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near $1 billion. I am not saying that in this case, but I am saying that happens on this Hill.

So I think we need, Mr. Chairman, to be real adamant in seeing to it that what cost figures are floated are accurately justifie and supported and defended.

i thank the chairman and I thank you all for having called this hearing today.

Representative EDWARDS. Thank you, Mr. Coble.

The gentleman from Florida, Mr. Canady?
STATEMENT OF HON. CHARLES T. CANADY, A REPRESENTA-

TIVE IN CONGRESS FROM THE STATE OF FLORIDA
Representative CANADY. Thank you, Mr. Chairman.

I won't repeat the comments that I made at our hearing several months ago. I will just say that based on a preliminary review of H.R. 4927, it appears to me that this is legislation which does strike an appropriate balance and that significant progress has been made in dealing with this important issue. I will look forward to hearing the testimony of the witnesses today. Thank you.

Representative EDWARDS. Thank you.

I think what we will do is introduce each of the witnesses just before they speak, and then after all the statements have been made, we will have a series of questions.

The first member of the panel is Hon. Louis J. Freeh, Director of the Federal Bureau of Investigation. Welcome. STATEMENT OF HON. LOUIS J. FREEH, DIRECTOR, FEDERAL

BUREAU OF INVESTIGATION Mr. FREEH. Thank you, and good afternoon to both Chairman Leahy and Chairman Edwards and other distinguished members of the panel as well as your staffs.

It is a great privilege to appear back here today, having discussed this issue in the Committee on March 18, not so long ago, and to really marvel at the remarkable progress that has been made both between the committee staffs and the principals and my colleagues that are sitting here with me this afternoon. I think it is a great testament to the nature of the process and the good faith behind the process that such a critical compromise was reached and such an important result has been obtained.

I have a longer statement for the record, and with your permission, I will just highlight some of the points which I have already made and now which I can make in the framework of this legislative proposal.

We believe that the legislation, as introduced this past Tuesday, offers the strongest investigative assurances that the authority which Congress gave us in 1968 will continue unimpeded by technology. The issue before the Congress and before the public is the updating of the technical assistance requirement embodied in the statute, but of course changed by technology.

I think that a delicate but critical balance has been achieved between public safety and privacy and constitutional rights. If you look at the bill simply and graphically, there are ten provisions. Four provisions are addressed to law enforcement; the other six to privacy. Even within the law enforcement provisions, there are all

of the safety valves, both to encourage cooperative design and development but also to prevent by a safe harbor provision the penalties to any member of the community, particularly the common carriers or the equipment suppliers and manufacturers, so if they are unable to achieve a certain agreed-upon standard, either because of technological problems or funding problems, they are protected. That is, by my own admission today, a vast improvement as to the proposal made in the legislation which we discussed earlier this year.

Without question, and I need not repeat this, court-authorized electronic surveillance is a critical law enforcement and public safety tool. I think we have reached a remarkable compromise and achievement in preserving that tool as it has existed since 1968 and yet balancing all the technology and privacy concerns which are so precious to all of us.

The legislation, in our view, is not just a compromise but a victory for all of the interests involved. The legislation reflects reasonableness in every provision: The limited but appropriate scope of coverage, the longer compliance period—4 years as opposed to 3, the specifically-articulated law enforcement capacity requirements, and, as I mentioned, the creation of a safe harbor for industry through the use of technical requirements developed cooperatively between law enforcement and industry standards has now been achieved. All are very reasonable and practical solutions to difficult problems.

Further, the administration proposed and your bills include a mechanism for reimbursing carriers for making modifications necessary to achieve compliance during a more flexible compliance period. În my view, reimbursement is desirable if we are to meet the concerns of industry and still maintain effective law enforcement, ensuring the public safety and protecting national security. I believe the proposed reimbursement should be viewed as a substantial effort to assist industry in meeting the technical assistance requirement imposed by Congress.

We, too, are extremely concerned and appreciative with respect to the estimated costs which would be necessary to fund this proposal. I think with respect to that concern, I would draw very heavily from the excellent GAO report which has been furnished by my colleague to note that the costs, obviously, will be directly related to the solutions.

It seems to me that with the cooperative spirit and the momentum which we have achieved in the discussions of this legislation, the setting of standards and the absolutely priority goal of achieving the most efficient cost-saving methods to achieve them can be attained. Working between the industry, and the law enforcement and the standards-setting bureaus, I believe that we can achieve great efficiency and I am hopeful that even the estimated costs, which we have said could vary from $300 to $500 million, could be reduced perhaps with that cooperation with the efficiency and with focusing on the most difficult law enforcement objectives that need to be achieved.

With respect to the security systems involved in these provisions, as pointed out by both chairmen, they do, in fact, enhance privacy and security by requiring, for instance, that switch-based intercept

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efforts be activated only with the affirmative intervention of a carrier employee, thereby leaving the controls to these systems within the purview and jurisdiction of the telephone companies and not the law enforcement agencies.

