Tennessee resident K. C. "Khan" Smith owes the internet
service provider EarthLink $24 million. According to the
CNN, in August 2001 he was slapped with a lawsuit
accusing him of violating federal and state Racketeering
Influenced and Corrupt Organizations (RICO) statutes, the
federal Computer Fraud and Abuse Act of 1984, the
federal Electronic Communications Privacy Act of 1986
and numerous other state laws. On July 19, 2002 - having
failed to appear in court - the judge ruled against him. Mr.
Smith is a spammer.
Brightmail, a vendor of e-mail filters and anti-spam
applications warned that close to 5 million spam "attacks"
or "bursts" occurred in June 2002 and that spam has
mushroomed 450 percent since June 2001. This pace
continued unabated well into the beginning of 2004 when
the introduction of spam filters began to take effect. PC
World concurs.
Between one half and three quarters of all e-mail
messages are spam or UCE (Unsolicited Commercial
Email) - unsolicited and intrusive commercial ads, mostly
concerned with sex, scams, get rich quick schemes,
financial services and products, and health articles of
dubious provenance. The messages are sent from spoofed
or fake e-mail addresses. Some spammers hack into
unsecured servers - mainly in China and Korea - to relay
their missives anonymously.
Starting in 2003, malicious hackers began using spam to
install malware - such as viruses, adware, spyware, and
Trojans - on the unprotected personal computers of less
savvy users. They thus transform these computers into
"zombies", organize them into spam-spewing "bots"
(networks), and sell access to them to criminals on
penumbral boards and forums all over the Net.
Spam is an industry. Mass e-mailers maintain lists of e-
mail addresses, often "harvested" by spamware bots -
specialized computer applications - from Web sites. These
lists are rented out or sold to marketers who use bulk mail
services. They come cheap - c. $100 for 10 million
addresses. Bulk mailers provide servers and bandwidth,
charging c. $300 per million messages sent.
As spam recipients become more inured, ISPs less
tolerant, and both more litigious - spammers multiply their
efforts in order to maintain the same response rate. Spam
works. It is not universally unwanted - which makes it
tricky to outlaw. It elicits between 0.1 and 1 percent in
positive follow ups, depending on the message. Many
messages now include HTML, JavaScript, and ActiveX
coding and thus resemble (or actually contain) viruses and
Trojans.
Jupiter Media Matrix predicted in 2001 that the number of
spam messages annually received by a typical Internet
user will double to 1400 and spending on legitimate e-
mail marketing will reach $9.4 billion by 2006 - compared
to $1 billion in 2001. Forrester Research pegs the number
at $4.8 billion in 2003.
More than 2.3-5 billion spam messages are sent daily.
eMarketer puts the figures a lot lower at 76 billion
messages in 2002. By 2006, daily spam output will soar to
c. 15 billion missives, says Radicati Group. Jupiter
projects a more modest 268 billion annual messages this
year (2005). An average communication costs the
spammer 0.00032 cents.
PC World quotes the European Union as pegging the
bandwidth costs of spam worldwide in 2002 at $8-10
billion annually. Other damages include server crashes,
time spent purging unwanted messages, lower
productivity, aggravation, and increased cost of Internet
access.
Inevitably, the spam industry gave rise to an anti-spam
industry. According to a Radicati Group report titled
"Anti-virus, anti-spam, and content filtering market trends
2002-2006", anti-spam revenues were projected to exceed
$88 million in 2002 - and more than double by 2006. List
blockers, report and complaint generators, advocacy
groups, registers of known spammers, and spam filters all
proliferate. The Wall Street Journal reported in its June
25, 2002 issue about a resurgence of anti-spam startups
financed by eager venture capital.
ISPs are bent on preventing abuse - reported by victims -
by expunging the accounts of spammers. But the latter
simply switch ISPs or sign on with free services like
Hotmail and Yahoo! Barriers to entry are getting lower by
the day as the costs of hardware, software, and
communications plummet.
The use of e-mail and broadband connections by the
general population is spreading. Hundreds of thousands of
technologically-savvy operators have joined the market in
the last five years, as the dotcom bubble burst. Still, Steve
Linford of the UK-based Spamhaus.org insists that most
spam emanates from c. 80 large operators.
