magicJack Demos Working GSM Femtocell, Plans to Offer Unlimited Femtocell Calling for $20 a Year

Event Summary

January 7, 2010 –magicJack demonstrated a working femtocell at CES 2010 that connects GSM mobile handsets to a broadband-connected PC. Commercial service is planned for Q2 2010, with service prices under $20 a year to make and receive unlimited local and domestic long distance voice calls over the $20 femtocell (priced separately) using the YMAX network.

Current Perspective

• Current Perspective: Slightly positive on magicJack’s femtocell progress because if magicJack proceeds as planned, for less than $20 a year it will offer an in-home substitute service for traditional unlimited local and domestic calling that lets callers use their GSM handset and phone number. However, the company could face legal challenges if AT&T or T-Mobile decide to launch a legal offensive to counter this offer, because it uses GSM spectrum for connections between the handset and the VoIP network.

• Vendor Importance: Very high to magicJack, because it opens doors for it to become an in-home substitute for GSM users. T-Mobile has yet to offer a similar service and will not be able to provide a tested femtocell alternative for the foreseeable future, although AT&T does has femtocell technology in trials.

• Market Impact: Low in the immediate term because the product is not yet commercially available. But high on the digital home services for voice services if magicJack proceeds as planned in four months, because the company’s low price could force competitors into a low price point for competing femtocell options.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

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