Archive for the ‘service providers’ tag

Gas, Electric, Water, and…Internet?

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In the midst of the battle for the future of the Internet, President Barack Obama has made his allegiance clear. Obama released a statement on November 10th urging the FCC to adopt new regulations that would treat the Internet like a utility in order to preserve a “free and open internet.” The President’s plan endorses an idea that has become popularly known as “net neutrality.” Proponents of net neutrality claim that it would prevent Internet service providers (ISPs) from picking winners and losers online, which they claim would effectively destroy the open Internet. In his recent statement, Obama outlined several bright line rules which would prevent ISPs from blocking content from customer access, prohibit throttling, increase transparency, and forbid paid prioritization. In order for the FCC to accomplish these goals, President Obama advised that the Commission must adopt the strictest rules possible, which would require broadband service to be treated as a public utility.

Opponents of President Obama’s plan argue that treating the Internet like a utility would slow innovation and raise costs, equating the potential FCC regulations to “micromanagement.” Many who oppose the plan argue that the move would increase bureaucracy and cause inefficiency; rather than add it to the list of government-controlled infrastructure, they believe that the open market is the best method of meeting consumer needs.

Classifying the Internet as a utility would entail treating ISPs as common carriers, which are governed by Title II of the 1934 Telecommunications Act. Currently, ISPs are classified as information services. Section 706 of the 1996 Telecommunications Act, which governs the FCC’s oversight of broadband services provided by ISPs, grants the Commission only limited power when compared to FCC control over common carriers under Title II. According to George Foote, a lawyer who works closely with the FCC, this reclassification would be a major shift in FCC policy, and would run counter to the “decades-long efforts to deregulate.”

Net neutrality has become a hot-button issue as of late, and the debates have intensified since the U.S. Court of Appeals for the D.C. Circuit struck down previous FCC rules relating to equal treatment of Internet content. Judge David Tatel wrote for the court, stating that because “the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such. Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order.” The reclassification of Internet as a utility under Title II, however, would do away with the exemption, and afford greater control to the FCC over ISPs, which would now be “common carriers.”

President Obama’s stance on classifying the Internet as a utility puts him in somewhat unfamiliar company, as Supreme Court Justice Antonin Scalia advocated this same approach in National Cable & Telecommunications Association v. Brand X Internet Services in his dissenting opinion. 545 U.S. 967, 968 (2005). It also puts side by side with former FCC chairman Reed Hundt and former FCC commissioner Michael Copps. Meanwhile, many of those across the aisle, including Republican Senator Ted Cruz and Republican House Speaker John Boehner oppose the President’s plan.

In the end, President Obama’s statements are only persuasive. The FCC is an independent agency and, as such, Obama recognized that this decision is “theirs alone.” As the war for the future of the Internet continues to rage on, however, net neutrality has gained a powerful ally.

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January 8th, 2015 at 4:03 pm

Yielding to FCC Pressure, Verizon Scraps Plan to Extend Data Throttling to 4G Customers

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Last week, Verizon appeared to cave to FCC pressure when it shelved a new network management policy which would have extended the controversial practice of “data throttling” to 4G customers with unlimited data plans.  Verizon’s decision put an end to its two-month spat with the FCC over whether the new policy would have violated the FCC’s Open Internet Order.

To provide some background: Verizon has “throttled” (i.e. slowed) data speeds for some customers on its 3G network since February 2011.  This practice only affects customers on “unlimited” data plans whose data usage ranked in the top 5%, and only lasts for the duration that they are connected to a “congested” cell site.  On July 25 of this year, Verizon announced that, starting in October, it would extend this network management policy to its 4G network.

Luckily for 4G customers on unlimited data plans, the FCC was paying attention.  In a letter sent less than a week after Verizon’s announcement, FCC Chairman Tom Wheeler expressed doubts as to whether the new policy fit within the Open Internet Order’s definition of “reasonable network management.”  In particular, Mr. Wheeler found it “disturbing” that Verizon would “base its network management on distinctions among its customers’ data plans, rather than on network architecture or technology.”   Verizon responded swiftly to Mr. Wheeler’s criticism.  In a letter sent just two days later, Verizon explained that the policy targeted customers on unlimited data plans because they do not have an incentive to limit their data usage, which made them disproportionately responsible for network congestion.  On its face, this argument seems reasonable—after all, the FCC gives “mobile” broadband providers more leeway to manage their network than it does “fixed” broadband providers.  So why wasn’t the FCC satisfied?

