CALEA Cost Recovery Regulations; Section 610 Review, 31648-31652 [E8-12399]

Download as PDF 31648 Proposed Rules Federal Register Vol. 73, No. 107 Tuesday, June 3, 2008 This section of the FEDERAL REGISTER contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules. Union Administration, 1775 Duke Street, Alexandria, VA 22314–3428; send a facsimile to (703) 518–6319; or send an e-mail to regcomments@ncua.gov. Correction In proposed rule FR Doc. E8–10247, beginning on page 28904 in the issue of May 19, 2008, make the following correction to the SUPPLEMENTARY INFORMATION section. On page 28937 in the third column, first paragraph, revise the fifth sentence to read: ‘‘The requirements are found in 12 CFR 535.13, 535.28, 535.32, 706.13, 706.28, and 706.32.’’ DEPARTMENT OF THE TREASURY Office of Thrift Supervision 12 CFR Part 535 [Docket ID. OTS–2008–0004] RIN 1550–AC17 NATIONAL CREDIT UNION ADMINISTRATION 12 CFR Part 706 RIN 3133–AD47 Unfair or Deceptive Acts or Practices; Correction Office of Thrift Supervision, Treasury (OTS); and National Credit Union Administration (NCUA). ACTION: Proposed rule; correction. AGENCIES: This document corrects the preamble to a proposed rule published in the Federal Register on May 19, 2008, regarding Unfair or Deceptive Acts or Practices. This correction revises cross-references in OTS’s and the NCUA’s Paperwork Reduction Act (PRA) analysis. FOR FURTHER INFORMATION CONTACT: OTS: Ira L. Mills, Paperwork Clearance Officer, (202) 906–6531, Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552. Comments on the collection of information should be addressed to: Information Collection Comments, Chief Counsel’s Office, Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552; send a facsimile transmission to (202) 906–6518; or send an e-mail to infocollection.comments@ots.treas.gov. NCUA: Jeryl Fish, Paperwork Clearance Officer, or Tracy Sumpter, Computer Information Assistant, (703) 518–6440, National Credit Union Administration, 1775 Duke Street, Alexandria, VA 22314–3428. Comments on the collection of information should be addressed to: Jeryl Fish, Paperwork Clearance Officer, National Credit Dated: May 28, 2008. By the Office of Thrift Supervision, Deborah Dakin, Senior Deputy Chief Counsel. By the National Credit Union Administration Board, on May 27, 2008. Mary F. Rupp, Secretary of the Board. [FR Doc. E8–12359 Filed 6–2–08; 8:45 am] BILLING CODE 6720–01–P (50%); 7535–01–P (50%) DEPARTMENT OF JUSTICE ebenthall on PRODPC60 with PROPOSALS SUMMARY: VerDate Aug<31>2005 14:17 Jun 02, 2008 Jkt 214001 28 CFR Part 100 [Docket No. FBI 119] CALEA Cost Recovery Regulations; Section 610 Review Federal Bureau of Investigation, Justice. ACTION: Notice of a section 610 review and request for comments. AGENCY: SUMMARY: This document summarizes the results of a review of the CALEA Cost Recovery Regulations, under the criteria contained in section 610 of the Regulatory Flexibility Act (RFA). DATES: Written comments must be postmarked, and electronic comments must be sent, on or before August 4, 2008. To ensure proper handling of comments, please reference ‘‘Docket No. FBI 119’’ on all written and electronic correspondence. Written comments being sent via regular mail should be sent to CALEA Implementation Unit, Technical Programs Section, Engineering Research Facility, Building 27958A, Quantico, Virginia. Comments may also be sent ADDRESSES: PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 electronically through http:// www.regulations.gov using the electronic comment form provided on that site. An electronic copy of this document is also available at the http://www.regulations.gov Web site. FBI will accept attachments to electronic comments in Microsoft word, WordPerfect, Adobe PDF, or Excel file formats only. FBI will not accept any file formats other than those specifically listed here. FOR FURTHER INFORMATION CONTACT: CALEA Implementation Unit, Technical Programs Section, Engineering Research Facility, Building 27958A, Quantico, Virginia, (703) 632–6897. SUPPLEMENTARY INFORMATION: I. Posting of Public Comments Please note that all comments received are considered part of the public record and made available for public inspection online at http:// www.regulations.gov and are maintained in the public docket regarding this matter. Such information includes personal identifying information (such as your name, address, etc.) voluntarily submitted by the commenter. If you want to submit personal identifying information (such as your name, address, etc.) as part of your comment, but do not want it to be posted online or made available in the public docket, you must include the phrase ‘‘PERSONAL IDENTIFYING INFORMATION’’ in the first paragraph of your comment. You must also place all the personal identifying information you do not want posted online or made available in the public docket in the first paragraph of your comment and identify what information you want redacted. If you want to submit confidential business information as part of your comment, but do not want it to be posted online or made available in the public docket, you must include the phrase ‘‘CONFIDENTIAL BUSINESS INFORMATION’’ in the first paragraph of your comment. You must also prominently identify confidential business information to be redacted within the comment. If a comment has so much confidential business information that it cannot be effectively redacted, all or part of that comment may not be posted online or made available in the public docket. Personal identifying information and confidential business information E:\FR\FM\03JNP1.SGM 03JNP1 Federal Register / Vol. 73, No. 107 / Tuesday, June 3, 2008 / Proposed Rules ebenthall on PRODPC60 with PROPOSALS identified and located as set forth above will be redacted and posted online and placed in the public docket file. If you wish to inspect the agency’s public docket file in person by appointment, please see the FOR FURTHER INFORMATION paragraph. II. Overview The Communications Assistance for Law Enforcement Act (CALEA), codified at 47 U.S.C. 1001–1010, is an important statute. CALEA was enacted in 1994 to preserve the Government’s ability, pursuant to court order or other lawful authorization, to intercept communications and related information involving advanced technologies, while protecting the privacy of communications and without impeding the introduction of new technologies, features, and services. CALEA requires telecommunications carriers to ensure that their telecommunications equipment is, among other things, capable of enabling the lawfully authorized interception of communications by the government. The law under CALEA treats telecommunications equipment deployed on or before January 1, 1995 differently from equipment deployed after 1995. With regard to pre-1995 telecommunications equipment, CALEA provides that the carrier may request the Attorney General to provide reimbursement for certain costs associated with modifications necessary to render the equipment compliant with CALEA’s surveillance assistance capability requirements. If the Attorney General chooses in his discretion not to make such reimbursement, then CALEA provides that the equipment shall be ‘‘considered to be in compliance’’ until it is modified, replaced or significantly upgraded. 47 U.S.C. 1008(d). Under certain limited circumstances, described further herein, the payment of costs associated with post-1995 equipment might also be authorized. See 47 U.S.C. 1008(b)(2)(A). The FBI, as the authorized delegate of the Attorney General under CALEA, adopted the CALEA Cost Recovery Regulations which are published at 28 CFR 100.9, et seq. The regulations were adopted by a final rule and published in the Federal Register on March 20, 1997 (62 FR 13324). The FBI uses these regulations in appropriate cases to govern the submission of claims (and accompanying information) by telecommunications carriers under CALEA, and, as is further required by CALEA Section 109(c), to allocate appropriated funds ‘‘in accordance with law enforcement priorities.’’ See 47 U.S.C. 1008(c). VerDate Aug<31>2005 14:17 Jun 02, 2008 Jkt 214001 The CALEA Cost Recovery Regulations are accounting and procedural rules. The Regulations specify certain requirements for submission of cost recovery claims under CALEA. The Cost Recovery Regulations specify in detail the types of costs that could be authorized for reimbursement (28 CFR 100.11), how such costs should be documented (§ 100.16), and the process by which a claim could be evaluated or audited (§ § 100.18, 100.19). In the FBI’s experience, many of the costs eligible for reimbursement were paid through ‘‘Nationwide Right-To-Use (RTU) Software License Agreements.’’ Through this program, administered by the FBI, several major telecommunications equipment manufacturers contracted to produce CALEA-compliant software upgrades and make them available to telecommunications carriers without additional charge. As discussed in this Notice, the FBI finds that the Cost Recovery Regulations probably do not have a ‘‘significant impact on a substantial number of small entities.’’ We have, however, undertaken the review herein pursuant to Section 610 to determine whether the Cost Recovery Regulations should be continued without change, amended, or rescinded (consistent with the objectives of CALEA) to minimize the impacts on small entities. The Cost Recovery provisions serve an important purpose by governing the submission of cost recovery claims under CALEA. Other methods of cost recovery have been utilized by the FBI under CALEA, as explained herein, but the procedures set forth in the Cost Recovery Regulations provide another valid method. The CALEA Cost Recovery Regulations have been established in such a way as to protect the carrier against incurring any additional costs that will not be reimbursed. For example, prior to signing an agreement, all costs that the government is willing to reimburse are documented and their estimated amounts are agreed to. The CALEA Cost Recovery Regulations have no analogue under State laws. There is no state equivalent to the requirements of CALEA. The FBI has not received any complaints or expressions of concern regarding the regulations from the public since the time the regulations were adopted by the FBI. The regulations do not conflict with or duplicate other Federal rules. The FBI therefore has determined that the CALEA Cost Recovery Regulations should be continued without change. PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 31649 III. Section 610 Review of the CALEA Cost Recovery Regulations A. Purpose of the Review This review is being conducted under section 610 of the Regulatory Flexibility Act (RFA). The DOJ published in the Federal Register (64 FR 54794–01; October 8, 1999), its plan to review certain regulations, including CALEA Cost Recovery Regulations, under criteria contained in section 610 of the RFA 5 U.S.C. 601–612. After consideration, we believe that the CALEA Cost Recovery Regulations set forth procedural requirements only and that they likely do not have a ‘‘significant economic impact upon a substantial number of small entities.’’ Nevertheless, the FBI has conducted a review pursuant to the criteria under section 610. The purpose of the review is to determine whether the CALEA Cost Recovery Regulations should be continued without change, amended, or rescinded (consistent with the objectives of CALEA) to minimize the impacts on small entities. In conducting this review, we considered the following factors: (1) The continued need for the regulations; (2) the nature of complaints or comments received from the public concerning the regulations; (3) the complexity of the regulations; (4) the extent to which the regulations overlap, duplicate, or conflict with other Federal rules, and, to the extent feasible, with State and local governmental rules; and (5) the length of time since the regulations have been evaluated or the degree to which technology, economic conditions, or other factors have changed in the area affected by the regulations. B. 1. Background Regarding CALEA The Communications Assistance for Law Enforcement Act (CALEA), codified at 47 U.S.C. 1001–1010, is an important statute and sets forth requirements that are critically important to federal, state and local law enforcement agencies. It was enacted in 1994 to preserve the Government’s ability, pursuant to court order or other lawful authorization, to intercept communications and related information involving advanced technologies, while protecting the privacy of communications and without impeding the introduction of new technologies, features, and services. CALEA generally requires telecommunications carriers to ensure that their telecommunications equipment is, among other things, capable of enabling the lawfully authorized interception of E:\FR\FM\03JNP1.SGM 03JNP1 31650 Federal Register / Vol. 73, No. 107 / Tuesday, June 3, 2008 / Proposed Rules ebenthall on PRODPC60 with PROPOSALS communications by the government. See 47 U.S.C. 1002(a)(1)–(4). CALEA divides telecommunications equipment generally into two classes. The first class includes equipment, facilities and services installed or deployed on or before January 1, 1995. The second class includes all other equipment, facilities and services installed or deployed after January 1, 1995. With regard to pre-1995 equipment, the law provides that the carrier may request the Attorney General to agree to pay reimbursement for certain costs associated with reasonable modifications necessary to ensure that it is compliant with CALEA’s surveillance assistance capability requirements set forth in 47 U.S.C. 1002(a)(1)–(4). If the Attorney General chooses in his discretion not to make such reimbursement, then CALEA further provides that the equipment shall be ‘‘considered to be in compliance’’ until it is modified, replaced or significantly upgraded. 47 U.S.C. 1008(d). This provision essentially accords ‘‘grand-father’’ protection to pre-1995 equipment. Post-1995 equipment is generally required to be fully compliant with CALEA without any such cost reimbursement. Under certain very limited circumstances, however, the reimbursement of such costs may be authorized if the Federal Communications Commission (FCC) makes a formal determination that compliance by a carrier is ‘‘not reasonably achievable.’’ See 47 U.S.C. 1008(b)(2)(A). The circumstances under which such determinations might be made by the FCC are quite limited. As the FCC has noted, this provision ‘‘imposes a high burden of proof for telecommunications carriers to demonstrate that they made reasonable efforts to develop CALEA solutions and that none of them are reasonably achievable.’’ See Communications Assistance for Law Enforcement Act and Broadband Access and Services, Second Report and Order, ET Docket No. 04– 295, RM–10865, 21 FCC Rcd 5360 ¶ 30 (2006). Thus, while the law provides that some cost reimbursement could potentially be authorized under CALEA for post-1995 equipment; such circumstances would likely be rare. B. 2. The CALEA Cost Recovery Regulations In order to control any payment of costs under the provisions described above, CALEA further directs the Attorney General to ‘‘establish regulations necessary to effectuate timely and cost-efficient payment to telecommunications carriers under this VerDate Aug<31>2005 14:17 Jun 02, 2008 Jkt 214001 title.’’ 47 U.S.C. 1008(e). CALEA contains specific directives for the Attorney General to follow in adopting these regulations. Sections 1008(e)(2)(A) through (C) of Title 47, United States Code provides: (2) CONTENTS OF REGULATIONS—The Attorney General, after consultation with the Commission, shall prescribe regulations for purposes of determining reasonable costs under this title. Such regulations shall seek to minimize the cost to the Federal Government and shall— (A) Permit recovery from the Federal Government of— (i) The direct costs of developing the modifications described in subsection (a), of providing the capabilities requested under subsection (b)(2), or of providing the capacities requested under section 104(e), but only to the extent that such costs have not been recovered from any other governmental or non-governmental entity; (ii) The costs of training personnel in the use of such capabilities or capacities; and (iii) The direct costs of deploying or installing such capabilities or capacities; (B) In the case of any modification that may be used for any purpose other than lawfully authorized electronic surveillance by a law enforcement agency of a government, permit recovery of only the incremental cost of making the modification suitable for such law enforcement purposes; and (C) Maintain the confidentiality of trade secrets. In addition, the regulations must include a requirement that claims for cost reimbursement will ‘‘contain[] or [be] accompanied by such information as the Attorney General may require. * * *’’ Id. § 1008(e)(3). The FBI Director is the authorized delegate of the Attorney General under CALEA. 