Answer. The, Administration's legislative proposal contains a "consultation" provision (Section 3(g)) which encourages the Attorney General to consult with the FCC and the telecommunications industry to discuss details of the law enforcement requirements "related to capacity and cost-effective approaches." Pursuant to this provision, the Attorney General, through the FBI and other law enforcement representatives, will consult closely with industry so that industry will be able to develop appropriate and flexible deployment strategies for their solutions based, in part, upon historical interception activity as well as upon flexible components that accommodate broad "ranges of capacity." (See pages 5 and 6 of the legislative proposal's section-by-section analysis and page 47 of Director Freeh's statement for the record.) Approaches currently being discussed in the Electronic Communications Service Provider Committee, acting under the aegis of ATIS, will most likely allow for acceptable and compliant ranges of intercept/pen register capacity without the need to develop or be concerned with precise interception/pen register/trap and trace numbers.

Representative EDWARDS. Thank you, Mr. Freeh.

Senator LEAHY. I am going to yield to Senator Specter, but I would just make one point. None of us wants to impede the ability to go after kidnappers. I have been involved in kidnapping cases. I have been involved with missing persons cases. I have been involved in extortion cases. I have another district attorney beside me who is going to ask questions who has had far more experience than I.

I would just remind you of a survey done, a Time-CNN survey, that said 66 percent of the people thought privacy was more important than wiretapping capability by police. Now, obviously if it is your family involved, that may well change. But we do have some very serious privacy concerns in this country. I know you are dedicated to protecting privacy; we are dedicated to protecting privacy. But that is also one of the underlying questions of this whole thing. Arlen?

STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM THE STATE OF PENNSYLVANIA

Senator SPECTER. Thank you very much, Mr. Chairman. At the outset, I commend the chairmen of the Senate and House for convening this joint hearing. Coincidentally, Director Freeh, with your testimony today the Philadelphia Inquirer has a major story on "FBI Nets Stanfa In Mob Sweep," and the subheadline is "FBI's Rich Harvest Was a Tale of the Tape," which could not come at a more opportune time to underscore the kind of need of which you are testifying.

As Senator Leahy stated, I was district attorney of Philadelphia where we targeted the mob for a long period of time, so that I think there is a good bit of sympathy from the Congress on trying to accommodate law enforcement's interests.

I have just written a note to one of the chairmen asking if we might hear early from the telephone company on the technical problems I have to excuse myself at about 11:45-to see what is involved there and perhaps have some insights from the civil liberties interests where there understandably a major concern. When you and I talked about this matter privately, we spent some substantial time on the civil liberties aspect.

I have long had a concern about wiretapping from the civil liberties point of view. Back in the mid to late 1960's I was the sole dissenter among Pennsylvania's 67 DA's on a a wiretapping issue. Therefore, I think the issue of need is fairly well established as to

what you have testified to in results from today's headlines. But the technical questions, which Senator Leahy has put his finger on, are ones which I would like to hear. And I had made that suggestion, so I am going to be brief on this round as to you, hoping we can move into those other fields.

Thank you, Mr. Chairman.

Senator LEAHY. You do not want to talk about the Mafia up in your home town?

Senator SPECTER. No, I want to talk about the civil rights issues with some of the civil rights people if we can before I have to absent myself.

Senator LEAHY. Mr. Hyde?

Representative HYDE. Well, very briefly, Director Freeh, I do not have sufficient knowledge to ask a lot of interesting questions. I am here to listen and learn, but I can express my own view. The balance between the reasonable demands of privacy and the need of law enforcement to keep pace with the advances in technology is very important. I come down on the side of law enforcement, frankly, because it is easy to imagine one's own child being kidnapped and then demanding that everything be done immediately to find your child and to track the criminals.

Crime is certainly going to keep pace with technological advances, white-collar crime especially, and I think when one uses a telephone-I do not know how many people are naive to think that that is not something that people can listen to, especially in the mobile phones that you carry around. Involuntarily you hear other conversations, whether you want to or not, and most of them are not all that interesting. After 20 minutes I put them down. [Laughter.]

