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Cellular Lottery: FCC Says the Odds Are Against You

October 3, 1985

WASHINGTON (AP) _ Patiently, up to 100 times a week, officials of the Federal Communications Commission tell would-be millionaires how slim the chance is to hit the cellular telephone jackpot.

On the other side, entertainer Mike Douglas ″wants you to learn how you may become very rich in the Billion Dollar Cellular Mobile Telephone Industry.″

At stake are licenses to run cellular systems in communities with populations ranging from 250,000 to 325,000. The FCC will conduct a lottery sometime next year to select the winners, but it not yet even begun to accept applications.

Douglas, acting as spokesman for American National Cellular Inc., a Los Angeles-based application preparation company, is pictured in ads urging, ″take your chance on being ... owner of an FCC Cellular License in one of 30 lucrative markets.″

The FCC has asked the Securities and Exchange Commission, the Justice Department and the Postal Service to investigate claims made by some preparers.

On Monday, Massachusetts Secretary of State Michael Connolly ordered American National Cellular to cease and desist all sales activites in the state because of what he called deceptive promotional practices.

There is money to be made in cellular radio, a technology that allows an extensive network of portable and automobile telephones to operate in every part of the country, replacing old systems that were severely limited by the number of customers that could be served in any community.

But, warns FCC official Harold M. Wilchins, winning the FCC’s cellular lottery will not make a person an instant millionaire.

″The thing that is the real heartbreaker for me″ is explaining that the winner of the lottery will have to ″go out and run a business and make it profitable,″ said Wilchins, deputy chief of the enforcement division of the commission bureau that handles cellular applications.

American National Cellular is one of several application firms that for a fee - usually $5,000 per market - will fill out the FCC papers, provide technical data and file the application.

The Massachusetts order charged that the company misrepresented the degree of risk, the likely investment and time frame of the return, as well as the ease of obtaining a cellular communications license.

The order named Earl Serap, chairman and chief executive officer of the company, and several other parties, including Douglas.

Michael Godfree, president and chief executive officer of ANC, said he preferred to withhold comment on the Massachusetts action until he had received the order.

The company also was named in a complaint filed by the Securities Division of the Arizona Corporation Commission. The complaint alleged American National did not inform potential customers that new FCC rules ″greatly diminish the advantages of forming agreements between lottery applicants.″

Previously, each member of an alliance had an individual chance in the lottery. Now, the alliance is considered as a single applicant.

Wilchins said people who sent money, at the end of last year for preparation of applications for licenses to operate in the next batch of communities are surprised to find the commission it is not yet accepting those proposals.

When the applications do arrive, the commission staff will check that they meet basic technical and financial qualifications, including access to the $3 million to $5 million to build a system.

″You can’t meet the financial qualifications with a form letter from a bank″ that says it will lend money to anyone who wins a cellular lottery, Wilchins said.

He said some people who have called the agency think there will only be 200 applications submitted in each lottery. In fact, the commission has no limit.

Five to 15 companies applied for cellular licenses in markets such as New York and Philadelphia, where economies of scale make it more likely that a cellular operation will be profitable.

When the commission decided on lotteries for smaller communities, more than 100 applications came in for systems in places the size of Shreveport, La., and Peoria, Ill., with populations of roughly 325,000 to 450,000.

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