James B. Murray’s new book, Wireless Nation: The Frenzied Launch of the Cellular Revolution, reads like an early Jimmy Breslin novel. We meet dreamers, geeks, gamblers, horse traders, legit businessmen, shysters, good ole boys, and buccaneers who connived and colluded to create empires and—this is the amazing part—reshaped the U.S. telecommunications landscape in the process.

As we head into another new age of telecommunications, in which the pace and degree of technological change is quickening exponentially, Murray’s tale of vision, greed, and expediency is instructional. As his excerpt shows, technology can easily move faster than government’s ability to regulate it, and markets can develop in messy, chaotic ways that even the best minds couldn’t have fathomed.

An aroma of pastrami, sweat-damp collars, and cigar smoke hung thick at the RubinBaum law offices on New York City’s Fifth Avenue during the last week of September 1984. Inside the conference room, an extraordinary scene was taking place. Businessmen and lawyers, ties askew and brows furrowed, were milling about, calling out the names of cities like traders on a stock exchange floor.

“Who’s got a Fresno for an El Paso?” “How about a Toledo? Anyone need a Toledo?” “I’d take another Dayton; who’s got a Dayton they can part with?”

Some 150 businessmen who had filed applications for cellular licenses in the U.S.’s 31st to 90th largest markets had agreed to set up 60 partnerships that would share licenses in those markets. The participants called it Le Grand Deal. Now the applicants were fulfilling the next part of the vision articulated by Carl Aron, the chief executive officer of applicant RAM Broadcasting Corp. and an attorney at RubinBaum LLP [www.rubinbaum.com]. They were trading, trying to turn lots of small ownership stakes into a few that they really cared about.

The currency for trading came in two forms. First, the businessmen had the many small bits and pieces of the licenses they’d received in the first round of cellular spectrum grants for the nation’s top 30 markets. Second, participants had assigned each other hypothetical shares of the licenses for the 31st to 90th largest markets based on the applications that were filed for the Federal Communications Commission lottery that was about to apportion the spectrum. Although none of the participants yet had any official rights in those cities and although the FCC was oblivious to Le Grand Deal, the businessmen decided that if, say, 10 companies had applied for a market then each would, for trading purposes, have one-tenth of that market.

The hope was that the trading would let the businessmen take the 700 applications they had filed for the coming lottery and turn them into one per market, removing the need for the lottery. The businessmen felt that the first round of spectrum licensing had been a mess, as the FCC handed out rights based on merit and split markets among many groups. So the businessmen wanted to take matters into their own hands.

They gathered at the RubinBaum offices for the Big Monopoly game a week and a half ahead of the planned lottery, which they figured would give them just enough time to dicker before lawyers had to present paperwork to the FCC.

In theory, the process was simple enough: Anyone could trade their fractions for any other fractions, and properties could change hands any number of times. But first, the traders had to overcome a value problem. One-tenth of, say, Johnson City, Tenn., was obviously worth less than one-tenth of Salt Lake City, which was a lot larger. That meant trading based simply on the fraction of license ownership wouldn’t work. Besides, there were varying numbers of applicants in each market, so the ownership fractions were different in each one. How did one-thirteenth of Mobile, Ala., size up against one-seventh of Rochester, N.Y.? The traders needed a way to quickly and appropriately value each fraction.

They settled on one almost immediately, and it became the standard metric for the industry: The “POP” was based on how many heads of population—thus, the “POP” abbreviation—lived in a market. The population figures, traders agreed, would be based on the 1980 U.S. Census.

In theory, as the trading started, a POP was worth a POP, regardless of which market it was in. But before long, the traders began applying other, more subtle variables to determine how valuable certain markets really were. Here the game got interesting. No one really knew what made a “good” cellular market, but ignorance didn’t preclude educated speculation, and a few value rules quickly surfaced.

First and foremost, control was worth a premium. A market—any market—where you could get a significant majority of ownership was worth more per POP than a minority interest in another. Next on the list of consideration was affluence. The only people who owned mobile telephones in 1984 drove BMWs and Jaguars, so Palm Beach, Fla., it was assumed, would have more customer prospects than, say, Harrisburg, Pa. Then came growth rates. The shrewder traders understood that the 1980 populations weren’t static. Salt Lake City, for example, was growing at more than 2% every year, which meant that in the four years since the 1980 census it had added 80,000 “free” POPs. Finally, there was the oldest, most reliable measure of value: If someone else wanted it, it must be valuable.

After Barry Adelman, the attorney for RAM, wrote out one-paragraph trading slips that read, “I give you this many POPs, and you owe me this many POPs”—little blanks were left for players to fill in the names of the markets being traded—the free-for-all began. It was a surreal scene: Licenses to run the latest high-technology businesses were being traded in a process that would have been recognized in the bazaars of ancient Mesopotamia. Traders waved chits in the air and shouted to be heard. On all sides, the sounds of bargaining, bluffing, and bullying clattered about the room.

Morning, afternoon, and evening, the players milled about, plotting strategy, making calls, trading fractions, taking catnaps, and talking business. Every afternoon, the Monopoly game would break for an hour or two for lunch. Some of the players would go off in small groups. Some pored over population figures and demographic information and strategized. And some indulged in lavish luncheons replete with pre-prandial cocktails and post-prandial cigars. Whitey Bluestein, who was MCI’s representative at the time [MCI was later bought by WorldCom Inc.], remembers: “People would go out to lunch or bring sandwiches in. Some people would go out, get completely sloshed, come back in. You were always more productive in the mornings than the afternoon.”

