Online Privacy A Key (But Not Simple) Issue - Report

Coming to grips with consumer concerns over online privacy will be critical to the future of online commerce, but industry- and government-backed solutions to the issue aren't as simple as they may seem to their proponents, according to a new report from the Internet Policy Institute (IPI).

The latest addition to the IPI's Briefing the President project was penned by Ellen Alderman and Caroline Kennedy, who have in the past partnered on books about the history and impact of the US Bill of Rights and about the notion of Americans' legal rights to privacy.

The IPI was launched late last year as a nonpartisan "think tank," focusing on Internet research and analysis from a variety of high- profile experts. IPI sponsors include some well-known names as well, including America Online Inc. and MCI WorldCom Inc.

Alderman's and Kennedy's report released Friday, titled "The Internet, Consumers and Privacy," draws on Federal Trade Commission (FTC) statistics to show consumer concern over the potential misuse of the information they hand out online is reaching the critical point.

"The FTC's most recent survey confirms that 92 percent of Americans are concerned - 67 percent very concerned - about the misuse of their personal information on the Internet," the report says. "The FTC report also indicates this apprehension translates into lost online sales with estimates ranging from $2.8 billion in 1999 to as much as $18 billion in 2002 - compared to a projected total of $40 billion online sales - if nothing is done to increase consumer confidence."

Rather than suggest solutions, the pair's report outlines the pros and cons of both industry self-regulation and government controls on privacy issues and outlines self-help options available to consumers. The report also argues that consumer privacy on the Internet is an issue that extends into the bricks-and-mortar world of businesses whose trade exists online and offline, suggesting it's unlikely that Internet-only approaches will address all the concerns.

"Although there are privacy issues unique to the Internet (e.g. clickstream monitoring), to a large extent, online use of personal information overlaps with the offline world, and all indications are that the two worlds of 'bricks' and 'clicks' will continue to merge," Alderman and Kennedy wrote.

"Large corporations which have long trafficked in personal information are moving online and new companies created online are building bricks-and-mortar stores," they continued. "Even small retailers have their own Web site or are connected to the Web through intermediaries. Experts predict that information that has traditionally been stored offline will be stored and accessed online in the near future. And whether online or off, the information collected is often the same. Thus the distinctions between online and offline use of information are becoming less meaningful and solutions for online privacy must be considered against this larger backdrop."

Despite the similarity in the kinds of consumer data collected online and offline, current laws in place to protect consumers in the bricks-and-mortar don't offer promising guidelines over Internet controls, the pair said.

"Historically, we have reconciled the competing interests regarding informational privacy through a series of laws that have been compared to a tapestry, or more accurately, a crazy quilt," the IPI report said. "States, through both the common law and statute, offer differing degrees of protection for personal information. Similarly, at the federal level, we have approached privacy sector-by-sector, creating a patchwork of laws that provide varying levels of protection depending on the kind of information at stake, leaving some information, even that we deem highly sensitive, with no protection at all.

"For example, government data banks, credit reports, educational, motor vehicle and video rental records are all subject to different privacy protection schemes under different federal statutes. It was not until last year that Congress spelled out certain protections for financial records under the Financial Services Modernization Act, and that law was immediately criticized for not being protective enough. And Congress has yet to pass a federal law protecting the confidentiality of our medical records."

Wrote Alderman and Kennedy: "Although some of the laws speak specifically to electronic records and it is presumed that others can be interpreted to do so, exactly how this welter of laws will apply as information moves online is not completely clear. Similarly, it is not clear exactly how privacy provisions in laws originally aimed at the related telecommunications and cable industries will apply to the Internet. Cases dealing with these issues are just now reaching the courts. Perhaps the one certainty is that the confusion and shortcomings of privacy protection off line will move online as well."

IPI frames its report as one in a series of briefing documents for "the next President of the United States."

The IPI and the full text of the briefing by Alderman and Kennedy can be found online at: http://www.internetpolicy.org/.

Reported by Newsbytes.com, http://www.newsbytes.com.