Before the Federal Communications Commission Washington, D.C

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1 Before the Federal Communications Commission Washington, D.C In the Matter of ) ) Protecting the Privacy of Customers of Broadband ) WC Docket No and Other Telecommunications Services ) Comments of the American Advertising Federation, American Association of Advertising Agencies, Association of National Advertisers, Direct Marketing Association, Electronic Retailing Association, Electronic Transactions Association, Interactive Advertising Bureau, National Business Coalition on E-Commerce & Privacy, and Network Advertising Initiative I. Introduction The undersigned trade associations collectively represent hundreds of companies, from small businesses to household brands, which engage in responsible online data collection and use that benefits consumers and the economy. We appreciate this opportunity to comment on the Federal Communication Commission s ( FCC ) Notice of Proposed Rulemaking on Broadband Privacy ( NPRM ). 1 We and our member companies are concerned that the FCC, through the NPRM, is attempting to create restrictive new requirements for data collection and use that will threaten the Internet s economic success and consumer benefits. We believe that the proposed restrictions are unnecessary, overly burdensome, and outside the FCC s statutory authority. II. Data-Driven Marketing Benefits Consumers The FCC s proposal for restrictive regulations is a solution in search of a problem. The FCC has not established a record of consumer harm that necessitates new regulation in this area 1 Protecting the Privacy of Customers of Broadband and Other Telecomm. Servs., 81 Fed. Reg. 23,360-23,411 (Apr. 20, 2016) (to be codified at 47 C.F.R. pt. 64) [hereinafter NPRM]. When possible, we cite to the FCC s notice in the Federal Register. However, no footnotes were included in the Federal Register notice. As a result, where we cite to the FCC s footnotes, we cite to FCC

2 or justifies the specific approach put forward by the FCC. In fact, the current online ecosystem subsidizes content and programming that consumers value, promotes innovation, and grows the economy. 2 A recent study commissioned by DMA s Data-Driven Marketing Institute ( DDMI ) and conducted independently by Harvard Business School Professor John Deighton and recent Adjunct Columbia University Professor Peter Johnson, entitled, The Value of Data: Consequences for Insight, Innovation, & Efficiency in the U.S. Economy ( Value of Data ), quantifies the concrete economic benefits of data. 3 The Value of Data study found that the Data- Driven Market Economy ( DDME ) generates vital revenue and jobs for the U.S. economy. Specifically, the study found that the use of data-driven marketing added $202 billion in revenue to the U.S. economy and fueled more than 966,000 jobs in The study also found that the U.S. DDME provides the American people with high value jobs. 5 While the undersigned associations are committed to responsible data practices, the unnecessary new restrictions in the NPRM could threaten these economic benefits. A recent academic analysis identified significant concerns with regulating privacy through legislation and formal rulemaking. 6 The article explains how positive corporate privacy 2 A recent Zogby Analytics poll commissioned by the Digital Advertising Alliance ( DAA ) shows that consumers assign a value of almost $1,200 a year to ad-supported online content. DAA, Zogby Poll: Americans Say Free, Ad-Supported Online Services Worth $1,200/Year; 85% Prefer Ad-Supported Internet to Paid, PR Newswire (May 11, :30 AM), 3 Deighton and Johnson, The Value of Data: Consequences for Insight, Innovation & Efficiency in the U.S. Economy (2015) (hereinafter The Value of Data ). 4 Id. at Id. 6 Kenneth A. Bamberger & Deirdre K. Mulligan, Privacy on the Books and on the Ground, 63 STAN. L. REV. 247, 260 (2010) ( Statutes provide inconsistent treatment of similar information and similar business activities leading to an uneven playing field for business and an unpredictable set of protections for individuals. ), 2

3 practices developed using the existing legal framework as a base. 7 The study s authors concluded that reliance on compliance with a set of detailed provisions may frustrate, rather than further, underlying regulatory ends. Rule systems are inevitably incomplete, failing to provide guidance in a host of contexts, especially as circumstances change. 8 III. Self-Regulation Is the Appropriate Tool to Regulate Online Data Practices The NPRM is unnecessary because existing voluntary self-regulatory standards are the appropriate tool to govern the dynamic and interrelated online content and advertising ecosystem. Currently, online data collection and use are governed by robust enforceable industry self-regulatory regimes. The Congress has considered online privacy issues many times based on ample hearings and debate, and each time has declined to enact new legislation, recognizing that new regulation in this rapidly evolving area would hinder innovation, not provide new benefits to consumers, and threaten the economic value of a thriving market sector. Consistent with this longstanding approach, we believe that enforceable, voluntary selfregulatory codes remain best suited to honor consumer privacy preferences while allowing legitimate data practices to flourish. Self-regulation is flexible and responsive, both of which are key qualities for the regulation of rapidly evolving technologies and practices. Companies participating in self-regulation recognize that responsible data practices are essential for the continued success of the Internet economy, and such regimes are vigorously enforced and regularly updated. In addition, companies have a strong business incentive for compliance with self-regulation, since many companies choose to work only with companies that have a proven track record of responsible data collection and use. Industry provides model approaches for self- 7 Id. at Id. at

