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You have to remember that the telephone company does not just decide everything that is going to be developed, produced, manufactured, and marketed for a national telecommunications network. All of these new services we are talking about, most of them were, in fact, developed by entrepreneurs, small, medium, and large companies. So you have to consider the specter of anyone who would develop a new product, creating jobs and enhancing this network, having to make absolutely sure that this technology, this service, this product, is compatible with the Justice Department's technological requirements, which unfortunately are quite vague. It is difficult to manufacture to an ambiguous standard like this.

Turning the Justice Department into some sort of technology product certification office is not something I think that you would want, nor would we; moreover, they would have little incentive in accelerating the deployment of these technologies because of the various concerns the Agency has had.

I would not go so far as to say that it would seriously diminish our ability to export products, but it would clearly put a damper on the enthusiasm of entrepreneurs to develop products to deploy on this network if they are facing such severe sanctions if they just happen not to fit.

Now, we have talked a lot about the problems in this proposal. It is not unfair to ask what we would propose to fix this. The problem with the Agency's proposal here seems that there is some kind of magic wand that can be waved to solve this problem simply by decreeing that the local telephone industry shall fix this problem for everyone, even for providers that they cannot legally tap into, is a little unrealistic. A year ago, the General Services Administration pointed out that this proposal, as presented in an earlier form, was simply unnecessary.

We believe that what the Congress might want to do and, in fact, what the Agency should do is simply redouble its effort with the so-called Quantico Group. The FBI now cochairs this group and one of its major subgroups. I think that while the dialog has been going on for 4 years, this working group has only had about a year to work. So to essentially walk away from that experience, that cooperative industry-government activity, is a little bit like Michael Jordan being behind in the first quarter and saying, well, you know, we are just going to take the ball and leave the court.

The fact is you just redouble your efforts, work through these problems and go on. And I think it is not unfair to say that no matter what you do, even if this proposal were to become law, that does not fix the problems. You still have to have these kind of industry-government relationships to come up with the actual solutions. We are absolutely committed to that.

[Mr. Neel submitted the following:]

PREPARED STATEMENT OF ROY NEEL ON BEHALF OF THE U.S. TELEPHONE

ASSOCIATION

Thank you, Mr. Chairman. I am Roy Neel, President of the United States Telephone Association (USTA).

USTA represents more than 1,100 local telephone companies ranging in size from the Regional Bell Operating Companies to small companies with fewer than 100 subscribers. Although many of the member companies of USTA have interests in a variety of businesses, USTA represents only their traditional telecommunications

business. As a result, I will confine myself to sharing with the committee the perspective that local telephone companies have of this legislation.

I. WHAT IS THE "DIGITAL TELEPHONY PROBLEM?"

Let me begin by assuring the committee that USTA member companies always have, and always will, cooperate fully with the legitimate needs of law enforcement. In the quarter century since the federal government first authorized court ordered wiretaps there have been tens of thousands of requests for assistance from local telephone exchange companies (LECs). In virtually every instance the local telephone company provided the appropriate law enforcement authority with the timely assistance it needed to effect the intercept.

USTA is aware of only a handful of instances in which there has been difficulty in providing assistance. These were caused by oversights in the original statute authorizing wiretapping which left certain issues, such as liability, unresolved. These oversights were quickly rectified, and since then there has been a long history of unblemished cooperation between LECS and law enforcement agencies.

The industry's cooperative spirit and commitment have been cited formally by the Bureau itself through the awarding of Certificates of Recognition from the Director, as well as through personal expressions of appreciation.

In fact, the Senate Committee Report accompanying the passage of the Electronic Communications Privacy Act (ECPA) refers to the statute's "technical assistance" provision as "a codification of the cooperative working relationship that exists between telephone companies and law enforcement."

Perhaps the best índication of the successful relationship we enjoy with law enforcement is that despite all the issues Director Freeh cited in his testimony, I am not aware of a single instance in which a wire line local telephone company has not been able to effect a lawful intercept due to complications related to advancements in technology.

