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Given at a Full Committee Hearing:
Hearing on Spam (Unsolicited Commercial E-Mail)
Wednesday, May 21 2003 - 9:30 AM - SR-253
The Testimony of
Mr. Ted Leonsis
Vice Chairman, American Online, Inc.

Chairman McCain, Senator Hollings, and Members of the Committee, on behalf of America Online, Inc., I would like to thank you for the opportunity to testify before the Committee on the issue of junk e-mail - or "spam." My name is Ted Leonsis, and I am Vice Chairman of America Online, Inc. and President of the AOL Core Service.

I would like to tell you a little bit about the nature of the spam problem and its effect on ISPs and Internet users, as well as some of the things that AOL is doing - along with our other industry colleagues - to help address this issue. But first, I would like to commend you for holding this hearing and taking a forward-looking approach to the spam problem at such a critical time. We believe that there is a strong and important role for government to play on this issue, and we are anxious to work with you to find a solution to this crisis.

Spam is one of the biggest problems facing Internet users and Internet service providers (ISPs) today. Junk e-mail clogs the arteries that carry communications across the Internet - misappropriating the network and resources of ISPs, and negatively affecting the online experience of Internet users. And because junk e-mailers do not bear most of the costs of sending their millions of messages, consumers and ISPs must shoulder the majority of the expense and burden of handling spam. Moreover, much of the mail contains objectionable or misleading advertisements. Consumers are being bombarded with offensive, deceptive, annoying e-mail; and legitimate commercial e-mail that consumers might want to read is being lost in a sea of junk. Clearly, spam is a significant business and consumer issue that needs to be addressed.

While spam has caused problems for ISPs and consumers for years, it has grown exponentially in recent months. Spam now accounts for 60-80% of all mail coming in from the Internet to AOL members, and AOL estimates that the overall volume of spam is doubling at least every four to six months. Spam is costing U.S. businesses in excess of $10 billion annually, clogging the Internet and overwhelming e-mail service providers (see Ferris Research at www.ferris.com). For everyone in the online world, spam is a burden that has reached crisis proportions - and it's only getting worse.

Fighting spam has become a serious quality of life issue for everyday consumers. At AOL, we're listening to our members and have declared spammers to be "Public Enemy #1." AOL has taken a number of important steps over the past few months to fight back against spam, basing our actions on the complaints and concerns of our members. First, we have deployed strong technologies across our network to block and filter spam. Our anti-spam filters are now blocking up to 2.4 billion pieces of unwanted mail per day, which means we are stopping almost 70 spam e-mails per account per day from landing in the e-mail inboxes of our members. And we've fine-tuned technology that stops spam before it happens by preventing spammers from gathering - or "harvesting" -- e-mail addresses from AOL areas. Second, we're enlisting our members in this fight by giving them new tools that make it easier than ever to block spam and report spammers. Our popular "Report Spam" button has resulted in a dramatic increase in the amount of spam being reported directly to AOL by its members - we now receive upwards of 9 million reports of unwanted e-mail per day. AOL's Mail Controls are easy to use and allow our Members to block e-mail from specific mail address or entire domains, or to create a "permit list" of addresses from whom they will accept mail. We're also providing our members with important consumer safety tips that can help them reduce spam and improve the security of their online experience -- particularly in the broadband environment, where it is critical that consumers know how to protect themselves in the world of "always-on" high-speed connections. Later this year we will introduce new spam identification tools that will be personalized for each member, so members can decide for themselves what is unwanted mail. And we will strengthen our already powerful Mail Controls, offering more ways stop spam before it reaches the inbox. In addition, AOL will -- in keeping with our longstanding commitment to providing strong Parental Controls -- take special steps to help provide kids on AOL with a safe, spam-free experience. In addition to the technology tools we use and provide to our members, we're also joining with other ISPs in waging war against spammers in court. Just recently, AOL filed lawsuits against over a dozen companies and individuals responsible for sending 1 billion spam e-mails to our members. We've taken more than 100 individuals and companies to court over the past few years, resulting in millions of dollars in monetary penalties against spammers. We're supportive of the actions that Earthlink and other ISPs have taken to fight spam on the legal front, and we look forward to finding new ways that industry can work together to bring spammers to justice.

