[Federal Register Volume 63, Number 81 (Tuesday, April 28, 1998)]
[Proposed Rules]
[Pages 23231-23239]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-10928]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
28 CFR Part 100
RIN 1105-AA39
Implementation of Section 109 of the Communications Assistance
for Law Enforcement Act: Proposed Definition of ``Significant Upgrade
or Major Modification''
AGENCY: Federal Bureau of Investigation, DOJ.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The FBI proposes to amend the Communications Assistance for
Law Enforcement Act (CALEA) Cost Recovery Regulations by adding a new
section which defines the term ``Significant Upgrade or Major
Modification.'' This NPRM sets forth both the FBI's proposed section
and the rationale behind the proposed definition. The addition of this
section will clarify the applicability of the CALEA, Cost Recovery
Regulations and assist the telecommunications industry in assessing its
responsibilities under CALEA.
DATES: Comments must be received on or before June 29, 1998.
ADDRESSES: Comments should be submitted to the Telecommunications
Contracts and Audit Unit, Federal Bureau of Investigation, P.O. Box
221286, Chantilly, VA 20153-0450, Attention: CALEA FR Representative.
All comments will be available from the FBI Reading Room located at FBI
Headquarters, 935 Pennsylvania Avenue, NW., Washington, DC 20535. To
review the comments, interested parties should contact Ms. Mary
Stuzman, FBI Reading Room, FBI Headquarters, telephone number (202)
324-2664, to schedule an appointment (48 hours advance notice
required). See Section G of the Supplementary Information for further
information on electronic submission of comments.
FOR FURTHER INFORMATION CONTACT:
Walter V. Meslar, Unit Chief, Telecommunications Contracts and Audit
Unit, Federal Bureau of Investigation, P.O. Box 221286, Chantilly, VA
20153-0450, telephone number (703) 814-4900.
SUPPLEMENTARY INFORMATION:
A. General Background
Recent and continuing advances in telecommunications technology and
the introduction of new digitally-based services and features have
impaired the ability of federal, state, and local law enforcement
agencies to fully and properly conduct various types of court-
authorized electronic surveillance. Therefore, on October 25, 1994, the
President signed into law the Communications Assistance for Law
Enforcement Act (CALEA) (Public Law 103-414, 47 U.S.C. 1001 et seq.).
This law requires telecommunications carriers, as defined in CALEA, to
ensure that law enforcement agencies, acting pursuant to court order or
other lawful authorization, are able to intercept communications
regardless of advances in telecommunications technologies.
Under CALEA, certain implementation responsibilities are conferred
upon the Attorney General; the Attorney General has, in turn, delegated
responsibilities set forth in CALEA to the Director, FBI, or his
designee, pursuant to 28 CFR 0.85(o). The Director, FBI, has designated
the Telecommunications Industry Liaison Unit of the Information
Resources Division and the Telecommunications Contracts and Audit Unit
of the Finance Division to carry out these responsibilities.
One of the CALEA implementation responsibilities delegated to the
FBI is the establishment, after notice and comment, of regulations
necessary to effectuate timely and cost-efficient payment to
telecommunications carriers for certain modifications made to
equipment, facilities and services (hereafter referred to as
``equipment'') to make that ``equipment'' compliant with CALEA.\1\
Section 109(b)(2) of CALEA authorizes the Attorney General, subject to
the availability of appropriations, to agree to pay telecommunications
carriers for additional reasonable costs directly associated with
making the assistance capability requirements found in section 103 of
CALEA reasonably achievable with respect to
[[Page 23232]]
``equipment'' installed or deployed after January 1, 1995, in
accordance with the procedures established in section 109(b)(1) of
CALEA.\2\ Section 104(e) of CALEA authorizes the Attorney General,
subject to the availability of appropriations, to agree to pay
telecommunications carriers for reasonable costs directly associated
with modifications of any of a carrier's systems or services, as
identified in the Carrier Statement required by CALEA section 104(d),
which do not have the capacity to accommodate simultaneously the number
of interceptions, pen registers, and trap and trace devices set forth
in the Capacity Notice(s) published in accordance with CALEA section
104. Finally, section 109(a) of CALEA authorizes the Attorney General,
subject to the availability of appropriations, to agree to pay
telecommunications carriers for all reasonable costs directly
associated with the modifications performed by carriers in connection
with ``equipment'' installed or deployed on or before January 1, 1995,
to establish the capabilities necessary to comply with the assistance
capability requirements found in section 103 of CALEA. However,
reimbursement under section 109(a) of CALEA is modified by the
requirements of section 109(d), which states:
\1\ CALEA Sec. 109(e).
\2\ CALEA Section 109(b)(1) sets forth the procedures and the
criteria the Federal Communications Commission (FCC) will use to
determine if the modifications are ``reasonably achievable''.
---------------------------------------------------------------------------
If a carrier has requested payment in accordance with procedures
promulgated pursuant to subsection (e) [Cost Control Regulations],
and the Attorney General has not agreed to pay the
telecommunications carrier for all reasonable costs directly
associated with modifications necessary to bring any equipment,
facility, or service deployed on or before January 1, 1995, into
compliance with the assistance capability requirements of section
103, such equipment, facility, or service shall be considered to be
in compliance with the assistance capability requirements of section
103 until the equipment, facility, or service is replaced or
significantly upgraded or otherwise undergoes major modification.
(emphasis added).
While this section deals specifically with a carrier's compliance with
CALEA, the phrase ``significantly upgraded or otherwise undergoes major
modification'' (hereafter referred to as ``significant upgrade or major
modification''), depending on a carrier's actions after January, 1995,
also has a direct bearing on the eligibility for reimbursement of some
``equipment'' installed or deployed on or before January 1, 1995.\3\
---------------------------------------------------------------------------
\3\ ``Significant upgrade or major modification'' also appears
in CALEA Sec. 108(c)(3)(B) with regard to the limitations placed
upon the issuance of enforcement orders under 18 U.S.C. 2522.
