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With respect to the other costs of compliance (e.g., the cost of the research and development needed to build intercept capability into new services), the FBI has indicated that they will be di minimis and can therefore be easily borne by the carriers. Whether such costs are or will remain di minimis over time is, however, simply impossible to predict. AT&T would therefore respectfully ask that the Subcommittees include a clear mechanism in the bill by which carriers can be compensated for the costs of their ongoing compliance with the bill's requirements if such costs prove to be more than di minimis.

The other area that needs clarification is the section that outlines the circumstances under which carriers can deploy services that do not meet the bill's requirements. Sections 2602 and 2607(c) of the bill indicate that a carrier could deploy such a service if "(1) alternate technologies or capabilities or capabilities or the facilities are not reasonably available to law enforcement for implementing the interception of communications or access to call identifying information; and (2) compliance with the requirements of this chapter is reasonably achievable through the application of available technology to the feature or service at issue or would have been reasonably achievable if timely action had been taken.” (emphasis added)

Simply put, this language does not provide clear enough direction for a court as to how it should decide the question of when a service that has an "wiretap problem” can be deployed. Without such clarity and direction, it is impossible to predict how a court would rule on such an issue. This unpredictability, in turn, could have a chilling effect on the development and introduction of new services.

The simple reality is that, the less clear this section is, the more unwilling a carrier will be to allocate increasingly limited resources to the development of a service or feature that may have an a wiretap problem. Before it can prudently invest thousands, and perhaps millions, of dollars on a new service, a carrier must be able to plan and know whether it can be introduced. This "bottom line" should be clear without a carrier having to go through the costly and time-consuming stages anticipated by the bill—research and development, working with standards setting bodies, and a rulemaking procedure at the FCC—or risking court action.

The section-by-section analysis that accompanied the bill gives some guidance on the drafters' intent on this issue. It states,

“Of necessity, a determination of 'reasonably available' will involve a consideration of economic factors. This limitation is intended to excuse a failure to comply with the capability requirements or capacity notices where the total cost of compliance is wholly out of proportion to the usefulness of achieving compliance for a particular type or category of services or features. This subsection recognizes that, in certain circumstances, telecommunications carriers may deploy features or services even though they are not in compliance with the requirements of the Act.” Sectional Sum

mary, p. 7–8. This language is an important first step, but further guidance is needed in the bill itself. Thus, AT&T would again urge the Subcommittees to clarify this crucial issue in the language of the bill to indicate clearly that features and services may be deployed when the cost of achieving compliance with the bill's requirements exceeds the commercial usefulness of the service or feature in question.

OBLIGATIONS OF MANUFACTURERS The bill imposes an obligation on manufacturers to provide carriers with the modifications they need to comply with the bill's requirements on a reasonably timely basis. The bill also provides that manufacturers will be paid a reasonable charge for such work, correctly recognizing that manufacturers, unlike the carrier which can recover the costs of its compliance with the bill from the government or its ratepayers, have only one source for compensation for such costs: its customers, the carriers.

In addition, the requirements imposed on manufacturers by the bill mirrors what manufacturers already do for their customers today: consult with them and provide such services and features they request. These obligations, therefore, are in addition to those already imposed on manufacturers by the carriers under the contract they will surely have for the type of equipment (switching and transmission equipment) covered by this bill.

Thus, manufacturers will subject to both a double set of obligations with respect to interception capabilities if a customer asks AT&T to build intercept capability into its services and AT&T fails to so in accordance with the terms of its contract, it risks court action under this bill and a very costly breach of contract suit. Given

this double obligation, AT&T respectfully asks that Congress not impose any additional obligations, financial or legal, on manufacturers. FBI reporting obligations

Finally, the bill imposes substantial obligations on the telecommunications industry. It is important, as noted above, that these obligations not be imposed unnecessarily. To help ensure this, AT&T would encourage the Subcommittees to include a requirement that law enforcement provide Congress with an annual report on its interception-related and interception-affecting capabilities. In this way, Congress could maintain oversight over these issues, while at the same time minimizing the costs to the telecommunications industry and, ultimately, the consumer.

