For the Week of October 20, 2003

The recent explosion of spam and spam viruses should be acting as a "9-11" call to the Internet community. The damage is that extensive. The growth of this danger is driven by Moore's Law, meaning it is growing exponentially. The risk to the community's existance is that great.

The Internet is a dumb network, and social sanction has, until now, controlled its abuse. That no longer works against some people. The American government will have a really tough time getting its arms around this, but the "evil-doers" in this case are claiming to be businessmen. They are businessemen who operate outside the business consensus.

Many businessmen operate outside the consensus. There are the land speculators and health insurance scammers who nail "street spam" to telephone polls. There are the telemarketing boiler rooms selling stocks. There are developers and contractors who ignore building codes to save a few bucks, renovators who dump asbestos shingles in public landfills, and small businessmen who take cash from their own till to avoid taxes.

In the real world we accept these losses. They are minimal. Few businesses who operate this way grow to any size, and most go out of business for other reasons. But this is not true in the online world. The success of a handful of spam gangs has spawned imitators around the world and clogged the Internet's arteries. The connection between spam gangs and virus writers has given the latter their first taste of cash flow. A small number can just do much more damage in an online world built on consensus than they ever could in a physical world where the majority rules.

When reporters interview spammers they all claim to be just businessmen. And they are aided by a huge marketing industry that refuses to see the bright line of PERMISSION as essential in the e-mail realm, and which thus fights laws mandating permission audits. If there were an industry supporting the Muslim terrorists, you can imagine how the government would react. (No, don't imagine - just click here . Yet no reaction is coming against these fellow travelers of the Internet Terrorists, and it's likely that none will.

Thus it is left to the community itself to find solutions.

One such proposal is Tripoli , offered by Lauren Weinstein of People for Internet Responsibility . The idea is that encryption keys would be sold to all users, who would require the support of these keys by all their correspondents, and who would hold these keys based on their own promises not to spam. They would then only accept e-mail from other users who held keys. Hopefully, this would include support for Permission Audits by all those companies that wanted to send e-mails in bulk, and an adjudication process for handling disputes.

It's a proposal worth considering, but as with all such proposals, many will quickly make the perfect the enemy of the good. What if your key is stolen by a spammer? Why should I pay for individual e-mail privileges? Who will judge, on what basis, and how will we assure it's fair? Is this not a private government?

Some of these arguments are legitimate, and can be dealt with. But others are excuses, from people who claim they're against spam but who don't really want to trample what they see as spammers' "First Amendment rights." But these rights, like all rights, are public rights, and private organizations are free to set their own membership rules (right Boy Scouts )? Managing such a database would be a large undertaking, but I nominate these folks - they've proven themselves good guys and could use the money.

There is a second, more ominous danger, in letting such a contract. That is, the contractor could become a Verisign . Verisign is much bigger than ICANN, the "government" which granted its license. It can buy the legal horsepower, and the technical wherewithal, to go around that government. Even if its control of the .com and .net DNS were lost, it could easily use Sitefinder to offer its DNS services to foreign governments, promising to let them share in its profits. The cash flow from mistaken calls to national databases, plus a share of the receipts from domain registrations, could easily move many nations to become the Internet equivalent of Liberia , which has long made big money by not regulating shipping, or Switzerland , which has long made big money by not regulating banking.

Any attempt to impose a world order on the Internet, in other words, may be circumvented by a nation that sees a profit in ignoring that order. As is true in gambling , and pornography , and even terrorism there is in fact no World Law, absent meaningful enforcement based on consensus.

This is in fact what makes me hopeful, despite the fact that the Internet evil-doers are often private businesses protected by American law and the government. An agreement on, say, e-mail, which achieved consensus among all major ISPs worldwide, would carry its own enforcement provision, especially if that consensus included an agreement to cut-off from the Internet any ISP that failed to sign on the line which is dotted. This need for consensus would also serve to make such a private legal regime minimally onerous, based not on content but on more technical grounds, which permission is.

So your Clue is this. ICANN holds its power under a license from the U.S. Department of Commerce. It considers itself the primary law enforcement agency of the Internet World.

It is time for Internet law enforcement to be privatized, and for the control of Internet law to move from the majoritarian impulses of government to the consensual needs of honest businesses with stakes in the result.

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Shameless Self-Promotion

My last book, "The Blankenhorn Effect" won the Computer/Internet category in the 2003 Independent Publisher (IPPY) awards .

You have my permission to forward this newsletter widely. And if you have trouble subscribing let me know. Remember: it's journalism that keeps the Clues coming...

