Internet Privacy: A Matter of Competition?

WASHINGTON, D.C. -- Respecting privacy may simply be good business for Internet companies seeking an edge, industry leaders claim.

Consumers who surf (and spend) where they feel safest may be more effective at changing site policies than any legislation, says John Scheibel, director of government relations for Yahoo.

"Privacy is a competitive issue for us," Scheibel says. "That is what drives us more than anything Congress could do."

The right role for government in protecting consumers online was the topic of a conference on Privacy in the Information Age held Monday at George Washington University here. It drew participants from dot-com companies as well as Congressional counsel and representatives of citizens' groups, notably privacy advocacy organizations.

Their key debate: Should the government regulate how companies can collect customer information, including their surfing habits, or should companies set their own privacy regulation standards?

Self-Regulation: Effective or Negligent?

Companies that make online privacy a priority may have a competitive advantage, as consumers decide whom they can trust with their personal information, some participants suggested. Industry representatives favor self-regulation by businesses.

"If we pass draconian privacy legislation, we are going to hurt the business model of the Internet," said Robert Atkinson, vice president of the Progressive Policy Institute.

But Frank Torres of the Consumers Union countered that "self-regulation is a failure." As an example, Torres pointed to efforts to protect children from adult material online. The business community promised to regulate children's access. But Congress felt that the efforts fell short and stepped in to pass the Children's Online Privacy Protection Act, according to Torres.

Yahoo's Scheibel argued that self-regulation can work because it is in a company's interest to protect its customers' privacy. If a company is dishonest about what it collects and doesn't protect that information, consumers won't patronize that company, he said.

"We trade our services for information," Scheibel said.

But if companies violate that trust, consumers have few options under the law, Torres said. "The only vengeance you have is to stay off the Internet," he said.

A U.S. Chamber of Commerce official attending the conference cautioned against far-reaching legislation like that enacted by the European Union.

"Let's find out the specific harm that is out there and with legislation target that specific harm," suggested Rick Lane, director of e-commerce and Internet technology for the U.S. Chamber of Commerce. He cautioned that overreaching regulation would tie the hands of the business community.

Consumers Want to Be Forewarned

Many sites post privacy notices explaining what information they collect, Lane noted. But Torres countered that this is a good idea that is often executed poorly. Privacy notices are often hard to find and difficult to understand, Torres said.

Fair notice, however, is what people want, said Susannah Fox of the Pew Internet and American Life Project, an initiative studying the social impact of the Internet. Pew research found that more than half of users polled want the most say in what information can and can't be gathered.

How people feel about privacy may be connected to how long they have been using the Internet, according to Fox.

"If you have been on the Internet for a year or less, you worry about privacy," agreed Scheibel. "If you've been on for two or more years, you worry, 'When am I going to get broadband?'"

Torres, however, characterized consumer attitudes as: "Leave me alone. It's none of your business, unless you ask me first."

Having personal information accessible online could have benefits, noted Christopher Hankin, director of federal affairs for Sun Microsystems. For example, medical records could be stored securely but be available so that a hospital could access your files if you need care while you're away from home, he suggested.

And businesses can use the personal data they gather to better serve their customers, noted Kenneth Glueck, vice president for government affairs and public policy at Oracle. A company does well to tailor its services to individuals based on the information collected, he said.

Lawmakers are watching this topic, with numerous proposals introduced this session. But conference participants agreed that Congress will not pass major privacy legislation this year.

"It is clear that we haven't figured this out and are not even close," said Jim Dempsey, a deputy director with the Center for Democracy and Technology, an organization concerned with civil liberties.