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| DATE | 2016-11-02 |
| FROM | Ruben Safir
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| SUBJECT | Subject: [Hangout-NYLXS] All the internet is ours
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http://www.bna.com/fcc-privacy-rules-n57982079136/
FCC Privacy Rules Could Hamper AT&T-Time Warner Data Mining
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From Telecommunications Law Resource Center
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By Lydia Beyoud and Kyle Daly
Oct. 24 — AT&T Inc.’s plans to leverage data it would acquire by buying
Time Warner Inc. are likely to run up against new Federal Communications
Commission privacy regulations the agency is expected to approve Oct. 27.
It wasn't clear late Oct. 24 whether the FCC will have a formal role in
reviewing the $85.4 billion acquisition. Regardless, if the deal wins
regulatory approval, the commission's planned new privacy rules could
set limits around data collected from across a combined company's
content and distribution platforms.
Executives for the companies tout the benefits of bringing Time Warner
content, including HBO, Turner and Warner Bros. to AT&T's various
pay-TV, mobile and internet subscribers.
They have also underscored the deal's impact on effective advertising.
“We think it’s good for giving consumers both more choice and probably,
in fact for sure, they will end up with lower cost burdens because more
of it can be borne by advertising,” Time Warner Chairman and CEO Jeff
Bewkes said on an Oct. 22 press call announcing the deal.
But the FCC's prospective rules are expected to throw roadblocks in the
way of streamlined data monetization. According to an Oct. 6 FCC fact
sheet, internet service providers would need customer consent under the
agency's proposed rules before they use or share sensitive information
with affiliated companies or third parties. Those consent requirements
would apply to web browsing and app usage history, possibly including
things such as the HBO Go mobile content app or the HBO Now streaming
service.
That would create a higher — but not insurmountable — hurdle for the
company to clear in order to capitalize on targeted advertising based on
that information. Consumer advocacy groups argue the FCC's prospective
rules are the minimum necessary to protect consumer privacy.
Internet service providers such as AT&T have said the rules would put
them at a significant competitive disadvantage against companies such as
Alphabet Inc.'s Google and Facebook Inc., whose business models are
largely based on mining and monetizing user data.
If the deal is approved, there's no question both companies will have
significantly more information available to them. The question will be
what they will be able to do with it depending on how the businesses are
regulated.
An AT&T spokesman told Bloomberg BNA via e-mail that the company would
review new privacy rules once the FCC adopts them. A Time Warner
spokesman didn't immediately respond to a request for comment.
Advertising Services
Both AT&T and Turner Broadcasting System, Inc., a Time Warner
subsidiary, already have targeted advertising businesses in their
portfolios. As both a wireline and wireless ISP, as well as a pay-TV
provider, AT&T is already able to combine significant amounts of
customer data from across its platforms. The company leverages that data
in part through AT&T Adworks, which offers targeted advertising on TV
and digital platforms.
In a Sept. 21 release, AdWorks said advertisers would soon be able to
deliver targeted ads “across nearly 14 million TV households, 30 million
mobile devices and millions of monthly DIRECTV app streams.”
Turner partnered in 2015 with data management platforms to develop a
data cloud service, which it said was meant to enable advertisers to
address custom audiences “across all Turner properties.”
It's unknown whether the combined companies would merge or continue both
marketing models, but those revenue streams stand to be heavily impacted
by the FCC's rules, several telecommunications attorneys told Bloomberg BNA.
“The entire FCC proposal is based on the assumption that certain
companies provide network services and other companies provide ‘edge'
services,” Christopher Yoo, a law professor at the University of
Pennsylvania, told Bloomberg BNA. Edge services include websites and
applications.
The merger demonstrates the kind of innovative services engendered
through acquisitions by traditional telecom companies of both content
and advertising companies, such as Verizon Communications Inc.'s recent
purchases of AOL Inc. and Yahoo Inc., and the 2008 Comcast-NBCUniversal
merger, Yoo said.
“We're likely to see similar innovations in the future,” said Yoo, but
added that the FCC's privacy rules stand to make development of those
services “much harder.” Yoo is among the parties opposing the FCC's
privacy regulations.
Critics Warn of Repercussions
It remains unclear just how far the combined AT&T-Time Warner company
would be able to go in sharing and use customer data across units under
the FCC’s proposed rules. That's partly because the company's plans
aren't known, and partly because the agency hasn't formally finalized
and published those rules.
To be sure, the FCC's prospective privacy rules, if approved, are likely
to face legal challenges from ISPs. Such legal challenges could end up
paralleling a regulatory review of the merger.
In theory, the Federal Trade Commission would be responsible for
protecting consumer privacy on the content—i.e., Time Warner—side of the
business, while the FCC would handle privacy when it comes to AT&T’s
collection of data from its broadband customers. But it's not clear
whether the FTC is able to regulate any subsidiary of a telecom company,
under a recent federal appeals court decision that the FTC is appealing
( FTC v. AT&T Mobility LLC, 9th Cir. , No. 15-16585, petition for en
banc rehearing 10/13/16 ).
Even if the FTC regains clearer privacy authority, critics of the FCC
proposal say the different jurisdictions could create confusion and
limits on business models for conglomerates such as AT&T.
“It’s going to be very messy within companies,” Tim Sparapani, senior
policy fellow at tech industry coalition CALinnovates, told Bloomberg
BNA. “It's not going to be clear whether you'll be able to hand off the
data from one side of the company to another.”
Companies having to collect, store and use customer data in different
ways depending on what side of the business collected that data could
create engineering headaches and regulatory compliance woes for
companies, Sparapani said.
Merger Conditions
The U.S. Department of Justice is expected to conduct the government's
antitrust review of the deal.
The department is likely to address privacy concerns, including the use
of ISP subscriber data, as part of its merger conditions,
telecommunications attorneys told Bloomberg BNA. “This would be a
natural result of the high profile nature of the ISP broadband privacy
proceeding at the FCC,” Paul Feldman, a telecommunications and privacy
attorney at Fletcher, Heald & Hildreth, PLC in Arlington, Va., said.
Public interest groups are already lining up to push the Justice
Department for strong limits on the combined companies' ability to share
customer data as a condition of department approval of the deal.
The acquisition “is all about tracking and targeting us regardless of
whether we use a mobile device, PC or TV,” Jeff Chester, executive
director of the Center for Digital Democracy, a consumer privacy think
tank, said in an Oct. 22 statement. “While some programmers and large
advertisers will benefit, the deal raises a host of consumer concerns,
including about privacy,” Chester said.
To contact the reporters on this story: Lydia Beyoud in Washington at
lbeyoud-at-bna.com ; Kyle Daly in Washington at kdaly-at-bna.com
To contact the editor responsible for this story: Keith Perine at
kperine-at-bna.com
For More Information
Text of the FCC's fact sheet is at
http://transition.fcc.gov/Daily_Releases/Daily_Business/2016/db1006/DOC-341633A1.pdf.
Text of the AT&T AdWorks statement is at
http://about.att.com/story/att_adworks_expands_ad_offering.html?linkId=29037445.
Text of the Turner Broadcasting Systems cloud services statement is at
http://www.turner.com/pressroom/upfront-2015-turner-data-cloud.
Text of the Center for Digital Democracy statement is at
https://www.democraticmedia.org/blog/cdd-statement-atttime-warner-deal.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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