28 CFR 0.85(o). The FBI therefore adopted the ‘‘CALEA Cost Recovery Regulations’’ as required by the statute. The Cost Recovery Regulations were adopted by a final rule and published in the Federal Register on March 20, 1997 at 62 FR13324, and are now codified at 28 CFR 100.9, et seq. The FBI relies on these regulations in appropriate cases to govern the submission of claims and accompanying information by telecommunications carriers. Information accompanying such claims is used by the FBI in part to decide whether payment would be appropriate, after considering the nature and amount of the claim, the benefit to law enforcement, and other factors. The FBI allocates any funds appropriated under CALEA ‘‘in accordance with law enforcement priorities’’ as required by CALEA. 47 U.S.C. 1008(c). The CALEA Cost Recovery Regulations, in general, consist of a set of special accounting rules pertaining to costs eligible for reimbursement under PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 CALEA. These Regulations were adopted pursuant to the requirements of CALEA, and meet the requirements set forth in CALEA, 47 U.S.C. 1008(e)(2)(A)–(C). Each section of the Cost Recovery Regulations addresses a different procedural requirement for carriers seeking to submit a valid claim for reimbursement, including: Definitions, Allowable Costs, Reasonable Costs, Directly Assignable Costs, Directly Allocable Costs, Disallowed Costs, Cost Estimate Submission, Request for Payment, Audit, Adjustments to Agreement Estimate, Confidentiality of Trade Secrets/Proprietary Information, and Alternative Dispute Resolution. As discussed above, CALEA provides for submissions of claims by carriers for cost reimbursement with regard to pre1995 equipment, and to a much more limited extent, certain post-1995 equipment under circumstances where the FCC makes a determination that compliance is ‘‘not reasonably achievable.’’ If a carrier chooses to request reimbursement of eligible costs under CALEA, then it must submit a claim in accordance with the Regulations. Of course, a carrier is only required to comply with the Cost Recovery Regulations to the extent that it chooses to seek cost reimbursement. If, for whatever reason, an eligible carrier chooses not to seek any reimbursement, but rather to comply with CALEA and recover any costs through other means, then such a carrier would not need to submit a claim under the Regulations. A carrier submitting a claim must demonstrate in accordance with the Cost Recovery Regulations that the expenses were incurred and that they are potential eligible for reimbursement, among other things. The FBI then uses the information provided to evaluate various factors in order to determine whether or not to exercise its discretion to pay the claim. In addition to payment of certain eligible costs in accordance with the Regulations as described above, the FBI is further authorized at its option to make certain payments of eligible costs under CALEA to telecommunications carriers and equipment manufacturers pursuant to ‘‘firm fixed-price agreements.’’ See Public Law 106–246, Div. B, Title II, July 13, 2000, 114 Stat. 542. The FBI made two agreements under the firm-fixed price option, after determining that the prices were reasonable, based on allowable costs, and supported by sufficient documentation. E:\FR\FM\03JNP1.SGM 03JNP1 Federal Register / Vol. 73, No. 107 / Tuesday, June 3, 2008 / Proposed Rules C. FBI’s Experience With the Cost Recovery Regulations ebenthall on PRODPC60 with PROPOSALS After CALEA was enacted in 1994, the FBI, over several years, successfully pursued a CALEA implementation strategy whereby it pursued agreements with major telecommunications equipment manufacturers to develop CALEA-compliant software upgrades for the majority of the types of telecommunications equipment already deployed throughout the United States. The agreements resulted in the manufacturing of the software upgrades, along with a ‘‘Nationwide Right-To-Use (RTU) Software License’’ granting any telecommunications carrier the right to install and use the software free of charge. These agreements ensured the ready availability of CALEA-compliant software upgrades for a significant amount of pre-1995 telecommunications equipment. The FBI made such agreements with AG Communications Systems, Lucent Technologies, Motorola, Nortel Networks, and Siemens AG. When considered in total, these agreements resulted in software upgrade solutions being made available for the vast majority (over 85 percent) of pre-1995 telecommunications equipment. Because the software is available free of charge, costs to telecommunications carriers were significantly reduced. Consequently, the need for carriers to seek reimbursement for costs associated with modifying pre1995 equipment to comply with CALEA, and also to comply with the Cost Recovery Regulations, was likewise significantly reduced. The agreements did not entirely cover all potentially reimbursable costs associated with each carrier’s compliance. In particular, some carriers incurred some costs in the installation of the free-of-charge software solutions on pre-1995 equipment. In the FBI’s experience to date, it has received and processed a total of 84 claims submitted in accordance with the CALEA Cost Recovery Regulations. Many of these claims were submitted seeking FBI approval for interim ‘‘progress payments’’ issued pursuant to the comprehensive RTU agreements described above. Only three claims were submitted by small entity carriers and these sought a total reimbursement of $24,000. D. Economic Impact of the Cost Recovery Regulations on Small Entities Section 610 of the RFA requires each agency to plan for the periodic review of any rules issued by the agency ‘‘which have or will have a significant economic impact upon a substantial VerDate Aug<31>2005 14:17 Jun 02, 2008 Jkt 214001 number of small entities.’’ 5 U.S.C. 610(a). The FBI estimates that over 5,000 telecommunications carrier entities are engaged in providing communications services and would be subject to CALEA’s requirements. We further estimate that about 90 percent of these companies would be considered small businesses under criteria established by the Small Business Administration (13 CFR 121.601). Both large and small carriers, if they were to submit claims for cost recovery under CALEA, must comply with the same Cost Recovery Regulations. After considering all of the available facts, and its experience since publication of the 1997 final CALEA Cost Recovery Regulations, the FBI finds that the Cost Recovery Regulations likely do not have a ‘‘significant economic impact upon a substantial number of small entities.’’ Several reasons support this conclusion. First, as described above, only a limited class of telecommunications equipment is even eligible for cost reimbursement under CALEA, and most of that equipment was installed before 1995. Since it has been over 10 years since CALEA’s enactment, a significant portion of this equipment has already been upgraded or replaced. Second, and more significantly, however, the FBI’s implementation strategy after CALEA’s enactment greatly reduced the costs associated with CALEA compliance with regard to pre-1995 equipment. By contracting with major equipment manufacturers to produce CALEAcompliant software upgrades available free-of-charge to carriers, the costs incurred through compliance with CALEA were greatly reduced for a majority of carriers. This action necessarily reduced the potential number of claims for cost recovery, and hence, the number of entities potentially required to comply with the Cost Recovery Regulations. The fact that this reduction occurred is evidenced by the relatively low number of claims (84) that the FBI has processed under CALEA to date, and very few claims (3) having been submitted by small entities to date. It is very likely therefore that the Regulations have no effect at all on a substantial number of small entities. Moreover, even in cases where a small entity does submit a claim, the Cost Recovery Regulations would not likely have any ‘‘significant economic impact’’ on that entity. As described above, the Regulations are procedural. They require an entity to support and document its monetary claim with records evidencing the accuracy of the claimed costs, and demonstrating that such costs are eligible for repayment PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 31651 under CALEA. In general, an entity providing this information would be required to reference and provide copies its own business records, and to summarize information that is readily available from its own business records. At most, it might be necessary for a carrier to seek the assistance of an employee or contractor with financial expertise in order to comply with the Regulations. This type financial accounting activity occasioned by compliance with the Cost Recovery Regulations is common in many businesses. This activity is very unlikely to create a ‘‘significant economic impact’’ on any small entity. As stated above