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FCC overlooks the word proprietary

The Federal Communications Commission refers to customer data as “proprietary” in its privacy order set for vote this coming Thursday. Webster’s New World Dictionary defines proprietary as something belonging to an owner like a patent, trademark, or copyright. By placing the qualifier “proprietary” on customer data, the Commission gives the impression that the data is compiled by the consumer for possible placement into the stream of commerce and by transferring this data can receive something in return. Is the consumer doing this; getting something in return for putting her data out there?

The relationship between a consumer and her broadband internet access service is one where she provides certain personal information along with a network access fee to her broadband provider and in exchange receives access to the internet. An informed consumer is aware that sharing some personal data is part of her total cost for receiving access to the internet via her broadband provider. The best way to ensure privacy of her data is to not buy access service to begin with but public and social policy currently promotes universal deployment of and access to broadband so discouraging her purchase is not a policy option.

In my view, the consumer has created a negative externality by providing property, in this case her personal information, for free. The rate the consumer pays for broadband access overcompensates the service provider given the value the broadband service provider receives. What the Commission should encourage is a pricing regime where consumers can charge for the use of their proprietary information. This way, the prices paid for access provide a better reflection of what is actually being exchanged.

The Commission may find that with this market solution concerns of privacy will be abated as the consumer exercises more control over her market relationship with the broadband service provider. Allowing for consumers compensation for providing data may create a ripple effect in the internet eco-system. Go onto Facebook and you see consumers sharing a lot of personal information for free. Advocates for consumer empowerment should like this approach but these so called advocates would lose too much control of the consumer protection debate if consumers were to enjoy this type of market freedom over compensation for their data.

Bottom line, if the Commission is truly concerned about protecting proprietary consumer information, it should give the consumer the front line tools to protect her data and in a market system, that front line tool is the ability to be compensated for one’s property.

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