Testimony Of
Deirdre Mulligan
Staff Counsel
Of
The Center For Democracy And Technology

Before

The Senate Committee On Commerce, Science, And Transportation
Subcommittee On Communications
JULY 27, 1999



I. Overview

The Center for Democracy and Technology (CDT) is pleased to have this opportunity to testify about privacy in the online environment. CDT is a non-profit, public interest organization dedicated to developing and implementing public policies to protect and advance civil liberties and democratic values on the Internet. One of our core goals is to enhance privacy protections for individuals in the development and use of new communications technologies. We thank the Chairman and Senators Wyden and Hollings for holding this hearing and for their commitment to seeking policies that support both civil liberties and a vibrant Internet.

CDT wishes to emphasize three points this morning:

II. What Makes the Internet Different?

CDT focuses much of its work on the Internet because we believe that it, more than any other medium, has characteristics–architectural, economic, and social–that are uniquely supportive of democratic values. Because of its decentralized, open, and interactive nature, the Internet is the first electronic medium to allow every user to "publish" and engage in commerce. Users can reach and create communities of interest despite geographic, social, and political barriers. As the World Wide Web grows to fully support voice, data, and video, it will become in many respects a virtual "face-to-face" social and political milieu.

But while the First Amendment potential of the Internet is clear, and recognized by the Supreme Court, the impact of the Internet on individual privacy is less certain. Will the online environment erode individual privacy–building in national identifiers, tracking devices, and limits on autonomy? Or will it breathe new life into privacy–providing protections for individuals’ long held expectations of privacy?

The Internet poses both challenges and opportunities to protecting privacy. The Internet accelerates the trend toward increased information collection that is already evident in our offline world. The trail of transactional data left behind as individuals use the Internet is a rich source of information about their habits of association, speech, and commerce. When aggregated, these digital fingerprints reveal a great deal about an individual’s life. The global flow of personal communications and information coupled with the Internet’s distributed architecture presents challenges for the protection of privacy. However, Anonymizers, anonymous remailers, and other privacy-enhancing tools allow individuals to create zones of privacy -- limiting who knows what about them and protecting their sensitive communications from prying eyes. Computer code and products are becoming increasingly critical to the protection of privacy in this distributed environment. With privacy-enhancing tools users will be empowered to control their personal information in new ways.

As we move swiftly toward a world of electronic democracy, electronic commerce and indeed electronic living, it is critical to construct a framework of privacy protection that fits with the unique opportunities and risks posed by the Internet. But as Congress has discovered in its attempts to regulate speech, this medium deserves its own analysis. Laws developed to protect interests in other media should not be blindly imported. To create rules that map onto the Internet, we must fully understand the characteristics of the Internet and their implications for privacy protection. We must also have a shared understanding of what we mean by privacy. Finally we must assess how to best use the various tools we have for implementing policy–law, computer code, industry practices, and public education–to achieve the protections we seek.

III. The Erosion of Privacy and the Path Towards its Restoration

There are several core "privacy expectations" that individuals have long held vis-à-vis both the government and the private sector, the protection of which should carry over to interactions on the Internet. Surveys of Internet users, and would-be Internet users, reveal a high level of concern with threats to privacy online. Surveys suggest that concern over privacy is keeping individuals off the Internet, retarding the growth of e-commerce, and leading individuals to engage in privacy-protective behaviors such as providing false information. A recent survey of Internet users found that 87% are concerned about threats to their personal privacy.

The remainder of our testimony will discuss the three critical privacy expectations of autonomy, fairness, and confidentiality, explore the changes in technology and policies that threaten them, and finally outline a plan for their restoration.

  1. The Expectation of Autonomy Why is it at risk?

    Imagine walking through a mall where every store, unbeknownst to you, placed a sign on your back. The signs tell every other store you visit exactly where you have been, what you looked at, and what you purchased. Something very close to this is possible on the Internet.

    When individuals surf the World Wide Web, they have a general expectation of anonymity, more so than in the physical world where an individual may be observed by others. As documented in several surveys, individuals value their anonymity and will take steps, such as providing false information and refusing to register, to protect it. Online, individuals often believe that if they have not affirmatively disclosed information about themselves, then no one knows who they are or what they are doing. But, contrary to this belief, the Internet generates an elaborate trail of data detailing every stop a person makes. The individual’s employer may capture this data trail if she logs on at work, and it is captured by the Web sites the individual visits. This transactional or click stream data can provide a "profile" of an individual’s online life.

    Two recent examples highlight the manner in which individuals’ expectation of autonomy is increasingly challenged in the online environment. (1) The introduction of the Pentium III processor equipped with a unique identifier (Processor Serial Number) threatens to greatly expand the ability of Web sites to surreptitiously track and monitor online behavior. The PSN could become something akin to the Social Security Number of the online world — a number tied inextricably to the individual and used to validate one’s identity throughout a range of interactions with the government and the private sector. (2) The Child Online Protection Act (COPA), passed in October, requires Web sites to prohibit minors’ access to material considered "harmful to minors." Today, when an individual walks into a convenience store to purchase an adult magazine, they may be asked to show some identification to prove their age. Under the COPA, an individual will be asked not only to show their identification, but also to leave a record of it and their purchase with the online store. Such systems will create records of individuals’ First Amendment activities, thereby conditioning adult access to constitutionally protected speech on a disclosure of identity. This poses a Faustian choice to individuals seeking access to information -- protect privacy and lose access or exercise First Amendment freedoms and forego privacy.

