When Richard McSpadden wanted to put in some new pay phones at Union Station, he didn't have to look far. "In the past several months I'd say I've gotten about eight calls from companies wanting to either put in new phones or rip out our phones and put in their own," says the manager of the lower downtown train station.
Recently, McSpadden decided to add five new phones. He selected a newcomer called American Public Telephone Company. The company, which started doing business several months ago, lured McSpadden with a generous cut of the business: About one fifth of the money dropped into the phones would go to Union Station. APT also promised not to add any surcharges to long-distance calls, a practice that recently has given the pay-phone business a bad name.
APT had another gimmick. Its large, back-lighted sign includes a biblical verse in gothic type: Proverbs 3:1-6 ("Trust in the Lord with all thine heart..."). The company's owner, a Californian named Wayne Tully who's setting up shop in Colorado, believes the attention to piety discourages vandalism.
But his fondness for scripture doesn't mean he's shy about protecting his interests. As he scrambles for new pay-phone business in Denver, Tully is embroiled in a Colorado Springs lawsuit. He and another pay-phone company, Automated Telecom Technology Inc., are exchanging accusations of bilking investors and each other in the race to grab more business. "We gave him a large sum of money, and we didn't get anything in return," contends Stanley Cameron, A-Tel's president.
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Wrong number, replies Tully. The crooked pay-phone operator here, he suggests, is Cameron's A-Tel. He charges that the company literally convinces little old ladies in church congregations to hand over money to invest in pay phones and then doesn't give them anything for it. "It's a big thing going on, a big scam," he says.
Welcome to the fast-growing world of Colorado's public pay phones.
A tangle of federal and state regulations wraps like twisted cord around most telephone goings-on. Long-distance carriers are watched over by the Federal Communications Commission. Colorado's Public Utilities Commission keeps an eye on US West.
Pay-phone entrepreneurs, however, represent the one corner of the telephone industry that is exempt from most regulation. Despite the fact that the FCC gets about 300 pay-phone-related complaints every month, recent attempts to cap pay-phone charges have been put on hold as the issue is thrashed out in court. (Independent pay-phone companies oppose the proposed regulations.)
At one time, US West controlled virtually the entire local market, and it still maintains 16,000 pay phones throughout Colorado, about half of them in Denver. Yet independent pay-phone operators now own or operate about 4,500 booths, and an increasing number of companies are hungry for more.
"A lot of companies come in and try to undercut our lease," concedes Jeff Garrett, a spokesman for US West Communications. The result is a Tin Men-like hustle for the growing local pay-phone business.
"It's pretty wide open out there," says Ronald Andersen, another California transplant who has teamed up with Tully to form American Public Telephone. Andersen's company is a good example of just how wild the Colorado pay-phone market is. It employs five independent "site contractors" whose job is to grab more business. They drop by shops or gas stations or any other place where enough people might want to reach out and touch someone. If a phone is already there, they wheel and deal the owner to replace it with an APT phone.
The competition is fierce. "The best man wins," says Andersen. "Some store owners will tell our contractors, `You're the fifteenth person who's been here. Get out.'" But it pays to be persistent. A good site contractor can earn a hefty commission, up to $300 for a new site signed and delivered to American Public Telephone.
Savvy shopkeepers also can cut lucrative deals for themselves. APT will offer anywhere from 13 percent to 25 percent of the coins used in the phone. Union Station's McSpadden says he hopes to earn as much as $300 a month in extra income from his new phones. To sweeten the pie, APT also is starting to offer bonuses, or up-front commissions, to owners. (Andersen says business is so tight in California that a store owner can haul in a $1,000 signing bonus for agreeing to switch phone companies.)
Of course, APT wouldn't be so generous if it weren't making out well, too. A good phone can bring in $500 a month. "Our best phone is in Five Points," says Andersen. "It's a killer phone. And it's next to a catfish stand."
Might any of the business in rugged Five Points come from, say, drug dealers? "That could be," he concedes. But, he stresses, "we don't know that." If it were the case, Andersen says, APT's phones could be programmed so they couldn't be connected to pager numbers.
The Colorado Pay Phone Association estimates that about fifty independent pay-phone operators are scrambling for business in Colorado. Adds a spokesman, "We probably get ten new inquiries a month."
Even with all the competition, however, APT stands out: It's the only one quoting scripture on its booths. "Maybe they're praying for revenue," guesses Al Burst, who owns a rival pay-phone company, Communication Vendors of Southern Colorado.
Nope. Tully, a Christian, explains: "A few years ago we had about a hundred phones in California that were getting cut up all the time. So I got religion. I went to my knees to save my phones. I said, `Can You put a fence around our phones for me?' And we went from a lot of trouble to none."
Still, after a fierce internal debate, APT will not be including the Proverbs reference on its next batch of phone booths. "I don't think you mix religion and business," argues Andersen, who opposed his partner's scripture shtick. A potential problem: "How do you sell to a Jewish person?"
Andersen also didn't like American Public Telephone's distinctive gothic signs. "I'd rather not look like a private pay-phone company," he says. "I wanted to look more like AT&T. In the future, people are going to know that most independent companies have surcharges [for long-distance calls]. We wanted to look nondescript."
Tully refused to back off from the gothic, but he compromised on the biblical references. Not before he'd made a splashy entrance onto the Colorado pay-phone scene, though.
It all started last summer, when Tully was lured to Colorado Springs by Cameron's A-Tel. According to Cameron, the deal was that Tully would be made an A-Tel vice president; eventually, A-Tel would purchase phones Tully had in the Los Angeles area. In addition to a generous five-year contract, Cameron claims, he gave Tully nearly $300,000 to buy more phones.
In exchange for which he claims he got not much. Last November Tully was fired.
At least that's Cameron's story. Tully sees it differently. "I can assure you that every nickel and every dime was accounted for," he says. Two weeks after he was canned, Tully (who, incidentally, says he quit) sued A-Tel, claiming he became disheartened after he found improprieties in the way A-Tel raised money.
In other words, Andersen says darkly, "he was terminated for asking too many questions."
Tully's lawsuit contends that A-Tel and Cameron engaged in "illegal activity [that] included the non-existence of pay phones which had allegedly been paid for and installed...Representations had been made to investors that their monies were in fact utilized to pay for phones and equipment that had been purchased and installed, when...the purchase and installation of approximately 680 phones had been misrepresented to investors."
"There are companies in Colorado Springs"--Wayne Tully won't elaborate--"who network with a lot of churches and retired folks from the Air Force Academy," says Tully. "They get members lists of their congregations and then go after their retirement accounts."
Here's how it works, jumps in Andersen: The pay-phone company--and he's not saying which one--"sells" a pay phone to a widow for $4,000. The widow then agrees to lease back the phone to the independent company. She collects rent for five years, plus the same 15 to 25 percent commission the company would offer any store owner.
"Everybody wants to make a buck," says Tully, disgusted.
The problem, says Al Burst, whose Communication Vendors of Southern Colorado runs about 300 phones, is "I don't think there's 18 percent to be made out there."
According to records at the secretary of state's office, American Public Telephone incorporated in December 1994--less than a month after Tully left the employ of A-Tel. His partners are Andersen and Ed Hindelang, who owns a California company called Pacific Coin Co., an industry giant that operates about 7,000 phones in the Los Angeles area.
In March 1995 the company's name was changed to APTC, Inc. Since then it has grown to about 100 phones, approximately 70 of which are in Colorado--most in Denver--and 30 in New Mexico. Tully says he expects his move here from California to pay off big.
"Colorado is so far behind in the pay-phone market," he says. "I felt this turf was a little greener.
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