How MagicJack Works

MagicJack was invented by Dan Borislow and launched in late 2007. Both the original MagicJack and the newer MagicJack Plus are analog telephone adapters (ATAs), roughly the size of a matchbox, that allow you to make VoIP phone calls over your Internet connection. The original has a USB connector and a standard RJ11 phone jack. The newer MagicJack Plus has both of those plus an Ethernet port, and it incorporates its own motherboard, removing the need for a constant computer connection.

To use the original MagicJack, plug the device into your computer's USB port and it automatically installs software on your computer. Once setup and registration are complete, you plug a corded or cordless phone into the phone jack and you should be ready to make and receive calls. You can even dispense with the physical phone and use the MagicJack soft-phone (software phone) to dial numbers via a virtual keypad on your screen and talk directly via your computer's speaker and microphone or an attached headset. This version requires that your computer stay on and awake constantly to make and receive calls. If you turn off your computer or it goes to sleep, you can still get voicemail, and call forwarding will still work.

To set up the new MagicJack Plus, you still need to plug it into a computer and go through several setup and registration steps. After that, you can either use it like the original -- via your computer -- or plug the device into your broadband modem or router via an Ethernet port (the cable is included). This arrangement will require you to connect a phone and to plug the device into an AC power adapter (also included). The main advantage over the original is that your computer does not need to be present, let alone turned on all the time, for you to make and receive calls. But as with original MagicJack, broadband is required.

MagicJack Plus is compatible with Windows XP, Windows Vista, Windows 7, Windows 8 and Intel-based Apple Macintosh OS. The original silver MagicJack is supported on all of the above except for Windows 8. Linux and non-Intel Mac users are currently out of luck with both versions.

As of fall 2013, your MagicJack Plus purchase comes with six months of service, which includes unlimited calls to numbers in the U.S., Puerto Rico, the U.S. Virgin Islands and Canada. This holds true even if you are using the MagicJack abroad. You can also call other MagicJack users for free anywhere in the world. You can make international calls with the device, but it requires purchasing pre-paid minutes.

You can purchase a year or five years additional service during setup or at any time afterward. The service also includes voicemail, caller ID, call waiting, call forwarding, 411 directory assistance, conference calling and E911 service (the VoIP version of traditional 911 emergency service, which sends your address along with the call). MagicJack's voicemail can be accessed via the software on your computer or by calling your phone number. You can also set up an e-mail address to have your voicemails delivered to your inbox as audio attachments. The software also saves contacts and call history logs.

MagicJack provides you with a free number, and you can select the area code and prefix, if available, and it doesn't have to be dependent upon your location. Initially, customers couldn't keep their own existing numbers, but now if you choose to do so, you can port your existing number, or pick a Canadian or vanity number, for additional annual fees.

The company also offers iOS and Android apps through iTunes and Google Play, for use on your phone or tablet. The apps allow you to use your WiFi or data plan to make VoIP calls to the U.S., Canada and to other MagicJack numbers anywhere, while avoiding using minutes or racking up roaming charges. If you don't have a paid MagicJack account, it will assign a random outgoing number to you every time you use it. You can also receive calls, although the caller will have to call a special number then enter your MagicJack app number.

MagicJack provides VoIP service, which means you bypass traditional twisted-pair copper phone lines within your home. Rather than making analog calls like with traditional phone service, you are using hardware and software to convert your call into a digital signal and send it over the Internet. But your calls still have to hit a telephone service network's lines at some point.

That's where the MagicJack business model comes in handy. Its parent company, YMax Communications, founded by Dan Borislow and Don Burns, was created as a phone network and is officially a competitive local exchange carrier (CLEC), holding CLEC certifications in all 50 U.S. states. Rather than having to pay other companies to originate calls on their landline networks, YMax/MagicJack only has to pay to terminate calls on others' networks, and can bill other companies when their users place calls to MagicJack users. As a CLEC, it also gets its phone numbers for free and can resell to other phone service providers. It is a phone company as much as it is a provider of a VoIP device.

VocalTec, cited as the inventor of VoIP, merged with YMax Communications and MagicJack in 2010 and MagicJack is now officially called MagicJack VocalTec Ltd. The company is headquartered in Israel with its main warehouse in West Palm Beach, Fla. The company holds a variety of VoIP and MagicJack related patents.

But despite all advantages, MagicJack is not the only game in town. Next, find out how it compares to some other VoIP providers.

One major difference between MagicJack and most other VoIP devices and services, besides its diminutive size, is that it's super cheap. The original device was around $40, which included one year of service, and thereafter had an annual subscription fee of $20. Yes, that is annual, not monthly. The MagicJack Plus lists for $70, but tends to retail for around $50, and includes six months of service. You can pay $29.95 annually for year-to-year renewals, or the equivalent of $19.95 per year for a five-year renewal (paid upfront).

Most other VoIP services either have much more expensive upfront device costs or charge higher fees, usually on a monthly rather than annual basis, although MagicJack does have one very close competitor price-wise.

Its major competition includes Ooma, Vonage and netTALK. You can buy the Ooma Telo device for around $150, which gives you free unlimited calls within the U.S. for no cost other than government fees and taxes. If you want to make calls outside the U.S., Ooma also offers plan options starting at $9.99 a month or per-minute pay-as-you-go rates. Vonage provides equipment, charges $29.99 a month for an unlimited domestic and international plan, and has various cheaper calling plans including U.S. and Canada with limited minutes for $11.99 a month.

The competitor that is similar in price is the netTALK Duo device, with a $50 version and $65 WiFi version, both of which you can plug into your computer or router and come with one year of service to the U.S. and Canada. Additional years are $29.95, and you can add enhanced calling plans for additional monthly or annual fees, as well as an SMS text plan. netTALK also has a free app, but it doesn't include an incoming phone number and limits you to 50 free minutes per month.