---------------------------------------------------------------------------
B. CALEA Cost Recovery Regulations
As required by CALEA Sec. 109(e), the FBI, after notice and
comment, promulgated the CALEA Cost Regulations (62 FR 13307, 28 CFR
part 100), which establish the procedures which telecommunications
carriers must follow in order to receive reimbursement under Sections
109(a), 109(b) and 104(e) of CALEA, as discussed above. Specifically,
the Cost Recovery Regulations set forth the means of determining
allowable costs, reasonable costs, and disallowed costs. Furthermore,
they establish the threshold requirements carriers must meet in their
submission of cost estimates and requests for payment to the Federal
Government for the disbursement of CALEA funds. Additionally, they
ensure the confidentiality of trade secrets and protect proprietary
information from unnecessary disclosure. Finally, they set forth the
means for alternative dispute resolution.
Of particular interest for the purposes of this proposed amendment
to the Cost Recovery Regulations is Sec. 100.11(a)(1) of 28 CFR part
100, which includes in the costs eligible for reimbursement under
section 109(e) of CALEA:
All reasonable plant costs directly associated with the
modifications performed by carriers in connection with equipment,
facilities, and services installed or deployed on or before January
1, 1995, to establish the capabilities necessary to comply with
section 103 of CALEA, until the equipment, facility, or service is
replaced or significantly upgraded or otherwise undergoes major
modifications; (emphasis added).
At the proposed rule stage of the rulemaking process establishing
the Cost Recovery Regulations, the FBI received comments from 16
representatives of the telecommunications industry, including wireline
and wireless carriers and associations. Of the 16 sets of comments
received on the proposed rule, half requested that the FBI define
``significant upgrade or major modification'' as used in
Sec. 100.11(a)(1) of the proposed cost recovery rules.
Given the dynamic nature of the telecommunications industry and the
potential impact on eligibility for reimbursement, the FBI acknowledged
that ``significant upgrade or major modification'' must be defined.
Therefore, on November 19, 1996, the FBI published an Advanced Notice
of Proposed Rulemaking (ANPRM) in the Federal Register (61 FR 58799),
which solicited the submission of potential definitions of
``significant upgrade or major modification'' from the
telecommunications industry and the general public. This ANPRM was also
sent to a large number of associations representing the interests of
the various telecommunications carriers, both wireless and wireless.
In response to the ANPRM, the FBI received comments from 13
representatives of the telecommunications industry, including wireless
and wireless carriers and associations. All comments received have been
fully considered in preparing this proposed definition of ``significant
upgrade or major modification.'' Significant comments received in
response to the ANPRM are also summarized in Section D, below.
Additionally, in developing this proposed definition, the FBI has
relied on the input of other governmental agencies and
telecommunications industry experts.
C. Definition Development
1. Introduction
Committed to the consultative process and to maintaining an on-
going dialogue with the telecommunications industry, the FBI published
its ANPRM in order to draw on the expertise of that industry so that
the FBI could gain an understanding of the range of options available
with regard to ``significant and upgrade or major modification.''
Therefore, the FBI requested that telecommunications carriers and other
interested parties submit potential definitions of ``significant
upgrade or major modification'' in response to the ANPRM. However, the
FBI did not leave off working on a definition of ``significant upgrade
or major modification'' in the interim. Rather, the FBI, in addition to
considering the potential definitions submitted by the industry, also
explored a number of means of defining this term. Specifically, the FBI
has examined three definitional approaches: Accounting, Technical, and
Public Safety. Each of these approaches, along with relevant public
comments received and the results of the Bureau's research, is
discussed in detail below.
2. Accounting Approaches
In order to define ``significant upgrade or major modification'' in
accounting terms, the FBI first sought to determine at what point
expenditures would be considered significant in either dollar or
[[Page 23233]]
percentage terms. It became immediately apparent that a specific dollar
figure could not be determined in light of the differences between
wireline and wireless switching equipment and the dearth of available
information on wireless carrier expenditures.
In an effort to establish the threshold for significance in terms
of a specific percentage, the FBI researched several accounting and
procurement regulation sources. As a result of this research, the FBI
identified two references which generally support 20% as being the
threshold for significance. In the Accounting Principles Board Opinion-
18 (APB-18) pronouncement concerning the equity method of accounting
for investments in common stock, the term ``significant'' is used when
it refers to influence over the operating and financial policies of the
investee. APB-18, paragraph 17, reads: ``Absent evidence to the
contrary, an investment (directly or indirectly) of 20% or more in the
voting stock of an investee is presumed to indicate the ability to
exercise significant influence, and the equity method is required for
fair presentation.'' There was also a presumption in APB-18 that
``significant'' influence does not exist in an investment of less than
20%.
The use of the 20% threshold for significance is also supported in
the Communications Act of 1934, Section 310, which indicates that a
station license shall not be granted to ``any corporation of which more
than one-fifth of the capital stock is owned of record or voted by
aliens.'' \4\ This would seem to indicate that control of 20% of the
capital stock imparts significant influence upon the stockholder.
---------------------------------------------------------------------------
\4\ 47 U.S.C. 310(b)(3).
---------------------------------------------------------------------------
In each of the above references it can be inferred that 20% was
considered to be the threshold for significance. Translating this
inference to the task of defining ``significant upgrade or major
modification,'' it could be argued that any telecommunications carrier
that incurred expenditures equal to or exceeding 20% of the
telecommunications plant in-service value of a switch has made a
``significant upgrade or major modification'' to that switch.
Based on this premise the FBI could define ``significant upgrade or
major modification'' in financial terms as follows: ``A significant
upgrade or major modification is defined as any improvement to a
carrier's existing equipment, facilities, or services for which the
construction, installation, and acquisition costs of the project equal
or exceed 20% of the telecommunications plant in-service value in
switching equipment and switching assets used for stored program
control.''
However, this accounting definition ultimately proved untenable.
