Analyst: Magicjack causing landline loss

[tazz]

Analyst: Magicjack causing landline loss
February 3, 2009 — 6:50pm ET | By Pete Wylie

Bernstein Research analyst Craig Moffatt has taken a closer look at MagicJack's reported customer win rate, and he thinks the company might be taking more landlines from telcos than most industry observers realize. MagicJack owner Dan Borislaw told an audience at CES that the company has moved more than 2 million units in the past 11 months ago and is now selling the device at a clip of 250,000 units a month. MagicJack launched in fall 2007, offering voice services for a flat $19.99 per year.

Moffat asserts that, if Borislaw's figures are accurate, then MagicJack sales could amount to up to 28 percent of landlines lost by telcos last year. Up until now, most substitution was assumed to be from landline to wireless devices, but the MagicJack figures show that VoIP calling devices are a factor as well.

Moffat also posited that many consumers may not have connected their MagicJack device after purchase, or kept their landline to use in addition to a MagicJack plan. "It's hard to imagine that more than a quarter of all access line losses are going to one company and a late-night direct marketer at that," Moffat told Telephony.

He also made it clear that telcos are more concerned about the losses themselves, rather than whether a wireless or VoIP device is to blame. But he said MagicJack's success can be attributed to excellent marketing, as it has avoided the pitfalls that befell many me-too VoIP players by making VoIP "a thing." By selling a tangible device that enabled VoIP calls, Moffatt thinks Borislaw and MagicJack were able to succeed, while other consumer VoIP players like Vonage got creamed by "digital voice" offerings from cable companies.

[az2008]

The problem with his analysis was evident in the telephonyonline report. It only considered MJ's marketing, not it's service.

It's easy to say MJ reported millions of sales -- but ignore the factors which may affect how those customers use the service. Things like number of returns. Number of people who don't renew. Number of people who stop using it before their expiration date.

And, all the complaints concerning reliability, call-cap surprises, voice quality, mysteriously broken USB units.

Mark

[steve1975]

i still say in a one on one virtual match between p.o.t.s. and magicjack, p.o.t.s. wins. The service is always there. All the tech stuff is handled by the telco. It's an old technology and has been perfected. The infrastructure is there. I could keep going about why a landline should be your choice if you need a telephone service guaranteed.

So there are people out there who have been running the magicjack everyday since they got it without any problems. Good for you. There are more of us who either had trouble, whether it be minor or major, or it worked and then started having trouble.

It's new and imperfect.

[mberlant]

The advice and the caveats are not limited to magicJack.

VoIP service is a wonderful replacement for Long Distance service, but a terrible replacement for POTS.

Any service that is carried over the public internet is subject to its foibles, not the least of which is that the internet is specifically designed to be inexpensive at the cost of reliability and efficiency.

On top of that, within the VoIP world MJ has chosen to position itself as a VoIP service that is specifically designed to be inexpensive at the cost of reliability and efficiency.

So, if you want 99.9999% reliability, buy it from the phone company. If you want $20/month internet service and $20/year telephone service, they are available, too. Just don't deceive yourself into believing that the service is the same.

[aaronwt]

the 99.00% relaiblity from MAgic JAck seems pretty good. It might not be 99.999% but 99% is close enough. Besides for me my cell phone is my main phone line. I mainly use my MJ for outgoing calls.

[JohnnyFreightTRAIN]

well it also depends on your situation, I'm young so we just use cell phones. I use magicjack for the look and feel of a landline, cheepness and because my cellphone isnt very good in the basement.

If a service like this didn't exist, I would have to suffer with my cell phone.

[mberlant]

There are many countries in the world, like here in Japan, where there is no such thing as "Free Nights and Weekends" or "Mobile-to-Mobile Calling" as you know it in the US and Canada. One company has recently introduced 1AM-to-9PM Mobile-to-Mobile calling, but only on their plan that has the fewest features and no included calling allowance. 9PM to 1AM is the peak personal calling traffic window, so it is not included in the offer.

This same company, though, also operates an ISP. If you subscribe to both their cellular service and their ISP service with its bundled VoIP service you can call any other of their cell phones or IP phones for free from either phone. If it weren't for the fact that this ISP is the most restrictive (AOL-ish customer "guidance and protection" and MCGP VoIP instead of SIP), I might have gone for their service.

[JohnnyFreightTRAIN]

MagicJack owner Dan Borislaw told an audience at CES that the company has moved more than 2 million units in the past 11 months ago and is now selling the device at a clip of 250,000 units a month.

I tend to not believe Dan. Especially when you take into account that fake counter on his website.

"Look at how many people came for our free trial offer today"