Bell's plan to collect customer data could backfire big time: Peter Nowak

Bell Canada (Brent Lewin/Bloomberg via Getty Images)

Bell Canada (Brent Lewin/Bloomberg via Getty Images)

It’s been more than a week since the revelation that Bell Canada is gathering customer usage data with the intention of selling it for ads. I refrained from proclaiming it as the worst idea ever just to give it time to sink in, but yup, even with the benefit of sober second thought this is clearly one of those dumb moves that is either out of touch with what customers want or amazingly presumptuous about what the company can get away with.

In case you missed it, Bell has been sending out notices informing customers that, starting Nov. 16, it will be relaying new product offers based on their phone, Internet and TV usage. As the Globe and Mail reports, this will include the monitoring and exploitation of:

Internet activity from both mobile devices and computers, including Web pages customers have visited and search terms they have entered; customers’ location; use of apps and other device features; television viewing habits; and “calling patterns.” Account information shared will include product use including type of device, payment patterns, language preferences, postal codes, and demographic information.

Customers will be able to opt out of receiving the ads, but not the data collection itself. Bell is painting the service as a win for consumers, since they’ll be able to receive ads that are more relevant to them. Hotels, for example, might be able to send ads to customers who are also frequent travelers. What Bell plans to do with the collected data on customers who have opted out, however, is a mystery.

The other natural defence to the ad effort is that it isn’t much different from what Google does. The company monitors everything from searches and emails to YouTube and Maps usage, then tailors ads accordingly.

The privacy commissioner’s office was quick to jump on the news, wasting no time in announcing that it will be investigating the plan. Bell, which is promising not to identify individuals specifically, is certain to argue that it’s not doing anything that the likes of Google or Facebook aren’t doing, so the commissioner shouldn’t have anything to object to.

On the other hand, University of Ottawa professor and Canada Research Chair in Internet and E-commerce Law Michael Geist suggests Bell’s plan may in fact be illegal, since any data gathering of a “sensitive” nature requires participants to opt in rather than opt out. “Given the breadth of data – which includes locational information, payment records, and profiles on interests and media activities – it is hard to see how it can be fairly characterized as non-sensitive.”

Even if the privacy commissioner forces Bell to switch its data collection to opt-in because of that, it would still be bad news. Bell could make opting-in a condition of receiving its services – anyone who doesn’t like it is free to take their business elsewhere, which is basically what Google and Facebook do. If so, it could lose customers, but will other telecom service providers be able to resist the allure of a second revenue stream through selling customer data for ads? Fat chance. Without outright restrictions disallowing this sort of thing, consumers may eventually be faced with this sort of double-dipping becoming a wide-spread norm before long.

What is most objectionable to many customers and commentators about all of this may not be privacy related at all, but rather that internet companies and Bell are very different businesses. The former provide almost all of their services for free in exchange for customers’ data, while Bell already reaps a healthy amount of money from subscribers in the form of paid services. As one reader of the Hamilton Spectator put it, Bell’s data grab is a giant step too far – it’s “beyond offensive” to effectively make customers pay twice, in one way or another, for the same service. If Google or Facebook started charging users cash in addition to their data, there’d be the same kind of outrage.

If this sort of thing is to be stopped, it might require the intervention of authorities other than the privacy commissioner. A case could be made that Bell’s effort would qualify as tied selling, where customers are forced to take additional products that they don’t necessarily want, or another of the Competition Bureau’s no-no’s. Bell’s plan could also contravene several sections of the Canadian Radio-television and Telecommunications Commission new Wireless Code, taking effect Dec. 2, in areas such as changes to terms of service or privacy notifications.

Failing that, the effort could face two larger tests: international scrutiny and the bottom line of competition. If Bell is allowed to go ahead with its move here in Canada, telecom providers in other countries are sure to try the same – and will inevitably be stopped somewhere. It’s difficult to see European regulators, for example, allowing their providers to go ahead with such efforts. And when they come up with reasons for denial, it’ll be fun to watch the rationalizations of why they can’t also apply in Canada in retrospect.

At the end of the day, market forces may ultimately kill Bell’s plan. My gut reaction to the company wanting to compete with Google or Facebook is to let it do exactly that, and good luck with that. Bell has already tried to compete with the likes of iTunes and promised a rival to Netflix. How did either of those work out?

Over on the Huffington Post, technology strategy expert Paul Barter compares Bell’s data grab to Rogers’ negative-option billing fiasco back in the 1990s, where the company tacked new TV channels onto subscribers, then made them opt out if they didn’t want them. Ted Rogers later wrote in his autobiography that the company “forgot about the customer…. It was a mistake that was quickly rectified and has not been repeated, nor will it ever be repeated at Rogers.”

One way or another, Bell’s idea isn’t likely to succeed because it is an immensely bad one. Yet, if consumer reaction is any indication, the company will likely learn the same hard lessons along the way that Rogers discovered almost 20 years ago.