First, it is possible for a carrier to make a modification or upgrade
which could cross the 20% threshold, yet have no impact on law
enforcement's ability to conduct lawfully authorized electronic
surveillance. Such an occurrence would be inconsistent with the intent
of CALEA. Additionally, given the wide variety of network-based systems
in use today, it would be extremely difficult to determine precisely to
what the 20% threshold should apply (e.g., the entire network, a
specific switch, an available feature). In practice, applying such a
percentage to a telecommunications network would ultimately create more
confusion than it would resolve. Therefore, the FBI discarded this
approach.
3. Technical Approaches
The FBI also considered a number of technical approaches to
defining ``significant upgrade or major modification.'' The term
``significant'' was used in relation to equipment upgrades by the
Federal Communications Commission (FCC) in only one telecommunications
proceeding during the past few years: FCC Docket Number 95-116,
Telephone Number Portability (``Number Portability Proceeding''). The
discussion of implementation costs in the Number Portability Proceeding
states: ``long-term, or database, number portability methods require
significant network upgrades, including installation of number
portability-specific switch software, implementation of Signaling
System No. 7 and Intelligent Network or Advance Intelligent Network
capability, and the construction of multiple number portability
databases.'' \5\ This specific reference to ``significant network
upgrades'' does not, however, provide a generic definition; rather, it
provides only examples of upgrades which could be considered
significant.
---------------------------------------------------------------------------
\5\ Telephone Number Portability, First Report and Order and
Further Notice of Proposed Rule Making, CC Docket No. 95-116 (1996),
paragraph 122.
---------------------------------------------------------------------------
As the FBI worked through a number of technical definitions, some
dealing with software generics, some dealing with switch architecture,
it became apparent that every technical definition was open to question
on some type of equipment. Furthermore, each technical definition
proposed left ambiguities and called for constant definition of the
terms used. Therefore, the FBI discarded this approach for the long
term.
4. Public Safety Approaches
The intent of CALEA is to ensure that law enforcement agencies,
acting pursuant to court order or other lawful authorization, will
continue to be able to interpret communications regardless of advances
in telecommunications technologies. Therefore, the FBI began to look at
defining ``significant upgrade or major modification'' from a public
safety perspective. In doing so, the FBI determined that any new
modification or upgrade which created an impediment to lawfully
authorized electronic surveillance could be considered ``significant''
or ``major'' given the intent of CALEA in that it would endanger public
safety and prevent law enforcement from carrying out its mission.
Therefore, the FBI developed the following definition: ``the term
`significant upgrade or major modification' means any change, whether
through addition or other modification, to any equipment, facility or
service that impedes law enforcement's ability to conduct lawfully
authorized electronic surveillance.''
However, the FBI recognizes that events have overtaken the CALEA
implementation process, specifically the enactment of the
Telecommunication Act of 1996, and that carriers could not cease all
activity on their systems until a definition of ``significant upgrade
or major modification'' was promulgated. Therefore, in the interests of
reasonableness, the FBI developed the following bipartite definition:
Sec. 100.22 Definition of ``significant upgrade or major
modification.''
(a) For equipment, facilities or services for which an upgrade
or modification has been completed on or before October 25, 1998,
the term ``significant upgrade or major modification'' means any
fundamental or substantial change in the network architecture or any
change that fundamentally alters the nature or type of the existing
telecommunications equipment, facility, or service that impedes law
enforcement's ability to conduct lawfully authorized electronic
surveillance, unless such change is mandated by a Federal or State
statute;
(b) For equipment, facilities or services for which an upgrade
or modification is completed after October 25, 1998, the term
``significant upgrade or major modification'' means any change,
whether through addition or other modification, to any equipment,
facility or service that impedes law enforcement's ability to
conduct lawfully authorized electronic surveillance, unless such
change is mandated by a Federal or State statute.
[[Page 23234]]
The technical terminology in proposed Sec. 100.22(a) is derived from
the comments submitted by the telecommunications industry in response
to the ANPRM. Given that October 25, 1998 is the compliance date for
CALEA capability, the FBI believes that this initial definition will
give carriers the time they need to make appropriate business decisions
about their ``equipment'' in light of CALEA's ``significant upgrade or
major modifications''' clause and will not penalize carries for most
upgrades or modifications made to their ``equipment'' while both a
definition of ``significant upgrade or major modification'' and a CALEA
solution were unavailable. However, carriers who made upgrades or
modifications about which no argument can be made regarding their
``significance'' (e.g. changing from analogue to digital switching)
will still be required to comply with CALEA at their own expense.
Proposed Sec. 100.22(b) will then carry out the intent of CALEA by
ensuring that law enforcement will continue to be able to carry out
lawfully authorized electronic surveillance in cases where carriers
made informed business decisions to modify or upgrade their equipment
in such a way which impedes law enforcement. Carriers do not modify or
upgrade equipment at random; such business decisions are made so that
they will ultimately increase a carrier's revenue. With the
promulgation of this definition, carriers will be able to factor the
requirements and costs of CALEA compliance into their decisions,
thereby being able to determine if upgrading or modification is the
best decision at that time.
D. Industry Comments in Response to ANPRM
In response to the ANPRM, commenters raised a number of issues,
many of which had little direct bearing on the issue of defining the
term ``significant upgrade or major modification'' and have since been
addressed in the final CALEA cost recovery rule (62 FR 13307).
Therefore, the FBI has opted to address in this document only those
comments which have a direct bearing on ``significant upgrade or major
modification'' and which have not been previously addressed in print.
1. Definition of ``Installed or Deployed''
The CALEA Cost Recovery Rules (28 CFR part 100) define ``installed
or deployed'' as follows: ``Installed or deployed means that, on a
specific switching system, equipment, facilities, or services are
operable and available for use by the carrier's customers.'' (28 CFR
100.10). Several commenters responding to the ANPRM argues that
``deployed'' should mean ``commercially available prior to January 1,
1995'' and should, therefore, be defined separately from ``installed.''
