Senator LEAHY. So if the Topsham Telephone Co. in Topsham, VT, which has five employees, is concerned, we could tell them that if they have got to have somebody on call there, you guys would pay for it?

Mr. FREEH. I think if they have the right software package that they could probably design much cheaper than the Federal Government. They could be home sleeping at night, and we could still get the access we need.

Senator LEAHY. Let me go back to something you said earlier. You said technology may be fast outstripping the capacity to wiretap. By the same token, what that means is that if this legislation were passed, you would be able to, in effect, stop all this technological advancement until it was redesigned in such a way that you could tap. Is that correct?

Mr. FREEH. I do not think that is correct, respectfully. Again, I am basing this not on my own engineering skills, of which I have none, but on the report of the working group, the industry and law enforcement working group that has discussed this issue for 4 years. The group, the industry group, by the way, is the entity that identified this as a grave problem that has to be solved and has to be addressed. It is not the FBI coming in and saying we have the problem. it is the phone companies telling us they are not going to be able to serve our orders.

In terms of the technology, I do not think we impede technology. I think that

Senator LEAHY. Well, we may be talking past each other on this. The phone companies obviously are moving forward on technology. It is moving very rapidly. They have come to you and said that this is technology you probably will not be able to tap into, and I share your level of engineering experience. I suspect yours is higher than mine. But let us just take the facts as they state them.

Mr. FREEH. All right.

Senator LEAHY. They are moving forward to develop new technologies. They have told you this technology is something you cannot tap into. It is obviously technology they feel they want, or they would not be moving forward on it. We are talking about hundreds of millions, even billions of dollars of investment on their part. You are saying, wait a minute, we have to be able to tap into this, and we are going to go to the Congress, and get legislation to tap into it. Well, then, doesn't it follow that that technology has either got to change, stop, wait, or develop some new feature to work, and it is not going to be the technology that they have made the corporate decision to go forward with?

Mr. FREEH. Well, again, I respectfully disagree. I think if the phone company-we have met with engineers, and I do not have an engineering background, but at the meeting last Friday the GTE representative told us that they are now building switches. They are building switches which will be marketed 2 or 3 years from now. What he said is, look, give me the requirements—the industry has to know what the requirements are and we will build those into the switches, in effect. Not that they want to do it and not that they would rather do something else, but they are not telling us that this is an impossibility.

Senator LEAHY. Your response to that is give us technology that we can tap, but you do not need a new law for that.

Mr. FREEH. We do because they will not do it voluntarily. Two thousand companies will not sit down at the same table and agree unilaterally to do exactly the same thing with respect to our requirements.

Senator LEAHY. So what you are saying is that you want this committee to set an industry-wide uniform standard, which may not be the standard the industry wants and may be legislatively impeding technological advances that would be there without our stepping in.

Mr. FREEH. Yes, yes, we want this committee to set and mandate requirements in future equipment which is currently being engineered and deployed to give us the continued access, the access which the Congress gave us in 1968. And I will wage if you ask the American people whether they would want a feature package on their phones where we can find their children when they are abducted, they would say fine, we would like that feature. That is a real nice feature to have on our telephones. That is what we are asking for.

Senator LEAHY. What if we told them we have some major technological advances coming that would make life easier but we are going to hold it up? We are also going to add significant costs both through taxes and service fees to do this.

Mr. FREEH. Well, it is a cost-benefit analysis. I sat last week with Polly Klaas' father, who came in from California to talk to me, and he said to me, "Mr. Freeh, the FBI did everything in that case to find my little girl." I do not want to be in the position where I am going to tell some father that I could not do everything I would normally do because I could not get the access that I have today. Senator LEAHY. Mr. Edwards?

Representative EDWARDS. Thank you, Mr. Chairman.

Other countries, modern countries like the United States, must be having the same problem because they do the same kind of work that the FBI does in wiretapping. Is this true? Are you in communication with Germany and Britain and the other friendly nations?

Mr. FREEH. Yes, Mr. Chairman, we are. In fact, Jim Kallstrom just came back from England where he met with people in the police as well as the home secretary. I met with the German Minister of the Interior back in December. They are doing exactly what we are doing, and they are going to follow our lead since we are the leader in telecommunications.

What they have told us is that they would like to take our industry standards and put them into their telecommunications carriers, which means that instead of being noncompetitive, American companies who build these features in will actually be more competitive overseas because our counterparts want the exact same access that we are going to need in the new technology.

Representative EDWARDS. Are you serious about a $10,000 a day fine of companies that are recalcitrant?

Mr. FREEH. I think that is flexible. I think for the most part an article III judge has, under the All Writs Act, powers well beyond $10,000 fines and injunctions. The reason we put that into the proposal is that it gives a benchmark; it also gives some guidance to

the district courts as to the area where they should operate. But I do not think that is a necessary authorization. I think any title III judge has that power now. We do not use it because the phone companies have been very, very cooperative with us.

Representative EDWARDS. My last question, Director Freeh. How much is this going to cost the Government?

Mr. FREEH. We estimate $300 to $500 million. That could be off by $200 million. It could be off by $500 million. There is no good rock-bottom answer in terms of the money.

