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Why Broadband Discounts for Data Are Pro-Consumer

August 15, 2016

Prohibiting data-based price differentiation would be terrible policy and a remarkably paternalistic departure from a common practice that is widely accepted throughout the economy.

The FCC’s recent proposal to impose a sweeping new privacy regime on broadband Internet services has sparked debate over whether or to what extent providers should be able to offer discounts in exchange for permission to use consumer data commercially. Critics decry the concept as “pay-for-privacy” and argue it ought to be banned, even when the data is anonymized. But the truth is prohibiting price differentiation would hurt consumers and slow broadband adoption.

This type of price differentiation based on exchange of consumer information is an incredibly common cornerstone of online activity. The gathering of user-information allows many online services to be made available for free. Consumers benefit this arrangement, and many would gladly choose a discount in the context of broadband access as well, even if it doesn’t make the service completely free.

Consumers privacy preference vary considerably, but can be placed into three general categories: privacy fundamentalists, who guard their privacy carefully; those unconcerned about their privacy; and the largest group, the privacy pragmatists, who are willing to share their personal data in exchange for benefits.

Advocates calling for a ban on financial inducements to share broadband data speak only for the fundamentalists. A prohibition would adversely affect the great majority of U.S. citizens willing to consider the tradeoffs involved in sharing their data, especially when direct savings are involved. These advocates seek to deny consumers choice in the matter, and based on unfounded hypotheticals.

The FCC should recognize that privacy-based discounts clearly have the potential to benefit consumers and refrain from limiting the use of this practice by broadband providers.

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