Sim Cards

Re: [spiers] Sim Cards

> As many I'm sure know, cell phones (even or
> especially used phones) are more expensive over there than they are
> here due to the nature of the cost structure differences for phone and
> service. Because of the differences in price, you would be better off
> buying a used phone here in the US (in other words, you can find a good
> quality used phone very cheap here). The used phone I bought over
> there had problems and I didn't have much recourse with the vendor I
> purchased the phone from. All in all, it ended up being more
> troublesome than a convenience.
>
> Victor

In today's Seattle Times on this issue:

Cellphone makers fight resales abroad by high-volume buyers
By Andrew Welsh-Higgins

The Associated Press

COLUMBUS, Ohio - People moving state to state, armed with cash and tricks to
avoid scrutiny, are buying cheap prepaid mobile phones by the thousands with
plans to sell them in Latin America and Hong Kong.
Cellphone companies say the practice is costing them millions of dollars,
and some have hired private investigators to document what they say is
illegal tampering with their phones. Wal-Mart, Radio Shack and other
retailers are limiting how many phones they will sell at one time.

The buying has raised concerns that the phones might be used to aid
terrorism, though those in the trade say it's nothing but capitalism at its
best - no different from reselling stock for more than you paid.

The FBI and Department of Homeland Security warned police earlier this year
to be on the lookout for bulk purchases of cellphones. Authorities are
worried that profits could end up financing terrorism or that the phones
could be used as detonators in attacks.

Widespread pattern

The practice, at the center of court cases in Florida, Ohio and Michigan,
appears widespread and unlikely to subside soon.

"Don't leave a phone behind. To make real money buy them all," urged an
e-mail by Larry Riedeman of Larry's Cell in Altamonte Springs, Fla., that
was included in a lawsuit against that entity by TracFone Wireless Inc.
"Thousands a day if you can!"

Riedeman and other small companies are considered the middlemen in a system
that starts with buyers snapping up phones at retailers such as Wal-Mart and
ends with resale of the phones overseas.

In Ohio, two men acknowledged last month to authorities that they had
delivered 600 TracFones to a middleman.

Also in August, three Dallas men briefly charged in Michigan with
trafficking counterfeited goods told the FBI that several businesses in
Texas buy telephones "from hundreds of people like themselves," according to
an FBI filing in that case. The phones are then sold to middlemen in
California, New York or Miami.


Another buyer, Bilal Mustafa, 22, of Minneapolis, told The Associated Press
he travels around the Midwest a week at a time in search of phones. He and a
buddy buy four to six at once at small-town department stores, as many as
250 a day.

Mustafa sells them to a cellphone business he wouldn't identify. He says
he's doing nothing illegal and scoffs at FBI concerns that the practice
could aid terrorists.

"If it did, I wouldn't do it," said Mustafa, a Palestinian immigrant from
the West Bank. "I'm not stupid."

Purchasing cellphones in bulk is not illegal. A federal judge threw out the
charges against the men in the Michigan case, saying there wasn't enough
evidence to take the case to trial.

The Michigan charges alleged that by removing the cellphones from their
original packaging, the men made it easier to repackage them with
counterfeit trademarks in violation of federal copyright law.

The men arrested in Ohio in August face a low-level charge of giving
misleading information to police, including changing their story about why
they had so many cellphones when they were first stopped.

Terrorism charges were leveled in both cases but quickly dropped.

The middlemen indicate an apparently insatiable hunger for the phones, with
profits in some cases of 100 percent for a handset that retails for as
little as $20.

The phones are so cheap because TracFone and other providers of prepaid
cellular service sell them at a loss to create a market for their real
profit maker: selling customers more call time.

The Dallas men arrested in Michigan said they had spent $20,000 on phones
within just a few days.

The Riedeman e-mails promise earnings of $10,000 a month for aggressive
buyers. Riedeman offered bonuses to such suppliers, from $120 to anyone
bringing in 400 phones a month to $2,000 for someone buying 2,000 a month,
according to court documents.

Mustafa wouldn't say how much he earns on each $20 Buyers - often young
men - pay cash, frequently making purchases in the middle of the night to
avoid scrutiny and to skirt stores' sales limits, according to affidavits
and other filings in state and federal court.

They make up stories about why they need the phones, move from cashier to
cashier or simply buying the limit from a store, waiting a while, then
returning.

"I have many times used other shoppers to help me," said the Riedeman
e-mail. "You would be surprised how many folks will lend a helping hand."

Riedeman could not be reached to comment.

After receiving the phones from the buyers, often in bulk shipments, the
middlemen deactivate a software lock on the devices so they can be used on
other cellular services. The phones are then repackaged and shipped to their
next destination, records show.

Nokia filed suit in January accusing Pan Ocean Communications of Pompano
Beach, Fla., of buying $20 cellphones from Wal-Mart, Sam's Club and Target
stores, disabling their software, then reselling them for $39 as legitimate
Nokia handsets.

A judge ordered Pan Ocean and another company, Sol Wireless Group of Miami,
to stop reselling the phones.

Where the phones go

Destinations have changed over the years, from Singapore in the past to
Mexico today, said John Walls, a spokesman for CTIA, the cellular-industry
trade association that opposes the practice.

"You're able to deliver a pretty good product that will operate on the
Mexican network, the black market can deliver a handsome profit on that
device, and Mexican consumers have the opportunity to save themselves a few
dollars," Walls said.

Suits filed by TracFone and Nokia also name markets in Latin America and
Hong Kong, where resale prices are higher.

Since TracFones that haven't been tampered with can work only in the United
States, overseas buyers ought to know they aren't being sold legitimately,
said Jim Baldinger, a TracFone attorney.

Lawyers for the men arrested in Michigan and Ohio say their clients were
conducting legal business and are being targeted only because they are of
Middle Eastern descent.

"All these individuals were doing was buying and reselling phones," said
Detroit attorney Nabih Ayad. "There's nothing illegal about it."

Retailers, wireless service providers and phone makers don't see it that
way. "Resale on the black market is never a good thing," said Wendy
Dominguez, a Radio Shack spokeswoman.

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