In conclusion, AT&T would like to again thank Senator Leahy and Congressman Edwards for their leadership and efforts. AT&T looks forward to working with you and your staff through the legislative process in efforts to improve and clarify the bill and to fashion legislation which will best address the legitimate needs of law enforcement, while protecting the customer's privacy and the telecommunications industry ability to speed the deployment of new services.

STATEMENT OF MCI COMMUNICATIONS CORPORATION MCI welcomes this opportunity to express its views on the recently introduced "digital telephony” legislation.

MCI recognizes that S. 2375 and H.R. 4922 represent substantial improvements over the FBI's proposals and we commend Senator Leahy, Congressman Edwards, and their staffs for their leadership in achieving these improvements. In particular, we support the limitations contained in the legislation that exempt interexchange carriers to the extent that their facilities merely interconnect two other carriers.

MCI has several concerns about the legislation that make it fall short of a bill that we could support at this time. Under the proposed legislation, the government commits to pay indefinitely for costs incurred by industry in increasing the surveillance capacity of the networks. We believe that the government should also commit to pay indefinitely for costs incurred in increasing the networks' surveillance capability. Our main concern is that this legislation will result in the enactment of a largely under-funded mandate. The legislation should ensure that telecommunications carriers not be subject to the new surveillance requirements unless the government pays for the modifications to facilities and services needed to comply.

Thus, MČI strongly supports the Digital Privacy and Security Working Group's proposal to amend the bill to clarify the link between compliance obligations and reimbursement of costs. Under this “pay-as-you-go” approach, telecommunications carriers would be required to comply with the new law's provisions only to the extent that they have been reimbursed by the federal government. This, in turn, will help prevent unnecessary modifications that may otherwise be required to permit digital surveillance. MCI's interest in digital telephony legislation

Pursuant to the existing requirements of section 2518(4) of Title 18, United States Code, which directs carriers and others to furnish all information, facilities, and technical assistance necessary to accomplish an authorized interception, MČI already cooperates extensively with law enforcement in conducting electronic surveillance. Furthermore, MCI has actively participated in the on-going dialogue between industry and law enforcement conducted within the Electronic Communications Service Providers Committee sponsored by the Alliance for Telecommunications Industry Solutions.

MCI has a direct and material interest in this legislation, which would compliment the existing requirements of section 2518(4). While the local exchange networks may bear the primary responsibility for complying with the new requirements, the interexchange networks remain subject to the bill's provisions. This recognizes that there exist services for which surveillance points cannot be identified in the local exchange network.

Furthermore, while we know of no reports of unsuccessful attempts to conduct authorized surveillance on interexchange networks, MCI's business ventures will increasingly take it into the wireless and the competitive local exchange lines of business. It is in these areas where the majority of incidences of surveillance have traditionally occurred. Therefore, this legislation's requirements are significant to MCI's present and future activities.


FACILITIES S. 2375 and H.R. 4922 would authorize $500 million to be spent by the Attorney General in reimbursing, telecommunications carriers for bringing their networks into compliance with the bill.

At the outset, MCI is very concerned that the costs estimates that have been cited are based on surveillance obligations that are not clearly stated in the legislation. These requirements will be refined by the industry standards process and by the FCC. Even when the obligations are reasonably defined, it will take time for industry to identify the technological alternatives that will satisfy those requirements across the various services. Therefore, it is difficult for individual entities to assess the ultimate financial impact to their business operations and, eventually, the ratepayer.

As has been stated by USTA, CTIA, GAO, and others, the true extent of the costs associated with developing and deploying the modifications necessary to existing facilities to satisfy the bill's surveillance requirements is not known. While the FBI contends that $500 million will be sufficient to cover all reasonable industry expenses associated with this bill, even Director Freeh testified in March of 1994 that compliance costs could run to $1.5 billion. Industry estimates put compliance costs at $3 billion or more. As the law enforcement agencies' (LEAS) requirements and industry

discussions evolve, a clearer picture of the actual costs should evolve. MCI urges Congress to delay compliance dates until the actual requirements as well as the means to implement those requirements are known.