4 regulation including those of the Direct Marketing Association ( DMA ), Digital Advertising Alliance ( DAA ), and the Network Advertising Initiative ( NAI ). By way of example, the DAA, led by multiple trade associations, has convened industry to address complex policy issues involving the collection and use of web viewing, application use, precise geolocation, and other online data for interest-based advertising and other applicable uses ( Self-Regulatory Program ). 9 The successful approach taken by the DAA led to an event in February 2012 at the White House where the then-chairman of the Federal Trade Commission ( FTC ), the then-secretary of Commerce, and White House officials publicly praised the DAA s cross-industry initiative. The White House recognized the Self-Regulatory Program as an example of the value of industry leadership as a critical part of privacy protection going forward. 10 The DAA Self-Regulatory Program s principles have been expanded several times since they were launched to address new business practices such as cross-device linking and mobile advertising. The DAA s further work in releasing the expanded principles has garnered additional praise, including from FTC Commissioner Ohlhausen who has stated that the DAA is one of the great success stories in the [privacy] space. 11 If a company fails to meet its obligations under the Program, the DAA s independent accountability programs, run by the Council for Better Business Bureaus ( CBBB ) and the DMA, will work to bring a company into compliance. The programs may refer unresolved matters to the FTC. The CBBB publicly 9 The NAI Code of Conduct requires similar notice and choice with respect to Interest-Based Advertising. 10 Speech by Danny Weitzner, We Can t Wait: Obama Administration Calls for A Consumer Privacy Bill of Rights for the Digital Age (February 23, 2012), (last visited May 18, 2016). 11 Katy Bachman, FTC's Ohlhausen Favors Privacy Self-Regulation, Adweek (June 3, 2013, 2:50 PM), (last visited May 18, 2016). 4

5 reports its decisions and has brought more than 60 enforcement actions since the DAA Program went into effect. The FCC acknowledged that the NPRM s notice and choice requirements were informed by the DAA s Self-Regulatory Program, as well as the NAI s Updated Code of Conduct and Updated Mobile Application Code, 12 and noted the DAA s and NAI s efforts in its discussion of the possible effect of its proposed rules on the broadband ecosystem. 13 The FCC s proposal states the need for flexibility to accommodate new technologies while continuing to provide for privacy-protective practices, 14 and the DAA s and NAI s programs demonstrate that industry self-regulation amply meets this need. IV. The NPRM Oversteps the FCC s Authority The FCC s attempt to regulate this area is an overreach of its authority. The NPRM states that the rulemaking secur[es] what Congress has commanded. 15 On the contrary, Congress directed the FCC to provide rules to safeguard telephone records not to regulate privacy in the very different area of online data collection. In 1996, Broadband Internet access service ( BIAS ) did not even exist. Section 222 of the Telecommunications Act of 1996 gives the FCC authority to regulate the privacy of customer proprietary network information ( CPNI ) in the context of voice telephony, not BIAS. Other provisions in the Act include references to the Internet, but Section 222 does not. 16 Consistent with that understanding, both Congress and the FCC itself have defined CPNI to include personal information specific to voice 12 FCC , 142 n FCC n NPRM at 23, NPRM at 23, See, e.g., 47 U.S.C

6 telephone records and billing information. 17 A plain reading of the statute as a whole shows that the FCC s authority to address privacy under Section 222 is limited to CPNI and to voice telephony. V. Specific Concerns with the Proposed Rules A. The Proposed Definition of PII Is Too Broad The NPRM proposes to regulate a new category of customer information it terms Customer Proprietary Information ( Customer PI ) made up of CPNI and personally identifiable information ( PII ). 18 The proposal defines PII as any information that is linked or linkable to an individual. 19 The NPRM proposes that information is linked or linkable to an individual if it can be used on its own, in context, or in combination to identify an individual or to logically associate with other information about a specific individual. 20 The proposal puts forth a broad definition of PII that includes, according to the FCC s non-exhaustive listing of more than 30 data elements, numerous data elements that generally are not, and have not been considered, individually identifiable, such as application usage data, geo-location information, and Internet browsing history. 21 PII should, on its own, identify a specific U.S.C. 222(c); Implementation of the Telecommunications Act of 1996: Telecommunications Carriers Use of Customer Proprietary Network Information and Other Customer Information, CC Docket No , Report and Order And Further Notice of Proposed Rulemaking, FCC 07-22, 5 (2007); Implementation of the Telecommunications Act of 1996: Telecommunications Carriers Use of Customer Proprietary Network Information and Other Customer Information, CC Docket No , Notice of Proposed Rulemaking, FCC 06-10, 1 n.1 (2006). 18 NPRM at 23, NPRM at 23, NPRM at 23, NPRM at 23,366. The NPRM cites several sources for its proposed list, but the use of such a broad definition creates a broader impact in the context of the NPRM than in these other contexts. For example, the FTC sources cited are consent orders with respect to specific companies; the National Institute of Standards and Technology ( NIST ) framework lists items 6

