Wireless advertising messaging legal analysis & public policy issues, a review

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Wireless advertising messaging legal analysis & public policy issues, a review

  1. 1. Andrew Olsen Wireless Advertising Messaging: Legal Analysis & Public Policy Issues By Ross D. Petty A Review :University of Maryland University College
  2. 2. 2 Abstract Wireless marketing is fairly new, but it is expected to top $8 billion by 2005. A majority of wirelessmarketing is done by SMS and there were roughly 1 billion text messages exchanged by U.S. consumers inDecember. Wireless advertising messaging (WAM) is not a major problem in the U.S. now, but it grew toepidemic proportion in Japan and Europe. The U.S. is trying to take the necessary steps to avoid the sameproblem that plagued Japan and Europe. The FTC and FCC have been working to limit the affect of WAM,but the laws and regulations are unclear. The states have been the most vigilant against fightingspam/WAM issues despite jurisdictional and constitutional concerns. Federal legislation has also beenproposed that deals with spam and privacy issues, but now it also includes language that would deal withWAM. No legislation has yet passed and it would most certain face a First Amendment suit, but passage ofthis legislation appears to be promising. The Wireless Advertising Association (WAA) has establishedguidelines and others are also following suit in order to deal with this WAM issue. In addition, the wirelessindustry is taking necessary steps to prevent spam from affecting its customers. There are still a lot ofissues that need to dealt with, but it will probably have to include a combination of advertising associationguidelines, industry self-regulations, and federal oversight and/or regulations. Introduction The wireless market is not a new one and is one that will continue to grow. According to theCellular Telecommunications & Internet Association (CTIA) there are over 137 million wireless subscribersin the United States (www.wow-com.com). What is new, however, is wireless marketing. The developmentof wireless marketing is still at an experimental stage, but it is gaining ground. Wireless marketing isexpected to top $8 billion by 2005 (Swartz, 2003), but it is still only emerging in the U.S. At this point, themajority of advertisements and alerts that are being sent is Short Message Service (SMS) text messaging.
  3. 3. 3 Text messaging has just recently begun to catch on widely in the United States over the pastcouple of years, since wireless providers just recently agreed on an industry wide standard, but it is growingdramatically in popularity. Roughly 1 billion text messages were exchanged by U.S. consumers inDecember, which was up four times from the year before (Swartz, 2003). Wireless customers now payanywhere between $3 and $20 per month for the SMS text-messaging feature, but that is where theproblem surrounding wireless advertising develops. WAM: The Problem WAM or wireless spam is defined as push messaging related to the user’s location that is sentwithout standard or confirmed opt-in and just like e-mail spam, it wastes time and resources, but it alsoprovokes the recipient even more because it could cost them valuable plan minutes. Since wirelesscustomers are paying to view wireless advertising messaging (WAM), they do not want to be spending theirmoney viewing junk advertising. Text messages can cost anywhere from 2 to 10 cents to receive, if it is notincluded in the cost of the customer’s cellphone plan (Swartz, 2003). It could also cause enoughcongestion to their wireless device that it could lead a network to crash. Privacy concerns are anotherimportant issue because of WAM. Wireless consumers number one concern is privacy and most feel thatWAM poses a direct threat to their privacy. Many wireless customers are interested in services like voiceportals, SMS, and so forth, but it diminishes once advertisements are thrown into the mix (Luna, 2001). WAM poses a major threat to the nascent wireless industry. Abuse of WAM could potentiallycause irreparable harm, expense to the customer, and undermine the value of an important communicationline between customers and advertisers. Spam whether wireless or email is something customers hateand will not contribute to the growth of the industry. However, WAM still has not become a major problem in the U.S. as it has been in Europe andJapan because text messaging and other wireless features has been a popular feature of wireless devices