however, notwithstanding this conclusion the FBI has proceeded to consider the factors specified for review in Section 610(b) of the RFA. D. 1. The Continued Need for for the Regulations As discussed herein, the purpose of the CALEA Cost Recovery Regulations is to implement the requirements of CALEA related to costs. See generally 47 U.S.C. 1008. CALEA specifically required the Attorney General to establish regulations setting forth the procedures that telecommunications carriers must follow in order to request and be considered for reimbursement for the costs of modifications to pre1995 equipment, and any other eligible costs. Id. at section 1008(e)(1). In addition, in order to facilitate CALEA’s implementation, Congress authorized $500 million to be appropriated to reimburse the telecommunications industry for certain eligible costs associated with CALEA compliance. The majority of the funds appropriated under CALEA, have been applied in the ‘‘Nationwide Right-ToUse (RTU) Software License’’ strategy described above, which covered a majority of the eligible of costs associated with upgrading pre-1995 telecommunications equipment in order to comply with CALEA’s requirements. As stated herein, these arrangements allowed the FBI paid for the development of CALEA software solutions for certain high priority switching platforms, and allowed all carriers to receive CALEA-compliant software at no charge. The arrangements did not, however, cover certain additional, and potentially reimbursable, costs associated with each carrier’s compliance. In particular, some carriers would still incur costs in the deployment and activation of the software solutions on pre-1995 equipment. The FBI continues to hold discussion with carriers to determine E:\FR\FM\03JNP1.SGM 03JNP1 31652 Federal Register / Vol. 73, No. 107 / Tuesday, June 3, 2008 / Proposed Rules ebenthall on PRODPC60 with PROPOSALS whether it is appropriate to consider agreeing to reimbursement of these or other costs, subject to the level of remaining appropriated funds and the limitations specified in CALEA. Despite some reductions in the level of appropriated funding, these discussions create a continuing need for the CALEA Cost Recovery Regulations. In addition, as is also described above, the FBI might in its discretion, and within the very limited circumstances of an FCC decision that compliance by a particular entity is ‘‘not reasonably achievable,’’ agree to pay certain eligible other costs. Payments in these situations might also require the entity to submit a claim in accordance with the Cost Recovery Regulations. For these reasons, there is a continued need for the Regulations. D. 2. The Nature of Complaints or Comments Received From the Public Concerning the Regulations The FBI has processed 84 claims for reimbursement to date. Each of these claims was paid, and required only minor adjustments to the amount claimed. No complaints have been received by the FBI regarding the Cost Recovery Regulations. In those few cases where the FBI required additional information beyond the information initially submitted by the entity with the claim, the FBI’s questions were answered satisfactorily and reimbursement was made. There have been no instances since the adoption of the Regulations where an entity has expressed to the FBI any difficulties in its compliance with the Regulations. In fact, in many cases, carriers expressed satisfaction that they had received proper reimbursement for the costs they had incurred. In addition, some carriers found the Regulations to be useful, because the process allowed the entity to proceed with CALEArelated modifications while after receiving assurance from the FBI that eligible costs would be reimbursed. The Regulations thus serve as a helpful tool that provide carriers and other entities with guidance as to how to verify the eligibility of compliance costs for reimbursement before such costs are actually incurred. Additionally, as described above, the FBI is also authorized to use an alternate procedure authorized in, whereby the FBI may agree to a to firm fixed-price arrangement with a carrier, manufacturer or other entity. See Public Law 106–246, Div. B, Title II, July 13, 2000, 114 Stat. 542. This alternative provides flexibility for cases where a firm-fixed price is appropriate, and has been used by the FBI in two arrangements. VerDate Aug<31>2005 14:17 Jun 02, 2008 Jkt 214001 The FBI also considered whether any changes that could be made to improve the cost-reimbursement process. Based on the flexibility inherent in the Regulations themselves and the firmfixed price strategy, and also on the success of the Regulations to date, the FBI determined that no changes are necessary. D. 3. The Complexity of the Regulations The CALEA Cost Recovery Regulations are roughly similar in complexity to other existing costaccounting regulations imposed by the Federal government, including for example, the Federal Acquisition Regulations. Based upon our review, the Regulations do not appear to be excessively complex. In the FBI’s experience, all of the entities submitting claims in accordance with the Regulations have successfully complied with minimal assistance from the FBI. D. 4. The Extent to Which the Regulations Overlap, Duplicate, or Conflict With Other Federal Rules and to the Extent Feasible With State and Local Government Rules No other Federal or State regulations overlap, duplicate or conflict with the CALEA Cost Recovery Regulations. This is because the FBI, as the authorized delegate of the Attorney General, is the only Federal or State agency with the authority and responsibility for implementing the cost recovery provisions of CALEA. As described above, there is no analogue to CALEA under State law. D. 5. The Length of Time Since the Regulations Have Been Evaluated or the Degree to Which Technology, Economic Conditions, or Other Factors Have Changed in the Area Affected by the Regulations The Regulations were evaluated in some respect in 2000, when it was determined that it would be beneficial to add flexibility by providing the government with the discretion to make firm fixed-price agreements in certain cases. The FBI has re-evaluated the Regulations pursuant to this inquiry. Technology, economic conditions, and other factors have changed in the telecommunications area affected by the Regulations since the time when they were adopted. For example, the wide deployment by carriers of new technologies, such as broadband internet access and Voice-Over-InternetProtocol, has led the FCC to adopt new rules for CALEA-compliance. See In the Matter of Communications Assistance for Law Enforcement Act and Broadband Access and Services, First PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 Report and Order and Further Notice of Proposed Rulemaking, 20 FCC Rcd 14989 (2005). These changes however have no impact on the requirements for the Cost Recovery Regulations, since the Regulations are based on accounting concepts which are essentially neutral as to technology, economic conditions, or other factors. For example, the application of the definition of ‘‘reasonable costs’’ found in 28 CFR 100.12(a) (‘‘A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person in the conduct of a competitive business.’’) would be the same without regard to the technology utilized by the entity incurring the cost. This is the case for all of the Cost Recovery Regulations. For these reasons the FBI has determined that no changes are necessary at this time to the Cost Recovery Regulations. E. Conclusion For the reasons discussed herein, the FBI concludes that the CALEA Cost Recovery Regulations do not have a significant economic impact upon a substantial number of small entities. The FBI further concludes after consideration of the criteria set forth in the Regulatory Flexibility Act, Section 610(b), Title 5, United States Code, that the Regulations should be maintained in their current status, without changes. Dated: April 10, 2008. Marybeth Paglino, Unit Chief, Federal Bureau of Investigation, CALEA Implementation Unit. [FR Doc. E8–12399 Filed 6–2–08; 8:45 am] BILLING CODE 4410–02–P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 165 [Docket No. USCG–2008–0121] RIN 1625–AA11 ‘‘McCormick & Baxter’’ Regulated Navigation Area, Willamette River, Portland, OR Coast Guard, DHS. Notice of proposed rulemaking. AGENCY: ACTION: SUMMARY: The Coast Guard is establishing a Regulated Navigation Area on the Willamette River, Portland Oregon Captain of the Port Zone. This action is necessary to preserve the integrity of the engineered pilot cap placed over contaminated sediments as part of an Environmental Protection E:\FR\FM\03JNP1.SGM 03JNP1

