FCC To Let Carriers Share Customer Data

The Federal Communications Commission (FCC) has cleared the way for telephone companies to share customer data with associates that hawk communications services -- without first seeking customer consent.

Earlier regulations governing use of such data had prevented telecom companies from sharing customer information unless they first sought permission from customers. But in 1999, a federal appeals court ruled that those regulations were a violation of free speech, so the agency was forced to revisit the issue.

The new ruling is much broader than industry pundits expected, giving telecom carriers the right to share details about customer calling habits with marketers. But FCC Chairman Michael Powell defended the decision, saying that "consumers have a reduced expectation of privacy" regarding that data when their carriers use it "to market services customarily offered by telephone companies, such as voicemail and Internet access."

'Loss for Privacy'

"I'm generally disappointed with the decision," Aberdeen Group senior analyst Dana Tardelli told the E-Commerce Times. "Yes, you need to address the situation, but the opt-out approach is weak, and it is certainly a loss for consumer privacy.

"Obviously, people don't want to get bombarded with marketing," Tardelli added. "Somehow, in the carrier world, it's okay to do it. That shows what the sentiment is -- slanted toward the business world rather than the consumer. That shows how the industry is currently being run."

Following the Court's Lead

The commission said its decision is in keeping with the Tenth Circuit Court of Appeals' ruling, and added that it walks a fine line between preserving consumer privacy and honoring the free speech rights of companies.

"The Commission implements the Tenth Circuit's directive that we must, as a constitutional matter, carefully weigh the costs and benefits associated with satisfying consumers' statutory entitlement to give knowing consent to the use and disclosure of their customer proprietary network information (CPNI)," Powell said.

"We do this, as the court insisted, while still respecting companies' valid speech interests pursuant to the First Amendment."

Company vs. Consumer?

But Paul Waadevig, industry manager of telecommunication services at Frost & Sullivan, told the E-Commerce Times he is surprised that the FCC would place such importance on corporate free speech.

"Commercial free speech rights have, historically, been very weak compared to individual privacy rights," Waadevig said. "Given the scramble in the telecommunications market right now to do whatever it takes to increase market share and profits, I'm sure that most telecom companies will interpret the use of CPNI allowed by this decision in the broadest possible light.

"From a market perspective, telecommunications companies should be very wary in using CPNI on an opt-out basis only, even though permitted by the ruling," Waadevig added. "As we approach the first anniversary of 9/11, the immediate shock of the event is wearing off. Consumers are already beginning to question proposals that will limit their privacy rights for national security reasons. Certainly, the potential for a consumer backlash is high in this atmosphere if additional privacy rights are limited for commercial reasons."

Dissension on Decision

Under terms of the FCC's decision, customers will have to explicitly tell a carrier not to make their data available to its associates. On the other hand, carriers will need customers' permission if they want to share data with companies that are not their associates or that do not offer communications services.

"Companies must obtain affirmative consent from consumers for third-party and non-communications uses," said Powell.

The decision was denounced by FCC Commissioner Michael Copps as too far-reaching and a clear trouncing of privacy protection. "Everyone should understand that this decision is neither narrow nor pro-privacy," Copps said. He noted that information technologies already can "monitor what we do, who we talk with, what we buy, what organizations we belong to, what political activities we undertake."

He warned that "the threat of technology intrusion into our private lives is not only real -- it is growing."

Powell Hesitant

In his statement, Powell admitted he harbored some trepidation about changing the rules and considered the Commission to be hamstrung by the Tenth Circuit's actions.

"The reach of the Tenth Circuit's opinion does not allow us to adopt an across-the-board opt-in regime at this time," he said.

The Commission did pledge to be vigilant in monitoring the activities of telecom carriers that share customer information.