Online Privacy: A Matter of Choice

Earlier this month, the trade association NetChoice released the first 2011 update of its Internet Advocates’ Watchlist for Ugly Laws (iAWFUL). iAWFUL spotlights what the group considers to be the top ten pieces of state and federal online privacy legislation that threaten the Internet and e-commerce.

The coalition of about 40 search companies, e-tailers, and marketing and advertising firms opposes legislative actions that “tie the hands of online innovators” and “insert government regulators between consumers and the online services on which they depend.” Members include AOL, eBay, Electronic Retailing Association, Expedia, NewsCorp, Oracle, and Yahoo! 

At the top of the iAWFUL list is a bill by Rep. Jackie Speier (D-CA) that would require online commerce companies to create a global “Do Not Track” system allowing Internet users to prevent the tracking and collection of their online activities and information.

The list also takes aim at state-level legislative proposals (Tennessee’s SB 487,California’s SB 242, New York’s AB 4809) that seek to regulate online speech and the use of consumer information for advertising.

The offenders designated by NetChoice:

1. Congressional Do-Not-Track Privacy Bill
2. Social Network Micro Managing

3. Affiliate Nexus Bills

4. Recurring Offer Restrictions Bills

5. Child Online Registry and Do-Not-Market Mandate

6. Behavioral Advertising Restrictions

7. Telemarketing Restrictions on Online Marketing

8. Adolescents’ Online Privacy Protection Act

9. Remote Purchaser Reporting Mandate

10. Restrictions and Liability for Geo-Location Tracking

Literacy 2.0 spoke with Carl Szabo, Policy Counsel, for NetChoice at the group’s offices in Washington D.C. about the issue of Internet privacy as it pertains to e-commerce. Szabo specializes in the analysis of tech-related legislative and regulatory initiatives relevant to online companies. Prior to joining NetChoice, he was an intellectual property attorney at the law-firm of Wildman, Harrold, Allen & Dixon, with an emphasis on privacy matters, Internet, e-commerce and contracts.

Before obtaining his J.D. and Communications Law Certificate from the Catholic University of America, Szabo worked at the Federal Trade Commission (FTC) on the staff of Commissioner Orson Swindle, where he helped create and implement the FTC’s Consumer Information Security Outreach Plan and assisted the White House in establishing the National Strategy for Cyber Security. He has worked on copyright, trademark and anti-piracy issues for the Motion Picture Association of America (MPAA) and the Entertainment Software Association (ESA). He has B.A. in Economics, Managerial Studies, and Policy Studies from Rice University.

Let’s start with iAwful’s #1 concern, the so-called ‘Do Not Track” bill introduced by Rep. Jackie Speier (D-CA). What’s wrong with allowing consumers to opt out of having their information collected and used for targeted advertising?

There is nothing wrong with that. In fact we encourage giving consumers that option and they do have that option. It’s called the Self Regulatory Program for Online Behavioral Advertising. It is a self-regulated, business-created program to not only educate consumers on how to manage their privacy but to also provide them a just-in-time opportunity to opt-out of having their information collected by advertisers.

What is the overall goal of the program?

Our goal is to make sure we do not kill the Golden Goose we have here in America.

And that goose is named?

The free and open Internet. We see the openness and choice of the Internet as mutually beneficial to consumers and businesses. There is a misconception that consumers are at odds with business. It’s a symbiotic relationship.

Do you see NetChoice as an advocacy organization?

We are primarily about education. We believe that if we educate consumers as to what’s going on, especially with respect to managing their privacy online, that’s good for everybody.

What don’t consumers know that they do need to know?

A lot of this fear, this fervor that you’re seeing about Internet privacy is because consumers and users of the Internet don’t understand what is actually happening, what is being collected. And I think once they have that knowledge it will be very disarming to them. As consumers start to see what information is being collected about them they realize it is not that bad.

The other part of the education process is explaining to them that opting out does not mean that you will not see any advertisements at all. Too often people use the term “Do Not Track” to describe the opt-out process. When people hear that they think it’s the same as the “Do Not Call” program. When you sign up on Do Not Call, you no longer receive calls with advertisements. If you sign up on [the proposed] Do Not Track you are still going to see ads. You are still going to be advertised to. The only difference is they may not be the ads you are interested in seeing.

The ads will be random.

One of the wonderful things about the Internet is the ability to tailor your experience. If I am interested in sports, I am more likely to see ads about sports. If you go to your local newspaper’s website and look up a sports article, the information that is being collected is only that you are interested in sports.

This type of targeted or direct advertising is nothing new. It has been going on for 100 years. It is the same as you see on broadcast TV, which is ad-supported.

What do consumers need to know how to do?

It’s about learning how to manage their privacy and knowing how to opt out of collection of information when that is what they want to happen. The best way to learn is to try it by clicking on the advertising option icon that appears on an ad that served by one of the participating companies.