From the FCC’s point of view, the fatal flaw in the new policy was not that Verizon throttled data speeds for some customers, but that Verizon chose which customers it throttled based on their data plans.  If the new policy’s purpose was to discourage or punish heavy data users, then it should not matter whether the customer being slowed had unlimited data.  Put another way, a customer with a 4G device who uses 5 gigabytes worth of data per month puts the same strain on Verizon’s network regardless of whether the customer is on a usage-based plan or an unlimited plan.

Had the policy gone into effect, it would have effectively forced 4G customers on unlimited data plans to choose to either (a) put up with potential throttling, or (b) switch to usage-based data plans (which are more profitable for Verizon).  As both of these options would have resulted in customers receiving something less than “unlimited” data, the FCC was understandably skeptical of Verizon’s motive behind the new policy.[1]

Regardless of whether the FCC’s concern was justified, Verizon’s decision to throw in the towel was likely influenced by other concerns.  For one, this dispute came at an awkward time between Verizon and its chief regulator.  Earlier this year, Verizon successfully challenged many of the FCC’s “net neutrality” regulations, which the FCC is currently in the process of rewriting.  Consequently, Verizon may have decided that it risked stricter regulations if it continued to fight.  (The fact that the FCC held a roundtable in September in which it discussed rescinding some regulatory exceptions for mobile broadband networks seems to reinforce this idea.)  It’s also possible that Verizon decided it was unlikely to persuade the FCC in light of the FCC’s recent requests for information from other major wireless carriers’ regarding their own data throttling policies.  This move could signal that the FCC intends to more carefully scrutinize network management policies going forward, or even that the FCC will be less permissive of data throttling policies going forward.

Whatever Verizon’s true reason was for ditching its policy, the significant number of customers who remain on unlimited data plans suggests this may not be the last we hear about “reasonable network management” practices.


[1] By contrast, when Verizon first began throttling speeds for 3G customers in 2011, customers on unlimited data plans still had the option to keep their plans without speed limits by upgrading to the higher-capacity 4G network. In fact, some industry experts speculated that Verizon began throttling 3G precisely to encourage customers to make the switch to 4G.

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October 27th, 2014 at 6:56 pm

Are Your E-mail Communications Protected by the Stored Communications Act?

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Last month, the Supreme Court of South Carolina ruled that the Stored Communications Act (“SCA”) did not protect e-mails contained in a user’s webmail account. Jennings v. Jennings, No. 27177 2012 WL 4808545 (S.C. Oct. 10, 2012). The e-mail user sued his wife and her relative for violating the SCA by accessing his Yahoo! account to obtain e-mails he exchanged with another woman.

The SCA was enacted in 1986 as part of the Electronic Communications Privacy Act and provides protection to electronic communication service providers and users by limiting when the government can compel disclosure of certain communications, limiting when service providers can voluntarily disclose information, and providing a cause of action against a person that intentionally obtains an “electronic communication while in electronic storage” without authorization. 18 U.S.C. § 2701(a)(2) (2000). Due to outdated definitions, the SCA affords little protection to internet communications exchanged today.

An electronic communication service is a service providing “electronic storage,” which is defined as “(A) any temporary intermediate storage of a wire or electronic communication incidental to the electronic transmission thereof; and (B) any storage of such communication by an electronic communication service for purposes of backup protection of such communication.” 18 U.S.C. § 2510(17) (2000). This definition of electronic storage tracked the way e-mail was used at the time the SCA was enacted; mail was temporarily copied and stored before being downloaded to the recipient’s computer. Today, webmail services allow the user to access mail on the web through any computer rather than require the user to download the mail onto their personal computer, which raises the question of whether webmail is ever in temporary intermediate storage or stored solely for backup protection.