Indeed, The New York Times of March 1, 1994, reports that documents obtained through the Freedom of Information Act indicate that a survey of several FBI offices found "no instances in recent years in which FBI agents had encountered any technology-based problems in conducting wiretaps."

At least one USTA member, Ameritech, which has taken a leadership role in several of the technical cooperative committees that have been formed to assist law enforcement, requested more than a year ago that the Bureau provide it with information on the number of “held orders" within their region. Not a single held order has been identified.

Perhaps this is why the federal government's own General Services Administration critiqued an FBI legislative proposal, similar to the current one in most major respects, as "unnecessary" and warned that it could "hurt the nation's competitiveness * * * and posed a possible danger to national security." (NYT 1/15/93)

Of course, the fact that there has not been a documented need for legislation to address a current problem regarding court-ordered surveillance does not mean that future concerns should not be anticipated and accommodated. Members of the local exchange industry are committed to continue and, if necessary, escalate their work with the various law enforcement agencies to address legitimate needs before they arise.

In 1992 the FBI first floated draft legislation which, while not attracting a congressional sponsor, did attract the interest of the telecommunications industry. Together we formed the Quantico Joint Government Industry Group which grew into a "Technical Committee" charged with the following:

• Developing a process for incorporating law enforcement's needs into future industry technological standards;

• Developing technical capabilities and procedures to permit continued interception by law enforcement of communications that use transition technologies; and

• Monitoring and tracking the timeliness of the industry's response to law enforcement requests. The committee's goal is "zero-held intercepts."

Through mutual commitment, the Technical Committee has now grown into a formal and permanent forum called the Electronic Communications Service Provider Committee (ECSPC). This committee is co-chaired by law enforcement and industry representatives. The commitment of the local exchange industry to this effort is evidenced by the fact that we have supported committee activities with funding of more than a half million dollars over and above the expenses of our personnel to assist the committee.

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In short, Mr. Chairman, it is evident that the local exchange industry always has been and always will be committed to assisting law enforcement in addressing its interception needs. We believe that by building on this environment of cooperation, we can best serve the needs of all of the interested parties who use the public communications network.

We further believe that the proposed legislation ignores the historical relationship we have enjoyed with law enforcement. It is a punitive approach with unjustifiably harsh penalty provisions. It also forces local exchange carriers to become, in effect, agents of the law enforcement community, rather than maintaining the more appropriate arms-length relationship between common carriers and law enforcement.

II. HOW CAN LAW ENFORCEMENT GET BROADER AUTHORITY TO WIRETAP? Naturally, we do not expect law enforcement to rely only on the good graces of the providers of communications services to fulfill their needs for lawful intercepts. However, when one looks at the current statute under which the cooperative spirit has grown, it is frankly hard to see how it could be usefully enhanced.

As I stated earlier, the original Omnibus Crime Control and Safe Streets Act of 1968 which authorized court-ordered wiretapping and which the FBI actively sought, was technically flawed and needed correction. Congress therefore amended the law on July 29, 1970. One of the amendments to the original law spoke specifically to the degree of cooperation that law enforcement had a right to expect from telephone companies. That amendment stated the following:

An order authorizing the interception of a wire or oral communications under this chapter shall upon request of the applicant, direct that a communication common carrier, landlord, custodian or other person shall furnish the applicant forthwith all information, facilities and technical assistance necessary to accomplish the interception unobtrusively and with a minimum of interference with the services that such communications are to be intercepted.

Virtually identical language appears in the Foreign Intelligence Surveillance Act of 1978 and the Electronic Communications Privacy Act of 1986 which also covers pen registers and trap and trace devices.

It is hard to imagine statutory language that more fully mandates cooperation with any possible needs law enforcement may have. The statute specifically says that a communication common carrier, landlord, custodian or other person shall furnish forthwith all information facilities and technical assistance necessary to accomplish the interception."

These statutes, together with the positive attitude we have cultivated over the past quarter century and with our intensive ongoing technical assistance, should be enough to assure that law enforcement maintains and enhances its ability to carry out legitimate surveillance activities.

III. IF THERE IS A NEED FOR FURTHER LEGISLATION, WHAT SHOULD BE ITS GUIDING

PRINCIPLES?

