High Tech Pie In The Sky?

Elosia L. Amick recalls the fast-talking salesman on the phone telling her that for a mere $5,000 she could enter a government lottery and win a "wireless-cable" television license worth millions. "I felt like it was weighted heavily in my favor," says the saleswoman from Winston-Salem, N. C. So she put down $30,000 to get six licenses.

But the feds think Amick may have bought the high-tech equivalent of swampland. On Apr. 1, the Federal Trade Commission sued the company that contacted her, Applied Telemedia Engineering & Management Inc. of North Miami, Fla., charging it with deceptive marketing. Other alleged wireless-cable "license mills" are under FTC investigation. Government officials believe the operations are wildly inflating both the chances of winning a wireless-cable license and its value. They want to shut down the operations and get investors refunds. The probe "is very extensive," says FTC lawyer Stephen Gurwitz.

WOES. Robert L. Schmidt, president of the Wireless Cable Assn., estimates that the mills last year raked in about $15 million in fees for filing $155 applications and engineering studies. It's easy to see the allure to investors. Wireless cable, which sends TV signals via microwave in 65 cities to homes with special antennas, was launched in 1983 to give regular cable TV some competition. Setting up a system costs $100,000 or so, and the cost of hooking up a new subscriber in an urban area runs about $400 vs. $2,000 or more for regular cable.

But the Federal Communications Commission's way of awarding licenses is hardly weighted in investors' favor. The FCC uses a lottery to dole out licenses when there's more than one applicant, and it so far has received about 30,000 applications for about 500 markets. What's more, a winning investor isn't sure to profit, as many of the best markets already have been scooped up. Even established wireless companies have had their share of woes. Microband Co. of Fairfield, N. J., which operates in New York City, Detroit, and Washington, is in Chapter 11. And ACS Enterprises Inc., which runs systems near Philadelphia, last year lost $1.8 million. The probe "tarnishes the whole industry," says ACS Chairman Alan Sonnenberg.

The FTC suit against Applied Telemedia claims the company took in more than $2 million from 200 clients in the second half of 1990 by boasting that the wireless business was a low-risk, high-return investment. Anthony Liggio, a company founder, calls the FTC charges "totally unfounded." And Elosia Amick? Six months after investing, she still is holding out hope her gamble will pay off: "I really need some extra cash," she says. But the odds are against her.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE