would like to address myself to them, with the permission of the Chair.

Mr. KASTENMEIER. You may proceed, sir.

Mr. CAMING. First, I think as I mentioned in my statement, we have to look at this in historical perspective so that you can appreciate the problems that the telephone industry as a whole, including the Bell System, of course, faced.

First, the advent of the black and blue boxes in the early sixties, and I think the first one was found in the State of Washington at the latter part of 1961, created a problem that we had never faced before, one that jeopardized the very integrity of our billing system and our ability to serve this Nation, and it was the fact that it could, by seizing the line in various ways, circumvent the billing equipment so that the calls would not be chargeable, seize and control indefinitely lines and clog our facilities accordingly.

At that time we recognized-and we can say this more confidently in public in retrospect-that we had no immediate defense. This was a breakthrough almost equivalent to the advent of gunpowder, where the hordes of Genghis Khan faced problems of a new sort, or the advent of the cannon.

To us the problem required an immediate course of action if the public interest was to be protected, because it was feared that if these devices, which I had shown, and I might just, so Mr. Drinan could be aboard with the others, sir, with the indulgence of the Chair, since I may allude to it again, just show you.

This is a Marlboro cigarette pack which I had mentioned earlier, and this is one of the devices, and they are even smaller than this. It has on the back-and I did not mention to the committee earlier, an ability to transmit by placing it against the mouthpiece so that you can carry this in your in the pocket. It is completely concealable, and there are smaller ones. Then you take it out anywhere, any phone in the world. You can be in Hong Kong, London, it will work just as well, or in the United States, and usually, of course, our references are wholly to the United States. The others were an unlearned statement which my learned colleague, Mr. Mack, may correct.

Can you use these outside the United States?

Mr. MACK. No, technically you cannot. But the technique can be worked outside of the United States, but you need different sequences and frequencies.

Mr. CAMING. But it is similar in principle?

Mr. MACK. In principle, yes.

Mr. CAMING. Thank you.

The point is you can just press this and that is all it needs to seize the line because that specific tone is the tone on our equipment which indicates to it the line is under the dominion of the operator, say, at the toll center, and she is going to send a long-distance call through by key pulsing, and then all you do is pulse these through and it proceeds. Mr. KASTEN MEIER. Mr. Caming, I would like to go into the question of losses.

Mr. CAMING. Surely.

Mr. KASTEN MEIER. I say this because at least one person has asserted, that in the Southwestern Bell Telephone Co. case, the cost of security personnel exceeded any losses attributable to the blue box or

anything else in the region. And so the question is, what provable losses do you have.

I notice you have 270 cases, apparently, you have won, or that have been pursued, prosecuted, according to your testimony. What in fact is the loss over all of these years due to these mechanisms?

Mr. CAMING. Sure, I will go into that, and then we will revert back to what we started on before I diverted myself, to produce the box for Mr. Drinan.

We estimate our provable annual losses, Bell System wide-and it is difficult to segment them by a particular location in the order of $1 million. But let me emphasize to you very graphically how understated that figure is. First, we, because of our concern for privacy of communications, only record a limited number of calls. For example, there was a gentleman who bore the sobriquet of Captain Crunch, who for years had been making a great many calls from all over. He was finally tracked down through various methods and necessary evidence gathered. Now we only gathered a few calls in his case, and in those instances, the calls were perhaps six in number for which he was indicted, yet we know definitely, and I think this is the norm, that probably thousands of calls were placed.

To give you another order of magnitude, we understand the market price today because we have been offered these devices in the underworld, is close to between $2,500 and $3,500 for a device you can make for $25 to $50, and if you mass-produced it you could probably make it for less.

This indicates the importance attached to it and the use placed of it. We have found businessmen have been constantly using this to have their salesmen call in or considering using it for that purpose, yet when we prosecute, in order to minimize any intrusion on privacy of communications, we only take a few calls. And that is why I say that even despite the constant threat-and we do prosecute every case that we can, because we have found unless we do that there is no deterrent of effective measures despite that, it is still at a flood level.

But our annual losses, to respond again, are in the order of, we estimate, $1 million, and it would be 10 or 20 times that at the least. Mr. KASTEN MEIER. You say you prosecute every case you can. To date it is your testimony you have some 270 convictions, is that correct? Mr. CAMING. Yes.

