FCC Restricts Phone Firms’ Use of Data on Customers

Amid growing concerns about privacy in the Information Age, federal regulators on Thursday ruled that an individual’s telephone dialing habits cannot be used to market other phone services to him unless the customer gives his permission.

The decision by the Federal Communications Commission, which takes effect in about two months, is a setback for incumbent local phone companies and a handful of fast-growing software concerns. They had been promoting “one-stop shopping” of telecommunications services ranging from Internet access, credit cards and long-distance service, in part, by analyzing how customers currently use their phones.

A host of personal but potentially valuable marketing data is captured by telephone carriers when a customer makes calls or pages. They include who is contacted, as well as the time and duration of the call.

Telephone companies can also tell how much their customers spent for service. Enhanced with other publicly available databases such as household income, the telephone carriers have amassed one of the biggest and most valuable databases on personal information outside of credit card and insurance companies, experts say.

“Your phone company knows a lot about you--when you call, who you call and how much you spend,” said William E. Kennard, chairman of the FCC. “Consumers will now control what the phone company can do with that personal information.”

Thursday’s FCC vote stems from an obscure provision in the Telecommunications Act of 1996 that ordered the FCC to implement rules restricting how phone companies can use confidential customer data to market telecommunications services.

Carriers had been largely free to use confidential customer data to market new telecommunications services.

But, in practice, carriers did not have much incentive to capitalize on their customers’ dialing habits, since local and long-distance telephone companies were restricted under federal law to their own markets. What’s more, many promising new telecommunications services, such as the Internet, have only recently become popular and widespread.

The FCC said it wants to level the playing field between incumbent carriers with vast storehouses of information about their customers and less-entrenched players like Internet providers and local phone company start-ups.

Consumer advocates have long feared an explosion of telemarketers--as well as a loss of personal privacy--as local, long-distance and cellular carriers step up efforts to offer their customers one-stop shopping of a growing array of new telecommunications services. And they applauded the FCC’s decision Thursday.

“This is an important privacy protection for consumers and we applaud the FCC for moving forward to make sure consumers aren’t abused as phone companies begin cross-marketing for new services,” said Gene Kimmelman, co-director of the Washington office of Consumers Union.

But some carriers expressed disappointment with the decision.

“This FCC rule effectively undermines one of the most cherished customer-convenience goals of the Telecom Act--one-stop shopping for telecommunications service,” said Randy New, BellSouth Corp. vice president of legislative implementation. “The FCC order means more regulation, confusion and inconvenience for consumers--just the opposite of what Congress intended.”