  4. 4. 4for years there. According to NTT Docomo, Japans largest wireless carrier, 17% of its 38 million iModesubscribers receive up to five pieces of spam a day, which is down from 30% in 2001 (Blakeley, 2003).Figures are similar in the EU, but thanks to new anti-spam laws, customer education and filtering efforts,the number of wireless spam have been reduced significantly. It is estimated that the total market for wireless advertising in the U.S. was about $23 million in2000, but is expected to grow to roughly $4 billion by 2005 (Jarvis, 2001). As traffic over wireless networkscontinues to grow, WAM will also grow. Currently it is difficult to separate WAM from the other forms ofspam when trying to determine how to fight this growing problem more so because the difference betweencomputers and wireless devices are disappearing. Since there have been very few laws that havespecifically dealt with WAM, it has been very difficult to determine if current laws would apply toadvertisement sent to wireless devices via an e-mail address. The fact is that WAM is going to become aconsiderable problem unless the U.S. is able to get some control over this issue. WAM Legal Analysis & Public Policy Issues Summary: This article examines the complex issues involved in balancing privacy rights and the unfetteredflow of information as applied to the regulation of unwanted text messages (WAM) sent to wireless devicessuch as newer types of cellular telephones, pagers and personal data assistants (PDAs). The advent ofthe wireless Web and related technical advances has pushed spam and other privacy issues onto theagendas of service providers and vendors, as well as regulators. It starts off by giving an extensivebackground on WAM and what role it has played in Japan and Europe and what the U.S. should expect. InJapan it has been estimated that between 900 million and 1 billion text messages are sent on an averageday, and an injunction was recently granted when a firm sent 900,000 unsolicited text messages in a singlehour. Because of significant cost advantages in communicating to consumers through spam and WAM theUS market is projected to grow exponentially, raising the stakes on these policy issues.
  5. 5. 5 There are various forms of regulations, federal, state, and self that are currently in place and thisarticle examines what effect they have when dealing with WAM. The determination is that the U.S. doesnot have current laws that anticipate all forms of WAM, but some believe that current state and federal lawsand regulations may work when dealing with WAM. Federal law already prohibits junk faxes and prohibitstelemarketers from making unsolicited calls to cell phones in order to protect consumers from paying forads they probably have no interest in receiving. Some already feel that these laws already cover SMSmessaging, but the issue has not been tested enough in the courts to know for sure. This is where theconstitutionality of current and future laws and regulations becomes a contentious issue. FTC/FCC & WAM: In April of this year the Federal Trade Commission (FTC) had a three-day summit on spam andaccording to FTC Commissioner Orson Swindle, "If you think spam is bad on your computer, wait until itgets on your phone” (Swartz, 2003). The FTC has estimated that over 70% of spam is fraudulent,misleading or deceptive (Pruitt, 2003) and so there have been several bills affecting privacy and spam havebeen introduced in Congress. Congress is trying to give the FTC more power to catch and punishspammers. So far, however, the FTC has rejected calls to fight email spam. They have cited limited timeand resources and decided to maintain their current level of enforcement, while working with the public toexplore solutions to the deluge of spam (Guerra, 2003). Out of these discussions, there has been a pushfor the FTC to evaluate the legality and constitutionality of a consumer opt-out site for spam or a “do notemail” list, as it did with telemarketing. The FTC intends to have more workshops and hearings dealingwith spam and WAM. Even the Federal Communications Commission (FCC) has stated that the legal status of cellphonespam is murky. The Telephone Consumer Protection Act (TCPA) of 1991covers unsolicited cell-phonetraffic, but the FCC recommends that wireless customers ask their providers how they deal with text
  6. 6. 6message spam under their plan (Holton, 2003). Ultimately, what the FCC is trying to determine is whetherwireless data, such as spam, is a telecommunications service, protected under the TCPA, or whether it isan information service, which would not be regulated by the FCC. According to the FCC, spam would fallunder the TCPA only if it was sent to a wireless telephone number, not an e-mail or Internet address, butwhat they have not reached is what happens when spam is sent to an Internet address (Weaver, 2003).What they are still dealing with is this gray area and what to do with it. State Regulations: Even with commerce clause issues, state legislatures have continued to pass anti-spam legislation.There are currently at least 30 states that have passed or are currently considering legislation that wouldimpose legal restrictions on spam. Several, including California, Colorado and Tennessee, would requirethat senders of unsolicited commercial e-mail place "ADV" in the subject line of the e-mail. There are a fewstates that allow lawsuits against spammers that violate posted state policies. Other