We're also building alliances with others in our industry to think creatively and constructively about how to craft and implement real solutions to the spam problem. Just last month we joined with Microsoft and Yahoo! to announce a commitment to work together and with other industry stakeholders to combat spam. The group will initiate an open dialogue to drive the development of open technical standards and industry guidelines that will help fight spam, as well as discussing ways to cooperate with law enforcement efforts against large-scale spammers.

And finally, we're working with policymakers to support efforts to reduce unwanted e-mail. For example, we worked with Virginia legislators, the Attorney General, and the Governor to get a tough new law enacted in Virginia earlier this month that would provide criminal penalties for spammers who send junk e-mail by fraudulent means. We were also honored to participate in the spam workshop sponsored by the FTC several weeks ago, which served as a lively forum for debate and discussion about the complexities of the spam problem and how it can be addressed.

Yet despite these efforts, spam remains a problem for service providers and their customers, particularly because many spammers use fraudulent transmission tactics -- such as forging e-mail addresses and Internet domain names -- to circumvent filters that are designed to allow ISPs to manage their mail load and empower consumers to exercise choice. In fact, we believe that these "outlaw spammers" (those who engage in fraud) are the primary cause of the overall spam problem.

The "outlaw" spam problem includes: 1) e-mail that is sent using falsified means of technical transmission; 2) e-mail sent using hacked e-mail accounts; and 3)e-mail sent by spammers who intentionally abuse legitimate e-mail service providers by registering for multiple e-mail accounts or domain names using a false identity for the sole purpose of transmitting spam. "Outlaw" spam has increased alarmingly in the past year, and we believe that this dramatic growth underlies the astonishing increase in overall spam volume. These spammers are hijacking the computer resources and bandwidth of private consumers and businesses large and small, threatening to overwhelm the entire online medium.

With the spam problem reaching crisis proportions, we believe that government can play a strong role in helping fight spam - both through increased enforcement efforts and through the enactment of new laws to target spam. AOL believes that federal legislation can serve two purposes in helping to fight spam. First, it can help set baseline rules of the road for legitimate marketers who use the e-mail medium to reach consumers. Such rules, combined with industry standards and new spam-fighting technologies developed by relevant stakeholders, will help to ensure that marketers use e-mail responsibly and will also provide legitimate businesses with some clarity regarding the legal obligations governing their marketing operations.

Second, we believe that government action is critical to deterring "outlaw" spammers. Strong and effective laws - including tough criminal penalties - must be put in place to pursue and prosecute spammers who use fraudulent transmission tactics. The newly amended Virginia Computer Crimes Act is an example of a law that gives ISPs and law enforcement powerful tools for fighting "outlaw" spam. The Act calls for enhanced criminal penalties if, for instance, spammers employ minors to send spam or derive significant revenue from sending large-scale spam. This statute provides another way for law enforcement and service providers to take direct aim at "outlaw" spammers, using the law to put them out of business.

We hope that Congress will follow Virginia's lead by enacting legislation that will target "outlaw spam" by imposing stiff penalties on spammers who engage in techniques of fraud and falsification. Such legislation is needed not only to stop existing abuses, but also to safeguard new e-mail technologies that outlaw spammers may try to circumvent. We are pleased that many Members of Congress - including Members of this Committee - have taken an interest in the spam problem and are working to advance legislative solutions.

In the meantime, AOL is committed to maintaining a leadership role in the fight against spam. The goodwill and trust of our members depends on our continued focus on developing solutions to this problem. AOL will to continue to pursue strong enforcement actions and innovate our spam fighting tools -- putting our members in even greater control. But ultimately, we believe the spam battle must be fought on many fronts simultaneously in order to be successful. From technology to education, from legislation to enforcement, industry and government can work together to reduce spam significantly and give consumers control over their e-mail inboxes.

We applaud the Committee for examining this issue at such a critical time, and we look forward to working with you and other lawmakers to stop spammers in their tracks.

Thank you for the opportunity to testify; I am happy to answer any questions you may have on this topic.