ISPs Vow Self-Regulation to Curb Data Misuse

Online Privacy, NebuAd and ISPs

In the wake of turmoil over ISPs’ efforts to track users’ online activities and deliver ads accordingly, leading ISPs pitched self-regulation as an alternative to regulatory action, telling a Senate committee today that they are working on their own to protect subscribers’ privacy.

Verizon Communications told the Senate Commerce, Science and Transportation Committee that it is spearheading an industry “framework” to safeguard subscribers, and that it is developing best practices that include allowing consumers to opt-in to the sharing of online activity data.

“All online players should protect online users. The goal is to enhance, not spoil, the online experience,” Thomas Tauke, executive vice president for public affairs, policy and communications at Verizon (NYSE: VZ), told the committee. “It is in our best interests to keep the faith of customers and we must provide transparency and complete control [over data use] to the user.”

The Senate committee hearing is the second such meeting on broadband and consumer privacy issues spurred by ISPs’ work with a behavioral ad targeting technology partner, NebuAd. The company supplies ISPs with a hardware appliance that enables them to mine packets of information traveling across their networks, a process known as Deep Packet Inspection.

It then uses that data — including search terms — to target participating Web sites’ ads to users.

The prospect alarmed both consumer advocates and some lawmakers. In June, Charter Communications, the nation’s fourth-largest cable company, ultimately set aside its plans to work with NebuAd following public outcry. NebuAd earlier this month abandoned the controversial practice.

Today, faced with pledges from ISPs to self-regulate their monitoring of subscribers, committee members and privacy advocates reacted with skepticism.

“If I may, I’d like to play the skunk at the self-regulatory party,” said Gigi Sohn, president and co-founder of advocacy group Public Knowledge. During the hearing, Sohn said she is “dubious” of how effective industry self-regulation could be.

Current regulations already govern ISP use of consumer data — namely, the 1934 Communications Act, since amended in 1996 with privacy stipulations. But Sohn charged that the existing law has gaps that allow for potential abuse of consumer data online.

“At a minimum, the Communications Act needs to be amended,” she said.

ISPs: Online tracking is rampant

In response, Tauke said that if the committee “took on” the Communications Act and rewrote it to “level the playing field,” the industry would applaud.

Tauke and other ISP representatives at the hearing contended that behavioral tracking technologies are already in use by other online advertising companies — which they did not name. They also said those activities are legally permissible, since federal communications laws don’t apply to other sorts of companies.

Dorothy Attwood, chief privacy officer and senior vice president of public policy at AT&T Services, agreed that online behavioral tracking is a practice “well underway” by other companies.

“It is a largely invisible practice and any privacy framework must apply to all involved in online advertising,” she told the committee. She added AT&T does not engage in behavior-based advertising and would only do so once “clear and consistent” consumer controls are in place.

Time Warner Cable, which also said it is not engaging in such online advertising practices, said it likewise supports a “framework” that involves affirmative consumer action.

“There must be common rules for an equal playing field,” Peter Stern, the company’s chief strategy officer, told the committee.

Verizon’s Tauke also repeatedly noted that the Federal Trade Commission (FTC) already has established best practices that need to be enforced on a wider array of companies using online advertising data.

“Any [new] policies should be centered on mandating meaningful consent by consumers,” he said.

The statements were echoed by the representatives from AT&T (NYSE: T) and Time Warner Cable (NYSE: TWC).

“There is a remarkable consensus in the industry that consumers should maintain ultimate control,” Attwood told the committee. “Setting policy is critical to a healthy marketplace.”

Still, Tauke maintained that the ISPs were still pushing ahead on their self-regulatory effort ahead of any possibility of regulation.

“We are not opposed to regulations, but the industry wants to get its acts together,” he added, saying that he expects to have some news on self-regulatory efforts in the next few months.

But Public Knowledge’s Sohn said she won’t be satisfied with just a framework. Her group wants “comprehensive legislation” that would encompass “not just the good guys” — referring to the ISPs that spoke at the hearing — but all companies involved in online advertising.

“We need a comprehensive regulatory structure,” Sohn told the committee.

According to the committee, additional hearings may be scheduled after Congress returns from its January break. A spokesperson said no legislation related to online consumer privacy has yet been drafted.

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