Privacy, Please

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Washington — The issue of privacy is about to get a
whole lot of attention.

As more and more of our personal information and
consumer habits flow through the Internet and cable
boxes, marketers have been tempted with a rich stockpile
of data. If they can harness and harvest this information,
they’d save money on ads and customers would
be pitched only the products they prefer.

Most parts of a person’s life are now connected, and the
Obama administration is pushing to put education, medical
information, government interactions and virtually
everything else online. The Federal Communication Commission’s
goal is to connect every household to the Internet
— including by turning every TV set and mobile phone
into an interactive broadband device.

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In this electronic ecosystem, personal information is
more far-flung than ever before and the government is determined
to protect it. History-sniffing and spear-phishing
are becoming new terms of art, and online privacy as an
issue is heating up in Washington. Two privacy bills were
already introduced in the new Congress two weeks ago,
with more on the way.

In addition, both the Commerce Department and the
Federal Trade Commission are preparing final reports on
protecting privacy in the digital age, with the goal of shaping
long-term policy.

At stake for cable operators: Their ability to run their
increasingly over-the-top service, including how they
manage online networks in an age of FCC-enforced transparency,
as well as the potential effect of privacy restrictions
on billions of dollars in targeted advertising.

Cable had a taste of what a privacy backlash would look
like in 2008. Online ad network NebuAd, which delivered
ads according to Web preferences gleaned from tracking
technology, got hammered by the Hill, and numerous cable
operators that had planned to at least test the technology
backed off under pressure from, among others, Reps.
Ed Markey (D-Mass.) and
Joe Barton (R-Tex.).

Both the Commerce Department
and the FTC have
told networks and advertisers
in no uncertain terms that the
industry needs to regulate itself,
or it will face some form
of government action. “If the
business community wants to avoid more prescriptive legislation,
it needs to move with all deliberate speed,” FTC chairman
Jon Leibowitz said.

But privacy activists are pushing hard for government
regulation.

“It’s time to pay the piper,” Center for Digital Democracy
founder and executive director Jeff Chester said. “You
can’t have CableLabs create advanced-advertising initiatives
and unleash Canoe Ventures without confronting the
privacy issues.”

Canoe, a consortium backed by cable operators, said
two weeks ago it would team with five big advertisers to
study consumers’ taste for interactive advertising as part of
a partnership with the Association of National Advertisers.
“Canoe has built privacy by design into our operations
from the beginning,” chief marketing officer Vicki Lins said.
“Our interactive Request For Information advertising allows
television viewers to request a coupon, sample or further information
about a product or service by using the remote
control — but only after explicitly
agreeing to and confi
rming the request.

“Our privacy policy was
developed after thorough
and careful consideration,
and is well-documented
in writing and through informational
videos in both
English and Spanish.”

Lins also pointed out that
Canoe works with, but is
separate from, CableLabs.
“Canoe works with Cable-
Labs to help define technical
specifi cations for the
execution and operation of
advanced ad products and
services in a standard and
open way.”

While two privacy bills
have just been reintroduced
in Congress, the current emphasis
from the Obama administration
and regulators
is on self-regulation. That affords content companies and
advertisers a window of opportunity to adopt and adapt
online tracking and targeting policies.

STAKEHOLDER TALKS

According to a senior FCC official, the commission has
been talking with stakeholders over the past couple of
months with an eye toward empowering consumers to
control information while not putting a crimp in business
models, a senior agency official who asked not to be identified said.

Those talks will emphasize location-based information
on cell phones and other such devices — mobile broadband
is a big focus for the commission.

At least two sections of the Communications Act that apply
to privacy, including local-based information: one that
involves CPNI (customer proprietary-network information),
Section 222F; and a second on cable privacy, Section 631,
which likely covers cable set-tops. The FCC has never promulgated
rules under either section, though, according to
an FCC source familiar with its privacy discussions.

Whether the FCC can promulgate rules is an open question,
the source said, adding that the commission over the
past few months has been talking to cable, broadband, and
mobile providers about what the emerging privacy issues
are and what the FCC can do to address them.

A key issue is where location-based info comes from. If
such information comes from the applications provider, it
is less clear whether the FCC has authority. If the mobile
carrier is generating the information, the source said, it is
more clear that the FCC could step in.

The FTC’s Leibowitz said he is hearing less “the sky is
falling” rhetoric from the industry. “Because I am an optimist,
I would like to think that the industry is in the process
of turning around,” he said.

But given distrust of those self-regulatory efforts — and
with an emphasis on protecting kids — the Center for Digital
Democracy and others intend to push hard for government
oversight and action.

“You have the privacy issue teed up at the Federal Trade
Commission for the first time in decades,” Chester said.

The FTC and the Commerce Department’s National
Telecommunications & Information Administration have
been doing their own balancing act — promoting industry
self-regulation while trying not to depress the economy
through regulations that could take a bite out of the billions of dollars in online advertising that helps support
all the free online content Web surfers have come to feel
entitled to as something of an electronic birthright.

Commerce’s emphasis on self-regulation is in part an
acknowledgement that online advertising helps drive the
economy and support free Web content.

But National Telecommunications & Information Administration
chairman Lawrence Strickling said that it will not be
strictly self-regulation. “We think the Department of Commerce
is well-positioned to play the facilitator and convener
role in the industry as they develop codes of conduct,” he said.

The department also has a real-world adviser who
knows all about the business of cable in general counsel
Cameron Kerry, a longtime industry attorney.

