BUSINESS MODELS

Why your broadband provider is interested in all your online purchases, and how fast they move to get that information

telcos-oct-29-2016The Googles and Facebooks of this world collect and analyze all your consumer data. As these companies are not considered utility-like in the U.S., while your broadband provider is, they can share your data without your permission.

Broadband (or internet service) providers are now moving fast to avoid a new ruling aimed at protecting your data.

Your broadband provider is interested in all your online purchases to show you personalized ads. You are the main source of the new moves to an even higher economic growth.

So one may wonder if the broadband providers like AT&T and Verizon have the right to be called victims. Each make more than $100 billion in revenue a year. Read more below.

Data about all your online purchases is one of the hottest areas in the marketing space. Getting a single view of you or me as I go from PC to tablet to mobile to television is what innovation in the advertising industry is about. So you shouldn’t be surprised to learn that your internet service provider (ISP) is interested in learning what you have in your refrigerator. Such broadband providers, like AT&T, Comcast or Verizon, are classified as utility-like services.  To get to Google or Facebook you need such a service.

However, these Silicon Valley companies are not regulated by the Federal Communications Commission (FCC). On October 27 2016 the FCC ruled that Internet service providers must get permission to gather and share consumers’ private data, including web browsing, app use and location. So AT&T, Comcast and Verizon, and other internet service providers complain there is a double standard – some companies, such as Google and Facebook can gather and share consumer data without permission (in the U.S.), which the ISP’s cannot. So according to the New York Times article the ISP’s cast themselves as victims in a world dominated by Silicon Valley firms. The march towards Big Data is continuing.

“Consumer behavior across devises to better place, track and measure ads” is the new focus of the ad industry. This is according to David Cohen, president of North America at Magna Global, a major ad-buying firm. This was presented in the New York Times article October 29 2016 entitled “U.S. Rules May Curb Telecoms’ Ambitions”. Click here to get full access to the article.

The internet service providers have been moving fast the past weeks though, as they are buying and want to acquire companies that are outside the domain of the Federal Communications Commission – companies that are not considered providing utility-like services. AT&T just made a $85.4 billion bid for Time Warner (which owns CNN for example); Verizon spent more than $4 billion on AOL last year and is prepared to spend billions more for its pending acquisition of Yahoo.

The move of the ISP’s can be illustrated and explained by some of the components in the Service Innovation Triangle (SIT-model – see a separate Category about this model in the blog named ByPIF.org. I use capitalized letters for the sub-triangles of the SIT-model applied in this comment: Customer experiences; Service System; Technology; Business model, and Value).

For the broadband providers it is all about collecting the Customer experiences, using a Service system that captures the information. The Service system builds on the Technology the ISP’s themselves have. To increase the Value of their Service systems, the ISP’s are buying companies outside of the FCC area – Time Warner, AOL, and Yahoo for example. The crucial part of the SIT-model for creating Value – the Business model – sits between the Customers experiences and the Service systems sub-triangles. This is where the innovation in the ad industry is about – getting a single view of you or me as I go from PC to tablet to mobile to television.

Once these acquisitions are completed, the FCC regulations will no longer apply to the internet service providers in the sense that they can get data about their users via the companies they acquire.

The more information we share, the better the broadband providers and the Silicon Valley companies understand us as customers. I hope we think more about that going forward. We are becoming a source of revenue for companies like AT&T and Verizon, which already have over $100 billion in revenues per year. Perhaps we should not exchange this information for getting the ‘free’ services of Google or Facebook either? What is your opinion? To be continued…..

….. and for the continuation, please see my blog post “Consumer privacy protection is the U.S. is now gone”. For decades federal rules have protected the privacy of the information in a phone call. In 2016 Obama extended those same protections to the internet. Trump undid this March 28 2017.

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