But I want to be helpful to make sure that you keep pace with the technology so that crimes of terrorism and serious felonies are not immune from the searching that you must do to solve them. Thank you.

Senator LEAHY. Mr. Canady?

Representative CANADY. Thank you, Mr. Chairman.

I appreciate your testimony, and I would just like to ask you to expand a little bit on the efforts that the FBI has undertaken to date to resolve this situation with the telecommunications industry. I think all of us would agree that if this could be resolved without legislation, that would be desirable. It would be helpful, I think, for us to understand the steps that have been taken to date that bring us to this point where you believe that legislation is necessary.

Mr. FREEH. Surely. The discussion started in a very organized fashion approximately 4 years ago, obviously long before I came here. Meetings went on between representatives of law enforcement and the telecommunications industry for upwards of a year and beyond.

At a certain point, law enforcement was told by the industry that we were meeting with the wrong people, that we should have been meeting with a different group of their people. So we changed teams and started negotiating with a second group, the working group, which has been very beneficial. And I really think the Government should get some credit for having a dialog with the companies as we have. We have not introduced the bill. We have gotten

some very important suggestions, some of which we have incorporated in our discussions.

But the problem is there are hundreds and hundreds of these companies, and to level the playing field by having everyone agree as to the requirements and timing is, in my view, a management impossibility, even though there is a lot of good faith on everybody's part.

If you were a judge supervising a multidistrict litigation with hundreds of parties, you would encourage them to meet together; you would require them to meet together; and they would, in fact, make progress from time to time. But there comes a point where there needs to be a process and there needs to be some mandated requirement, whether it be a motion deadline or a decision by the judge. But there has to be a point where a mandate is given, one, so everybody is on the same playing field, and, two, so everyone is looking to the same objective.

The companies have told us that they are not now putting into the software being designed the necessary access for us. So these switches which will be marketed and used in the next couple of years do not now have those things in there because they do not feel any compulsion to put them in there. And I do not blame them. If I were their lawyer advising them, I would tell them the same thing.

There has to be some requirement by law where the requirements of law enforcement will be designed and put into the package to maintain what we have now.

Representative CANADY. Thank you very much.

Senator LEAHY. First off, I do want to commend you for working with the industry. You, Mr. Kallstrom, and others have been over to see me and, I know, many, many other members on this. I know the great amount of time you and others have spent personally on it and in trying to work this out. I think that is what we all want to do.

But I have questions that raise red flags in my mind. The FBI's proposed requirements are written in pretty absolute terms. Companies are not excused just because they tried to help law enforcement. If they are unable to or fail to comply with the requirements, they could get up to a $10,000 per day fine. They could actually be closed down. That could happen even if there was a good-faith effort but an unsuccessful one.

Do you think that may be being just a tad bit too strict?

Mr. FREEH. As I said, with respect to the enforcement mechanisms, we have had a great history in this country between the Department of Justice and the telecommunications industry. I do not know of any occasion where the Government has made an application to hold a common carrier in contempt for noncompliance with an order, and there have been many instances of noncompliance. I think you have to read that portion of the proposal as any district judge would read it, which is applying the rule of reason, the rule of good faith. I do not expect that the district court, unreviewed by a court of appeals, is going to shut down a phone company because they have made every possible good effort to comply and technologically have not been able to do so. And if the lan

guage needs some tinkering in that regard, that is fine. We are just looking to preserve access.

Senator LEAHY. You would want to be able to get real-time interception, no matter what feature is used by the subscriber. Does that set an industry-wide standard on cellular phones, for example? I understand the electronic serial numbers are now being changed by some criminals so the calls cannot be traced. Is that going to require some kind of clone-proof cellular phone?

Mr. FREEH. I think that it might. I think that there would be an industry standard with respect to software. I think that same software would also give the companies and us as their investigators the ability to apprehend and prosecute telecommunications fraud, which is several million dollars a day in terms of defrauding the companies. There is a flip side to this access which gives us the ability to prosecute people who are defrauding the companies out of millions of dollars.