Now, according to Jupiter Media, ISPs and portals are
poised to begin to charge advertisers in a tier-based
system, replete with premium services. Writing back in
1998, Bill Gates described a solution also espoused by
Esther Dyson, chair of the Electronic Frontier Foundation:
"As I first described in my book 'The Road Ahead' in
1995, I expect that eventually you'll be paid to read
unsolicited e-mail. You'll tell your e-mail program to
discard all unsolicited messages that don't offer an
amount of money that you'll choose. If you open a paid
message and discover it's from a long-lost friend or
somebody else who has a legitimate reason to contact
you, you'll be able to cancel the payment. Otherwise,
you'll be paid for your time".
Subscribers may not be appreciative of the joint ventures
between gatekeepers and inbox clutterers. Moreover,
dominant ISPs, such as AT&T and PSINet have
recurrently been accused of knowingly collaborating with
spammers. ISPs rely on the data traffic that spam
generates for their revenues in an ever-harsher business
environment.
The Financial Times and others described how WorldCom
refuses to ban the sale of spamware over its network,
claiming that it does not regulate content. When "pink"
(the color of canned spam) contracts came to light, the
implicated ISPs blame the whole affair on rogue
employees.
PC World begs to differ:
"Ronnie Scelson, a self-described spammer who signed
such a contract with PSInet, (says) that backbone
providers are more than happy to do business with bulk
e-mailers. 'I've signed up with the biggest 50 carriers
two or three times', says Scelson ... The Louisiana-based
spammer claims to send 84 million commercial e-mail
messages a day over his three 45-megabit-per-second
DS3 circuits. 'If you were getting $40,000 a month for
each circuit', Scelson asks, 'would you want to shut me
down?'"
The line between permission-based or "opt-in" e-mail
marketing and spam is getting thinner by the day. Some
list resellers guarantee the consensual nature of their
wares. According to the Direct Marketing Association's
guidelines, quoted by PC World, not responding to an
unsolicited e-mail amounts to "opting-in" - a marketing
strategy known as "opting out". Most experts, though,
strongly urge spam victims not to respond to spammers,
lest their e-mail address is confirmed.
But spam is crossing technological boundaries. Japan has
just legislated against wireless SMS spam targeted at
hapless mobile phone users. Many states in the USA as
well as the European parliament have followed suit. Ideas
regarding a "do not spam" list akin to the "do not call" list
in telemarketing have been floated. Mobile phone users
will place their phone numbers on the list to avoid
receiving UCE (spam). Email subscribers enjoy the
benefits of a similar list under the CAN-Spam Act of
2003.
Expensive and slow connections make mobile phone
spam and spim (instant messaging spam) particularly
resented. Still, according to Britain's Mobile Channel, a
mobile advertising company quoted by "The Economist",
SMS advertising - a novelty - attracts a 10-20 percent
response rate - compared to direct mail's 1-3 percent.
Net identification systems - like Microsoft's Passport and
the one proposed by Liberty Alliance - will make it even
easier for marketers to target prospects.
The reaction to spam can be described only as mass
hysteria. Reporting someone as a spammer - even when
he is not - has become a favorite pastime of vengeful, self-
appointed, vigilante "cyber-cops". Perfectly legitimate,
opt-in, email marketing businesses and discussion forums
often find themselves in one or more black lists - their
reputation and business ruined.
In January 2002, CMGI-owned Yesmail was awarded a
temporary restraining order against MAPS - Mail Abuse
Prevention System - forbidding it to place the reputable e-
mail marketer on its Real-time Blackhole list. The case
was settled out of court.
Harris Interactive, a large online opinion polling
company, sued not only MAPS, but ISPs who blocked its
email messages when it found itself included in MAPS'
Blackhole. Their CEO accused one of their competitors
for the allegations that led to Harris' inclusion in the list.
Coupled with other pernicious phenomena - such as
viruses, Trojans, and spyware - the very foundation of the
Internet as a fun, relatively safe, mode of communication
and data acquisition is at stake.
Spammers, it emerges, have their own organizations.
