Broadband Providers See a Goldmine in Terms of Service Agreements

Still hung over from a brief, drunken courtship with the media giants, broadband providers have awoken to a harsh reality where Internet connections are now a commodity. The "we bring the eyeballs, you bring the content" delusion faded as media conglomerates realized that ISPs have almost no control over which websites their customers visit. In this paper, I argue that in response to this commoditization of bandwidth, broadband providers are creating a crisis of informed consent by deceptively changing their standard Terms of Service and Privacy Policy agreements, effectively adding invisible asterisks to "Unlimited" Internet plans, deluding consumers and chilling the adoption of innovative web services.

The Road to Commoditization

Somewhere along the path from dialup to broadband, the value-add disappeared from Internet service. A decade ago, Internet service providers put at center stage features like webspace, email addresses, and in AOL's case, exclusive portals and chat features. But as broadband began its slow roll-out across the States, these extra features began to mean less next to web services like Hotmail and Yahoo, which had both buzz and portability to their credit.

Broadband providers like Time Warner, Comcast and Cox now face a customer base that only wants an invisible, fast Internet connection, effectively reducing provider differentiation to zero, and cutting revenue sources to just the monthly subscription fee. The industry-wide panic that has ensued can be seen in what players in similar industries are doing to avoid the same fate. Wireless carriers are fighting tooth and nail to hold on to their own outdated add-ons-- carriers still lock out custom ringtone and SMS applications, even though phones have been capable of user-generated ringtones and instant data delivery for years. Indeed AT&T removed text messages from the standard iPhone 3G plan, the thought being that the SMS-addicted public will gladly pay the extra $5/month as an add-on. Broadband companies only wish they had such control over customer computers.

New Profit Sources

But ISPs do still have vast quantities of users who would rather die than wait for the cable/DSL guy in order to switch providers; still other customers have no broadband alternatives. While this might encourage monopolistic complacency, other factors push back. First, shareholder pressure and newfound independence for some ISPs, such as Time Warner Cable, have increased pressure to find new profit sources despite peaking subscriber numbers. Second, there is a clear and increasing usage gap between users of high-bandwidth, cutting-edge web services like Hulu and Bittorrent, and the average Hotmail, MySpace? , and YouTube? user: power users force expensive network upgrades.

Broadband executives then face two tasks in a bandwidth commoditized world: to reduce costs by reeling in the most expensive customers, and to discover new profit sources while keeping in mind consumer desire for invisible, unlimited Internet service. To accomplish these tasks without upsetting customer immobility, two solutions have emerged: limiting the connections of high-bandwidth users ("network management"), and selling customer browsing data to advertisers through services like Phorm. Phorm claims that its software represents a "privacy revolution" by assigning random numbers instead of IP addresses. (Random numbers? How soon we forget.)

These service changes pose no problem in themselves, as long as consumers consent. But Phorm, for its part, seems quite aware that "informed" and "consent" might be mutually exclusive with regard to its service, and seems to be taking a page from Facebook regarding the meaning of "opt-in". Even some providers like Virgin and Charter have conceded, in a way, that privacy and consent problems exist with network management and Phorm-like programs.

Hidden in Plain Sight

But most ISPs continue to bury these changes in their Terms of Service and Privacy Policies, while refusing to update the way they advertise their plans. Such service agreements, unless crafted carefully, fail to alert users to potential outcomes. They often employ indefinite wording (i.e. "...network management activities may include..."), leaving users, who often lack both alternatives and bargaining power, unaware of the real facts. Comcast deceptively lists the first three reasons for network management as preventing "spam, viruses, [and] security attacks"; Cox Communications requires users to ensure their activities "do not improperly restrict, inhibit, or degrade any other user's use of the service," although they don't specify how often one should call the neighbors to check on their connection. Time Warner Cable reserves that they "may" use means such as "suspending or reducing the Throughput Rate of the [Internet] Service" and "monitor [users'] usage patterns to facilitate the provision of the [Internet] Service."

The problem is that ISPs want to have their cake and eat it too, by advertising service plans based solely on maximum transfer rates, then manipulating those rates based on an undisclosed formula. But American providers are hesitant to switch to the aggregate-usage plans that are so popular abroad. The reason may be that, as illustrated by the Netflix model of business, American consumers tend to bite off more product than they can consume. It's the "better Supersize that" and "get the 5-disc plan just in case" mode of thinking, encouraged by high-quantity discounts. Companies from Comcast to Netflix thrive on this phenomenon, which allows them to sell more than consumers use. So many users who don't need "unlimited" Gigabytes per month still prefer to have it, and will pay a higher rate than they would for a finite limit.

The problem here remains one of informed consent. The vocal minority has had only limited success in changing provider policies, and one of the few relevant private sector organizations has essentially admitted helplessness: "[TRUSTe CEO] Ms. Maier said that the TRUSTe would not attract companies into its program if it required them to get the affirmative consent of every user for any use of personal data." By attempting to maintain the status quo, ISPs are chilling the development of innovative, high-bandwidth web services, and tricking users out of their valuable personal information. Regulation of service agreements or broadband providers may therefore be necessary to ensure users are giving informed consent.

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