The first transition into phreaking and eventually carding happened over a period of about six months in 1988. Early hackers on PI and Zen relied primarily on dial-outs, like those at Melbourne University or Telecom's Clayton office, to bounce around international computer sites. They also used X.25 dial-outs in other countries—the US, Sweden and Germany—to make another leap in their international journeys.
Gradually, the people running these dial-out lines wised up. Dial-outs started drying up. Passwords were changed. Facilities were cancelled. But the hackers didn't want to give up access to overseas systems. They'd had their first taste of international calling and they wanted more. There was a big shiny electronic world to explore out there. They began trying different methods of getting where they wanted to go. And so the Melbourne underground moved into phreaking.
Phreakers swarmed to PABXes like bees to honey. A PABX, a private automatic branch exchange, works like a mini-Telecom telephone exchange. Using a PABX, the employee of a large company could dial another employee in-house without incurring the cost of a local telephone call. If the employee was, for example, staying in a hotel out of town, the company might ask him to make all his calls through the company's PABX to avoid paying extortionate hotel long-distance rates. If the employee was in Brisbane on business, he could dial a Brisbane number which might route him via the company's PABX to Sydney. From there, he might dial out to Rome or London, and the charge would be billed directly to the company. What worked for an employee also worked for a phreaker.
A phreaker dialling into the PABX would generally need to either know or guess the password allowing him to dial out again. Often, the phreaker was greeted by an automated message asking for the employee's telephone extension—which also served as the password. Well, that was easy enough. The phreaker simply tried a series of numbers until he found one which actually worked.
Occasionally, a PABX system didn't even have passwords. The managers of the PABX figured that keeping the phone number secret was good enough security. Sometimes phreakers made free calls out of PABXes simply by exploited security flaws in a particular model or brand of PABX. A series of specific key presses allowed the phreaker to get in without knowing a password, an employee's name, or even the name of the company for that matter.
As a fashionable pastime on BBSes, phreaking began to surpass hacking. PI established a private phreaking section. For a while, it became almost old hat to call yourself a hacker. Phreaking was forging the path forward.
Somewhere in this transition, the Phreakers Five sprung to life. A group of five hackers-turned-phreakers gathered in an exclusive group on PI. Tales of their late-night podding adventures leaked into the other areas of the BBS and made would-be phreakers green with jealousy.
First, the phreakers would scout out a telephone pod—the grey steel, rounded box perched nondescriptly on most streets. Ideally, the chosen pod would be by a park or some other public area likely to be deserted at night. Pods directly in front of suburban houses were a bit risky—the house might contain a nosy little old lady with a penchant for calling the local police if anything looked suspicious. And what she would see, if she peered out from behind her lace curtains, was a small tornado of action.
One of the five would leap from the van and open the pod with a key begged, borrowed or stolen from a Telecom technician. The keys seemed easy enough to obtain. The BBSes message boards were rife with gleeful tales of valuable Telecom equipment, such as 500 metres of cable or a pod key, procured off a visiting Telecom repairman either through legitimate means or in exchange for a six-pack of beer.
The designated phreaker would poke inside the pod until he found someone else's phone line. He'd strip back the cable, whack on a pair of alligator clips and, if he wanted to make a voice call, run it to a linesman's handset also borrowed, bought or stolen from Telecom. If he wanted to call another computer instead of talking voice, he would need to extend the phone line back to the phreakers' car. This is where the 500 metres of Telecom cable came in handy. A long cable meant the car, containing five anxious, whispering young men and a veritable junkyard of equipment, would not have to sit next to the pod for hours on end. That sort of scene might look a little suspicious to a local resident out walking his or her dog late one night.