NOIC - the National Organization of Internet Commerce
threatened to post to its Web site the e-mail addresses of
millions of AOL members. AOL has aggressive anti-
spamming policies. "AOL is blocking bulk email because
it wants the advertising revenues for itself (by selling pop-
up ads)" the president of NOIC, Damien Melle,
complained to CNET.
Spam is a classic "free rider" problem. For any given
individual, the cost of blocking a spammer far outweighs
the benefits. It is cheaper and easier to hit the "delete"
key. Individuals, therefore, prefer to let others do the job
and enjoy the outcome - the public good of a spam-free
Internet. They cannot be left out of the benefits of such an
aftermath - public goods are, by definition, "non-
excludable". Nor is a public good diminished by a
growing number of "non-rival" users.
Such a situation resembles a market failure and requires
government intervention through legislation and
enforcement. The FTC - the US Federal Trade
Commission - has taken legal action against more than
100 spammers for promoting scams and fraudulent goods
and services.
"Project Mailbox" is an anti-spam collaboration between
American law enforcement agencies and the private
sector. Non government organizations have entered the
fray, as have lobbying groups, such as CAUCE - the
Coalition Against Unsolicited Commercial E-mail.
But, a few recent anti-spam and anti-spyware Acts
notwithstanding, Congress is curiously reluctant to enact
stringent laws against spam. Reasons cited are free
speech, limits on state powers to regulate commerce,
avoiding unfair restrictions on trade, and the interests of
small business. The courts equivocate as well. In some
cases - e.g., Missouri vs. American Blast Fax - US courts
found "that the provision prohibiting the sending of
unsolicited advertisements is unconstitutional".
According to Spamlaws.com, the 107th Congress, for
instance, discussed these laws but never enacted them:
Unsolicited Commercial Electronic Mail Act of 2001
(H.R. 95), Wireless Telephone Spam Protection Act (H.R.
113), Anti-Spamming Act of 2001 (H.R. 718), Anti-
Spamming Act of 2001 (H.R. 1017), Who Is E-Mailing
Our Kids Act (H.R. 1846), Protect Children From E-Mail
Smut Act of 2001 (H.R. 2472), Netizens Protection Act
of 2001 (H.R. 3146), "CAN SPAM" Act of 2001 (S. 630).
Anti-spam laws fared no better in the 106th Congress.
Some of the states have picked up the slack. Arkansas,
California, Colorado, Connecticut, Delaware, Idaho,
Illinois, Iowa, Kansas, Louisiana, Maryland, Minnesota,
Missouri, Nevada, North Carolina, Oklahoma,
Pennsylvania, Rhode Island, South Dakota, Tennessee,
Utah, Virginia, Washington, West Virginia, and
Wisconsin.
The situation is no better across the pond. The European
parliament decided in 2001 to allow each member country
to enact its own spam laws, thus avoiding a continent-
wide directive and directly confronting the
communications ministers of the union. Paradoxically, it
also decided, in March 2002, to restrict SMS spam.
Confusion clearly reigns. Finally, in May 2002, it adopted
strong anti-spam provisions as part of a Directive on Data
Protection.
Responding to this unfavorable legal environment, spam
is relocating to developing countries, such as Malaysia,
Nepal, and Nigeria. In a May 2005 report, the OECD
(Organization for Economic Cooperation and
Development) warned that these countries lack the
technical know-how and financial resources (let alone the
will) to combat spam. Their users, anyhow deprived of
bandwidth, endure, as a result, a less reliable service and
an intermittent access to the Internet;
"Spam is a much more serious issue in developing
countries...as it is a heavy drain on resources that are
scarcer and costlier in developing countries than
elsewhere" - writes the report's author, Suresh
Ramasubramanian, an OECD advisor and postmaster for
Outblaze.com.
ISPs, spam monitoring services, and governments in the
rich industrialized world react by placing entire countries
- such as Macedonia and Costa Rica - on black lists and,
thus denying access to their users en bloc.
International collaboration against the looming destruction
of the Internet by crime organizations is budding. The
FTC had just announced that it will work with its
counterparts abroad to cut zombie computers off the
network. A welcome step - but about three years late.
