New Phone Sales Scam: Wireless Cable Licenses : Communications: Sales of application services to small investors are plagued by deception. Few ever obtain approval to open TV stations.
Move over, precious metal and oil lease scams. Securities regulators are admonishing the public about the latest trend in telemarketing fraud: wireless cable television licenses.
Promising fat returns and little risk, “boiler-room” salesmen for so-called application mills typically charge $5,000 to $7,000 to help investors apply for wireless cable licenses in lotteries sponsored by the Federal Communications Commission, regulators say.
The reality, they warn, is that investors will probably lose their money, because few applications lead to a license for a new television station, which can cost up to $1 million to build.
“Any time you hear someone say that they can turn $5,000 of your savings into a multimillion-dollar windfall, it’s time to stop listening and hang up the phone,” said Thomas Sayles, commissioner of the California Department of Corporations.
Regulators in Washington, California and elsewhere are planning news conferences today to warn that the fast-growing sales of these obscure licenses to small investors are plagued by deception and misrepresentation.
Though legitimate application services do exist, regulators say they usually do not seek investment funds from the general public.
“These operations are not inherently evil,” Sayles said, “but investors have to understand the risks.”
The Federal Trade Commission has obtained injunctions against cable-license application firms in Florida, Nevada and Arizona, as well as California. About a half-dozen such firms are operating in California, mostly in Los Angeles, Orange and San Diego counties, Sayles said.
Telemarketing abuses have usually been associated with the sales of exotic items, such as gold, diamonds and petroleum leases. And Southern California typically has been the spawning grown for new telephone sales pitches.
But regulators say the wireless cable application mills sprang up in Nevada and Florida before spreading to the Golden State.
The mills are now the nation’s fastest growing telemarketing fraud, expected to take at least $25 million from the public this year, regulators say.
Wireless cable is a minor portion of the cable TV industry, with only 350,000 subscribers nationwide. As its name applies, programs are delivered through rooftop antennas, not traditional hard-wire cable hookups.
Wireless cable licenses have been sold by lottery since 1983. Those now available are in rural areas; the ones in 250 major markets already have been sold. The FCC has been flooded with nearly 36,000 applications for the licenses that remain, even though the potential profitability of these stations is questionable.
Regulators say the application mills typically don’t provide adequate explanations of the lottery process or say where the available TV stations are located.
Leading the charge against such sales practices is the North American Securities Administrators Assn., a group of state and local regulators, and the Better Business Bureau.
The lead article in the April publication of Investor Alert, put out by NASAA, is devoted to application-mill abuses. The article notes: “When the federal government holds a lottery, con artists are among those who profit the most.”
