TELECOM Digest OnLine - Sorted: Postage Due for Companies Sending e-Mail

Postage Due for Companies Sending e-Mail

Saul Hansell (
Sat, 4 Feb 2006 16:55:43 -0600


Companies will soon have to buy the electronic equivalent of a postage
stamp if they want to be certain that their e-mail will be delivered
to many of their customers.

America Online and Yahoo, two of the world's largest providers of
e-mail accounts, are about to start using a controversial system that
gives preferential treatment to messages from companies that pay from
1/4 of a cent to a penny each to have them delivered. The senders must
contact only people who have agreed to receive their messages, or risk
being blocked entirely.

The Internet companies say that this will help them identify
legitimate mail and cut down on junk e-mail, identity-theft scams and
other scourges that plague users of their services. The two companies
also stand to earn millions of dollars a year from the system if it is
widely adopted.

AOL and Yahoo will still accept e-mail from senders who have not paid,
but the paid messages will be given special treatment. On AOL, for
example, they will go straight to users' main mailboxes, and will not
have to pass the gantlet of spam filters that could divert them to a
special bulk e-mail box or strip them of images and Web links.

Yahoo and AOL say the new system is a way to restore some order to
e-mail, which, because of spam and worries about online scams, has
become an increasingly unreliable way for companies to reach their
customers, even as online transactions are becoming a crucial part of
their businesses.

"The last time I checked, the postal service has a very similar system
to provide different options," said Nicholas Graham, an AOL
spokesman. He pointed to services like certified mail with return
receipts, "where you really do get assurance that if what you send is
important to you, it will be delivered, and delivered in a way that is
different from other mail."

But critics of the plan say that the companies risk alienating both
their users and the companies that send e-mail. The system will apply
not only to mass mailings but also to individual messages like order
confirmations from online stores and customized low-fare notices from

"AOL users will become dissatisfied when they don't receive the e-mail
that they want, and when they complain to the senders, they'll be
told, 'it's AOL's fault,' " said Richi Jennings, an analyst at Ferris
Research, which specializes in e-mail.

As for companies that send e-mail, "some will pay, but others will
object to being held to ransom," he said. "A big danger is that one of
them will be big enough to encourage AOL users to use a different
e-mail service."

In a broader sense, the move to create what is essentially a preferred
class of e-mail is a major change in the economics of the
Internet. Until now, senders and recipients of e-mail -- and, for that
matter, Web pages and other information -- each covered their own costs
of using the network, with no money changing hands. That model is
different from, say, the telephone system, in which the company whose
customer places a call pays a fee to the company whose customer
receives it.

The prospect of a multitiered Internet has received a lot of attention
recently after executives of several large telecommunications
companies, including BellSouth and AT& T, suggested that they should
be paid not only by the subscribers to their Internet services but
also by companies that send large files to those subscribers,
including music and video clips. Those files would then be given
priority over other data, a change from the Internet's basic
architecture which treats all data in the same way.

This Tuesday the Senate Commerce Committee will hold a hearing to consider
legislation for what has been called Net neutrality -- effectively banning
Internet access companies from giving preferred status to certain providers
of content. The concern is that companies that do not pay could find it hard
to reach customers or potential customers, threatening the openness of the

AOL and its parent, Time Warner, which also owns a large cable system
offering high-speed Internet access, have not taken a public stand on
the principle of Net neutrality. Neither has Yahoo, which has close
relationships with AT& T and Verizon. The issue of e-mail postage has
not yet come up in the debate over Net neutrality. In the next two
months, AOL will start accepting e-mail processed by Goodmail Systems,
a company in Mountain View, Calif., that will collect the electronic
postage and verify the identity of the sender. Goodmail has tested the
system with the participation of a few companies, including the
American Red Cross and The New York Times.

Paying senders will be assured that their messages will be delivered
to AOL users' main in-boxes and marked as "AOL Certified E-Mail."
Unpaid messages will be subject to AOL's spam-filtering process, which
diverts suspicious messages to a special spam folder. Most of these
messages will also not be displayed with their original images and
links. Users will be able to specify that unpaid messages from a
particular person or company should never be treated as spam, as they
can do now.

