Basically, the majority of the 700mg band is held for police fire and safety concerns. A small portion of the bandwidth was auctioned to the cell providers.
Yes it is illegal to sell or use a 700mg system. Technically, you are S.O.L. with your investment.
I would not advocate its use, however, working with wireless systems professionally, I do know there are very very very very very few municipalities using the 700mg bandwidth. You actually could be using most of the old 700mg wireless systems out there on a daily, even hourly basis. The nature of the UHF wireless system is that it does not have a long distance capability. Us old timers that had to deal with VHF systems could typically travel 2 times further from the receiver or more than with a UHF. Your wireless could experience cut outs, but it will never be pumpin' bass into an ambulance or squad car. Could it step on and potentially interfere with a critical communication. Possibly. Likely in most areas? Nah. Might you be screwing with somebody's game of Angry Birds or preventing somebody across the bar from you from getting his baseball scores on his Droid? Doubtful.
So, the FCC would have to be very very very very very close to find you. The cell providers will never find you because its not like you are going to be thumping bass notes and jamming them unless they are very very very very very close. In many cases it is a non issue for the unit to function properly. The story of the AKG system going wacky is not completely surprising, this guy lives where it is being used. But I am surprised he couldn't find a clear channel to operate on, I'm guessing he had a fixed freq. model.
I personally have five perfectly great sounding and great working 700mg Audio Technica 7000 series systems. Now of course I would never use these systems because it is illegal. Regardless of how well they seemed to work everywhere they could have been used. It doesn't matter even if you have a scanner app on your droid or ipad, or perhaps a good table top scanner that could be used to locate potential conflicts in the 700mg range. No matter how much research you might do into a local municipalities use of broadcast freq. You are not supposed to use these systems. Even though a 9volt battery is all you need to secure a nights playing in likely 90% of America.
Nice kick in the nuts right? Well in fairness every single manufacturer of professional wireless products offered a buy-back credit towards a new unit for about a year leading up to and past the ban. Everyone who puts in a little reading time to enhance their knowledge of not just their instrument but also live sound and the entertainment industry in general would have caught on to all of this about three years back when it was all over the industry news.
I do know this was no scam by the wireless system makers in anyway. They had all just sunk a fair amount of cash into tooling up for all these 700mg systems because there had been nothing but clear air in that band. They were far more upset that they had to take a great wireless system design with clear air space and go back to fighting for bandwidth in the 400-600mg ranges.
But to recap. Yes they are illegal, the guy needs to give you money back.