TCS Daily

The Only Thing Worse Than No Government

By Robert Hahn - November 12, 2003 12:00 AM

You probably didn't read it here first: the U.S. Senate declared war on spam. The bill, which passed by a close vote of 97 to nothing, throws everything but cruise missiles at spammers who clutter email in-boxes with offers to lower mortgage rates and raise sexual members. Ron Wyden of Oregon, a sponsor, aptly characterized the prevailing political winds: "Every day the Senate delays, big-time spammers [get] another opportunity to crank up their operations to even more dizzying levels of volume." But will this anti-spam approach, also under enthusiastic consideration by the House, really do much?


Not likely.


The Can Spam Act responds to a wider disgust with the nuisances associated with high-tech communications. The regulators' response to telemarketing was to create the wildly popular do-not-call registry. And when the courts recently expressed doubts about its constitutionality, Congress told the regulators to go for it anyway. As Billy Tauzin, chair of the House Commerce Committee, put it, "50 million Americans can't be wrong."


Not to be outdone, the Senate anti-spam bill contains a do-not-spam registry. But it contains a lot more -- for example, million-dollar fines and jail time for spammers. The bill also enables Internet service providers like AOL and Juno to sue spammers as well as their clients, and prohibits spammers from hijacking computers with pop-up ads or falsifying sender information to bypass email filters. 


There's no denying the problem is real and growing. Brightmail estimates that spam has increased from around 5 percent of all email in 2001 to about 50 percent today. Hotmail and MSN subscribers receive over 2.4 billion junk email messages daily. And MCI fields some 500,000 complaints per month from spam victims. According to Ferris Research, containing spam will cost business more than $10 billion in 2003 in labor, hardware and software.


That last figure does not include the intangible costs to reluctant or embarrassed recipients. One in five emails is estimated to have "adult" content. And the Federal Trade Commission estimates that two-thirds contains false information. Spam emails frequently promote illegal or problematic products -- everything from descramblers to cheat the cable companies to dangerous drugs without prescriptions.


While the social cost of spam is high, it costs almost nothing to produce. You simply need an email list, and a way to send and receive email -- without getting caught. Mass email list providers use spam "bots" to scour the web for email addresses (so be careful next time you visit that chat room).  Since the lists are cheap to produce and overhead is extremely low, it only takes a handful of responses per million emails to make spamming worthwhile.


What's more, it's relatively easy to stay a step ahead of the sheriff. Between 50 percent and 90 percent of spam can't be traced with state-of-the-art defenses. And if you can't track the perps, how are you going to prosecute them?


This raises a fundamental problem: Even the most carefully crafted anti-spam law may be ineffective. As FTC Commissioner Tim Muris notes, "Our experience, and that of the few states that have tried to punish spammers, is that it can take months of investigation, and sometimes a dozen or more subpoenas, simply to locate a spammer..." And even if prosecution improves, the spammers could simply move offshore where enforcement is even more difficult.  While a hefty penalty for spamming is definitely in order, million dollar fines are no panacea.


What about that anti-spam registry? For starters, it isn't likely to reduce spam by much. Those who sign up won't get spam from law-abiding mass marketers. But the legitimate marketers are not much of the problem. According to an FTC analysis, very few ethically minded businesses are in the game: some 85 percent of spam is generated by those at the fringes of commerce. Thus unless enforcement improves radically, spammers are unlikely to be deterred.


Second, the do-not-spam registry itself is a mailing list waiting to happen. Indeed, in one nightmare scenario, those who have thus far eluded the ads for penis enlargement will lose their cover, no thanks to the FTC.


If law is not likely to be a big part of the solution, what is? The best hope lies in technology and economics. Smarter filters, which leave the baby but not the bathwater, seem to be evolving in the marketplace. AOL recently blocked over 2 billion pieces of spam in a single day. Other promising approaches include having trusted third parties bless companies with a Good Housekeeping-type seal for unsolicited emails, and requiring a showing that a human is likely to have sent the email.


A more radical long term solution may involve charging for access to email boxes. Demanding, say, a penny to get past the doorkeeper wouldn't have much impact on legitimate e-mail, but would deter spammers who must send tens of millions of messages daily to make a buck.


"E-cash," which allows multiple transactions to be settled without the repeated use of checks or credit cards, already exists. But each transaction still costs money to perform. For example, PayPal now charges 30 cents for each transaction -- far more than one could, as a practical matter, charge for incoming spam. On close examination, then, the goal of using transactions fees to contain spam is still a bridge too far. 


It is impossible to know what creative economic or technical solution will emerge down the road. But one thing is clear: ineffective government is worse than no government. Congress should resist the temptation to pass laws that aren't likely to work.


Mr. Hahn is the Executive Director of the American Enterprise Institute-Brookings Joint Center, which focuses on regulatory policy.



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