In an anticipated, but not wholly welcome move, the US Federal Communications Commission (FCC) has proposed new data security and privacy rules for broadband internet service providers (ISPs). The proposed rules would require ISPs to disclose what data they are collecting, how that data is being used and give the customer the choice not to have their information shared.

Why has the FCC introduced these rules and what are the implications for advertisers and marketers?

ISPs are often described as the gatekeepers of the internet. That role also gives them invaluable access to information. As internet traffic passes through an ISP, the ISP can collect information about a customer’s network usage, search queries and websites visited. This information can be aggregated by the ISP and sold to third-parties to serve targeted ads. The aggregation and sale of information is the foundational step in programmatic trading.

In the absence of how to regulate the gatekeepers, consumers and privacy advocates have raised concerns about how ISPs are making use of customer information, sometimes without customer knowledge or consent. In March of this year, Verizon Wireless settled with the FCC for a $1.35 million fine for the use of “supercookies” without customer permission. Supercookies are permanent and hard to detect tracking technology which can help advertisers deliver targeted advertising often without the web browser knowing the supercookies have been installed in their browser.

The FCC’s proposals have been met with opposition even if the rationale behind the proposal follows a line of thinking consistent amongst privacy advocates globally.  Specifically, when someone uses a “free” service, like signing up for a Facebook account, the “price” to be paid is some reasonable sharing of information. When a customer is paying for a service (e.g. paying an ISP for access to the internet), the collection, use and/or sale of information is another profit center for that service provider. However, the bargain between the customer and service provider did not necessarily explicitly include the collection, use and possible profit of the customer’s information.

It is this extra bargain that unsettles regulators and privacy advocates alike. Did the customer know the service provider was profiting from them in another way? If so, did the customer consent to it?

Where does this leave the advertising industry?

It is a glass half-empty, half-full view. For the glass half-empty school, obtaining opt-in consent to the collection and use of information is ad blocking in another form. Add it to the list of barriers to serving targeted ads to potential customers. The proposed rules have a particular impact on ISP’s who have multiple business divisions such as Time Warner and AT&T. The ability of these larger ISP’s to leverage data across multiple business units could get a little harder.

For the glass half-full school, the argument exists that conversion rates will be higher for customers who have opted in to have targeted ads served to them. The consumers are consciously consenting to it and providing relevant information.

The proposed rules do have loopholes. The rules only apply to ISPs and not companies like Google or Facebook. The rules also do not apply to device makers since the FCC has no authority over them.  As such, the proposed FCC rules have limited application to the industry as a whole.

What happens next?

The rules are proposed rather than finalized. Stakeholders are encouraged to provide responses as quickly as possible as the response date for the consultation period is quite aggressive (May 27, 2016).

Albert Luk, VP of Operations and General Counsel, Jumbleberry (http://Jumbleberry.com)

As Jumbleberry’s VP of Operations and General Counsel, Albert Luk is responsible for designing and implementing a compliance system in connection with advertising and marketing campaigns in multiple jurisdictions as well as all legal affairs of the company. As a member of the Executive Committee, he is responsible for strategic risk management of the enterprise and contributing to the strategic direction of Jumbleberry.

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