magicJack will see its business model challenged in early March when the West Virginia public service commission will rule on whether magicJack’s owner will be required to pay fees that traditional telcos and VoIP providers pay to help support E911 service. The magicJack offering— which provides phone service for $19.95 a year using a special adapter, an existing broadband connection and a traditional telephone– was launched by YMAX which has been acquired by VocalTec and now goes by the VocalTec name.  The adapter costs $39.95 with a year of free service.

The unusually low cost of magicJack phone service relies in part on VocalTec’s CLEC status, which enables the company to collect access charges on calls to its customers. Apparently another reason the carrier can charge such low rates is that it does not collect monthly fees for E911 service—at least not in Kanawha County, W. Va., where the county commission has convinced the state PSC to conduct hearings on March 1 and 2. Other carriers in Kanawha County pay $3.34 a month to help support E911 service, collecting the fees and remitting them to the county, reports the Charleston Gazette of Charleston, W. Va.  

“There’s nothing ‘magic’ about Magic Jack,” Kanawha County Commission President Kent Carper told the Gazette. “It erodes the ability of the 911 center to pay for the services it’s being mandated to provide. Magic Jack is not paying a penny, and their position is they don’t have to.”

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According to the Gazette report, VocalTec is arguing that it doesn’t have to pay the 911 fee because the magicJack service does not meet the FCC’s definition of VoIP, which refers to a single service that allows customers to receive and place calls.

VocalTec reportedly argues that it offers two separate services—one for placing calls and another that provides the customer with a phone number. The Gazette reports, however, that a consultant hired by the Kanawha County Commision tried to purchase only the magicJack outgoing call service at a Walmart store and was unable to do so.

Things aren’t looking good for VocalTec because, according to the Gazette report, the West Virginia PSC staff already has concluded that magicJack is a VoIP offering. And the West Virginia case could set a precedent for other areas where VoIP providers are required to pay fees to support 911 service.

If the West Virginia PSC rules against VocalTec, the company’s biggest problem might not be paying the actual fee itself but figuring out a way to collect and remit the fee moving forward. According to the Gazette report, VocalTec currently has no way of doing that—and assuming that’s true, it seems like the company might need to make a significant back office investment to add that capability. Potentially the West Virginia ruling also could apply to VocalTec’s new softphone offering, magicTalk, further complicating a potential solution.

Nevertheless, it seems to me that if a communications service provider offers a service that can use 911– as magicJack should be able to do— then that provider also should be required to pay to support that service.

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14 thoughts on “magicJack Faces E911 Showdown

    1. I will pay more to my village than I pay to MagicJack, even when I am travelling and the 911 service will not be local or helpful.

  1. It's about time these virtual phone companies start contributing support for E911. They alway try to weasel out by saying we're not this or that. Voice service is voice service, whether its VoIP or analog.

  2. Right on the money. It is the old Duck Claim. I believe all the other taxing authorities should have a look-see at these service providers that say or imply they are a telephone company or long distance company except they are exempt from the taxing authorities because they only use portions of the public networks.

  3. The same issue applies on terminating access. Why shouldn't they pay terminating access if they are going to terminate on the phone systems of other companies. They apparantley are collecting from others terminating on them, then turnaround is fair play. This should apply to all Voip service providers.

  4. This is a typical Enron deal. Lots of marketing hype, run up the revenue, screw everybody and then play the "woe is me..everyone is picking on us" syndrome. This device is also responsible for better than 50% of the phantom traffic on carrier networks that cannot be billed as terminating service that NECA requires. No USF contribution like all legitimate carriers are mandated to collect and pay. No regulation whatsoever and if you have a problem with their service… that's just tough! Nobody likes regulation however, the playing field should be leveled in this case. They continue to slide through the loophole and that needs to be plugged!

  5. 911, USF, and other such fees should be eliminated from the phone service industry equation altogether. It's time to recognize that these mandates have out-lived their technical and social relationship with what used to be a monopolistic LEC business model. It would make more sense to evolve 911 (emergency dispatch) to a web "application" (app) that any communications device could access. Subscription costs would still be borne by users, but at a much lower cost. We could dump all these expensive state 911 centers, government commissions, regulatory filings, equipment subsidies, and let the voice business evolve into something more amazing than an opportunistic Magic Jack.

  6. "The unusually low cost of magicJack phone service relies in part on VocalTec’s CLEC status, which enables the company to collect access charges on calls to its customers." OK, so… at what rate is magicJack receiving access money? Seems like it ought to be absurdly low since they have virtually no facilities to recover on.

  7. Also, some of the magicJack's use an internal cell chip to make a 911 call as a non-service intialized cell call. So they'll just dodge this bullet with this alternative way to provide 911 thru a different FCC loophole.

  8. Why do we fund emergency services based on legacy PSTN phone calls? As we move voice over IP why do we try to con people into thinking that emergency services must be funded by keeping the PSTN around? Is West Virginia also going to shut down Skype, iChat and every other means of communicating?

  9. If tax and fees on a traditional phone line was not one-fifth of your bill, people would not have to resort to such a service.

  10. I for one love my Magic Jack and to be honest, waived the 9-11 feature as I have a cell phone that can do that (as most everyone else does as well). I like their low price and quite frankly dont want you fools messing up a good thing. If you like paying 9-11 fees, go for it. I do not, and waived off the feature. MY CHOICE!

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