Over the course of a few days in March 2017, the position of internet service providers (ISPs) in the US was altered. Senator Jeff Flake (R. AZ) sponsored a little-known — and before Trump little-used — Congressional Review Act (CRA), which gives Congress powers to review rules enacted by federal agencies like the FCC, to overturn the 2016 FCC rule “Protecting the Privacy of Customers of Broadband and Other Telecommunications Services.” The vote of “disapproval” that followed struck down the FCC Privacy rule from 2016 and barred its replacement in “substantially the same form.”
The move was a win for ISPs like Verizon, Comcast and AT&T, who had been lobbying to ease regulations for months. With Congressional disapproval of the FCC Privacy rule, ISPs would no longer be classified as “telecommunications services” and therefore no longer subject to the privacy protections that regulate telecommunications companies, like the requirements to obtain explicit opt-in consent from users for how their sensitive information was used and opt-out consent for non-sensitive information.
From the perspective of ISPs, under the FCC Privacy rule they would have been operating in an unfair business climate where Google and Facebook were free to monetize their access to customer data — any Facebook user accepts that their browsing data is tracked a fed back in personalized ads on their Facebook feed — but ISPs were prevented from doing the same. The FCC Privacy rule also drew attention to the privileged position of ISPs as gatekeepers to the internet.
Arguably, ISPs have the best view of users’ internet activity. If you’re in a totally Verizon house, they might know that from 9-10pm you watched Scandal and during this time, you opened the Twitter and Amazon apps on your phone, checked your email, checked the weather for the Boston area and made a phone call lasting 11 minutes. Verizon might also know that someone else in your house opened two gaming apps and browsed on Google. The issue is the extent to which they are free to capitalize on this wealth of information.
With the surge in people’s online activity across a constellation of devices and a plethora of locations, digital advertising is on the rise. Digital ad spend passed TV ad spend in the US last year and forecasts predict that digital ad spend with see steady growth, from $83 billion in 2017 to $129 billion by 2021. Mobile advertising will be the driver of this growth. Unsurprisingly, Google and Facebook dominate, controlling about 60% of the market. Data is the ultimate currency in this marketplace and ISPs want in.
Google and Facebook have no small deal of power thanks to the scale of their user data, which can be used for targeted advertising. With new freedom to compete, ISPs appear to see convergence as the way forward. Mergers between Verizon, Yahoo and AOL; AT&T and Time Warner; and Comcast and Charter; demonstrate a shift in the ISP business model. While ISPs will continue to generate most revenues from traditional sources like subscriptions, they can now unlock a goldmine of customer data, especially those specializing in mobile services, and even more so across partner platforms.
Last month, Verizon completed its $4.48 billion acquisition of Yahoo’s operating business and formed a new subsidiary called “Oath” that includes both Yahoo and AOL, each of which have bought up a number of content and ad tech companies. Verizon hopes that Oath will be “a diverse house of more than 50 media and technology brands that engages more than a billion people around the world” — and advertising is key to those ambitions. Verizon looks to be trying to produce its own content and have control and free access to the content and the customer data travelling through their pipes.
ISPs claim that their access to customer data will allow them to provide faster, cheaper internet access and user-friendly platforms tailored to the customer’s needs. However, the focus seems to be on advertising revenue streams, not customer needs. While the FCC rollback is not likely to cause a severe loss of privacy for customers, it does open the door for personal data collection on a larger scale, especially in the case of ISPs offering bundled services of TV, internet, landlines mobile phones and even home security.
Looser privacy regulation appears misaligned with customer interests and preferences. It does not incentivize improving access for Americans who still lack reliable internet, or increasing options for people with little choice of provider; but it might create opportunity for coercive contracts where customers hand over their data in exchange for cheaper plans. Only 43% of Americans trust broadband companies with their personal information and 70% are uncomfortable with companies tracking their website visits. But digital users are fast becoming their own data’s first and last defense.