MagicJack harnesses femtocell for VoIP

The device can be used with any GSM phone and bypass mobile operators, the company says

MagicJack is demonstrating a device near the International Consumer Electronics Show this week that it claims will let consumers make VoIP calls using any GSM phone.

The company already sells a MagicJack made for use with conventional, analog desk phones. In the new product, coming in the second quarter of this year, it will replace the phone jack with a miniature GSM (Global System for Mobile Communications) base station, or femtocell. Any GSM phone from any carrier will be able to connect with the femtocell to make VoIP (voice over Internet Protocol) calls to anyone in the U.S. and Canada, MagicJack founder Dan Borislow said.

Like other VoIP service providers, MagicJack sends calls over an IP network instead of the standard public telephone network, so it can sell phone service for less. The company charges US$40 for the MagicJack and includes one free year of service, then charges $20 per year for subsequent years. That covers calls to other MagicJack users as well as to conventional phones. The pricing will remain the same for the new femtocell.

The current MagicJack is a device about the size of a matchbox with a USB connection and a phone jack. The USB connector plugs into the user's computer, loads software onto it, and uses the computer's power, processor and broadband connection. The femtocell will also use the PC, but it will let users make calls with their cell phones instead of wired phones.

Many carriers are already exploring the use of femtocells to improve coverage inside subscribers' homes and ease the strain on their own networks. A femtocell is designed to work like a cellular base station, but only within a home, and to carry calls over the subscriber's own broadband connection instead of the carrier's wired backhaul network.

MagicJack's femtocell lets users bypass mobile operators altogether. It can be used with any GSM phone on any band, including locked phones and the Apple iPhone, Borislow said. He expects most customers to make the calls with old phones that they haven't been using. The femtocell's range is wide enough to cover a 3,000-square-foot (278-square-meter) home, he said. Borislow said he didn't want to disclose how the femtocell can work with locked phones.

MagicJack, a subsidiary of a private company called YMax, launched its product two years ago and so far has sold 5 million MagicJack devices, Borislow said. The MagicJack is sold in retail stores including Best Buy, Walmart and RadioShack. He claims the service operates with 99.9 percent reliability and better call quality than Skype. Ymax, based in Palm Beach, Florida, had revenue of about $30 million in 2008 and $110 million in 2009 and is profitable, he said. Borislow said the service is so successful that the company doesn't have to charge for calls to phones on the public telephone network.

Also in the second quarter, the company plans to introduce a softphone application that will allow consumers to use the service through their PCs, without a MagicJack device. That service will also cost $20 per year, Borislow said.

The MagicJack is set to be demonstrated on Thursday night next to the ShowStoppers product showcase, which is being held on the sidelines of CES in Las Vegas.

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