The FBI believes that the commenters' proposed definition of
``deployed'' as it is used in CALEA is incorrect. CALEA section
109(e)(3), Submission of Claims, reads: ``Such [Cost Control]
regulations shall require any telecommunications carrier that the
Attorney General has agreed to pay for modifications pursuant to
[section 109] and that has installed or deployed such modification to
submit to the Attorney General a claim for payment * * *'' (Emphasis
added). It is unlikely that the Congress intended that carriers be able
to submit claims for payment simply because a piece of equipment was
commercially available. It is also unlikely that the Congress intended
that the Attorney General agree to reimburse carriers for commercially
available equipment sitting in their warehouses. Rather, it seems clear
that the Congress intended that claims be submitted only for such
equipment for which the CALEA solution was ``operable and available for
use,'' or ``deployed.'' Therefore, no change to the definition of
``installed or deployed'' has been made.
2. Definition of ``Replaced''
Some commenters requested that the FBI defined ``replaced'' as used
in the phrase ``replaced or significantly upgraded or otherwise
undergoes major modification.'' \6\ These commenters advocated defining
``replaced'' as meaning the installation of equipment, facilities or
services which became commercially available after January 1, 1995 and
which are not upgrades or modifications to equipment, facilities or
services commercially available prior to January 1, 1995. However, the
plain language of CALEA never addresses the issue of commercial
availability with regard to grandfathered equipment; rather, CALEA
repeatedly refers to the date of installation or deployment as the
relevant date for reimbursement eligibility. Additionally, unlike the
potentially subjective or ambiguous nature of the term ``significant
upgrade or major modification,'' the meaning of the term ``replaced''
is both clear and common. Therefore, the FBI does not intend to define
this term.
---------------------------------------------------------------------------
\6\ CALEA Sec. 109(d).
---------------------------------------------------------------------------
3. Just Compensation
Some commenters asserted that an overly broad definition of
``significant upgrade or major modification'' would constitute a taking
for which the carriers would be entitled to full compensation pursuant
to the Just Compensation Clause of the Fifth Amendment of the
Constitution of the United States. One commenter asserted that this was
so regardless of whether Congress provides funding for CALEA cost
reimbursement.
No set formula exists for identifying when Government regulatory
action constitutes a ``taking'' under the Constitution; the Supreme
Court has instead generally relied on an ad hoc, factual inquiry into
the circumstances of each particular case. The Supreme court has,
however, indicated that the following factors have particular
significance: (1) The severity of the economic impact of the regulation
on the claimant; (2) the extent to which the regulation has interfered
with distinct investment-backed expectations; and (3) the character of
the government action. See Concrete Pipe and Products of California,
Inc. v. Construction Laborers Pension Trust for So. California, 508
U.S. 602, 113 S.Ct. 2264, 124 L.Ed. 2d 539 (1993); Connolly v. Pension
Benefit Guaranty Corp., 475 U.S. 211, 106 S.Ct. 1018, 89 L.Ed.2d 166
(1986); see also Lucas v. South Carolina Coastal Commission, 505 U.S.
1003, 112 St.Ct. 2886, 120 L.Ed.2d 798 (1992).
In response to the comments received, the FBI has analyzed these
factors and has concluded that the proposed definition of ``significant
upgrade or major modification'' does not amount to a compensable
taking. First, the FBI does not believe that the economic impact of
this definition on carriers will rise to the level of a taking
requiring compensation. The proposed definition will not significantly
impair the economically beneficial use of the carriers' property, and
the value of such property will not be substantially reduced. If any
such reduction does occur, CALEA section 109(b) provides a mechanism
whereby carriers may petition the FCC for relief through a
determination that CALEA compliance is not reasonably achievable.
Moreover, it has been held that ``mere diminution in the value of
property, however serious, is insufficient to demonstrate a taking.''
Concrete Pipe, 508 U.S. at 645. Second, this definition, and the
regulations of which it is a part, will not interfere with investment-
backed expectations of the carriers. Carriers have cooperated with the
execution of court-ordered electronic surveillance for some time now.
Carriers could,
[[Page 23235]]
consequently, readily anticipate that such wiretapping would continue
and that the mechanisms of such wiretapping would evolve as
telecommunications technology advanced. These regulations do not expand
law enforcement authority but merely maintain the ability of law
enforcement to conduct court-ordered surveillance. Carriers had no
reasonable expectation that they would not be required to continue to
provide assistance to law enforcement. Finally, the character of the
government action involved suggests that regulations do not involve a
compensable taking. In carrying out CALEA, no law enforcement agency
will physically invade any carriers' property or appropriate any
carriers' assets for its own use. The FBI feels that the regulations of
which this definition is a part substantially advance the Nation's
legitimate interests in preserving public safety and national security.
These interests would unquestionably be jeopardized without the ability
to conduct court-ordered electronic surveillance. Such wiretaps are
critical to saving lives and preventing and solving crimes. In sum, the
FBI does not believe that the carriers are being forced to bear a
burden ``which, in all fairness and justice, should be borne by the
public as a whole.'' Armstrong v. United States, 364 U.S. 40, 49, 80
S.Ct. 1563, 4 L.Ed.2d 1554 (1960).
4. FBI Authority To Define ``Significant Upgrade or Major
Modification''
Some commenters challenged the FBI's authority to define the term
``significant upgrade or major modification,'' asserting that final
authority rests with either the FCC or the courts. The FBI began this
rulemaking proceeding regarding ``significant upgrade or major
modification'' at the request of commenters on the proposed cost
recovery rule. In fact, some of the same entities which requested in
their comments on the proposed CALEA cost recovery rule that the FBI
define ``significant upgrade or major modification,'' are those who are
now challenging the FBI's authority to do so.
There is no explicit language in CALEA placing the definition of
``significant upgrade or major modification'' under the FCC's
authority.\7\ In fact, in light of the FCC's greater technical
expertise, the FBI has consulted on several occasions with the FCC
regarding the definition of ``significant upgrade or major
modification.'' The FBI offered to defer to the FCC in this area;
however, the FCC determined that the definition of ``significant
upgrade or major modification'' falls within the FBI's CALEA
implementation responsibilities, specifically with regard to
reimbursement.
