Intellectual Property Law

What Is Online Privacy Worth?

By Deven Desai

It is an old question (at least in Internet time): What is online privacy worth? Yet there seems to be a new wrinkle. Not just the Web sites or search companies want to track what one surfs. ISPs are now in the Web tracking game and stand to make ?several dollars per month? per customer. When there are millions of customers for an ISP that can be some serious money. For example, if a company has 10 million customers and could gain even an extra one dollar per customer per month — well you can do the math. (Fine, here?s the math: $120 million). So it may be time for ISPs to live the dream. According to the New York Times NebuAd can help an ISP track its customers surf habits, then serve up ads based on those patterns, and pay the ISP for that privilege. Per the Times

Here?s how the system works: NebuAd installs a hardware device it has designed inside the network of I.S.P.s One device can monitor all of the information going to and from 30,000 to 50,000 users. The device associates the information it sees with the I.P. address of the user.

A month ago NebuAd refused to discuss with whom it had partnered but claimed to ?soon be monitoring the activities of 10 percent of Internet users in the country, mainly customers of small and medium Internet service providers.? Now, however, NebuAd has partnered with Charter Communications which is the fourth largest cable provider in the U.S. Charter told its customers about the change in a letter which in classic corporate spinese called the change a way to provide ?an enhanced online experience that is more customized to your interests and activities.?

The system is opt-out. When challenged by The Times? Saul Hansel about using opt-out rather than opt-in, Ted Schremp, Charter?s senior vice president for product management and strategy, claimed that opt-out is the norm for targeted ads on the Internet. That idea alone is worth researching. (Then again shame on the New York Times for checking the ?remember me on this computer? box rather than leaving it blank.)

So how much could Charter make from Web browsing? Apparently ?several dollars per month for every user that is monitored.? Let?s allow several to equal three dollars a month per customer. Now suppose Charter proceeds to turn all its 2.8 million customers into NebuAd surfers but two-thirds choose to opt out. Charter would still stand to make around $2.8 million per month or $33.6 million per year. Not a bad haul for connecting someone to the Internet. Put differently, under this system one will pay for the privilege (usually around $50 per month) of letting a company make money off what one does online.

How will all this play out? Most likely the apostles of the market and choice are lining up to share the good news that both are not coming but here. Of course whether a customer has a real choice in her home between two let alone more ISPs is up for grabs depending on where one lives. Furthermore, as ISPs seek more income (which is their duty) would the competitors really test the market? Or would they all install NebuAd style deveices and then charge for not having one?s surfing tracked (remember that do not list fee for your phone number?)? Talk about a bad default rule.

The bigger issues here are net neutrality and privacy. The discussions of those topics sometimes become quite abstract. Maybe bringing home how they intersect and impact the individual user will rally the populace against poor policies. Then again, if they give me a discount card, well heck, that could make me happy to pay for the privilege of giving up me privacy.

cross-posted at Concurring Opinions

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Full post as published by Madisonian.net on May 16, 2008 (boomark / email).