Selling Your Data: The Vote to Deregulate Online Privacy

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Wharton's Kevin Werbach and New America's Eric Null discuss online privacy.

Controversy continues to ramp up in Donald Trump’s presidency, with the latest debate spurred by a congressional vote that reverses landmark online privacy protections put in place during the last days of the Obama administration. While some experts say the problems with online privacy don’t loom as large as health care or immigration, the conflict surrounding what internet service providers can do with customer data is shaping up to be a hot-button issue that could take years to resolve. Kevin Werbach, professor of legal studies and business ethics at Wharton, and Eric Null, policy counsel at the think tank New America’s Open Technology Institute, which focuses on internet openness and affordability, recently joined the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111 to explain the ramifications.

Here are the key takeaways from their conversation:

What is the Background of the Vote?

In October 2016, the Federal Communications Commission drafted regulations set to take effect later this year that would have limited what internet service providers could do with the reams of data collected on their customers, including browsing history and locations. The privacy rules, which would have prevented those companies from selling valuable marketing information without customer consent, drew immediate opposition from broadband companies and conservatives, who argued they were too sweeping and anti-business.

Werbach said the changes illustrate the jurisdictional problem between the Federal Trade Commission, which is the primary agency that deals with privacy issues, and the FCC. The latter reclassified broadband service in a way that made the FTC lose jurisdiction over those companies.

“Now with this reversal of the FCC decisions, there are no rules,” he said. “And the Federal Trade Commission doesn’t have the legal authority to put even their existing rules for other companies into place, and Congress hasn’t moved on that.”

The changes also muddy the waters in terms of what states can do about enacting internet restrictions and protections. Null said federal laws provide more clarity than a patchwork of state regulations.

“The FCC’s rule was one of the most recent rules that increased the amount of privacy that people can expect online, and that was certainly a good thing for consumers,” Null noted. “Whether states can replicate that, I’m not totally sure.”

Ultimately, the controversy is rooted in politics. Any rollback of privacy protections does not have popular support, so the issue — along with bigger ones like net neutrality — creates a sort of standoff between the federal agencies and policymakers.

“It’s a big concern and an issue that’s not going away,” Werbach said.

“The only way that global online commerce exists as we know it is because Europe and U.S. over the years have been able to patch over their differences. All of that now is under siege.”–Kevin Werbach

What Is the Impact of the Vote? 

The immediate concern is that consumers will lose much of the protections that would have been enacted by the old rule. With the loosening of restrictions, consumers will have to opt out if they don’t want their information sold.

“There’s a lot of distrust right now with consumers online about how information is being handled and sold and used in any number of ways that people have no transparency about,” Null said. “This rule was designed to give them a little more choice and transparency when it comes to how internet service providers use that data. With the rollback of this rule, and with potentially no rule ever being in place again on ISP privacy, it leaves consumers without any protections.”

Werbach points out that the changes also stand in sharp contrast to European regulations about data collection, which are more stringent and require opt-in for the sale of data. He describes the looming conflict as “the iceberg headed straight at us.”

“The only way that global online commerce exists as we know it is because Europe and the U.S. over the years have been able to patch over their differences,” Werbach said. “All of that now is under siege. Based on what’s happening with this administration in the U.S., all of that could collapse. Europe has much stronger rules going into effect in 2018. I’m frankly very worried that … we’re not going to be at a point where we could work out with Europe how data is going to flow around the world. And that’s very scary to anyone who’s doing business online.”

Null agreed. “I don’t think the FCC is thinking a whole lot about the privacy shield, and there wasn’t a lot about it in the record, and I think that’s probably a mistake given that the rolling back of the privacy rules will probably have a pretty serious impact on international business,” he said.

What Is the Future of Online Privacy?

While the short-term impact of the congressional vote is clear, what will happen in the years to come is not. Werbach and Null said the controversy shows just how thorny the issue of internet privacy can be, especially in a climate with competing political interests.

Werbach said the complexities require stakeholders to take a holistic approach.

“Ultimately, it doesn’t make sense to have inconsistent sets of rules,” he said, noting that inconsistency was one of the arguments for getting rid of the FCC rules. “The problem is that the solution is to have no rules for the broadband providers. That’s a big issue we’re going to have to resolve, and ultimately it is going to require some legislation.”

Werbach also said the deregulation is an opportunity for internet providers to offer a higher standard of privacy in order to earn consumers’ trust.

“I think the broadband providers, if they are thoughtful about this, will see that the best long-term play for them is to be better stewards of data,” he said.

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