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MINNESOTA TELEPHONE ASSOCIATION Telecommunications Guide April 17, 2002
Data Privacy Whether it’s a home computer invaded by hackers, the risk of identity theft, or the sharing of personal data with businesses, many people are concerned about keeping their private information – medical, financial and telecommunications – private. Due to a recent flap about the data sharing practices of Qwest, a regional bell operating company with 25 million customers in Minnesota and 13 other states, the issue has seen its share of headlines. Opt-out or Opt-in? Federal law currently allows financial companies to use or share customer information with affiliates and with other companies in “joint marketing” efforts. Both can then market services and products the customer does not receive from the company. Customers cannot prevent this information transfer. To share information with unrelated outside marketers (third parties), however, companies must obtain customer approval. Though companies can use the “opt-in” method (defined below), most choose an “opt-out” arrangement. In this system, companies send customers a notice that they plan to share or sell data unless the customer tells them they can’t. Anyone who doesn’t call or write to “opt out” is considered to have given the company permission to share personal data according to the company’s privacy guidelines. The result – especially with banks, stock brokerages, insurers and credit card companies now legally able to merge – is a lot of information sharing. Publishers, retailers and other businesses also exchange information. Many people, including consumer advocates, would prefer that all systems be “opt-in.” Using that standard, data sharing would be prohibited unless a consumer specifically indicated it was all right. There’s no doubt that “opt-in” would provide more privacy and less data sharing. That’s because less than 10 percent of customers would be expected to let companies share their data in an “opt-in” system, while about 70 percent of customers wouldn’t prevent data-sharing with “opt-out” in place. Businesses argue that “opt-in” would be an economic burden and would slow the free flow of information that was a factor in the unprecedented growth of the ‘90s. “Opt-in” advocates argue that protecting our privacy is worth the price. FCC’s Rules By law, all telecommunications companies – local, long distance and wireless – have a duty to protect Customer Proprietary Network Information (CPNI). This includes what numbers someone calls and how often, what services they have and how they’re used, what people pay for everything, and other personal and sensitive information about telephone usage. The Federal Communications Commission, which currently allows telecoms to use an “opt-out” system, is expected to come out with new rules by the end of the year that detail how companies can use CPNI. With the courts, Congress, state legislatures and state regulatory agencies also concerned, however, an FCC ruling is not likely to be the end of things. The Current Situation In fact, three states – California, Vermont and New Mexico – have or are considering “opt-in” systems for financial companies. (The 1999 Gramm-Leach-Bliley Act, which allowed various financial companies to merge, also allows states to pass tougher laws.) Vermont and New Mexico regulators imposed rules that impose an “opt-in” system on companies that want to share customer data with third-party marketers. New Mexico imposes “opt-in” on joint marketing arrangements as well. (Regulations in both states face lawsuits.) The possible legislation in California would have both of New Mexico’s “opt-in” standards, but would also add something else. Consumers would have an “opt-out” option when it came to companies sharing customer data internally with affiliates. A bill in Congress to impose a four-year moratorium on new state privacy laws argues that these laws would make it harder to track terrorists’ financial assets. Opponents call this argument a “smoke screen.” Businesses say that varying state laws would make it impractical to integrate databases, a practice that cuts operating costs. In Minnesota, the only privacy bills to reach the floor are H.F. 3625 and S.F. 2908. The bills restrict Internet service providers from disclosing customer information and require that some unsolicited e-mails be identified as advertisements. The Senate version allows an “opt-in” system; the House version is “opt-out.” The Privacy ‘Controversy’ The data privacy issue became bigger in Minnesota when Qwest privacy notices said the company would not only share account information internally and with joint marketers, but also with third parties when it was “commercially reasonable to do so.” The company argues that the exchange of information among its local, long distance, wireless and high-speed Internet businesses would help it ascertain the products and services best suited to particular customers, who would only receive offers for products that would probably interest them. Company executives made many promises that they would not sell or disclose confidential customer information to outside marketers but, after strong objections by political officials and others, as well as calls from more than a million, or over five percent, of its customers, Qwest reversed its policy about sharing customer information internally and with partners – at least until the FCC issues its ruling. Qwest’s phone directory unit, Dex, will still sell names, phone numbers and addresses to other firms because this data is not considered private. And Qwest units will also use private customer information to offer new products and services, but only to people who are already customers of a particular unit. How can customers control their private information?
Four steps to privacy:
MTA Member Profile: Benton Cooperative Telephone Co. Benton Cooperative Telephone Company is celebrating its 50th year of providing its members with the latest in telecommunications services. Headquartered in Rice, about 12 miles north of St. Cloud, Benton has more than 4,500 access lines in a predominantly rural service area that covers over 450 square miles. The cooperative’s 16 employees, under the direction of the Board of Directors, provide local phone service to the exchanges of Bock, Foreston, Gilman and Ramey as well as Rice. In addition to having the equipment of three Internet providers at its sites, Benton also provides cable TV in the Rice area, and is a partner in St. Cloud Wireless Holdings, which provides cellular service in St. Cloud and surrounding areas. Benton also manages a competitive local exchange carrier (CLEC) in Milaca in partnership with East Central Energy of Braham. The cooperative feels it is important to be part of its communities. They recently launched a community safety program in which their technicians inspect smoke detector batteries in each household they visit and replace them when necessary. The cooperative also has donated more than $30,000 to area high school students for their post-secondary education as part of an annual scholarship program. And each year, employees form a team in the Relay for Life to raise funds for the American Cancer Society. “We’re very proud of our staff because they’re always looking for ways to improve our services,” said Cheryl Scapanski, the co-op’s general manager. “And we’re very proud of our company. We continue to invest in fiber optic cable and DSL services to meet the needs of our customers in today’s fast-changing world, while maintaining the cooperative philosophy of returning profits to members.” More information about the Minnesota Telephone Association can be found online at www.mnta.org.
(c) 2002 Minnesota Telephone Association
Published by the Minnesota Telephone
Association (MTA) |