New device has cell companies crying foul

By: JP Smith | Published: January 9, 2010

Categories: Mobile, Hardware

You've likely seen the commercials for the product that allows you to use your broadband connection to more cheaply and easily replace your current land line.  Now, the creators of the MagicJack are now trying to get at your cell phone business as well by making those calls virtually free.

At first I couldn't understand how it worked but, Peter Svennson, technology writer for the AP explains how it works:

The size of a deck of cards, it plugs into a PC, which needs a broadband Internet connection. The device then detects when a compatible cell phone comes within 8 feet, and places a call to it. The user enters a short code on the phone. The phone is then linked to the magicJack, and as long as it's within range (YMax said it will cover a 3,000-square-foot home) magicJack routes the call itself, over the Internet, rather than going through the carrier's cellular tower. No minutes are subtracted from the user's account with the carrier. Any extra fees for international calls are subtracted from the user's account with magicJack, not the carrier.

So, what this means is that, basically, if you are using to cell phone to replace your home phone, those domestic calls you make will now be free, meaning that you could go to a cheaper plan or not have to worry about going over on your existing plan, neither of which would be appealing to your carrier.

Because the new MagicJack is GSM-based, carriers such as AT&T and T-Mobile are up in arms.

The new MagicJack will debut this spring at a cost of $40, with the first year of calls to the U.S. and Canada being free.