Agencies

[Federal Register Volume 73, Number 107 (Tuesday, June 3, 2008)]
[Proposed Rules]
[Pages 31648-31652]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-12399]


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DEPARTMENT OF JUSTICE

28 CFR Part 100

[Docket No. FBI 119]


CALEA Cost Recovery Regulations; Section 610 Review

AGENCY: Federal Bureau of Investigation, Justice.

ACTION: Notice of a section 610 review and request for comments.

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SUMMARY: This document summarizes the results of a review of the CALEA 
Cost Recovery Regulations, under the criteria contained in section 610 
of the Regulatory Flexibility Act (RFA).

DATES: Written comments must be postmarked, and electronic comments 
must be sent, on or before August 4, 2008.

ADDRESSES: To ensure proper handling of comments, please reference 
``Docket No. FBI 119'' on all written and electronic correspondence. 
Written comments being sent via regular mail should be sent to CALEA 
Implementation Unit, Technical Programs Section, Engineering Research 
Facility, Building 27958A, Quantico, Virginia. Comments may also be 
sent electronically through http://www.regulations.gov using the 
electronic comment form provided on that site. An electronic copy of 
this document is also available at the http://www.regulations.gov Web 
site. FBI will accept attachments to electronic comments in Microsoft 
word, WordPerfect, Adobe PDF, or Excel file formats only. FBI will not 
accept any file formats other than those specifically listed here.

FOR FURTHER INFORMATION CONTACT: CALEA Implementation Unit, Technical 
Programs Section, Engineering Research Facility, Building 27958A, 
Quantico, Virginia, (703) 632-6897.

SUPPLEMENTARY INFORMATION:

I. Posting of Public Comments

    Please note that all comments received are considered part of the 
public record and made available for public inspection online at http:/
/www.regulations.gov and are maintained in the public docket regarding 
this matter. Such information includes personal identifying information 
(such as your name, address, etc.) voluntarily submitted by the 
commenter. If you want to submit personal identifying information (such 
as your name, address, etc.) as part of your comment, but do not want 
it to be posted online or made available in the public docket, you must 
include the phrase ``PERSONAL IDENTIFYING INFORMATION'' in the first 
paragraph of your comment. You must also place all the personal 
identifying information you do not want posted online or made available 
in the public docket in the first paragraph of your comment and 
identify what information you want redacted.
    If you want to submit confidential business information as part of 
your comment, but do not want it to be posted online or made available 
in the public docket, you must include the phrase ``CONFIDENTIAL 
BUSINESS INFORMATION'' in the first paragraph of your comment. You must 
also prominently identify confidential business information to be 
redacted within the comment. If a comment has so much confidential 
business information that it cannot be effectively redacted, all or 
part of that comment may not be posted online or made available in the 
public docket.
    Personal identifying information and confidential business 
information

[[Page 31649]]

identified and located as set forth above will be redacted and posted 
online and placed in the public docket file. If you wish to inspect the 
agency's public docket file in person by appointment, please see the 
For Further Information paragraph.

II. Overview

    The Communications Assistance for Law Enforcement Act (CALEA), 
codified at 47 U.S.C. 1001-1010, is an important statute. CALEA was 
enacted in 1994 to preserve the Government's ability, pursuant to court 
order or other lawful authorization, to intercept communications and 
related information involving advanced technologies, while protecting 
the privacy of communications and without impeding the introduction of 
new technologies, features, and services. CALEA requires 
telecommunications carriers to ensure that their telecommunications 
equipment is, among other things, capable of enabling the lawfully 
authorized interception of communications by the government.
    The law under CALEA treats telecommunications equipment deployed on 
or before January 1, 1995 differently from equipment deployed after 
1995. With regard to pre-1995 telecommunications equipment, CALEA 
provides that the carrier may request the Attorney General to provide 
reimbursement for certain costs associated with modifications necessary 
to render the equipment compliant with CALEA's surveillance assistance 
capability requirements. If the Attorney General chooses in his 
discretion not to make such reimbursement, then CALEA provides that the 
equipment shall be ``considered to be in compliance'' until it is 
modified, replaced or significantly upgraded. 47 U.S.C. 1008(d). Under 
certain limited circumstances, described further herein, the payment of 
costs associated with post-1995 equipment might also be authorized. See 
47 U.S.C. 1008(b)(2)(A).
    The FBI, as the authorized delegate of the Attorney General under 
CALEA, adopted the CALEA Cost Recovery Regulations which are published 
at 28 CFR 100.9, et seq. The regulations were adopted by a final rule 
and published in the Federal Register on March 20, 1997 (62 FR 13324). 
The FBI uses these regulations in appropriate cases to govern the 
submission of claims (and accompanying information) by 
telecommunications carriers under CALEA, and, as is further required by 
CALEA Section 109(c), to allocate appropriated funds ``in accordance 
with law enforcement priorities.'' See 47 U.S.C. 1008(c).
    The CALEA Cost Recovery Regulations are accounting and procedural 
rules. The Regulations specify certain requirements for submission of 
cost recovery claims under CALEA. The Cost Recovery Regulations specify 
in detail the types of costs that could be authorized for reimbursement 
(28 CFR 100.11), how such costs should be documented (Sec.  100.16), 
and the process by which a claim could be evaluated or audited (Sec.  
Sec.  100.18, 100.19).
    In the FBI's experience, many of the costs eligible for 
reimbursement were paid through ``Nationwide Right-To-Use (RTU) 
Software License Agreements.'' Through this program, administered by 
the FBI, several major telecommunications equipment manufacturers 
contracted to produce CALEA-compliant software upgrades and make them 
available to telecommunications carriers without additional charge.
    As discussed in this Notice, the FBI finds that the Cost Recovery 
Regulations probably do not have a ``significant impact on a 
substantial number of small entities.'' We have, however, undertaken 
the review herein pursuant to Section 610 to determine whether the Cost 
Recovery Regulations should be continued without change, amended, or 
rescinded (consistent with the objectives of CALEA) to minimize the 
impacts on small entities. The Cost Recovery provisions serve an 
important purpose by governing the submission of cost recovery claims 
under CALEA. Other methods of cost recovery have been utilized by the 
FBI under CALEA, as explained herein, but the procedures set forth in 
the Cost Recovery Regulations provide another valid method.
    The CALEA Cost Recovery Regulations have been established in such a 
way as to protect the carrier against incurring any additional costs 
that will not be reimbursed. For example, prior to signing an 
agreement, all costs that the government is willing to reimburse are 
documented and their estimated amounts are agreed to. The CALEA Cost 
Recovery Regulations have no analogue under State laws. There is no 
state equivalent to the requirements of CALEA.
    The FBI has not received any complaints or expressions of concern 
regarding the regulations from the public since the time the 
regulations were adopted by the FBI. The regulations do not conflict 
with or duplicate other Federal rules. The FBI therefore has determined 
that the CALEA Cost Recovery Regulations should be continued without 
change.