At the end of each day, most traders went wearily back to wherever they were staying to assess the day’s activity and perhaps report back to the home office. Bluestein recalls: “Every night, I’d go back to my hotel room and [sit there] on my little, trashy Model 100—the first laptop, $300 from Radio Shack, great little keyboard, a tiny LCD screen, and an old 300-baud modem—and [send the home office] a daily wrap-up.”

Others repaired to hotel bars in order to drink late into the night, and a few simply lay down to sleep in the conference room, anxious not to miss any trading opportunities. Adelman spent most nights at RubinBaum, where “we’d sleep in the office or on a couch, because people would wander in at all times of the day and night, dead drunk, and they’d say, ‘I traded X for Y.’” The lawyers were there to play referee and record-keeper.

Hanging over the proceedings was a kind of disbelief that all of this was actually happening. “I mean, we were all out in left field picking daisies,” says George Perrin, then the chief negotiator for applicant CellNet Data Systems. “First of all, it wasn’t clear to any of us at the time that the FCC was going to sanction this, and I remember a lot of us sitting around saying, ‘I hope we’re not wasting our time,’ because it kind of felt illegal, but we didn’t know.” Another trader had a different angle: “You know, if we were doing this in a motel room instead of a law firm on Fifth Avenue, we’d all be going to jail.”

As the week wore on, trading fodder became harder to find, and IOUs—offered when a trade left one side with a POPs deficit—were getting harder to pay. Traders were looking for specific pieces, rather than just good markets, and someone who coveted a certain property might not have anything desirable to offer. Not surprisingly, a few traders began to use cash to get what they wanted.

Once the cash-for-POPs ice was broken, it took little time for more opportunistic players to follow suit. This was a clear violation of the FCC’s rules, which prohibited selling spectrum licenses, but the players decided to forge ahead in hopes that the FCC would overlook the purchases or rule them legal, perhaps out of mere expediency. Aggressive consolidators like Metro Mobile CTS and McCaw [which was eventually acquired by AT&T Corp.] simply chose to believe that the FCC wouldn’t scuttle the whole process for a tangential rule violation.

But even those with cash didn’t really know what they were playing with. “You have to remember that this was a time when nobody knew what the hell they were buying into,” Adelman says. “What the hell is a ‘cellular system’? Is it going to work? Is anybody going to buy this service? The prices in the early days were single digits—$2 or $3 per POP.”

Metro Mobile Chairman George Lindemann, chomping on a cigar that another trader said was the size of a “baseball bat,” was unburdened by any such uncertainty. He declared that certain markets were worth certain per-POP prices because...well, because he declared it so.

“I remember Lindemann coming in and saying, ‘Shoot, [that market is] worth $10 a POP,’” Perrin says. “And everybody would say, ‘Well, George, how’d you come up with that?’ He said, ‘Shoot, don’t you guys understand? You’ve got to put an artificially high value on it so everybody will justify the financing we want to get underneath it.’ And I think it was the first time in a lot of our cases that the light bulb went on. You’ve got to set these values [high], because what you want [the lenders] to do is come back and multiply that dollar value by everything you own, and that gives you an implied equity value that’s going to enable you to borrow on it. Lindemann said, ‘None of us wants to put any real money into this.’ It was really absolute genius.”

At last, Friday, Sept. 28, arrived—the day that Larry Movshin, the attorney for wireless operator Graphic Scanning, and Adelman had declared would be the end of trading. The FCC lottery date was only five days away, and Movshin and Adelman somehow had to reconstruct who had ended up with what in the Big Monopoly game, draft all the documents, and get them to the FCC in time to stop the FCC lottery before it happened.

Every day, the two lawyers found holes, and, every day, they called the parties involved to straighten out who had traded or sold what. In the end, everything sorted out, to the astonishment of the happy Movshin and Adelman. They presented the settlements to the FCC on Monday, Oct. 1, and the grateful and relieved FCC staff postponed, and then canceled, the Round II lottery.

Even though the lawyers reported to the FCC that the market ownerships were settled with the end of the Big Monopoly game, the trading actually continued. The informal extension of the trading bazaar left the lawyers trying to document a moving target, so a second Big Monopoly session was scheduled for the second week of December 1984. For 10 days, the traders again milled about the RubinBaum conference room, wheeling and dealing with competitors whom they now knew all too well. On Jan. 15, 1985, the lawyers presented the FCC with the truly final list of who owned what in the 31st to 90th largest cellular markets, essentially giving the FCC a map of the American cellular landscape.

Even the most hard-nosed businessmen who took part in the settlements still describe them in near-mythical terms. “It was a historic event, and very few people recognized it,” says Dick Sherwin, a junior executive and chief negotiator for license applicant Graphics Scanning in Le Grand Deal. It was “a major event in the history of the economy.” Faced first with years of delay and legal battles, then with the uncertainty of lotteries, a group of businessmen had dealt with a bureaucratic system by writing their own rules. “Nobody did anything except act selfishly,” Aron says, “and it worked.”

From the book, Wireless Nation: The Frenzied Launch of the Cellular Revolution.Copyright ©2001 by James B. Murray Jr. Reprinted by permission of Perseus Publishing. All rights reserved.