How MagicJack Works

How does MagicJack's service work?

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.