Who's reading your bills?
A court ruling on privacy riles the FCC
By Daniel Eisenberg
August 30, 1999
Web posted at: 12:00 p.m. EDT (1600 GMT)
It's enough to make the most gregarious gabber think twice
before picking up the phone again. What if the record of all
your personal calls--whom you're talking to, when and for how
long--were being sold to the highest bidder, by none other than
your very own telephone company? Every time you dial up your
shrink for a quick calm-me-down, for instance, that history
could be sold to a pharmaceutical firm ready to pitch you on the
benefits of tranquilizers.
A telemarketing nightmare, perhaps. But if a recent federal court
decision is any guide, that kind of invasion of privacy could
become policy, at least according to an outraged William Kennard,
chairman of the Federal Communications Commission. Last week the
FCC noisily announced that it would appeal a 10th Circuit Court
of Appeals ruling, handed down in Denver, two weeks ago, that it
claims gives telephone companies the right to peddle data on
customers to a third party without their permission. "We tried to
give consumers a meaningful cloak of privacy," said Kennard. "But
what we have today is nothing more than a fig leaf."
Although the case involved a phone company's effort to broaden
its right to circulate information among its own divisions, the
decision hit a raw nerve--the one that jangles with every
telemarketing call. True, all manner of corporations are already
trading your personal details in an estimated $3 billion-a-year
data market. Most websites are collecting your browsing
preferences on the sly, many banks are selling account records on
the open market, and sensitive medical files remain vulnerable to
snooping. "Americans have little clue about what happens to their
personal information," says John Featherman, president of Privacy
Protectors, a consumer-consulting firm.
But as people start to realize what's going on, more and more of
them are wondering if any part of their personal lives is
off-limits. That's one reason the FCC is objecting so loudly. As
part of the 1996 Telecommunications Act, the FCC established
strict "opt-in" privacy provisions, under which a consumer has to
give his consent before his calling data can be made part of
marketing campaigns for additional services or products. Not
surprisingly, the telcos and other businesses prefer the
"opt-out" approach, which costs less and bears more fruit. It
gives companies the right to exchange the valuable
information--both internally and with third parties--unless
consumers expressly forbid it.
The plaintiff, U S West, argued successfully that the more
burdensome opt-in method was an abridgment of its First Amendment
right to free commercial speech. In a 2-to-1 decision, the
appeals panel wrote, "Although we may feel uncomfortable knowing
that our personal information is circulating in the world, we
live in an open society where information may usually pass
Many privacy advocates are worried that the ruling could set a
bad precedent for all kinds of privacy protections. "The court
[in the Denver case] doesn't think privacy alone is enough,"
notes Deirdre Mulligan, staff counsel at the Center for Democracy
and Technology. "They think an invasion of privacy has to lead to
something else" before the government can intervene.
There's no trouble on the line, insist the Baby Bells; they
merely want to define their rights regarding the sharing of data
internally. They've never hawked privileged information, nor does
the ruling, in their view, give them the freedom to start, they
say. "There is no reason to push the privacy panic button,"
declares BellSouth spokesman Bill McCloskey. At the very least,
the Bells add, they will always use the opt-out rules. In fact,
they characterize the ruling as a victory for consumers. U S West
attorney and constitutional scholar Laurence Tribe argues, "The
irony now is that there will be less marketing calls interrupting
dinnertimes because companies can tailor their efforts."
Others think the temptation to sell out will be hard to resist.
Says Democratic Congressman Ed Markey of Massachusetts: "We used
to think of the phone company as a privacy keeper, but now we
think of it as a peeper, and a reaper of profit."
Is there anything legally wrong with that? The answer, which may
surprise people who think of privacy as an inalienable right, is
probably no. The Bill of Rights has no explicit privacy clause. A
patchwork of state laws governs how businesses handle customer
information, but there is no overriding federal statute. At this
point, because of a law passed in the '80s, your video-rental log
may be better protected than your bank or health records.
The pressure for more protection may come from consumers. Late
last week, online mega-merchant Amazon.com, responding to
criticism, modified its new Purchase Circles feature, which lets
surfers find out which books, music and videos are most popular
at different companies, universities, organizations and
geographic regions. And Comptroller of the Currency John D. Hawke
Jr. has noted a rise in complaints about banks selling
confidential customer data and he called on the industry to clean
up its act. "There's mounting evidence of an increase in banking
practices that are at least seamy, if not downright unfair and
deceptive," Hawke said. Some banks heard him. Chase has begun a
moratorium on working with third-party telemarketers to pitch
nonfinancial products. Bank of America and Wells Fargo have
Soon enough they may not have a choice in the matter.
Bank-reform legislation pending in Congress would require
companies to give customers the chance to opt out of joint
marketing programs, though this would apply only to information
shared with outside firms. So a soup-to-nuts financial behemoth
like Citigroup could pass on your data from its brokerage to
mortgage officers to insurance salesmen without your approval.
Federal efforts to pass a universal medical-privacy act have
moved at a snail's pace; Congress just missed a self-imposed
deadline to enact a law. When it comes to privacy, whether it
concerns your bank account or your phone records, keep this in
mind: it's on hold.
--With reporting by Sally B.
Donnelly/Washington and Richard Woodbury/Denver
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Cover Date: September 6, 1999