'Net ad targeting may lose to privacy concerns

Although Web sites routinely target advertising, privacy advocates hold ISP traffic as sacrosanct. Imagine the post office opening your mail to gauge your preferences and then deciding which catalogs and fliers to leave in your box.

Complaints about NebuAd largely failed to gain traction until Charter, the nation's fourth-largest cable access provider, began notifying customers of its planned trial. A House subcommittee took notice and held a hearing in mid-July, following a similar one in the Senate.

Dave Burstein, editor of the industry Web site DSL Prime, said the backlash came as a surprise given years of deregulation being embraced in Washington.

"Inside the industry, nobody took the politics seriously," Burstein said. "They all looked at the financial opportunity and didn't think about the repercussions. They didn't realize what problems they would get when they got exposed."

NebuAd said late last year that some of the largest service providers were at least testing the service, though it identified only CenturyTel. Then this June, CenturyTel stopped its tests on about 20,000 customers, mostly in Kalispell, Montana, and surrounding areas.

In recent letters sent to Congress, the largest U.S. service providers all said they have not participated. United Online Inc. said it considered doing so, but ultimately decided against it. Smaller phone and cable companies that have conducted trials with hundreds of thousands of customers said they have ended them.

"There will be a long time to go before anyone is making any decisions with any finality," said Shawn Beqaj, a spokesman for Bresnan, which tested NebuAd in Billings, Montana. That stance is wise, Beqaj said, "whenever the congressional committee with the regulatory authority over your industry expresses concerns with your technology."

Knology said in its letter to Congress that it stopped its trials in Georgia, Florida, Tennessee and Alabama on July 14 — three days before the House hearing — "to study the issues raised about the NebuAd system by your Committee, privacy advocates, and others."

Cable One spokeswoman Melany Stroupe said her company was waiting for "clear rules and boundaries." She added that based on a six-month test in Anniston, Alabama, it wasn't clear that customers noticed any improvements in the relevancy of ads.

In Britain, though, the three large service providers appear ready to proceed, with BT paving the way.

Liversage said BT will seek explicit consent, known as "opt in," before any trial, whereas the U.S. providers using NebuAd had at most offered a way to decline, or opt out. Critics say an opt-out approach is inadequate because it assumes consent even if the notification is in the fine print of a billing insert that most customers throw away.

Yet Liversage acknowledged that secret trials BT conducted in 2006 and 2007, disclosed after a memo was leaked on the Internet, haven't helped its efforts to promote BT's commitment to transparency regarding Phorm.

Even if NebuAd and perhaps Phorm are forced to fold, privacy advocates believe other companies will surely follow, adapting their approach slightly until one succeeds. Other startups such as Front Porch Inc. have similar technology.

Front Porch's chief executive, Zachary Britton, said his company insists that ISPs get opt-in permission from subscribers, perhaps in exchange for more bandwidth or discounts. Although opt-in is the approach favored by privacy advocates, Britton suspended U.S. trials this summer anyhow.

"We have to work out in society what we believe is a good exchange," he said. "When that happens, we want to be ready to move forward."

Yet Front Porch's promotional material continues to circulate. Its promise: "New FREE Revenue for Broadband ISPs!"

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