NOTE:   These columns are written for telecommunications professionals only.

IN THE PHONE ROOM – The•Mart Magazine - May 2006

By Mike Sandman

• PFISHING ON THE PHONE
• THE NEXT INDIA?
• GAS PRICES ARE OUT OF CONTROL
• WHAT HAPPENED TO "MADE IN JAPAN"?

If you have tips that you’d like to share, give me a call at 630-980-7710, or e-mail me at mike@sandman.com. If your tip is published, it will be attributed to you, and you’ll get a FREE "Word Ad" in the classified section. To get your free "Word Ad," call The-Mart at 1-800-864-1199, and ask for Joy Brookshire. Opinions expressed in this column are strictly my own.

Why has the US been redesigning US paper money (over $1) in recent years? Because North Korea has been producing nearly undetectable counterfeits of US paper money. Although they are produced by North Korea, distribution is handled through Russia, China and even Ireland. In some cases, officials of foreign governments (or the foreign governments themselves?) seem to be helping North Korea.

North Korea was indicted last year for producing $100 ''supernotes'' - exact copies of the first ''large head'' US $100 bill from the early 1990s, that was designed to help prevent counterfeits. A group of Chinese nationals in California were indicted last year for distributing the North Korean supernotes in the US.

Interestingly enough, these supernotes are said to have purposely been made with tiny flaws so the crooks could tell them apart from the real thing, which also makes it possible for others to identify the notes.

Many of the counterfeit notes in the US are shipped in from Colombia. The US Secret Service has a special counterfeit detector for Colombian forgeries, which are usually printed on real US one dollar bills that have been bleached of all the original ink, and then reprinted in a larger denomination. The Secret Service uses a dog that can smell the chemicals used in the process. The dog works cheap. He’s happy to get an old towel to chew as a reward for finding the fake money.

A local cellular store took a few hundred dollar bills from a guy who walked in off the street. His bank wouldn’t take them when he made the deposit since they were counterfeit (they weren’t the supernotes). He’s out $300.

PFISHING ON THE PHONE

Most of us know that we shouldn’t believe an email that tells us that there’s a problem with "our account," telling us we have to log into a web site and enter the account number and password for a bank, Paypal or anything else (usually called pfishing). It’s easy to make the link you click in the email go to a crook’s web site that has been made to look like a real bank. It literally only takes a few seconds for the crook to copy an entire web page with the logos, including the little security logos.

Last month, a new type of pfishing email showed up – but this one didn’t ask you to log in to your account on the web, it asked you to call an 800 number so you could enter your account and pin numbers. You may even end up talking to a human when you make the call.

The crooks got cheap 800 numbers from VoIP providers, which are essentially untraceable (pay for it with a stolen credit card!). They pay around 5 cents a minute for the 800 number. Because it’s not a real phone line, when someone calls the 800 number the crooks can get the calls anywhere they have a broadband connection. They use a free VoIP PBX with a built-in IVR (the Asterisk PBX) connected to the Internet anywhere in the world. Because the calls come in via VoIP as IP data packets, no real phone line is necessary – no POTS line, no T1, no PRI, no ISDN, nothing more than a broadband connection. The voice quality might not be all that great if the crook has a slower broadband connection or there are a lot of calls coming in at once, but the banks have already conditioned us to accept that we can’t understand customer service people when we call them.

When you call to talk to a human at a real bank, the voice quality is usually horrible because the customer support people are in some other country. The banks try to save as much money as possible by compressing the voice calls to handle more traffic on each T1. In addition, even if you call your local bank in Nebraska, you’re probably going to talk to a foreigner in another country who’s hard to understand. That sure makes the VoIP calls to the crooks sound authentic!

The crooks were able to record real prompts off the real bank’s IVR, onto their IVR, so it sounds just like the real bank when you call it. You make a choice off a menu, and then enter your account number and pin number. Once you’ve done that your bank account or credit card is really screwed. Actually, you’re really screwed.

Because of all the pfishing on the Internet, most real financial institutions have given up sending email. It’s unlikely some crook is going to try to get you to enter an account number for a small local merchant, but pfishing has gotten to point where it’s impossible to know whether an email is really from the big company it says it’s from, so most big companies have given up on sending email.

In general, if you’re going to your bank’s web site or need to call them, never use the phone number or a link in an email. Call the number on your statement or credit card, or look them up on Google. Wow, I wonder when the crooks are going to make a fake Google?

