CES: MagicJack celebrates two millionth customer

The less-than-one-ounce USB device plugs directly into a PC and a phone and auto-configures to provide voice over a broadband connection. Consumers can then make long-distance and local calls through a unique phone number and with free directory assistance. Borislow said MagicJack currently covers 85% of United States area codes. The device and first year of service cost $39.95 with subsequent years for $19.95 per year. With more than two million sold, the VoIP device is certified in all 50 states and has been used in more than 50 countries.

Over the past year, MagicJack’s online tech-chat-based customer service has also been improved to align consumers with Borislow’s vision of never having a phone number to call. Because chat automatically provides the critical information of the consumer’s operating system, browser and Internet status, he believes it is the wave of the future. At the end of each chat session, customers can grade the support representative on a scale of one to five, with five being excellent. In the beginning, most were ranking around one to three, as they were newly trained reps on a less-than-reliable network and buggy software, he said. In the past year, more than 700 bug fixes have been installed and redundancy added to the network has led to 100% availability over the last six months. The reps are now more educated with the poorest-performing agents weeded out. Today, MagicJack’s receives only one poor rating for every 20 excellent ratings, Borislow said.

“We activated 9,000 Jacks yesterday and had about 6,000 chats,” Borislow said. “The average wait time was about four seconds…It came in at 19 to one on a very busy day. It kept the rating system very busy. Back [at launch] we had liability issues. Now, we haven’t had a network outage, and reliability has gotten better.”

MagicJack’s parent company, YMax Voice Network, built and designed its own CLEC network for the service, relying on more than 50 switches and gateways – more than any other telecom company, according to Borislow – where its customers actually live. The company owns the network assets and has made acquisitions totaling $30 million. Despite the investment, Borislow said with the scale MagicJack has achieved to date, incremental growth is very inexpensive, and the company is poised for profitability this year.

YMax also acquired chip company TigerJet in 2008 and software company SJ Labs in 2007 to create more than 1.7 million lines of plug-and-play code for MagicJack. The six-patent owner also just acquired Stratus Telecom on Friday to provide the remaining pieces of the business before another competitor could. The company employs a team of 340: 100 people to assemble the product, 160 in customer service, 40 employees building software and 40 working on the network, corporate, media and sales.

“We own a chip company, software company and network company but didn’t own the glue that kept us all together,” Borislow said. “[With Stratus], we’ll be able to develop features and functions a lot faster, and we can sleep more comfortably knowing that a competitor won’t buy that company. We pretty much have complete control of every aspect of the business right now.”