Privacy Please: Q&A With FTC Chairman Jon Leibowitz

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Federal
Trade Commission Chairman Jon Leibowitz has been encouraging ISPs and
advertisers to provide a flexible, consumer-friendly regime for protecting
privacy online, and specifically allowing the broadband nation to better
control  how their information is tracked
and used online.

He is
encouraged by their progress, but still says the industry needs to do more, and
fast. As the FTC vets hundreds of comments in preparation for a policy report
on what the government and industry can do to make sure they are on "the right
side of consumers," Leibowitz talked with
Multichannel News Washington  bureau chief John Eggerton for the Feb. 21 cover story, Privacy Please.

Privacy, Please: Will the Government's Effort to Protect Personal Data Hurt Profits?

MCN: Let's say
you had a roomful of ISPs and advertisers in a room, what would you advise them
to do to avoid the threat of regulation?

Jon Leibowitz: One of the most important things, and cable operators know this,
is you want to be on the right side of consumers.  I think the way you do that is to offer them
more choice and transparency and more privacy protection. Those seem
pretty  fundamental.
And I think most cable operators and programmers want to do the
right thing. We're beginning to see some promising signs from industry.

MCN: What would
those be?

JL: Those would be that right after we released our report, both
Microsoft and Mozilla came out with [browser-based] do-not-track
proposals.  And the development of an
icon that consumers can click on to opt out of targeted advertising is pretty
promising. There are flowers of privacy blooming out there that don't involve
government regulation. Indeed, they involved the private sector moving with
alacrity on its own.
Moving that process forward would probably be a pretty effective
way to avoid more prescriptive government regulation.  So, I guess I would say that the business
community really has it in its hands to avoid regulation, it just has to step
up to the plate.

MCN: How much time do they have?
JL: I think the congressional timetable on privacy protection is going
to pick up soon [two privacy bills were introduced within the past two weeks,
with more promised], and so I think if the business community wants to avoid
more prescriptive legislation it needs to move with all deliberate speed.

MCN: The cable
industry, in its comments on the Commerce Department's privacy Green Paper,
said they were big fans of regulatory restraint.  You sound like you are, too.

JL: Yes. We are a bipartisan agency and privacy is one of the most
bipartisan issues. Industry, when it wants to, can move with real speed, and
sometimes faster and more effectively than government.
There is a complex interplay between getting companies to move in
the right direction to protect consumers and having the government, including
Congress and agencies like ours, use the bully pulpit or the legislative stick
that Congress has to push for clear rules.
So, again, we really do believe in self-regulation. We have seen
some promising signs that industry is moving to protect the privacy of American
consumers, including stepping forward on options to allow consumers to have
choice not to be tracked.  But time will
tell whether this is a consistent moving forward, or simply a brief and not
sufficiently consequential response.

MCN: Sometimes
lobbyists will take their positions to the last ditch.  Has the industry been talking to you about a
solution that involves government and public interest groups --  rather than simply defending their turf.

JL: Because I am an optimist, I would like to think that the industry
is in the process of turning around. When we first put out our [draft] report
in December, there was a fair amount of pushback and talk that the sky was
going to fall if you didn't allow surreptitious tracking, and that do-not-track
wasn't feasible.
I think for the most part that it's clear when Microsoft and
Mozilla and an industrywide coalition have said they want to provide consumers
with tools to prevent tracking. I think it is pretty clear that do-not-track is
feasible.  I am hearing a lot less of
"the sky is falling" than I did six weeks ago.
It is somewhat instructive that when we created the do-not-call
list, which was a more regulatory approach, direct marketers said U.S. commerce
would suffer enormously.  That turned out
not to be the truth.  It turned out that
nothing could have been further from the truth. 

This is a much more flexible and industry-driven approach, but
what has been really heartening to us is that we seem to have a lot of support
, and not just browser venders but among a lot of major advertisers who
recognize that when you are on the wrong side of consumers you're not going to
get very far selling your product.

MCN: If you
were going to draw up a privacy bill of rights for the digital age, what would
be in it?

JL: It would be for others to develop. But in the report we put out
with guidance for lawmakers, we called for three things which we think are
fundamental principles.  One is more
transparency so that people know what is happening with their information,
because nobody reads privacy policies. 
Second is "privacy by design," which means when you develop new
technologies, incorporate privacy protections 
into them before rather than after the breech. And the third is giving
consumers more choice about what is happening with information, both online and
off-line.
We have gotten more than 500 comments from stakeholders on our
report. We are in the process of reading hundreds of comments. If companies
move towards a regime-and some of them are already doing it-that includes
privacy by design, more transparency and more choice, that will be empowering
to consumers but also will be a way for Internet commerce and innovation to
thrive.

MCN: And you
are confident industry can do this without government regulations?.

JL: I am confident they can do this, whether they will do this is a
question we are hoping to find out the answer to in the next six months or so.

MCN: You don't regulate in this area [though a
just-introduced bill would have the FTC monitor voluntary privacy steps that
could avoid regulation]. Who should take the lead, then --Commerce?

JL: We respect the Commerce
Department report. But it's a big enough area that you can have multiple
agencies involved. We have the enforcement function, and to some extent Justice
does to. We have been a leading voice on policy issues and we think we have
discharged that obligation pretty well, and in a balanced way.
So, there is room for more than one entity to be involved in
privacy. In fact, to have a good privacy policy you really need to have a
robust debate.

MCN: The Commerce
Department seems to be even more focused on self-regulation than you are. I
wonder if you have any concern might miss an inflection point on getting the
privacy balance right for fear of slowing the economy.

