Without raising the legislative pen, Congress appears to be driving industry standards for online targeted advertising. Highly targeted ads can lead to higher advertising revenues. But powerful new targeting technologies also raise privacy concerns, as they can monitor nearly all an individual's movements online and build detailed individual profiles. Over the summer, hearings in the House and Senate scrutinized behavioral advertising, inquiring whether the implied degree of consumer monitoring is legal and in what respect, if any, consumers have agreed to these practices. The bipartisan leadership of the House Commerce Committee went further, asking a range of Internet Service Providers (ISPs) and other online actors for written responses to these questions.

Reportedly, many online businesses pulled back from adopting online advertising tools shortly after the House Commerce Committee's letters were sent. Also, Yahoo! and Google announced new opportunities for their users to opt out of certain customized advertising. Other ISPs stated that they were placing behavioral advertising initiatives on hold.

ISP Heavyweights

In late September, the Senate Commerce Committee took up targeted advertising again, holding a hearing for large ISPs Verizon, AT&T and Time Warner. On the surface, ISPs of all sizes appear to be natural consumers of targeted advertising tools, which could propel ISPs into online advertising markets now dominated by search engines (e.g., Google and Yahoo!) and advertising networks. Many ISPs have proceeded cautiously, however, as wholesale monitoring of their customers' online movements could spark a commercial and legislative backlash.

In the September hearing, the three broadband companies acknowledged a strong consensus among themselves to uphold consumer privacy. None currently engages in online behavioral advertising. Each is committed to obtaining consumers' affirmative consent before any behavioral advertising could occur. The validity of consent would depend on the customer first receiving a clear, conspicuous description of the ISP's targeted advertising program. Customers should be able to retract their consent at any time. Finally, any behavioral advertising program must provide legitimate value to the customer.

The "consumer-oriented approach" of the large ISPs goes hand in hand with their efforts to develop industry self-regulatory guidelines. According to Verizon, once a company states publicly that it would follow the guidelines, the Federal Trade Commission generally could enforce against failures as unfair or deceptive trade practices. Ideally, guidelines calling for meaningful consent would attract sufficient numbers of ISPs, search engines and others in the "online advertising ecosystem" that Congress would be persuaded not to legislate. But the large ISPs pulled no punches before the Committee in emphasizing that many online actors currently use behavioral advertising without following a "consumer-oriented approach." If legislation becomes necessary, Verizon, AT&T and Time Warner said, it must apply to all actors involved in online targeted advertising, including ISPs' competitors, search engines and advertising networks.

On the Flip Side: United Kingdom Endorses Behavioral Advertising

Traditionally, European governments have imposed more privacy-based restrictions than their U.S. counterparts. Behavior targeting is proving the exception, at least in the United Kingdom. In September, the U.K. communications regulator, Ofcom, approved British Telecom's and other ISPs' testing of behavioral targeting systems. Ofcom appears to view online advertising as a new revenue source for build-out of super-fast broadband service. Meanwhile, the regulator is developing privacy best practices in cooperation with the U.K. Information Commissioner, a privacy regulator.