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Tuesday, March 16, 2010

National Broadband Plan on Privacy Regulation: Another FCC Power-Grab
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I've just read through the National Broadband Plan's (NBP) section on online privacy (pp. 52-57). I share the FCC's goal of increasing consumer control over their digital profiles, and applaud the FCC's call for promoting the development of trusted identity providers and for increased education about identity theft.  But I'm disappointed to see that the FCC is focused on regulatory solutions instead of less restrictive alternatives like consumer education, technological empowerment, increased enforcement of existing laws, or limiting government access to data collected by the private sector.

Given the nature of bureaucracies and the FCC's sweeping assertions of its own authority in recent years, I suppose we shouldn't be surprised that the FCC's primary suggestion is that it should be given a key role in crafting privacy regulations for online services.  But the FCC clearly lacks any statutory authority over the "computing cloud" and Congress has not asked the agency for suggestions on expanding its jurisdiction.

The FCC deserves credit for recognizing something I've stressed: the manifold benefits of online data collection and use, especially that targeted advertising can significantly increase funding for "free" ad-supported content and services:

These data are giving rise to something akin to a "digital identity," which is a major source of potential innovation and opens up many possibilities for better customization of services and increased opportunities for monetization. The value of a targeted advertisement based on personal data can be several times higher than the value of an advertisement aimed at a broad audience. For example, the going rate for some targeted advertising products can be several times the rate for a generic one because consumers can be six times more likely to "click through" a targeted banner advertisement than a non-targeted one. This differential will likely increase as targeting becomes more refined and more capable of predicting preferences, intentions and behaviors.

Firms' ability to collect, aggregate, analyze and monetize personal data has already spurred new business models, products and services, and many of these have benefited consumers. For example, many online content providers monetize their audience through targeted advertising. Whole new categories of Internet applications and services, including search, social networks, blogs and user-generated content sites, have emerged and continue to operate in part because of the potential value of targeted online advertising.

Unfortunately, the FCC doesn't acknowledge that these benefits are a critical part of the trade-off inherent in increased regulation of how online service providers collect and use data.

The Plan cites the economic value of "digital profiles" not as a reason for policymakers to tread cautiously in tinkering with the economic engine of the Internet, but as a justification for leveling the playing field among competitors through increased regulation. I'm all in favor of increased data portability and applaud efforts like Google's cheeky Data Liberation Front, but it's funny how even the benefits of data use become reasons for further regulation!

None of this is what Congress had in mind when it asked the FCC to propose ways of increasing the affordability and utilization of broadband as part of last year's economic recovery legislation. I stressed that point in my comments back in January on the FCC's NBP privacy inquiry (which was actually written by outside regulatory advocates and simply adopted by the FCC wholesale).  In essence, the FCC seems to have done what TV talk show guests do: Ignore the question asked and provide the answers you want.  When it comes to online privacy, the FCC's answers mostly involve increased FCC regulation of the Internet.

posted by Berin Szoka @ 2:12 PM | Advertising & Marketing , Broadband , Privacy

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