Thank you Mr. Chairman and members of the Committee. I am very grateful to have been invited here today to discuss the issue of unsolicited commercial e-mail.

I am here today representing my firm, AllAdvantage.com, a world leader in the emerging Infomediary industry. As one of the world's largest Infomediaries, AllAdvantage.com works as an agent for consumers. We provide consumers with the means to take control of the way information is gathered about their Web habits, and to benefit from the collection and use of their personal information. Because we strictly maintain the privacy of the personal information they share with us, we are able to build a relationship of trust with consumers, providing them with relevant content, including advertising, individually targeted to their interests and preferences. To become the world's most trusted Infomediary; we depend upon not only consumer trust in us, but also upon consumer trust in the entire electronic commerce marketplace.

As one of more than 200 corporate members of the Coalition Against Unsolicited Email (CAUCE, www.cauce.org), a grassroots coalition of businesses and consumers concerned with the problems of spam, and an association for which I sit on the Board of Directors, AllAdvantage takes the issue of spamming very seriously. The reason I am here today is to share with you a sense of why AllAdvantage sees spam as a threat to not just our company, but to the future of our industry. I also want to discuss with you some of the lessons I have learned in dealing with companies who have been on the receiving end of a flood of spam. Finally, I wish to present some conclusions I have drawn about the appropriate role for the Congress to play in solving this problem.

Let me be clear about one thing at the outset: AllAdvantage is not eager to see burdensome regulations imposed on electronic commerce. Our first preference is for technology to provide an answer to an abuse that technology has made possible. However, as one who has worked for many years on technological solutions to the spam problem, I can speak with some authority to the fact that technology alone cannot end the scourge of spam.

I worked for many years as a technology consultant and as an attorney in private practice for clients consisting primarily of Internet ``startups'' and Internet service providers (ISPs). On occasions too numerous to count, I received panicked phone calls from companies whose businesses were under assault from spammers. Sometimes their systems would crash under the weight of millions of e-mail messages to their service's subscribers. In other cases, their domain name had been appropriated by a spammer, used to deflect complaints or to absorb undeliverable (``bounced'') e-mail, messages that were now flooding their server. In still other instances, the spammers might even have hijacked their mail server to deliver a flood of mail to another site. Recently, the House of Representatives own system crashed due to a spammed message from an exuberant staffer.

Always the conversation would follow the same pattern. After confirming that they had taken an array of technical steps to limit the load of incoming spam and implemented measures to repair any damage done, talk would turn to the question of legal recourse. Explaining to them the state of the law on spamming, and reviewing their legal options, inevitably they would come to the same conclusion that countless other victims had: pursuing a legal case is not worth the trouble or expense. Even if the chances of winning a suit were high, the likelihood of recovery was miniscule.

This fact highlights the double-edged promise of bulk unsolicited commercial e-mail. Sending e-mail in bulk costs the sender a fraction of the cost of sending postal mail or making telemarketing phone calls. One person can generate huge volumes of mail with just a few clicks of a mouse, blanketing millions in a matter of minutes or hours. However, the ability for one individual to generate enough e-mail to take down the systems of a multi-million dollar corporation means that on a daily basis we are faced with situations in which a single person's actions can cause damage and business losses often far in excess of their ability to pay for the trouble they cause.

When turned into an advertising medium, the skewed economics of e- mail turn traditional notions of advertising on their head. In virtually no other advertising medium does the advertiser get to force the recipient to bear more costs than they do. At least with television, print ads in newspapers, or advertisements in the U.S. Postal Service, the sender incurs significant initial costs and is forced to target their advertising carefully because each additional ad bears in incremental cost.

But in the world of junk e-mail marketing, it costs no more to send the first e-mail than it does to send the ten millionth e-mail. Thus, there is every incentive for the marketers to cast their advertisements as widely and indiscriminately as possible. There isn't even an incentive to remove duplicate addresses from mailing lists. And why not? When advertisers pay nothing more for each additional message, any time spent on editing a mailing list is time wasted.

Nobel Prize-winning economist Ronald Coase wrote eloquently about the damage done when costs are chronically externalized onto an ever- widening base. Coase discussed the dangers to the free market when an inefficient business--one that cannot bear the costs of its own activities--distributes its costs across a greater and greater population of victims. What makes this situation so dangerous is that when millions of people only suffer a small amount of damage, it becomes too costly for the victims to recover their tiny share of the overall damages. Such a population will continue to bear those unnecessary and detrimental costs unless and until their individual damage becomes so great that those costs outweigh the transaction costs of fighting back.

The classic example is pollution: It is much cheaper, in raw terms, for a chemical manufacturer to dump its waste into the local river than to treat it and dispose of it in a more environmentally sensitive manner. By creating such ``externalities,'' as economists call it, the creator can maximize their own profit, even if it comes at another's-- or everyone's--expense. Certainly those who are harmed by poisons in a river might have a cause of action under civil law to recover their actual damages. But for the vast majority of victims, there are significant transaction costs involved in bring individual lawsuits. For most, those costs will prohibit them from ever seeking redress. As a result, the skewed economics in this example give incentive to the polluters while making it prohibitive for victims to seek a remedy. Hence, governmental intervention became necessary.

Much is the same when it comes to spam. While some companies have successfully sued junk e-mailers for the damage they have caused, very few ISPs can afford to fight these kinds of cutting edge cyberlaw battles. As a result, the economics favor the abusers and disfavor those victimized. Indeed the mailers are counting on the fact that the incremental costs foisted upon each individual member of the public at large will be ignored, and on the occasions when those costs become aggregated in the crash of an ISP, they know that they present too small of a target to be worth suing.