---------------------------------------------------------------------------
\7\ See, however, the amendments to the Communications Act of
1934 contained in Title III of CALEA, specifically 47 U.S.C. 229(a):
``In general--the Commission shall prescribe such rules as are
necessary to implement the requirements of the Communications
Assistance for Law Enforcement Act.''
---------------------------------------------------------------------------
With regard to the courts, CALEA section 108 does place the final
authority regarding this issue with the courts in any enforcement order
proceeding. However, that should not preclude the FBI from defining
this term so that carriers will know whether their equipment,
facilities and services are grandfathered under CALEA section 109(d),
whether they may be eligible for compensation under CALEA section
109(a), and whether they may need to petition the FCC under the
provisions of CALEA section 109(b). Therefore, the FBI is proceeding
with this rulemaking.
5. Potential Burden on Small Carriers
Two associations representing the interests of carriers qualifying
as ``small entities'' for regulatory purposes sought assurances that
the proposed definition of ``significant upgrade or major
modification'' would take into consideration the potential burdens
imposed upon small carriers. The FBI is cognizant of the needs of small
carriers and has taken these needs into consideration during the
development of the proposed definition. This issue is addressed at
length in Section F, Initial Regulatory Flexibility Analysis, below.
6. The Telecommunications Act of 1996
Several commenters were concerned that upgrades and modifications
required by the Telecommunications Act of 1996, as well as other
federal and state mandates, be exempt from consideration as
``significant upgrades or major modifications'' under CALEA. The FBI is
persuaded by these comments and has worked such an exemption into the
proposed definition.
7. Availability of a CALEA Standard
Several commenters asserted that a pre-condition for the occurrence
of a ``significant upgrade or major modification'' was the availability
of an industry-developed CALEA standard. However, the plain language of
CALEA states that the absence of a standard shall not ``relieve a
carrier, manufacturer, or telecommunications support services provider
of the obligations imposed by sections 103 [Assistance Capability
Requirements] or 106 [Cooperation of Equipment Manufacturers and
Providers of Telecommunications Support Services], as applicable.'' \8\
Therefore, the FBI does not accept this comment.
---------------------------------------------------------------------------
\8\ CALEA Sec. 107(a)(3)(B).
---------------------------------------------------------------------------
8. Availability of CALEA Compliant Technology
Several commenters asserted that a pre-condition for the occurrence
of a ``significant upgrade or major modification'' was the availability
of CALEA compliant technology. Carriers could not be expected to
include the CALEA solution along with any ``significant upgrade or
major modification'' if such a solution did not exist.
The FBI is cognizant of this issue and has taken steps to minimize
the impact of the ``significant upgrade or major modification'' clause
in these circumstances. To this end, the FBI has proposed the bipartite
definition proposed above, which limits ``significant upgrades or major
modifications'' prior to October 25, 1998 to ``any fundamental or
substantial change in the network architecture or any change that
fundamentally alters the nature or type of the existing
telecommunications equipment, facility, or service, that impedes law
enforcement's ability to conduct lawfully authorized electronic
surveillance, unless such change is mandated by a Federal or State
statute.'' Given that October 25, 1998 is the compliance date for CALEA
capability, the FBI believes that this initial definition will give
carriers the time they need to make appropriate business decisions
about their ``equipment'' in light of CALEA's ``significant upgrade or
major modification'' clause and will not penalize carriers for most
upgrades or modifications made to their ``equipment'' while the CALEA
solution is unavailable. However, carriers who made upgrades or
modifications about which no argument can be made regarding their
``significance'' (e.g. changing from analogue to digital switching)
will still be required to comply with CALEA at their own expense.
9. Definition of ``Significant Upgrade''
Most commenters proposed a definition of ``significant upgrade or
major modification'' similar to the one proposed by the United States
Telephone Association (USTA):
Significant upgrade or major modification includes only those
upgrades or modifications which are generally available to the
industry and installed/implemented in
[[Page 23236]]
order to be consistent with industry-developed standards and/or FCC
technical requirements associated with implementation of CALEA. Such
upgrades or modifications pertain only to facilities, services,
functions, etc. that affect compliance with the capabilities [sic]
requirements of CALEA and represent changes in the network
architecture or changes that fundamentally alter the nature or type
of the existing telecommunications equipment, facility, or service.
Such term does not include upgrades and/or modifications to networks
mandated by state or Federal law where CALEA compliant technology is
not available.
As discussed above, the FBI has taken this proposed definition
under consideration and has incorporated parts of it into the FBI's own
proposed definition regarding upgrades and modifications made between
January 1, 1995 and the CALEA capability compliance date of October 25,
1998. The FBI has also included in toto the proposed exemption for
upgrades or modifications required by state and federal mandates.
However, the FBI believes that this definition will not satisfy the
intent of CALEA in the long term. Therefore, the FBI has broadened the
definition for modifications occurring after October 25, 1998 to
include any upgrade or modification which impedes law enforcement's
ability to carry out lawfully authorized electronic surveillance. Such
impediments are clearly ``significant'' and ``major'' in that they
endanger public safety and prevent law enforcement from carrying out
its mission. Therefore, the FBI can accept the commenters proposed
definition only in part.
E. Applicable Administrative Procedures and Executive Orders
1. Unfunded Mandates
The FBI has examined this proposed rule in light of the Unfunded
Mandates Reform Act of 1995 and has tentatively concluded that this
proposed rule will not result in the expenditure by State, local, and
tribal governments, in the aggregate, or by the private sector, of
$100,000,000 or more (adjusted annually for inflation) in any one year.
2. Executive Order 12866
The FBI examined this proposed rule in light of Executive Order
12866 and has found that it constitutes a significant regulatory action
only under section 3(f)(4). In accordance with section 6 of Executive
Order 12866, the FBI has submitted this proposed rule to the Office of
Information and Regulatory Affairs, OMB, for review, and has met all of
the requirements of this section.
