Change in Technology May Curtail Wiretaps : Surveillance: Agents will have difficulty isolating the one conversation they are authorized to intercept.

At a time when all forms of legal telephone surveillance are at record highs, FBI agents and local police are about to lose their ability to wiretap anyone.

Most phone companies are switching to digital systems, which transform the way a conversation is transmitted across wires or fiber-optic cables--just as the switch from rotary to touch-tone phones changed the way numbers are dialed.

On a digital system, a conversation is broken down into a series of electronic 0s and 1s, compressed and channeled into an incomprehensible buzz of telephone, facsimile, video or computer signals. Scrambling devices or coding techniques--called encryption--can add more confusion.

Intercepting a conversation on a conventional telephone line takes no more than a pair of alligator clips and a handset because the signal has not been converted or broken up, and is moving along a single wire. It is so easy that a child can do it--and many have.

FBI officials say the new technology will make it harder for agents conducting a wiretap to single out the one conversation they are authorized to intercept. Even if they can fish it out of the digital stream, new, private encryption techniques may prevent them from understanding what they intercepted.

“That is what is going to happen in the future,” said James K. Kallstrom, FBI chief of investigative technology. “This is a problem being wrestled with by law enforcement and intelligence agencies in all countries in the world.”

For example, the Pacific Telesis Group, which owns Pacific Bell, plans to finish modernizing its 800 central switching offices in California with the newest digital technology by 1997. This effectively will lock law enforcement agents out of many phone calls on the West Coast. Other companies across the country also are installing digital systems.

“If nothing is done, they are going to have a problem nationwide,” said Ron Pete, PacTel’s director of federal legislative analysis.

In the meantime, court orders for intercepts--which authorize police to tap telephones, pagers, cellular phones and electronic mail--last year rose 7%, to 919 orders involving more than 100,000 people across the country. Police also used electronic devices that record or trace the numbers of incoming and outgoing calls--without monitoring the conversations--more than 4,000 times last year, records show.

Pacific Telesis says it handled 891 court-ordered wiretaps between January, 1991, and April, 1992, up about 5% from the previous reporting period.

In 1992, the company also complied with more than 23,000 requests or subpoenas for customer phone records, up from 19,300 the year before.

The official figures do not reflect the true scope of the surveillance.

For example, a single court-ordered wiretap authorized by a California federal judge last year covered 97 people and more than 37,000 conversations, records show. Another court-authorized wiretap resulted in agents monitoring 764 people and more than 19,600 conversations. Each tap lasted 60 days.

Advanced phone technology and law enforcement have been on a collision course since 1985, when cellular phones came into fashion, FBI officials said. The central switching systems are designed in such a way that agents have a harder time carrying out wiretaps.

To tap a single cellular phone in New York City last year, agents spent more than $500,000.

“Many court orders for wiretaps could not be complied with,” said the FBI’s Kallstrom. “That was the case in New York City and across the United States.”

Recently, FBI officials have been pushing telecommunications and computer companies to guarantee that any system they build can be monitored by the government, no matter what new technology is involved.

The FBI has been trying to persuade the companies to stop modernizing the phone network until the digital lines can be revamped so agents can conduct court-ordered wiretaps. The agency also wanted to approve any future modernization plans, PacTel officials said.

To make sure they can understand the contents of the conversations they intercept, FBI officials also are urging adoption of the Skipjack code and the Clipper Chip, which would allow them to decipher any coded phone conversation.

Last year the FBI tried unsuccessfully to persuade Congress to require that companies build wiretap capability into their systems at their own expense. PacTel officials estimated that it would cost the seven regional phone companies about $75 million each.

“And there are about another 1,200 phone companies in the United States who would have to do the same thing,” Pete said. “It could run (a total of) $1 billion.”