In a week if not a few days, something will happen such as shutting
down the list, everybody unsubscribing, or not accepting e-mail from your
forwarding address, in which case you would get a new one. If you really
want to annoy the list, get 3 or 4 email addresses and subscribe them to the
same lists so that suckers would get about 3 or 4 times more E-mail. Have
fun.
editorial-The Death of Phreaking-Mohawk
A lot of people have been thinking about the death of phreaking
lately. They look at the way things use to be and compare it to the way
things are today. They look at the goldenage of phreaking in the early
80's and they feel that we have things have been on a downward slope
ever since. Let me clear something up, phreaking will never die. In fact,
phreaking is probably more popular now than it has ever been. Phreaking
in the future might just be reading old text files and thinking about
what it must of been like or maybe history will repeat itself and another
goldenage will emerge that will rival the one of the 80's. I doubt
either will happen but you never know. However, if we want to keep
phreaking as good as it is today if not improve it, we too have to change.
Every day the telco's find new and better ways to thwart the efforts of
phreaks everywhere. We have to let go of the old methods of phreaking and
concentrate more on new methods. Redboxing is the reason 75% of people
ever get into phreaking and it is probably the most talked about subject.
However, the redbox is slowly phasing out. It won't be long until it
becomes a thing of the past. We also have to stop relying on other people
to do the work for us. Try to invent a new method of your own or at least
try to improve on a new one. Even if you don't succeed you will probably
learn something, and that's what phreaking is all about, learning. Also,
try not to live your life on boxes alone. I've talked to people that could
make every box ever made in their sleep but when I asked "why does that
work" they had no idea. So try to learn about why a method works not just
how. If enough people change their ways, phreaking should be ok. But what
good is it if we all change and there are no phones? I'm not saying that
phones are gonna disappear tomorrow but how much longer will a phone be just
a phone. With phones being able to send email and computers being able
to be used as phones will phreaking and hacking remain as too different
entities in the future? It's interesting to think about and no one can
say for sure. So will phreaking ever die? Well even if everything
that has to do with phreaking disappears the spirit of phreaking will
never die.
The Beige Box-Cap'n Nemo
The beige box is a modification to your phone that allows you to
perform the functions of a Lineman's Headset. This lets you to hook up to
someone's house and become an extension of their line. The device I am going
to tell you how to build is actually a split-line beige box because it is
made from a split phone line. I would advise that you read all of this file
including the disclaimer before performing any actions outlined in this
text.
Supplies:
2 alligator clips (red and green)
1 6 ft. telephone cord
1 razor (Radio Shack sells a nice 11 piece kit)
3 inches of solder (optional)
Soldering Iron (optional)
A telephone (not portable)
Construction:
1. Cut the phone cord in half.
2.Strip 8 inches of plastic casing off of one of the pieces of telephone
cord. (Be cautious to not cut any wires inside of the casing)
3.Cut off the yellow and black wires that you have now exposed.
4.Strip about 1 inch of wire off of the ends of the red and green wires.
5.Twist the now exposed copper wires to form one wire on both the red and
green wires.
6.Connect these wires to the alligator clips. (red and green respectively)
7.Solder all connections for more secure connections. (optional)
8. If you want 2 beige boxes then repeat steps 1 through 7 on your other
half of telephone wire.
Connecting:
On the side of every office or house there is a small gray box
labeled "Telecommunications Network Interface". You need to open this box.
Depending where you live you will need either a flat-head screwdriver, a
7/16 in. hex driver, or a lock pick set. If it looks like you need a
screwdriver and a hex driver it turns out that the hex nut actually opens
a sub-box inside of the main one, so you will only need the screwdriver to
open the box. When you open this box you will see 4 screws with colored
wires attached. Clip your red alligator clip to the screw with red wires
running to it, and attach the green alligator clip to the screw with green
wires to it. Now plug in your phone to the phone wire. Note: The layout of
the box may vary.
Use:
What this does is make your telephone a legitimate extension of their
line. What this means is you can make phone calls, listen in on phone calls,
and anything you would want to do on your home phone number.
Here are some ideas:
-Calling long distance free
-Holding conference calls with other friends (0-700-456-1000)
-Making a very large phone bill for someone (i.e. 900#s)
-Making calls you wouldn't want traced to your house.
-Eavesdropping
Tips:
-Do beige boxing at night or in a secluded spot.
-When doing it at night bring a flashlight with a purple light filter on it.
-Do not talk of doing this on BBSs.
-Do this on your home until you feel comfortable doing it.
-Do not beige box on a house more than two times.
-If you want to be extra safe then wear gloves to avoid fingerprints.
Busted in 97-Mohawk
1997 had it's share of people getting busted. This is one of the
most comprehensive lists known to us and we did all the research ourselves.
Our main goal in providing this section to you is to not only keep
you up to date on current events but we hope you will realize how the
people in this article got caught. That way maybe you will see what
mistakes you are making so that your name doesn't appear in this section one
day.
GMU SCHOOL FILES LOST
Accused ComputerHackers Arrested
Computer hackers have invaded the databanks at George Mason
University, destroying student and faculty files and sending derogatory
messages about a school official.
áááá Fairfax Police and the university have investigated 11 incidents of
computer hacking since April. The intrusions mostly affect projects at the
School of Information Technology and Engineering.
áááá Last month, authorities arrested two George Mason students in several
hacking incidents. Police said Robert Shvern of Alexandria installed a
virus into the school's computer. Ryan Whelan of Centreville allegedly
erased Shvern's messages to hinder the investigation.
áááá Shvern is charged with computer trespassing, forgery and theft of
services. Whelan is charged with being an accessory after the fact.
How to catch a hacker: Follow the money
By most measures, those responsible for the Citibank caper were
world-class hackers - just really poor money launderers. When bank and
federal officials began monitoring activities of a hacker moving cash
through Citibank's central wire transfer department, they were clueless about where the attack was originating.
Monitoring began in July and continued into October, during which
there were 40 transactions. Cash was moved from accounts as far away as
Argentina and Indonesia to bank accounts in San Francisco, Finland, Russia,
Switzerland, Germany and Israel.
In the end, all but $400,000 taken before monitoring began was
recovered. The break came Aug. 5, when the hacker moved $218,000
from the account of an Indonesian businessman to a BankAmerica account in
San Francisco. Federal agents found that account was held by Evgeni and
Erina Korolkov of St. Petersburg, Russia.
When Erina Korolkov flew to San Francisco to make a withdrawal in
late August, she was arrested. By September, recognizing a St. Petersburg
link, authorities traveled to Russia. A review of phone records found that
Citibank computers were being accessed at AO Saturn, a company specializing
in computer software, where Vladimir Levin worked.
By late October, confident it had identified the hacker, Citibank
changed its codes and passwords, shutting the door to the hacker. In late
December, Korolkov began cooperating. Levin and Evgeni Korolkovone were
arrested at Stansted Airport, outside London, on a U.S. warrant March 4,
1995.
Unknown is how the hacker obtained passwords and codes assigned
to bank employees in Pompano, Fla., and how he learned to maneuver through
the system. Citibank says it has found no evidence of insider cooperation
with the hacker.