Yahoo will start trying out Goodmail's system in coming months, but it
has not decided how paid mail will be differentiated from unpaid, said
Brad Garlinghouse, vice president of communications products at
Yahoo. Goodmail will charge 1/4 cent to 1 cent per message, with
high-volume mailers getting the biggest discounts. It will give more
than half of that amount to the e-mail service provider.

When AOL started to explain the details of its plan last month to
companies that send a lot of e-mail, many quickly raised objections.

"No one wants Goodmail or any other provider to set up a tollbooth
that makes it cost-prohibitive for legitimate mailers to reach the
in-box," said Matthew Moog, the chief executive of Q Interactive. The
company runs a marketing service called CoolSavings that sends e-mail
to 10 million people a month who have requested it.

Mr. Moog said that he was very much in favor of systems that helped
distinguish the mail he sent from spam. But Mr. Moog added that he
wanted AOL and other Internet providers "to offer several competing
services to ensure that innovation continues and there is a
competitive market to drive fair pricing for the service."

For example, he said that CoolSavings already works with Bonded
Sender, a company used by Microsoft's Hotmail service and other
providers to identify sources of legitimate mail. Bonded Sender
charges a flat fee of no more than $20,000 a year to the
highest-volume senders, a fraction of what they would pay through the
Goodmail system. Mr. Moog said that the Goodmail system would at least
double the cost of an e-mail campaign. "I don't think the economics
work," he added.

Matt Blumberg, the chief executive of Return Path, the New York
company that runs Bonded Sender, said there was no need for the
Goodmail price to be so high.

"From AOL's perspective, this is an opportunity to earn a significant
amount of money from the sale of stamps," he said. "But it's bad for
the industry and bad for consumers. A lot of e-mailers won't be able
to afford it."

But Mr. Garlinghouse of Yahoo said that by making senders pay for each
message, they will be forced to be more discriminating in whom they
send e-mail to, which will benefit users.

"Because the cost of sending e-mail is so low, some players are not as
good at keeping their lists clean," he said. "I still gets e-mails
from lists I signed up for three years ago, but I haven't responded to
a single one."

As spam has started to clog millions of mailboxes, particularly over
the last five years, some people have suggested that requiring all
e-mail senders to pay some sort of postage would drive out spammers,
who can profit even if they sell their wares to a very small
percentage of mail recipients.

But in recent years the volume of spam has leveled off, in part
because of a new federal law that imposes penalties for many deceptive
e-mail practices. Moreover, most major e-mail providers have built
sophisticated filters that divert much of the spam. AOL says that spam
complaints from its members are down 75 percent since their peak in
2003. (These filters also capture about 20 percent of legitimate mail,
according to Ferris Research.)

A more troublesome problem now is phishing, messages that appear to be
from a bank or an online payment service and that seek to fool
recipients into divulging their passwords or credit card
numbers. Phishing has led Internet providers and other companies to
look for ways to help people identify legitimate mail.

Goodmail was founded several years ago with the idea that it would
charge postage for all mail, but it has narrowed its focus to mail
sent by companies and major nonprofit organizations, which will pay a
reduced rate. It does not envision that individuals will pay to have
their e-mail delivered.

"The e-mail in-box is a potentially dangerous place," said Richard
Gingras, the chief executive of Goodmail. "There is a tremendous need
for a class of certified e-mail that can convey to consumers that a
message is authentic."

Mr. Gingras argued that companies will be glad to pay the postage fee
because their customers will have more trust in their e-mail and thus
will buy more from them.

And Mr. Graham of AOL added that the portion of the postage it will
receive is justifiable compensation for the costs it has incurred in
developing systems to combat spam.

"We have some prerogative to move to a system that asks for other
people to participate and share the financial burden in making a clean
e-mail environment on the Internet," he said.

Copyright 2006 The New York Times Company

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