MagicJack Can Now Offer Free Cell Phone Calls Too

magicJack is putting AT&T, Verizon, Sprint, and every other cell phone company on notice. The company is planning to put them out of business.

How so?

The nifty little gizmo that lets you make free telephone calls from home over your computer has just unveiled a new technology that allows free calls from cell phones.

Oh yeah, no one’s going to try and block that.

The new magicJack uses (without permission) radio frequencies for which cellular carriers have paid billions of dollars for exclusive licenses.

YMax Corp., based in Palm Beach, Florida, said this week at the 2010 International Consumers Electronics Show that it plans to start selling the new devices in about four months for around $40, the same price as the original magicJack. Like before, it will provide free calls to the U.S. and Canada for one year.

Already being called the “femtojack,” the $40 magicJack version is basically a very small cell phone tower for the home.

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.

According to YMax CEO Dan Borislow, the device will connect to any phone that uses the GSM standard, which in the U.S. includes phones from AT&T Inc. and T-Mobile USA. At a demonstration at CES, a visitor’s phone with a T-Mobile account successfully placed and received calls through the magicJack. Most phones from Verizon Wireless and Sprint Nextel Corp. won’t connect to the device.

Borislow said the device is legal because wireless spectrum licenses don’t extend into the home.

AT&T, T-Mobile and the Federal Communications Commission had no immediate comment on whether they believe the device is legal, but said they were looking into the issue. CTIA — The Wireless Association, a trade group, said it was declining comment for now. None of them had heard of YMax’s plans.