March 15, 2016 / 4:10 PM / 4 years ago

UPDATE 1-U.S. FCC Internet privacy proposal could harm broadband providers - Moody's

(Updates background, details of proposal)

By David Shepardson

WASHINGTON, March 15 (Reuters) - Ratings agency Moody’s Investors Services said on Tuesday that a proposal by U.S. communications regulators to impose privacy restrictions on broadband providers like Verizon Communications Inc, AT&T Inc, Comcast Corp and Charter Communications Inc was “credit-negative.”

U.S. Federal Communications Commission Chairman Tom Wheeler on Thursday proposed barring providers from collecting user data without getting consent as part of a privacy proposal for internet use.

Moody’s said Internet providers could be “severely handicapped” in their ability to compete with digital advertisers such as Facebook Inc and Google.

Under the FCC proposal, Google, Facebook, Twitter Inc and other websites could keep collecting data from users without their consent, Moody’s said.

“We believe this to be a long-term risk to the current TV advertising business model, as well as all broadband providers whom also have ad sales exposure,” Moody’s said.

Digital advertisers like Google and Facebook are regulated by the Federal Trade Commission, under a less stringent standard than the FCC’s proposed rule.

Unless the two agencies align their privacy laws, Moody’s said, online digital advertisers will have “a distinct competitive advantage” as more advertising dollars will continue to flow to them.

AT&T said last week that it was unfair that the FCC is holding broadband providers to a different standard than companies such as Apple Inc and Google.

Wheeler’s plan would require broadband providers to obtain consumer consent, disclose data collection, protect personal information and report breaches. These companies currently collect consumer data without consent, and some use it for targeted advertising, which has drawn criticism from privacy advocates.

The FCC has authority to set privacy rules after it reclassified broadband providers last year as part of new “net neutrality” regulations. A federal appeals court has not ruled on a court challenge to that decision.

The FCC will vote on Wheeler’s proposal at its March 31 meeting. A final vote on new regulations would follow a public comment period.

Last week, Verizon agreed to pay $1.35 million to settle an FCC privacy probe after it admitted it inserted unique tracking codes in its users’ Internet traffic for advertising known as “supercookies” without getting their consent or allowing them to opt out. (Reporting by David Shepardson; Editing by Chizu Nomiyama and Lisa Von Ahn)

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