Let me be clear about the position of the local exchange industry. We do not believe that a case has been made that legislation of the sort proposed by the FBI is warranted or wise at this time. However, we also recognize that the magnitude of this issue demands that this committee carefully and fully examine this issue and that law enforcement's needs are accommodated. In a continued vein of cooperation, we offer the following principles that we believe should guide the committee's deliberations.

A. All communications providers and networks should be required to assist the law enforcement community efforts to conduct lawful electronic surveillance

In the briefing materials that the FBI is widely circulating, the Bureau makes the following point:

In 1970, the telephone industry was monolithic, and the part of the telecommunications network where the government effected electronic surveillance was relatively uncomplicated. Since that time, with the break up of AT&T through divestiture, the entry of numerous new communications providers in the marketplace and the introduction of many new technologies, services and features, the telecommunications networks have become more varied, advanced and complicated.

We could not agree more. In fact, the explosion of providers of various telecommunications services and networks is just beginning. Both Houses of Congress

are currently considering legislation that will further stimulate the divergence of the telecommunications marketplace.

In the face of this developing multiplicity of communications providers, and in a legislative proposal attempting to address future technological developments, it is curious that the Bureau's bill narrows its focus only to common carriers. Private carriers, shared networks, PBX's, and computer networks-including the Internetare all carved out of this bill.

If we assume, as the FBI assures us, that most criminals are stupid, then it would seem that we should be able to catch them without resorting to the FBI's proposal. If, however, we are to assume that we are dealing with criminals with even a modicum of intelligence, it would seem obvious that they would simply choose to communicate over, to quote the Bureau, "the many new technologies, services, features (and) networks" that are not covered by this bill. And, remember, the Bureau itself has acknowledged that these networks are growing rapidly.

Moreover, the existence of multiple providers of telecommunications also means that the government must select the entity that has access to a communication at the point where it can be identified and accessed. This may be before it enters or after it leaves the common carrier network. However, the bill places all of the requirements on the common carrier alone. Does this mean that we as the common carrier must now go and effect the tap on someone else's network for law enforcement? And if we do not, are we subject to fines of $10,000 per instance per day and to the ultimate fine-having our service shut down? And what happens to telephone subscribers in that event? Incredible as it may seem, that is what the language of the proposed legislation would provide.

USTA believes that an essential feature of any proposal, legislative or otherwise, must cover all available communications modalities available to criminals in order to prevent circumvention. This is particularly appropriate with a proposal, such as the current one, which carries such a potentially large price tag for carriers entering a competitive era.

B. Public confidence in the public network must be maintained

One of the hallmarks in the security of our nation's telecommunications system is the ability to provide secure communications. Confidence in your conversations is more than a core element of the privacy that we have come to expect; it is an essential feature of maintaining the nation's economic foundation.

The proposed legislation calls for common carriers to build the capability into their networks to hold and receive at all times sufficient capacity to "execute expeditiously and simultaneously * * * all court orders and lawful authorizations for the interception of wire and electronic communications and the acquisition of call setup information" to be delivered "unobtrusively" to any remote location specified by any federal state or local government entity "authorized by law to conduct electronic surveillance."

In describing its proposal, the FBI strongly asserts that it is not seeking expanded authority. We must, with all due respect, disagree. We believe that this is a level of surveillance capability unprecedented in terms of immediacy, breadth of application or capability for routine surveillance of individual citizens.

Furthermore, the increasing use of telecommunications in all aspects of life as we move into the "information age" means that a substantial behavioral profile can be developed with great precision from "call set-up" information. And, although the discussion of this issue sometimes gets fuzzy, we need to remember that, under this proposed legislation, call set-up information does not necessarily require the issuance of a court order based on probable cause.

A dramatic illustration of the primacy that our citizens place on their privacy is the fact that while the media is rife with stories about violent crime, a poll conducted two weeks ago by the Yankelovich Partners and reported in Time Magazine March 14 found that "two-thirds of Americans said that it was more important to protect privacy of phone calls than to preserve the ability of the police to conduct wiretaps."

