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Tolmes News Service 07
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# <Tolmes News Service> #
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# > Written by Dr. Hugo P. Tolmes < #
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Issue Number: 07
Release Date: November 19, 1987
Much of this issue deals with cellular phreaking and cellular technology.
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TITLE: Federal Sting Nets 26 for Cellular Phone Fraud in NYC
FROM:
DATE: April 15, 1987
NEW YORK-
A free ride on the nation's airwaves ended abruptly here late last month when
FBI and Secret Service Agents rounded up 26 people for using illegally re-
programmed phones that billed other parties, some of them fictitious, for an
estimated $40,000 a month worth of airtime.
The arrests culminated a six-month undercover operation by the FBI and
Secret Service in cooperation with NYNEX Mobile Communications Co., during
which agents managed to infiltrate a network of fraudulent instlation shops,
the FBI said.
Those arrested, including a plumber, a hair stylist, a bus driver, a real
estate businessman, and an electronics technician, were arraigned the week of
the roundup in U.S. District court in Brooklyn, but no trial dates had been
set by press time, according to NY FBI press officer Joe Valiquette.
A maximum jail term of 10 years and a fine of up to $250,000 could be levied
for the most serious offence with which the arrested were charged, law
enforcement officials said here.
The 26 were charged in the investigation allegedly were using mobile phones
with counterfit electronic serial numbers and number assignment modules that
enabled other parties to be billed for airtime use.
The arrests "represent the first of a series of inatives undertaken jointly
by the FBI and Secret Service to target fraud in emerging technologys" the FBI
said. The bureau added that the investigation was conducted in accordance
with federal fraud ststutes and made aggresive use of a statute drafted
originaly to address credit card fraud.
At a press conference here after the arrests, the FBI reportedly estimated
the undercover operation put an end to fraud costing local operators about
$40,000 a month. Officals added that carriers accross the country loose about
3 million annualy to fraud.
Thomas Sheer, FBI assistant director and head of the office here, complemented
NYNEX' participation in the sting operation, saying, "Recent technological
advances in computerized telephone switching equipment and billing systems
were instrumental in allowing law enforcement to ficus on this crime problem
and will assist investigators in keeping this problem in check.
The arrests prompted Audiovox Corp. of Hauppauge, NY to dash off a press
release to the mobile industry highlighting aones to prevent fraud oof the kind
charged in the FBI and Secret Service
operation.
An algorithm built into the software of Audiovox phones prevents the
illegal alteration of memory chips, the firm said.
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NOTA:
The next article also deals with cellular phone fraud busting.
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TITLE: 18 Are Seized in Illegal Use of Mobile Telephones
FROM: The New York Times
DATE: March 27, 1987
Yesterday's arrests, which started at 6 AM and took place at homes and
places of employment, mostly in Brooklyn was carried out by 70 FBI and
Secret Service agents.
The 18 people who had the illegally altered chips installed "awoke
this morning to find that their cellular telephones had been disconnected"
electronically, Mr. Sheer said at a news conference at the bureau's office
at 26 Federal Plaza in lower Manhattan.
The officials said the arrests followed a six-month investigation that
used the use of a confidential informer who installed the chips and Federal
agents working under cover. The authorities acknowledged the cooperation
of the Nynex Mobile Communications Company in the investigation.
Mr. Sheer said that the fraud, which was not the product of an organized
conspiracy, cost local mobile telephone companies about $40,000 a month and
that nationwide, carriers of cellular services were losing about $3 million a
year because of the frauds.
The authorities gave not details about he alteration of the chips.
Among the cellular telephone users who were arrested were a plumber, a
hair stylist, a gasoline station owner, a physician, a student and a diamond
merchant, as well as several business executives. Most lived or worked in
Brooklyn, but they did not know each other, the authorities said.
Andrew J. Maloney, the United States Attorney for the Eastern
District, said in a statement that the cases against those arrested would be
presented to a Federal grand jury in Brooklyn. The most serious charge that
could be brought against each carries a maximum term of 10 years in prison and
a possible fine of $250,000.
According to the Federal authorities, each cellular mobile telephone
has a memory chip containing a mobile identification number, or MIN, and
another containing an electronic serial number or E.S.N. When a mobile
telephone call is made, the two numbers are automatically transmitted.
The mobile carriers make a computer check of the E.S.N. to see if it is
valid. If it is, the call goes through and the cost is billed to the billing
number provided by the M.I.N. chip.
By using illegally reprogrammed chips, the Federal complaint said, other
people were billed for calls made by those participating in the fraud.
Those arrested were arraigned in United States District Court in
Brooklyn and released in their own recognizance.