THE NEXT INDIA?

I ordered a couple of parts from the Nextel (Sprint?) web site last month, and both parts were wrong. I called the 800 number on the packing slip, and eventually got someone who told me they would give me an RMA number. I really couldn’t understand what the lady was saying, but she kept repeating it and eventually I got it (I think their headset mics are turned up to the point that they distort). I couldn’t tell what kind of accent the lady had (kind of sounded like Jamaican?), but it was obvious she wasn’t in the US.

After getting the RMA, she said she’d transfer me to someone who would get me the right parts. An hour later after talking to all kinds of people with the same accent, nobody would ship me the right parts. I found another company selling the same stuff on the Internet, and got the correct parts two days later (and they were cheaper).

I called the 800 number back and asked the lady who answered what country she was in? There was a long pause. Eventually she said the Caribbean. I said that was a geographic area, not a country. Another long pause. Then she told me that she was in Barbados. Wow. Those guys from Sprint are really geniuses!

If you were a manager of a call center in India, it’s unlikely you’d see your bosses very often. Who wants to go to a poor third world country very often, especially when it’s a long plane ride from the US? These Sprint guys put their call center on a Caribbean island vacation destination, a fairly short plane ride from almost anywhere in the US. The locals in Barbados are dirt poor and they kind of speak English, so Sprint has plenty of potential workers who will work cheap – while the bosses are at the ritzy beach hotels having a good time.

The people I talked to at the Sprint call center didn’t sound very smart, but they were certainly no worse then the people I’ve talked to in India, and the calls don’t have to go over the only undersea cable - that’s now owned by an Indian company. If you call our company some day and hear Jamaican accents, you’ll know Donna and I are on the beach in Barbados with our umbrella drinks.

GAS PRICES ARE OUT OF CONTROL

Gas prices are out of control, but there may be a silver lining in all this. If Americans get pushed too far, they’ll start buying alternative energy products. At some point, America will have to stop using oil – when we’ve pumped all of it out of the ground.

In the oil shortages of the 70’s, when the Arabs wouldn’t sell us oil for political reasons, we were their biggest customer. The oil embargo was just a brief political statement. Today, because we’re buying so much from China, China needs the oil as badly as we do. If the Arabs cut us off for good, China would buy the oil until the wells went dry. The Arabs probably won’t cut us off, since they need the demand from both China and America to keep prices high.

You may have heard that China has decided to start drilling in the Gulf of Mexico near Cuba, about 50 miles from the Florida Keys. The US doesn’t drill there because they’re worried about the environmental impact, but at least it was a Plan B for us. If China drills that oil out of the ground, one of our Plan Bs will be gone. China also seems to be siding with Iran, saying it’s fine for Iran to do whatever they want with nuclear stuff – including building bombs. Apparently North Korea, who is pretty tightly aligned with China, has delivered missiles to Iran that can strike as far as Europe (and Israel), with nuclear warheads. Since we’re China’s largest customer, it doesn’t seem they’re too worried about making us mad and losing our business. After all, where are we going to get our socks and underwear from if we make China mad at us?

It’s not "if" but "when" we’ll have to use something other than oil for autos, trucks, planes and trains. Auto makers and oil companies have been buying patents for alternative energy products for years so nobody else can use them. With their current obscene profits, there’s nothing the oil companies can’t buy. As a matter of fact, they don’t know what to do with all the money. They aren’t going to spend it on anything that might make prices for gas and oil go down, like new refineries or alternative energy products (some oil companies do have small programs to develop wind energy).

1995 through 2000 was an unbelievable heyday in the US, as the Internet was developed. Once an alternative energy technology for vehicles takes hold, the economy in the US will really take off, probably making the Internet look like small potatoes.

Gasoline is going to a bigger part of an Interconnect’s costs. I was amazed to see the current cost to drive 25 miles in my 1997 Plymouth Voyager at $3.47. You can look up the costs for most American cars and light trucks at the government’s site: www.fueleconomy.gov/feg/findacar.htm

This month, Fedex’s fuel surcharge is 3.75% for Fedex Ground, and 13.5% for Fedex Express. UPS’s fuel surcharge is 3.75% for ground packages, and 12.5% for air packages. That amount is added to the normal shipping costs for every package you ship or receive.