Clearly it is in the interest of all parties to do what is best for the country at large. A poll reported in Time magazine earlier this year 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. Thus, Congress should assure the voting public that any measures enacted will continue to protect their rights to privacy, spend their tax dollars prudently, and not create hidden costs by shifting surveillance costs to carriers who will ultimately pass them on to their customers.

The FBI insists that $500 million will suffice to modify the nation's networks to permit necessary electronic surveillance. What happens, however, if the $500 million (or whatever lesser amount is actually appropriated) fails to cover the costs of complying with the government's requirements? Requiring payments as a condition of modifying facilities to comply with the bill's surveillance requirements would have several advantages compared to enacting a largely under-funded mandate: 1) Efficiency: Budgetary constraints can prevent the deployment of unnecessary

surveillance capability. Only the discipline of tying capability to funding limitations will ensure that law enforcement allocates limited resources in the most efficient manner to obtain surveillance capabilities and capacities when and where they are needed most without burdening industry and, more importantly, other customers with needless costs and delays in access to innova

tive service offerings. 2) Equity: Taxpayers, not ratepayers or shareholders, should bear the cost of a

public good-the greater availability of this investigative tool. Limiting obligations to the extent of government reimbursement spreads the cost of surveillance feature ("a public good”) over the entire public as opposed to having common carrier customers “subsidize” improvement of the rest of the public's

safety. 3) Oversight: The federal government should not hide its electronic surveillance

expenditures from public scrutiny. Mandating electronic surveillance without a corresponding funding requirement will distribute costs over the customers and shareholders of common carriers without any visibility to the "public" on whose behalf the costs are being incurred or to their representatives in government. On the other hand, direct payment by the government, using funds appropriated by the Congress, will encourage and facilitate congressional

oversight. 4) Cooperation: To date, law enforcement and the intelligence community have had a very close,

cooperative relationship with common carriers. While mandated to provide "technical assistance,” carriers have gone out far beyond the letter of that requirement to accommodate the needs of the government in this area. Imposing onerous requirements on industry without funding needlessly jeopardizes the heretofore positive and productive relationship between industry and law enforcement.

The cost of this surveillance technology to industry does not end with its deployment. The legislation also should commit the government to paying for operating and maintaining these government-imposed capabilities. If future needs warrant surveillance of services not covered by the legislation at this time, carriers should be funded regardless of the time elapsed since passage of a bill. Indeed, the government's obligation to reimburse should extend indefinitely, not end after four or six years. The same linkage between reimbursement and compliance in the first four years should be applied to capability requirements in later years.

While we support the "pay-as-you-go" approach and the concomitant need to allocate funds on a priority basis, we note that different carriers will still need funds for infrastructure enhancements to meet the new obligations even if the surveillance capability is not used everywhere. Therefore, the funds need to be carefully and fairly distributed.

To protect the public and industry from unreasonable governmental demands, the lack of appropriated funds sufficient to reimburse telecommunications carriers for modifications and other costs required by the bill should be a complete defense to any claims of noncompliance.


We also call to your attention that new entrants in the carrier market must be assured equal funding treatment. Without equitable funding, it will not be possible for those new entrants to compete fairly against established carriers that were granted government funding to develop and implement their surveillance capabilities. Also, government funds should not be made available for carriers to modernize network elements which should have been otherwise upgraded. As noted by GAO at page 7 of its August 11, 1994 report, the government should not pay for “a switch replacement that is needed to meet a capacity requirement [if it] coincide[s] with a switch replacement (needed] to meet a carrier's business needs."

CONCLUSION In summary, MCI is firmly convinced that choosing the correct funding mechanism is the key to achieving the objectives of the bill most efficiently in the overall public interest. The government should pay for what it demands. Telecommunications carriers should be required to comply with the new law's provisions only to the extent that they have been reimbursed by the federal government. This approach will help ensure that the LEAs' and the public they serve receive the optimum results per dollar spent.