III. Section 610 Review of the CALEA Cost Recovery Regulations

A. Purpose of the Review

    This review is being conducted under section 610 of the Regulatory 
Flexibility Act (RFA). The DOJ published in the Federal Register (64 FR 
54794-01; October 8, 1999), its plan to review certain regulations, 
including CALEA Cost Recovery Regulations, under criteria contained in 
section 610 of the RFA 5 U.S.C. 601-612. After consideration, we 
believe that the CALEA Cost Recovery Regulations set forth procedural 
requirements only and that they likely do not have a ``significant 
economic impact upon a substantial number of small entities.'' 
Nevertheless, the FBI has conducted a review pursuant to the criteria 
under section 610.
    The purpose of the review is to determine whether the CALEA Cost 
Recovery Regulations should be continued without change, amended, or 
rescinded (consistent with the objectives of CALEA) to minimize the 
impacts on small entities. In conducting this review, we considered the 
following factors: (1) The continued need for the regulations; (2) the 
nature of complaints or comments received from the public concerning 
the regulations; (3) the complexity of the regulations; (4) the extent 
to which the regulations overlap, duplicate, or conflict with other 
Federal rules, and, to the extent feasible, with State and local 
governmental rules; and (5) the length of time since the regulations 
have been evaluated or the degree to which technology, economic 
conditions, or other factors have changed in the area affected by the 
regulations.

B. 1. Background Regarding CALEA

    The Communications Assistance for Law Enforcement Act (CALEA), 
codified at 47 U.S.C. 1001-1010, is an important statute and sets forth 
requirements that are critically important to federal, state and local 
law enforcement agencies. It was enacted in 1994 to preserve the 
Government's ability, pursuant to court order or other lawful 
authorization, to intercept communications and related information 
involving advanced technologies, while protecting the privacy of 
communications and without impeding the introduction of new 
technologies, features, and services. CALEA generally requires 
telecommunications carriers to ensure that their telecommunications 
equipment is, among other things, capable of enabling the lawfully 
authorized interception of

[[Page 31650]]

communications by the government. See 47 U.S.C. 1002(a)(1)-(4).
    CALEA divides telecommunications equipment generally into two 
classes. The first class includes equipment, facilities and services 
installed or deployed on or before January 1, 1995. The second class 
includes all other equipment, facilities and services installed or 
deployed after January 1, 1995. With regard to pre-1995 equipment, the 
law provides that the carrier may request the Attorney General to agree 
to pay reimbursement for certain costs associated with reasonable 
modifications necessary to ensure that it is compliant with CALEA's 
surveillance assistance capability requirements set forth in 47 U.S.C. 
1002(a)(1)-(4). If the Attorney General chooses in his discretion not 
to make such reimbursement, then CALEA further provides that the 
equipment shall be ``considered to be in compliance'' until it is 
modified, replaced or significantly upgraded. 47 U.S.C. 1008(d). This 
provision essentially accords ``grand-father'' protection to pre-1995 
equipment.
    Post-1995 equipment is generally required to be fully compliant 
with CALEA without any such cost reimbursement. Under certain very 
limited circumstances, however, the reimbursement of such costs may be 
authorized if the Federal Communications Commission (FCC) makes a 
formal determination that compliance by a carrier is ``not reasonably 
achievable.'' See 47 U.S.C. 1008(b)(2)(A). The circumstances under 
which such determinations might be made by the FCC are quite limited. 
As the FCC has noted, this provision ``imposes a high burden of proof 
for telecommunications carriers to demonstrate that they made 
reasonable efforts to develop CALEA solutions and that none of them are 
reasonably achievable.'' See Communications Assistance for Law 
Enforcement Act and Broadband Access and Services, Second Report and 
Order, ET Docket No. 04-295, RM-10865, 21 FCC Rcd 5360 ] 30 (2006). 
Thus, while the law provides that some cost reimbursement could 
potentially be authorized under CALEA for post-1995 equipment; such 
circumstances would likely be rare.

B. 2. The CALEA Cost Recovery Regulations

    In order to control any payment of costs under the provisions 
described above, CALEA further directs the Attorney General to 
``establish regulations necessary to effectuate timely and cost-
efficient payment to telecommunications carriers under this title.'' 47 
U.S.C. 1008(e). CALEA contains specific directives for the Attorney 
General to follow in adopting these regulations. Sections 1008(e)(2)(A) 
through (C) of Title 47, United States Code provides:

    (2) CONTENTS OF REGULATIONS--The Attorney General, after 
consultation with the Commission, shall prescribe regulations for 
purposes of determining reasonable costs under this title. Such 
regulations shall seek to minimize the cost to the Federal 
Government and shall--
    (A) Permit recovery from the Federal Government of--
    (i) The direct costs of developing the modifications described 
in subsection (a), of providing the capabilities requested under 
subsection (b)(2), or of providing the capacities requested under 
section 104(e), but only to the extent that such costs have not been 
recovered from any other governmental or non-governmental entity;
    (ii) The costs of training personnel in the use of such 
capabilities or capacities; and
    (iii) The direct costs of deploying or installing such 
capabilities or capacities;
    (B) In the case of any modification that may be used for any 
purpose other than lawfully authorized electronic surveillance by a 
law enforcement agency of a government, permit recovery of only the 
incremental cost of making the modification suitable for such law 
enforcement purposes; and
    (C) Maintain the confidentiality of trade secrets.

