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It won't be so funny if he does start calling 911 (he hasn't so far, is that right?).
I'm sorry that his friends have been upset, but there it is - the ones who matter will understand the background by now. I used to get occasional calls from a gentleman who lived in my neighbourhood and had somehow got hold of my number. I never did find out what his name was - I tried to, because I wanted to alert social services - just that he was lonely and confused. Every couple of sentences he would tell me "I'm a grandpa, you see" as though that explained everything. It was sad, but not a problem.
Who is with him during the day? The ideal answer would be to ensure that he gets enough one to one attention not to think about his phone. It would also be better if whoever is with him kept hold of the phone, and took it to him to receive incoming calls. Could you organise a rota for friends and relations each to call him every so often?
On my cell only people on my contacts list ring thru. The rest go to VM. You can set up that only certain numbers can be called. I would find out if the 911 is true. 911 would not appreciate him calling for a non emergency thing.
One solution could be to get him a toy cell phone? There are ones that look and sound quite realistic! He may not be advanced enough in his dementia to accept it as real yet.
I am not familiar with the different types of cellphones [I still use a flip-phone and landlines], maybe you can have the cellphone set up so Dad-in-law can only call out certain telephone numbers and have the other ones blocked.