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Shameless Promotion

Your list is your most important asset. But what happens when someone forgets who you are and you get on a "spam" blacklist? Your asset becomes worthless.

Need a-clue on how to avoid that? Get your list audited, and managed professionally, by the fine folks at Whitehat , part of the American Computer Group , a long-term leader in database services for direct marketers.

When your list is truly opt-in, not only do you become a white hat yourself, but your e-mails are read, even anticipated, by your audience. That means higher conversions and more money in your pocket.

If you're serious about Internet Commerce, you need Whitehat Interactive . Get it today.

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Takes on the News

Gore Cox

Two journalists have run for President in the last century. Both lost. And the second is now trying to walk in the footsteps of the first.

The first was James M. Cox. He was a three-term Governor of Ohio when he was selected in 1920 to succeed Woodrow Wilson, who was at the time incapacitated by a stroke. Cox fought the good fight. He picked Franklin D. Roosevelt as his running mate, and endorsed the League of Nations a Republican Senate had rejected. He got his clock cleaned by Warren G. Harding and his "Return to Normalcy."

Before entering politics, however, Cox had been a newspaper publisher, of the Dayton Daily News in Ohio. After 1920 he went back to work, and bought the Miami News in 1923 as a place to winter. In 1939 he bought a paper midway between them, the Atlanta Journal, so he could get prime tickets to the "Gone With the Wind" premiere.

Cox Enterprises was a very lucky outfit. Cox bought radio stations alongside his papers, when that was legal, and when TV came around in the late 1940s he let himself be convinced to take those licenses as well. By the time he passed away he was very, very rich, and his heirs have carried on in the same way. A grandson, James Cox Kennedy, now runs the outfit, which has grown into a multi-media powerhouse with cable and an auto auction outfit added.

Al Gore was not a publisher in his previous life. He was a reporter, like me. And he was in politics for 24 years, not 8. He went back to public life with only his celebrity, the friends he made while in office, and some big dreams. Those dreams start with a cable news station - he hopes to do for liberals what Rupert Murdoch's Fox did for conservatives.

There is a market for what he's trying to do. There are millions of liberals who feel disenfranchised by the current media. The question remains whether Gore has the business chops, or can find the capital, necessary to exploit this opportunity. The odds are against him, but they are against everyone. He mainly needs to find a role and find others who will fill the cast of his company.

I suspect he's in over-his-head because he lacks an Internet strategy, and the opportunity here may be bigger than in broadcast. The time has come for like-minded sites to affiliate, and someone who can bring such sites a steady income can do it. Instead of thinking "liberal cable," Al Gore ought to be thinking "Internet Commerce and Advertising." If he does he has a chance. Being wealthy can be the best revenge.

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Sell Yahoo

There's a new Internet bubble out there.

Barry Diller's Interactive Corp.(IACI) now has a price-earnings ratio of over 1,200. It has some nice real estate - Expedia, Travelocity, Ticketmaster - but we are long past the time of rewarding promise. It's performance that counts. Show me the money, on the bottom line, and I should evaluate you based on that. These are not businesses with incredible growth prospects.

Want more evidence? Yahoo's P/E is now over 120 . That's not the IACI territory it held during the first bubble, but it's still far beyond anything that can be justified based on its real prospects for growing sales and earnings. Amazon is also at record highs, despite the fact it is still bringing in no profit at all .

We haven't had that kind of spirit here since 1999. Relax said the night man, we are practiced to deceive. You can check in any time you like, but your money will never leave...

Making Up The Losses

When the Internet is used to bypass taxable activities, then tax revenues are reduced and politicians naturally want the Internet to pick up the slack.

The problem is that payment and enforcement mechanisms don't exist in the online world as they do in the real world. A bit is a bit, and no one can really tell if it's being used for an untaxed letter or a taxed phone call.

But Internet users, despite their libertarian impulses, must at some point admit that government services have value. Conservatives can point to the police and military, liberals to schools and hospitals, but we all have our favorites. Some mechanism must be found to pay for it all. By not engaging in the debate over how, advocates of the Internet are just allowing the debate to be driven by people who don't understand technology, and who will impose solutions that drive people off-line. That won't be good for anyone.

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Clued-in, Clueless

Clued-in is Michael Copps of the FCC for his warning that "the Internet is dying" due to monopoly-controlled regulation . Competition will become an issue in the 2004 election.

Clueless is the Chicago Tribune, which "discovered" that some blogs are well-written and influential. We don't need the condescension.

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