Hacker pleads guilty to stealing credit cards
The Associated Press
SAN FRANCISCO - A computer hacker accused of collecting 100,000
credit card numbers off the Internet pleaded guilty before his scheduled
trial.
Carlos Felipe Salgado, Jr., 36, could get up to 30 years in prison
and a $1 million fine when he is sentenced Nov. 25. He was indicted in May
on charges that he gathered credit data from a dozen companies selling
products over the Internet.
The FBI arrested him following a sting in which he tried to sell the
information to agents posing as organized crime figures, agency spokesman
George Grotz said. Salgado asked for $260,000, Grotz said.
Salgado's trial had been scheduled to start Monday. Instead, he
admitted to four counts, including unauthorized access of a computer,
trafficking in stolen credit card numbers and possessing more than 15
stolen card numbers with intent to defraud.
NASA nabs computer hacker
The Associated Press
WASHINGTON - A Delaware teen-ager is under investigation for
hacking his way into a NASA Internet site, agency officials say.
NASA Inspector General Robert Gross cited the most recent example
of a computer invasion of a NASA Web site as an example of how the
space agency has become "vulnerable via the Internet."
"We live in an information environment vastly different than 20
years ago," Gross said Monday in a written statement. "Hackers are
increasing in number and in frequency of attack."
In the latest case, the Delaware teen, whose name, age and hometown
were not released, altered the Internet Web site for the Marshall Space
Flight Center in Huntsville, Ala., according to the statement from the
computer crimes division of NASA's Inspector General Office.
"We own you. Oh, what a tangled web we weave, when we
practice to deceive," the teen's message said, adding that the government
systems administrators who manage the site were "extremely stupid."
The message also encouraged sympathizers of Kevin Mitnick, a
notorious computer hacker, to respond to the site. Mitnick was indicted last
year on charges stemming from a multimillion-dollar crime wave in cyberspace.
The altered message was noticed by the computer security team in
Huntsville. The NASA statement called the teen's hacking "a cracking spree"
and said it was stopped May 26 when his personal computer was seized.
Prosecutors from the U.S. Attorney's office in Delaware and Alabama
are handling the case with NASA's computer crimes division.
Teen recounts hacking into U.S. military computer
The Associated Press
ZADAR, Croatia - Nervously glancing at the desk where his computer
was before police took it away, 15-year-old Vice Miskovic explained with
a mixture of pride and bewilderment how he managed to hack his way into a
U.S. military computer.
"I used some of the hacking programs available on the Internet,
adjusted them, and, with a bit of luck, managed to break into the computer
system of the Anderson Air Force Base in Guam," Miskovic said last week.
"It was a challenge," he said, smiling. "I was curious to see
whether I could do it or not." Miskovic said he searched through the
Anderson base files during the month of January, but whenever he wanted to
download files, they would disappear.
He got scared "because I didn't intend to destroy any files, I just
wanted to see them," he said, adding that he assumed the files had
self-destruction programs installed in them. On Feb. 5, Croatia's computer
crime investigators put an end to Miskovic's search and temporarily
impounded his computer. Current Croatian criminal law does not provide for
punishment of computer crime.
The Pentagon confirmed that Miskovic had gotten into Anderson base
computers, but said he had not compromised any classified documents. When
news about the teen-age hacker broke here last week, the small medieval
Adriatic town was puzzled - and Miskovic's parents were shocked.
Soon Miskovic - whose hacker code was "Intruder" - became known
throughout Croatia. Nediljka Miskovic said her shy grandson has always been
fascinated by computers. "He had no interest in new jeans, sneakers or
girls," she said. "Day and night, he was hooked onto the computer."
Computer hacker pleads guilty
The Associated Press
ST. LOUIS - A computer whiz deemed so cunning he could control
almost any computer system has accepted a plea bargain for hacking
his way into the secret files of two major communications companies.
Christopher Schanot, 20, was linked to the Internet Liberation Front,
a group of hackers who have claimed responsibility for some high-profile
computer pranks and who decry the commercialization of cyberspace.
In exchange for a reduced sentence, Schanot pleaded guilty Thursday
to two counts of computer fraud and one count of illegal wiretapping.
He faces up to 15 years in prison and $750,000 in fines at his sentencing
on Jan. 31.
Prosecutors said Schanot broke into national computer networks and
had passwords to military computers, the credit reporting service TRW and
Sprint. They gave no indication he tried to profit from his intrusion.
His hacking caused security breaches that companies said cost tens of
thousands of dollars to repair.
The break-ins took place between October 1994 and April 1995,
when Schanot was an honor student at a Catholic boys' school in suburban
St. Louis. He vanished after graduating in May 1995. Authorities caught up
with Schanot last March and arrested him at the suburban Philadelphia
apartment he shared with a 37-year-old woman, Netta Gilboa, the publisher
of the magazine Gray Areas. The magazine professes to explore subject
matter that is "illegal, immoral and/or controversial."
In April, Schanot was placed under 24-hour house arrest and ordered
not to talk about computers. Originally accused in a five-count indictment,
he pleaded guilty to charges surrounding break-ins at Southwestern Bell and
Bellcore, a communications research company owned by seven regional
telephone companies.
Mike Schanot said his son made the plea bargain only after
prosecutors threatened him with a wider range of charges.
Attack on Web site leads to charges
A hacker who engineered the cyber-hijacking of the world's leading
supplier of Web addresses has been arrested in Canada on charges of wire
fraud and faced deportation hearings yesterday.
Eugene Kashpureff, co-founder of Alternic Inc., was apprehended
outside Toronto last Friday after a month-long investigation by the FBI.
The Royal Canadian Mounted Police, acting on a warrant issued by the
Canadian government, picked up Kashpureff without incident, a
spokeswoman said.
The charges reportedly stem from Kashpureff's virtual attack this
summer on the Web site of Network Solutions Inc., the Herndon, Va., company
that controls most domain names, which are used for Internet addresses.
An FBI spokesman confirmed that Kashpureff was in custody on wire
fraud charges, but declined to provide further details.
Kashpureff, whose residence is listed as Belfair, Wash., this summer
hacked into Network Solutions' computer system and redirected people
trying to reach its address -- www.internic.net -- to his own site,
www.alternic.net.
He said he pulled the prank to protest Network Solutions' exclusive
agreement with the National Science Foundation to assign and route traffic
to the five most popular Web domain addresses -- .com, .org, .net, .gov
and .edu -- for the past five years. Network Solutions charges $100 for
each name registration.
Ironically, Network Solutions' contract with the NSF
expires on March 31, 1998. Network Solutions filed a civil suit against
Kashpureff in U.S. District Court in Alexandria, Va., and the case was
settled in August.
The court ordered a permanent injunction barring
Kashpureff and Alternic from disrupting Network Solutions' Web addressand
forced Kashpureff to issue an online apology to the Internet community.
"Our problems with him are over," said Philip Sbarbaro, general counsel
for Network Solutions. "We were not involved in any way in his arrest."
But an associate of Kashpureff said Canadian immigration authorities
contacted him a few weeks ago looking for Kashpureff, who reportedly
fled to Canada in September. "They said he was wanted by the FBI for
computer and wire fraud," said the source, who requested anonymity.
He said he was shocked by the severity of the charges against Kashpuref.
"There were no monetary damages and minimal inconvenience," he said.
"This isn't murder. It was just silly high-tech high-jinks."
But the Internet community takes Kashpureff's prank very seriously.
"When someone tinkers with the Internet illegally, it is serious business
that needs to be policed," said Michael Donovan, a lawyer for pgMedia, a
New York-based domain name registry that is suing Network Solutions
for monopolistic business practices. "It harms people's livelihoods and
undercuts faith in the Net. He should be punished."
Though most Netizens do not condone Kashpureff's protest, they agree
that Network Solutions has a monopoly on dispensing top-level domain
names. Network Solutions disclosed in July that it is being
investigated by the U.S. Justice Department for possible monopolistic
business practices.
Busted: Digital detectives take byte out of computer crime
One day last month, a half-dozen law enforcement agents in black
bullet-proof vests trotted cautiously through a quiet North Sacramento
neighborhood. Their target: a suspected "chop shop."
Traditionally, these shops have been unmarked garages where crooks
rip apart stolen autos for the valuable parts. But today's chop shops are
just as likely to house computer parts and criminals busily cobbling
together PCs for later resale through the local want ads.
That's what these agents -- members of an elite squad of computer-
savvy crime busters known as the Sacramento Valley High-Tech Crimes Task
Force -- were after. Created last year, the group has earned a nationwide
reputation for its digital detective work on cases ranging from chop shops
to cloned cell phones to Internet child pornography. Law enforcement
agencies from around the country often troop to Sacramento to learn from the
group.
Sen. Patrick Johnston, D-Stockton, this year even introduced a bill
that would help nurture high-tech crime fighting units like Sacramento's
elsewhere in California. The bill is on the governor's desk, though it had
not been signed as of Friday.
In last month's raid, agents entering the suspected chop shop
discovered a stocky 33-year-old man and a silicon graveyard: Crunched
keyboards stacked knee high. An elaborate network of surveillance cameras.
Junked circuit boards. A credit-card reader, and thousands of black
microchips scattered like crumbs around the carpet.
Almost immediately, two members of the task force -- some of whom
have engineering degrees -- pounced on the suspect's personal computer,
humming quietly in the corner. Like a bloody knife or dead body, the agents
know that computers can hide valuable evidence. They scanned the machine for
booby traps, then prepared to haul it back to their "computer forensics"
laboratory to examine.
Sgt. Michael Tsuchida of the Sacramento County Sheriff's department
surveyed the mess and shook his head. "I hope nobody has any plans for
tonight," he chuckled. Computer chop shops are just the latest addition to
the expanding realm of high-tech crime, a world in which thumbnail-sized
computer chips can be costlier than gold chips and high-tech criminals are
no longer limited to pimply-faced high-school hackers, but range from
organized crime members in Armani suits to drug addicts in flop houses.
In the North Sacramento raid agents found a suspected stove-top
methamphetamine lab and several guns, including one that had been reported
stolen, alongside the computer chips. "Computers have become so user
friendly that even the most uneducated thief can use it to commit a crime,"
said Robert Morgester, a deputy district attorney with the Sacramento
County DA's office who helped to create the task force.
Regardless of who is doing it, high-tech crime carries a high price
tag. A 1995 study by the accounting firm Ernst & Young found that computer
break-ins can cost companies more than $1 million in losses. Cellular phone
companies last year lost an estimated $650 million to crooks who stole
wireless phone codes to talk for free. Sacramento is no exception.
"The Sacramento Valley has become one of the largest manufacturers
of computer components in the world," said Alberto Roldans, deputy district
attorney in the Sacramento County office. "And we're seeing more and more
high-tech crime."
In 1996 the high-tech task force investigated 176 cases, conducted
117 searches, arrested 156 suspects and recovered about $9 million worth of
stolen property, according to its annual report. The group's headquarters on
Folsom Road is tucked away inside one corner of a windowless, crypt-like
building that resembles a storage room more than a high-tech nerve center.
The group is headed by Tsuchida, who has been with the Sheriff's
Department for 22 years. Tsuchida, unlike nearly every other member of the
task force, admits he barely knows how to turn on a computer.
"I'm a computer dummy," said Tsuchida, adding with a wry smile,
"You'd be surprised how much low-tech detective work it takes to solve high-
tech crime." The proof hangs behind his desk: plaques honoring him as
detective of the year award from the Sheriff's Department as well as the law
enforcement officer of the year for Northern California.
On technical matters, Tsuchida calls on his stable of
computer-savvy cops on the task force. Detective Michael Menz of the
Roseville Police Department is a self-taught programmer who hasbeen
tinkering with computers since about 1975, when personal computers were
being built by hobbyists as kits.
Menz patrols cyberspace much the way a beat cop would patrol a
neighborhood. A wizard at computer forensics and the Internet, he spends
hours online working undercover, loitering in chat rooms with suspected
pedophiles or cyberbars with hackers. To do this, Menz keeps several
Internet accounts, each with different user names and identities.
"It's hard to put yourself in the mind set of a pedophile or a
14-year-old hacker," said Menz. "You've got to listen to how they talk, the
kind of lingo they use." To make himself more believable, Menz watches TV --
lots of it -- from "Saved By The Bell" to MTV.
This undercover work occasionally pays off and produces
incriminating evidence that can be used in court. "Sometimes the bad guys
will come out and say, 'Here's a stolen credit card number. Don't tell
anyone where you got it,'" said Menz with a smirk. The team's Folsom Road
digs also contains its computer forensics lab, one of the few in California.
Computer forensics is a new, cutting edge area of law enforcement that
allows police to extract powerful and often damning electronic evidence
against criminals. The task force members are experts at it.
"Just think, what do regular people keep on their computers? You
have private e-mail. You keep your address book. You may keep your financial
records," Tsuchida said. "Well, criminals are no different." The group has a
clearinghouse for seized computer gear as detectives in other units
routinely lug over computers they've retrieved on busts to see whether they
contain incriminating evidence.
"The task force is invaluable in the investigation when it comes to
computer access," said Lt. Robert Kraft of the Sheriff's Department's
narcotics gang division. "They break the password codes and access the
information we need for seizing assets or getting evidence for a crime."
Probably 70 percent of the computers they examine contain
incriminating evidence, said Special Agent Fred Adler, a former Motorola
engineer now with the FBI. Adler is the team's computer forensics guru.
When they encounter a computer at a crime scene, a computer
forensics expert like Adler first disconnects the telephone line from the
computer modem so nobody could sabotage evidence from a distance before
they've had a chance to get it. Then the person checks for booby traps.
Criminals have been known to rig their computers to wipe out any
potentially incriminating data if the proper shut-down procedure isn't
followed or password given.
"We've found bombs hardwired to computers, so that if you hit a
button it goes kabloomy! -- there goes the computer, the evidence and the
investigator," said Morgester.
