F.C.C. Tightens Privacy Rules for Broadband Providers

F.C.C. Tightens Privacy Rules for Broadband Providers

- in Business

Data from the habits of wireless and home broadband customers are subject to new regulations.

Todd Heisler/The New York Times

WASHINGTON — Federal officials on Thursday approved privacy rules that will curb the ability of broadband providers to collect data about users, dealing a blow to AT&T, Verizon Communications and others that rely on such information for their advertising businesses.

The new privacy rules approved by the Federal Communications Commission require broadband providers to get permission to collect data on a subscriber’s web browsing, app use, location and financial information. Currently, broadband providers can track users unless those individuals tell them to stop.

The F.C.C. said the rules, approved in a three-to-two vote along party lines, were necessary to protect internet users who want more control over how companies treat their private information. The agency said it created the rules after it reclassified broadband last year into a service like a utility, a move that required broadband to have privacy rules similar to those imposed on phone companies.

“There is a basic truth: It is the consumer’s information. It is not the information of the network the consumer hires to deliver that information. What this item does is to say that the consumer has the right to make a decision about how her or his information is used,” said Tom Wheeler, the chairman of the F.C.C.

The decision hurts companies, including Comcast, Verizon and AT&T, that rely on user data to create profiles on subscribers for ads tailored to an individual’s preferences.

It also takes some air out of the goals of AT&T’s $85.4 billion bid for Time Warner, even before the ink on that deal has dried. The companies said they wanted to combine resources to move more forcefully into targeted advertising. Crucial to that ambition is information about AT&T’s wireless and home broadband users, combined with Time Warner’s viewer data and its huge audience. That would help the merged companies serve up, say, a tailored promotion for Gap Kids in downtown Atlanta.

AT&T, which has criticized the privacy regulations, said it was reviewing details of the final rules. It would not comment on how the rules would affect the proposed merger with Time Warner.

In a call with investors on Monday, AT&T’s chief financial officer, John Stephens, said that the vast amount of data available from the combined company would allow “a greater value proposition to offer advertisers.”

Broadband providers said the rules went much further than phone privacy rules and unfairly put them at a disadvantage to web companies like Google and Facebook, which do not have to follow similar privacy regulations but increasingly challenge their businesses.

AT&T, Verizon and Comcast have acquired media companies in recent years with an eye toward targeted advertising. The F.C.C. rules apply only to their broadband businesses, which would mean data from the habits of AT&T’s wireless and home broadband customers would be subject to the regulations, but not data about AT&T’s DirecTV users or users of the HBO Now app, for example.

If the AT&T-Time Warner merger was approved, they would still have many ways to collect data about users and could even buy information from data brokers.

“It could dampen some of the companies’ ambitious joint advertising plans. But I doubt even really tough rules would fundamentally change the business rationale of the deal,” said Paul Gallant, an analyst at Cowen & Company.

The privacy rules are among a set of last-ditch moves by Mr. Wheeler to make the F.C.C. a stronger watchdog over the broadband industry. Those efforts, including the opening of the cable box market aimed at promoting streaming videos, have stirred up a powerful and expensive defense by the broadband industry.

“Hopefully, this is the end of what has been the race to the bottom for online privacy, and hopefully the beginning of a race to the top,” said Harold Feld, senior vice president at Public Knowledge, a nonprofit public interest group.

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