WHAT HAPPENED TO "MADE IN JAPAN"?

We don’t see many products that say "Made in Japan" these days. Some of the wealthiest people (families) in the US were the first to import little doodads from Japan in the 50’s and 60’s. Japanese stuff started as cheap junky stuff, but evolved into the expensive extremely dependable high-tech products Japan sells today. Even if they sell it, they don’t make much of it in Japan – most of it is made in China or other third world countries.

In 1995 I was buying handset components from a company in Dallas. I asked for a discount. The response from the guy who ran the company? ''I am Japanese. This is a Japanese Company. We do not give discounts.'' We essentially bought nothing from them after that conversation. I wonder how long it will take before I hear that from a Chinese vendor?

We did get a big taste of reality last month. A vendor mentioned to me a couple of months ago that he was having trouble getting ''penny'' stuff made in China. This is what he calls stuff like Modular Y-Adapters and In-line Modular Adapters. He said some of his vendors just don't want to make that kind of stuff any more.

We've been ordering a part from a Chinese company for around six years. They’re usually made in 1,000 quantity. We called to place an order a couple of months ago, and they took the order. When we called to see how the order was doing, the company told us they decided not to make them any more - for any price. They just didn't make enough money on it, and it was too labor intensive (how can it be too labor intensive for a country with 1.3 billion people, most of whom are dirt poor, and who make maybe 50 cents an hour?).

I called a Taiwanese friend who recently opened an office in China to support his factory in Taiwan, to ask him what was going on. He told me that some factories are moving into making more complicated products with circuit boards, which they make a lot more money on than the little cheap doodads. They also want to make larger quantities. It might take half a day to setup an assembly line to make our little gizmo that they make $2 a piece profit on. If they use the same half-day to setup a line to make a device with a circuit board, they might make $10 a piece profit. It's really a no-brainer for the Chinese factory owner who has a limited amount of space for assembly lines. If we were buying a lot of different products from that factory, they might have a different attitude since they might not want to lose other profitable business.

It sounds reasonable, but I'm still amazed. The results will be: A. China will open more factories to make cheap doodads. B. Another poor country will take over making cheap stuff. C. We'll start making lower volume stuff in the US again. D. Some cheap stuff will be gone forever. I see D as the correct answer for many parts. We've decided to make the part here in the US, although it will be more expensive.

I'd expect that we've seen the lowest prices on everything coming out of China. Prices will go up from now on - whether it's a pair of socks, a modular adapter, or an electronic telephone set. The high margins that are keeping US companies going will be reduced. Either the selling price will go up in the US, or the profits will go down at these companies. If it’s a private company, they may be able to reduce costs and accept a smaller margin. At a public company (that sells stock), the managers will never be able to get away with reduced profits, so we’ll probably see higher prices, reduced quality, and bad customer service until they go bankrupt.

Most of China is still poor, undeveloped and uneducated. Even China has limited resources to develop more areas into manufacturing centers. They're already getting as many US dollars to build China as they can. With our $200 billion trade deficit - we haven’t got much left to give them.

Coming from Chicago where politicians have considered the city as their own personal gold mine for almost a century (and it's still that way today under the current Mayor Daley), I'm pretty sure that other countries are looking at the US (us!) as their gold mine. Whether they're passing counterfeit money or selling us nearly everything we use every day, these foreign countries seem to think that we're all suckers for any kind of scheme someone can dream up. Allegations of fraud with hurricane relief and rebuilding Iraq by crooked American companies shows that even Americans figure we're a bunch of suckers.

When I was in school (a long time ago), I was taught that the US fed the world. Much of our food products were exported to other countries. Today, we’ve exported the knowledge of how to grow crops with sophisticated fertilizers and insecticides, along with the know-how to make the farm implements that allow one person to produce many acres of food. We pay farmers not to grow crops (we could sure use some crops for Ethanol these days!). If you read the packaging at the grocery store, you’ll be amazed to find out how much of the food we eat today is produced in other countries – including China.

A few months ago, I wrote letters to President Bush and (at the time) Fed Chairman Greenspan, suggesting that putting a very small tariff on every item imported into the US from China is the only way to get close to having a balanced budget, and then reducing our huge debts. Gee, I was surprised that neither one of them got back to me, or instituted the tariffs. I personally think it's the only way out for the US.