states, includingConnecticut, Delaware, Hawaii, Idaho, Iowa, Illinois, Maryland, Nebraska, Nevada, North Carolina,Oklahoma, Virginia, Washington and West Virginia, have passed or are currently considering similarlegislation (http://www.spamlaws.com/state/index.html). However, it is the validity of the state laws banningor limiting unsolicited commercial e-mail is currently in question. More specifically, it is the constitutionalityand jurisdictional issue of these state laws that are questioned. In addition, the debate is there whether ornot current state laws and regulations cover WAM. New York passed an amendment to its do-not-call law that includes email and it is the first state todo so, and because email is sent via wireless and wireline networks, the law applies to wireless spam aswell, (Goldman, 2001). California has followed suit and has one of the strictest spam regulations in thecountry. Current California legislation, SB12, would require an opt-in system for e-mail and it wouldbecome a misdemeanor to transmit unsolicited commercial email advertisements within the state or to any
  7. 7. 7California residents email address (Norr, 2003). Many other states are also looking to continue to tightentheir spam regulations and laws, however; again the question is how far can the state go to regulatespam/WAM? Federal Regulations: Even though WAM is in its infancy in the U.S., legislation has been introduced that may help deterthe problem of unwanted spam. Lawmakers have been working with the CTIA to include wireless in broad-reaching anti-spam bills. Congress has been trying to pass anti-spam legislation since 1997, but it haseither been continually stalled or abandoned in committee (Sampath & Miller, 2003). Currently, there are anumber of privacy-related and anti-spam bills that have been introduced before Congress and several ofthem are particularly relevant to wireless privacy and spam. The most pertinent bill that would specifically deal with the WAM issue is H.R. 122, which iscurrently pending in the Subcommittee on Telecommunications and the Internet. The Wireless TelephoneSpam Protection Act would make it unlawful for any person to use any covered mobile telephonemessaging system to transmit an unsolicited advertisement. It would also prohibit the FCC from exemptingfrom certain telephone regulatory requirements any call that violates such prohibition. This has beenintroduced every year since 2001, previously as H.R. 113, but legislation against wireless spam appears tobe promising. The House Commerce Committee has taken up anti-spam legislation this year that wouldinclude language to combat wireless spam. A second bill that would deal with wireless spam is H.R. 2214, the Reduction in Distribution ofSpam Act of 2003, which had a hearing in the Subcommittee on Crime, Terrorism, and Homeland Securitythis past July. This bill would go a long way to address the existing spam problem, while also trying to cutoff development of future spam problems, like wireless spam (Weaver, 2003).
  8. 8. 8 Several other pieces of legislation: H. R. 4678, H.R.71, H.R.1933, H. R. 2515, S. 877, S.1231,and S.1293 have been proposed to either address privacy concerns, penalize fraudulent spam, or create asystem to secure mobile phone owners’ permission before a company could market services to them.These pieces of legislation could be very important because they could address wireless users’ privacy andspam concerns while also providing guidance to advertisers. Any federal anti-spam law will have to survive a First Amendment challenge. The governmentcannot regulate commercial speech unless it shows that the law is narrowly tailored to address a matter ofsubstantial government interest. There will be a lot of work in the various committees in Congress in orderto determine if lawmakers will be able to craft and enact an anti-spam law that will sustain a constitutionalchallenge. In addition, a lot of spam comes from outside the U.S. and would not fall under the jurisdictionof U.S. law. Industry Regulations: Members of the major advertising associations, such as the Mobile Marketing Association (MMA),previously the Wireless Advertising Association (WAA), Wireless Advertising Industry Association (WAIA)and the Interactive Advertising Bureau (IAB) all agree that spam posses a major problem to the industry.However, how it should be dealt with vary among the members. Most prefer self-regulation to governmentregulation, which is why the WAA established guidelines that dealt with difficult and critical issues of privacyand spam and offered well-needed guidance. Furthermore, the WAIA and the IAB have launched efforts todefine standards and best practices for delivering ads to cellular phones and handheld devices. They feelmore comfortable letting the customers tell us what they want and do not want and responding with theirdollars (Goldman, 2001). However, that has yet to prove successful and there is no guarantee thatmembers will adhere to these guidelines let alone the many nonmembers.
