Wireless Nation: The Frenzied Launch of the Cellular Revolution in Americaby James B. Murray, Lisa Dickey
Written by industry insider James B. Murray, Jr., Wireless Nation details how the genesis of the cell phone business became
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Wireless Nation is two fascinating stories in one: It's the sensational account of the entrepreneurs and corporate barons who built America's wireless industry, and an insider's perspective on the greatest government boondoggle of our time.
Written by industry insider James B. Murray, Jr., Wireless Nation details how the genesis of the cell phone business became the biggest federal giveaway since the Oklahoma Land Rush -- and the most misguided one in history. From 1985 on, the U.S. government essentially ran a casino, awarding invaluable spectrum licenses -- the coveted permits needed to run cell phone systems -- via lottery. Anyone could win, regardless of whether they'd ever run a business, or even seen a cell phone. Hucksters peddled applications to anyone who would buy, and all over America random golddiggers and sincere hopefuls tried their luck. When the lottery drum stopped twirling, truckdrivers, nurses, deep-sea divers and preachers suddenly found themselves newly minted cell phone entrepreneurs.
Wireless Nation chronicles the unique development of this powerful industry and the protagonists who brought it to life. In the mix is the inimitable entrepreneur Craig McCaw, MCI Chairman William McGowan, John Kluge of Metromedia, and also Peter Lewis, a former Army officer and cellular business pioneer whose career ended in disgrace when he finally bent the rules a little too far.
Murray tells this story as only an insider can, detailing the incredible circumstances that shaped and defined the most prominent business of the last two decades. But this colorful, engaging account of cellular's strange history is much more than a business narrative. It is the true story of an industry that thrived despite chaos, emerging as a workable, competitive sector while it transformed the way Americans communicate.
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You Could Be a Winner!
Bob Pelissier couldn't sleep.
It was 1 a.m., and the velvet-black night pressed against the windows of Pelissier's ranch-style home in Redwood City, California. He'd been feeling ill all daynothing serious, just a slight fever and a coughand as he lay in bed he slowly gave into the realization that sleep was unlikely to come.
He got up and made his way into the living room, pausing to flip on the TV before sinking into his favorite chair. As he settled his six-foot-two-inch frame into his recliner, a familiar face materialized on the screen: Talk show host Mike Douglas, an icon of '70s television, was midpitch in a late-night infomercial.
"Cellular technology, an unprecedented breakthrough in telecommunications, can and will change the life styles of millions," Douglas announced. "Some prominent financial experts have heralded it as one of the greatest business opportunities, not only in your lifetime, but of the century!"
It was the fall of 1985, and Pelissier, a fifty-six-year-old truck driver with more than thirty-five years behind the wheel, had never heard of a cellular telephone before. Mildly intrigued, he watched as Douglas continued his pitch. "There are estimates indicating that in the future, 40 percent of all telephone communications will involve cellular mobile telephones," Douglas declared, "and cellular may even substantially replace the wire telephone system we now use. According to a recent AT&T report, higher profits are projected for cellular than any other communications technology in history."
But the real pitch was yet to come: "You and I," Douglas announced, "have an equal opportunity to compete with the corporate giants for a piece of the multibillion-dollar pie!" The U.S. government, a voice-over went on to explain, was holding a lottery to give away licenses to run cell phone systemslicenses that were worth a whole lot of money, perhaps millions of dollars. Anyone could send money in, buy a chance in the lottery, and possibly win big.
"What a bunch of bull," thought Pelissier, and changed the channel.
A few nights later, Pelissier again couldn't sleep. He made his way to the living room and switched on the TV, and as the screen flickered to life, he once again saw Mike Douglas making his pitch. This time, Pelissier watched a bit longer, and he found his curiosity rising. Was there anything to this? Was it true that anyone in America could enter and win this lottery, and be handed these licenses for free? If they were so valuable, why would the government just give them away? There had to be a catch, he thought. Now as intrigued as he was skeptical, Pelissier pondered Douglas's words before drifting off to sleep.
A week passed before Pelissier again found himself wandering into the living room late at night. This time he didn't stumble upon the Mike Douglas adthis time, he flipped around the channels until he found it. Pelissier suddenly got an inexplicable gut feeling. He picked up a pen and jotted down the number shown on the screen.
A few phone calls later, Pelissiera man with a high-school education and no business experiencefound himself facing a young sales associate on the sixth floor of a nondescript building in San Mateo, California. It couldn't be easier, the salesman told him, to take a chance in the big cellular giveaway. There were no requirements other than willingness to take a risk, and the ability to pay for it.
For $100,000, the young man explained, Pelissier could have what amounted to a handful of lottery tickets: applications to win the cellular license for one of fifteen markets the Federal Communications Commission planned to lottery off in April 1986. These were licenses to run cellular systems for cities like Pensacola, Florida; Atlantic City, New Jersey; and Santa Barbara, Californiathe licenses for bigger cities had been given out earlier, and those for even smaller cities were yet to come.
If a lottery number assigned to one of Pelissier's applications got chosen, he'd own the majority share of a city's license50.01 percent. The other 49.99 percent would be owned by a vast alliance comprised of dozens, even hundreds of other applicants solicited by the salesman and his company, part of a convoluted scheme to make sure everyone could win at least a small fraction of a license.
