Telecoms using ‘opt-out’ approach to privacy
Indianapolis ? When Jason Settles added his name to Indiana’s new “no-call” list, he expected relief from the tyranny of telemarketers.
But the computer consultant’s dreams of dinner in peace quickly turned to alarm when he learned his own phone company intended to share details of his calling habits with its corporate affiliates.
Unless customers call a toll-free number to request otherwise, Ameritech plans to share information about what numbers they call, how often they call and how much they pay.
Could telephone offers of Internet, wireless service and other products be far behind? Settles asked.
“From a marketing standpoint, they’re taking the path of least resistance if you don’t do anything, we’re going to have the right to use that information,” Settles said. “Most people don’t ever get around to calling that number.”
While insisting they are upholding their legal obligation to protect customers’ calling data, many of the nation’s biggest phone companies have begun sharing that information with affiliates.
Verizon, Ameritech parent SBC Communications Inc. and Sprint are among the telecommunications giants using an “opt-out” approach: notifying customers about their data-sharing plans, typically through fliers tucked into phone bills, and assuming customers approve unless they call a toll-free number.
This backfired for Denver-based Qwest Communications International, which withdrew its “opt-out” plans in January after thousands of customers in the West expressed privacy concerns.
Verizon also has responded to consumer resistance, mailing “opt-out” notices to local-service customers in 30 of the 31 states it serves. The exception was Washington, where the mailing was postponed after the Qwest outcry, spokesman Bill Kula said.
The turmoil comes as consumer groups and attorneys general in 38 states are urging federal regulators to reinstate restrictions that required phone companies to employ an “opt-in” approach for sharing customer calling information with affiliates.
The banking industry also is in a long-running fight against information-sharing restrictions, with lobbyists defeating “opt-in” legislation in several states.
“The whole idea that a company can freely market their customers’ sensitive or personal information unless a customer expressly tells them not to is troubling to me and should be troubling to anyone who values personal privacy,” said Michigan Atty. Gen. Jennifer Grandholm, one of the AGs who wrote the Federal Communications Commission in December to urge an “opt-in” requirement.
In 1999, US West, a former Baby Bell company, challenged the previous “opt-in” requirement as an unconstitutional infringement of commercial speech, and the 10th U.S. Circuit Court of Appeals invalidated the rule.
In response, the FCC is reconsidering regulation of customer calling data. New rules could emerge by year’s end, FCC spokesman Michael Balmoris said.
Privacy on the Internet also is a target. Legislation has been introduced in the Senate by Sen. Ernest Hollings, D-S.C., that would allow data such as addresses, records of items purchased, user preferences and Web browsing histories, to be shared with third parties unless customers take the initiative to forbid it.
Telephone companies that have chosen the “opt-out” route concede that sharing customer data will lead to more phone sales pitches. But they argue consumers gain by learning about service options and bill-cutting strategies.
“I think the biggest misperception people have is that we’re selling this information to third parties,” said Mike Marker, a spokesman for SBC Ameritech of Indiana.
Ultimately, Marker said, sharing of calling data among affiliates will help usher in a new era of “bundled” communications in which customers will pay a single bill for a variety of communications services.
Jeff Kagan, an independent telecommunications analyst in Atlanta, agreed that consumers could benefit in the long run.
“If I’m doing business with the company, I already trust them. So I would like to know what other products they are offering,” he said. “It’s a way of solidifying the customer base.”
Still, many consumers want more protection from telemarketers, not less. More than 25 states, including Kansas, have passed “no-call” list legislation, most with penalties. Typically, violators are fined, from $2,000 in New York to $10,000 for first-time violators in Indiana.
Under Indiana’s law, corporate affiliates of phone companies are barred from making sales pitches to phone customers on the state’s list.
That’s a relief to Settles, who said he unknowingly tossed out the flier Ameritech inserted into January phone bills to notify customers that had to call to protect their data.
Ameritech should require customers to “opt-in” if they want to share their calling details, he said.
“As a paying customer, I feel that it is poor service” to take the opposite approach, he said.