Telephony has a nice article about Magic jack: Can Jack make VoIP Magic?
By operating its own network, Magic Jack has a much more favorable business model, Burns said. "We were in the SunRocket process – the unwinding – as a potential suitor, and we saw what they were paying," he said. "We found that for every telephone number they purchased, which was $4 a month, to terminate their calls, they paid $3.80 a month and $1.25 per customer for 911 service. With our own captive CLEC network in 31 cities, you actually make money on originating calls through the assessment and collection of access charges – balanced out by what we pay to terminate calls. For what [SunRocket] was paying $7, our costs are nothing." ... Borislow originally built the 31-city network and acquired CLEC certifications, which now span 49 states, intending to deliver a fixed/mobile convergence service using dual-mode Wi-Fi phones.
"The device itself was invented by Dan Borislow, the man who brought Talk.com to AOL, and the service is being marketed by Don Burns, the guy who created the 10-10 dial-around service." [from the Telephony article]. The CLEC is YMAX Corp. I think the success of Magic Jack is infomercials. They are on all the time on DISH network - selling a consumer device nationwide. It's not a bad approach.