The Department of Justice (“DOJ”) has adopted a narrow interpretation of “electronic storage.” According to the DOJ, a communication is not electronic storage under §2510(17)(A) unless it is stored in the course of transmission, and communications stored as backup protection under § 2510(17)(B) are those that are stored by the service provider as a backup copy prior to delivery to the recipient. CCIPS, U.S. Dep’t of Justice, Searching and Seizing Computers and Obtaining Electronic Evidence in Criminal Investigations, 123 (3d ed. 2009). Conversely, in Theofel v. Farey-Jones, the Ninth Circuit found that e-mail read by the recipient but still available on the server was stored for the purpose of “backup protection” and thus protected by the SCA under § 2510(17)(B). 359 F.3d 1066 (9th Cir. 2004).

In Jennings, a lower court relied on Theofel in determining that the e-mails were in electronic storage “for purposes of backup protection.” The Supreme Court reversed, holding that the “passive inaction” involved in opening e-mail and leaving the single copy on the server cannot constitute storage for backup protection. Based on this holding, it is unclear whether any web-based e-mail communication would be protected under the SCA. Although the question of whether the e-mail could be protected under §2510(A) (“temporary intermediate storage of a wire or electronic communication”) was not raised in Jennings, it is unlikely that any opened e-mail could be said to be “intermediate storage.” The SCA’s outdated definitions are difficult to apply to electronic communications as they are used today and therefore do not adequately protect web-based communications.

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November 12th, 2012 at 8:24 am

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The FCC v. ISPs: Net Neutrality and the Battle for Internet Freedom

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In December 2010, the FCC announced its new ‘net neutrality’ rules, in efforts to promote “freedom and openness” of the Internet and to prevent service providers from limiting which Internet sites and services their customers can access and controlling access speed.  Proponents view this as a noble effort to maintain Internet values, but critics believe the FCC is overstepping its boundaries and that such limitations will cause broadband investment to suffer.  Verizon Communications and MetroPCS Communications filed suit against the FCC in early 2011, alleging the agency had overstepped its regulatory power.  Their complaints were speedily dismissed, not on merits, but because the two had brought suit too quickly, before the new rules had even been published in the Federal Register.

The new rules are now officially published, and Verizon is again challenging the FCC’s authority in regulating Internet traffic.  The telecommunications giant is bringing this suit (like the previous one) in the D.C. Circuit — the same court that held in April 2010 that the FCC could not prohibit Comcast from slowing access to certain Interest sites, likely in hopes that the court will similarly limit the agency’s authority this time around.  The ruling called into question the Commission’s regulatory power over Internet services and prompted analyst predictions that the FCC or Congress would adopt new rules to clearly define the agency’s power, and it looks like they were right.

Published in the Federal Register on September 23, The Commission’s new rules codify three protection principles:

“First, transparency:  fixed and mobile broadband providers must disclose the network management practices, performance characteristics, and commercial terms of their broadband services.  Second, no blocking:  fixed broadband providers may not block lawful content, applications, services, or non-harmful devices; mobile broadband providers may not block lawful websites, or block applications that compete with their voice or video telephony services.  Third, no unreasonable discrimination:  fixed broadband providers may not unreasonably discriminate in transmitting lawful network traffic.”

While the rules aim to provide equal access to Internet sites and services, they also establish different standards for wired (such as Comcast) and wireless (such as AT&T) service providers, giving a little more flexibility to the latter to limit access (due to the challenges of managing data traffic on the more easily overwhelmed wireless networks).  The next lawsuit comes in here — Free Press, a media advocacy organization, has filed a lawsuit against the FCC claiming the wired and wireless distinction is nothing more than arbitrary.  There is much criticism for the rules in general, not only for the wired/wireless distinction, but there are also accusations that the FCC has only provided vague policy still full of loopholes.

Congress itself isn’t entirely on board either.  Back in April, the House voted to repeal the rules, questioning the need to further regulate the Internet and highlighting fears that limitations on broadband systems would discourage investors.  Without Senate support however, the rules are still on track to go into effect on November 20.

The biggest question and concern, however, is how these new rules will effect the consumer and the Internet landscape for future innovators of Internet sites and services.  It’s pretty to clear to see how prohibition on access limitation is a plus for the average web browser.  But regulation could come at a price for everyone.  Problems faced by services providers are legitimate from a business model perspective, and could ultimately negatively affect the consumer if there is no leeway in controlling access.  Given the volume of data transfer and finite capacity of broadband systems, some connection is going to slow down somewhere for someone, providing more ground for usage-based pricing models and tiered-access packages.