Spammers the world over are still six steps ahead and are
having the upper hand.
The Content Downloader's Profile
Interview granted to Tim Emmerling, a student at Eastern
Illinois University.
Q. What do you know about people illegally
downloading files over the internet?
A. I know what everyone knows from being exposed to
the news media and to lawsuits filed by publishers: the
phenomenon is widespread and most of the millions of
exchanged files are music tracks and films (though book
rip-offs are not unknown as well).
Q. Why do you think people are taking part in these
electronic transactions? Does the cost of purchasing the
media come into play?
A. It's a complex canvass of motivations, I guess. Many
media products (especially in developing and poor
countries) are overpriced in terms of the local purchasing
power. Illegally downloading them is often an act of
protest or defiance against what disgruntled consumers
perceive as excessive profiteering. It may also be the only
realistic way to gain ownership of coveted content.
The fact that everything - from text to images - is digital
makes replication facile and enticing. Illegal downloading
also probably confers an aura of daring and mystique on
the "pirates" involved (whose life may otherwise be a lot
drearier and mundane).
Additionally, these products resemble public goods in that
they are nonrivalrous (the cost of extending the service or
providing the good to another person is (close to) zero)
and largely nonexcludable.
Most products are rivalrous (scarce) - zero sum games.
Having been consumed, they are gone and are not
available to others. Public goods, in contrast, are
accessible to growing numbers of people without any
additional marginal cost. This wide dispersion of benefits
renders them unsuitable for private entrepreneurship. It is
impossible to recapture the full returns they engender. As
Samuelson observed, they are extreme forms of positive
externalities (spillover effects).
Moreover, it is impossible to exclude anyone from
enjoying the benefits of a public good, or from defraying
its costs (positive and negative externalities). Neither can
anyone willingly exclude himself from their remit.
Needless to emphasize that media products are not public
goods at all! They only superficially resemble public
goods. Still, the fact that many books, music, and some
films are, indeed, in the public domain further exacerbates
the consumer's confusion. "Why can I (legally) download
certain books and music tracks free of charge - but not
others?" - wonders the baffled surfer, who is rarely versed
in the intricacies of copyright laws.
Q. Do you think this leads to a feeling of disrespect
toward the various pieces of media by the person that
steals it so frequently? (If I download music all the time,
will I lose interest in it?)
A. I am not sure that the word "respect" is relevant here.
People don't respect or disrespect music - they enjoy it,
like it, or dislike it. But frequent illegal downloading of
media products is, probably, the outcome of disrespect
towards content intermediaries such as publishers,
producers, and retail outlets. I don't know for sure because
there is no research to guide us in this matter, but I would
imagine that these people (wrongly) perceive content
intermediaries as parasitic and avaricious.
Q. Downloading is still a widespread act today. The
threats of lawsuits and legal action against downloaders
hasn't stopped the problem. What, in your opinion,
needs to be done to stop this behavior?
A. Law enforcement activities and lawsuits are already
having an effect. But you cannot prosecute thousands of
people on a regular basis without suffering a
commensurate drop in popularity and a tarnished image.
People do not perceive these acts as self-defense but as
David vs. Goliath bullying. Sooner or later, the efficacy of
such measures is bound to decline.
Media companies would do better to adopt new
technologies rather than fight them. They must come forth
with new business models and new venues of
dissemination of content. They have to show more
generosity in the management of digital rights. They have
to adopt differential pricing of their products across the
board, to reflect disparities in earnings and purchasing
power in the global marketplace. They have to transform
themselves rather than try to coerce the world into their
antiquated and Procrustean ways of doing things.
Q. Psychologically speaking, is there a certain kind of
person who is more likely to take part in this behavior?
Do you feel that this is a generational issue?
A. I cannot but speculate. There is a dearth of data at this
early stage. I would imagine that illegal downloaders are
hoarders. They are into owning things rather than into
using or consuming them. They are into building libraries
and collections. They are young and intelligent, but not
affluent. They are irreverent, rebellious, and non-
conformist. They may be loners who network socially
only online. Some of them love culture and its artifacts
but they need not be particularly computer-savvy.