WASHINGTON-A divided Federal Trade Commission last week said industry self-regulation of Internet privacy was a failure and called on Congress to legislate consumer safeguards, an action that immediately drew criticism from high-tech advocates and further underscored the prospect for new government regulation of wireless firms as they expand into e-commerce.
Even before the high-tech industry had a chance to criticize the FTC, Sens. Ernest Hollings (D-S.C.), Jay Rockefeller (D-W.Va.) and eight other Senate Commerce Committee members announced plans to introduce sweeping privacy legislation.
“The legislation that we are introducing will give consumers-not companies-control over their personal information on the Internet,” said Hollings, ranking minority member of the Senate Commerce Committee. A committee hearing on Internet privacy was scheduled for last Thursday.
FTC Chairman Robert Pitofsky, for his part, said it was time for federal intervention.
“While the commission applauds the efforts by the private sector to address the issue of online privacy, the survey results show that such efforts have not been enough,” said Pitofsky. “As this year’s survey makes clear, the number of Web sites meeting basic standards of privacy protection is far too low, endangering consumer confidence in this fast-growing, pro-consumer marketplace.”
The FTC report, which a slim majority of three commissioners voted to release, got a mixed reaction. The high-tech industry and a leading telecom lawmaker in the House criticized Pitofsky’s legislative push. Even the White House seemed to distance itself from the idea of enacting privacy legislation to protect consumers.
“To the extent that the private sector can show it will address the … problem and improve the quality of privacy policies,” said Commerce Secretary William Daley, “legislation would not be necessary.”
Ken Johnson, press secretary for House telecommunications subcommittee Chairman Billy Tauzin (R-La.), said the lawmaker believes the scope of the privacy problem needs to be understood before considering any legislation.
“The trouble is, not everyone is playing by the rules,” said Johnson.
On the other hand, Johnson said some legislation may be necessary next year to remedy the patchwork of state laws that might be applied to Internet privacy. “That may require a little federal preemption,” he said.
While some privacy issues identified by the FTC-such as collection of personal information at Web sites-are more relevant to wireline e-commerce than to wireless e-commerce, the wireless industry nonetheless remains vulnerable to a host of new laws and regulations that may accompany the development of the nascent e-commerce business.
Sprint PCS got itself into hot water a few months ago when it was revealed that telephone numbers of Wireless Web subscribers were left behind at every Web site visited. Sprint PCS is changing that practice.
“The fix is imminent,” said Tom Murphy, a Sprint PCS spokesman. Murphy noted that Sprint PCS has contractual agreements with Yahoo!, AmeriTrade and Amazon.com prohibiting the sale of wireless customer data.
“We take the issue seriously,” said Murphy.
For sure, the wireless industry is squarely on the FTC’s radar screen.
In a separate report by an FTC advisory committee on online access and security, made the point loud and clear.
“The privacy implications of new technologies may be profound,” the report stated.
“For example, with new wireless technology, a unique identifier heretofore not linked with a specific individual may now be linked to an individual identified with a phone number, location information, or other identifier,” the report said. “And wireless communications can be intercepted in an undetectable manner.”
Wireless location information is limited by law to emergency situations unless prior consumer consent is given.
The GOP-led Congress, given its decision to avoid sticky Internet issues this election year and the cool reception given the FTC report generally, is not likely to act on Pitosfsky’s call for privacy legislation any time soon.
But the issue is teed up for Congress next year, regardless of what political party is in charge.
“This is an issue critical to the wireless industry as we look more and more to the Internet for sales and distribution,” said Rob Hoggarth, senior vice president of government relations for the Personal Communications Industry Association.
Hoggarth said PCIA was disappointed with the FTC’s call for e-commerce privacy legislation. “This was an awfully quick whistle,” said Hoggarth. “We believe self regulation is the way to go.”
Others agree.
“The FTC recommendations represent a potential giant step backward, not forward, for online consumers concerned about their privacy,” said Ken Wasch, president of the Software & Information Industry Association.
Some studies predict wireless devices will be strong drivers of e-commerce in the future, a forecast underscored by the increasing number of strategic business partnerships between wireless firms and dot-coms.
Indeed, eBay last week announced its wireless strategy for offering online auctioneer services through mobile phones, pagers and personal digital assistants.
“This clearly will impact the wireless industry as it moves in the direction of Internet access applications,” said Dan Phythyon, a communications lawyer who oversaw wireless policy under former FCC Chairman Reed Hundt.
In Austin last week, the Wireless Data Forum-an organization managed by the Cellular Telecommunications Industry Association-was host to 1000 attendees at a meeting on mobile computing and e-commerce.
Christina Martin, a CTIA spokeswoman, said the association “did not have a comment at this point in time” on the FTC privacy survey.
As such, Phythyon said he sees a danger in industry complacency about wireless Internet issues, like privacy.
“The rules of the game for Internet [e-commerce] may be set before the wireless industry is suited up and ready to play,” cautioned Phythyon.
