Is the MagicJack Femtocell For Real?

The answer is, probably, yes.

The most interesting announcement I saw in CES coverage was the MagicJack femtocell. It's one of those products that is brilliant technically, and a brilliant and audacious business idea.

What the MagicJack femtocell does is: It enables your mobile phone to connect to the MagicJack VoIP phone service as if it were connecting to your mobile service provider's femotocell. This is far better than using a SIP client application on a smartphone. First, you don't need a smartphone, which is incompatible with the budgets of many of MagicJack's customers. And it just works. Your phone will display a network name indicating you are connected to MagicJack and that's it. No added software in the phone.

Well, that sounds simple enough, but it is enormously disruptive: MagicJack just jacked your mobile carrier's subsidized handset, and a slice of GSM bandwidth, and used them to to connect to their $20 per year VoIP phone service. And it should work as smoothly as using your carrier's femtocell. And it is cheaper than your carrier's femtocell.

How is this all possible? Once you start to look at it, it begins to look unlikely:

1. Femtocells are not cheap. A 3G radio. A GPS receiver. A router. Considerable amounts of software. Integration with your mobile carrier's operating software (so you don't stray into areas where they do not own bandwidth licenses). Etc.
2. Femtocells take big-company resources to develop: Huawei and Alcatel Lucent, to name a couple early entrants to the market, spent tens of millions each on femtocell development. MagicJack's total revenues amount to tens of millions.
3. Femtocells are not easy: How did MagicJack take a femtocell, make all the modifications needed to connect it to their VoIP network, test it, and ship it? MagicJack is a relatively large VoIP operator, but companies like MagicJack, which has been slammed by some for having clunky, adware-filled software for their VoIP dongle don't suddenly become past master at femtocells, ripping out their MSC-connected software guts and replacing them with what can be described as a Very Fine Hack.

And yet, that is what they claim to be demonstrating.

If they are doing this, it has to be made of off-the-shelf parts. Integrating a system like what they claim to have is hard enough. Let's put aside the idea that they did school everyone at what you can do with femotocell firmware and see if there is a path of least resistance to what they claim to have.

First, the femtocell itself: I believe MagicJack must be using a 2G femtocell. This makes sense because they have no need to be your mobile ISP. No requirement for 3G data. This is for VoIP calls, and, if you are home, you, and your smartphone, if you have one, can connect to your WiFi network.

Second, the software: MagicJack's requirements seem unique. Who would make something that would connect a femtocell to a VoIP system? The answer to that question, as with many fine cheap telephony hacks, is in developing markets. Who would substitute an Asterisk server for a proper MSC? A rural telco in the developing world is who. And here is one supplier of just such a system: http://www.go2callsoftware.com In fact, Go2Call Software seems to be a perfect fit for what MagicJack is doing: Femtocell to VoIP.

Does this make it any less amazing? Not really. It is still one of those brilliant and audacious ideas you find you are rooting for. It takes cross-functional thinking – skillful “intellectual trespassing” - to figure out something as, well, devious, as this.

Hardware, check. Software, check. Now for the audacity of it all. Is it kosher, or even remotely legal, to operate a 2G femtocell without a network operator's permission? Is it legal to sell femtocells if you don't own spectrum licenses? This is the part that remains to be seen. But I hope it is. Disruption and change bring opportunity.