Like any citizen, I am troubled by the implications of the IRS or local law enforcement gaining access to an extensive personal profile of me without any court order. But I will leave it to others on the panel to develop that issue.

From a purely business perspective, there also are troublesome issues involved here that transcend the concerns of telephone companies. Just last Congress, Chairman Brooks held a hearing on the issue of corporate surveillance. He pointed out that American corporations had billions of dollars at risk due to corporate espio

nage.

While that hearing focused more directly on the "encryption" issue which is not considered in this specific legislative proposal, I further suggest that in the public's

mind these issues will merge. And I suggest further that perception and public confidence in the nation's telecommunications network are very much at issue here.

If the public becomes skittish about using the public network for fear either that it is full of "back doors" designed so that the FBI can more easily tap into it, or that their local sheriff will be developing a dossier on them based on call set-up information, that fear will translate into reduced use of the system. The result will be the loss of billions of dollars in potential revenue, and along with that many of the jobs, the taxes, and the benefits that we anticipate from the information age. C. Rate payers should not be required to pay for law enforcement's upgrades

This is, of course, the old bottom line issue of who pays for the law enforcement's system. In this respect USTA acknowledges that there has been some progress made with the Bureau. The Bureau has moved away from its original position that the telephone companies absorb these costs as a "cost of business." It is now rightfully acknowledged that such a procedure would simply mean that costs are passed on to telephone customers in the form of rate increases.

We now seem to agree on the essential premise that law enforcement itself should pay for the cost of system alterations. Law enforcement is a public good; therefore, funds for these alterations should come from general tax revenues. But, heavy telephone users do not benefit from law enforcement more than other users and should not bear a disproportionate share of the costs of law enforcement.

Even with that basic premise agreed to, the current legislative proposal makes several unrealistic assumptions that would, in the end, cause telephone rate payers to absorb substantial rate shock, particularly in the "out years."

First we have to have some idea of how much these system upgrades will cost. The Bureau has expressed significant interest in the issue of call forwarding. Preliminary USTA estimates are that the software upgrades alone necessary to capture the needed information at the originating end of these calls would cost between $180 million and $1.8 billion.

In addition, new equipment and software would have to be developed to assure that carriers have the "ability to intercept the content of communications," particularly in the approximately 1,200 ISDN switches deployed throughout the nation. Estimated costs here are approximately $450 million.

This does not even anticipate the costs associated with newer technologies such as photonics and asynchronous transfer mode. USTA's technical disciplines department does not even have rough cost estimates on these items, but they will certainly be significant.

The point here is not that we cannot make the adjustments law enforcement says it needs. In fact, we can. However, there will be costs involved costs that will likely go far beyond the Bureau's estimates both in number of dollars and number of years.

Since we have agreed that the general population, not just telephone subscribers, should pay for whatever upgrades law enforcement requires, the artificial caps, such as the three-year maximum period for which the government will cover expenses, must be eliminated. Similarly, we strongly question law enforcement's technical ability to be the judge of what constitutes "reasonable and cost-effective charges directly associated with modifications required to assure common carrier compliance." Surely decisions about what constitutes "reasonable and cost effective" and "directly associated” cannot be made solely by the entity footing the bill. D. The information age cannot be delayed

I have already referred to the legislation advocated by the Administration, designed to hasten the advent of the "Information superhighway." The priority of this effort should not be underestimated. The prospect for making the best teachers and educational materials in the nation available to every child regardless of geographical location or economic means is close at hand. The ability, through telemedicine, to enable the world's best doctors to consult in real time for patients in distant locations, is now practical. The ability to diversify our economy from the central cities, and, in doing so, substantially reduce environmental pollution and save energy is realistic.

But all of these advances are the outgrowth of the speedy deployment of a modern information infrastructure. This bill calls into question the priority of this effort and creates an enormous speed bump in the information superhighway.

This legislation would make the Attorney General the arbiter of whatever technologies and equipment can be deployed in the public telecommunications network. Presumably this is necessary to assure that new systems, or at least the new systems deployed by the common carriers, will be susceptible to ready interception and real time delivery of desired information to remote areas.

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