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ECommerceTimes.com

Critics Fret Over Commerce Dept.'s Internet Privacy Plan

Critics Fret Over Commerce Dept.'s Internet Privacy Plan

The Obama administration's latest Internet privacy proposal indicates it is "embarking on a fairly serious new regulatory reign," said Adam Thierer, senior research fellow at the Mercatus Center. "The potential downside is that it would significantly undercut the economic engine of the free Internet, namely advertising. The government could be killing the goose that lays the Internet's golden eggs."

By Rob Spiegel
12/17/10 9:17 AM PT

The U.S. Commerce Department's proposed federal Internet privacy rules are a giveaway to data collectors, according to some consumer groups. Other critics say they could spell the end of the free Internet.

The Commerce Department wants to create an online privacy bill of rights and a code of conduct regarding privacy that would be enforceable by the U.S. Federal Trade Commission. In an Internet privacy paper release by the department on Thursday, the department said the privacy rules would be developed with input from Internet companies and other groups.

The rules would represent a sea change in the way the U.S. government views Internet regulation. During the administrations of both Bill Clinton and George W. Bush, the federal government allowed Internet companies to operate without clear privacy regulations. Companies created their own standards while also managing a patchwork of regulations set out by 46 individual states.

No Teeth?

A number of consumer watchdog groups have described the Department of Commerce proposal as a gift to the data collection industry. Groups such as the Center for Digital Democracy, Consumer Watchdog and the Consumer Federation of America have panned the proposed privacy rules as leaning toward business and away from consumers.

Since the Internet-data-collection foxes have been invited to help draft the rules, the proposal can be viewed as fostering industry self-policing.

"Voluntary standards are not enough. Self-regulation has never been effective in protecting personal privacy," Beth Givens, director of the Privacy Rights Clearinghouse, told the E-Commerce Times. "The challenges are only increasing as technology becomes ever more sophisticated, not to mention ever more intrusive and invisible to the consumer."

When companies get to develop their own regulations, the individual consumer may not have a voice.

"Individuals need and deserve the protection afforded by a strong law that covers both online and offline privacy," said Givens. "In voluntary multi-stakeholder processes, which are what the report recommends, consumers usually get the short end of the stick."

The Free Internet Threatened

Other Internet experts believe privacy rules will undermine the free Internet.

"It's clear the Obama administration is embarking on a fairly serious new regulatory reign for the Internet in the name of protecting privacy," Adam Thierer, senior research fellow at the Mercatus Center at George Mason University, told the E-Commerce Times.

"The potential downside is that it would significantly undercut the economic engine of the free Internet, namely advertising. The government could be killing the goose that lays the Internet's golden eggs," he said.

"Most sites and services online are free of charge," noted Thierer. "That does not mean they are truly free. Somebody pays for them, and that's adverting powered by data collection. If the law went far enough to protect privacy that it restricted certain forms of data collection, it could result in changes for services that we currently get for free. Would people be willing to pay (US)$20 per month for Facebook? I don't think a lot of people are acknowledging the trade-offs."

Commerce Department officials did not respond to the E-Commerce Times' request for comments by press time.

Privacy Concerns Are Growing

The report from the Commerce Department comes just two weeks after the Federal Trade Commission's proposal for Do Not Track rules. The idea is to bring the concept of the phone system's Do Not Call registry to the Internet.

The goal of the proposal is to support consumers who wish to keep websites from gathering data on their Internet habits without permission. However, Do Not Track violations would be hard to detect and even harder to enforce, especially given the global nature of the Internet.

On the heels of the Do Not Track proposal, Microsoft announced that its next version of Internet Explorer -- due in 2011 -- will include a do-not-track feature that will allow consumers to stop websites from tracking their Internet behavior, possibly making the FTC proposal moot.

The Commerce Department proposal coincides with a major shift to cloud computing as tech companies such as Microsoft and Google entice customers -- both businesses and consumers -- to shift their data from hard drives to the cloud.

The "cloud" may sound benign, but it actually means your data is on someone else's server. When your data is on a vendor's server, the rules covering who can look at it are fuzzy.


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