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FCC Approves Landmark Broadband Privacy Protections for Consumers

ISPs must now obtain “opt-in” consent before using or sharing “sensitive information.”

Federal telecom regulators on Thursday approved tough new rules designed to give consumers more power over how internet service providers handle their personal data, in a major victory for public interest advocates and a bitter defeat for the nation's largest cable and phone companies.

The new rules would for the first time establish clear, enforceable policies about how and when internet service providers like Comcast, AT&T and Verizon can use and share customer data for behavioral tracking and targeted advertising.

"What this item does is to say that the consumer has the right to make a decision about how her or his information is used," Federal Communications Commission Chairman Tom Wheeler said during the agency's open meeting on Thursday. "It is the consumer's information, it is not the information of the network that the consumer hires to deliver that information."

Under the new policy, ISPs would be required to obtain "opt-in" consent from consumers before using or sharing "sensitive information" such as financial and health information, children's information, social security numbers, precise geolocation data, web browsing history, app usage data, and the content of online communications. The plan would also require ISPs to be much more transparent about what data they are collecting, how they are using it, and with whom they are sharing it.

The FCC has been under increasing pressure to address growing concern among public interest advocates and privacy watchdogs about the power of broadband giants like Comcast, AT&T, and Verizon to track and record everything that consumers do online, without their knowledge, for commercial purposes. Some 91 percent of adults "agree or strongly agree that consumers have lost control of how personal information is collected and used by companies," according to a recent Pew Research poll.

The FCC voted to approve the new rules by a 3-2 party-line vote, with the agency's three Democratic commissioners, including Wheeler and his colleagues Jessica Rosenworcel and Mignon Clyburn, voting in favor, and the two Republican commissioners, Ajit Pai and Mike O'Rielly, voting against.

For Wheeler, the new privacy rules amount to the latest pro-consumer initiative that he has muscled through the agency. A former cable and wireless industry lobbyist, Wheeler has developed a reputation as an unlikely public interest champion during his three years leading an agency that wields broad regulatory power over the nation's cable, phone, and satellite companies.

"This marks a significant step forward in protecting consumer privacy," the DC-based consumer advocacy group Public Knowledge said in a statement. "For the first time, internet service providers will be required to get consumer consent prior to using the sensitive information they collect. While much remains to be done to protect consumers online writ large, the Commission's rules establish a baseline level of protection for all."

The new privacy rules could have significant implications for AT&T's proposed $85 billion purchase of entertainment giant Time Warner. AT&T CEO Randall Stephenson has argued that the combined company will be able to monetize the mountains of user data generated by users, such as browsing history and app usage, but the new FCC policy could make it more difficult to do so.

Addressing an increasingly controversial issue, the proposed rules would increase disclosure requirements for controversial "pay-for-privacy" plans in which ISPs offer discounts in exchange for more intrusive access to consumer data. In a FCC fact sheet distributed Thursday, the agency said it would "determine on a case-by-case basis the legitimacy of programs that relate service price to privacy protections."

Language prohibiting controversial "mandatory arbitration" clauses that limit the legal rights of consumers who feel their privacy was violated was not included in the new policy. Such fine-print language requires consumers to "agree" to a third-party dispute resolution process, and precludes class action lawsuits. But in a victory for public interest advocates, the FCC committed to proceed with a rulemaking in February 2017 designed to address the issue.

The cable industry opposed the new privacy rules, in part because the FCC's policy only applies to internet service providers, and does not cover websites like Google and Facebook, which also collect massive amounts of consumer data. (The Federal Trade Commission, not the FCC, has jurisdiction over these so-called "edge providers.") As a result, the cable industry has complained that the FCC's policy puts it at a competitive disadvantage relative to the Silicon Valley giants, an argument that was echoed Thursday by the two Republican FCC commissioners.

In a statement, NCTA—The Internet & Television Association, an industry trade group that represents some of the nation's largest broadband companies, blasted the new privacy rules. "There is no lawful, factual or sound policy basis to justify a discriminatory approach that treats ISPs differently from some of the largest companies in the internet ecosystem that engage in similar practices but operate under different regulatory standards," the group said.

Many analysts believe Wheeler's time at the FCC is running out, because it has traditionally been the prerogative of an incoming US president to nominate their own choice to lead the agency. In his time remaining, Wheeler hopes to pass new rules that would increase competition in the video "set-top box" market by requiring cable operators to offer software "apps" allowing consumers to access content like ESPN or CNN on the device of their choice, without the need to spend an average of $231 annually to rent a set-top box.

Last month, Wheeler postponed a vote on the set-top box measure, in part because of fierce opposition from the cable industry, which has warned that the proposed policy could imperil intellectual property rights and improperly insert the FCC into licensing negotiations between content studios, programmers, and video distributors. It's unclear when Wheeler will take another crack at the set-top box initiative.