True Crime Stories

A few years ago, cloning was the central problem in wireless fraud. Any schmuck with a good receiver could intercept a signal from a wireless phone and record its mobile identification and electronic serial numbers. This information could then be programmed into another handset and — before anyone knew it was happening — free calls were being charged to another guy's account.

But great progress has been made in cloning deterrence, taking it from a $650 million blight on the industry in 1996 to a $26 million problem in 2001, according to numbers gathered by CTIA and provided by Sprint PCS.

“The word is ‘miniscule,’” said a Sprint PCS spokesman. “When we built our CDMA network, we thought cloning would be a real big deal. Working here in the last five or six years, I've seen the decibel level drop markedly.”

So markedly, in fact, that most analyst firms no longer track numbers related to cloning fraud.

The reason for the decline is simple: the transition from analog to digital networks. While signals from analog phones could be easily captured, the encryption inherent in digital wireless networks makes such theft too burdensome for even high-tech fraudsters to bother.

But wouldn't you know it? One big fraud problem gets beaten back, another emerges. Low-tech subscription fraud — generally carried out via identity theft — is the new Public Enemy No. 1.

More disciplined sign-up processes that cross-check dates, addresses and Social Security numbers should help solve this problem, but carriers must remain vigilant. In a high-churn industry in which everyone scrambles to get and keep customers, it might be tempting to allow distributors to waive certain application requirements on the spot. Bad idea.

Another form of fraud that remains alive and well: handset theft. In this voice-dominant era, simple robbery may not be a costly problem. A few calls are made, the subscriber cancels the phone, the carrier eats the loss. But when wireless data ramps up, handset theft will be a real issue, said Phillip Redman, research director with Gartner Group. If people are doing banking and running their businesses' back-office programs on handheld devices, a handset thief could do serious damage.

“The problem is that there aren't many security precautions you can take,” Redman said. “The only way to really be sure [who the user is] is with biometrics.”

And if you think tales of cloning scared away potential customers, just wait until people hear tales of stolen PDAs, emptied bank accounts and damaged back-office systems. Fraud hasn't stopped nibbling away at the industry; it may just be taking a breather before coming back for a bigger bite.