Can the regulators and providers keep speeds up and prices down? There is much to be seen as the rules become effective and the lawsuits roll in.

AT&T and T-Mobile Merger Confronts the Horizontal Merger Guidelines

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Last week’s announcement that AT&T is buying T-Mobile from Deutsche Telekom for $39 billion should raise serious antitrust concerns with regulators analyzing the deal under the horizontal merger guidelines of the Department of Justice and Federal Trade Commission. The Wall Street Journal reported that antitrust specialist Herbert Hovencamp thinks the deal will face difficulty with the merger guidelines.  Hovencamp stated that “it’s a pretty highly concentrated market” and “the guidelines would say this is a highly questionable merger unless there is a significant provable efficiency.”

Guideline Factors

Many of the factors which make a merger questionable under the guidelines are present in this deal.  First, the deal would eliminate substantial head-to-head competition between AT&T and T-Mobile, the 2nd and 4th largest wireless carriers nationally.  Second, it would eliminate T-Mobile’s arguable “maverick” or disruptive role in the market caused by its cheaper wireless plans.

Third, it would dramatically increase AT&T’s market shares in the relevant market and increase market concentration.  The merger would give AT&T approximately 129.2 million subscribers compared to Verizon’s 94.1 million subscribers and Sprint’s 49.9 million subscribers.  AT&T and Verizon would together hold more than 70 percent of the “U.S. mobile service provider market” with Sprint and other competitors far behind.

A calculation of the deal’s Herfindahl-Hirschman Index (“HHI”), a tool used by regulators to analyze market concentration, in the national market for mobile services demonstrates the intense market concentration.   This analysis gives a pre-merger HHI of 1990, post-merger HHI of 2406, and change in HHI of 416.  A mere change in HHI greater than 100 can raise the eyebrows of federal regulators.  Here, we have an significant change in HHI of 416 in a market that is near highly concentrated (anything greater than 2500 is highly concentrated).

AT&T Counter-Arguments

AT&T will challenge federal antitrust regulators with at least three potent counter arguments.  First, the numbers used to calculate market concentration above are incorrect because the relevant geographic market is not the United States.  AT&T wants to calculate market concentration on a city-by-city basis in order to demonstrate that the largest markets, which may have more market players, are more competitive than the United States as a whole.  Second, Hovencamp’s “significant provable efficiency” exists in the efficiency gains created by combining the wireless spectrums of AT&T and T-Mobile.  Indeed, the merger guidelines contemplate that efficiencies matter in antitrust analysis.  Third, when all else fails, AT&T might be willing to divest itself of a “substantial” number of subscribers to satisfy regulators.

Still, the guidelines will be a significant hurdle in the months ahead.  But AT&T is confident, given that the company has committed to pay Deutsche Telekom $3 billion if the merger does not close. After all, it seems unfathomable that AT&T would attempt this purchase if the company’s highly-sophisticated team of lawyers did not believe the deal could overcome antitrust concerns raised by the elimination of a head-to-head competitor, the elimination of a disruptive market player, and the significant increase in market concentration and market power.

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April 3rd, 2011 at 10:04 pm

Mystery Solved: Verizon Settles With FCC Over “Mystery Fees”

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The Federal Communications Commission announced on Thursday, October 28, 2010 that it had reached a record settlement with Verizon Wireless over the telecommunications giant’s so-called “mystery fees.”  Verizon has agreed to pay a staggering $25 million to the U.S. Treasury and will refund $52.8 million to approximately 15 million customers for wrongfully charging customers over the last three years.  This is the largest settlement payment in FCC history.

The FCC’s Enforcement Bureau began its investigation of the mystery fees in January 2010.  The focus of the investigation was on unexplained “pay-as-you-go” data fees charged to Verizon Wireless customers that are not subscribed to a data package or plan.  Beginning in November 2007, Verizon erroneously charged $1.99 per megabyte for data sessions that customers did not intend to initiate.  For example, customers not signed up for data service were charged when they accidentally pushed buttons that opened the web browser capabilities on their phones.  Data sessions were also initiated by phone applications that automatically accessed the Internet without the customer’s knowledge.

