Spam on the Run

It all started, inconveniently enough, in the middle of “Riverdance.” Rodney Joffe, one of the founders of Web hosting firm Genuity, was watching a production of the Irish dance spectacle two years ago in Phoenix when his cell phone alerted him to an incoming text message: Acacia National Mortgage was offering reduced mortgage rates — dancers be damned, it was the perfect time to sign up.

When Joffe complained to the sender, the company promptly apologized. But when Acacia sent him yet another SMS ad soon after, Joffe took them to court. His story was spotlit in a March 2001 Wall Street Journal article, where it caught Republican California State Assemblyman Tim Leslie's attention. As a Verizon customer, Leslie sometimes gets SMS from his staffers while on the assembly floor. As he read Joffe's story, he cringed at the thought of his own phone filling up with spam.

“Our thinking was, ‘Let's prevent this from happening before it gets out of hand,’” Leslie said. “Nip it in the bud. So that's what we did.”

Early this year, Leslie introduced a bill — the first anti-spam bill specific to SMS — to the California State Assembly that bans unsolicited text message advertising to cell phones. A.B. 1769, as it's called, passed the state legislature in August and was signed by the governor last month. The bill will take effect in January.

Major mobile carriers neither supported nor opposed the bill, Leslie said, aptly reflecting their dual view of SMS marketing: They know it could scare customers away from SMS, but they also see its potential as both a marketing tool and a revenue-driver, and they don't want the government to take it away.

“We talked to pretty much all of [the major carriers],” said Leslie. “They were all a little nervous about the bill.”

At the suggestion of carriers, Leslie said he included a clause that makes an exception, allowing major wireless carriers to spam their own customers. “I probably would have had a dead bill if I hadn't because they would have opposed it,” he said.

And anyway, Leslie wasn't worried about carriers excessively spamming their own customers. “It's not in their best interest to inundate their customers with a bunch of spam,” said Brian O'Neill, Leslie's legislative director. “Companies aren't going to do that.”

Aside from the common sense argument, there's evidence that carriers recognize the threat spam poses to their SMS revenues and profit margins. In 2001 Verizon filed suit against Acacia National Mortgage for spamming its subscribers, claiming that the firm had violated a Colorado anti-spam law meant to curtail junk e-mail.

Acacia settled the case before it went to trial and agreed to leave Verizon's customers alone. But experts say carriers do the majority of SMS marketing today, such as that done by Cingular and Sony to promote the movie “Spider-man.”

Though the current volume of SMS spam is uncounted, sources on all sides of the issue say it's not widespread at the moment, which is one reason why its applicability to various state laws against e-mail spam hasn't been tested. But as more companies are tempted by the cost benefits of SMS marketing — and as logistical snags like inter-carrier operability are remedied — spam production could explode. Domestic spending on SMS marketing will grow to about $5 billion by the end of 2004, according to one estimate from m-Qube, a start-up with designs on the space.

Other states could follow California, either by drafting their own A.B. 1769's or amending current laws to include SMS spam. Rep. Rush Holt, D-N.J., introduced a bill that would ban SMS spam at the federal level, but it has languished in committee since early 2001.

In September the FCC announced it would finally consider instituting a national do-not-call list to keep telemarketers at bay. After rejecting the idea a decade ago, the commission cited cell phones as a prime impetus for the decision because, unlike landlines, users pay for the calls.

Telemarketing to cell phones has been a federal no-no since it was outlawed (albeit with some loopholes) in the Telephone Consumer Protection Act of 1991. But when wireless local number portability takes effect next year, telemarketers will have a tough time distinguishing mobile lines from landlines. When that happens, audiences trying to watch Riverdance could get downright ugly, to say the least.

And the same argument for a do-not-call list applies in many cases to SMS as well. For example, AT&T Wireless doesn't charge customers for incoming text, but many carriers charge per message above a certain limit. Still, the emergence of a national SMS do-not-call list is tough to predict at this stage. Robert Bulmash, president of the vehemently anti-telemarketing consumer group Private Citizen, warned that the current administration's heavy leanings toward deregulation make it an unlikely champion of effective do-not-call policies.

“While the Bush administration is in office, I hope the FCC does not try to go after a national do-not-call list,” Bulmash said, just days before the FCC voiced plans to do just that. “The FCC buckled [under the former President Bush], and they'll buckle again.”

One reason regulators might treat SMS spam differently than the e-mail kind is the important difference between the two media that allows the SMS industry to better police itself. Because messaging passes through carrier gateways, carriers have more control over the SMS spam on their networks. If carriers find their subscribers being bombarded by duplicates of a single message, they can simply shut the sender out at the messaging gateway.

AT&T Wireless, for example, regularly monitors its network for blast messaging, a spokesperson said. “We categorically do not allow anyone to send unsolicited text messages to our customers.”

If carriers don't keep a leash on spam, they could kill a goose that lays golden eggs said Mark Grindeland, m-Qube's executive vice president of marketing and brand services. m-Qube's goal is to exploit the SMS space without poisoning it, creating SMS marketing campaigns for global brands and splitting the revenue with carriers.

To protect the business from anti-spam legislators like Leslie and Holt, m-Qube is advocating SMS that is entirely “opt-in,” or customer-requested. For example, during a football game, m-Qube could direct fans in the stadium to call an 800 number at the end of each quarter. On the call, fans could take a shot at winning prizes (e.g., discounts on concessions or a chance to win merchandise raffles) by answering trivia questions. Once they do, m-Qube would send a follow-up message asking permission to send further promotions, and subscribers could opt out at any time.

“When a consumer requests it, there's no legislation in America that can preclude it,” Grindeland said. “Everything we do falls into that category.”

m-Qube is just beginning to work with the CTIA and other groups to create and manage the SMS industry's own do-not-call list, but the company's biggest hurdle now is convincing major carriers to agree on a universal policy for SMS marketing so major brands can reach SMS users more easily. After that, the challenge for carriers and marketers will be to maintain contact with consumers without annoying the hell out of them. And that will depend on individual tastes and circumstances.

“I asked analysts how many messages consumers were willing to receive a day. The answer was anywhere from two to four a day was palatable,” Grindeland said. “If I got four unsolicited e-mails from a company a day, it would probably piss me off.”