3. Executive Order 12612
This final rule does not have a substantial direct effect on the
States, on the relationship between the national Government and the
States, or on distribution of power and responsibilities among the
various levels of government. Therefore, in accordance with Executive
Order 12612, it is determined that this rule does not have sufficient
federalism implications to warrant the preparation of a Federalism
Assessment.
4. Executive Order 12988
This proposed rule meets the applicable standards set forth in
sections 3(a) and 3(b)(2) of Executive Order 12988.
5. Paperwork Reduction Act of 1995
This proposed rule contains no information collection requirements
and is not, therefore, subject to the Paperwork Reduction Act of 1995.
F. Initial Regulatory Flexibility Analysis
As required by the Regulatory Flexibility Act (``RFA''),\9\ the FBI
has prepared an Initial Regulatory Flexibility Analysis (``IRFA'') of
the expected significant economic impact on small entities of this
proposed rule. Written public comments are requested on the IRFA.
Comments must be identified as responses to the IRFA and must be filed
by the deadlines for comments on the NPRM provided above on the first
page, in the heading. The FBI shall send a copy of this NPRM, including
the IRFA, to the Chief Counsel for Advocacy of the Small Business
Administration (SBA) in accordance with section 603(a).\10\
---------------------------------------------------------------------------
\9\ U.S.C. 603.
\10\ The Regulatory Flexibility Act, 5 U.S.C. Sec. 601 et seq.
has been amended by the Contract with America Advancement Act of
1996, Pub. L. No. 104-121, 110 Stat. 847 (1996) (CWAAA). Title II of
the CWAAA is the ``Small Business Regulatory Enforcement Fairness
Act of 1996'' (SBREFA).
---------------------------------------------------------------------------
1. Need for and Objectives of the Proposed Rules
This NPRM responds both to the legislative mandate contained in
Section 109 of the Communications Assistance for Law Enforcement Act,
Pub. L. No. 103-414, 108 Stat. 4279 (1994) (codified as amended in
scattered sections of 18 U.S.C. and 47 U.S.C.) and to public comments
received in response to the proposed CALEA Cost Recovery Rules
published in the Federal Register on May 10, 1996 (61 FR 21396 .
2. Legal Basis
The proposed action is authorized under the Communications
Assistance for Law Enforcement Act, Pub. L. No. 103-414, 108 Stat. 4279
(1994) (codified as amended in scattered sections of 18 U.S.C. and 47
U.S.C.).
3. Description and Estimate of the Number of Small Entities to Which
the Proposed Rules Will Apply.
This proposed rule may have a significant economic impact on a
substantial number of small telephone companies identified by the SBA.
The FBI seeks comment on how small entities may be affected by the
proposed definition of ``significant upgrade or major modification.''
The RFA generally defines ``small entity'' as having the same
meaning as the term ``small business,'' ``small organization,'' and
``small governmental jurisdiction'' and the same meaning as the term
``small business concern'' under the Small Business Act, unless an
agency has developed one or more definitions that are appropriate to
its activities.\11\ Under the Small Business Act, a ``small business
concern'' is one that: (1) Is independently owned and operated; (2) is
not dominant in its field of operation; and (3) meets any additional
criteria established by the Small Business Administration (SBA).\12\
The SBA has defined small business for Standard Industrial
Classification (SIC) categories 4812 (Radiotelephone Communications and
4813 (Telephone Communications, Except Radiotelephone) to be small
entities when they have fewer than 1,500 employees.\13\ This IRFA first
discusses generally the total number of small telephone companies
falling within both of those SIC categories. Then, the IRFA addresses
the number of small businesses within the two subcategories, and
attempts to refine further those estimates to correspond with the
categories of telephone companies that are commonly used under the
FCC's rules. It must be noted, however, that only small entities in
operation on or
[[Page 23237]]
before January 1 1995 are affected by this proposed rule.
---------------------------------------------------------------------------
\11\ 5 U.S.C. 601(3) (incorporating by reference the definition
of ``small business concern'' in 15 U.S.C. 632).Pursuant to 5 U.S.C.
601(3), the statutory definition of a small business applies
``unless an agency after consultation with the Office of Advocacy of
the Small Business Administration and after opportunity for public
comment, establishes one or more definitions of such term which are
appropriate to the activities of the agency and publishes such
definition in the Federal Register.''
\12\ 15 U.S.C. 632. See, e.g., Brown Transport Truckload, Inc.
v. Southern Wipers,. Inc., 176 B.R 82(Bankr. N.D.Ga. 1994).
\13\ 2 CFR 121.201.
---------------------------------------------------------------------------
Total Number of Telephone Companies (SIC 4813) Affected
This proposed rule may have a significant effect on a substantial
number of the small telephone companies identified by SBA. The United
States Bureau of the Census (``the Census Bureau'') reports that, at
the end of 1992, there were 3,497 firms engaged in providing telephone
services, as defined therein, for at least one year.\14\ This number
contains a variety of different categories of carriers, including local
exchange carriers, interexchange carriers, competitive access
providers, cellular carriers, mobile service carriers, operator service
providers, pay telephone operators, PCS providers, covered SMR
providers, and resellers. It seems certain that some of those 3,497
telephone service firms may not qualify as small entities because they
are not ``independently owned and operated.''\15\ For example, a PCS
provider that is affiliated with an interexchange carrier having more
than 1,500 employees would not meet the definition of a small business.
It seems reasonable to conclude, therefore, that fewer than 3,497
telephone service firms are small entity telephone companies that may
be affected by this proposed rule.
---------------------------------------------------------------------------
\14\ United States Department of Commerce, Bureau of the Census,
1992 Census of Transportation, Communications, and Utilities:
Establishment and Firm Size, at Firm Size 1-123 (1995) (``1992
Census'').
\15\ 15 U.S.C. Sec. 632(a)(1).