In addition to paying the settlement fees, Verizon has promised to provide greater consumer protections in the future.  The company has promised to cease charging the contested fees and has vowed that no more “mystery fees” will be charged in the future.  Verizon will also allow customers to set up data blocks on their phones so that they will not be charged for any unintended access to the Internet.   Finally, Verizon must improve its customer services by explaining the pay-as-you-go option in plain language and offering tutorials that help customers understand their bills.

Verizon must begin its repayment to customers immediately.  The FCC notes that the repayment is not capped at $52.8 million.  Customers that do not receive a refund but believe that they were wrongfully charged for data services have a right to appeal to Verizon.

The FCC is now investigating other complaints relating to Verizon as well as looking into the practices of other mobile providers.  This is a big step forward for consumer protection in the mobile phone industry.  With the increased capabilities offered by mobile devices, service providers will have the burden of explaining the fees and billing related to these new services.  Consumers will also have an incentive to check their bills for other “mystery fees” now that they know refunds are possible.

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November 3rd, 2010 at 9:04 pm

Momentum Builds for Reform of Electronic Communications Privacy Act

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Business, legal, and academic leaders urged reform of the Electronic Communications Privacy Act (ECPA) during hearings last week before the Senate Judiciary Committee and a Subcommittee of the House Committee on the Judiciary. Enacted in 1986, the ECPA regulates government access to citizens’ electronic communications while seeking a balance between the demands of law enforcement and privacy protection. A broad coalition of interests, spearheaded by the group Digital Due Process, has been advocating ECPA reform because of the staggering changes in electronic communication since 1986, including the growth of email and cloud computing.


Email

Senator Patrick Leahy (D-VT) highlighted in his opening statement that “a single e-mail could be subject to as many as four different levels of privacy protections under ECPA.” Brad Smith, General Counsel for Microsoft, eviscerated the arbitrary legal standards in a serious of rhetorical questions during the Senate Judiciary Committee hearing:

“Why should email in someone’s inbox be treated different from something in someone’s sent folder?” asked Smith. “Why is something unread in my junk folder subjected to greater privacy than something read in my inbox? Why does an email I sent in April have fewer privacy protections than one I sent in September?”


Cloud Computing

Internet users are increasingly storing important photos, documents, emails, and more online in the “cloud.” Businesses are also looking at the cloud as a cost-effective storage system. Edward Felten, Professor of Computer Science and Public Affairs at Princeton University, described the cloud in his testimony before the House committee as “rather than keeping the only copy of your data on your own computer, you rent computing resources from a service provider, and that provider keeps the primary copy of the your data.”

But the ECPA could never have predicted the growth of online storage in 1986. Michael Hintze, Associate General Counsel for Microsoft, summarized the problem for the House Subcommittee:

“When law enforcement officials seek data or files stored in the cloud, such as Web-based email applications or online word processing services, the privacy standard that is applied is often lower than the standard that applies when law enforcement officials seek the same data stored on an individual’s hard drive in his or her home or office.”


A Potential Solution

Digital Due Process has proposed that electronic communication such as email be disclosed “only with a search warrant issued based on a showing of probable cause, regardless of the age of the communications, the means or status of their storage, or the provider’s access to or use of the communications in its normal business operations.”

While no one expects Congress to reform the ECPA in the very near future or as precisely as Digital Due Process would hope, there is growing consensus among academics, businesses, legal advocates, and political leaders that the status quo is unacceptable.

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September 27th, 2010 at 11:34 pm

The Big Test – Proposed Comcast and NBC Universal Merger

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The proposed merger between Comcast and NBC Universal is a major test for the Obama administration’s positions on vertical mergers and media consolidation.  Comcast has already made some commitments to aid it during the review process, which is likely to take at least a year.  These commitments include continuing free over-the-air broadcast of NBC and Telemundo as well as enhancing availability of children’s programming and Hispanic-focused content through on demand capabilities and some use of the digital spectrum available to various channels.

