TCS Daily


The hidden costs of online privacy

By James W. Harper - March 27, 2000 12:00 AM

Earlier this month, Kevin O'Connor, the Chairman and CEO of DoubleClick, announced that his company was retreating from its plan to amalgamate consumers' personal information. Up until then, DoubleClick was taking dramatic steps to customize the advertising you see online. This retreat represented a turning point in the unfolding history of Internet regulation. The online privacy debate has been joined and, despite yawning gaps in the quality of that debate, the press for federal regulation will either gain ground or recede from here.

DoubleClick's move came on the heels of a rather large public relations blunder. The online advertising industry has not yet made the case for using personal information to tailor ads, and there were allegations that the DoubleClick plan violated the company's own privacy policy.

Online advertisers are on the defensive and in disarray on use of personal information. This is leading some to conclude --- even those supposedly lobbying on the industry's behalf --- that federal online privacy regulation is inevitable.

This sense of inevitability is appropriate, but for a different reason than one might think: we are about to see federal online privacy regulations in action. There is no need to guess at what they might do. An experiment with government privacy standards has already begun on our nation's children.

Congress passed the Children's Online Privacy Protection Act in 1998. Regulations that take effect April 21st will dictate for the first time that a commercial website collecting personal information from children must have a privacy link more prominent than other links on the site. "Personal information" includes e-mail addresses, and just knowing that a child's information has been collected brings the site under the regulation. As a practical matter, this means that the regulation affects all high-traffic sites that collect information from users.

More important than dictating the appearance of every commercial home page, the regulations require "verifiable parental consent" before a website operator may collect information like e-mail addresses from children. For the internal use of the website, this means getting an e-mail from the parent. For other uses, this means talking to a parent, or getting a parent's snail mail, fax, or credit card number.

Estimates of the price tag for serving kids online run as high as $100,000 dollars a year. This means that small or new businesses will never enter this market or create innovative content for kids. The Federal Trade Commission was wildly off-base when it certified that these regulations would not significantly impact a substantial number of small businesses. Predicting what we give up when we make it hard to serve children online is like predicting what species would have evolved in an ecosystem that has been lost. If the Internet has taught us one thing, though, it is that innovation comes faster and stronger if small entrepreneurs participate.

With the price of serving children on the Web going from a few pennies each to a few dollars or more, access for some children will be cut off entirely. Several companies have announced that they will no longer provide free e-mail for kids.

Other companies are undertaking the onerous "verifiable parental consent" process. This hurdle will trip up many of the children who might benefit most from online contact and educational content. Parents who are absentee, do not have computer skills, do not speak English, or do not have credit cards will be unlikely to allow their children access to the online world. The children of highly educated and credit-worthy parents will speed through an increasingly diverse and engaging online world, while those outside the mainstream will languish in ignorance. Once again, the law of unintended consequences will have its most devastating effects on the most innocent, our nation's at-risk children.

The children's privacy regulations provide a small, but widening window on what could come from broader regulation. Additional federal online privacy regulations are not an inevitability and they should not be.

There will be debates about online privacy in the coming months and years. Hopefully, they will be serious enough to focus on uses of personal information that are both harmful and not already illegal. They should acknowledge that our society is premised on freedom of information, and that each individual should have power to define and defend his or her own sense of privacy. And these debates should absolutely include whether current regulations requiring businesses to report customers' private financial information to the government should stand.

Most of all, before the Federal Trade Commission and Congress institute a new round of online privacy regulation, they should examine the last round, and whether children on the margins should lose access to our increasingly online society.

James W. Harper is the founder and principal of PolicyCounsel.Com.
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