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Mixed Feelings about Latest Facebook Privacy Fiasco

by on February 18, 2009 · 11 comments

facebook-logoMuch like the Beacon incident before it, I have mixed feeling about this latest kerfuffle over Facebook’s changes to its privacy policy.

On one hand, I just don’t see what the big deal is. People act like Facebook is taking away all their “rights” or possessions, which is just silly. They were just clarifying how information would be used. In one sense, I feel like saying ‘Chill out. And if you don’t like Facebook’s policies, go use some other social networking site for God’s sake!’

On the other hand, I appreciate the fact that some people are far more sensitive about these things and are seeking to collectively pressure Facebook to change its approach to information use and ownership, and I’m fine with that. In fact, like the Beacon hullabaloo, it’s an example of what Berin Szoka and I have argued is the power of voluntary persuasion and social pressure to remedy privacy concerns before we call on government to adopt coercive, top-down, ham-handed, one-size-fits-all regulatory solutions. As we noted in our recent paper about the looming threat of online advertising regulation:

there are many indirect pressures and reputational incentives that provide an important check on the behavior of firms and the privacy policies they craft.  Just as the Internet increases the ways advertisers can reach audiences, it increases the power audiences have to influence advertisers.  For example, when Facebook introduced its Beacon program in 2007, which shared users’ online purchases with their friends without sufficient warning about how the program worked and the ability to opt-out of the program, the response was swift and effective:  Users “collectively raised their voices” and “the privacy pendulum [swung] back into equilibrium” [according to the Interactive Advertising Bureau.]  Within two weeks of the Beacon program being first deployed, Facebook had created an opt-out procedure.

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FCC targets long-term service plans

by on June 9, 2008 · 8 comments

Are you a mobile phone user, FiOS TV subscriber, or DirecTV customer who’s happy with your service and bound by a long-term contract? If so, then brace for higher prices thanks to a multifaceted regulatory assault on voluntary contracts.

On June 12, the FCC will hold a hearing to consider imposing regulations on early termination fees, which are the charges that customers who’ve entered into long-term service agreements must pay if they choose to end service prior to the culmination of their contract term.

The FCC isn’t alone in its push to regulate early termination fees. Bills that would limit wireless contract terms have been drafted in both the Senate (by Sens. Klobuchar and Rockefeller) and in the House (by Rep. Markey). And Verizon, among other carriers, faces a $1 billion class-action lawsuit arguing its early termination fees are illegal.

While the bills pending in Congress focus solely on early termination fees for mobile service, the Washington Post reports that the FCC’s upcoming hearing will encompass early termination fees offered by all kinds of consumer telecom services. In addition to wireless companies, many broadband and video providers including DirecTV, Verizon, RCN, and Comcast also offer long-term service plans with cancellation charges levied on customers who end service early.

In late 2007, when the early termination fee debate began heating up, many providers changed their policies to address complaints against wireless contract provisions. Now, AT&T Mobility, Verizon Wireless, and Sprint all prorate early termination fees for wireless subscribers, so users who cancel service in the middle of the contract term don’t have to pay the full $175 early termination fee. The three carriers have also begun allowing customers to change calling plans without affecting their contract end date.

Despite intensifying opposition to early termination fees, these fees are really nothing new. Outside of high-tech services, consumers have long had the choice of signing long-term contracts that involve early cancellation charges. Renters typically sign 12-month apartment leases, and are usually required to pay a breakage fee if they back out of their lease early. Similar contract clauses are often found in fitness center memberships and automobile leases. Are all these incarnations of early termination fees fair game for government regulation, too?

Dictating the terms of telecommunications service contracts runs the risk of depressing investment in network modernization, ultimately harming consumers. At a time when Sprint is building a high-speed wireless network from the ground up, Verizon is laying fiber to millions of homes across the nation, and DirecTV is expanding its fleet of geosynchronous orbital satellites, government-imposed revenue volatility would delay next-generation telecom services that promise faster broadband speeds and more high-def programming.

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