'Pay-for-privacy' internet actually benefits low-income consumers
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Broadband service plans that offer discounts to subscribers who permit their internet service provider (ISP) to use their browsing behavior to deliver targeted advertising have become the latest issue for privacy advocates. Seven senators, including Elizabeth WarrenElizabeth Ann WarrenPoll: Sanders leads Biden by 9 points in Iowa Poll: Biden leads in Iowa ahead of caucuses The Memo: Impeachment dominates final Iowa sprint MORE (D-Mass.) and Bernie SandersBernie SandersPoll: Sanders leads Biden by 9 points in Iowa Poll: Biden leads in Iowa ahead of caucuses The Memo: Impeachment dominates final Iowa sprint MORE (I-Vt.), recently urged the Federal Communications Commission (FCC) to prohibit such "pay-for-privacy" plans, arguing that they "disproportionately harm low-income consumers, the elderly, and other vulnerable populations."

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In fact, the opposite is true: "Pay-for-privacy" plans disproportionately benefit lower-income individuals. Indeed, the notion that offering an additional option would be detrimental to any consumers, whatever their income, is misguided.

The senators' views on plans offering a discount in exchange for data are echoed by advocacy groups such as Free Press, which argues, "For a struggling family, that could mean choosing between paying for privacy and paying for groceries or the public transportation needed to get to work."

But this is precisely backward. A plan that offers a discount in exchange for data may enable a lower-income consumer both to have internet service and pay for groceries. Depriving the consumer of that choice may put the internet connection out of reach.

Companies collect individuals' data in order to deliver targeted advertising, the revenues  from which can be used to cover costs and in some cases provide services for "free." As is well-known, major internet companies, such as Google and Facebook, are built on this advertising-supported business model.

ISPs have had a more traditional business model, relying on direct payments from their customers rather than advertising revenues. Recently, however, ISPs have shown more interest in monetizing customer data, and thereby offering a partly or perhaps eventually even a fully advertising-supported service.  AT&T is already experimenting with such a model, offering a $30 discount to customers who allow their data to be collected and used. And Comcast recently urged the FCC not to limit these business models.

"Pay-for-privacy” and advertising-supported business models are two sides of the same coin. AT&T is giving the subscriber the opportunity to allow advertisers to pay part of the subscription fee. What would be the rationale for allowing Google to offer advertising-supported service but not AT&T?

In their letter, the senators argue, "Consumers should not have to pay an ISP an additional amount in order to protect their privacy." The lawmakers seem to be implicitly assuming that by prohibiting these plans everyone would be offered the lower price. But that's not what would happen. Basic economics implies that everyone would pay the higher price, or something close to it, because companies would not be able to use data to generate the additional revenue. This clearly would not be good for lower-income consumers.

Plans that offer a discount in exchange for data will be even more important if the FCC proceeds with its current privacy proposal, which requires affirmative opt-in for most data collection. It will likely be difficult to get consumers to go through the process of opting-in if failing to do so is perceived to be costless. But many consumers — not just lower-income consumers — are likely to opt-in in exchange for a discount. This will allow them to express their preferences for privacy in a market, and that's something we should encourage.

Lenard is president and senior fellow at the Technology Policy Institute.


The views expressed by contributors are their own and not the views of The Hill.