If the collection of information is as innocuous as you suggest and can be of value to the user who wants to see targeted ads rather than random ones, why the high level of concern and all of the passionate rhetoric?

Let’s be honest, if a legislator is out there telling you your privacy is being invaded or there is an attack happening on your privacy, what are you going to think? The words they are using–invasion, attack–they create fear.

For example?

In trying to push her “Do Not Track” bill Rep. Speier misquoted a survey that asked Google users if they are concerned about their privacy. 52% said yes. But Rep. Speier stated the results as 52% of consumers are worried about “the invasion of their privacy.” The original question did not say “invasion.” People are always worried about threats from invasions.

We need to start educating and stop fear mongering.

Who should be doing the job of educating consumers about privacy awareness and management?

The education should come from businesses and that is what they are doing. At the same time, the FTC should get involved. The FTC is incredibly good at educating consumers. The FTC’s Bureau of Consumer Protection is one of their crown jewels. It’s one of the things the FTC is very proud of, and it’s one of the best ways to get this information out to consumers.

What is the best way to call a truce between the legislation fans and the self-regulation advocates?

There are basically two options. The first and best is for self-regulatory groups to get out ahead of this issue and give consumers the tools and training they need to take responsibility for managing their own relationships with online service providers. Legislators are only going to pass bills if they see a need for them.

And the second option?

There are some bad actors out there. They make us all look bad. If there is somebody violating their own privacy policies by collecting more than they claim that they do, the FTC should go after them. If a company doesn’t have privacy policies, the FTC should go after them. If a company has privacy policies that are unfair, the FTC should go after them.

Enforcement is a much better approach than legislation. Bad actors are ignoring the existing rules and will ignore any new rules. We need to get rid of the bad actors, not legislate away the good ones.

How do we avoid the legislative fragmentation that iAWFUL cites as a threat to e-commerce and consumer choice?

We don’t need to have federal legislation on top of a crazy-quilt pattern of state legislation. All that does is hamper new companies and prevent them from being able to grow.

If there were federal legislation, and I am not advocating it, but if there were, there would have to be a supremacy clause that makes this is an interstate commerce issue with Congress being the only one who can regulate it.

In its literature and comments NetChoice places primary responsibility on the consumer for managing their information.

Yes. We want to educate consumers in a rational, calm way because that is the way you get people to manage their privacy properly. There are no monsters under the bed or in the closet. But at the same time you need to be aware of what to do. It is a personal responsibility first.

Do consumers have the wherewithal to manage their own information and their own relationships with online service providers?

I believe they do. I believe consumers can learn how to use new technologies and use them safely. The idea that people cannot learn to use the Internet safely is like saying people can’t learn to operate a stove without getting burned.

I believe that consumers have the wherewithal.

And that sometimes government can be overly protective?

It is the opinion of some, including some at the FTC, that there is too much collection of information, that it is too bright out there. Their solution is to turn out the lights completely. At NetChoice we are talking about dimming the lights.

The collection done by most of the companies out there is information that is going to do no harm.

Is the degree of harm the right metric to determine what should or shouldn’t be done?

You have to look at both the potential for harm and the value.

The big question that is not being asked in all this is: “Are you willing to permit this innocuous tracking in exchange for the ability to use free services online?”

What happens if the Internet becomes increasing inaccessible because it is hidden behind pay gates and turnstiles? The information superhighway should not become the information toll road, which is what it will become without targeted advertising.

How so?

If the option to use targeted ads is removed, companies will likely see a 65% decrease in effectiveness of their ads. If you take away targeted advertising, online service companies are going to have to supplement their revenue somehow. One way is with more non-targeted ads.

Remember what it was like in the early days of the Internet when there were ads everywhere? There were pop-ups. There were ads with big colorful text and strobe lights. Those have diminished because targeted ads are orders of magnitude more effective than non-targeted ads. Advertisers don’t have to scream for attention. Targeted ads show people something they are interested in.

If you cut out targeted advertising you are also going to see services that you enjoy at no cost start asking for money. Search engines, for example, might have to charge for searches. Free online email services, like Hotmail, Google Gmail and Yahoo! Mail, might start asking consumers to pay.

A lot of people, President Obama included, are saying we need to continue to expand the Internet. More people will be getting online, but if we start putting up pay barriers, once they are there they will not be able to do anything else.

Then it all comes back to, as it says in your association name, a matter of giving people a choice on the Net?

One of the greatest attributes of American business is innovation, and one of our greatest exports is intellectual property. Just look at some of the companies that have been created here and have spread all over the world.

We can’t afford to kneecap innovation or intellectual property now or ever.

It’s the wrong thing to do, especially when businesses are already taking it upon themselves to do the right thing.



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