INCREASE IN ELECTRONIC SURVEILLANCE IN 1993 Fueled by an increased use of electronic surveillance by federal officials in drug cases, the number of wiretaps and microphones installed by federal, state and local law enforcement officials increased by 6 percent in 1993 over the previous year. There were also substantial increases in the total number of days in operation, extensions granted and the cost of each surveillance order.

Federal and state courts approved a total of 979_requests, the highest number since electronic surveillance was legalized in 1968. Federal orders increased by 33 percent from 1992, while state investigations decreased by 9 percent. No requests were rejected or amended. In 25 years, only 27 requests have ever been rejected, two most recently in 1988. Narcotics main offense cited

The vast majority of cases investigated listed narcotics as the primary offense. Seventy-four percent of the federal investigations and 69 percent of all investigations were for narcotics. Racketeering accounted for ten percent of orders and gambling for nine percent. Homicide and assaults accounted for 6 federal cases and 28 total cases. Larceny and theft accounted for 13 cases, loan sharking, usury and extortion for nine more. There was only one case each involving kidnapping and bribery. 48 cases were categorized as “other.” The figures continue long-standing trends. Use of electronic surveillance in narcotics cases has increased 240 percent since 1980 and over 500 percent since the legalization of electronic surveillance in 1968. Other offenses have decreased or remained at similar levels.

Federal use increase

Federal investigations accounted for nearly half of all requests for electronic surveillance in 1993. 450 requests were approved by Federal judges, a 30 percent increase in requests over 1992. The 450 requests approved by federal judges represent a 30 percent increase over 1992. Federal use of electronic surveillance has increased nearly 450 percent since 1980. 51 federal judicial districts utilized electronic surveillance in 1993. The Southern District of New York, which includes New York City, and the Eastern District of Michigan, which includes Detroit were the areas with the highest number of orders. State use of electronic surveillance declines

State use of electronic surveillance declined from 1992 to 526 orders, a decrease of nine percent. State use was at its peak in 1973, when 734 orders were approved. Since the mid-1970's, average number of state orders has fluctuated between 450 and 550 per year.

In 1993, only 23 states used electronic surveillance. New York had the highest number of orders-204.73 percent of state orders were in New York, New Jersey and Pennsylvania. Total days in use increases substantially

The total use of electronic surveillance methods increased in 1994. Taps and bugs, on average, are in operation far longer overall There was a substantial increase in the total number of days in which surveillance was in reported in operation. The total number of days jumped 22 percent over 1992 to a total of 39,819 total days. Since 1980, there has been a nearly 400 percent increase in the number of days that surveillance devices have been in operation. Federal orders accounted for 56 percent of the days.

Requests for extensions have also increased substantially. The total number of extension requests granted for existing has surveillance increased 27.7 percent over 1992 to 825 total. Since 1980 there has been a 400 percent increase in the number of extensions granted. Each extension was conducted for an average of 29 days. Costs increase substantially

The average cost of each electronic surveillance order rose sharply in 1993. The average costs increased by 23 percent over 1992, up to an average of $57,000 per order. Federal orders were more expensive, each costing an average of $66,323. The total cost in 1993 for electronic surveillance was an estimated $55 million dollars. Since 1970, the average cost per order has increased 1,100 percent. Efficiency declines

As the use of electronic surveillance has increased, its efficiency as a law enforcement tool has substantially declined. The vast majority of conversations overhead are determined by the prosecutors to be irrelevant to any investigation. In 1993, prosecutors determined that only 20 percent of all conversations were relevant. For federal investigations, only 17 percent were relevant. These percentages have been rapidly decreasing since the 1970's when prosecutors reported that on average over half of all conversations were relevant.

Prosecutors reported that, on average, 100 different individuals conversations were intercepted per order. Of the nearly 100,000 people whose conversations were intercepted, 2,400 were reported in 1993 to have been arrested with the assistance of electronic surveillance.





Marc Rotenberg, EPIC Director
David L. Sobel, Legal Counsel
Dave Banisar, Policy Analyst
EPIC Board of Advisors:
Hon. John Anderson
Prof. Chris Borgman, UCLA School of Information Science

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