Finally, they make an exact duplicate of the hard drive to avoid
contaminating the original hard drive, which might make any evidence they
find inadmissible in court. To make sure they always get admissible digital
evidence, Adler and other task force experts are teaching other cops how to
handle computers when they come upon them at a crime scene.
"We've seen case after case where you have law enforcement agents
who know the computer was used in the crime and still leave it behind.
That's the equivalent of going to a murder scene, finding a dead body,
seeing the bullet in the head and not taking the gun," Morgester said.
Part of the problem, said police, is that most beat cops don't know
what to do with a computer when they find it. A 1995 University of
California study found that 40 percent of police professionals received no
formal training on computers, and another 20 percent received less than two
hours.
"If it had been a knife, the police would have taken it. If it had
been a gun, they would have taken it. But a computer? Their thinking is: How
do you dust a microprocessor for prints?" Tsuchida said. By contrast, the
FBI recently estimated that 90 percent of criminals will be computer
literate by the year 2001.
"If you go into any prison, what do they teach you how to use? A
computer," Morgester said. To illustrate how important it is for beat
officers to become more computer literate, Tsuchida likes to tell the story
of one case involving a Bakersfield teen who was using the Internet to
persuade people to meet him in person, then robbing them when they did.
The Bakersfield police were the first to nab the teen, but when
they searched his house for evidence, they left his computer. Later,
Tsuchida's team was called in to help because some of the crimes occured
around Sacramento. When forensic expert Adler examined the hard drive, he
found evidence the teenager may have been involved in mail fraud as far away
as Pennsylvania.
Police agencies are so hungry to learn this digital detective work
that they've come to Sacramento from as far away as Ottawa, Canada. Next
month, the task force is putting on a training seminar in South Lake Tahoe
for police officers around the country. Already, it's nearly sold out.
Besides inexperience by some officers, another problem faced by
investigators is money: High-tech crime is expensive to investigate.
"You can't fight crime with a 486 (CPU), if the bad guys are using
Pentium IIs. It takes a hacker to catch a hacker," said Tsuchida.
Each computer forensics job, for example, requires investigators to
make an exact duplicate of the confiscated computer's hard drive. To do
this, they need a hard drive as big as the one they're working on. These
days a typical hard drive might run several hundred dollars.
Tsuchida often turns to the local high-tech industry for help and
works hand in hand with companies such as Apple, Hewlett Packard, NEC
Electronics, Packard Bell, Intel, Air Touch Cellular, and AT&T Wireless
Services. These firms often provide hard drives for the task force's
computer forensic work, free cell phone use or the money for controlled
buys.
Despite this help, there's fear in law enforcement circles that as
the bad guys grow more technologically savvy and well-equipped, law
enforcement departments will be unable to fight back. When the task force
was formed last year, it had more than 10 members from various laws
enforcement agencies in the surrounding counties. Today, the group's ranks
have been cut nearly in half as short-staffed local agencies pull their
people off the task force and back home.
For Tsuchida, this means lots of late nights for his squad and some
tough decisions about where to deploy his troops. "I know of three or four
places like the chop shop we hit the other day," he said, recalling the
North Sacramento raid. "But I just don't have the officers to do it."
The digital detectives may be in for a long, tough fight. "For a lot
of the sophisticated criminals, money is no object," said Lt. Kraft, the
narcotics detective."
Computer Hacker Must Pay Restitution
ASSOCIATED PRESS
GREENEVILLE, Tenn. -- A computer hacker must pay $40,000 in
restitution for intrusions into the Air Force Information Warfare Center and
other classified defense computer systems. Wendell Dingus also was
sentenced Monday in federal court to six months of home monitoring.
Federal prosecutor Neil Smith said Dingus will be liable for
restitution for time and efforts involved in tracking hackers. Dingus was
sentenced for a series of intrusions into the computer in 1995. He admitted
he used a program installed by telephone modem transfer in a Vanderbilt
University computer to gain log-in passwords to Air Force and NASA
computers.
Nabbed in Gates Death Threats
Billionaire computer software wizard Bill Gates was threatened with
death unless he paid out $5 million in an amateurish extortion
plot, officials said yesterday.
Computer hacker Adam Pletcher, 21, was arrested May 9 in the Chicago
suburb of Long Grove, where he lives with his parents, and charged
with extortion, federal prosecutors said. He was freed on $100,000
bond and is due to appear in U.S. District Court in Seattle on Thursday for
arraignment.
According to court documents, Pletcher sent four letters to Gates,
beginning in March, threatening to kill the founder of Microsoft Corp. and
his wife, Melinda, unless payment of at least $5 million was made.
"The writer cautioned Gates not to notify law enforcement and that if
Gates did so, the writer could kill him with 'one bullet from my rifle
at a quarter of a mile away,' " court documents say. The last letter told
Gates to pay a specified amount of money into a foreign bank "to avoid
dying, among other things," the court papers say.
The first letter was intercepted at the company's headquarters in
Redmond, Wash., by corporate security officers, who contacted the FBI.
Agents then used an America Online dating service specified by the author of
the letters to track down Pletcher, described as a loner who spends
much of his time in front of his computer.
Authorities said they treated the threats seriously but did not
believe Gates' life was ever in danger. "We generally think this was a kid
with a rich fantasy life, just living that out," said Tom Ziemba, a
spokesman for U.S. Attorney Katrina Pflaumer.
Pletcher is being sued by Illinois authorities who say he operated a
fraud scheme over the Internet. He also is being investigated for
allegedly using the Internet to sell counterfeit driver's licenses, the FBI
said.
Teen Hackers Don't Cover Tracks
ASSOCIATED PRESS
BLOOMINGTON, Minn. -- Five teens were smart enough to break into a
computer security program to obtain credit card numbers - then naively had
merchandise bought with the stolen numbers shipped to their own doorsteps,
police said.
Police said the five juveniles -- including a 15-year-old who is
already attending college -- solved online security encryption to steal 20
to 25 credit card numbers from Minneapolis residents.
The young hackers used the card numbers to buy thousands of dollars'
worth of merchandise, Sgt. Jim Ryan said. "They were ordering stuff on
credit cards, and people would see these purchases on their statements,"
Ryan said. "All were pointing to a couple of addresses in Bloomington."
"They got the credit card numbers by hacking into an Internet shopping
site and also from a dry cleaner where one of the kids worked," Ryan said.
Police said they recovered computer scanners, monitors, computer games, car
stereos, cellular telephones and other electronic equipment at the
suspects' suburban homes earlier this month.
Police also accused the teens of defacing Bloomington Kennedy High
School's World Wide Web page with pornographic photographs. The five
juveniles may face felony theft charges, which could be brought as early as
next week after a formal charge is presented in juvenile court.
Letters
Out of all the letters we get, we seem to get scams the most. Keep
sending them in because June will be our next scam issue. Your letters will
be reprinted in the the letters section and the best of them will be
featured in the June issue. But don't send in just scams, send your
questions, comments, stories,suggestions, responses to another letter, etc.
In your letter be sure to include your name or handle so that we can
identify who sent the letter. If you do not include your handle or name we
will use your user name of your email address.
<>=editor's response
From:~LoGikphear~!