  9. 9. 9 AOL, Microsoft, and Yahoo are already working together to fight spam. The wireless industry isalso fighting to protect their customers from unwanted advertising and are taking steps to avoid the influx ofWAM. They realize that subscribers will change operators if they do not address this problem. Mostwireless carriers also prefer self-regulation along with rigorous opt-in requirements, which has beenadvocated by the CTIA. In addition, wireless carriers are treating their networks like private property andplan to kill off bulk text messages at gateways before they hit customer in-boxes. (“News briefs,” 2003). Ifwireless carriers can operate and maintain their networks as their own private entities, they can set a newstandard of integrity that makes the wireless Internet that much better than the wired (Wickham, 2003).The wireless industry is continuing to work with legislatures and other groups so to best protect theirconsumers from this growing problem. Conclusions: There is still no definitive answer about what to do when it comes to wireless spam. Statelegislation along with effective federal legislation may have some effect. However, besides forconstitutionality and interstate commerce issues of such state and federal legislation, the law can onlyregulate the means of transmission and not the content itself. In addition, some feel that legislation isunnecessary because the industry already is heavily regulated and the market will take care of wirelessspam. Many in the wireless and advertising industry are very wary of government regulation and wouldprefer self-regulations. National legislation would raise difficult issues about defining spam and they do notwant the government defining what or what not spam is. More so government regulations will affect thosethat abide by laws and those are legitimate organizations, which are more apt to listen to and protect theircustomers anyway. No matter how hard the federal government tries, they will not be able to stop spam, but they couldmake it more difficult. However, a solution could be a combination of comprehensive federal laws that
  10. 10. 10include regulatory action, fines, and private lawsuits along with spam filtering. Basically, the combinationof advertising association guidelines, industry self-regulations, and proper federal oversight and/orregulations, could prove to be the most effective tool in curbing spam and controlling WAM before itbecomes a problem. In addition, it could also help shift the costs of spam/WAM back to the marketers,while allowing legitimate marketers to operate in their and the consumers’ best interests.
  11. 11. 11 References:http://frwebgate.access.gpo.gov/cgi-in/getdoc.cgi?dbname=108_cong_bills&docid=f:h122ih.txt.pdfhttp://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=108_cong_bills&docid=f:h2214ih.txt.pdfhttp://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=108_cong_bills&docid=f:h2515ih.txt.pdfhttp://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=108_cong_bills&docid=f:s877rs.txt.pdfhttp://thomas.loc.gov/http://www.spamlaws.com/state/index.htmlhttp://www.wow-com.com/pdf/hr4678_intro_stearns.pdfBaines, Stewart. (2000, August). “When push comes to shove.” Communications International, pg. 9. Retrieved September 19, 2003 from MdUSA ABI/Inform on the World Wide Web: http://www.umuc.edu/library/.Blakeley, Kiri. (2003, June 9). “Et Tu, AT&T Wireless?” Forbes, Volume 171, Issue 12, pg. 60. Retrieved September 17, 2003 from MdUSA ABI/Inform on the World Wide Web: http://www.umuc.edu/library/.Goldman, Chris. (2001, July 1). “Do not spam me!” Wireless Review, Volume 18, Issue 13, pg. 8. Retrieved September 21, 2003 from MdUSA ABI/Inform on the World Wide Web: http://www.umuc.edu/library/.
