Is your Magicjack plugged into the wall power thru a power module? Try plugging the magicjack directly into a USB port on your computer. If the magicjack work now, then you have a bad power module.
I had the same problem. My Magicjack was plugged into a wall socket. First the dial tone became inconsistent, then I could no longer make calls out, then it died completely. I plugged the MJ into a USB socket on my computer, and it then worked nomally.
The problem is in the seperate magicjack power supply module.
When the magicjack is plugged into your computer USB port, it is getting power directly from the 5 volt source in the USB port.
In order to use AC wall current to power the magicjack, a power converter module is needed. That module contains a transformer and rectifier that coverts 115V AC into 5V DC. It is that power converter module that is failing.
I decided to trouble shoot the problem. I measured the 5V output of the power module to be only 3.5V. I took the power module apart to figure out why it failed. I found two 220uF 10V capacitors that were labelled "Low ESR" (C8 and C9). I measured the ESR of these caps and C8 measured 1.5 Ohms. I replaced that cap and it fixed the problem. Output voltage restored to 5V. These electrolytic capacitors do not fail suddenly, they gradually deteriorate. The output voltage of the Magicjack power module will drop gradually until it hits a critical level. The MJ will start to behave sporadically, then it will die completely.
I do not recommend repairing these power modules. I did it out of curiosity. These modules are very cheap.
Magicjack is aware of the problem. To contact them, go to www.magicjack.com
and go to "support". They will ship you a new power module for about $5.50. Some people have reported that the replacement modules from Magicjack are no better than the originals and have had repeat failures.
Also, consider getting a power module from another source. There are lots of AC to USB power converter modules available on Ebay for only a few dollars. Search Ebay for "magicjack power adapter".