Surveillance Law Slaps Small Telcos

Many customers of the nation's small telephone companies may be deprived of better phone service thanks to the cost of implementing a 1994 federal wiretapping law, the companies say.

Government officials say hundreds of phone companies have asked for extensions for a June 30 deadline to make their networks technologically accessible to FBI wiretaps.

The requirements come from the Communications Assistance for Law Enforcement Act--passed years before September 11 brought surveillance and privacy concerns to the fore. It seeks to ensure that phone networks are advanced enough to support a wiretap if one is authorized. It isn't designed to increase the FBI's spying powers, officials say.

"We're just doing this to keep up with the technology," says Les Szwajkowski, unit chief in the FBI's CALEA Implementation Section. "We're always sympathetic to small companies because we're emphatic in our belief that we want to minimize the economic burden."

Costly Upgrade

But concerns about that burden remain for many local phone companies that haven't been asked to submit to wiretaps in decades. They say the price of following the law will set back their businesses. They won't be able to afford to add new customer services as soon as they would like.

Implementation could cost the industry millions or even billions of dollars, experts say. Upgrading a switch--the network device that directs calls--could cost a carrier between $100,000 and $500,000, says Alan Feldman, a deputy chief in the FCC's Industry Analysis and Technology Division.

Upgrades cost Utah-based Gunnison Telecommunications $150,000, says Jim Sanders, office manager. Gunnison has only 1800 subscribers, and this expense hinders the company's ability to improve its service, he says.

The company met the June 30 deadline with difficulty. Yet the upgrades will likely never be put to use, Sanders says. "There's never been a federal tap on a phone here in 90 years," he says.

Sweetser Rural Telephone, based in Indiana, applied for an extension of the deadline so it could invest in a better upgrade, says company network administrator Glen Hidze. He says the upgrade will cost as much as $500,000 for his company, which has 2000 subscribers.

Such charges can prohibit service improvements for smaller firms, Hidze agrees. "The cost to the telephone companies is pretty extreme," he says.

Help Available

These concerns aren't new, and are fairly widespread among local telephone companies, says Tiki Gaugler, assistant general counsel for the Association for Local Telecommunications Services.

The vast majority of extension requests are from smaller, local telephone companies, according to the FCC. "It's a very big concern to the commission in terms of costs," Feldman says.

Although Congress set aside $500 million to support CALEA upgrades, almost all of that money went to reimburse companies that created the new technology, the FCC and FBI say.

Although the fines for non-compliance could exceed $10,000 per day, the FBI and FCC are working with telephone service providers who are making a good faith effort to upgrade as needed.

"Compliance is very important to national security," Szwajkowski says. "But we understand the economic burdens."

FCC regulators point out third-party products are available to reduce compliance costs. For example, Fiducianet builds its business around helping telcos handle surveillance-based demands, including those stemming from CALEA. By sharing staff and technologies with its clients, Fiducianet claims to cut such costs by at least 50 percent, freeing up funds for other uses.

"We've had interest expressed by several hundred companies," says Mike Warren, company president and former head of the FBI's CALEA Implementation Section. Most of Fiducianet's customers are the smaller carriers struggling with the cost of compliance, Warren adds.

Majority Complies

Meanwhile, larger companies, which comprise the vast majority of the telecommunications industry, are not nearly so concerned about compliance.

"Most of the major switches of most major [cellular] companies should be compliant," says Travis Larson, spokesperson for the Cellular Telecommunications and Internet Association.

Since its 1994 inception, the law has faced challenges both on cost grounds and privacy concerns. Although cost issues may remain, most of the original privacy issues were addressed in a 2000 court ruling, says David Sobel, general counsel for the Electronic Privacy Information Center.

The CALEA deadline comes as the number of court-authorized wiretaps continues to grow. Federal and state courts authorized almost 1500 wiretaps in 2001, a 25 percent increase over 2000. Most of these intercepts--78 percent--were drug related, according to the Administrative Office of the U.S. Courts.