The battle over Internet privacy will play out in two rounds of legislation — one in 2001 and another in 2005. According to the new Report “The Internet’s Privacy Migraine” from Forrester Research, Inc. (Nasdaq: FORR), this process will take place in three stages: An initial round of legislation focused on Web sites will be passed in 2001; the issue will go into remission from 2002 to 2004; a second, broader round of legislation will be passed in 2005.
“Rising consumer concern, technological advances, and business pressures will make privacy one of the hottest areas of Internet policy debate in the next several years,” said Jay Stanley, analyst at Forrester. “The combination of consumers’ feelings of irritation and violation, combined with the findings of this week’s FTC report and the politics of an election year will put the privacy issue at center stage.”
After an excruciating series of fights and compromises, Forrester believes that the first set of legislation will come later next year. The legislation will require Web sites to provide notice of their information practices — with the FTC retaining authority to take action against those who do not abide by their own policies. It will also require consent for the sharing of data, but that provision is complex, full of large exceptions, and vague in key areas such as the definition of “third party.” Industry lobbying will successfully defeat measures that require companies to provide consumers with access to information that has been collected about them.
After quieting down in the wake of the initial legislation, the privacy issue returns to center stage in 2004 as a result of three factors. First, businesses under continuing relentless competitive pressure will increase the power and scope of their information-handling abilities. Second, the privacy issue will spill outward from Web sites to offline data collection as the aggregation of data by marketers and personal information brokers becomes more aggressive. Third, antigovernment conservatives will join anticorporate liberals on the privacy bandwagon, injecting new political life into the privacy issue.
Momentum for a new privacy bill will finally crest in late 2005. Congress will pass sweeping legislation establishing unified privacy principles that apply to the Internet, financial institutions, and medical providers. This legislation will also pre-empt state privacy laws. The measure requires genuine opt-in for the sharing of personal information with third parties, including any business partners and affiliates, consumer access to basic factual data being held by an institution, and severe restrictions on data aggregators akin to those contained in the Fair Credit Reporting Act.
For the Report “The Internet’s Privacy Migraine,” Forrester interviewed 50 heads of marketing or privacy at companies with an online presence, both Dot Com and brick and mortar. In addition, Forrester spoke with 29 privacy advocates, government regulators, online advertisers, and companies offering privacy solutions.