For his $100,000 fee, Pelissier would be part of that alliance too, meaning he'd share in that 49.99 percent if another member of his alliance pool won a market. The pitch sounded compelling: Even if Pelissier didn't end up winning the majority piece of a license himself, he still had a good chance of winning at least a small fractionand the payoff, the salesman assured him, would be worth many times the investment. Cell phones were the wave of the future, and these cellular licenses were as good as goldeven if you only owned a tiny percentage of one.
Was it all a scam? Pelissier was intrigued by talk of million-dollar payoffs, but he was wary of laying out so much money. These guys could just be quick-buck artists, ready to make money off gullible investors like himself. On the other hand, how could this be a scam if Mike Douglasa trusted TV personality, a man Americans had welcomed into their living rooms every day for twenty yearswas lending his name to it? It couldn't be, Pelissier decided. There must really be something to it.
But the $100,000 price tag was too much. After thinking it over, Pelissier asked a few friends to join him in a partnership and split the cost, but no one was willing to take the riska risk they told Pelissier he was crazy to take. This was serious money, after all, and what in the world did Pelissiera man who'd driven a truck his whole lifeknow about cellular phones? What would he do if he didn't win? And, even more worrisome, what would he do if he did?
"Something keeps telling me to do this," he told his wife, Lorraine. At age fifty-four, Lorraine worked as hard as her husband didshe owned her own little catering truck, a specially rigged vehicle out of which she sold sandwiches, sodas, potato chips, candy bars and other snacks. She was on the road each morning by 5 a.m., driving her truckBob called it her "roach coach" to a construction site or across the street from a school, where she'd sell her snacks for twelve solid hours before heading home in the evenings.
Though he'd never gambled on anything bigger than charity raffle tickets, Pelissier made a decision: He wanted in on the cellular lottery. He and Lorraine didn't have that kind of money in their bank account, though, so the couple would be forced to borrow it. With the applications' filing date fast approaching, they had to hurry: They quickly arranged a home-equity loan, and Pelissier presented the salesman with a check for $37,500. That amount would buy him one-quarter of a partnership ($25,000), with the remaining $12,500 tacked on to cover something called "associated filing costs," related to the bigger alliance Pelissier would be part of.
The salesman set him up with the two other men who were to be his partnersa wealthy octogenarian and an Iranian-born structural engineer, neither of whom Pelissier had met before. His two partners didn't want to be burdened with any paperwork or phone calls, so Pelissier agreed to be the point man for the little partnership.
A few weeks earlier, Bob Pelissier had heard the words "cellular telephone" for the first time. Now, based on a late-night infomercial, he had bet tens of thousands of dollars, entered a partnership with people he didn't know, and declared himself able to finance, build and run a highly technical, multimillion-dollar telephone company. The lottery drawing was to be held in two and a half months, on April 21, 1986. More than 8,000 applications had been filed for the fifteen markets up for grabs; these were expensive lottery tickets, and with the flood of applications, the chances of winning a license outright weren't good. Now all Pelissier could do was wait.
The day of the lottery drawing, Pelissier stayed home in California, tending his roses and puttering around the house. He figured he'd end up with a modest windfall from the small fractions of license ownership he'd get when someone else in the massive alliance won something. It might not be a huge payoff, but hopefully he'd at least break even.
The phone rang. When Pelissier picked it up, a woman on the other end of the line told him, "You've won." Pelissier and his partners had won the license for the market covering Manchester and Nashua, New Hampshire, a quiet New England metropolitan area with a combined population of 277,000. More than 500 applications had been filed for Manchester-Nashua and, remarkably, Pelissier's little three-man partnership was the one whose lucky Ping-Pong balls were drawn from the lottery drum.
"Thanks," said Pelissier, with only marginal enthusiasm. He had misunderstood. He thought the nice young woman meant that the big alliance had won, and so he figured his share would be, as the salesman had explained, a little less than 1 percent. He thought that perhaps, with luck, that tiny percentage might be worth the $37,500 he'd invested. Or it might not. He thanked the woman for calling and hung up.
A moment later, she called again. "I don't think you understand what I meant," she told Pelissier, who thought her voice sounded like she was suppressing a smile. He and his partners had won the license, she told him. They needed to have a cell phone company up and running in six months. As blood began to pound excitedly in Pelissier's veins, he heard the woman say one more thing: "You should get an FCC attorney."
Just like that, the unlikely California trio of a middle-aged trucker, an elderly gambler and a highway engineer became the new owners of a cellular license for the towns of Manchester and Nashua, New Hampshire. Now they had a cellular telephone company to builda company that would be competing for customers with an established telephone company.
"Oh boy," thought Bob Pelissier, "What do we do now..."
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Richard T. Liebhaber, Former Chief Technology Officer, MCI
Meet the Author
James B. Murray, Jr. was an early investor in and broker of cellular telephone licenses. In his two decades of involvement in wireless, Mr. Murray has done deals with hundreds of industry players, from the biggest carriers down to the "little people" who won licenses in the FCC lotteries. A co-founder of Columbia Capital Corporation, a venture capital firm now managing assets in excess of $1.5 billion, Mr. Murray currently runs Court Square Ventures, a venture capital firm specializing in telecommunications and information technology investments. The father of two children, he lives with his wife of 32 years on a farm near Charlottesville, Virginia.
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