With the Senate's vote to roll back consumer privacy protections that the Obama Federal Communications Commission put in place, AT&T (T) - Get Report , Comcast (CMCSA) - Get Report and Verizon (VZ) - Get Report are set to score a victory.
The Senate voted 50 to 48 along party lines in favor of a resolution to repeal regulations that sponsor Jeff Flake, R-Ariz., said in a statement "would not change or lessen existing consumer privacy regulations" -- a sentiment that is widely disputed.
Electronic Frontier Foundation policy analyst Kate Tummarello wrote that internet service providers, or ISPs, should not "profit off of the information about what you search for, read about, purchase and more without your consent."
Democratic Sen. Al Franken of Minnesota said in a statement that his colleagues in the majority "voted to kill" internet privacy protections. All Democrats in the Senate voted against the bill, which now will go to the House.
The Senate vote ratchets up the debate over internet privacy. It also represents the latest power shift between cable and telecom operators and the companies like Alphabet's (GOOGL) - Get Report Google, Facebook (FB) - Get Report and Amazon (AMZN) - Get Report that reap online fortunes by manipulating consumer data.
The vote rightly focuses debate on whether the government is adequately protecting consumers. It also should spark discussion of whether ISPs and internet advertising giants should play by the same rules -- and whether those rules should be tougher.
The FCC adopted the privacy rules under former Chairman Tom Wheeler in October 2016. The rules required the broadband providers to receive affirmative consent from customers before using sensitive data from geolocation to web browsing data to health information.
"It seemed that the playing field was being tilted towards the Silicon Valley folks at the expense of the cable companies and the telecom network owners," Moody's analyst Neil Begley said.
"Any company that owned the network, the wires, and put a set-top box in the home, before they collected data, even anonymous data, which happens everyday, would have to go to the customer and ask them in the affirmative for permission," Begley said. "When Google put a set-top box or other device in your home, since they didn't own the network, the FTC rules would apply, which requires the customer to take an action to opt out, and in the absence of that action assumes that the device provider has permission."
When the FCC passed the rules in October, Gartner marketing and advertising analyst Andrew Frank blogged about the regulatory issues they raised. "Chief among these is the gap between the new FCC rules that govern ISPs and the FTC rules that govern Internet companies such as Google, Facebook and Amazon, especially when it comes to the widespread use of browsing history and geolocation data to target ads," he wrote.
"Critics point out the potential for consumer confusion when one opts out of data collection from an ISP (which must now pro-actively seek permission to collect data for advertising) and assumes this choice applies to data collection by other sites and services they use, which is not the case," Frank added. "They also point out, more generally, that the order places "substantially greater burdens" on ISPs than other Internet companies face."
Comcast cable boss Neil Smit told investors at a Deutsche Bank conference in March that the rules overlapped with protections at the FTC. "The privacy conversations, we always believed that there shouldn't be two privacy regimes, and so having one privacy regime would be beneficial," Smit said.
Verizon head of operations John Stratton said at the same conference that the network operators and the Internet giants who profit from the infrastructure should play by the same rules. "Whether it would be ISPs, web companies, anybody who's in that same arena should be governed by the same set of principles. So the leveling of that structure between FCC and FTC we think is very healthy," he said.
The catch, Tummarello wrote, is that the FTC arguably can't protect privacy. A decision last year in the U.S. Court of Appeals for the 9th Circuit "eliminated the Federal Trade Commission's authority to enforce privacy rules on ISPs in Arizona, Alaska, Hawaii, California, Idaho, Montana, Nevada, Oregon and Washington," she wrote.
The ISPs and the internet advertising giants, therefore, both could face loose privacy restrictions in many states.
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