As Coase pointed out, this is a prescription for economic disaster. When inefficiencies are allowed to continue, the free market no longer functions properly. The ``invisible hands'' that would normally balance the market and keep it efficient cannot function when the market is carrying dead weight and perpetuating chronic inefficiencies. Unchecked, businesses that are (and should be) otherwise unprofitable will indefinitely leech off the indirect subsidies they extract from the public at large.

In the context of the Internet, the costs of these externalities can be seen every time you have trouble accessing a Web site, whenever your e-mail takes 3 hours to travel from one ISP to another, or when all your e-mail is lost in a server crash. But the costs do not stop there.

With spam, the number one complaint of most Internet users, we see that consumers have deserted many public discussion forums for fear that their e-mail addresses will be ``harvested'' and added to junk mail lists. Customers are afraid to give their addresses out in legitimate commerce for fear of being added to and traded among thousands of mailing lists. Legitimate businesses are afraid to use e- mail to communicate with their existing customers for fear of being branded net abusers.

AllAdvantage believes that consumer distrust of the medium is the greatest impediment to the growth of e-commerce--a belief borne out in study after study. A recent Gartner Group survey indicated that 34% of respondents saw spam as an invasion of their privacy, while 63% of respondents to an Intelliquest survey cited spam as the reason they feared making online purchases. Because of its impact on consumers' online habits, we believe spam is a threat to our business and to the entire online industry. As an advocate for our members, we believe that by giving individuals and ISPs the legal tools needed to stop spam, and by avoiding cumbersome and costly procedures, consumers are better served.

In particular, our hope is to see legislation that recognizes the right of individuals and businesses to be free from bearing the costs of unwanted advertising. AllAdvantage supports legislation that will allow the marketplace to determine the value of unsolicited commercial e-mail, with senders clearly able to discern recipients' desires, and recipients given recourse if their rights are violated.

First, we believe that service providers should be permitted to set policies based upon the preferences of their customers, up to and including the unrestricted right to undertake such technical measures as they deem necessary to limit the amount of spam entering their systems. Already, dozens of ISPs cater to the wishes of parents and religious communities who wish to buy Internet access that filters out unwanted and offensive materials. The ability of service providers to respond to consumers' desires for such content-based blocking should not be hindered.

Second, we believe that operators of mail servers, be they service providers, private businesses, or school, should be permitted to publicly post a policy stating whether they accept unsolicited commercial e-mail, and if so, under what terms. For those who do not wish to accept unsolicited commercial e-mail, the notice should be respected and treated under law much like a ``No Trespassing'' sign on the border of one's private property. For those organizations that agree to accept unsolicited commercial e-mail, such a system could enable senders and recipients to negotiate a fair delivery arrangement, in effect establishing a marketplace for spam.

Providing a server-based ``No Trespassing'' sign is already possible today, a fact acknowledged in H.R. 2162. The technology is already built into virtually every e-mail server in operation today, and even as I address this committee, hundreds of e-mail servers around the country are already broadcasting their spam preferences to every prospective e-mail sender, if they know what to look for. This technique, called ``SMTP Banner Notification,'' gives advertisers ample opportunity to avoid unintended liability by allowing them to quickly and authoritatively assess the publicly posted policies of service providers. All that is needed in this regard is for Congress to acknowledge that such a notification process is possible and to establish the legal weight of the notice transmitted through it.

Third, and finally, we believe that if a sender of unsolicited commercial e-mail fails to heed the wishes of recipients through such public notices, the law should permit both individuals and businesses harmed by spam to seek recovery by bringing private attorney general (qui tam) actions in court. For those individuals or businesses who cannot afford to bring such actions to enforce their rights, we would like to see them be able to petition the Federal Trade Commission to bring an enforcement action on their behalf. This dual approach is already contained in H.R. 3113 and we believe it is an excellent starting point.

By carefully assembling pieces of both H.R. 2162 and H.R. 3113, we believe it is possible to craft a bill that is stronger than either of the bills taken separately. We believe that combining the complementary portions of both bills will produce a measured approach that gives maximum flexibility to service providers and their customers, while also giving responsible marketers ample opportunities to reach audiences that will be receptive to their information.

AllAdvantage, along with a coalition of business and consumer groups, has been honored to share with Representatives Wilson and Miller new language that we believe draws from the best ideas contained in bills H.R. 2162 and H.R. 3113. Through the leadership of these outstanding Members of Congress, and hopefully with the input from and support of Representatives Goodlatte and Boucher--two of the most respected advocates for strong Internet commerce--we hope to be able to take part in crafting a compromise. We would like to thank the talented staff in the offices of Representative Wilson, Representative Green and Representative Miller for allowing our coalition to share our concerns and ideas.

It is my hope that we can ultimately reach agreement on language that can win not only bipartisan support in Congress, but can be supported by e-commerce firms, ISPs, advertisers, and advocates for consumers. If we can meld the approaches contained in these two bills, I believe we can reach language that will give ISPs and e-commerce businesses the tools they need to react to the concerns of their customers, without creating unnecessary government involvement in the Internet.

In conclusion, electronic mail is a marvelous tool of business and personal communication. It is simple, it is accessible, and it is becoming more and more an indispensable part of our professional lives. Yet in just a few short years, the outrageous volumes of unsolicited advertisements by e-mail have clearly begun to have a profoundly negative effect upon all Internet commerce. My fear is that the untapped potential of e-mail may be lost if its functionality and utility are destroyed by the unchecked activity of the extreme minority of individuals who send unsolicited commercial e-mail. Unless Congress acts to preserve the viability of the medium and to give businesses and consumers the ability to protect themselves from floods of unsolicited e-mail, our electronic mailboxes will cease to be a useful tool for business and personal communications and we will have squandered one of the most powerful tools of communication this planet has ever known.

Thank you, Mr. Chairman, for allowing me the opportunity to address the committee. I look forward to answering any questions you might have.