    In addition, the regulations must include a requirement that claims 
for cost reimbursement will ``contain[] or [be] accompanied by such 
information as the Attorney General may require. * * *''  Id. Sec.  
1008(e)(3).
    The FBI Director is the authorized delegate of the Attorney General 
under CALEA. 28 CFR 0.85(o). The FBI therefore adopted the ``CALEA Cost 
Recovery Regulations'' as required by the statute. The Cost Recovery 
Regulations were adopted by a final rule and published in the Federal 
Register on March 20, 1997 at 62 FR13324, and are now codified at 28 
CFR 100.9, et seq. The FBI relies on these regulations in appropriate 
cases to govern the submission of claims and accompanying information 
by telecommunications carriers. Information accompanying such claims is 
used by the FBI in part to decide whether payment would be appropriate, 
after considering the nature and amount of the claim, the benefit to 
law enforcement, and other factors. The FBI allocates any funds 
appropriated under CALEA ``in accordance with law enforcement 
priorities'' as required by CALEA. 47 U.S.C. 1008(c).
    The CALEA Cost Recovery Regulations, in general, consist of a set 
of special accounting rules pertaining to costs eligible for 
reimbursement under CALEA. These Regulations were adopted pursuant to 
the requirements of CALEA, and meet the requirements set forth in 
CALEA, 47 U.S.C. 1008(e)(2)(A)-(C). Each section of the Cost Recovery 
Regulations addresses a different procedural requirement for carriers 
seeking to submit a valid claim for reimbursement, including: 
Definitions, Allowable Costs, Reasonable Costs, Directly Assignable 
Costs, Directly Allocable Costs, Disallowed Costs, Cost Estimate 
Submission, Request for Payment, Audit, Adjustments to Agreement 
Estimate, Confidentiality of Trade Secrets/Proprietary Information, and 
Alternative Dispute Resolution.
    As discussed above, CALEA provides for submissions of claims by 
carriers for cost reimbursement with regard to pre-1995 equipment, and 
to a much more limited extent, certain post-1995 equipment under 
circumstances where the FCC makes a determination that compliance is 
``not reasonably achievable.'' If a carrier chooses to request 
reimbursement of eligible costs under CALEA, then it must submit a 
claim in accordance with the Regulations. Of course, a carrier is only 
required to comply with the Cost Recovery Regulations to the extent 
that it chooses to seek cost reimbursement. If, for whatever reason, an 
eligible carrier chooses not to seek any reimbursement, but rather to 
comply with CALEA and recover any costs through other means, then such 
a carrier would not need to submit a claim under the Regulations. A 
carrier submitting a claim must demonstrate in accordance with the Cost 
Recovery Regulations that the expenses were incurred and that they are 
potential eligible for reimbursement, among other things. The FBI then 
uses the information provided to evaluate various factors in order to 
determine whether or not to exercise its discretion to pay the claim.
    In addition to payment of certain eligible costs in accordance with 
the Regulations as described above, the FBI is further authorized at 
its option to make certain payments of eligible costs under CALEA to 
telecommunications carriers and equipment manufacturers pursuant to 
``firm fixed-price agreements.'' See Public Law 106-246, Div. B, Title 
II, July 13, 2000, 114 Stat. 542. The FBI made two agreements under the 
firm-fixed price option, after determining that the prices were 
reasonable, based on allowable costs, and supported by sufficient 
documentation.

[[Page 31651]]

C. FBI's Experience With the Cost Recovery Regulations

    After CALEA was enacted in 1994, the FBI, over several years, 
successfully pursued a CALEA implementation strategy whereby it pursued 
agreements with major telecommunications equipment manufacturers to 
develop CALEA-compliant software upgrades for the majority of the types 
of telecommunications equipment already deployed throughout the United 
States. The agreements resulted in the manufacturing of the software 
upgrades, along with a ``Nationwide Right-To-Use (RTU) Software 
License'' granting any telecommunications carrier the right to install 
and use the software free of charge. These agreements ensured the ready 
availability of CALEA-compliant software upgrades for a significant 
amount of pre-1995 telecommunications equipment. The FBI made such 
agreements with AG Communications Systems, Lucent Technologies, 
Motorola, Nortel Networks, and Siemens AG. When considered in total, 
these agreements resulted in software upgrade solutions being made 
available for the vast majority (over 85 percent) of pre-1995 
telecommunications equipment. Because the software is available free of 
charge, costs to telecommunications carriers were significantly 
reduced. Consequently, the need for carriers to seek reimbursement for 
costs associated with modifying pre-1995 equipment to comply with 
CALEA, and also to comply with the Cost Recovery Regulations, was 
likewise significantly reduced. The agreements did not entirely cover 
all potentially reimbursable costs associated with each carrier's 
compliance. In particular, some carriers incurred some costs in the 
installation of the free-of-charge software solutions on pre-1995 
equipment.
    In the FBI's experience to date, it has received and processed a 
total of 84 claims submitted in accordance with the CALEA Cost Recovery 
Regulations. Many of these claims were submitted seeking FBI approval 
for interim ``progress payments'' issued pursuant to the comprehensive 
RTU agreements described above. Only three claims were submitted by 
small entity carriers and these sought a total reimbursement of 
$24,000.

D. Economic Impact of the Cost Recovery Regulations on Small Entities

    Section 610 of the RFA requires each agency to plan for the 
periodic review of any rules issued by the agency ``which have or will 
have a significant economic impact upon a substantial number of small 
entities.'' 5 U.S.C. 610(a). The FBI estimates that over 5,000 
telecommunications carrier entities are engaged in providing 
communications services and would be subject to CALEA's requirements. 
We further estimate that about 90 percent of these companies would be 
considered small businesses under criteria established by the Small 
Business Administration (13 CFR 121.601). Both large and small 
carriers, if they were to submit claims for cost recovery under CALEA, 
must comply with the same Cost Recovery Regulations.
    After considering all of the available facts, and its experience 
since publication of the 1997 final CALEA Cost Recovery Regulations, 
the FBI finds that the Cost Recovery Regulations likely do not have a 
``significant economic impact upon a substantial number of small 
entities.'' Several reasons support this conclusion.
    First, as described above, only a limited class of 
telecommunications equipment is even eligible for cost reimbursement 
under CALEA, and most of that equipment was installed before 1995. 
Since it has been over 10 years since CALEA's enactment, a significant 
portion of this equipment has already been upgraded or replaced. 
Second, and more significantly, however, the FBI's implementation 
strategy after CALEA's enactment greatly reduced the costs associated 
with CALEA compliance with regard to pre-1995 equipment. By contracting 
with major equipment manufacturers to produce CALEA-compliant software 
upgrades available free-of-charge to carriers, the costs incurred 
through compliance with CALEA were greatly reduced for a majority of 
carriers. This action necessarily reduced the potential number of 
claims for cost recovery, and hence, the number of entities potentially 
required to comply with the Cost Recovery Regulations. The fact that 
this reduction occurred is evidenced by the relatively low number of 
claims (84) that the FBI has processed under CALEA to date, and very 
few claims (3) having been submitted by small entities to date. It is 
very likely therefore that the Regulations have no effect at all on a 
substantial number of small entities.
    Moreover, even in cases where a small entity does submit a claim, 
the Cost Recovery Regulations would not likely have any ``significant 
economic impact'' on that entity. As described above, the Regulations 
are procedural. They require an entity to support and document its 
monetary claim with records evidencing the accuracy of the claimed 
costs, and demonstrating that such costs are eligible for repayment 
under CALEA. In general, an entity providing this information would be 
required to reference and provide copies its own business records, and 
to summarize information that is readily available from its own 
business records. At most, it might be necessary for a carrier to seek 
the assistance of an employee or contractor with financial expertise in 
order to comply with the Regulations. This type financial accounting 
activity occasioned by compliance with the Cost Recovery Regulations is 
common in many businesses. This activity is very unlikely to create a 
``significant economic impact'' on any small entity.
    As stated above however, notwithstanding this conclusion the FBI 
has proceeded to consider the factors specified for review in Section 
610(b) of the RFA.
D. 1. The Continued Need for for the Regulations
    As discussed herein, the purpose of the CALEA Cost Recovery 
Regulations is to implement the requirements of CALEA related to costs. 
See generally 47 U.S.C. 1008. CALEA specifically required the Attorney 
General to establish regulations setting forth the procedures that 
telecommunications carriers must follow in order to request and be 
considered for reimbursement for the costs of modifications to pre-1995 
equipment, and any other eligible costs. Id. at section 1008(e)(1). In 
addition, in order to facilitate CALEA's implementation, Congress 
authorized $500 million to be appropriated to reimburse the 
telecommunications industry for certain eligible costs associated with 
CALEA compliance.
    The majority of the funds appropriated under CALEA, have been 
applied in the ``Nationwide Right-To-Use (RTU) Software License'' 
strategy described above, which covered a majority of the eligible of 
costs associated with upgrading pre-1995 telecommunications equipment 
in order to comply with CALEA's requirements. As stated herein, these 
arrangements allowed the FBI paid for the development of CALEA software 
solutions for certain high priority switching platforms, and allowed 
all carriers to receive CALEA-compliant software at no charge. The 
arrangements did not, however, cover certain additional, and 
potentially reimbursable, costs associated with each carrier's 
compliance. In particular, some carriers would still incur costs in the 
deployment and activation of the software solutions on pre-1995 
equipment. The FBI continues to hold discussion with carriers to 
determine

