YOU ARE AT:Archived ArticlesHE SAYS EMULATION IS FAIR GAME, BUT CARRIERS CRY FRAUD

HE SAYS EMULATION IS FAIR GAME, BUT CARRIERS CRY FRAUD

Michael Snitz of Phoenix-based Cell Phone Extensions says his business is a part of the new “emulation industry,” but cellular carriers call his work illegal cloning and fraud.

“This is a thorn in the paw of the cellular industry,” said U S West NewVector Group Inc. spokeswoman Lisa Bowersock. “Just because a need exists doesn’t mean federal law can be circumvented.”

U S West is suing Cell Phone Extensions for allegedly breaking a federal regulation that forbids altering the electronic serial number on cellular phones. The case goes to trial in January in Arizona federal court, but a Cell Phone Extensions office in Minneapolis already was closed last month after AT&T Wireless Services received an injunction from a St. Paul, Minn., federal judge.

Cell Phone Extensions still has four storefronts nationwide, where ESNs of cellular phones are altered upon request. Customers pay $195 per phone; Snitz said each store alters about 100 phones a month, using legal computer equipment.

Many customers are couples that subscribe to cellular service for one phone, Snitz said. They would like a second cellular phone, but don’t want to pay an additional monthly access charge. So, Cell Phone Extensions alters the ESN of the second phone to emulate the first phone.

“The carrier loses a potential monthly fee, but it leads to more airtime (for the first phone),” Snitz said. “The carriers are trying to protect their market share, and they are right in one respect-it’s wrong to steal. But we are not stealing.”

The legality of ESN emulation evolves around a May 1981 order by the Federal Communications Commission declaring that each cellular phone have a unique ESN.

Southwestern Bell Mobile Systems recognized the customer need for cellular extension phones nearly two years ago, and has offered that service for an additional monthly charge in Dallas and Washington, D.C. But ESN numbers aren’t altered; extensions are created using internal network technology. That’s how carriers should, and probably will, offer such cellular phone extensions, Bowersock said.

Another company interested in emulation, Birmingham, Ala.-based C2-Plus Technology, asked the FCC in 1992 to amend the ESN rules, but the FCC rejected the proposal. The commission issued a new order in the fall of 1994 reiterating its original position, which went into effect in January of this year, according to AT&T. C2-Plus has asked the FCC to reconsider, AT&T said.

Carriers thought the FCC’s recent order would stop emulators, said attorney Roseanna DeMaria, vice president of revenue security for AT&T Wireless Services.

“We presumed they would comply with the regulations. Our posture is that they are just doing cloning,” DeMaria said.

When emulation operations continued nationwide after January, AT&T was the first to begin filing civil lawsuits, beginning with a Houston-based operation. The carrier argues that emulators are breaking a federal regulation and harming the cellular operator. Monetary damages often are requested, AT&T said.

The Texas court ruled in AT&T’s favor. AT&T then sued two New York emulation businesses, Cellular Emulation Systems Inc. of Woodbury and Cellular Two of Brooklyn. Again, the federal judge ruled in the carrier’s favor and the two emulation businesses ceased, AT&T said. Next, AT&T took on Cell Phone Extensions’ Minneapolis store.

Snitz sees pressure from cellular carriers as an attempt to restrict trade.

“It is interesting why a large cellular provider would try and force out a small business that provides a legal and revenue-enhancing product in conjunction with (cellular) service,” Snitz said.

Carriers say they have installed fraud protection programs in their networks that can shut off a second phone emulating the ESN of an original, legitimate subscriber.

“This undermines the industry’s efforts to curtail cloning fraud,” Bowersock said. She likens the altering of ESNs to swapping licenses plates on cars, or changing a car’s Vehicle Identification Number.

“What has clouded the issue is that they are calling these cloned cellular phones extensions. So we hearken back to our home extensions, but they are not the same thing,” Bowersock said.

Snitz disagrees. “The only difference is that with home extensions, two people can be on at the same time. In our situation, only one user can be on the phone at the same time,” he said.

DeMaria said there is a danger the service is used by criminals.

“Saying it is just for legitimate customers is like saying a loaded gun can be used effectively as a paperweight. Unless you shoot it at someone, it won’t do any harm. This industry has spent millions of dollars moving forward in fraud management,” DeMaria said.

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