Setting aside the legality question for the moment, I should first point out that's its perfectly normal. Almost all organizations use "packet-sniffers" to help manage their network. Almost all organizations have "intrusion detection systems" (IDS) that monitor network traffic looking for hacker attacks. Learning how to use packet-sniffers like "Wireshark" is part of every network engineer's training.
Indeed, while the news articles describes this as some special and nefarious plot by Napolitano, the reality is that it's probably just an upgrade of packet-sniffer systems that already exist.
Ironical, much packet-sniffing practice comes from UC Berkele. It's famous for having created "BPF", the eponymously named "Berkeley Packet Filter", a standard for packet-sniffing included in most computers. Whatever packet-sniffing system Berkeley purchased to eavesdrop on its networks is almost certainly including Berkeley's own BPF software.
Now for the legal question. Even if everyone is doing it, it doesn't necessarily mean it's legal. But the wiretap law does appear to contain an exception for packet-sniffing. Section 18 U.S. Code § 2511 (2) (a) (i) says:
It shall not be unlawful ... to intercept ... while engaged in any activity which is a necessary incident to the rendition of his service or to the protection of the rights or property of the provider of that service
In other words, you can wiretap your own network in order to keep it running and protect it against hackers. There is a lengthy academic paper that discusses this in more details: http://spot.colorado.edu/~sicker/publications/issues.pdf
At least, that's the state of things before OmniCISA ("Cybersecurity Act of 2015"). Section 104 (a) (1) says:
Notwithstanding any other provision of law, a private entity may, for cybersecurity purposes, monitor ... an information system of such private entity;
In other words, regardless of other laws, you may monitor your computers (including the network) for the purpose of cybersecurity.
As I read OmniCISA, I see that the intent is just this, to clarify that what organizations are already doing is in fact legal. When I read the text of the bill, and translate legalese into technology, I see that what it's really talking about is just standard practice of monitoring log files and operating IDSs, IPSs, and firewalls. It also describes the standard practice of outsourcing security operations to a managed provider (the terms we would use, not how the bill described it). Much of what we've been doing is ambiguous under the law, since it's confusing as heck, so OmniCISA clarifies this.
Thus, the argument about whether packet-sniffing was legal before is now moot: according to OmniCISA, you can now packet-sniff your networks for cybersecurity, such as using IDSs.
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