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Policy / DCN perspectives on policy, law, and legislative news surrounding digital content

How the new FCC privacy rules can work for our industry

November 10, 2016 | By Chris Pedigo, SVP Government Affairs – DCN @Pedigo_Chris

In late October, the Federal Communications Commission (FCC) approved sweeping new privacy rules, which require Internet providers Service Providers (ISPs) to obtain affirmative opt-in consent before collecting and using sensitive consumer data. Importantly, sensitive data was defined broadly by the FCC to include financial and health data, geolocation, social security numbers and—for the first time—browsing history and app usage data. ISPs would need to offer consumers a way to opt-out of the collection and use of non-sensitive data. With Donald Trump’s election, a Republican-led FCC is likely to withdraw or significantly alter these privacy rules. So, where do we go from here?

It is important to note there is significant precedent and support for requiring a higher data collection threshold for ISPs. In 2012, the Federal Trade Commission (FTC) issued a report, entitled “Protecting Consumer Privacy in an Era of Rapid Change,” which laid out a framework for how companies should protect consumer privacy. The report drew lines between practices that would meet an average consumer’s expectations and those that would not. In their argument for a heightened requirement for ISPs, the FTC noted that “ISPs serve as a major gateway to the internet with access to vast amounts of unencrypted data that their customers send or receive over the ISP’s network. Thus, ISPs are in a position to develop highly detailed and comprehensive profiles of their customers—and to do so in a manner that may be completely invisible.”

In addition, the Digital Advertising Alliance (DAA), the industry’s self-regulatory body, holds ISPs to a heightened requirement because they are in a unique position to “collect all or substantially all” of a consumer’s data. As the DAA Principles note, ISPs or “service providers” must “obtain the consent of users before engaging in online behavioral advertising.” For comparison, the DAA requires only that websites offer consumers a way to opt out.

This differentiated treatment of ISPs exists for good reason—there are fundamental differences between ISPs and other actors in the ecosystem. While the FCC has asserted on several occasions that it has no ability to regulate edge providers (aka websites), FCC Chairman Tom Wheeler also recognizes the difference between ISPs and edge providers. He has noted that consumers have fundamental choices about which websites they visit, while they do not have the same kind of choice when it comes to their ISPs. Indeed, the above-mentioned FTC 2012 Privacy Report notes that data collection and use by publishers like members of DCN tends to meet consumers’ expectations because that data collection and use occurs within the same context.

As we noted last February, context matters. DCN members go to great lengths to provide a trusted experience for consumers because our members understand that consumers have a myriad of places from which to get news, entertainment and information on the internet. This trusted experience and direct relationship with the consumer is also the value proposition for advertisers. Ubiquitous and non-transparent tracking by 3rd parties undermines the trusted experience that premium publishers are striving to create for their audiences.

As Ben Thompson notes in his post-election wrap, digital advertising has been built to be mostly direct marketing and data arbitraging on the failed premise that consumers don’t really care about their individual privacy or right to use the web without being tracked by 3rd parties. But the reality is that consumers do care – they’re limiting their online activity, clearing cookies, enabling Do Not Track signals and increasingly adopting ad blocking software. The current dynamic that favors a clear (and legal) arbitrage opportunity is actually harming advertisers and publishers along with the consumers they both serve and need. To continue ignoring these consumer concerns is likely to invite more regulatory scrutiny and foster an unhealthy digital economy. But, more importantly, ignoring these trends is also a missed opportunity for premium publishers who are best positioned to benefit from increased consumer trust.

While there will be significant debate about whether the FCC should have acted and whether the rules should be repealed, let’s be clear: Value should be shifted back to companies that collect and use consumer data transparently and in ways that meet with consumer expectations. In this way, the FCC privacy rules may serve to help publishers. If more companies act in an open and respectful manner, perhaps we can begin to repair the consumer trust issues that have battered our industry. In a world where context matters, premium publishers matter.

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