I do not think it is going to cost more than a billion dollars. The industry in our meeting last week is not sure either. Someone said it would be a minuscule cost. Someone else said it would be a couple of billion dollars.

What I do know is that the World Trade Center cost us $5 billion in damages when it was blown up and that these costs, like the 911 system, are really, on a cost-benefit analysis, worthy of people's investment.

[Mr. Freeh submitted the following:]

PREPARED STATEMENT OF LOUIS J. FREEH, DIRECTOR, FEDERAL BUREAU OF

INVESTIGATION

SUMMARY

In summary, it is my view that the digital telephony issue is the number one law enforcement, public safety, and national security issue facing us today. The maintenance of an effective electronic surveillance capability is essential to our nation's law enforcement and intelligence agencies. This investigative technique is a unique and indispensable weapon against national and international drug-trafficking organizations, organized crime syndicates, terrorist groups, and violent criminal conspiracies. Without an effective electronic surveillance capability, our law enforcement and intelligence agencies will not be able to protect the public adequately or acquire the evidence needed to put some of society's most dangerous felons in jail. Recent efforts to ensure substantial jail time for violent, hardened criminals will be undercut, if we in law enforcement first cannot identify them, arrest them, and obtain the compelling evidence required to secure their convictions.

As you are aware, after an extensive review of this serious problem the administration has concluded that Federal legislation is the only viable means of solving the so-called "digital telephony" problem. The technological impediments to courtordered electronic surveillance, which are the unintended by-products of advanced digital telephony, constitute a major nationwide obstacle to effective law enforcement. To date, numerous court orders have been frustrated, in whole or in part, by these impediments. Left unaddressed, this problem will soon grow to dangerous proportions. The Federal Bureau of Investigation and the entire Federal, State, and local law enforcement community are completely unified in our assessment that impediments which hinder or preclude court-ordered electronic surveillance must not be allowed to stand.

The decision to press for legislation was not reached lightly. Over the last four years, we have made substantial efforts to resolve this matter through numerous meetings with leaders in the telecommunications industry. Included in these efforts has been a law enforcement/industry technical working group which was specifically instituted by industry to "solve the problem." Even though we have met for nearly two years (and have mutually benefited from the discussions), there is no mechanism for assuring the timely, comprehensive development and implementation of the required technological solutions. In fact, the chairman of the industry technical working group acknowledges this fundamental shortcoming and problem. Obtaining these solutions can no longer be left to chance. Federal legislation represents the only realistic prospect for obtaining, with certainty, the timely and comprehensive development and implementation of the required technological solutions by the telecommunications industry.

As I indicated, the proposed legislation is focused on "mainstream" telecommunications service providers, on "common carriers," who historically have been subject to regulation. This legislative proposal should be more acceptable to the common carriers. For instance, the electronic surveillance requirements have been clarified;

a network "systems security" provision added, which specifies that all premisesbased intercepts (switches, network elements) must be activated exclusively by common carrier personnel; a mandate that support service providers and equipment manufacturers, upon whom the carriers rely, will furnish the timely cooperation required to permit compliance; an Attorney General "consultation" provision designed to facilitate discussion and cost-effective approaches to compliance; and, importantly, Federal Government payment to common carriers for reasonable and costeffective charges directly associated with attaining compliance which are incurred within the three year period set for compliance.

Also included in the legislation are amendments to the Federal criminal electronic surveillance laws ("Title III") which improve communications privacy protection: privacy protection for handheld "cordless" telephones on a par with wireline and cellular telephones, clarification of privacy protection for electronic communications transmitted by radio, and privacy protection for communications transmitted using security-enhancing modulation techniques.

Law enforcement fully supports the introduction and deployment of advanced telecommunications technologies as a means of sharing information, educating Americans, and increasing our productivity. In particular, we are extremely supportive of the Vice President's initiative to create a national information infrastructure for the benefit of all Americans. As we all embrace the vast potential offered by advanced technology, and advanced telecommunications technology in particular, it is critical that the equities of our law enforcement and intelligence agencies not be forgotten or ignored. However, it would be wrong for all of us as public servants, both within the executive and legislative branches of government, to knowingly allow this information superhighway to jeopardize the safety and economic well-being of law-abiding Americans by becoming an expressway and safe haven for terrorists, spies, drug dealers, murderers, and thugs.

I do not relish the thought of being the first FBI Director to tell a father and mother that we were unable to save their son or daughter because advanced telecommunications technology precluded the telephone company from providing us with lawful access to the criminal conversations that would have prevented the untimely death of an innocent child. Nor do I want the president placed in the position of having to tell the American public that we in law enforcement could not prevent a violent terrorist act directed against innocent Americans in a major metropolitan area solely because of advanced telecommunications technology.

It is imperative that Congress promptly enact the administration's proposed legislation that will solve this serious problem on a timely and comprehensive basis. Every day that passes in which this problem remains unresolved, the longer the safety and economic well-being of the American public are unnecessarily placed at risk. I look forward to working with each one of you and this Congress regarding the enactment of this important legislative initiative.