---------------------------------------------------------------------------
Wireline Carriers and Service Providers
SBA has developed a definition of small entities for telephone
communications companies other than radiotelephone (wireless)
companies. The Census bureau reports that there were 2,321 such
telephone companies in operation for at least one year at the end of
1992.\16\ According to SBA's definition, a small business telephone
company other than a radiotelephone company is one employing fewer than
1,500 persons.\17\ All but 26 of the 2,321 non-radiotelephone companies
listed by the Census Bureau were reported to have fewer than 1,000
employees. Thus, even if all 26 of those companies had more than 1,500
employees, there would still be 2,295 non-radiotelephone companies that
might qualify as small entities. Although it seems certain that some of
these carriers are not independently owned and operated, the FBI is
unable at this time to estimate with greater precision the number of
wireline carriers and service providers that would qualify as small
business concerns under SBA's definition. Consequently, the FBI
estimates that there are fewer than 2,295 small entity telephone
communications companies other than radiotelephone companies that may
be affected by this proposed rule.
---------------------------------------------------------------------------
\16\ Census, supra, at Firm Size 1-123.
\17\ 13 CFR 121.201, Standard Industrial Classification (SIC)
Code 4812.
---------------------------------------------------------------------------
Local Exchange Carriers.
Neither the FCC nor SBA has developed a definition of small
providers of local exchange services (LECs). The closest applicable
definition under SBA rules is for telephone communications companies
other than radiotelephone (wireless) companies. The most reliable
source of information regarding the number of LECs nationwide of which
the FBI is aware appears to be the data that the FCC collects annually
in connection with the Telecommunications Relay Service (TRS).
According to the most recent data, 1,347 companies reported that they
were engaged in the provision of local exchange services.\18\ Although
it seems certain that some of these carriers are not independently
owned and operated, have more than 1,500 employees, or were not in
operation prior to January 1, 1995, the FBI is unable at this time to
estimate with greater precision the number of LECs that would qualify
as small business concerns under SBA's definition. Consequently, the
FBI estimates that there are fewer than 1,347 small LECs that may be
affected by this proposed rule.
---------------------------------------------------------------------------
\18\ Federal Communications Commission, CCB, Industry Analysis
Division. Telecommunications Industry Revenue: TRS Fund Worksheet
Data, Tbl. 21 (Average Total Telecommunications Revenue Reported by
Class of Carrier) (December, 1996) (``TRS Worksheet'').
---------------------------------------------------------------------------
Interexchange Carrier
Neither the FCC nor SBA has developed a definition of small
entities specifically applicable to providers of interexchange services
(IXCs). The closest applicable definition under SBA rules is for
telephone communications companies other than radiotelephone (wireless)
companies. The most reliable source of information regarding the number
of IXCs nationwide of which the FBI is aware appears to be the data
that the FCC collects annually in connection with TRS. According to the
most recent data, 130 companies reported that they were engaged in the
provision of interexchange services.\19\ Although it seems certain that
some of these carriers are not independently owned and operated, have
more than 1,500 employees, or were not in operation prior to January 1,
1995, the FBI is unable at this time to estimate, with greater
precision the number of IXCs that would qualify as small business
concerns under SBA's definition. Consequently, the FBI estimates that
there are fewer than 130 small entity IXCs that may be affected by this
proposed rule.
---------------------------------------------------------------------------
\19\ TRS Worksheet.
---------------------------------------------------------------------------
Competitive Access Providers
Neither the FCC nor SBA has developed a definition of small
entities specifically applicable to providers of competitive access
services (CAPs). The closest applicable definition under SBA rules is
for telephone communications companies other than radiotelephone
(wireless) companies. The most reliable source of information regarding
the number of CAPs nationwide of which the FBI is aware appears to be
the data that the FCC collects annually in connection with the TRS.
According to the most recent data, 57 companies reported that they were
engaged in the provision of competitive access services.\20\ Although
it seems certain that some of these carriers are not independently
owned and operated, have more than 1,500 employees, or were not in
operation prior to January 1, 1995, the FBI is unable at this time to
estimate with greater precision the number of CAPs that would qualify
as small business concerns under SBA's definition. Consequently, the
FBI estimates that there are fewer than 57 small entity CAPs that may
be affected by this proposed rule.
---------------------------------------------------------------------------
\20\ 13 CFR 121.201, SIC 4813.
---------------------------------------------------------------------------
Wireless (Radiotelephone) Carriers
SBA has developed a definition of small entities for radiotelephone
(wireless) companies. The Census Bureau reports that there were 1,176
such companies in operation for at least one year at the end of
1992.\21\
---------------------------------------------------------------------------
\21\ United States Department of Commerce, Bureau of the Census
1992 Census of Transportation, Communications, and Utilities:
Establishment and Firm Size, at Firm Size 1-123 (1995) (``1992
Census'').
---------------------------------------------------------------------------
According to SBA's definition, a small business radiotelephone company
is one employing fewer than 1,500 persons.\22\ The Census Bureau also
reported that 1,164 of those radiotelephone companies had fewer than
1,000 employees. Thus, even if all of the remaining 12 companies had
more than 1,500 employees, there would still be 1,164 radiotelephone
companies that
[[Page 23238]]
might qualify as small entities if they are independently owned and
operated. Although it seems certain that some of these carriers are not
independently owned and operated, the FBI is unable at this time to
estimate with greater precision the number of radiotelephone carriers
and service providers that would qualify as small business concerns
under SBA's definition. Consequently, the FBI estimates that there are
fewer than 1,164 small entity radiotelephone companies that may be
affected by this proposed rule.
---------------------------------------------------------------------------
\22\ 13 CFR 121.201, Standard Industrial Classification (SIC)
Code 4812.
