What’s the Big Deal About Internet Privacy (Part 2)

This is part 2 of a series. Here’s the link to part 1, in case you missed it.

Part 2: The FCC rule and current policy – what’s the argument, and why does it matter?

The argument in favor of the FCC ruling:

Supporters of the FCC’s Broadband privacy rules (including 3/5 FCC Commissioners, 2/3 appellate judges, and a host of industry and non-profit organizations) generally cite the following to justify the rule change:

1. The internet is an essential service

At this point it would be hard to argue that a person can conduct commerce or go about their daily lives in the 21st century without utilizing broadband networks. As I pointed out in Part 1, reliance on the internet for essential economic, health, regulatory, and personal activities is only continuing to grow. If you want to buy and airline ticket, you might pay a penalty for not booking it online. Many private and state agencies have eliminated or greatly scaled back over-the-phone support as they move increasingly to an online-only model.

Nobody who understands the difference between an ISP and an internet platform is actually contesting this point, so let’s move on.

2. ISPs are fundamentally different than internet companies in important ways

Internet platforms (i.e. Google, Microsoft, Facebook) provide siloed services, the use of which is voluntary. You can access online banking or government websites without using Google Chrome. You can send messages without Facebook Messenger. There is competition, however weak, in the market. People have a choice about whether to use these services, and which service to use.  In contrast, most consumers rely on ISP networks for all internet activity, and outside of metro areas many ISPs have effective monopolies.

Internet platforms are typically free to consumers.  Consumers are willing to provide access to personal data and deal with ads – giving up this data is the price we pay for access to high quality search engines and social media platforms.  In contrast, consumers pay sometimes ridiculous prices for internet service.  We are getting nothing in return for sharing our personal data (especially now, as congress removed any need for ISPs to incentivize consumers to allow their data to be monetized).

3. Collection of personal data through these networks should be voluntary and transparent

The data these companies want to monetize belongs to you and me. That data has a value, and you and I should be able to recognize that value. Reversing the FCC decision removed any incentive for ISPs to develop a brokerage or rebate system that would actually compensate consumers. The result is that we not only lose control of our data (they can sell it whomever they wish), we also lose the monetary value of that data. (Some people might argue that if ISPs are allowed to generate advertising revenue, the cost of Broadband will go down for you and me. Such an argument would be comical. I would bet everything I own that we never see a decrease in the cost of internet services proportional to the value created by selling our personal data.)

On the transparency side, we deserve to know what data is being collected, how it’s being packaged, and to whom it is sold.

4. Broadband service providers should secure their networks to protect customer data

This is in the national and public interest.  Economic espionage, identify theft, and online fraud are very real problems, and they will only get worse. The only real argument against this rule is a free market one: “Let the free market dictate how secure these networks are.” This might be the case if there was actual competition, but unfortunately for many Americans, they’re stuck with whatever ISP services their area. Even if they have 2 or 3 options, the chances are good that they are shopping on price, not security features.  Without a mandate to secure their networks it’s unlikely ISPs will make they investments needed to counter these threats.

The argument against the FCC ruling:

Opponents (2/5 FCC commissioners, the telecoms industry) argued the following:

1. The FCC does not have the legal authority to regulate Broadband
2. Allowing ISPs to sell personal data to advertisers would increase competition in the digital advertising market
3. The new rules will be burdensome and confusing to consumers.

Let’s unpack the merits of each argument in turn:

1. The FCC doesn’t have the legal authority to regulate internet service providers.

I’m no lawyer, but this one seems obvious to me. Broadband internet carries interstate and international communications, which clearly fall under the FCC’s purview.  (Spoiler alert – this argument was lost in court., with a ruling that resoundingly agreed broadband is an essential service.) The simple fact that overlapping and/or competing regulations exist does not in itself create cause to oppose this rule change.

2. Allowing ISPs to sell personal data to advertisers would increase competition in the digital advertising market

I can’t argue this.  It’s absolutely true.  ISPs desperately want to compete here – the reasons for which we’ll explore in more depth in the next installment. Could someone just explain to me how ISPs competing in the target ad market is good for consumers?  “Yay! More ads! And they’re even creepier!”

Many companies have claimed targeted ads are less annoying, even helpful to consumers.  Perhaps a percentage of them are.  However, I haven’t been able to locate any data that suggests consumers suddenly like advertisements because they’re targeted, or that they’re willing to trade their privacy for targeted ads.  In fact, there is data supporting the opposite.  This data aligns with my anecdotal experience, as I haven’t heard many people embracing and applauding targeting advertising that’s already happening.  Mostly I’ve heard complaints about how creepy it is.

This argument also requires us to ignore the very real potential that targeted ads are harmful to consumers. After all, the goal of targeted advertising is to reach the target demographic for a product at the time when they are most likely to purchase that product.  It’s not difficult to imagine scenarios in which this actively runs against consumer interests:

• • A dieter see an ad for a value meal when he/she is stressed and hungry
  • A gambling addict is targeted with an ad for a casino just as they are passing by one
  • Someone sees something they want but can’t afford at a time when they are most likely to use it

Many will argue that this is still a choice, that people have will power, etc., but it’s hard to argue that the deck isn’t getting stacked a little more against consumers every day.  At best, more/more effective targeted ads will be an annoyance for consumers, and at worst it’s harmful. The only stakeholders who actually benefit as a result of this reality are ISPs and marketers.

3. The new rules will be burdensome and confusing to consumers.

Basically, telecoms companies (and their allies in the FCC) made the argument that asking customers’ permission to collect and sell their personal data would be burdensome…for their customers?  I suppose this might be true if the ISPs deliberately misled customers about what was happening, but if they framed it in a transparent, clear, and accurate way…well, I don’t see how this argument holds up. Also, the link to the study above suggest consumers actually want this.

On the flip side, it would certainly be burdensome for ISPs.

This particular argument stood out as cynical to me, but without it there would have been no argument that the FCC rule was bad for you and me.  It provides a fig leaf’s worth of coverage for congressional action that is blatantly contrary to the interests of American consumers.

Next up, we’ll look a more closely at why ISPs, internet platforms (“edge providers”), and privacy advocates care so much about this issue, and why consumers really ought to care more.