MagicJack mystique

Unlimited long distance for $19.95 a year? It sounds more like a Ron Popeil commercial than a business plan.

The magicJack device costs $40 for the first year and includes a year of unlimited long distance calls anywhere in the United States. Plug one end of the over-sized thumb-drive device into a USB port, plug a phone into the other end of the device, dial away. The startup has sold more than 400,000 devices six months after launch and is now selling them at a clip of 7,000 per day, adding twice as many new accounts over the period as Vonage.

According to a variety of media pundits, the magicJack gizmo is easy to install and delivers consistently good sound quality on phone calls. Is it a threat to phone companies? You can't bundle TV and broadband with it. And consumer VoIP has been notoriously difficult to make profitable (See Vonage, SunRocket).

However, magicJack isn't perfect. There have been problems with delivering quality tones to menu-driven services and quality of service over cell phone broadband. Customer service--the Achilles heel of many businesses today--is only available through online chats. And you only can make and receive phone calls as long as your computer is on, so media pundits seem to be mixing and matching magicJack's functionality and convenience between Skype and Vonage.

Making money will be done through selling ads, displayed as a part of the software client that runs as magicJack is operational. The company also reserves the right to monitor the numbers dialed to in order to tailor ads, so users are going to give up some privacy in the process.  

For more:
- U.S. News and World Reports gushes praise on magicJack [1]

Related articles:
SPOTLIGHT: MagicJack voice-via-USB gains steam [2]
Telecom's voice is changing [3]