7 individual. Using this definition, the NPRM would apply its strict framework to nearly all customer data, including widely and publicly available information, such as names and addresses. Such a broad application of restrictive rules creates no privacy benefit for consumers, while imposing significant costs on businesses. The NPRM s approach of treating the above elements as PII where they stand unassociated with any other element much less any individual is not only out of step with current privacy standards but appears inconsistent with other elements of the NPRM. For instance, if an entity is the victim of a breach involving non-eponymous online identities not otherwise linked to an individual, does the breached entity have to collect additional PII and link the breached information to an individual in order to provide the required notification? Such a regime would create more privacy concerns than it seeks to address. B. Opt-In Consent Is Not the Appropriate Standard The FCC s proposed regime would also set opt-in consent as the default standard for most data collection and use. 22 The current regulatory framework shows that implied or opt-out consent is the appropriate standard. The FCC cites the FTC s 2012 report on Protecting Consumer Privacy in an Era of Rapid Change repeatedly throughout the NPRM in support of, or as a source of, various aspects of its proposal. 23 The FCC s proposal is far more restrictive than the guidance in the FTC report, which determines that choice is not required for first-party that may be considered PII; and the White House draft bill was a proposal that never progressed past a discussion phase. 22 NPRM at 23, FCC n.38, 60 n.98, 90 n.158, 122 n

8 marketing, 24 opt-out is the appropriate standard for online data collection across sites, 25 and an opt-in regime is advisable only in limited scenarios such as the collection of sensitive data. 26 The FCC s previous attempt to mandate opt-in consent was struck down by the Tenth Circuit in U.S. West, Inc. v. FCC for violating the First Amendment s commercial speech protections. 27 The same logic applies to the broadband privacy context. C. The Proposed Rules for Affiliate Sharing Create False Distinctions The NPRM sets forth a regime in which BIAS providers must provide notice and an opportunity to opt-out prior to us[ing a] customer s PI, or shar[ing] customer PI with affiliates who provide communications-related services, to market communications-related services to that customer. 28 The proposed opt-out standard for sharing data with affiliates for marketing communications-related services is unduly burdensome. It is a common practice, which consumers understand, for companies to market to their existing customers and to share within the same corporate family for this purpose, especially where the marketed service is related to the existing customer relationship. This approach helps to preserve efficiencies and maintain personalized, relevant relationships with consumers. Moreover, the FCC s proposal inappropriately regulates data based on the type of marketing it is used for, rather than the context or the sensitivity of the data. The new opt-out requirements proposed by the FCC create unnecessary hurdles for companies engaging in legitimate marketing efforts. 24 FTC, Protecting Consumer Privacy in an Era of Rapid Change 40 (Mar. 2012), https://www.ftc.gov/sites/default/files/documents/reports/federal-trade-commission-reportprotecting-consumer-privacy-era-rapid-change-recommendations/120326privacyreport.pdf. 25 Id. at Id. at U.S. West, Inc. v. FCC, 182 F.3d 1224, 1230 (10th Cir. 1999). 28 NPRM at 23,375. 8

9 D. Breach Notification and Data Security Should Be Left to Congress The NPRM includes prescriptive breach notification and data security requirements. A more flexible approach of requiring reasonable data security would be better suited to allow companies to assess and respond to rapidly evolving security threats. The FCC has also proposed to regulate breach notification in a way that is contrary to the existing state notification framework as well as the proposals under consideration by Congress. This addition to the existing patchwork of laws would cause compliance burdens for businesses and confusion for consumers, especially in light of the NPRM s broad definition of PII. Moreover, there is no statutory basis for specific data security requirements or a breach notification regime imposed by the FCC in the broadband context, and treating all types of PII (as defined in the NPRM), such as traffic data and IP addresses, the same as data that is admittedly far more sensitive, like Social Security numbers, is an ill-conceived approach to managing data security. Given these concerns, data security and breach notification should be left to Congress to provide consistent, meaningful standards across industries. * * * We appreciate the opportunity to submit these comments, and we look forward to working with the FCC on this important issue. Respectfully submitted, May 27, 2016 American Advertising Federation American Association of Advertising Agencies Association of National Advertisers Direct Marketing Association Electronic Retailing Association Electronic Transactions Association Interactive Advertising Bureau National Business Coalition on E-Commerce & Privacy Network Advertising Initiative 9

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