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NOTA:
I have only article. Certain portions of this article
have appeared in an issue of 2600 Magazine, but only a very small section.
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TITLE: Hello Anywhere
FROM: Business Week
DATE: September 21, 1987
For longer than he cares to remember, Peter Preuss has been the
kind of customer that phone companies dream about. Anxious to keep abreast of
his various interests, including a San Diego cancer research foundation,
Preuss has always kept a phone within arm's reach. There are 24 of them in
his three-bedroom house, two in the master bedroom alone. Then, in 1985,
Preuss reached nirvana. General Electric Co. introduced a
battery-powered cellular phone that he could use almost anywhere. Now there's
a phone in each of Preuss's three cars- and, of course, in his attache case.
One day last month, impatient with standing in a long airport ticket line,
he used his briefcase phone to get his seat assigned through the airline's
reservation system- and went directly to the gate. A couple of days later he
used the same phone to wind up an interview as his plane taxied down the
runway at Washington's Dulles International Airport. It may not be
the Industrial Revolution, but cellular phones are transforming the way
individuals communicate. In the 111 years since Alexander Graham Bell
summoned Mr. Watson, cars have replaced the horse and buggy, planes have
displaced passenger trains, and computers have made other business
machines obsolete. But the telephone has stayed essential the same: a box
connected by wire to a wall. Now, in one swift stroke, mobile phones are
shrinking the world even more.
EASY AS RADIO
Anyone who can drive and talk can drive and phone. Nils Ingervar Lundin,
chief press officer of Swedish telecommunications equipment maker L.M.
Ericsson, even likes to ring up reporters in Stockholm. Cellular phones
mean less wasted time, higher productivity, faster-arriving ambulances,
and smarter cops-smarter crooks, too. Can't find a pay phone? Use your
briefcase. Raves Barbara Schultis, a Freeport (N.Y.) real estate borker who
makes about $150 worth of car phone calls a month arranging deals. "I'd die
without it." One note of caution: Mobile phones also may mean no place to
hide. There certainly won't be a phone in every car until prices fall from the
current $1,200 per phone, a fixed month charge of $25 to $50, and 35 to 50
cents a minute in calling charges to the average customer- vs. the pennies
per minue charge for regular residential phone calls. The magic
figure for developing a mass market is less than $500 for the phone, says
Geroge L. Lindemann, chairman and co-owner with Fort Worth investors Sid
Bass and Richard Rainwater of New York-based Metro Mobil CTS Inc. But he
expects to see such prices within five years. In the meantime, a lot of buyers
aren't waiting. True, the so-called churn rate for carriers is high:
One-third of the industry's customers drop out every year. Still, the
Cellular Phone Industry Assn. predicts that more icans will
have mobile phones by the end of this year, up 40% from a year earlier.
The amount spent in the U.S. on cellular phone service jumped eightfold
from 1984 to 1986, to $600 million. That figure is likely to nearly double
this year, says market researcher
Dataquest Inc. and by 1990 the seven Bell regional operating companies, GTE
Corp., big independents such as McCaw Communications and Linn Broadcasting-
plus dozens of smaller carriers - should rake in $2.6 billion a year from
cellular service. Equipment sales are rising, too. Motorola, NovAtel, NEC and
other top manufacturers will sell about $285 million worth of cellular phones
this year, a 22% top over 1986. And Motorola, AT&T, and others will sell
the phone companies $555 million worth of cellular network equipment in
1987-up 37% from 1986.
Cellular phones are becoming riqueuer for anyone who spends a lot of
time in the field, and not just for construction executives, architects,
and traveling salespeople. when James Webb, a sweet-corn farmer near Albany,
N.Y., put a mobile phone in his tractor last year, he eliminated a broker and
doubled his 20 or so distributors to order directly, boosting revenues at
his Gold-Harvest Farms & Nursery by 15%. That far offsets the $250 or so a
month he spends on mobile calls during the harvest season.
"The potential is almost unlimited," declares John T. Stupka, chief
executive at Southwestern Bell Mobile systems. At least he hopes so.
Southwestern Bell Corp. is awaiting court approval for its $28 billion
acquisition of the cellular paging businesses of New Jersy financier John
W. Kluges's Metromedia. That will make Southwestern the nation's
second-largest cellular operator. Analysts say that because of the hoopla
over the industry's projected growth, only sugar-plum fairies float farther
that the market values of key independant cellular phone companies.
