MagicJack promises dirt-cheap phone calls

Scott dunn By Scott Dunn

Making phone calls over the Internet is nothing new, thanks to well-known providers like Skype and Vonage.

But a simple USB device from an upstart, MagicJack, promises to bring voice over Internet Protocol (VoIP) to the masses for as little as $20 USD per year.

What is MagicJack and how does it work?

MagicJack is a $40 appliance that’s about the size of two USB memory sticks. You plug any analog telephone into one end, and insert the other end into the USB port of a computer with broadband access. After waiting about one minute while the device self-installs, you can make free calls to any phone in the United States and Canada (no matter where in the world you are) — there are no per-minute charges. After the first year, you pay $20 annually for these calls. That’s not $20 per month, it’s $20 per year.

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MagicJackFigure 1. The MagicJack device (left) is approximately the width of two USB flash drives and takes about 30 seconds to initialize itself each time it’s plugged in.

MagicJack rates for calls to phones outside the U.S. and Canada vary from 2 cents per minute to landlines in the U.K., Germany, and France up to $1.21 per minute to Antarctica, according to a list posted by YMax, MagicJack’s parent company. Service to these countries at these rates will reportedly begin in early 2008. If the international party you are calling also has a MagicJack, the call is free.

Except for a desktop shortcut, MagicJack installs no software on the host computer. The company says this allows the device to work on PCs at Internet cafés that don’t permit the installation of executable files.

One frustration is that you must wait 30 seconds or more for the software to load from the device each time you plug it in. But the great benefit is that you can easily take this pocket-sized product with you to use on a laptop in hotels or wherever you may find broadband access. Currently, only Windows XP and Vista are supported, but a Mac version is in the works.

For home use, the product has an analog phone jack, into which you can plug any ordinary telephone. For travel, MagicJack works with any standard headset and microphone, including any that may be built into your laptop. Bluetooth headsets are also supported.

For incoming calls, U.S. customers currently receive a free inbound phone number. You can choose from 116 area codes in 31 cities. That sounds like a lot, but still includes only 23 states. Los Angeles is a major metropolis that’s notably absent from MagicJack’s service, but a company representative says L.A. area codes should be available by Dec. 25. A list of the currently available area codes is posted on the MagicJack site.

Figure 2. You dial calls using MagicJack’s on-screen softphone or the buttons on an ordinary telephone that you plug into the USB device’s RJ-11 phone jack.

Eventually, you’ll reportedly be able to use MagicJack’s site to change your phone number and even port your own, existing landline phone number (for a fee). Those features, however, are not yet available.

In our tests, the sound quality on MagicJack phone calls was very clear, although there was a faint buzzing sound on the caller’s end on one call. Windows Secrets editorial director Brian Livingston recently took a MagicJack on a business trip to Florida and reported no problems calling U.S. numbers via a laptop with a hotel Wi-Fi connection. Every call, however, brings up the on-screen softphone window with its built-in advertising pane on the left (see Figure 2), even if you’re using a regular phone for dialing rather than clicking the on-screen buttons with your mouse.

Other MagicJack features include:

• Free directory assistance using the Free411 Web site (in our tests, this site performed poorly at finding business phone numbers, so you get what you pay for);

• Free 911 service in the United States (you enter your physical address once, which you can change at any time);

• Free voicemail (even if your computer is off); and

• Free call forwarding to your cell phone or any other phone.

The 911 service requires not only that you enter your current address, but also (as with any MagicJack call) that you have power and a working Internet connection so you can dial the number.

If you use Microsoft Outlook, you can also download a plug-in that adds a toolbar to that program for one-click dialing of a selected contact.

MagicJack costs less than other VoIP services

MagicJack is only the latest entry to a growing number of VoIP service providers, two of the most popular being Skype and Vonage.

Perhaps the most similar product to MagicJack is the V-Phone from Vonage. This USB device is the size of a typical flash drive and includes an audio jack for the included cell-style headset (earphones and microphone). Like MagicJack, you plug a V-Phone into a computer with Internet access and, after about 30 seconds of setup, begin calling. You dial out using the on-screen keypad (which is optional in MagicJack). An incoming phone number is included. Like MagicJack, you get voicemail, a call log, and a contact list.

Compared to MagicJack, however, the V-Phone rates are astronomical. Vonage’s cheapest billing plan (see Table 1) costs $180 USD per year for 500 minutes per month. Unlimited calling is available for residential users for $300 per year, while businesses pay $420 per year. The fees include all calls to the U.S., Canada, and a few European countries.

Skype, on the other hand, does not include any hardware. It’s free software that you download and install on your computer. The software includes instant messaging and file transfers, but to make VoIP phone calls, you’ll also need a Skype-compatible headset.

Skype charges $30 a year for unlimited outgoing (SkypeOut) calls to the U.S. and Canada, plus just over 2 cents a minute for calls to 30 selected countries, more to others.

To get a number for incoming calls, the SkypeIn service costs $18 for three months or $60 per year, a price that includes voicemail and call forwarding. (You can also buy up to 10 phone numbers using most U.S. area codes, as well as those from some other countries.) By contrast, if you have MagicJack service, incoming calls are free.

Table 1. MagicJack is cheaper than similar services. (All amounts in U.S. dollars.)

Vonage V-Phone
Unlimited outbound
calls from anywhere
to U.S. & Canada
(includes landlines
in five EU countries)
Unlimited inbound
calls from anywhere
Initial cost
$40 (includes 1st
year of service)
Free (software
Other calling
hardware needed
Analog phone
or headset
None (headset

Is MagicJack too good to be true?

With rates as low as those offered by MagicJack, how likely is it the service will survive in the long haul? That’s an open question, even for telecom experts, some of whom don’t expect any VoIP service to last for long. But MagicJack’s business model does offer some advantages that aren’t found in its competitors.

MagicJack differs from companies like Vonage and Skype, who buy their connection services from telecom businesses known as Competitive Local Exchange Carriers (CLECs) and other names.

MagicJack’s parent company, YMax — founded by telecom veteran Dan Borislow — is itself a CLEC that’s certified in 49 U.S. states (soon to be 50). Because the company owns much of its own switching and gateway hardware, YMax can make money by giving out phone numbers and leasing the lines it owns to other VoIP and telecommunications providers.

This infrastructure also gives the company more control over voice quality, asserts MagicJack marketer Don Bruns in a recent issue of TelephonyOnline. Founder Borislow echoes this point in a Broadband Reports article.

In addition to sales of the MagicJack hardware (and the $20 annual fee starting one year later), MagicJack intends to sell advertising that will appear next to the on-screen softphone any time you use the product. Indeed, as an article on the Broadband Reports site points out, MagicJack’s Terms of Service document goes so far as to state that “these advertisements are necessary for the magicJack device to work.”

Whether this business model is sufficient to make MagicJack a viable, long-term success, only time will tell. In the meantime, consumers can take advantage of MagicJack’s low rates and portable calling convenience wherever a computer and a good Internet connection can be found. For more information, see the MagicJack site.

Reader Rand New will receive a gift certificate for a book, CD, or DVD of his choice for his help in suggesting this topic. Have a tip about Windows? Send us your tips via the Windows Secrets contact page.

Scott Dunn is associate editor of the Windows Secrets Newsletter. He has been a contributing editor of PC World since 1992 and currently writes for the magazine’s Here’s How section.
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