magicJack Femtocell Device Officially Announced

In the past two years magicJack has barraged television viewers with ads for its eponymous VoIP devices. These plug-and-play tools deliver a home or business phone number—including free local and long distance calling in U.S. and Canada—for $20 a year. (See our review here.) The company says it has so far sold five million units.

Now the company has taken another step forward, extending the same calling capabilities, at the same price, to home users’ cell phones. magicJack inventor and founder Dan Borislow is calling it the smallest, lowest cost, plug and play use of femtocell technology.

The device—essentially a miniature cell tower that plugs into a USB port on an Internet-connected computer—can be used to augment an existing magicJack or can serve as a standalone means of achieving lower rates and clearer reception on a cell phone. Due out on the market in about four months, the device should cost about $40 along with the $20 annual subscription.

With the device deployed, cellular callers anywhere in a 3,000-square-foot home would have their calls pass through magicJack’s own IP telephone network. Outside the house the user’s phone would tap back into the user’s existing mobile carrier network.

It took the company six years to develop its mobile offering, which relies on a femtocell, a small cellular base station that connects to the service provider’s network via the subscriber’s broadband connection.

Borislow said his company has done more than harness the power of femtocell: It has packaged the technology in a way that will sell.

“We sell 5 million magicJacks because it is easy to use,” he said “All the other carriers have blown their opportunity with femtocell because they have made it too difficult to use and too expensive. You have $250 devices with high monthly fees, and they are very difficult to install.”

Claiming a setup time of less than a minute for his product, Borislow pointed to Verizon’s The Hub as a similar offering that fizzled on the launch pad this fall.

While some regulatory questions have been raised in regard to femtocell uses, Borislow said he has no concerns. In the first place, he said, FCC regulations only prohibit interference with a carrier’s operations. Since the use of magicJack is elective, he said, interference is a non-issue.

Moreover, he said, his company’s carrier-agnostic device “is exactly what the FCC wants. They wants cell phones to be carrier agnostic. They don’t want cell phones to be exclusive to a carrier. They want it because the consumer wants it.”

As to carrier concerns, Borislow sees a stronger indoor signal as an inducement to cooperation. Carriers should welcome femtocell “because their cell phone or smartphone will be a much more useful device,” he said.

With the announcement of its femtocell capability, magicJack now faces a further challenge: Bringing to new device to the public. When the company first came out with magicJack it spent “tens of millions of dollars” running a 28 minute infomercial, Borislow said. “That’s what it is going to take for this product, just because nobody has ever heard of something like this before.”

The hardest point all along has been to convince people they could buy decent phone service for $20 a year. magicJack is able to deliver that price point thanks to its lineage. The organization’s parent company YMAX also owns its own chip company, its own softphone company, and its own softswitch/SBC/application server company. With control over so many links in the chain, the company is able to deliver extremely low-cost service, Borislow said.

At the same time, the connection to YMAX also may help magicJack in its efforts to overcome its image as merely the as seen on TV company. “This kind of thing just adds more credibility to the company, and when you add more credibility you get more sales.”

Those sales should come through existing relationships with a broad range of retailers including Walmart, Best Buy, Target, Radio Shack, CVS, and Walgreens, among others.

As Borislow prepared to roll out its femtocell offering in these diverse outlets, he expressed confidence that magicJack’s cellular access product will quickly gain primacy in the market.

“Everybody else was going down the same path to develop femtocell. Everybody was building the same thing and the same thing is garbage,” he said. “They’ve got years to catch up.”

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