Privacy rules proposed by the Federal Communications Commission to limit how internet providers collect and use subscriber data could put small and rural providers out of business, experts and providers say.

Dr. Eric Burger, computer science research professor at Georgetown University and critic of the draft rules, says the legal costs associated with filing compliance reports with the FCC could put small internet service providers (ISPs) — many of whom may be the sole broadband provider for rural areas — out of business.

“I have a friend who operates a wireless ISP in Wyoming, and he’s already hugely burdened by regulation,” Burger told InsideSources. “He’s looking at this and saying, ‘It could be the straw that breaks my back, I’ll just have to drop out of the market.'”

Burger suggested larger incumbent ISPs like Comcast, who are more capable of paying those compliance costs, stand to benefit economically from the rules when they push out smaller competitors — a result that runs counter to one of the FCC’s primary goals of expanding broadband adoption, and Chairman Tom Wheeler’s recurring mantra of “competition, competition, competition.”

“He may be the only provider for a lot of people in Laramie,” Burger continued. “Now, Laramie, Wyoming has a population of 400,000 — that’s not going to make the front page of the Washington Post, but these are real people that are getting service that might get regulated out of existence.”

“He’d have to pack it in because he’d have to be filing monthly reports on how he’s protecting people’s CPNI [Customer Proprietary Network Information],” he added.

After claiming regulatory jurisdiction over ISPs in its net neutrality order last year, the FCC said it wouldn’t hold providers to the CPNI standards used to regulate how telephone providers collect and use subscriber data, but that it would develop rules specifically for ISPs.

Though the FCC has cited its history enforcing CPNI rules as justification for its ability to create new privacy standards for broadband, experts in industry and government have criticized the FCC’s approach, which requires ISPs to get customer consent before collecting almost any data for use in targeted advertising and other offerings.

Many of the same critics including a former Federal Trade Commission chairman under President Obama said the FCC should mimic the regulatory approach the FTC maintained over ISPs before net neutrality. Under the FTC’s regime, web companies have to offer customers the ability to opt-out of sensitive data collection and monetization — the reverse of the FCC’s proposal.

Smaller providers themselves agree. WTA-Advocates for Rural Broadband, a group that represents small and rural providers, urged the FCC during a phone call last week to get rid of the opt-in requirement to use customers’ personal information for anything other than “communications-related” services, Law360 reported.

“WTA urged the commission against adopting rules that prohibit carriers from contacting their own customers without targeting of individuals or a subset of customers, for example to obtain responses to customer satisfaction surveys, promote digital literacy events, announce annual meetings, or alert all current and former customers of new services being offered,” the group wrote in a letter discussing the call.

In comments submitted to the FCC in May, WTA said the costs associated with the rules will slow network growth in underserved areas.

“At a time when small rural providers are seeing decreasing federal and state universal service support while subject to increasing deployment obligations, overly restrictive privacy requirements that necessitate expensive compliance programs will only divert funds towards regulatory compliance and away from broadband buildout in rural areas where such investment is critically needed,” the group wrote.

WTA said small providers “to date do not engage in the creation of highly detailed profiles of individual consumers or online behavioral advertising or retain substantial amounts of sensitive customer information,” unlike larger incumbent carriers and edge providers like Google and Facebook.

Burger said his friend’s small Wyoming-based ISP has already pledged not to monetize his subscribers’ data, making the cost of complying with the potential new rules especially frustrating.

“The argument we need to be free to monetize your data — I’m not totally sympathetic to that,” Burger said. “If it’s in a market that has competitive offerings, then I would be sympathetic to it, but if your only choice is Verizon Wireless, who has this reputation of, ‘All your data is ours and we will sell it and make money,’ and that is your only choice for internet access, you don’t have a choice.”


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