Cellular fraud is defined as the unauthorized use, tampering, or manipulation of a cellular phone or service. Cellular industry estimates indicate that carriers lose millions per year to cellular fraud, with the principal cause being subscription fraud. Subscriber fraud occurs when a subscriber signs up for service with fraudulently obtained customer information or false identification.
In the past, cloning of cellular phones was a major concern. A cloned cellular telephone is one that has been reprogrammed to transmit the electronic serial number (ESN) and telephone number (MIN) belonging to another (legitimate) cellular telephone. Unscrupulous persons obtain valid ESN/MIN combinations by illegally monitoring the transmissions from the cellular telephones of legitimate subscribers. Each cellular telephone is supposed to have a unique factory-set ESN. After cloning, however, because both cellular telephones have the same ESN/MIN combination, cellular systems cannot distinguish the cloned cellular telephone from the legitimate one.
The Commission considers any knowing use of cellular telephone with an altered ESN to be a violation of the Communications Act (Section 301) and alteration of the ESN in a cellular telephone to be assisting in such violation. The Wireless Telephone Protection Act (Public Law 105-172) was signed into law on April 24, 1998, expanding the prior law to criminalize the use, possession, manufacture or sale of cloning hardware or software. The cellular equipment manufacturing industry has deployed authentication systems that have proven to be a very effective countermeasure to cloning. Authentication supplements the use of the ESN and MIN with a changing encrypted code that can not be obtained by off-the-air monitoring.