This is my fuckin' weird story!
Well one night I was phreaking. So I popped out my handy redbox and
went down to a public phone. (don't ask why I went down to a public phone
and not a bell, I must have been really tired! dammit!) So I put a nickel in
the payphone to break the mute control, then I played the flowing red box
tones, 25.......25.......10.....5 (don't ask why I played them I just
experiment a lot!) so nothing happened so I hung it up. And like a 1 dollar
and 50 cents popped out, it was working like a greenbox, so I being the
figure it out kinda guy I thought to my self what the fuck!?!?!?!?!? So I
did it again and again, well I used all the money I got, to rent videos
at the video store right in front of the payphone! Then I went home, the
next day I tried it again......in the day, and I found out it only works in
the day! Well this is my weird ass story!!!!!!!
<That's wierd as hell. I'd believe it cuz when it comes to payphones,
anythings possible.>
From:Anonymous
Hello, are you tired of nigger blatherings? "Fuck you whiteys" they
say. I don't appreciate it. I am tired of the niggers. Us white people
are not going to take it anymore. For this reason FUKNIG has released a
series of videos to educate people on the plight of white people and the
chains placed on them by niggers. We will teach you ways of dealing with
niggers. For example the next time you are at burger king and a nigger is
serving you like the slave it should be you should ask for its manager and
tell the manager about the problems you are having with the nigger. If you
do this right and the nigger did act improperly the nigger will get fired.
You can learn about the problems with niggers like Al Sharpton or Clarance
Thomas. Al Sharpton is a horrible man and Clarance Thomas is a rapist.
Learn where to complain about Clarance Thomas. Also we will teach you how
to protest legally. These videos show you the most effective places to
protest like outside of nigger churches and at nigger funerals. It explains
the best way to protest near the whitehouse. Learn how to protect your
women from nigger rapists. All this for only $39.95. Thats right! What is
that I hear? You think I'm cheating you? Well, how about it if I throw in
a picture on Martin Luther King for use on your dart board? That is OK, but
the price is too high? Come on I have given you so much already. OK I will
lower the price to only $35.95 but not a penny less. What is that I hear?
Still too high? OK, how about if I lower it to $29.95. OK then $29.95 it
is. But only for the first 100 orders. After that the price goes back up!
<First off, let me just say that, racism sucks. It has gotta be the
stupidest damn thing ever invented. Just because someone's skin color is
different, it doesn't make them that much less of a person. Well I better
stop before I start to rant. This has to be the wierdest thing I've ever
seen though, someone exploiting racism. Out of all the ways to make money
and all the things to exploit they chose racism? Scary.>
From:johnny quest
Hey what's up I was wondering if you had any credit card numbers or
other codes to make free calls.
<What goes through your mind when you mail these letters? For all of you
people that ask these kind of questions, no one is just going to give you
things like CC#'s for free.>
From:Stranger
Also, here's a scam for ya... you may have heard this one before, I
just heard it somewhere myself, although I can't remember where. First,
get a group of friends and go to a Burger King. Go up to the counter
and order a raw whopper. When they give you shit, just remind them of
their slogan, "Your Way Right Away!". After a while of convincing, they
will give it to ya. Take it, and leave. Go down the street to another
Burger King. Walk into the store, and throw the raw whopper on the
counter saying that you just got this in the drive thru and almost took
a bite from it. This works best in the middle of lunch or dinner rushes
because its busy and in case they check the register receipts to see if
anyone ordered a whopper in the past few minutes at the drive thru,
there is a better chance that someone did. You will get a complete meal
for everyone in your group. (If they dont you could always sue em, but
I guess thats getting a little greedy.)
From:Count Z3R0
Sup,
I'm a phreak in Central IL(217), and just wanted to give some help and
let you know that I liked the page.
OK, first off in OCPP#1, there was an article on scaming VMB's. It is
a pretty good article, but you missed one thing. Alot of major companies'
800 number's will take you to the voice-mail automated system. From there
you can crack mail-box #'s & pw's, like you talked about, but also in big
co.'s they have a PBX hidden in the atomated VBM system...you can usually
reach these from the first operator prompt by hitting *9, #9, or simply
9....if you can't find one there, then access your cracked VMB and listen at
the box editing prompt for a Public Branch Exchange(or PBX) option, if
there's no option there then try the *9, #9, or 9 technique.
Whew, second off, In Ocpp#2 there was an article on scams to pull... My
friend and I have a good one that works...
HOW TO GET REALLY CHEAP CAR INSURANCE
First, pick a really cheap insurance company. Go apply for insurance,
after they accept you, pay the first month, then cancel(be sure you have the
insurance card before you cancel). Keep the card around, don't toss it or
give it back to the company, keep it in your car and you have free insurance
for the next 6 months.
PS...Don't worry pigs can't catch you unless you get in a wreck. When
they check your insurance card they just look at the experation date.
Well, that's all I gotta say...
OCPP News
"more news, less chopper"
Comdex 97
Pager let's you control your car
Yahoo! hackers threaten to unleash virus
British Telecom courts GTE
Microsoft-Scotland plant robbed
Comdex 97
LAS VEGAS (Nov. 18) - Who needs a home computer to hook up to the Internet? Suddenly it seems cooler to go online using technology built into a home telephone, television set - or even the family car.
Just ask the makers of the latest gizmos angling to take a piece of the Web from the desktop PC. While the technology is still evolving, making Internet access simpler and more portable could help convert the remaining people who have yet to get wired - which so far is most of us.
The flurry of products, some still in the experimental stage, fought for attention amid the clutter of more than 10,000 new items displayed at the week-long Comdex show that opened here Monday.
Among them were plenty of tiny hand-held computers that enable people to go online from remote locations, using wireless modems.
But Samsung Electronics, a unit of South Korea's Samsung Group, has another idea. It introduced its Web Video Phone, which looks like a fancy home telephone - except that it lets people make calls over the Internet while transmitting a live video of themselves. Users also can surf the Web, exchange electronic mail and conduct financial transactions.
The sleek device combines a telephone, a built-in video camera, 5.6-inch touch-sensitive screen, a slide-out keyboard and a slot for swiping your bank or credit card.
To make a call, the user starts by touching the screen's video phone icon, and dials the number on the phone pad below. The user obviously must phone someone who also has Internet access - through either a computer or another Web Video Phone. But people also can make calls across regular phone lines.
Making calls across the Internet costs the same as a local call, saving on long-distance and international rates. But there generally is a delay in hearing the person's response, which can make for a confusing conversation. Also, the image that is transmitted appears jerky.
Other problems need to be worked out. During an attempt to make a call on Monday, the screen suddenly went blank as the Samsung demonstrator apologetically explained that the machine had been used for too many hours.
But the simplicity of the device got an enthusiastic response from some Comdex attendees, who also lauded its ability to ''read'' special bank cards to pay for Web purchases.
"It takes what we're already doing and makes it simpler for everyone," said Daniel Basse, a U.S.-based technology manager for Japan's Matsushita.
While several companies are working on similar devices, Samsung claims to be the first to show one and expects to start selling the Web Video Phone by next summer for under $1,000, said Charles Yum, a technology manager for Samsung Electronics America Inc. Samsung hopes to convince Internet service providers to sell the phone as part of the monthly service they sell to consumers.
An experimental car from IBM, Delco, Netscape and Sun Microsystems takes the idea of unfettered Internet access even further. The auto, which incorporates the latest speech recognition technology, includes built-in screens that enable passengers to cruise the Internet. Moreover, riders can use their voices to command the on-board computer. It even talks back. Say ''Read stocks,'' and the computer lists stock quotes out loud.
But a marketable product could be years off. Key to the car is a special antenna built into the roof to receive Internet signals from satellites. Based on military technology, the antenna is supposed to point in the direction of the satellite as the car moves, but the technology is another 3-4 years away, said Richard Lind, director of automotive electronics development for Delco Electronics Corp.
Still, the technologies further a concept pioneered by Web TV, which was bought by Microsoft Corp. last spring. The device enables couch potatos to access the Internet from their television using a remote control.
The latest advance to Web TV was shown at Comdex. Now, viewers can simultaneously see their favorite TV show and a Web site in different parts of the TV screen. The idea is to connect the TV with related Internet information, creating an active program guide that accentuates television.
Such innovations could be necessary to convince people to use these alternate ramps to the Internet. Forrester Research estimates that sales of Web TV and similar devices won't reach 1 million until the year 2000. But the Cambridge, Mass. research firm predicts that by 2002, improvements by manufacturers will convince 14.7 million households to connect their TVs to the Internet, and 9.2 million to have Internet-connected screen phones.
Pager lets you control car
Locked your keys in the car? Lost your car at the mall? No problem.
Motorola plans to unveil a new paging device Wednesday called CreataLink that could be a boon for forgetful motorists but a headache for customers behind on their car payments.
Using one-way paging networks, CreataLink can remotely lock or
unlock a car door, honk the horn, flash the lights and start or kill a car
engine. And it's inexpensive ù about $100 for the pager, $50 to
install it in the vehicle and $25 for unlimited paging for a year. "They have an inexpensive way to provide a lot of convenience for motorists" says John Hoffecker, head of automotive practice for the consulting firm A.T. Kearney in Detroit.
Here's how it works: A customer dials an 800-pager number and enters
the code to identify the vehicle. The customer then enters another secret code to activate functions in the vehicle. The customer then selects from a list of about 10 functions, from locking the doors to killing the engine.
Motorola says CreataLink will be in car alarm stores and car dealers in two weeks and it may soon be available at Circuit City, says Allan Spiro, Motorola's marketing manager. Spiro says at least two rental car companies want to install the device because customers often lock keys in the car. And car loan companies want to use CreataLink to force
car owners to make car payments. Loan companies could send owners
several warnings by honking the car horn before cutting off the engine.
The engine would not be shut down while the motorist is
driving. But when the motor is turned off, a finance company could
use CreataLink to make sure it doesn't restart until the owner makes a
car payment. "The finance companies are becoming our hottest
customers," Spiro says.
Yahoo! hackers threaten to unleash virus
NEW YORK - Hackers broke into Yahoo!, the Internet's most
popular site, demanding the release of an imprisoned comrade and
threatening to unleash a crippling computer virus if he is not freed.
Computer security experts were skeptical of the hackers' claim that
they had implanted such a virus. The hackers, calling themselves PANTS//HAGIS, got into Yahoo!'s World Wide Web site Monday night, leaving a digital ransom note.
Yahoo! is a computer directory widely used for
searching the Internet. The note appeared briefly in place of the Yahoo! home page, preventing people online from using the search engine,
which got 17.2 milllion visits in October. "For the past month, anyone who has viewed Yahoo's page & used their search engine, now has a logic bomb//worm implanted deep within their computer," it read. "On Christmas Day, 1998, the logic bomb part of this 'virus' will become active, wreaking havoc upon the entire planet's networks."
"The virus can be stopped. But not by mortals." The note said an "antidote" program will be made available if hacker Kevin Mitnick is released. Mitnick was indicted last year on charges involving a multimillion-dollar crime wave in cyberspace.
Diane Hunt, a spokeswoman for the company, said the message was
up for only 10 to 15 minutes and a few thousand people saw it. "We immediately took action to see the extent of the damage and moved to correct it," she said. "And about that virus? There is, in fact, no virus."
Jonathan Wheat, manager of the Anti-Virus Lab at the National
Computer Security Association, said it is at least theoretically possible
to exploit security flaws on the Internet and implant such a virus. But he
said he doubts this group of hackers - already known to security experts - pulled it off.
"That's pretty much ridiculous," agreed Jamonn Campbell, an
information security analyst at the association. Wheat said there was little reason to be concerned that the popular Web site was hacked. "A lot of Web sites get hacked constantly," he said. He said that while Yahoo! is a high-profile site and should be expected to have better security than most, "no site is completely hack-proof."
British Telecom courts GTE
NEW YORK - British Telecom, on the rebound after MCI jilted it, has
opened preliminary merger talks with phone giant GTE, USA TODAY has learned.
Such a deal - though smaller than a BT-MCI combination - would give the British phone carrier a much wanted stake in the $200 billion-a-year U.S. telecommunications market.
BT also is considering a double acquisition. Just as WorldCom
simultaneously announced plans to buy MCI and a small local phone
company, Brooks Fiber, BT might make a bid for GTE and a smaller
carrier, such as Teleport Communications or Intermedia.
Despite the talks, BT continues to keep its options open. It also has
held talks with two regional Bells: Bell Atlantic and SBC Communications.
Bell Atlantic CEO Ray Smith recently met with BT Chairman Sir Iain
Vallance at BT offices in Britain. And while it is not clear whether BT officials have yet met face to face with SBC Chief Executive Ed Whitacre, BT strategists have explored the idea of a combination. "We are talking to a number of companies in North America about possible future partnerships, but we will not sign any deals until the
MCI-WorldCom deal is closed," BT spokesman Jim Barron says. GTE officials did not respond to requests for comment on this story.
While BT's U.S. strategy is still taking shape, it might fall rapidly into
place. A decision could be made during the first quarter of 1998. Talks
with GTE - focused on how the companies might work together as opposed to specific terms of a deal - already have taken place at the
highest level.
GTE Chief Executive Chuck Lee met with British Telecom
officials at the U.S. company's offices in Stamford, Conn., the week
after MCI accepted an offer from WorldCom. GTE appears to be favored over the others for several reasons. There are cultural and technological similarities between GTE and BT.
GTE's interactive cable TV service, broadcast in Florida and Texas
under the Americast name, is similar to BT services in Britain. And GTE has some of the aggressive marketing style that BT was hoping to find in MCI. GTE has signed up more than 1 million long-distance customers, most at AT&T's expense.
"GTE and BT have had discussions in the past. They are familiar with
each other. There are open lines of communication," says Scott Cleland, director of the Precursor Group at Legg Mason Wood Walker. He said an alliance with a Bell was less likely because the Bells can't offer long-distance service in the USA.
