The coming privacy divide

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February 24, 2000
Web posted at: 8:39 a.m. EST (1339 GMT)

by John Simons

(IDG) -- In the last month, the Internet chatterati have declared online anonymity officially dead. The fretting focuses on America Online's deal with Time Warner and last summer's pairing of Web advertising company DoubleClick with data-mining giant Abacus Direct.

Privacy advocates fear megacorporations like AOL-Time Warner might amass detailed dossiers on customers ö compiling data about, say, a person's magazine subscriptions, pay-per-view television orders and Web-browsing habits ö in an attempt to make target marketing more precise. With the help of "cookies" tossed onto PCs, meanwhile, DoubleClick-Abacus is carrying out plans to link consumers' online activities to their offline identities.

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But just as market influences and new technologies are conspiring to diminish privacy, equally powerful forces are combining to create a robust market in which consumers buy or rent the ability to be incognito on the Net. For $50 a year, Anonymizer of La Mesa, Calif., offers a Web proxy service through which users can mask their identities while surfing; San Jose, Calif.-based Privada offers a similar service for $60 a year. Zero-Knowledge Systems of Montreal sells Freedom 1.0, software that lets users travel the Web, send e-mail, and chat using cloaked identities. For $49.95 a year, Zero-Knowledge will encrypt and reroute traffic so users become nearly untraceable.

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Anonymity isn't dying ö it's moving to a pricier neighborhood. As pay-for-privacy develops, people who can't afford anonymity are forced to wander the Net in full-disclosure mode. Though they aren't online in great numbers now, low-income households will eventually plug in. An increasing number of these homes are choosing to let companies track their surfing habits in exchange for free or discounted PCs and Net access. The stage is set for a "privacy divide," in which a tiny minority of well-off, privacy-concerned users stands opposite the mass of less prosperous ö and less private ö consumers.

It's not surprising that privacy advocates haven't anticipated this disparity. Historically, much of their activism has focused on privacy violations against middle- and upper-income consumers. Their rationale: People in those brackets spend more money than their less-prosperous counterparts, so corporations expend more energy seeking them out. But for many companies, low-income consumers are crucial. PricewaterhouseCoopers data shows that inner-city consumers have $85 billion in annual spending power ö much of that aimed at aggressively marketed products like food and personal-care items.

Free-market zealots might argue that if low-income families have something of value ö their privacy ö why not empower them to use it as currency? The answer is that this newfound tender can also be used as a tool for their own manipulation. The more personal data that e-retailers compile, the easier it becomes, for example, to engage in online price discrimination. These are schemes in which consumers receive different price quotes on goods depending on where they live or how much money they make.

The Net was once trumpeted as "the great equalizer," casting off the burdens of racial, religious or economic discrimination. What's most alarming about a future in which online privacy stratifies along income lines is that it is possible ö and perhaps profitable ö for companies to recreate the biases many of us encounter in the physical world.

So far, Uncle Sam has allowed the Internet industry to set its own privacy rules. Public policy discussions have hinged on whether companies should give consumers a choice to "opt in" to personal data collection, or whether companies should be allowed to automatically collect data unless consumers actively "opt out." Both choices are inadequate. Policy makers should set clear limits on how companies can use consumer data.

As federal regulators, privacy advocates and corporations ruminate about setting online privacy standards, they might consider this: The nature of privacy is changing on the Internet, and it is lower-income families ö not the middle class or the affluent ö who have the most to lose.

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Electronic Privacy Information Center

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