The big questions left are how the Obama administration will react to the proposed merger and what conditions might be placed on the merger once its terms become more concrete.  The merger would see a significant combination of internet service provision, television programming distribution, television programming production, and news gathering into one entity.  At the very least, Comcast’s position as “one of the nation’s leading providers of cable, entertainment and communications products and services” is certain to raise a lot of questions during the review process.

An interesting effect of entering the review process is how Comcast’s need to enhance its image to aid in regulatory agency approval, and how this might affect the ability of other television networks to demand better retransmission terms from Comcast.  It is entirely possible that Comcast may have to take a softer line in its negotiations and pay more for local broadcasts than it has in the past, in order to help convince regulatory agencies that the merger will not have anticompetitive effects.

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December 31st, 2009 at 4:03 pm

New Zealand rethinks “3 strikes” copyright law

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New Zealand copyright protesters

New Zealand copyright protesters

New Zealand’s government announced this week that their proposed “three strikes”/”graduated response” copyright law would not go into effect, and would be rewritten from the ground up.The law, which would have required ISPs to cut off internet access to users who had been accused of copyright infringement three or more times, had already been delayed from its initial effective date in February after stalled implementation negotiations and public protests caused lawmakers some concern.

Of particular note to those interested in U.S. copyright issues, Google submitted comments arguing that Internet disconnection is a disproportionate response to unproven allegations of copyright infringement. New Zealand recording industry groups had argued that the evidence of infringement they provide to ISPs is highly reliable, but Google’s comments cite to a 2006 report (summary here) that showed up to 30% of takedown notices Google received “presented an obvious question for a court”, and over half of requests to remove links appeared to be from businesses targeting competitors. Obviously, many of the takedown requests that Google fields are not from official industry groups, but given that U.S.  industry group representatives have likened innocent infringers to dolphins inevitably caught in fishing drift-nets, New Zealand ISPs and consumers had good reason to be concerned.

Image credit – “Dare not write, dare not speak, dare not feel” CC by-nc Fertala

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March 25th, 2009 at 12:21 am

Cook County Sheriff Files Suit Against craigslist for Facilitation of Prostitution

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On March 5th, Cook County sheriff Tom Dart sued craiglist, Inc. in U.S. District Court for “knowingly promoting and facilitating prostitution” through its “Exotic Services” section. Dart does not seem fixated on the crime of prostitution per se, but that “missing children, runaways, abused women and women trafficked in from foreign countries are routinely forced to have sex with strangers because they’re being pimped on craigslist.” He asks for an injunction to shut down the “Erotic Services” section of the site, as well as damages of ~$100,000 to reimburse the police department in tax dollars expended in investigating prostitution claims on craiglist.

CEO of craiglist Jim Buckmaster said misuse of the site is extremely rare, and is not tolerated. In the past, Buckmaster has defended this section of the web site as striking a balance between allowing free speech and preventing exploitation. The craiglist blog lists 18 separate measures that the site takes to prevent illegal activity on the site.

This is not the first time the “Exotic Services” section of the site has been criticized. A year ago, the Attorney General of Connecticut Richard Blumenthal threatened a suit against the site for allowing nude pictures to be posted. In November 2008, Craiglist was able to come to an agreement with 40 states, which terms including a posting fee for advertisers to the “exotic services” section that required a valid credit card and working phone number (the idea being that law enforcement could access this information by subpoena). The website also agreed to sue 14 companies and individuals who allegedly used the site to facilitate human trafficking, child exploitation, and prostitution.

While craiglist claims that all revenue earned from the fee will be donated to charity, Dart has chided these efforts at goodwill as “dirty money”, and that the efforts have had “little practical effect”. Craiglist has countered this by showing the enormous reduction in postings to this section of the website since this November agreement, and continues to emphasize its continuing cooperation with law enforcement all around the country.

While it is perhaps too soon to see how the case will turn out, the Sheriff will face a tough battle. §230 of the Communications Decency Act provides immunity for ISPs and other service providers against actions perpetrated by 3rd party users, and craiglist will surely advance this as their defense. However, §230 is not so broad as to exclude federal criminal liability, and Dart is claiming that craiglist is more than a passive website operator, but actually an accomplice to the multiple federal crimes.

The Cook County Sheriff, Tom Dart, speaks about the suit at a press conference on March 5:

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March 15th, 2009 at 5:58 am

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