War on Terrorism

Friday, August 18, 2006

"Easy to Resell, Prepaid Phones Rankle Carriers"

Wall Street Journal (08/15/06) P. B1; Sharma, Amol; Chon, Gina

There is a large market in the resale of prepaid phones in which the phones are sold across state lines, shipped to non-U.S. countries, or sold on the black market for use by nefarious characters who need cell phones, but want to remain anonymous. In a recent incident in Michigan, law enforcement arrested three men who had purchased massive numbers of cell phones from Wal-Mart, supposedly for resale in Texas. They were detained on suspicion of terrorism, however, because cell phones also can be used as detonators. Cellular telecoms retail prepaid phones at a discount, often below cost, in expectation that consumers will eventually order more advanced services on their prepaid phone. Prepaid phone sales have risen 44 percent since 2004 and reached $7.4 billion total in 2005. Verizon and TracFone have taken legal action to prevent resale of its prepaid phones, and Cingular Wireless restricts purchases of its GoPhone prepaid line to three phones per customer in order to preclude resales. The three men arrested purchased 80 cell phones, and a Wal-Mart employee who became suspicious of them tipped off police. Though they are still being detained, the FBI has said the men have no known links to terrorism.

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