Illusions about MagicJack at CES

Many people have pointed out the MagicJack Femtocell product that has been announced at CES. I cannot really understand the big hype and news about it. Why? read further...

On the technical side, there is hardly anything new. Using projects like OpenBTS or OpenBSC, you can run your own GSM network and connect it to VoIP. Sure, the retail price of the MagicJack is much lower, but that's the economics of scale. As soon as OpenBSC support for one of the recent femtocells is done, we also have a much lower cost solution to the same problem.

On the legal and business side, I can see many problems for MagicJack:

• To operate equipment in the GSM or 3G spectrum, you need a license. Since a nationwide GSM operator license is very expensive in about any country of the world, it is economically not an option. Selling the MagicJack devices without a license and leaving the spectrum license to the user will not work, or at least not long, since regulatory authorities and commercial operators are not going to let anyone deploy systems that interfere with their networks.
• If you keep the Operator's SIM in the phone, and use that SIM on your own network you might at least violate the terms of services of the operator. The SIM card normally belongs to the operator, and it is part of the users business relationship with that operator. As such, you can not really use it with other networks. Sure, if you do this at home with your OpenBTS/OpenBSC installation, nobody will care. But if somebody is doing this commercially, and in a way that affects the sale of talk time of the regular operators, again it will not take long until the commercial operator will sue you.
• Security. If you run your phone with a "foreign" SIM, you do not know the Ki on the SIM and thus cannot do cryptographic authentication and/or encryption. This is a big security issue. It is once again not an issue in your personal testbed setup, but it is going to be one if you do this at large scale as a mass market product.

So, as you can see: It's neither technically something exceptionally new, nor is it something that has a very promising business or legal outlook. The only way how a product like this would work is if it is authorized by the respective operator. But why would the operator authorize something that will take talk time away from his network and thus his revenue stream?