Privacy advocates said Monday that Verizon’s $4.8 billion purchase of Yahoo’s web assets underscores the need for federal regulators to create strict new privacy rules for internet providers.
The acquisition — a sign of Verizon’s growing interest in the advertising business — comes as the Federal Communications Commission (FCC) moves toward a final vote on the hotly contested proposed rules, which would require internet providers to get permission before using their customers data for most advertising purposes.
“We certainly agree that this highlights the need to have the FCC continue to move as quickly as possible to finish its rules on broadband privacy,” said Chris Lewis, the vice president for government affairs at Public Knowledge, which has pushed for the rules.
“That’s especially important because the rules deal with how broadband providers deal with data collected through affiliated entities, so you have a company here with Verizon that you know is an internet provider but also does much more now.”
Jay Stanley, a senior policy analyst with the American Civil Liberties Union, said that the purchase “reaffirms the importance of putting in regulations on network neutrality and privacy when it comes to these carriers,” echoing calls from other privacy and public interest groups.
“It confirms what we already know, which is that the carriers want to get into the advertising business in a big way,” said Stanley.
Asked about the comments, Verizon spokesperson Rich Young defended the company’s commitment to privacy.
“We take privacy seriously, and will continue to comply with existing laws and to honor the commitments we have made to our customers,” he said in an email.
FCC Chairman Tom Wheeler’s proposed rules would severely limit the ways in which internet service providers could use the data they collect on customers without their consent. They are an outgrowth of last year’s strict net neutrality rules, which gave the commission different authority over broadband providers.
That puts Wheeler and his supporters on a collision course with Verizon and other service providers that see digital advertising as a potentially lucrative way to grow their businesses. They hope to compete with the giants of mobile advertising — Google and Facebook — by combining the data they gather as service providers with the web targeting available through companies like AOL and Yahoo.
Privacy advocates say that consumers should have more control over whether they are subject to such a regime.
“Verizon’s ability to track a single person across their devices, when they are in a store, at home, work or school, and connect the digital dots to know whether they are now on their mobile phone or home watching TV, is a threat to the privacy of Americans,” said Center for Digital Democracy Executive Director Jeff Chester in an emailed statement.
Wheeler and privacy groups argue that the potential ability of internet providers to survey the full-breadth of a customer’s browsing history and the frequent difficulty of changing service providers create a need for more aggressive rules. Some have also pointed to the ease with which wireless carriers could obtain location data to bolster their case.
Internet providers and their Washington representatives say that they should be subject to rules similar to the ones the Federal Trade Commission uses to govern privacy at companies like Google and Facebook, whose services are accessed over a network but don’t provide the infrastructure consumers use to get there.
Those so-called edge providers dominate the digital ad market, and internet service providers argue that as the new players they shouldn’t be subject to the harsher rules. They also say that having separate rules governing internet service providers and web services could confuse users.
Verizon has been especially aggressive in pursuing a strategy that would position the company to use its subscriber data to provide targeted advertisements. They purchased AOL for $4.4 billion last year — Yahoo’s assets will be integrated with the company, if the deal is approved by regulators and shareholders — and have partnered with Hearst to develop video content.
But Wall Street analysts have questioned whether the impact of those efforts could be dampened by the proposed FCC rules.
“Wireless carriers have the potential to generate significant advertising revenues due to their ability to precisely target ads to wireless subscribers,” said the research service Moody’s earlier this year. “But, if the FCC restricts the carriers' ability to collect this data, the advertising revenue opportunity will be reduced.”
But Lewis said Verizon’s planned multi-billion purchase was a sign that internet providers were still willing to move toward the advertising business despite the shadow of the proposed rules.
“This is a sign that even with that long lead time [before the rules were considered], and that proceeding starting and all of this going on around creating rules, Verizon still is not afraid to pull the trigger on this acquisition and spend billions of dollars to do so,” he said.
“So, clearly, this a market signal that ISPs are not concerned about these rules coming and how it will impact their ability to get into other markets, such as the ad market or the edge provider market.”