TrendTrend: U.S. domestic spying offers opportunities for niche players

The question of whether President Bush’s use of the National Security Agency (NSA) for domestic spying (what the administration now calls “terror surveillance”) is allowed by the Constitution will be debated for a long time yet, but there is no need to wait for the answer to the question of whether there is money to be made in this domestic spying. The answer is “Yes.” Even before the NSA’s foray into domestic eavesdropping, it was becoming clear that phone and Internet companies would need help meeting the steady increase in law-enforcement requests for customer calling and e-mail information.

Michael Warren, a former FBI agent, formed a company that won business from U.S. telecom, cable, and ISPs, and sold it last year for an undisclosed amount. Warren now works for Sterling, Virginia-based NeuStar, which bought his company. “There’s been a significant increase in demand and pressure on companies for providing records, tracing calls and wiretapping,” Warren told the Wall Street Journal. “That’s led to a great deal of strain on carriers.”

Setting aside the warrant-less NSA wire tapping, there has been a dramatic increase in recent years in the number of court-approved wiretaps. The number of telephone wiretaps from 2000 to 2004 authorized by state and federal judges increased by 44 percent to 1,710. This has led smaller telecom companies to seek help from outsiders in order to comply with the court-ordered subpoenas. An industry has been created.

Mountain View, California-based VeriSign, which manages the Internet’s .com and .net domain-name suffixes, launched its assistance business after the 9/11 terrorist attacks. San Jose, California-based SS8 Networks began as an Internet equipment company in 1999, but in 2001 changed focus and now helps other companies meet law-enforcement requests. Phone companies need that help. Monroe, Louisiana-based CenturyTel, a fixed-line phone company and ISP, is serving 2.5 million customers, and last year it received about 1,500 subpoenas and court orders for customer data last year. Stacey Goff, CenturyTel’s legal counsel, says: “A few years ago it was drugs and divorces, that was it. Now, we’re getting requests on more-sensitive matters.”

The companies in the sector sell software which simplifies the process of reviewing tens of thousands of phone-call records, but some third parties also provide assistance by setting up in-house compliance procedures, interacting with law-enforcement agencies, and providing access to networks for wiretaps.

The NSA eavesdropping has mostly involved the larger carriers with international lines. These larger companies are required under the 1994 Communications Assistance for Law Enforcement Act to install equipment to help law enforcement keep up with advances in technology. The 2001 Patriot Act now mandates the ISPs now must also comply with the 1994 act.

-read more in Christopher Rhoads’ Wall Street Journal report; and see NeuStar Web site