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Oh my god this is long.

I read all of the other responses to this thread, and I agree with what 
most people are saying.

I've gotten this question 100's of times from (former, beloved, missed) 
ISP customers.  And neighbors.  And relatives...

The absolute #1 best thing to do is to be a parent first, police second. 
This involves education AND spending time together on-line.  I feel the 
same way in the case of adults in a corporate setting - education, and a 
clear policy on appropriate computer use, solves 99% of the problem.

Number 2 is to be forthcoming with any monitoring or preventative measures 
that are taken.  In fact, I've seen this work REALLY well in a corporate 
environment, where adult website access was rampant (more on this 
below...)  Anyways, parents should be honest with their offspring.  It's 
better to let them know beforehand what measures will be taken.  You'd 
rather have them know ahead of time, than finding out about your 
monitoring when you've busted them and they're already mad (and the damage 
has been done).  Now, I don't own any kids, but if I did, this would be 
the way I'd run the show.

A word on the pederasts...child predators on-line are not alwaays easy to 
spot.  Especially when curiosity or hormones are involved.  Reading 
transcripts of some of these logs (more on this...), it's obvious to you 
and me that the person is a pedo, but the child is sometimes blinded by 
"my parents overreact, the media blew this out of proportion, he's *so* 
handsome and funny..."  These people, sadly, are very good at what they 
do.  For instance, they bring up any subject, "So you like computers?" 
(obviously, since they're on The AOL!!!) the question invites, "Does your 
dad work with computers for a living?"  Chances are, the child will name 
daddy's occupation, which helps the pedo determine when daddy's most 
likely to be home, if he's a big burly construction worker or a wimpy 
executive (in case daddy catches him...)  Then that's an in for finding 
out about mom and the rest of the family.  I used these tactics on Munir 
last night when I posed as SexyGirl16 and was trying to get him to talk 
dirty to me over AIM.  ("How big's your disk?  Oooh....and how much RAM?")

These people are more than capable of getting a reasonable picture of who 
else is in the house at various times of the day, what kind of bait to 
entice the child with, etc, with just a few innocent questions.  They are 
just playing the odds.  The "more on this" was to mention that any parent 
who hasn't yet eaten their own offspring, should read some of the chat 
transcripts at www.perverted-justice.com.  I read some of these a couple 
of years ago (this site was highlighted on the news), and was shocked. 
No, wait, nothing shocks me anymore, I've seen the proxy logs...but I was 
disgusted.

My other "more on this" was about monitoring.  I had a customer at ISP #1 
that had an employee porn-surfing problem.  When I went out there to setup 
the web proxy, they asked about what to do now that they had logs of 
everything.  I told them to announce to their staff that they were turning 
on web logging due to abuse, and would be monitoring the logs for 
inappropriate activity.  I guarantee you none of those employees wanted to 
be "caught with their pants down", as it were...and the problem went away.

I've been asked more recently how to deal with this in a corporate 
environment.  My favorite suggestion so far has been that the company 
should setup a proxy log reporting tool (like Sarg), and actually e-mail 
the users their previous day's web activity every morning.  I think this 
is a far better solution than the alternatives, because:

a) having staff sift through logs looking for "the pervs" doesn't scale in
    a 20,000 person company

b) content and URL filtering doesn't work - it ends up being an arms race
    trying to keep up with the porn industry (who are constantly coming
    up with new ways to help users get around corporate monitoring or
    filtering, or you end up blocking legitimate sites, and staff spends way
    too much  time allowing certain sites

c) I don't enjoy pulling up www.milfhunter.com to see if it's an adult
    site.  (ok, I actually do...nice mommy!)

Alternatively, telling the users that a random sampling will be examined 
(ala random drug tests for pro athletes...), or that the report will be 
e-mailed to them daily, and a weekly summary to their supervisor...who can 
escalate to Human "We'll bring your personal effects out to you" 
Resources.

I'm not a parent, but I can certainly appreciate the difficulties and 
responsibilities involved.  As for me and the 'lil woman, other people's 
kids, in small doses, is enough for us.  I'll stick with the dogs TYVM :)