[[Page 31652]]

whether it is appropriate to consider agreeing to reimbursement of 
these or other costs, subject to the level of remaining appropriated 
funds and the limitations specified in CALEA. Despite some reductions 
in the level of appropriated funding, these discussions create a 
continuing need for the CALEA Cost Recovery Regulations. In addition, 
as is also described above, the FBI might in its discretion, and within 
the very limited circumstances of an FCC decision that compliance by a 
particular entity is ``not reasonably achievable,'' agree to pay 
certain eligible other costs. Payments in these situations might also 
require the entity to submit a claim in accordance with the Cost 
Recovery Regulations. For these reasons, there is a continued need for 
the Regulations.
D. 2. The Nature of Complaints or Comments Received From the Public 
Concerning the Regulations
    The FBI has processed 84 claims for reimbursement to date. Each of 
these claims was paid, and required only minor adjustments to the 
amount claimed. No complaints have been received by the FBI regarding 
the Cost Recovery Regulations. In those few cases where the FBI 
required additional information beyond the information initially 
submitted by the entity with the claim, the FBI's questions were 
answered satisfactorily and reimbursement was made.
    There have been no instances since the adoption of the Regulations 
where an entity has expressed to the FBI any difficulties in its 
compliance with the Regulations. In fact, in many cases, carriers 
expressed satisfaction that they had received proper reimbursement for 
the costs they had incurred. In addition, some carriers found the 
Regulations to be useful, because the process allowed the entity to 
proceed with CALEA-related modifications while after receiving 
assurance from the FBI that eligible costs would be reimbursed. The 
Regulations thus serve as a helpful tool that provide carriers and 
other entities with guidance as to how to verify the eligibility of 
compliance costs for reimbursement before such costs are actually 
incurred.
    Additionally, as described above, the FBI is also authorized to use 
an alternate procedure authorized in, whereby the FBI may agree to a to 
firm fixed-price arrangement with a carrier, manufacturer or other 
entity. See Public Law 106-246, Div. B, Title II, July 13, 2000, 114 
Stat. 542. This alternative provides flexibility for cases where a 
firm-fixed price is appropriate, and has been used by the FBI in two 
arrangements.
    The FBI also considered whether any changes that could be made to 
improve the cost-reimbursement process. Based on the flexibility 
inherent in the Regulations themselves and the firm-fixed price 
strategy, and also on the success of the Regulations to date, the FBI 
determined that no changes are necessary.
D. 3. The Complexity of the Regulations
    The CALEA Cost Recovery Regulations are roughly similar in 
complexity to other existing cost-accounting regulations imposed by the 
Federal government, including for example, the Federal Acquisition 
Regulations. Based upon our review, the Regulations do not appear to be 
excessively complex. In the FBI's experience, all of the entities 
submitting claims in accordance with the Regulations have successfully 
complied with minimal assistance from the FBI.
D. 4. The Extent to Which the Regulations Overlap, Duplicate, or 
Conflict With Other Federal Rules and to the Extent Feasible With State 
and Local Government Rules
    No other Federal or State regulations overlap, duplicate or 
conflict with the CALEA Cost Recovery Regulations. This is because the 
FBI, as the authorized delegate of the Attorney General, is the only 
Federal or State agency with the authority and responsibility for 
implementing the cost recovery provisions of CALEA. As described above, 
there is no analogue to CALEA under State law.
D. 5. The Length of Time Since the Regulations Have Been Evaluated or 
the Degree to Which Technology, Economic Conditions, or Other Factors 
Have Changed in the Area Affected by the Regulations
    The Regulations were evaluated in some respect in 2000, when it was 
determined that it would be beneficial to add flexibility by providing 
the government with the discretion to make firm fixed-price agreements 
in certain cases. The FBI has re-evaluated the Regulations pursuant to 
this inquiry. Technology, economic conditions, and other factors have 
changed in the telecommunications area affected by the Regulations 
since the time when they were adopted. For example, the wide deployment 
by carriers of new technologies, such as broadband internet access and 
Voice-Over-Internet-Protocol, has led the FCC to adopt new rules for 
CALEA-compliance. See In the Matter of Communications Assistance for 
Law Enforcement Act and Broadband Access and Services, First Report and 
Order and Further Notice of Proposed Rulemaking, 20 FCC Rcd 14989 
(2005). These changes however have no impact on the requirements for 
the Cost Recovery Regulations, since the Regulations are based on 
accounting concepts which are essentially neutral as to technology, 
economic conditions, or other factors. For example, the application of 
the definition of ``reasonable costs'' found in 28 CFR 100.12(a) (``A 
cost is reasonable if, in its nature and amount, it does not exceed 
that which would be incurred by a prudent person in the conduct of a 
competitive business.'') would be the same without regard to the 
technology utilized by the entity incurring the cost. This is the case 
for all of the Cost Recovery Regulations. For these reasons the FBI has 
determined that no changes are necessary at this time to the Cost 
Recovery Regulations.

E. Conclusion

    For the reasons discussed herein, the FBI concludes that the CALEA 
Cost Recovery Regulations do not have a significant economic impact 
upon a substantial number of small entities. The FBI further concludes 
after consideration of the criteria set forth in the Regulatory 
Flexibility Act, Section 610(b), Title 5, United States Code, that the 
Regulations should be maintained in their current status, without 
changes.

    Dated: April 10, 2008.
Marybeth Paglino,
Unit Chief, Federal Bureau of Investigation, CALEA Implementation Unit.
[FR Doc. E8-12399 Filed 6-2-08; 8:45 am]
BILLING CODE 4410-02-P