Telecoms’ Ambitions on Targeted Ads Seen Curbed by F.C.C.’s New Privacy Rules

Telecoms’ Ambitions on Targeted Ads Seen Curbed by F.C.C.’s New Privacy Rules
By SAPNA MAHESHWARI and CECILIA KANG
Oct 28 2016
http://www.nytimes.com/2016/10/29/business/media/telecoms-ambitions-on-targeted-ads-seen-curbed-by-fccs-new-privacy-rules.html

In recent years, companies like Verizon and AT&T have made no secret of their ambitions to build online advertising businesses that can take on the behemoths of Silicon Valley.

But those plans, and the billions of dollars that have been invested in them, are in peril after federal officials approved broad new privacy rules that will limit the extent to which companies can collect and use digital information about individuals.

The Federal Communications Commission’s ruling on Thursday that internet service providers must get permission to gather and share consumers’ private data, including web browsing, app use and location, threw a wrench in the plans of several telecommunications and cable companies that need at least some of that information to pitch premium products to advertisers. It’s an especially big deal for Verizon, which spent more than $4 billion on AOL last year and is prepared to spend billions more for its pending acquisition of Yahoo, and for AT&T, which just made a blockbuster $85.4 billion bid for Time Warner.

“The challenge for Verizon and AT&T is that both companies have made big acquisitions that hinge largely on their ability to monetize advertising inventory more effectively, and the way they plan to do that is by targeting it better,” said Craig Moffett, senior analyst at MoffettNathanson. “If their hands are tied by the new F.C.C. rules, then that’s a very, very big deal.”

Currently, broadband providers can track users unless individuals specifically ask them to stop. The F.C.C. decision, set to take effect in about a year for major providers, has been hotly contested, in part because the rules apply only to internet service providers, or I.S.P.’s. They do not extend to online ad juggernauts like Google and Facebook — web companies that the F.C.C. does not regulate — which has spurred complaints of a double standard.

Companies like Comcast, Verizon and AT&T are only a small portion of the targeted-ad industry, but are seen as having great potential because of their broad view of online habits. Tom Wheeler, the chairman of the F.C.C., has contended, however, that while consumers may choose not to go on Facebook or use Google, they need I.S.P.s to get access to the internet, a view in line with the agency’s classification of broadband providers as utilitylike services.

The rapid rise of new “smart” devices that use broadband services, like thermostats and refrigerators, encouraged the F.C.C. actions. “Who would have ever imagined that what you have in your refrigerator would be information available to AT&T, Comcast or whoever your network provider is?” Mr. Wheeler said in a statement this week.

Innovation in the advertising industry is currently centered on understanding consumer behavior across devices to better place, track and measure ads, said David Cohen, president of North America at Magna Global, a major ad-buying firm.

“Getting a single view of you or me as I go from PC to tablet to mobile to television — that’s a real hot area in the marketing space,” Mr. Cohen said. “The ones who have the best visibility into that today are the big walled gardens, and that’s primarily Google and Facebook.”

Verizon has been trying within the last six months to leverage some nonpersonally identifiable information for improved targeting across AOL’s properties, which include MapQuest, The Huffington Post and TechCrunch, according to Mr. Cohen.

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