Internet service providers offering discounted rates in exchange for collecting more customer data are good for consumers, according to a new report urging the Federal Communications Commission not to ban such deals with new privacy rules due out later this year.
Those deals, dubbed “pay-for-privacy” by digital rights and privacy advocates, give consumers more options for saving money on their service bills every month, and help encourage broadband adoption overall, the Information Technology & Innovation Foundation (ITIF) said in a report this week.
“This type of price differentiation based on exchange of consumer information is an incredibly common cornerstone of online activity,” ITIF, which is funded in part by the telecom industry, said in a statement Monday. “The gathering of user-information allows many online services to be made available for free. Consumers benefit in this arrangement, and many would gladly choose a discount in the context of broadband access as well, even if it doesn’t make the service completely free.”
Such offerings haven’t become commonplace yet. Of the largest providers in the U.S., only AT&T offers a $30 discount if customers consent to tracking as part of its “Internet Preferences” program in Kansas City, Mo. and Austin, Texas, giving customers the option to pay $70 for high-speed service instead of $99 if they opt-out of receiving targeted ads.
That hasn’t stopped the FCC from considering a preemptive ban on them. Under the privacy rules FCC Chairman Tom Wheeler’s office is currently drafting, such offerings would be forbidden. In fact, should the FCC’s Democratic majority adopt the rule, providers would have to get advance permission from consumers before collecting the vast majority of data, reversing the opt-out they were required to offer consumers under the Federal Trade Commission.
“I hope that privacy doesn’t become a luxury item,” Wheeler said after an FCC meeting in August. In May, the chairman told Republicans in Congress skeptical of the rules they’ll help reverse the “retreat from privacy” in the online industry.
In its report, ITIF said the FCC’s position makes broad assumptions about the public’s privacy preferences. Citing a National Telecommunications & Information Administration commissioned study, the report says only a quarter of the population are “privacy fundamentalists,” a group that “places an especially high value on personal privacy and is distrustful of business or government use of their data.”
A fifth of the U.S. population are wholly unconcerned with privacy, while the largest portion — 55 percent — are “privacy pragmatists” who “favor voluntary standards over legislation and government enforcement,” and are willing to share data in exchange for personal or societal benefits.
While the report also cites a recent Pew Research Center study that found “[m]any Americans say they might provide personal information, depending on the deal being offered and how much risk they face,” the same report states “they are often cautious about disclosing their information and frequently unhappy about what happens to that information once companies have collected it.”
While 47 percent of respondents told Pew they were okay with a retailer collecting and sharing data on their purchases, 51 percent found the prospect of a social media platform tracking their activity to deliver targeted ads unacceptable (important to note, social media platforms do this, and the FCC’s rules would have no impact on them or other edge providers like Google and Yahoo, as one Republican FCC commissioner has already pointed out).
“Advocates tug at heartstrings with visions of privacy-deprived poor, when in reality, AT&T, where it has trialed this mechanism, has only implemented opt-in privacy based discounts on its most expensive product,” ITIF authors said in Monday’s report. “Perhaps, instead of harvesting information from low-income Americans, AT&T is attempting to serve more effective advertisements to America’s wealthy, who are much more likely to buy goods and services and online.”
Former Federal Trade Commissioner Jon Leibowitz told InsideSources the FCC shouldn’t decide for Americans if they want discounted service.
“If you’re a family of four making $40,000 a year or you’re like my 21-year-old daughter who has been online her entire life, but is about to graduate college, you may want that discounted product. The FCC approach says you can’t do that,” Leibowitz said.
The former FTC chair helped draft the agency’s landmark privacy report during the first half of the Obama administration, and oversaw privacy enforcement of providers before the FCC claimed that authority with its net neutrality order last year.
“Consumers should have the choice. The FCC should not be telling them they can’t do this,” he said.
In comments on the rules to the FCC, CEO Kim Keenan of the Multicultural, Media, Telecom and Internet Council, a digital civil rights non-profit, said the rules will hurt low-income and elderly consumers who could rely on discounts for service.
“Contrary to the commission’s belief, financial inducement programs that require informed consent should not be seen as presumptively coercive,” the comments read. “[C]onsumers should have sufficient information provided to understand the benefits of such services and make their choices. Instead, the Commission should provide guidance as to the privacy-protection components that an acceptable program would include.”
In a speech Sunday, Wheeler said he intends to finish the privacy rules before the end of 2016.
