E-mail tier system is coming

Soon companies will have to buy the electronic equivalent of a postage stamp if they want to be certain their e-mail will be delivered to many of their customers.

America Online and Yahoo!, two of the world's largest providers of e-mail accounts, are about to start using a system that gives preferential treatment to messages from companies that pay 1/4 of a cent to a penny each to have them delivered. The Internet companies said this will help them identify legitimate mail and cut down on junk e-mail, identity-theft scams and other scourges that plague users of their services.

The two companies also stand to earn millions of dollars a year from the system if it is widely adopted.

AOL and Yahoo! will still accept e-mail from senders who have not paid, but the paid messages will be given special treatment. On AOL, for example, they will go straight to users' main mailboxes and will not have to pass the gantlet of spam filters that could divert them to a special bulk e-mail box or strip them of images and Web links.

Declining reliability

Yahoo! and AOL say the new system is a way to restore some order to e-mail, which, because of spam and online scams, has become an increasingly unreliable mode of communication even as it has become more important in people's lives.

"The last time I checked, the Postal Service has a very similar system to provide different options," said Nicholas Graham, an AOL spokesman. He pointed to services such as certified mail with return receipts. But some say the companies risk alienating their users and the companies that send e-mail. The system will apply to mass mailings and to individual messages such as order confirmations from online stores and customized low-fare notices from airlines.

"AOL users will become dissatisfied when they don't receive the e-mail that they want, and when they complain to the senders, they'll be told, 'It's AOL's fault,' " said Richi Jennings, an analyst at Ferris Research, which specializes in e-mail.

Two-way profits

As for companies that send e-mail, "some will pay, but others will object to being held to ransom," she said. "A big danger is that one of them will be big enough to encourage AOL users to use a different e-mail service."

In a broader sense, the move to create what is essentially a preferred class of e-mail is a major change in the economics of the Internet. Until now, senders and recipients of e-mail — and, for that matter, Web pages and other information — each covered their own costs of using the network, with no money changing hands.

That model is different from, say, the telephone system, in which the company whose customer places a call pays a fee to the company whose customer receives it.

The prospect of a multitiered Internet has received a lot of attention recently after executives of several large telecommunications companies, including BellSouth and AT&T, suggested they should be paid not only by the subscribers to their Internet services but also by companies that send large files to those subscribers, including music and video clips. Those files would then be given priority over other data, a change from the Internet's basic architecture, which treats all data the same way.

Hearings this week

The Senate Commerce Committee will hold a hearing Tuesday to consider legislation for what has been called "Net neutrality," effectively banning Internet companies from giving preferred status to certain providers of content. The concern is that companies that do not pay could find it hard to reach customers or potential customers, threatening the openness of the Internet.

AOL and its parent, Time Warner, which also owns a large cable system offering high-speed Internet access, have not taken a public stand on the principle of Net neutrality. Neither has Yahoo!, which has close relationships with AT&T and Verizon. The issue of e-mail postage has not yet come up in the debate over Net neutrality.

In the next two months, AOL will start accepting e-mail processed by Goodmail Systems, a company in Mountain View, Calif., that will collect the electronic postage and verify the identity of the sender. Goodmail has tested the system with messages from a few companies, including the American Red Cross and The New York Times.

Paying senders will be assured their messages will be delivered to AOL users' main boxes and marked as "AOL Certified E-Mail." Unpaid messages will be subject to AOL's spam-filtering process, which diverts suspicious messages to a special spam folder. Most unpaid messages will also not be displayed with their original images and links.

Yahoo! will start testing Goodmail's system in coming months, but it has not decided how paid mail will be differentiated from unpaid, said Brad Garlinghouse, vice president of communications products at Yahoo!. Goodmail will charge 1/4 cent to 1 cent a message, with high-volume mailers getting the biggest discounts. It will give more than half of that amount to the e-mail-service provider.

When AOL started to explain the details of its plan last month to companies that send a lot of e-mail, many quickly raised objections.

"No one wants Goodmail or any other provider to set up a tollbooth that makes it cost-prohibitive for legitimate mailers to reach the inbox," said Matthew Moog, chief executive of Q Interactive. The company runs a marketing service called CoolSavings that sends e-mail to 10 million people a month who have requested it.

Moog said he was in favor of systems that helped distinguish the mail he sends from spam. But Moog added that he wants AOL and other Internet providers "to offer several competing services to ensure that innovation continues and there is a competitive market to drive fair pricing for the service."

Alternatives

For example, he said, CoolSavings works with Bonded Sender, a company used by Microsoft's Hotmail service and other providers to identify sources of legitimate mail. Bonded Sender charges a flat fee of no more than $20,000 a year to the highest-volume senders, a fraction of what they would pay through the Goodmail system. Moog said the Goodmail system would at least double the cost of an e-mail campaign. "I don't think the economics work," he said.

But Garlinghouse of Yahoo! said that by making senders pay for each message, they will be forced to be more discriminating in regard to whom they send e-mail, which will benefit users.

"Because the cost of sending e-mail is so low, some players are not as good at keeping their lists clean," he said. "I still gets e-mails from lists I signed up for three years ago, but I haven't responded to a single one."