Appeared in the Toronto Star on February 13, 2006 as Two-Tiered Email To Hurt Consumers
Appeared on the BBC on February 13, 2006 as Email Changes Spark Two-Tier Fears

America Online and Yahoo!’ s recent announcement of a new fee-based system for commercial email has generated enormous discussion within the Internet and marketing communities.  Supporters argued that the plan represents an innovative marketing approach that will help reduce spam.  Detractors, on the other hand, fear that the plan will choke off free speech by limiting the use of email to those who can afford to pay millions in new service fees.

Closer examination of publicly available information regarding the plan reveals that the proposed email fee-structure, commonly referred to as certified email, will actually do little to address spam and may not attract a large client base.  Rather, its more significant impact lies in the fact that it is yet another step toward the two-tiered Internet that will ultimately shift new costs to consumers.

With spam now accounting for the majority of all email traffic, the reliability of email has greatly diminished.  Where Internet users once trusted that their email correspondence would arrive at their intended destination, layers of spam filters designed to keep spam out of individual inboxes has also had the unfortunate effect of blocking legitimate email.

Large email providers such as AOL and Yahoo!, who together represent more than half of the email addresses on many U.S. consumer email lists, have sought to work with legitimate marketers by employing a "white list" that enables email sent from pre-identified addresses to arrive unhindered at no additional cost.

While that approach has been fairly successful, AOL and Yahoo! have floated plans to replace the white list approach with a certified email system managed by a company called Goodmail.  Under the certified email system, marketers would pay a fraction of a cent per email in return for guaranteed delivery that by-passes spam filters (AOL initially indicated that would drop the free white list by the summer, though it backtracked soon after in the face of mounting criticism).

Notwithstanding the link between certified email and spam, it is important to note that it has little to do with reducing spam.  Unlike spam, which is unsolicited commercial email, certified email only involves email that recipients have agreed to receive.

In fact, there is a danger that the plan could ultimately hinder the fight against spam, since there is an inverse relationship between the attractiveness of certified email and the effectiveness of spam filtering.  In other words, as the accuracy of spam filtering decreases (ie. greater blocking of legitimate email), the desirability of a certified email system that guarantees delivery increases, creating incentives for email providers to reduce the effectiveness of their spam filters in favour of a lucrative certified email system.

While there is good reason for concern about the negative impact of certified email on spam filtering, there is also ample reason to doubt that it will prove popular with marketers.  Marketers estimate that approximately 95 percent of legitimate email arrives at its intended destination.  If AOL and Yahoo! account for half of consumer email addresses, marketers will have to balance the value of paying to deliver emails for half their list against the loss of 2.5 percent of intended recipients.

If certified email does little to reduce spam and may not present an attractive business model, why all the attention?

There are at least three reasons.  First, many non-commercial organizations such as charitable or civil society groups may not have the resources to even engage in a cost-benefit analysis of certified email.  For those groups, many of whom depend upon email as their primary method of communication, the shift from low-cost email to certified email could have a debilitating effect.

Second, while consumers enjoy considerable choice among email providers, switching costs remain high since advising contacts of an email address change is a laborious process that invariably results in lost connections and missing emails.  In many respects, this market resembles the wireless phone market, where the lack of consumer mobility stems not from a lack of choice but rather from the ongoing delays in number portability that would allow consumers to switch providers but retain their existing cellphone number.  

Third, this marks the continuing progression toward increased differentiation – or tiering – of Internet services.  Users and websites are accustomed to a straightforward model that involves a flat fee for an established service.  In recent months, ISPs and now email providers are challenging those assumptions by moving toward two-tiered pricing, two-tiered access, and two-tiered email delivery.  

This movement represents a fundamental reshaping of the Internet.  It requires the active involvement of regulatory agencies such as the CRTC and the Competition Bureau in order to ensure that the dominant Internet access and service providers do not harm the long-term potential of the online world.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

Correction (Feb. 13/06): Yahoo! has advised that it is not planning, nor has the company ever
planned, to replace its white list with a certified mail accreditation program.  It is, however, planning to test the Goodmail certified email program in the coming months.