Thank you Mr. Chairmen and the members of these Subcommittees for providing me this opportunity to testify and provide you with information concerning the most important public safety and national security issues facing us today.

Mr. Chairmen, I appreciate the opportunity to appear before your subcommittees. I am here today not just in my capacity as Director of the Federal Bureau of Investigation but also as a spokesman for our nation's law enforcement and intelligence communities regarding a matter of extreme urgency and importance. I am here on behalf of the administration to tell you that we are confronted with a major threat to our ability to protect the American public, safeguard the national security, and effectively enforce the law. This threat results from various technological impediments to our ability to execute court orders and lawfully conduct electronic surveillance and acquire the associated dialing information. These impediments are the unintended side effects of advanced telecommunications technology which has been, and continues to be, deployed without consideration for the critical needs of our nations law enforcement and intelligence agencies.

I am here today to strongly assert what I and the administration believe is the only rational and viable means of removing this threat-the enactment of the proposed comprehensive legislation to address the digital telephony issue. Without its enactment, one of our most effective weapons against national and international drug trafficking, terrorism, espionage, organized crime, and serious violent crimes will be severely and adversely impacted.

The administration wants to work with the Congress to develop such comprehensive legislation. I will describe in this testimony a draft legislative proposal that has been shared with you.

Quite simply, the purpose of this legislation (draft) is to maintain technological capabilities commensurate with existing statutory authority-that is, to prevent advanced telecommunications technology from repealing de facto the statutory authority already conferred by the Congress. The proposed legislation explicitly states that the legislation does not enlarge or reduce the government's authority to lawfully conduct court-ordered electronic surveillance and install or use court-ordered pen register or trap and trace devices. The essence of the draft legislation is to clarify and more fully define the nature and extent of the telecommunications service provider's "assistance" requirement that was enacted by Congress in 1970. That requirement evidenced Congress' clear intent that lawful court orders should not be frustrated due to a service provider's failure to provide needed technological assistance and facilities. The proposed legislation relates solely to advanced technology, not legal authority or privacy.

We did not come to seek legislation blithely. For nearly four years, the FBI has expended every reasonable effort to address this threat through numerous and ongoing meetings with the telecommunications industry. However, it is my considered judgment, and that of the administration, that dialog alone, no matter how well intended, will not solve this serious threat to public safety. Nonetheless, we have listened and learned, and the legislative proposal before you represents, in our estimation, the only proper approach. On the one hand, it deals with the advanced telephony problem in an appropriately comprehensive fashion-it does not simply "band-aid-over" past problems, it also responsibly deals with new services and technologies (such as personal communications services) that likely will emerge in the next few years. On the other hand, the draft legislation is narrowly focused and covers on only those segments of the telecommunications industry where the vast majority of the problems exist-that is, on common carriers, a segment of the industry which historically has been subject to regulation. We believe the provisions of the administration's proposal address the problem in a very rational fashion. They include clearly stated law enforcement electronic surveillance requirements, systems security provisions, a reasonable deadline for compliance, requirements for equipment manufacturer and support service provider cooperation, proper enforcement and penalty provisions, ongoing government consultation with common carriers to facilitate compliance, and, importantly, a commitment on the part of the federal government to pay common carriers for reasonable charges associated with achieving compliance.

IMPORTANCE OF ELECTRONIC SURVEILLANCE

As the proposed legislation is considered, it is absolutely essential that Congress understand the importance of electronic surveillance, as well as the severe harm that will occur if this critical law enforcement tool is lost or diminished.

The nation's telecommunications networks are routinely used in the commission of serious criminal activities, including terrorism and espionage. Organized crime groups and drug trafficking organizations, which are often highly structured, rely heavily upon telecommunications to plan and execute their criminal activities and hide their illegal proceeds. Similarly, foreign intelligence service officers and their agents carry out their spy and other clandestine missions through these networks. Congress recognized this fact a little over 25 years ago, when it passed the Omnibus Crime Control and Safe Streets Act of 1968. Title III of that Act contained the first comprehensive federal legislative regimen regarding electronic surveillance for use in criminal investigations. The Title III legislation established strict procedures for the conduct of electronic surveillance by federal, state and local law enforcement authorities. These procedures are carefully adhered to by law enforcement and are rigorously enforced by the courts. To date, thirty-seven (37) states, Puerto Rico, the U.S. Virgin Islands, and the District of Columbia also have enacted electronic surveillance statutes. In 1992, a total of 919 Title III orders, as well as an estimated 9,000 pen register orders, were authorized for all federal, state, and local law enforcement agencies. On average, approximately two-thirds of the criminal-related electronic surveillance conducted in the United States is carried out by state and local law enforcement agencies. As mandated in the Title III legislation, electronic surveillance may be used only in the investigation of serious felony offenses and only when other investigative techniques will not work or are too dangerous.

In 1978, Congress established an analogous federal electronic surveillance regimen for use in counter-intelligence, counter-terrorism, and counter-espionage investigations, the foreign intelligence surveillance act of 1978 (FISA). Pursuant to FISA, the U.S. Government is authorized to intercept communications of individuals who pose a threat to the national security, and include those in furtherance of espionage and terrorism.