April 2000
Cable, Internet Access and the Commonwealth: Evaluating The Ballot Initiative's Impact on Government and Consumers
By Stuart N. Brotman

A. Privacy Concerns

With nearly 100 million Americans now using the Internet, they are finding a vast array of products, services and information in a marketplace that has experienced dramatic exponential growth since its beginnings only a few years ago. In 1998, for example, online sales were approximately $9 billion and online advertising revenue was about $2 billion.¹⁶ By year-end 1999, those figures grew to an estimated $20 billion¹⁷ and $4 billion,¹⁸ respectively.

The Web also is a rich source of information about online consumers, including children. Internet service providers (ISPs) and individual Web sites collect much personal information both explicitly, such as through registration pages, surveys and order forms and online contests, and by using software in ways that are not obvious to online consumers.

Notwithstanding the substantial benefits that consumers may derive from surfing the Net, they also care deeply about the privacy of their personal information in the online marketplace. Seventy percent of respondents in a 1999 Louis Harris & Associates, Inc. survey conducted for the National Consumers League reported they were uncomfortable in providing personal information to businesses online.¹⁹ And the Federal Trade Commission cited data in its July 1999 Report to Congress from a recent national survey of experienced Internet users which indicated 87 percent of respondents were somewhat or very concerned about threats to privacy online.²⁰ Experienced Internet users were particularly concerned about potential transfers of their personal information to third parties.²¹

Under the current method of delivering Internet services through cable television systems, Massachusetts consumers receive the highest level of national online privacy protection granted by the United States Congress.

In 1984, Congress enacted the Cable Communications Policy Act,²² which included a specific section devoted to cable subscriber privacy. This provision requires all Massachusetts cable operators, at the time of entering into an agreement to provide their own Internet access services, to give notice in the form of a separate written statement to each subscriber. This statement must inform the subscriber of the nature of personally identifiable information collected with respect to the subscriber and the nature of use of such information, any disclosures of such information and limitations on the ability of cable operators to collect and disclose the information.²³

The law, subject to certain exceptions that allow cable operators to obtain information necessary to render service or detect unauthorized reception, prohibits cable operators from using the cable system to collect personally identifiable information concerning any subscriber without the prior written or electronic consent of the subscriber concerned.²⁴

The Federal Trade Commission emphasizes the fundamental importance of such Notice/Awareness principles in privacy protection, deeming the right of consumers to be provided notice of a company's information practices to be "essential" before information is collected for them.²⁵

Although the 1984 Cable Act was passed a decade before the World Wide Web began, its language seems to include Internet as well as video services that are offered by the cable operator to its customers. Thus, according to a recent report from the Federal Communications Commission's Office of Plans and Policy, "application of the subscriber privacy provisions [of the 1984 Cable Act] would not appear to present any additional problems of 'fit.'"²⁶

In contrast, Massachusetts consumers may be forced to accept lower levels of online privacy protection for cable Internet services if the ballot initiative is approved. Under the ballot initiative's mandate, any Internet service provider that wanted to gain access to the cable operator's network would pay a flat fee based on government-required wholesale prices. Thus, the cable operator would retain its historical retail relationship only with online customers who decided to buy the cable operator's own brand of Internet service. The legal mandate of the federal Cable Act would follow this group of subscribers exclusively, giving them a secure basis for online privacy protection.

But for the dozens of other Internet services that the cable operator might be compelled to carry, those customers apparently would not be covered by the same high level of privacy protection backed by federal law. In effect, these customers would have to be on guard when buying these outside ISPs since none of them would be required by law to provide any privacy protection for online users.

In other words, the current privacy-friendly environment that cable offers its subscribers would be subsumed by a lower threshold of "caveat emptor" -- let the buyer beware. Thus, there is a trade-off in privacy protection that the ballot issues raises, a trade-off that its proponents would prefer be kept hidden from view because it suggests real-world problems that can arise despite a self-proclaimed litany of public benefits.

These proponents seem to suggest that privacy can be controlled through active bargaining with Internet service providers who lease network capacity from cable operators. According to Andrew Shapiro, author of The Control Revolution, "while there is every reason to applaud the idea of individuals working to safeguard their own privacy, expecting them to do so effectively without any help from government is dangerously naïve. It assumes that individuals can use technology and the market to achieve a task of such complexity that it has, to date, confounded most governments."²⁷

Mr. Shapiro, who serves as a Fellow at Harvard's Berkman Center for Internet and Society, offers an illustrative set of dilemmas that could be created if the safety net of cable Internet privacy protection was eroded by alleviating virtually all cable ISPs from federal privacy obligations that are now in force.

First, "leaving privacy protection solely to individuals could be highly inefficient. . . .All the time and effort we might have to spend dickering over different privacy arrangements . . . could add up to very high transaction costs."²⁸ Stated differently, under the new regime that the ballot initiative proposes, consumers could experience a substantial increase in hassling with a plethora of vendors and a probable decrease in privacy, since uniform data-collection rules no longer would apply.

Mr. Shapiro also points out that under a market reliance on privacy protection, consumers could experience a false sense of comfort. Individual vendors such as ISPs leasing wholesale network capacity from cable operators under government-required terms, would have "no incentive to have you think about these dangers. . . . We're not going to be fully informed."²⁹

Moreover, the lesser privacy protection that the ballot initiative would foster will have a particular impact on those Massachusetts families at the lower end of the income scale. Under the free-market privacy approach that most ISPs on cable would follow if the ballot initiative is approved, it is likely that these ISPs will begin charging increasingly higher rates for privacy protection. Although this premium might be small, it could have a disproportionate impact on the poor, since they might be willing to give up some of their privacy rights in order to conserve disposable income. Andrew Shapiro poses the potential trade-off clearly. He asks, "Do we really want to perpetuate such a system of first and second class privacy rights?"³⁰

Yet given the clear limits of existing federal cable law applicable to all Massachusetts cable operators, approving the ballot initiative will create just such a caste system. It is hard to imagine that any proponents wish to see such a system develop. Voters need to begin asking hard questions regarding the potential impact on their online privacy rights and continue to ask them so that this vital public policy risk is not understated or ignored. For if it is, we may find ourselves unwittingly surrendering our privacy rights to those who foster, in the words of MIT Professor Michael Dertouzos, "the big lie of technological inevitability."³¹

See Other Articles