For instance, shares of Seattle-based McCaw Communications
Inc., the nation's largest cellular carrier, with holdings in 94 markets,
were tentatively priced at $17 to $20 in early August when underwriter
Burnham Lambert Inc. announced plans to sell 12% of the company- some 10.5
million shares. On Aug. 8 the stock opened at 21.75 and eventually settled
at 24.75, putting McCaw's market value that day at $2.4 million. The McCaw
offereing underscores the huge gamble some people are taking in cellular
investments. McCaw, with a record much like most cellular carriers, lost $38.5
million in 1986, almost double its $12.9 million loss in 1985. Still, the
market is valuing it at about $70 per initial customer, which the industry
translates by taking the population of a sample market and multiplying it by
the percentage ownership a company has in a real cellular franchise. That's
three times what it cost into cellular companies just a year ago. Indeed,
last-minute investors could not keep holding the bag. The more conservative
ones are using one of the several regional Bell companies spun off in
American Telephone & Telegraph Co.'s breakup as a cellular plalar operators in t
he so-called top markets- big cities where commuters
travel long distances - are likely to prosper. But independant operators in
the hundreds of smaller markets around the country might not. Warns Robert B.
Morris II, vice-president and telecommunications analyst at Prudential
Bache Capital Funding, says "they're not all created equal. With the bigger
markets, you're picking the low-hangin fruit."
The primary reason for cellular's popularity is that is works. One
relative, the citizens band radio, brocasts more static than information
and is open to eavesdropping for miles around. An ancestor, the original car
phone, relied on a central antenna and an operator to connect a call. Put a
hill between you and the antenna, and communicatons stopped.
By contrast, cellular technology keeps signals pure. A call from a car
or portable phone travels via radio waves to "cell" stations that have been
places strategically throughout a calling region. A central switching
station does two things: It connects that radio signal to the regular public
phone network. Also, as the car cum phone travels from one cell to the
next, the switch seamlessly hands off the signal from one receiving tower to
the next. The result: fire battalion chiefs in Colombus, Ohio, can instantly
tap expert advice on how to handle even the most obscure chemical spill. At a
disaster scene, they simply connect their portable computers to their
cellular phones and log onto a national emergency materials data base. There's
no denying that mobile phones carry a certain cachet. "Have you ever
noticed," says Richard H. Conroy, a sales representative at Georgia-Pacific
Corp. in Los Angeles, "that when people call you from a car phone they always
make sure to point out they are calling you from a car phone?"
Even gimmick makers have been quick to capitalize on this. W-D
Industries Inc., of New York City, sells a "Sport-E Imitation Cellular
Phone Antenna" that lets any caller give off the power vibes of a cellular
phone owner- for only $4.95.
Snob appeal aside, however, many people need mobile phones.
Wheelchair-bound grandmother Jane Miller, in Oklahoma City, keeps a
portable handy when she's away from her home phone. In Scandinavia, many
fishing fleets now communicate via cellular radio instead of over the
public airwaves via ship-to-ship radio. the idea is to map strategy without
competitors listening in. Felix Grucci, president of the Long Island company
that staged the fireworks at last year's Statue of Liberty centennial
celebration, says Fireworks by Grucci Inc. often uses cellular phones to
coordinate detonations- because they pick up less interference than
walkie-talkies. When the phone system crashes at Nordstrom Inc.'s department
store in Seattle, employees open a suitcase-size bag, pull out a
five-phone portable system, and plug it into a wall socket- and the store is
back in business.
Cellular technology also promises to help hold down the cost of phone
service in rural areas. Currently, some carriers charge cusregions a small fortu
ne to run phone lines. Now some are looking to cellular
phones to bring down these costs. U.S. West, one of the seven regional AT&T
spinoffs, is test-offering "fixed" cellular phones. It's charging a $1,795
one-time fee for the cellular phone and installation, plus a $19.95-a-month
per-line charge and a usage fee to run service to Evergreen, Colo., a
mountatin town near Denver. The cellular phone's versatility also is
winning big fans in local governments across the country. the Sheriff's Dept.
in Boulder County, Colo., uses 13 cellular phones for more extended and
private conversations than it can get from its regular police radios,
according to Captain charles C. Pringle, head of staff services at the
department. But criminals are going high-tech, too. For some time now, drug
dealers in New York City's South Bronx have used radio-paging devices to reach
customers. Now that they've gone cellular, these people can make calls
that automatically are switched among the cellular system's 333 frequencies-
and law-enforcement officials are finding it increasingly hard to
eavesdrop on perpetrators.
Most other mobile phone innovations are more mundane. Customers of L.A. Cel
lular, and independent
network, get a service called Star Jam that warns of traffic tie-ups on Los
Angeles freeways. Farther south, Orange County, Calif., plans to set up a
network of 1,000 cellular call boxes along the freeways to aid motorists.
The move is expected to save the county about $44 million over what a regular
land-line system would cost. Orange County's project raises another issue:
how cellular will affect the $6 billion pay-phone business.
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NOTA:
