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

Andrew Olsen

Wireless Advertising Messaging:Legal Analysis & Public Policy Issues

By Ross D. PettyA Review :

University of Maryland University College

2Abstract

Wireless marketing is fairly new, but it is expected to top $8 billion by 2005. A majority of wireless

marketing is done by SMS and there were roughly 1 billion text messages exchanged by U.S. consumers in

December. Wireless advertising messaging (WAM) is not a major problem in the U.S. now, but it grew to

epidemic proportion in Japan and Europe. The U.S. is trying to take the necessary steps to avoid the same

problem 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 fighting

spam/WAM issues despite jurisdictional and constitutional concerns. Federal legislation has also been

proposed that deals with spam and privacy issues, but now it also includes language that would deal with

WAM. No legislation has yet passed and it would most certain face a First Amendment suit, but passage of

this legislation appears to be promising. The Wireless Advertising Association (WAA) has established

guidelines and others are also following suit in order to deal with this WAM issue. In addition, the wireless

industry is taking necessary steps to prevent spam from affecting its customers. There are still a lot of

issues that need to dealt with, but it will probably have to include a combination of advertising association

guidelines, 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 the

Cellular Telecommunications & Internet Association (CTIA) there are over 137 million wireless subscribers

in the United States (www.wow-com.com). What is new, however, is wireless marketing. The development

of wireless marketing is still at an experimental stage, but it is gaining ground. Wireless marketing is

expected to top $8 billion by 2005 (Swartz, 2003), but it is still only emerging in the U.S. At this point, the

majority of advertisements and alerts that are being sent is Short Message Service (SMS) text messaging.

3Text messaging has just recently begun to catch on widely in the United States over the past

couple of years, since wireless providers just recently agreed on an industry wide standard, but it is growing

dramatically in popularity. Roughly 1 billion text messages were exchanged by U.S. consumers in

December, which was up four times from the year before (Swartz, 2003). Wireless customers now pay

anywhere between $3 and $20 per month for the SMS text-messaging feature, but that is where the

problem surrounding wireless advertising develops.

WAM: The Problem

WAM or wireless spam is defined as push messaging related to the user’s location that is sent

without standard or confirmed opt-in and just like e-mail spam, it wastes time and resources, but it also

provokes the recipient even more because it could cost them valuable plan minutes. Since wireless

customers are paying to view wireless advertising messaging (WAM), they do not want to be spending their

money viewing junk advertising. Text messages can cost anywhere from 2 to 10 cents to receive, if it is not

included in the cost of the customer’s cellphone plan (Swartz, 2003). It could also cause enough

congestion to their wireless device that it could lead a network to crash. Privacy concerns are another

important issue because of WAM. Wireless consumers number one concern is privacy and most feel that

WAM poses a direct threat to their privacy. Many wireless customers are interested in services like voice

portals, 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 potentially

cause irreparable harm, expense to the customer, and undermine the value of an important communication

line between customers and advertisers. Spam whether wireless or email is something customers hate

and 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 and

Japan because text messaging and other wireless features has been a popular feature of wireless devices

4for years there. According to NTT Docomo, Japan's largest wireless carrier, 17% of its 38 million iMode

subscribers 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 in

2000, but is expected to grow to roughly $4 billion by 2005 (Jarvis, 2001). As traffic over wireless networks

continues to grow, WAM will also grow. Currently it is difficult to separate WAM from the other forms of

spam when trying to determine how to fight this growing problem more so because the difference between

computers and wireless devices are disappearing. Since there have been very few laws that have

specifically dealt with WAM, it has been very difficult to determine if current laws would apply to

advertisement sent to wireless devices via an e-mail address. The fact is that WAM is going to become a

considerable 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 unfettered

flow of information as applied to the regulation of unwanted text messages (WAM) sent to wireless devices

such as newer types of cellular telephones, pagers and personal data assistants (PDAs). The advent of

the wireless Web and related technical advances has pushed spam and other privacy issues onto the

agendas of service providers and vendors, as well as regulators. It starts off by giving an extensive

background on WAM and what role it has played in Japan and Europe and what the U.S. should expect. In

Japan it has been estimated that between 900 million and 1 billion text messages are sent on an average

day, and an injunction was recently granted when a firm sent 900,000 unsolicited text messages in a single

hour. Because of significant cost advantages in communicating to consumers through spam and WAM the

US market is projected to grow exponentially, raising the stakes on these policy issues.

5There are various forms of regulations, federal, state, and self that are currently in place and this

article examines what effect they have when dealing with WAM. The determination is that the U.S. does

not have current laws that anticipate all forms of WAM, but some believe that current state and federal laws

and regulations may work when dealing with WAM. Federal law already prohibits junk faxes and prohibits

telemarketers from making unsolicited calls to cell phones in order to protect consumers from paying for

ads they probably have no interest in receiving. Some already feel that these laws already cover SMS

messaging, but the issue has not been tested enough in the courts to know for sure. This is where the

constitutionality 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 and

according to FTC Commissioner Orson Swindle, "If you think spam is bad on your computer, wait until it

gets 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 have

been introduced in Congress. Congress is trying to give the FTC more power to catch and punish

spammers. So far, however, the FTC has rejected calls to fight email spam. They have cited limited time

and resources and decided to maintain their current level of enforcement, while working with the public to

explore solutions to the deluge of spam (Guerra, 2003). Out of these discussions, there has been a push

for the FTC to evaluate the legality and constitutionality of a consumer opt-out site for spam or a “do not

email” list, as it did with telemarketing. The FTC intends to have more workshops and hearings dealing

with spam and WAM.

Even the Federal Communications Commission (FCC) has stated that the legal status of cellphone

spam is murky. The Telephone Consumer Protection Act (TCPA) of 1991covers unsolicited cell-phone

traffic, but the FCC recommends that wireless customers ask their providers how they deal with text

6message spam under their plan (Holton, 2003). Ultimately, what the FCC is trying to determine is whether

wireless data, such as spam, is a telecommunications service, protected under the TCPA, or whether it is

an information service, which would not be regulated by the FCC. According to the FCC, spam would fall

under the TCPA only if it was sent to a wireless telephone number, not an e-mail or Internet address, but

what 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 would

impose legal restrictions on spam. Several, including California, Colorado and Tennessee, would require

that senders of unsolicited commercial e-mail place "ADV" in the subject line of the e-mail. There are a few

states that allow lawsuits against spammers that violate posted state policies. Other states, including

Connecticut, Delaware, Hawaii, Idaho, Iowa, Illinois, Maryland, Nebraska, Nevada, North Carolina,

Oklahoma, Virginia, Washington and West Virginia, have passed or are currently considering similar

legislation (http://www.spamlaws.com/state/index.html). However, it is the validity of the state laws banning

or limiting unsolicited commercial e-mail is currently in question. More specifically, it is the constitutionality

and jurisdictional issue of these state laws that are questioned. In addition, the debate is there whether or

not 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 to

do so, and because email is sent via wireless and wireline networks, the law applies to wireless spam as

well, (Goldman, 2001). California has followed suit and has one of the strictest spam regulations in the

country. Current California legislation, SB12, would require an opt-in system for e-mail and it would

become a misdemeanor to transmit unsolicited commercial email advertisements within the state or to any

7California resident's email address (Norr, 2003). Many other states are also looking to continue to tighten

their spam regulations and laws, however; again the question is how far can the state go to regulate

spam/WAM?

Federal Regulations:

Even though WAM is in its infancy in the U.S., legislation has been introduced that may help deter

the 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 has

either been continually stalled or abandoned in committee (Sampath & Miller, 2003). Currently, there are a

number of privacy-related and anti-spam bills that have been introduced before Congress and several of

them 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 is

currently pending in the Subcommittee on Telecommunications and the Internet. The Wireless Telephone

Spam Protection Act would make it unlawful for any person to use any covered mobile telephone

messaging system to transmit an unsolicited advertisement. It would also prohibit the FCC from exempting

from certain telephone regulatory requirements any call that violates such prohibition. This has been

introduced every year since 2001, previously as H.R. 113, but legislation against wireless spam appears to

be promising. The House Commerce Committee has taken up anti-spam legislation this year that would

include language to combat wireless spam.

A second bill that would deal with wireless spam is H.R. 2214, the Reduction in Distribution of

Spam Act of 2003, which had a hearing in the Subcommittee on Crime, Terrorism, and Homeland Security

this past July. This bill would go a long way to address the existing spam problem, while also trying to cut

off development of future spam problems, like wireless spam (Weaver, 2003).

8Several 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 a

system 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 and

spam concerns while also providing guidance to advertisers.

Any federal anti-spam law will have to survive a First Amendment challenge. The government

cannot regulate commercial speech unless it shows that the law is narrowly tailored to address a matter of

substantial government interest. There will be a lot of work in the various committees in Congress in order

to determine if lawmakers will be able to craft and enact an anti-spam law that will sustain a constitutional

challenge. In addition, a lot of spam comes from outside the U.S. and would not fall under the jurisdiction

of 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 government

regulation, which is why the WAA established guidelines that dealt with difficult and critical issues of privacy

and spam and offered well-needed guidance. Furthermore, the WAIA and the IAB have launched efforts to

define standards and best practices for delivering ads to cellular phones and handheld devices. They feel

more comfortable letting the customers tell us what they want and do not want and responding with their

dollars (Goldman, 2001). However, that has yet to prove successful and there is no guarantee that

members will adhere to these guidelines let alone the many nonmembers.

9AOL, Microsoft, and Yahoo are already working together to fight spam. The wireless industry is

also fighting to protect their customers from unwanted advertising and are taking steps to avoid the influx of

WAM. They realize that subscribers will change operators if they do not address this problem. Most

wireless carriers also prefer self-regulation along with rigorous opt-in requirements, which has been

advocated by the CTIA. In addition, wireless carriers are treating their networks like private property and

plan to kill off bulk text messages at gateways before they hit customer in-boxes. (“News briefs,” 2003). If

wireless carriers can operate and maintain their networks as their own private entities, they can set a new

standard 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 their

consumers from this growing problem.

Conclusions:

There is still no definitive answer about what to do when it comes to wireless spam. State

legislation along with effective federal legislation may have some effect. However, besides for

constitutionality and interstate commerce issues of such state and federal legislation, the law can only

regulate the means of transmission and not the content itself. In addition, some feel that legislation is

unnecessary because the industry already is heavily regulated and the market will take care of wireless

spam. Many in the wireless and advertising industry are very wary of government regulation and would

prefer self-regulations. National legislation would raise difficult issues about defining spam and they do not

want the government defining what or what not spam is. More so government regulations will affect those

that abide by laws and those are legitimate organizations, which are more apt to listen to and protect their

customers anyway.

No matter how hard the federal government tries, they will not be able to stop spam, but they could

make it more difficult. However, a solution could be a combination of comprehensive federal laws that

10include regulatory action, fines, and private lawsuits along with spam filtering. Basically, the combination

of advertising association guidelines, industry self-regulations, and proper federal oversight and/or

regulations, could prove to be the most effective tool in curbing spam and controlling WAM before it

becomes 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.

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