  12. 12. 12Guerra, John L. (2003, March). “Regulatory Watch: CTIA Pushes FCC on LNP Issues.” Billing World and OSS Today. Retrieved September 29, 2003 from MdUSA database LexisNexis on the World Wide Web: http://www.umuc.edu/library/.Holton, Avery. (2003, August 11). “When spam hits your cell phone.” Time, Volume 162, Issue 6, pg. 65. Retrieved September 25, 2003 from MdUSA database ABI/Inform on the World Wide Web: http://www.umuc.edu/library/.Jarvis, Steve. (2001, March 26). “FCC policy short-circuits wireless bids.” Marketing News, Volume 35, Issue 7, pg. 4. Retrieved September 21, 2003 from MdUSA database ABI/Inform on the World Wide Web: http://www.umuc.edu/library/.Karpinski, Richard. (2000, April 24). “Regulation finds its way to wireless advertising.” B to B, Volume 85, Issue 4, pg. 13. Retrieved September 27, 2003 from MdUSA database ABI/Inform on the World Wide Web: http://www.umuc.edu/library/.Luna, Lynnette. (2001, July 30). “Dueling Pricing Strategies.” Telephony, Volume 241, Issue 5, pg 7. Retrieved September 19, 2003 from MdUSA ABI/Inform on the World Wide Web: http://www.umuc.edu/library/.Maher, Brendan. (2001, January). “Finding content with wireless advertising.” Target Marketing, Volume 24, Issue 1, pg. 42. Retrieved September 21, 2003 from MdUSA database ABI/Inform on the World Wide Web: http://www.umuc.edu/library/.“News briefs.” (2003, May 05). Network World, Section: Front News, pg. 6. Retrieved September 24, 2003 from MdUSA database LexisNexis on the World Wide Web: http://www.umuc.edu/library/.
  13. 13. 13Norr, Henry. (2003, February 24). “Bill seeks to stem spam.” The San Francisco Chronicle, pg. E1. Retrieved September 28, 2003 from MdUSA database LexisNexis on the World Wide Web: http://www.umuc.edu/library/.Pruitt, Scarlet. (2003, September 26). “Stop buying from spammers, Net industry says.” IDG News Service. Retrieved September 23, 2003 from Network World on the World Wide Web: http://www.nwfusion.com/news/2003/0926stopbuyin.html.Sampath, Elizabeth D. & Miller, Jennifer L. (2003, March 31). “Congress Vacillates as Others Act to Can Spam.” The Legal Intelligencer, Volume 228, No. 61, pg. 5. Retrieved September 28, 2003 from MdUSA database LexisNexis on the World Wide Web: http://www.umuc.edu/library/.Secker, Matthew. (2001, October). “Small slice of the advertising pie for mobile operators.” Telecommunications (International Edition), Volume 35, Issue. 10, pg. 8. Retrieved September 23, 2003 from MdUSA database ABI/Inform on the World Wide Web: http://www.umuc.edu/library/.Swartz, Jon. (2003, June 16). “Spam tussle spreads to cellphones.” USA TODAY, pg. 1A. Retrieved September 23, 2003 from MdUSA database LexisNexis on the World Wide Web: http://www.umuc.edu/library/.Wickham, Rhonda. (2003, June 1). “Opting Out Of Spam.” Wireless Week, Volume 9, Issue 12. Retrieved September 28, 2003 from MdUSA database Business Source Premier on the World Wide Web: http://www.umuc.edu/library/.Weaver, Heather Forsgren. (2003, July 14). “House anti-spam bill to include wireless.” RCR Wireless News, Volume 22, Issue 28. Retrieved September 25, 2003 from MdUSA database Business Source Premier on the World Wide Web: http://www.umuc.edu/library/
  14. 14. 14Weaver, Heather Forsgren. (2003, May 5). “Text-messaging spam filter may be illegal.” RCR Wireless News, pg. 4. Retrieved September 27, 2003 from MdUSA database LexisNexis on the World Wide Web: http://www.umuc.edu/library/.

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