Microsoft-Scotland plant robbed
REDMOND, Wash. ù Masked gunmen broke into a Microsoft plant
in Scotland last week and stole an estimated 200,000 certificates of
authenticity, 100,000 CD-ROMS and computer equipment, Microsoft
said Tuesday.
The robbers bound and gagged three employees and locked them in an
office during the Nov. 10 break-in at the Thompson Litho Ltd. plant in
East Kilbride, Scotland. Microsoft said the certificates of authenticity ù which are packaged with all software sold to computer manufacturers ù
could be worth up to an estimated $16 million if they are attached to
counterfeit Windows 95 operating system-based products.
Microsoft said it was alerting software distributors and resellers to be on the lookout for the numbers that were on the stolen certificates.
The company said the gunmen escaped with the stolen certificates and
other products before the bound employees were able to free themselves and trigger an alarm.
The company said the stolen CD-ROMs include programs in various languages, such as Windows 95, Office 97, Windows NT 4.0, Encarta97 and several Microsoft games.
MCI Worldcom Merger
GTE stays on hold with MCI
NEW YORK - GTE Chairman Chuck Lee is weighing a possible
hostile takeover bid for MCI in the event WorldCom's $37 billion
acquisition begins to unravel. GTE had no comment. But Lee has made it clear to colleagues that if WorldCom's share price falls to the point where it
undermines the value of its takeover offer, he wants to wade back into the
action with an improved all-cash deal, likely in the ballpark of $45 a
share.
"I don't think GTE is out of this at all," says Tom Burnett, editor of
Merger Insight, an independent newsletter for institutional investors.
"They must be licking their chops watching the market action in WorldCom stock."
WorldCom shares have fallen almost 10% since CEO Bernard Ebbers'
first $30 billion bid for MCI Oct. 1. WorldCom stock closed Monday at $30 15/16, down 2 3/16, as investors expressed concern with the hefty price the
Mississippi telecommunications upstart is paying for MCI.
At $51 a share, MCI is selling at more than 11 times 1997 earnings
before interest, taxes, depreciation and amortization (EBITDA) or
more than 45 times next year's expected earnings per share. Under the terms of Monday's agreement, WorldCom's all-share offer loses value if its average stock price falls below $29 in the 20 days before the acquisition is expected to close, in six to nine months.
MCI shares rose 4 5/8 to $41 1/2, well below WorldCom's bid,
reflecting investors' concern that the WorldCom bid could be in trouble.
Not only are WorldCom shares vulnerable to recent market turbulence,
but the company has a full plate trying to integrate not only MCI, but
acquisitions of CompuServe and Brooks Fiber. There also are continuing concerns about the performance of MCI's local telephone business and its impact on WorldCom's performance.
Arbitrageurs, who make a living betting on the likelihood of mergers,
say the real value of WorldCom's offer lies somewhere in the low $40s
per share, after discounting for risk tied to WorldCom's share price, the time it will take for the deal to close and potential regulatory headaches.
If GTE did nab MCI, it could be expensive. GTE would have to pay WorldCom a $750 million breakup fee, plus a $465 million reimbursement for the breakup fee WorldCom paid British Telecommunications, which had the first deal with MCI.
MCI WorldCom sounds new call
Wonder why WorldCom would pay $37 billion for MCI? Because the merger, announced Monday, will create the first and only communications company of the future. MCI WorldCom will be, by far, the largest player in a
new wave of communications built on Internet technology. Established
telecommunications giants - such as AT&T and BellSouth - are stuck
with too much of the old technology built for voice conversations. Over
the next few years, communications will shift dramatically toward the
kind of network MCI WorldCom will own.
In other words, it's near the end of the road for the 100-year-old Ma
Bell-type of network. To use an analogy from another industry, this
could be like the days when the personal computer tore down the
mainframe computer powers. "Internet technology is the most important development in communications since the telephone replaced the telegraph," says James Crowe, a former WorldCom executive who is now a venture
capitalist.
Into that scenario rides MCI WorldCom. In a little more than a year,
WorldCom CEO Bernie Ebbers has bought major Internet carrier UUNet and bought the physical networks behind CompuServe and America Online. That alone has made WorldCom the biggest hauler of Internet traffic. Now it will add MCI, which carries 40% of Internet traffic. The merged company will own the world's biggest network built on digital packet switching technology, which is used for the Internet.
True, MCI WorldCom will be the world's second-biggest voice
long-distance carrier, behind only AT&T, and a growing challenger in
the local phone business. But that's about the present. MCI WorldCom
is about what comes next. "WorldCom is explicitly assembling the
communications company of the future," says James Moore, analyst with GeoPartners Research. "That's the design."
It may seem arcane, but the two types of communications
technology are very different - as different as train tracks and
roads. The shift from one to the other will have a huge impact on the
communications industry and on users from corporations to consumers.
Reed Hundt, former chairman of the Federal Communications Commission, puts it this way: "What we need is a data network that can
easily carry voice, instead of what we have today, which is a voice network struggling to carry data." Ever since the telephone's invention, communications networks have been built primarily to connect two people who are talking. So first, the connection had to be smooth and natural, without delays or interruptions.
Second, from the early days, the means of switching calls was
expensive. At one time, it took roomfuls of human operators; later, it
was done by clunky and costly mechanical switches. The cheap part of
the system were the lines. So, if you follow the economics, the system
was made to take advantage of cheap lines and avoid expensive switching.
That system, called circuit switching, is the basis for the phone
networks. Circuit switching connects one party with the other through
one, dedicated pipeline. Today, that pipe might be a series of lines
owned by different companies, but it's still one fixed set of resources
opened up for your conversation. For quality, it's first-class - like
having a road built just for you to drive on. Economically, the burden is
on the line, not the switch, which only has to connect the call in the first
place; then, it's done.
But circuit switching wastes the resources of the line. For instance,
during silences in a phone conversation, the line is empty. And that's becoming a major problem. The economics have shifted.Switches are now computers and computing power has become extremely cheap. Now the lines are expensive, especially digging up streets and buying rights of way when building new lines. MCI will lose $800 million this year building local phone networks, and the majority of that goes to the lines.
On top of that, thanks to the Internet, data traffic is flooding
communications networks. The Internet is growing 100% a year. Today, voice conversations are still a bigger part of overall communications traffic, but that's changing at light speed - especially since very rich data, like video, is starting to be transmitted over the networks, and video gobbles up hundreds of times more capacity than a phone call. Forrester Research
+predicts that by 2004, voice will be just 1% of communications traffic - a little burp among the Web pages, videos, software, transactions and business information zooming around the networks.
Changing economics
That's where the Net's packet switching comes in. It flips the
economics, wasting switch resources and jamming as much as possible into lines.
Increasingly popular Internet phone calls are a good example of how
packet switching works. Your computer uses a phone line to connect
to an Internet access company's switch, called a router on Internet
networks. When you talk into a headset plugged into your computer, your voice is turned into tiny digital packets, each about 200 bytes.
Each packet gets a digital label that says where it belongs with respect to its neighboring packets and where it's going. Once the stream of packets hits the first router, they are dispersed. Complex calculations tell each packet the most efficient route to go.