---------------------------------------------------------------------------
Cellular and Mobile Service Carriers
In an effort to further refine the FBI's calculation of the number
of radiotelephone carriers, Cellular Service Carriers and Mobile
Service Carriers. Neither the FCC nor the SBA has developed a
definition of small entities specifically applicable to Cellular
Service Carriers and to Mobile Service Carriers. The closest applicable
definition under SBA rules for both services is for telephone companies
other than radiotelephone (wireless) companies. The most reliable
source of information regarding the number of Cellular Service Carriers
and Mobile Service Carriers nationwide of which the FBI is aware
appears to be the data that the FCC collects annually in connection
with the TRS. According to the most recent data, 792 companies reported
that they are engaged in the provision of cellular services and 138
companies reported that they are engaged in the provision of mobile
services.\23\ Although it seems certain that some of these carriers are
not independently owned and operated, have more than 1,500 employees,
or were not in operation prior to January 1, 1995, the FBI is unable at
this time to estimate with greater precision the number of Cellular
Service Carriers and Mobile Service Carriers that would qualify as
small business concerns under SBA's definition. Consequently, the FBI
estimates that there are fewer than 792 small entity Cellular Service
Carriers and fewer than 138 small entity Mobile Service Carriers that
might be affected by the actions and rules adopted in this NPRM.
---------------------------------------------------------------------------
\23\ TRS Worksheet, at Tbl. 1 (Number of Carriers Reporting by
Type of Carrier and Type of Revenue).
---------------------------------------------------------------------------
Resellers
Neither the FCC nor SBA has developed a definition of small
entities specifically applicable to resellers. The closest applicable
definition under SBA rules is for all telephone communications
companies. The most reliable source of information regarding the number
of resellers nationwide of which the FBI is aware appears to be the
data that the FCC collects annually in connection with the TRS.
According to the most recent data, 260 companies reported that they
were engaged in the resale of telephone services.\24\ Although it seems
certain that some of these carriers are not independently owned and
operated, have more than 1,500 employees, or were not in operation
prior to January 1, 1995, the FBI is unable at this time to estimate
with greater precision the number of resellers that would qualify as
small business concerns under SBA's definition. Consequently, the FBI
estimates that there are fewer than 260 small entity resellers that may
be affected by this proposed rule.
---------------------------------------------------------------------------
\24\ Id.
---------------------------------------------------------------------------
4. Description of Projected Reporting, Recordkeeping and Other
Compliance Requirements
This proposed rule imposes no reporting or recordkeeping
requirements on small entities. Additionally, this proposed rule does
not impose any other direct compliance requirements on small entities.
However, this proposed rule does, by defining ``significant upgrade or
major modification,'' clarify the threshold at which telecommunications
equipment, facilities and services installed or deployed on or before
January 1, 1995 cease to be grandfathered under CALEA section 109.
Should a carrier make a ``significant upgrade or major modification''
to such grandfathered equipment, facility, or service, the carrier must
then bring the equipment, facility or service in question into
compliance with the assistance capability requirements of CALEA section
103 at the carrier's expense.
5. Significant Alternatives to Proposed Rules Which Minimize
Significant Economic Impact on Small Entities and Accomplish Stated
Objectives
The development of the proposed definition of ``significant upgrade
or major modification'' is discussed at length in Section C, Definition
Development, of this NPRM, supra. The FBI considered and rejected as
impractical both technical and accounting definitions. Having
determined that CALEA's intent was best served by a definition focusing
on public safety, the FBI then modified its definition to incorporate
industry's suggestions submitted in response to the ANPRM.
Because this document proposes a definition which must be as clear
and as finite as possible, the FBI has tentatively concluded that it is
not feasible to make special accommodations for small entities in this
proceeding. The FBI arrived at this tentative conclusion knowing that
CALEA itself makes ample provisions for the protection of small
entities which make ``significant upgrade[s] or major modification[s]''
by allowing these carriers to petition the FCC for relief under CALEA
section 109(b).
The FBI welcomes and encourages comments from concerned small
entities on this issue.
6. Federal Rules That May Overlap, Duplicate, or Conflict With the
Proposed Rules
The FBI is not aware of any overlapping, duplicating, or
conflicting Federal Rules to the Federal Rule proposed in this
document.
G. Electronic Submission of Comments
While printed comments are welcome, commenters are encouraged to
submit their responses on electronic media. Electronic documents must
be in WordPerfect 6.1 (or earlier version) or Microsoft Word 6.0 (or
earlier) format. Comments must be the only file on the disk. In
addition, all electronic submissions must be accompanied by a printed
sheet listing the name, company or organization name, address, and
telephone number of an individual who can replace the disk should it be
damaged in transit. Comments under 10 pages in length can be faxed to
the Telecommunications Contracts and Audit Unit, Attention: CALEA FR
Representative, fax number (703) 814-4730.
[47 U.S.C. 1001-1010; 28 CFR 0.85(o)]
List of Subjects in 28 CFR Part 100
Accounting, Law enforcement, Reporting and recordkeeping
requirements, Telecommunications, Wiretapping and electronic
surveillance.
For the reasons set out in the preamble, 28 CFR part 100 is
proposed to be amended as set forth below:
PART 100--COST RECOVERY REGULATIONS, COMMUNICATIONS ASSISTANCE FOR
LAW ENFORCEMENT ACT OF 1994
1. The authority citation for 28 CFR part 100 continues to read as
follows:
Authority: 47 U.S.C. 1001-1010; 28 CFR 0.85(o).
2. Section 100.22 is added to read as follows:
[[Page 23239]]
Sec. 100.22 Definition of ``significant upgrade or major
modification.''
(a) For equipment, facilities or services for which an upgrade or
modification has been completed after January 1, 1995 and on or before
October 25, 1998, the term ``significant upgrade or major
modification'' means any fundamental or substantial change in the
network architecture or any change that fundamentally alters the nature
or type of the existing telecommunications equipment, facility or
service, that impedes law enforcement's ability to conduct lawfully
authorized electronic surveillance, unless such change is mandated by a
Federal or State statute;
(b) For equipment, facilities or services for which an upgrade or
modification is completed after October 25, 1998, the term
``significant upgrade or major modification'' means any change, whether
through addition or other modification, to any equipment, facility or
service that impedes law enforcement's ability to conduct lawfully
authorized electronic surveillance, unless such change is mandated by a
Federal statute.
Dated: April 13, 1998.
Louis Freeh,
Director, Federal Bureau of Investigation, Department of Justice.
[FR Doc. 98-10928 Filed 4-27-98; 8:45 am]
BILLING CODE 4410-02-M