I've seen this covered on slashdot and digg but haven't seen many people weigh in on it, so I figured I'd write it up with my opinions.
Back in June, there was a post from someone to thinking he was infected by spyware since he was getting additional ads from a company called "Fair Eagle" inserted on all the pages he visits. After a little analysis he found this happened from his home but not from his office and mentioned that his ISP is MoonOverAddison and it appeared that they were inserting the advertisements. At which point jaiku user Chrisr chimed in with this information:
I noticed this at work and reported it to our IT department who contacted our ISP (Redmoon, who owns MoonOverAddison). Here's what we learned.
Redmoon installed this device knowing that the ads would alienate some customers, but not enough to make the device unprofitable.
Some additional research reveled this to be the likely device. Basically this device is a transparent proxy that add advertising to every web pages that passes through it. Basically the ISP becomes a piece of adware which is just slightly out of your reach.
I don't see how this device is anything but a copyright circumvention device. I am writing some AGs in the next couple of days, explaining what the device is, how it effects us and explaining how it violates the DMCA (they gave me the gun, I'm going to try and use it).
Recently, The CS folks over at the University of Washington has an integrity checker which will check your connection and determine if your ISP is adding content and tracking the information for later publication. You should head over there to make sure your ISP is behaving.
Buried in the ISP's TOS, the user is agreeing to allow this to happen, of course. The problem for these ISPs is that they are still breaking the content owner's copyright by creating a derivative work of the webpage. This effects content providers in a number of ways.
If a site is kept in business by advertising the additional ads reduces the odds that someone is clicking on an ad that supports your site, losing potential income. If a site is advertising free either through a subscription model or through social contract, this device makes it appear that the provider is violating that agreement. Vows not to accept advertise from certain businesses or industries are now moot. At the end of the day the ISP makes the profit and we, the content providers, are left holding the bag.
What worries me more then this, is what the ISPs can do next. What prevents them for changing the content owner's adsense id to theirs, or replacing the website's ads with their ads altogether? I have no problem with a user blocking ads (let's face it anyone who goes through the effort to block ads isn't clicking on them anyway), but an ISP replacing them for their own profit is another matter entirely.
I'm planning on writing a drupal module to test of this and report back in the next couple of days (I'm writing the UW folks right now). Hopefully, if enough parties are interested we can get some visibility to this problem.