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Implementation of the Communications Assistance
For Law Enforcement Act
by the Federal Bureau of Investigation
Report No. 02-14
March 2002
Office of the Inspector General
Congress enacted the Communications Assistance for Law Enforcement Act (CALEA) in 1994 to ensure that technological advances in the telecommunications industry (industry) would not compromise the ability of law enforcement agencies to engage in lawful electronic surveillance. Congress assigned overall responsibility for implementing the CALEA to the Attorney General. The Attorney General delegated the responsibility of implementing the CALEA to the Federal Bureau of Investigation (FBI). Congress authorized $500 million to reimburse telecommunications carriers (carriers) for certain eligible costs associated with implementing the CALEA capability 1 and capacity 2 requirements to facilitate law enforcement's electronic surveillance. In this regard, the FBI's CALEA Implementation Section Plan stated that:
Recent and continuing advances in telecommunications technology . . . have impaired law enforcement from fully implementing lawfully-authorized electronic surveillance . . . . In many cases, there is no substitute for the use of . . . electronic surveillance in gathering evidence, preventing and solving crimes, and bringing violent criminals, terrorists and spies to justice.
The Department of Justice (DOJ) Office of the Inspector General (OIG) is required by the CALEA to report to Congress biannually on the equipment, facilities and services that have been modified to comply with the CALEA capability and capacity requirements; whether FBI payments to carriers for such modifications were reasonable and cost effective; and projections of future costs for such modifications to meet the CALEA capability requirements.
Pursuant to the CALEA, the Attorney General may reimburse the carriers for modifications to equipment, facilities, or services installed or deployed on or before January 1, 1995 to meet the capability requirements. The carriers are responsible for such modifications to equipment, facilities, and services installed or deployed after January 1, 1995. However, the carriers may request reimbursement for these modifications provided that the Federal Communications Commission (FCC) has ruled that such modifications are not otherwise reasonably achievable. The carriers may also request reimbursement for costs of modifications to any of their systems or services to meet the capacity requirements. The CALEA provides that the telecommunications equipment manufacturers (manufacturers) shall make available to the carriers such features or modifications necessary to permit carriers to comply with the CALEA requirements.
In March 1998 we reported that the FBI and the industry disagreed over what capabilities had to be provided by the industry to be CALEA compliant and eligible for reimbursement. At that time, the carriers had not modified equipment, and the FBI had not made any payments to the carriers.
In March 2000 we reported that the FBI had entered into negotiations with carrier and manufacturer representatives to determine the most appropriate way to arrange for carriers to meet the capability requirements. The FBI desired an approach that was cost effective and would provide for the broadest carrier compliance with the CALEA. The FBI determined that right-to-use (RTU) licenses 3 for the use of the manufacturers' software would be a major cost for the carriers. We also reported that the FBI had entered into RTU license agreements with a manufacturer (Nortel) and certain carriers to permit them the use of the software developed by Nortel. Pursuant to these agreements, the FBI negotiated a price of $101.8 million for Nortel's RTU software licenses.
The FBI prepared a Determination and Findings Regarding the Implementation of the Communications Assistance for Law Enforcement Act (D&F) prior to entering into these agreements to present its case for the reasonableness of the cost of the RTU software licenses. The FBI prepared this document because it was unable to determine the reasonableness of the cost of the RTU software licenses through traditional means, such as cost and price analysis. This resulted from the lack of adequate cost data. The information given to us by the FBI at that time did not provide us with a basis to determine the reasonableness of these costs. Accordingly, in the March 2000 report, we offered no opinion on the reasonableness of the cost incurred for the RTU software licenses.
We also reported in March 2000 that the FBI's Office of General Counsel had issued a legal opinion in which it determined that the RTU license agreements were legal within the framework of the CALEA. The legal opinion also stated that such agreements were:
[A] reasonable attempt to minimize the costs to the federal government because it reduces the potential for manufacturers to collect substantial profit from carriers who will in turn seek reimbursement from the federal government.