Senator LEAHY. The proposed legislation applies only to common carriers, but as cable companies start offering telephone service, they might become a common carrier. Is that correct?

Mr. FREEH. That is correct. They are not included in the proposal.

Senator LEAHY. You say in your written testimony the proposal is limited to common carriers because that is where the vast amount of problems are. Some of the new technologies, such as personal communications services, would be exempted under your proposal. Does that make sense?

Mr. FREEH. Yes, there are parts of the industry-I am not so sure about the PCS's. I think the PBX's are exempted from the proposal. The personal communication systems, no, we would ask for access there. But you are correct that

Senator LEAHY. Wouldn't the PBX exception be a big hole in the proposal? Why would they be exempted?

Mr. FREEH. Well, the computer companies would widen that hole. You are correct. We are excluding them, and for a couple of reasons: one, to narrow the impact and focus of the legislation. We could have incorporated it in there, as we did in the proposal 2 years ago, which was rejected out of hand. I think what we did in the interim is we made a concerted effort to narrow the impact of our focus and pick up where we think we will get the majority of criminal operatives. We are losing that, but that is a concession we are willing to make to narrow the package.

Senator LEAHY. A cable company or a radio dispatcher is not a common carrier, but they are developing new technologies where at least in some areas they may be able to provide telephone service. Does your proposal set up a competitive disadvantage? Is the phone company going to have to develop the software and have an industry-wide standard, but some of these other entities are going to be exempt? Will they be able to start moving ahead of the telephone companies in their own technology?

Mr. FREEH. Well, that is an argument, certainly, that the phone companies make. I am not sure of the validity of it, only because I do not have enough technological background. I do know and I do concede that there are portions of the industry that are not addressed in that legislation.

In a perfect world, they would be in there, but we want to narrow the focus of this so we can get the greatest support by the Congress and the committees, because the last time we were here, we were told specifically that it was too broad and it had to be narrowed and focused. So we picked out where we think we have the greatest vulnerability.

Senator LEAHY. You say this proposal would not expand law enforcement's authority to collect data on people, and yet if new technologies are used where we can dial up everything from a video movie to doing our banking over the phone, you are going to have access to a lot more data, just because the phone is being used.

Mr. FREEH. I do not want that access, and I am willing to concede that. What I want with respect to pen registers is the dialing information: telephone numbers which are being called, which I have now under pen register authority. As to the banking accounts and what movies somebody is ordering at Blockbuster, I do not want it, do not need it, and I am willing to have technological blocks with respect to that information, which I can get with subpoenas or another process. I do not want that in terms of my access, and that is not the transactional data that I need.

Senator LEAHY. See what absolute pussycats we are. Not a tough question among us.

Senator SPECTER. No pussycats here. I just want to hear the next witnesses. [Laughter.]

Mr. FREEH. Does that mean I can go?

Senator LEAHY. Those of us who are willing to stay here and work all day

Senator SPECTER. I have a long line of tough questions for Director Freeh. I am just very regretful I cannot take the time to ask them.

Senator LEAHY. Feel free to go ahead.

Senator SPECTER. I will be doing a lot of work, not here, but later today.

Senator LEAHY. I do not question that. There are few people I have been with in the Congress who work harder than Arlen Specter.

I think, Director, you can understand from the nature of my questions and also from some of the conversations you and I have had privately, again, my concern. I will just reiterate it. As one who spent nearly a decade in law enforcement, I have a very strong feeling of wanting to help law enforcement in this area. I am also one who helped write our current wiretap law, trying to design it to take care of contingencies as technology changes.

I am also well aware of the fact that one of the areas where our country has an advantage over most other countries in the industrialized world is in the area of telecommunications. We have pushed the envelope as far as anybody ever thought you could in everything from our computers to the fact that a lot of our most effective industries today exist because they can move everything from vast amounts of data, blueprints, to phone conversations in matters of seconds across country and so forth.

The cellular phone industry has ballooned far beyond what anybody expected when it first came in, and technology has rapidly