Enhanced privacy protection regarding governmental access to stored transactional records is included, which again, by my own admission, is a vast improvement from the initial draft which the Government proposed.

There is the requirement to utilize pen register technology when reasonably available that restricts the recording of electronic impulses to the dialing or signaling information used in call processing. Location information associated with the use of cellular or mobile communications incidental to the execution of pen register court orders is now excluded, another important improvement.

Finally, there are a number of privacy-enhancing amendments to the Electronic Communications Privacy Act of 1986. After numerous meetings and drafting sessions with your excellent and able staffs with the telecommunications representatives, the privacy advocates, a balanced legislative language has been developed. We all recognize that this was and is a difficult issue and one where each of the parties involved approached with not just the wisdom but the spirit of compromise. Public safety demands that the legislative solution be found now.

I would like to take this time to commend you, Chairman Edwards, Chairman Leahy—

Senator LEAHY. You are scaring him away, Director.
Mr. FREEH. That is why I changed the order of it. [Laughter.]

Mr. FREEH. I commend you for the remarkable stewardship, wisdom, and leadership that you have shown, which is appreciated by all the parties represented here at the table.

Just as important, I would like to thank very sincerely your very able staffs, Jim Dempsey and Beryl Howell who are present in the hearing room, Nelson Cunningham and Ken Mendelson who I don't see but who were equally able, competent, extremely patient, and imaginative in solving what I admit was a most difficult problem.

Your efforts will ensure our continued ability to protect lives, property, and the national security. We will also continue in that protection without giving the law enforcement authorities any additional jurisdiction or ability to conduct such investigations and meanwhile balancing those necessary tools against critical privacy and constitutional rights.

We are just delighted and complimentary to you and my colleagues here for what we admit is not only a much better product than we came up with but one which is more likely to do the job. Thank you.

[Mr. Freeh submitted the following:) PREPARED STATEMENT OF LOUIS J. FREEH ON BEHALF OF THE FEDERAL BUREAU OF

INVESTIGATION Mr. Chairmen, let me thank you for providing me this opportunity to again discuss with you one of the most important issues facing law enforcement today. I also want to express my appreciation at the outset for the commitment and effort that you, your subcommittees, and your staffs have made in assisting law enforcement, and in particular the FBI, in achieving a successful resolution of this very difficult and extremely important issue.

As you recall, on March 18, 1994, I appeared before you and provided a detailed statement for the record explaining the tremendous importance of court authorized electronic surveillance to law enforcement, the technological impediments that have been impacting, and will continue to impact, such surveillance, and the dire consequences to effective law enforcement, the public safety, and the national security if no binding solution to this problem is obtained. Further, on March 25, 1994, the administration formally transmitted to the Congress a legislative proposal to address this critical issue. I believe that the legislation that has subsequently evolved, and that was introduced in both houses of Congress this past Tuesday, offers strong assurance that this important investigative technique will be preserved while at the same time also ensuring that the privacy of law abiding telephone users remains fully protected and that the telecommunications industry remains fully competitive, both domestically and internationally.

As I have previously indicated, court authorized electronic surveillance is one of law enforcement's most important and effective investigative techniques and is often the only way to prevent or solve the most serious crimes facing today's society. Because of advances in telecommunications networks, the introduction and deployment of new digitally-based technologies, services and features, law enforcement's ability to conduct court authorized surveillance is being threatened. Industry representatives have acknowledged that existing networks and networks planned for the future prevent common carriers from being able to comply with court orders and provide law enforcement with the needed access to all communications and dialing information set forth in the orders.

Over the past decade, we estimate that several hundred court orders have been frustrated, either in part or in whole, by various technological impediments. A recent informal survey conducted by the FBI, and updated this spring, identified 183 incidence were Federal, State, and/or local law enforcement had been frustrated by such technological impediment and that number is ever increasing.

I believe the legislation before you carefully balances the legitimate concerns of law enforcement, the telecommunications industry, and privacy advocates. It is the product of intense discussion, give and take, and compromise by all parties involved. you, your staffs, the FBI and those representing privacy and industry interests have worked extremely hard, and I believe, been flexible, in order to reach a satisfactory legislative solution which addresses the public safety concerns of the law enforcement community and affords great privacy protection to telephone users. I believe that we have clearly demonstrated that technological impediments to electronic surveillance indeed exist, that Federal legislation is the only realistic solution and, as I indicated on March 18th, that from the outset we have been willing to accommodate every reasonable concern raised by the telecommunications industry and privacy advocates.