JL: I don't think growing the economy and protecting privacy are
necessarily in tension. I think they go hand in hand.  To some extent, if you try to monetize every
piece of information about consumers that courses through cyberspace, you might
be presuming on American's privacy, but the truth of the matter is that you can
strike the right balance, grow the economy and protect privacy at the same
time. And most businesses understand that.

MCN: NCTA has
argued for competitive neutrality, which means that whatever privacy regulations
 or rules are adopted should apply to the
big search companies like the Google's and Microsof'ts .

JL: I would want to understand what they mean. To the extent we have
jurisdiction over all these companies that we deal with in the broadband
space, we apply the same test.
Our report is policy recommendations, it's no ˜If you don't do X,
we will go after you with an enforcement action.'  But we do exactly what I think the Congress
and the premise of the NC TA question is, which is, if they are engaged in an
unfair and deceptive act or practice, no matter what platform, we will go after
you.

MCN: In your
report, are you advising to up privacy protections for kids 17 and under?

JL: We have two things we are doing. We are reviewing COPPA [the
Children's Online Privacy Protection Act] 
and we are also looking at behavioral marketing.
I don't want to prejudge anything we might issue in our COPPA
review. But you want to have a benchmark standard for protecting  privacy, and then when it comes to
particularly vulnerable populations or sensitive information, so health
information and financial information, it may call for greater privacy
protection.

MCN: Is that
something you can do on your own authority in enforcing COPPA, or do you have
to go back to Congress?

JL: I think for the most part
we have multiple ways to do this. Again, using our bully pulpit and having
suggestions.  Another is going to
Congress and having them legislate, but we're not there yet.  In COPPA, we would theoretically have some
flexibility on rulemaking. But we couldn't change the age in COPPA [12 and
under]. That is statutory.

MCN: Does your
inquiry include interactive TV and set-tops.

JL: Our antitrust authority gives us jurisdiction over those areas,
but, honestly, when you have a sector-specific regulator [the FCC] you
sometimes want to defer to them unless there is a major problem.

MCN: What is
the timetable for action on the report and COPPA.

JL: On the report, we have a mid-February deadline for comments. It is
indicative of how useful the report is that we have gotten over 500 comments.
It is going to take us a while to process this. So, I would think a few months
at least to think through what people have said and fine-tune our report.
On COPPA, hopefully sometime late spring.

MCN: How many
privacy cases have you brought recently and there any more in the works.

JL: Yes, we have a lot of privacy investigations. We have brought ones
about data security, going after companies that have inadequate data security
so information often leaks. We've brought more than 100 spam and spyware cases.
We brought  a case involving Twitter, our
first social networking case. We have a handful in the pipeline as well. You
will see more privacy cases from us in the not-to-distant future.

MCN: Cable
operators talk about losing advertising dollars through a regulatory do not
track regime,  but they also say it could
discourage diverse voices by undercutting ad support for niche content. How
strong is that argument?

JL: When you are talking about internet advertising, consumers should
have the right to make choices. I myself would probably be very happy
continuing to receive targeted ads, but somebody might like to make a different
choice, and they ought to be able to  if
they want to choose not to be tracked online.
Second, if you have a really good advertising message and a really
good product to sell, I just don't think you are going to lose sales.
And that's what people are telling me, and that's why I think this
community has been coming around to the notion of allowing consumers more choice
not to be tracked.

MCN: So this is
not a 'sky is not falling, issue?

JL: Yes. I met with a company
that is designing innovative technologies to empower consumers not to be
tracked. This is a company that has VC backing and is going to provide another
tool for consumers. I think you can have innovation and a growing economy on
the one hand, with privacy protections on the other. They should go hand in
hand, and I think that is where the business community and I think that is what
Congress would like to see.
I like to think that what
is motiivating the evolution in advertisers and broadband providers is that
they want to do the right thing and they know that they aren't going to be
sacrificing a huge amount of revenue. 
But if you look at some of the public poling about do-not-track,
it is phenomenal. I think Gallup had a poll that found that 85% of Americans
want the choice of not being tracked.  So
again, the industry has the opportunity of doing well and doing good. They can
continue to make their customers happy and hopefully make the changes they have
to and insure the privacy protections they need to avoid legislation.

MCN: I don't
hear much about opt in vs. opt out. Is that a black and white that has turned
grey by virtue of technology?

JL: Yes. I have generally been on the record as supporting more opt
in, but I also think you can have a very good opt out and you can have a
somewhat more ineffective opt in. So they are not polar opposites.
And what is most important is to give consumers real choice.
I met a few weeks ago with some business folks who have a very big
presence in Europe. The European rules, while they are in the process of being
clarified, are almost all opt in. And that might be good for privacy
protection.

MCN: But that
is a much more prescriptive approach.

JL: Twelve years ago, when the commission was wrestling with
Personally identifiable information (PII) it seemed pretty clear it was a
pretty finite amount of information. Now, you can just take these massive
collections of information about any consumer, even including name, Social
Security number and address, and deconstruct who that person is, including who
that person actually is.
So, we are trying to make companies to the right thing. But I sort
of think they are coming around to the notion that they can live with an
approach where they have to give consumers more choice.

MCN: And you
are confident that concerns about depressing the economy won't trump privacy
protections on businesses powering that economy?

JL: I think that once you get into congressional hearings, which will
take place at the end of this month, if you don't see businesses moving in the
right direction, I think member s of Congress will really be raising the
decibel  level. I think you will really
see improvements here is my gut reaction. Passing legislation is a very hard
thing to do over opposition, but privacy is an extremely bipartisan issue.

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