The packets from that single conversation might flow four or five
different ways. Clumps of your packets will be put into a wire or
fiber-optic line among other, unrelated packets - all crammed in to use
all the capacity of that line. On their way, the packets might go through 20 or 30 routers. At the other end, a computer reads the labels and
reassembles the packets in their proper order and feeds them to the
other party - all in a fraction of a second.
There are some disadvantages. The route is not first-class. Packets can get lost or delayed. As Internet phone users will testify, the quality does not match a regular phone call. But the quality is improving quickly and is expected to catch circuit-switched networks. And the cost advantages are enormous.
Computing power will continue to get cheaper, pushing costs lower. By
contrast, the cost of the lines - especially building new ones - is going
up. Already, Crowe figures, the cost of sending a CD-ROM worth of
information across the country is about $1 on the Internet and $27 over
a public phone network. Packet switching is why Internet phone calls to
another continent can be essentially free.
New breed of rivals
So MCI WorldCom would be the one and only giant of packet
switching. There are other important companies in that arena, such as
start-up Qwest Communications. Sprint is a major player in packet
switching and in traditional phone networks. But MCI WorldCom is
biggest. MCI and WorldCom continue to build high-capacity data
networks in cities and for carrying long-haul Internet traffic. "We're
confident we'll have a company that is growing in the 25% range, which
is phenomenal, compared with other companies in the marketplace," Ebbers says.
Meanwhile, AT&T, GTE and the regional phone companies are deeply
entangled in circuit switching. Their financial structure, their billing
systems, even their cultures are built around that technology. Author
George Gilder writes of the phone companies: "They incarcerated their
capital and personnel ever more inexorably in million-ton cages of
copper wire." Like the mainframe computer companies of old, they'll
have a hard time changing.
On the other hand, MCI WorldCom is not a sure thing, either. While
some believe the company is the result of Ebbers' brilliant master plan,
critics say it's an accidental leader that now must figure out where to go.
"This is more about financial engineering than business sense," says Eric
Greenberg, founder of Silicon Valley Internet Partners.
Further ahead, packet switching is likely to make communications so
cheap, it will turn into a low-margin, commodity business, says Don
Tapscott, technology author. MCI WorldCom will have to create new
kinds of higher-priced services to make good money. "It's like we're
jockeying for the precondition to be able to get to that," he says.
Even if that's the case, MCI WorldCom has an important head start.
"Another technological shift could make WorldCom the next AT&T," says analyst Bryan Van Dussen of The Yankee Group. "That is clearly the risk WorldCom is absorbing in buying MCI."
MCI accepts WorldCom takeover bid
NEW YORK - MCI Communications Corp. agreed Monday to be bought by WorldCom Inc. for $37 billion in what would be the largest corporate merger in U.S. history.
Boards of both companies unanimously approved the agreement after
WorldCom sweetened its offer by more than 20%, ending a takeover battle for the nation's second-largest telecommunications company. The new company will be called MCI WorldCom and expects to have more than $30 billion in annual revenue next year.
WorldCom's bid leapfrogged a competing $28 billion all-cash offer
from GTE Corp. and also beat out a $24 billion merger agreement MCI had with British Telecommunications PLC. Talks with GTE continued through Sunday, MCI Chairman Bert Roberts Jr. said in a news conference in New York. "GTE is a fine company ... We didn't dismiss it lightly," Roberts said Monday of the rival offer. Nevertheless, he added, "MCI has made the best possible choice with this alignment with WorldCom. The two companies have complementary strengths."
British Telecom, which will receive $7 billion in cash from WorldCom
for its 20% interest in MCI, also agreed to the deal. That gives it a
profit of $2.25 billion on its MCI stock. In addition, British Telecom
will be paid $465 million because MCI broke its previous contract to merge with BT.
WorldCom also would assume $5 billion in MCI debt. The deal would eclipse the largest U.S. merger so far, a $25.6 billion marriage between Bell Atlantic Corp. and Nynex Corp. that was completed in August. The combined MCI WorldCom would be a telecommunications behemoth selling a full range of services, from local and long-distance to Internet service to 22 million customers in the United States and 200 other countries. As such it would fundamentally alter the telecommunications landscape, and also speed up merger talks by other companies adapting to changes in federal rules for
competing in long-distance and local service.
WorldCom, currently the No. 4 long-distance phone company, upped
its bid to $51 a share in stock for each of MCI's shares, from $41.50 a
share early last month. Details were announced by the two companies
Monday morning.
As the deal moved forward, WorldCom's president and chief executive, Bernard J. Ebbers, said the companies found new ways to save money beyond those considered when WorldCom first proposed its brash takeover bid.
"We have been able to identify significantly greater synergies," he said when asked to justify the higher offer by WorldCom. Executives said the additional savings would come from such areas as fees each of the companies pays the other for completing overseas calls. After studying MCI operations for the past month, for example, WorldCom said it found a combined company could save $500 million a year in such access fees, up from an original
estimate of $150 million.
Any deal would require approval from government regulators.
The warring bids had seemed lavish for MCI, which grew from a
startup mobile radio company more than three decades ago to become the fiercest challenger to AT&T Corp.'s once-solid monopoly on long-distance phone service. But the company has a unique position in a business
that has undergone enormous regulatory and technological changes the past
two years.
A federal law intended to force more competition in telecommunications has touched off a spate of attempts by the industry's biggest players - not all successful - to buy their way into each other's businesses. MCI, more than other players, is in a unique position to take advantage of those changes, particularly new opportunities in local markets.
MCI has been spending billions to build local networks of fiber-optic
cable to handle calls in more than two dozen cities so far. That contrasts with plans by No. 3 long-distance company Sprint and AT&T to lease lines from local phone companies and then resell them to customers.
MCI also is a leader in selling long-distance service to large companies and currently gets more than half of its revenue from big businesses. It has made MCI enormously attractive to companies such
as GTE, a hybrid local and long-distance company, and to WorldCom. Both are
attempting to expand into a range of communications businesses to take
advantage of the regulatory reform.
Under the agreement, MCI's chairman, Bert C. Roberts Jr., will
become chairman of MCI WorldCom, and WorldCom's chief executive, Bernard J. Ebbers will be president and chief executive. "We have aligned ourselves with a management team and employees who share our entrepreneurial spirit and continue to pioneer competition in our industry," Ebbers said.
WorldCom is counting on big cost savings to make the deal worth it. It
wants to slash $2.5 billion in costs in 1999 and $5.6 billion three years
later. Another $2 billion a year would be saved in capital spending.
British Telecom still holds 75.1% of Concert Communications Services,
a global telephone joint venture it created with MCI. British Telecom
has an option to purchase the remaining 24.9% of the venture, but said
it was not sure whether it would exercise that option or try to work with
WorldCom. The company would not disclose the price it would have
to pay to get all of the venture.
"This agreement clearly gives an immediate benefit to our shareholders and retains both BT's ability to meet the needs of
customers and the flexibility to pursue an aggressive global strategy
with a strong U.S. presence," said the British Telecom chairman, Sir Iain
Vallance.
British Telecom says it has been approached by several smaller U.S.
telephone companies that might be up for sale but it would not identify
