What's the story with the Phonejack 'femtocell"?

I'm now trying to catch up with events and analysis over the past few weeks, as I've been on vacation.

One of the more bewildering things I'm trying to get to the bottom of is the supposed Magic Jack "femtocell" as written about in numerous places such as here, here and here.

In theory, it hooks up a GSM phone to a VoIP client embedded in a USB stick. Details on how it works are remarkably thin on the ground, although allegedly it uses the IMEI number as part of its authentication mechanism.

As yet, the whole thing seems to be based on press releases rather than demonstrations or any hard detail on the underlying architecture. If it works as billed, I can see numerous pitfalls or open questions:

- what frequency band(s) does it work with?
- does it need a separate SIM in the phone, and does Magic Jack supply these? Do you need to switch SIMs when you leave the house? Or is the company hoping to sign some sort of roaming deal with operators?
- how does it deal with SIM-locked GSM phones? Does it "spoof" particular operators' network characteristics, or have its own network ID?
- what are the legalities around its use of licenced spectrum, even if the power is supposedly low enough to avoid interference?
- how many end users can work out how to use the "manual network select" function on their phones... or can be bothered to switch back and forth when they're at home.
- how does it deal with phones that are configured to look for 3G first, then fall back to 2G?
- what's the control, authentication and security mechanism? Does it emulate an MSC and HLR somehow?
- it looks like the PC it's attached to is a fundamental part of the device. What happens when it's in standby or hibernate mode?

The Engadget article linked above has a comment from someone who claims to be the device's inventor. He says "As far as licensed spectrum is involved,who gave somebody the right to sell spectrum in my house?You own your own cellphone,you own your own magicjack device and you own the air in your house.The licensed carriers owns the right not to be interfered with.Our device does not interfere."

While that's pretty contentious, it fits with some of the rhetoric I hear about "open spectrum". It's also worth pointing out that the various iPod-connected FM transmitters were initially thought of as illegal in some places, yet regulators such as Ofcom allowed them if they operated at sufficiently low power.

Other posts try to work out what's going on - one suggests that it looks to the phone like a network it's roamed into, but it "pretends" that it's authenticated with your "home" network and just replies "OK" to the handset.

That said, I'm extremely doubtful that this will fly, technically, legally, commercially or in terms of user experience.

EDIT: I see that Andy Tiller of ip.access has a detailed take on it - and actually got a chance to try the device at CES.

Actually, now I think more about it, one possible killer app for this is in markets with deregulated or light-licenced guard bands. In particular, if others follow the Netherlands' lead and try to have licence-exempt bits of GSM spectrum, all sorts of things become possible. Especially if you can do some clever things with connection management apps on smartphones - perhaps running 2G voice (via the Magic Jack) in parallel with 3G or WiFi data.