With all of the VoIP choices, including MagicJack, you may be required to pay government fees and taxes, including monthly charges for E911. And any additional services you select will likely incur monthly or annual charges, so take care to research your options thoroughly.

VoIP service is also available through cable or phone companies that offer Internet service, and can often be fairly cheap with a package deal. To compare all the options to each other or to traditional phone service, you have to consider your calling area and phone number needs, and you have to factor in the cost of the required broadband Internet service.

There are other communication alternatives such as Skype, which allows you to video or voice chat with other Skype users, but also has plans that allow you to call mobile and landline phones from software on your computer, tablet or mobile for various monthly or per-minute rates. There's also Google Voice, which gives you a number and lets you have calls forwarded to any or all of your phones, and will send you transcribed voice mails, but the service depends upon you already having some sort of existing phone service. Various instant messaging programs and social networking sites also allow voice and video chat. But they're arguably not the same as having a home phone line.

The original MagicJack required you to leave your computer on all the time to make and receive calls, and didn't allow you to use your existing phone number. This was all fixed with the newer MagicJack Plus, but there are still some notable limitations. Depending upon your wants and needs, they could range from minor annoyances to deal breakers.

As with all Internet-based services, if the Internet or power goes out, you will not be able to make or receive calls. Twisted-pair copper phone lines carry power to phones, but the newer coaxial cable and fiber optic lines by which many of us are getting Internet service these days do not. There are some VoIP services that provide optional battery backups that last a few hours, but MagicJack is not among them.

Regarding E911 service, when you call 911 with MagicJack, your address can't be automatically detected. You have to register your home address with MagicJack in order for emergency services to properly locate you, and it won't work if you are using the device in other locations. Also, it will only work in cities where the Public Safety Answering Point (PSAP) has a system that can receive the address information. You will also need to make sure the address is updated if you move.

There also might be issues with getting phone numbers in some area codes. If yours isn't available, you can pick a phone number with a different area code, and switch if and when yours becomes available, although this likely comes at a monetary price.

Other more minor issues include the following:

Also, if you are using your MagicJack connected to your computer, it could be felled by any number of computer issues, which might be something to consider when choosing the type of device or service you pick.

The company hasn't been controversy free. Dan Borislow, founder of MagicJack, insulted netTALK's quality and the viability of the company in a 2010 interview, and then sued them for patent infringement in 2012, although the case was dismissed.

The company also sued Web site Boing Boing for defamation over an April 2008 article that brought up some aspects of MagicJack's end-user agreement that it found objectionable. These issues included the fact that MagicJack reserves the right to analyze the numbers you call for advertising purposes and the stipulation that any legal claims against MagicJack had to be handled by binding arbitration, as well as the user agreement not being clearly presented on its Web site or at purchase or installation time. The article also took issue with the lack of an uninstaller and some aspects of the company Web site. The suit was dismissed in 2010 and MagicJack was ordered to pay around $50,000 to Boing Boing in legal fees. The software can be more easily uninstalled now, and some changes have been made to the Web site. The terms of service still include their right to analyze the phone numbers you call and your registration information to target relevant ads.

MagicJack itself was charged by the Florida Attorney General over accusations that it charged customer debit cards during a 30-day free trial period, had limitations it wasn't disclosing properly and that there were issues with its handling of customer complaints. The company settled the dispute by paying a fine without admitting to any wrongdoing and resolved the complaints. It also made some changes to its business practices. As of fall 2013, the MagicJack FAQ specifies that credit cards will not be charged during the trial period, although a hold may be placed, and you will be charged if you buy more than two MagicJacks or purchase extra years of service. If you use a debit, bank or check card, you will be charged immediately, but you will receive a refund if you return your MagicJack before the 30-day trial period ends.

Most reviews tend to agree that MagicJack works and is one of the cheapest home VoIP options. Early MagicJack suffered from the 24-hour computer connection requirement and the inability to port numbers, but these concerns are moot with MagicJack Plus. Some reviews of the original MagicJack stated that the quality wasn't quite as good as landline, but was as good as or better than cellular. There can still be distortion or delay caused by things like interference from software or computer issues, other devices sharing your bandwidth or a weak Internet connection, but the newer MagicJack Plus purportedly results in better call quality, even on par with landline service.

One repeated complaint is customer service, especially the fact that it's computer-based only, with no possibility of calling a support line. MagicJack's customer support is all via their online documentation and a live Web chat feature. You reportedly have to step through a few levels in the knowledge base to get to the Web chat, but at that point you are at least dealing with a real person. This is apparently fine for simple problems, but some find chat a difficult way to resolve more technically involved issues.

There are also complaints about the paucity of documentation included with the device and all the up-selling during setup. You have to be sure to opt out of all the extras you don't want in order to avoid additional fees.

There are also lots of good reviews, and even the reviews with some negatives or reservations tend to concede that the device works fairly well, and inexpensively, once you work out any kinks.

MagicJack is available through the company's Web site as well as a wide variety of retailers. If you order from the manufacturer's site, the 30-day free trial applies starting from the date you place the order. If you buy it elsewhere, you have to stick to the retailer's return policy.

According to the company, they have sold more than 11 million of the devices since the launch of the product. Perhaps surprisingly, the product attracts a large number of retirees. It's also popular with people overseas who want to call the U.S. or Canada cheaply. And, of course, it appeals to lots of people looking to reduce costs in tough economic times.

With so many people ditching their landlines for cell phones or VoIP, MagicJack is one of several viable options for having cheap in-home phone service. And even if you have another phone service, MagicJack could provide a handy extra line, long-distance savings or a way to preserve precious mobile minutes. It's definitely worth serious consideration when taking a trip abroad -- to locations with broadband, of course.