FCC Should Bar ‘Pay For Privacy’ Schemes

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As the Federal Communications Commission considers restricting what broadband providers can do with our personal surfing data, the agency is weighing whether it should outright ban a practice that’s come to be known as “pay for privacy.”

Certain broadband service providers, most notably AT&T, have begun charging a premium to customers who opt out of having those companies to track their online activities. Privacy and consumer rights advocates are blasting the practice and some are calling for the FCC to outlaw it.

The agency should. The FCC’s whole effort to establish rules protecting consumers’ privacy from broadband providers, which I wrote about in my last column, is grounded in a law passed by Congress. Companies shouldn’t be allowed to penalize customers who exercise their legal right to privacy.

But that’s effectively what some broadband companies have started to do. AT&T, for example, is employing the “pay for privacy” scheme with its new GigaPower broadband service. AT&T recently started offering that service, which provides internet speeds of up to 1 gigabit per second, in San Jose and other Bay Area cities.

AT&T tracks the web-surfing activities of GigaPower customers under a program it calls “Internet Preferences,” which is designed to deliver targeted ads. If customers don’t want AT&T to track their activities, they have to pay an extra $29 a month. So, instead of paying $70 a month for standalone broadband service, customers who decline to participate in Internet Preferences pay $99 month.

That’s a hefty premium to have to pay for privacy. More affluent people may be willing and able to pay up. But such fees risk penalizing those who can’t afford them.

Such schemes “hurt people in lower-income” groups, said John Simpson, director of the privacy project for Consumer Watchdog, a consumer advocacy group.

Allowing broadband providers to continue with such schemes runs the risk of giving them the green light to keep increasing the premium users pay for privacy so that ever fewer people opt out of the programs. And they already have an incentive to do so: The more data they collect the more they can precisely target ads and charge higher prices for them.

“There’s every economic incentive for broadband providers to do this coercive pricing,” said Meredith Rose, a staff attorney with Public Knowledge, another consumer advocacy group.

The broadband providers and their defenders tend to paint the “pay for privacy” schemes as benign. They help to ensure that the advertisements that consumers receive are more relevant to them, they argue. And they compare the arrangements to other discount programs that consumers are familiar with, like when they use a loyalty card at a grocery store.

But consumers generally have many choices about where to buy their groceries. Their choice of broadband providers is usually much more curtailed. If their local broadband provider is using a “pay for privacy” program, most consumers don’t have the option to go to switch to one who doesn’t.

What’s more, loyalty cards only generally track customers’ purchases within a particular store. They don’t track every purchase a customer makes.

And there are no laws that protect consumers from having their purchases tracked by retailers. But federal  law does restrict what communications providers can do with their customers’ data.

If it didn’t, broadband providers “would have absolute freedom to do what they want with people’s privacy,” said Ernesto Falcon, legal counsel at the Electronic Frontier Foundation, which advocates for and defends citizens’ online rights.

In exploring the pay for privacy issue, the FCC is weighing whether it will allow the practice but require providers to get consumers’ consent in the form of opting out or opting in to such programs.

The problem with opt-in and opt-out arrangements is that informed consent is something of a joke when it comes to privacy; consumers frequently have no idea what they are agreeing to when they allow their data to be collected and they usually have no clue as to the value of that data.

Corporate privacy policies and terms of use documents are notorious for being long, vague and convoluted. Even those who actually attempt to read them can have a difficult time figuring out what they mean or how their data will be used.

And it’s frequently difficult for consumers to realize that they actually have the option to keep their personal data private. AT&T’s Internet Preferences program is a case in point.

The only price AT&T advertises for GigaPower is the one that includes users agreeing to be part of the Internet Preferences program. The main page that describes the GigaPower services doesn’t mention the program, only saying that the quoted price includes a “ongoing discount” without saying what it’s for.

To find out about Internet Preferences, consumers would have to click on a “see offer details” link and then on another link to get to a separate page that describes the program. So, it would be hard for consumers shopping for broadband access to know there is a tracking program, that they could opt out of it or what the price would be if they did.

No wonder AT&T says that few people have declined to take part in Internet Preferences.

That’s why the FCC ought to just ban the pay for privacy practice. Consumers won’t have meaningful privacy protections if they don’t know they have a choice to protect their information or if broadband providers can just make privacy unaffordable.

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