Now, it must be borne in mind, just to clarify that, that the policy of prosecution was not initiated for a period of time. We tried through the preliminary equipment, scanning equipment I was adverting to earlier, to gain a measure of the magnitude of the fraud, and so we have not really—we did not initiate during the 1960's any but several landmark cases such as the Hanna case, the Nolan case, the Beckley case, D'Amato, and the like, and it was in the early 1970's.

Now, detection second, is a very difficult process because of the portability, because it may be used from a number of sources, although we have a large number of methods that we employ and we are getting increasingly effective. It is still a problem, and as I say, 270. There have been over 1,000 boxes picked up. That might be another statistic.

And then there are other devices. There is the cheese box, which is often used with a black box to interconnect two telephones. There is the so-called purple box or the red box which reflects the action of a

57-282-76-pt. 1-15

blue box by having the tones rather than the buttons, so that you just can on a tape bring out the tone.

Mr. KASTEN MEIER. Mr. Caming, let me return to the Post-Dispatch report. I would like to deal with the 30 million telephone calls. These were randomly recorded by electronic device, and of those, apparently you had selected out 1.5 million of the 30 million which were randomly recorded or screened in some sense, is that correct?

Mr. CAMING. Yes. If I may, perhaps if I gave it to you in sequence now it would be helpful. The answer to that is "yes." As I said, we had the problem burst upon the scene, but we did use some of the finest minds that Bell Laboratories could muster on a task force to attempt to obtain a first generation detector, something that could scan and give us some idea of the magnitude of the problem because one of the questions was do we have to redesign the entire nationwide telephone network to put in a new signaling system, the costs of which would vary in estimates from a quarter of a billion to a billion dollars, and many,

many years.

The second question was, in order to make an intelligent determination and to be able to justify it in the public interest, we had to have statistics, and therefore we devised six experimental units which were placed at representative cities. Two were placed in Los Angeles because of not only activity in that area, but also different signaling arrangements, and one was placed in Miami, two were originally placed in New York, one shortly thereafter moving to Newark, N.J., and one was placed in Detroit, and then about January 1967 moved to St. Louis. Now, these were put in place not until about the end of 1964, and that was still extremely speedy. It was not a novel breakthrough. We used a great deal of standard equipment.

Now, the purposes were first to gather statistics of toll fraud, and it was decided that the prosecution should not be undertaken except in a few salient cases because it could alert the users and distort the statistics that were the basis of the decision whether or not to modify the network at a cost that would have to be borne ultimately by the ratepayers, and with no assurance at all that if we did modify it, that that in turn would not be overcome, too, by a different signaling system.

Second, we felt that we could obtain some ideas of the number who were committing it in these particular representative systems, only outgoing direct distance dialed calls going through the switching machines were scanned. Now, the way they were scanned is very simple to understand because-I have a fair grasp of it. There were in each of these locations a hundred trunks selected out of a large number, and the equipment which was logic equipment, would select a call. There were five temporary scanners which would pick up a call and look at it with this logic equipment and determine whether or not it had the proper direct current supervisory signals, whether, for example, there was return answer supervision.

When we have a call, we have a supervisory signal that goes to and activates the billing equipment which usually we call return answer supervision. That starts the billing process and legitimatizes the call, and if you find voice conversation without any return answer signal, and that is what it was looking for, it is an indication, a strong indica

tion of a possible black box that the caller called in; and if, for example, you heard the tell-tone, blue box tone-and remember, this is a first generation development-this was a very strong indication of illegality because that tone has no normal presence upon our network at that point.

Now, all this equipment did was look at these calls. This equipment at these locations was not within the dominion, control, or ability to penetrate, of the local company. It was in locked cabinets. It was all automatically done. I know at least in one or two locations that I visited at the time, it was actually behind fences within the plant central office. So you would have to really penetrate that, too.

And the equipment then would determine whether there was a preliminary indication of illegality, either the lack of voice or the like.

Then we had another problem, particularly on black box calls, which were most prevalent at first, and were very easily concealable at the called end and as I say, these can be made for less than a dollar apiece without really any great mass-production development. We would then be able to discern the extent of the problem in this regard.