Kerry, who is co-chairing an interagency initiative involving
the Commerce and Justice departments, can provide
an insider’s view of the cable industry. However, he
has said, “in certain circumstances, we recognize more
than self-regulation is needed.”

DISCLOSURE ISSUE KEY

The key privacy issues are disclosure and opt-in, Media
Access Project president and CEO Andrew Schwartzman
said, which means requiring that companies that track
and target online surfing must get permission first. Th e
importance of disclosure mirrors the network-neutrality
issue, where the need for transparency was one of things
those on both sides of the debate could agree on.

The National Cable & Telecommunications Association
has told the Commerce Department that it should draw a
distinction between anonymous information collected online
and personally indentifi able information (PII), which
should be protected. Joseph Turow, a professor at the University
of Pennsylvania’s Annenberg School for Communication,
suggests the issue can’t be divided that way.
“Th e problem is that PII is an inadequate sense of what
we are talking about,” Turow said. “After a while, with the
ramping up of data and tracking, people get to be put into
‘reputational silos’…. and it is not just the ads that you get.
It’s the discounts you get and eventually it may be the news
headlines or stories you get.

“Down the line, it’s the agendas of entertainment you
get,” he said. “So, what ends up happening, I argue, is that
people feel abused.”

But perhaps the most controversial issue is “do not
track” and whether Web surfers
should have to opt in to having
their information tracked and
packaged by marketers.

The general public is “stunningly
ignorant” about what is happening
to their information online,
Schwartzman said. “Th ey have the
right to know and the right to opt
in to data collection, thing could
change very dramatically.”

But that is what some advertisers
and cable operators fear.

At a Dec. 2 hearing on Capitol
Hill, Time Warner Cable
executive vice president of media
sales Joan Gillman warned
legislators that an online donot-
track regime could have
unintended and negative consequences, not only on targeted
online advertising, but on the diverse and unique
Web sites such ads support.

If do-not-track becomes the law of the land, Gillman
told the House Subcommittee on Commerce, Trade and
Consumer Protection, it needs to apply to all parts of the
Internet “ecosystem” — that is, search-engine giants like
Google must be held to a similar standard. Turow agreed:
“Of course, it should be a level playing field.”

Gillman wouldn’t put a figure to the impact of do-nottrack
legislation, but said it would be premature, and could
prevent Time Warner Cable from innovating.

“Do-not-track raises unique issues” which make it more
complicated than the do-not-call list for telemarketers,
Gillman said. “For instance, how would do-not-track affect
consumers’ online experience and expectations?”
she asked. “Would they receive more pop-up ads? How
would it affect diversity on the Internet? Would it negatively
impact niche Web sites with small but loyal audiences?
Would it prevent new Web sites from launching?”

The FTC last month released a draft report that endorses
what it calls a “privacy-by-design” approach to industry
self-regulation, which agency chairman Jon Leibowitz has repeatedly
said would be preferable to government regulation.

The FTC and the Obama administration have pushed for
an industry “do-not-track,” preferably some form of browser
functionality that would give Web surfers control of how
their information is used, but without the kind of do-notcall
national database that raises its own privacy concerns.

Both the FTC and the Commerce Department have publicly
recognized the value of targeted advertising in supporting
free Internet content, and Leibowitz has said he,
personally, would probably not opt out of such tailored advertising.
But they have also said that if industry does not take
steps on its own, legislation might be necessary.

Sen. John Kerry, chairman of the Senate Communications
Subcommittee (and Cameron Kerry’s brother), said
he would propose legislation that would allow for safe harbor
programs — another FTC suggestion — for companies
that agree to the following: “First, all firms must put procedures
in place to secure personally identifiable information.
Second, consumers have a right to know in clear and
concise terms what firms intend to collect, why, and how
it will be used. Third, consumers should be given a simple
mechanism for opting out of the process.”

Sen. Jay Rockefeller (D-W.Va.), the Senate Commerce
Committee chairman, has said he hopes that when the
Commerce Department releases its final report, it will recommend
legislation.

In the House, Markey plans to introduce legislation in
this Congress that will include a do-not-track requirement
for kids to prevent their personal information from being
collected online.

BIPARTISAN SUPPORT

Of course, Republicans, not Markey’s Democrats, now
control the House, but the issue has been relatively bipartisan.
Rep. Fred Upton (R-Mich.), the new House Energy &
Commerce Committee chairman, told MultichannelNews
last month that “the status quo is not acceptable.”

Rep. Cliff Stearns (D-Fla.) co-sponsored privacy legislation
led by Democrats, but he plans on taking the lead
this time around and plans to offer a bill “soon,” spokesman
Paul Flusche said.

But whether the administration backs legislation will
likely depend on how much progress the industry has
made toward self-regulation.

Last October, amidst increased government attention
on privacy and in advance of the release of the FTC report,
the Digital Advertising Alliance launched a self-regulatory
program for behavioral advertising, or ads that rely on
Web-user profi les to target potential buyers.

That program relies on online advertisers
displaying an opt-out icon that consumers can click onto
find out what data is being collected about them, and to
opt out from collection if they so choose.

Leibowitz has lauded the effort, but Chester, one of the
most outspoken advocates of action on the privacy front,
said the self-regulatory icons are hardly the answer. In fact,
he plans to team with other kids’ media advocates to ask the
FTC to declare the icons themselves false and deceptive.

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