Indeed, I believe that a hallmark of your legislation is reasonableness. The language of the legislation reflects reasonableness in every provision. For example, the coverage of the legislation focuses on common carriers entities that historically have been subject to regulation. We have acknowledged, as have your subcommittees, that almost all of our electronic surveillance problems have occurred, and will continue to occur in the foreseeable future, in the networks and systems of common carriers. therefore, this legislation does not unreasonably and unnecessarily call upon small private branch exchange (PBX) operators, pure computer networks, or private networks to alter their systems and networks. Even within common carrier networks, we have agreed to language which reasonably limits carrier responsibilities in certain key areas. The legislation does not require common carriers to satisfy the electronic surveillance requirements by assuring access to targeted communications where the communications link is one that exclusively is dedicated to interconnecting carriers and private networks. second, information services are excluded. and third, with regard to cellular communications that are handed off to other common carriers or to other service areas, we have agreed to language which specifies that the initial carrier need not artificially reroute communications, and we have settled upon being advised as to identity of the new carrier when such a handoff occurs.

Because some carriers have expressed a concern about meeting these requirements within three years, as originally proposed by the administration, we have agreed to language which extends this period to four years, and which also permits a carrier to request an extension of up to two more years where the carrier can show that good faith and reasonable efforts require more than the four-year period.

We have also agreed to language which explicitly states that law enforcement may not dictate or require the specific design of features or system configurations, nor may law enforcement prohibit the adoption of any feature or service. As I have said on numerous occasions, law enforcement has no intention of becoming a technology

CZAR or of regulating the development of new and beneficial telecommunications systems, services or features.

Because telecommunications industry representatives have expressed a concern that the administration's proposal did not specifically address the capacities requirements that would be placed on each carrier, we developed, and the legislation includes, provisions which clearly place an affirmative responsibility on the Attorney General to advise carriers of law enforcement's specific capacity requirements within the first year after enactment of the legislation. These provisions will furnish carriers both with our short-term needs and our longer range capacity requirements, such that the required capacity will not be needlessly undersized or oversized.

We have agreed to language regarding carrier reliance upon industry-based technical requirements and standards that meet law enforcement's requirements which serve as a so-called "safe harbor” for carriers and prevent needless concern about civil liability exposure where good faith efforts are made to comply with such technical requirements or standards. Further, in case of any dispute with regard to such technical requirements or standards, any person may petition the FCC

to institute proceedings to resolve any conflict and establish appropriate requirements or standards consistent with the electronic surveillance requirements set forth in the legislation.

With regard to enforcement, we have agreed to language that allows a carrier to prevent the issuance of an enforcing court order under circumstances where alternative technologies or technical capabilities exist or where the law enforcement requirements are better met by another carrier. Further, such an order would be precluded where compliance is not reasonably achievable through the application of available technology and timely action has been taken. Finally, an enforcement action is flatly precluded where the capacity demands exceed those for which the car. rier has been provided notice. In any case, before a court can assess a civil penalty it would be required to take into account the nature, circumstances, and extent of the violation, and, with respect to the violator, ability to pay, good faith efforts to comply in a timely manner, effect on ability to continue to do business, the degree of culpability or delay in undertaking efforts to comply, and other matters.

Perhaps of greatest concern to the telecommunications industry is the issue of cost. We all recognize this is a highly competitive industry and that the issue of cost had to be addressed to make this solution practical. The administration proposed a mechanism for reimbursing carriers for making the modifications necessary to achieve compliance during the specified compliance period. Your bills do likewise and includes a well thought out dispute resolution process. In my view, reimbursement is desirable if we are to meet the concerns of industry and still maintain effective law enforcement, ensure the public safety, and protect national security. For other public welfare and safety issues, such as the installation of sprinkler systems, smoke detectors, fire alarms, fire escapes, safety belts, and air bags, to name but a few, industry has been required to meet these obligations without the benefit of this type of solution. I believe the proposed reimbursement should be viewed as a substantial effort to assist industry in meeting the "technical assistance” requirement placed on carriers by Congress some twenty-five years ago.

We have also been very willing to address the concerns of privacy advocates, which the provisions of your legislation make clear. First of all, there is the basic requirement that carriers fulfill their electronic surveillance assistance requirements in a manner that protects the privacy and security of communications and information of all subscribers whose communications are not authorized to be intercepted. Second, there are systems security provisions which enhance privacy and security by requiring that all electronic surveillance efforts initiated in switching premises be activated only with the affirmative intervention of a carrier employee. Third, enhanced privacy protection is included with regard to governmental access to any interactive transactions for which a carrier may keep a record. Fourth, law enforcement is required to utilize pen register technology, when reasonably available, that restricts the recording or decoding of electronic or other impulses to the dialing or signaling information utilized in call processing. Fifth, the assistance requirements in these bills exempt the provision of any location information associated with the use of cellular or mobile communications incidental to the execution of pen register court orders. Finally, there are a number of privacy enhancing amendments to the electronic communications privacy act of 1986, the foremost of which is the conferring of privacy protection on the radio portion of cordless telephone communications.

After numerous meetings and drafting sessions with your staff, telecommunications industry representatives, and privacy advocates, balanced legislative language has been developed that, I believe, is acceptable to the affected parties. We all recognize that this issue is a difficult one, one which each of the parties ap

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