Now, what happened when there was a preliminary indication, and remember, we had to make a decision, how long do we observe, in order to determine preliminary indications, and we tried to do the minimum possible. For example, with a black box call it was, I think, 90 seconds and then reduced to 60 seconds by the end of 1966, early 1967. In a blue box call it was first complete because of other reasons I will advert to, and then reduced to 5 minutes.

Now, these calls-and I must indicate to you, were calls the signals of which indicated abnormalities that would only be present normally if there was a plant irregularity or a preliminary indication of illegality. We were not looking at the contents of the calls to try to establish anything else at that stage.

These calls were then selected by the equipment randomly, the scanning was random, but it was specific selection on designated logic principles of the particular call, and only then would they be transferred over to a four-track recorder.

Now, this recorder was called a master recorder. It had a four-hour capacity. All it did on the first track was dub in the 90 seconds or so of recording of the call. That was taken and scanned and then later it would be fitted together in the analysis bureau. A second track would take the rest of the call if there was any, on a live basis, both the voice and also the tones of the conversation, and any signals.

The third took care of the so-called supervisory signals, such as direct current, the billing signals, and the like, and the fourth was a time announcement machine that gave you the time in which the call took place.

Now, what was done with this information? Whenever the reel was completed at these five locations, remembering there are six units, no more than five locations at any one time, and that is all, it was then accessed after an audible signal, and the reel removed by one of two local plant supervisors, who were very carefully selected, and they were the only two that had access from the local company, merely for the purpose of putting it in a container and sending it by registered mail to an analysis bureau we established in New York City under the supervi

sion of A.T. & T. to insure that the maximum privacy would be given to this, so that no one in the local companies even had access to these random calls which were outgoing DDD calls.

At the bureau there was first a very small group working on it. They were in a single room closely supervised, working together, using equipment such as some of our traffic service position and other computer equpiment, to analyze these calls. There was a preliminary analysis made first before there was even a further analysis, to weed out any except those that gave very strong indications [that] of illegality; if there was any doubt about illegality, the calls were immediately destroyed. Our tests were so vigorous that we winnowed out almost the great bulk of it.

Remember, no one has seen these at all.

Mr. KASTENMEIER. You had 1.5 million of these transferred to New York?

Mr. CAMING. Exactly, 1.5 to 1.8 million, somewhere in that order. I am not sure of the exact figures now, but in that order.

They were then the ones that were examined. They came from these five locations, only. They had not been seen or not been heard by any human ear until they reached the analysis bureau.

Now, at the analysis bureau they were subject to rigorous tests to attempt to determine whether they were illegal in fact.

Mr. KASTEN MEIER. How many of these were illegal in fact?

Mr. CAMING. Well, let us put it this way. It is hard to determine under our regular standards whether or not there may have been more calls with indications of illegality, but we had at least 25,000 cases of known illegality, and we projected for example in 1966, which was the early stage when toll fraud was just getting underway, that we had on the order of 350,000 calls nationwide.

Mr. KASTENMEIER. The 25,000 calls you referred to, were they directly attributable to the analysis of the 1.5 to 1.8 million?

Mr. CAMING. Yes, they were, but these were only preliminary indications of illegality. Now, more than 60 percent of those were almost completely winnowed out at once because we had only recorded very limitedly on the black box, that is, voice without any return answer supervisory signal.

Now, there are many other types of telephone calls where there is no real privacy problem as far as overhearing the customer-to-customer conversation. That fell within that group, and let me name some of them because I think it is a very valuable insight to assure you that this type of equipment in no sense constituted a threat to privacy.

The calls were intercept calls, calls to intercept, calls to a vacant number where they would be routed, and calls where you had what we would call free line service. If you called a plant repair office to report your telephone needed some adjustment, or calls to a business office bureau to order an extension telephone.

I have a list of them, and just to be complete, I will just advert to that if I may. And then the other would be in the area of service irregularities or plant trouble. Now we estimate of that group, for example, only something like the minute fraction of 0.006 percent were really in the service irregularity group. Would that be generally correct? Mr. MACK. Certainly less than a half percent.