Con Air

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Florida has filed charges against several of the people who worked with Shiner on the California power-company promotion, but Sotler says most of Shiner's deals are intentionally smaller. Usually about 100 shares are being hawked at $20,000 each. (Mile High had only fifty shares available at that price.)

"They've formed a half-dozen partnerships all along the same lines," Sotler explains. "They try to limit it to 80 to 120 [investors] and a million and a half dollars."

By setting up operations in multiple states and keeping the amount raised below a certain level, the promoters hope to evade the attention of federal law enforcement, Sotler says.

"It's a minimalist approach. If you walk into an FBI office and say, 'They took over a million from us,' they'll say, 'Sorry, but we don't have a lot of resources.'"

When state and federal politicians deregulated the telephone industry in the mid-1990s (Colorado started the process in 1995), they promised that consumers would soon enjoy bargain rates for local telephone service as old monopolies disappeared and new competition emerged.

It hasn't worked out that way. While businesses in places like downtown Denver and the Denver Tech Center are courted by several phone companies that spent millions putting fiber-optic lines in place to serve those areas, most small-business and residential customers in Colorado are still at the mercy of just one phone carrier.

Callaghan says only about 7 percent of residential customers in Colorado have a choice for their local phone service. "It's discouraging," she says. "It's fair to say that competition for the residential market is nascent competition at this point."

While a few companies -- notably AT&T Broadband and McCleod USA -- offer residential telephone service in some parts of Colorado, there has been no rush to provide consumers with a real alternative to Qwest. The recent financial crisis in the telecom industry has meant that money to build new networks has disappeared.

"If the money's not available for investment, it's not going to happen," notes Callaghan.

The Baby Bells are bitterly opposed to having to open their networks and have lobbied in Washington against the requirement for years. The Bush administration appears ready to give them what they want, as the Federal Communications Commission is reportedly preparing to abolish the requirement. FCC Chairman Michael Powell -- son of U.S. Secretary of State Colin Powell -- has said he thinks it's wrong for the established phone companies to have to share their lines with competitors. Powell is adamant that would-be telecom companies need to build their own facilities rather than depend on the lines built up over decades by government-sanctioned monopolies. However, with the telecom industry decimated by the bursting of the Internet bubble, the money to build rival networks is nowhere in sight, and many believe that excluding competitors from using Qwest's lines would be a huge mistake.

"That could wipe out residential competition," Callaghan warns.

While the odds are against Mile High, Petersen and Credle still believe it can be a viable company.

"The customers are the only equity we have to try to recoup our investment," Credle says. "The original money we put in has long since disappeared, and there's $4 million unaccounted for in non-payment to Qwest."

However, the PUC's December decision to shut down Mile High and transfer its customers back to Qwest may end all hope for the investors. They thought the deal they had negotiated with Premier was a good one for customers and are angry that the utility commissioners wouldn't go along with the idea.

"I'm disappointed in the whole process with the PUC," Credle says. "We were hoping Premier would be made the default carrier. We felt like they were a viable group to handle the customers."

Mile High is still operating, and the bankruptcy filing may allow it a respite before Qwest finally pulls the plug, but it seems unlikely that the company will last much longer.

The investors are still hoping to get control of start-up companies in other states; Petersen believes they may soon win a license to operate the Minnesota Phone Company, which has about 800 customers. However, that may be a mixed blessing, as the company is being sued by several customers who allege that they found hundreds of dollars in bogus charges on their bills.

"It's a really screwed-up mess," Petersen says. "I think the Minnesota Phone Company can survive with what little they have left. When I invested, I didn't expect to wind up running the company."

In Iowa, the state utilities board, which has greater enforcement power than the Colorado PUC, shut down the Iowa-Nebraska Phone Company last August after finding that the company had advertised local telephone service without obtaining a license to operate. The Arizona Corporation Commission has also scheduled hearings this month on the Arizona Phone Company, looking at allegations of improper licensing and a failure to pay Qwest $2.8 million.

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Stuart Steers
Contact: Stuart Steers