsewhere and were very impressed with his references and contributions in companies small and large before ooma.

3. The company is growing revenue rapidly and we are pleased as a board with their progress.

The departures include Yahoo veteran Tish Whitcraft, CFO Tom Cronan, and VP of communications Sarah Ross — though we're told Ross is still consulting for the company. Outcast PR, Ooma's agency, tells me it no longer represents the company; dropping a PR agency is usually the sign of a company whose cash is running short. No wonder: Ooma's phone device is overpriced and technically unimpressive.

The insular crowd, however, all but ensured I'd meet up with Ghosts of Valleywag Past. No, not a spectral Nick Douglas or a scary Nick Denton — but other people I've read about, or written about. That vaguely familiar girl chatting with Jeremy Stoppelman? Oh! It's his ex-girlfriend Liza, reportedly the center of love triangle involving Valley good-time-guy Sean Parker. There's Steve Chen, the YouTube founder, with spiky hair and glasses, holding hands with his girlfriend while bidding Stoppelman adieu. Over there, by the bar, is Ooma CEO Andrew Frame, wearing a form-fitting leather jacket and sporting bangs. Bangs? Really? And Keith Rabois, the ex-PayPaler now at Slide, with the controversial Stanford history.

Then I met Snocap founder Jordan Mendelson, whose appearance with a bevy of beauties at last year's Yelp party lead us to crown him the Valley's newest bad boy. Boy did we peg him wrong. My first thought, after taking in his supreme untallness, was that he seemed like such a nice guy. And so unassuming. The expression of smug self-satisfaction in last year's pictures was missing. As was, apparently, his job.

I asked about Snocap, the troubled music startup he founded with Shawn Fanning, whom he worked with at Napster. Mendelson confirmed our rumor that he had left for another project. So, was he going to indulge his Valleywag-created persona and party hearty all night? Sadly, no. Mendelson begged off early during the afterparty at Mr. Smith's, in order to prepare for a venture meeting today. The bad boys are growing up — or at least learning when they need to put on appearances.

After he joined the startup in question, Cerda saw the board bring in a CEO with a "big company background." A guy who subsequently who went around the founders and straight to the board, in the middle of financing, to tell them that the company was screwed.

While Cerda was talking, I was thinking, "Why blame the new CEO? I mean, come on, this is Ooma, which sells a pointless $400 phone gadget thing and hired actor and model Ashton Kutcher to make wacky commercials. We could have told you it was doomed from the start, too."

Cerda's lesson? Stick to your circle of trust. Well, it worked for Peter Thiel's PayPal gang, so Cerda might have a point. But it's not going to make skittish startup founders any less paranoid. Maybe that's a good thing.

Update: There's an odd postscript to Cerda's tale. He never named names in his brief speech, and certainly didn't do anything to correct listeners' impression that he was talking about Ooma. (Or to be fair, have much chance — he was cut off before his four-minute time allotment was up.) But Cerda now tells us the company in question wasn't Ooma. Who was it? The only other startup he mentions founding on his blog is The Yoga Company, a San Ramon yoga chain which seems an unlikely venue for such boardroom drama.

Cerda now explains that he was talking about a company where he worked as an early employee, not a founder, and that he was relaying a lesson he later applied as a founder. That narrows the possibilities to the host of network-equipment companies he worked at early in his career: Netopia, Livingston, Redback, Procket, and Trapeze Networks. So which one do you think it was? Cerda's still being discreet, but we're hoping you won't be.

To entice potential customers, Ooma created the commercial above to get viral attention about its product. Ooma "creative director" Ashton Kutcher — Mr. Demi Moore himself — produced the clip, which features an unfortunately dressed creepy kid actor and more quick cuts than an anime cartoon. We already had our doubts about the viability of the service. This doesn't help.

The Ooma Hub looks slicker than the PhoneGnome Box, which retails for $99. And of course, PhoneGnome doesn't have a Hollywood star hawking its device, while Ooma does in the form of "creative director" (read: overpaid spokesman) Ashton Kutcher. Despite the surface difference, Ooma's feature list — 911 calls through regular phone lines, free calls to "members" — is so similar to PhoneGnome's that we can't help wondering if Ooma founder Andrew Frame, desperate to launch his long-delayed startup, didn't just crib Ooma's product plan from PhoneGnome. And jack up the price fourfold. Because everything costs more in Hollywood, of course.

Ooma's main attraction, of course, is that it offers free calling. Free, that is, if you don't count the $399 cost of the Ooma Hub, a pretty but ridiculously overpriced piece of technology. Plug a regular phone into the Ooma Hub, and you'll get free calls placed over the Internet — just like the free calls you get via Skype and countless other voice over Internet protocol, or VOIP, services.

The Hub does one clever thing: It lets you keep your existing wired phone line for 911 service and for backup during Internet outages. But you could do the same thing yourself by simply calling the phone company and signing up for its cheapest service. (I'm surprised, frankly, that the normally sharp Walt Mossberg didn't notice that fact.)

The problem with Ooma's business model is that no one's going to pay $399 for a device that lets you do something you can already do. If you have DSL or cable, your broadband provider has likely thrown in voice service — and equipment — essentially for free. Everyone from AT&T on down offers VOIP plans with subsidized equipment. And 20somethings — the tech-savvy early adopters who might otherwise flock to Ooma — have ditched landlines altogether. Why would they start tethering themselves? Just because Kutcher gives them a dreamy look? I don't think so.

The wireless industry has proven time and time again that people would rather pay more per month and get a cheap phone up front. The same dynamic has hobbled TiVo; faced with the choice of paying hundreds of dollars for a TiVo box, or renting a subpar digital video recorder from their cable company, they go for the rental.

We're not worried for Frame or Kutcher. We predict Kutcher will soon head back to Hollywood — and with his looks, perhaps Frame, who bears a noted resemblance to George Oscar Bluth II of "Arrested Development," will follow him there. We wish him better luck in the movies.