    The Path to Individual Autonomy Online

    While the global, distributed environment of the Internet raises challenges to our traditional methods of implementing policy, the specifications, standards, and technical protocols that support the operation of the Internet offer a new way to implement policy decisions. In the area of autonomy, focusing on standards and applications is crucial. By building systems that respect individuals varied needs for identification, pseudonymity, and anonymity -- building a digital wallet with cash, credit cards, a metro fare card, and a driver's license -- will help build an online environment that promotes autonomy. By building privacy into the architecture of the Internet, we have the opportunity to advance public policies in a manner that scales with the global and decentralized character of the network. As Larry Lessig repeatedly reminds us, "(computer) code is law."

    Accordingly, we must promote specifications, standards and products that protect privacy. A privacy-enhancing architecture must incorporate, in its design and function, individuals’ expectations of privacy. For example, a privacy-friendly architecture would provide individuals the ability to "walk" through the digital world, browse, and even purchase without disclosing information about their identity, thereby preserving their autonomy. Of course, it would also provide individuals the opportunity to create relationships that are identifiable -- or at least authenticated -- for engaging in activities such as banking. This would be coupled with policies that allow individuals to control when, how, and to whom personal data collected during interactions is used or disclosed.

    While there is much work to be done in designing a privacy-enhancing architecture, some substantial steps toward privacy protection have occurred. Positive steps to leverage the power of technology to protect privacy can be witnessed in tools like the Anonymizer, Crowds, and Onion Routing, which shield individuals’ identity during online interactions, and encryption tools such as Pretty Good Privacy that allow individuals to protect their private communications during transit. Coupled with rules such as those found in the Government Paperwork Elimination Act of 1998, which established privacy protections governing personal information collected when the public uses electronic signature systems, technology may evolve in ways that support individuals' interest in autonomy.

  2. The Expectation of Fairness and Control Over Personal Information

    Who controls the data?

    When individuals provide information to a doctor, a merchant, or a bank, they expect that those professionals/companies will collect only information necessary to perform the service and use it only for that purpose. The doctor will use it to tend to their health, the merchant will use it to process the bill and ship the product, and the bank will use it to manage their account–end of story. Unfortunately, current practices, both offline and online, foil this expectation of privacy. Much of the concern with privacy in electronic commerce stems from a lack of privacy rules in various sectors of the economy, such as financial and health, that handle a treasure trove of sensitive information on individuals.

    Whether it is medical information, or a record of a book purchased at the bookstore, or information left behind during a Web site visit, information is routinely collected without the individual’s knowledge and used for a variety of other purposes without the individual’s knowledge–let alone consent.

    Focusing on the online environment, we now have information from two studies assessing the state of privacy notices on the World Wide Web. Last June, the Federal Trade Commission's "Privacy Online: A Report to Congress" found that despite increased pressure, businesses operating online continued to collect personal information without providing even a minimum of consumer protection. The report looked only at whether Web sites provided users with notice about how their data was to be used; there was no discussion of whether the stated privacy policies provided adequate protection. The survey found that, while 92% of the sites surveyed were collecting personally identifiable information, only 14% had some kind of disclosure of what they were doing with personal data.

    The newly released Georgetown Internet Privacy Policy Survey provides new data. The Survey was designed to provide an update on the state of privacy policies on the World Wide Web. The study shows that definite progress has been made in making many more Web sites privacy-sensitive, but substantive privacy protections are still far from ubiquitous on the World Wide Web. While more Web sites are mentioning privacy, only 9.5% provide the types of notices required by the Online Privacy Alliance, the Better Business Bureau and TRUSTe. Indeed, fair information practices on the Web appear to remain the exception, not the rule.

    The Georgetown Survey shows that, spurred by surveys documenting consumer concern and anxiety, and the work of individual companies and industry self-regulatory entities such as TrustE, the Online Privacy Alliance, and the Better Business Bureau, an increased number of Web sites are providing consumers with some information about what personal information is collected (44%), and how that information will be used (52%). Companies posting fuller information about their data handling are more likely to make them accessible to consumers. Many have a link to such statements from the home page (79.7%).

    However, on important issues such as access to personal information and the ability to correct inaccurate information, the Georgetown Survey shows that only 22% and 18% respectively of these highly trafficked Web sites provide consumers with notice. On the important issue of providing individuals with the capacity to control the use and disclosure of personal information, the survey finds that 39.5% of these busy Web sites say that consumers can make some decision about whether they are re-contacted for marketing purposes -- most likely an "opt-out" -- and fewer still, 25%, say they provide consumers with some control over the disclosure of data to third parties.

    Overall, the Georgetown survey reveals that, at over 90% of the most frequently trafficked Web sites, consumers are not being adequately informed about how their personal information is handled. At the same time the survey found that over 90% of these same busy consumer-oriented Web sites are collecting personal information. In fact, the survey revealed an increase in the number of Web sites collecting sensitive information such as credit card numbers (up 20%), names (up 13.3%), and even Social Security Numbers (up 1.7%).

    Thus, while many companies appear to be making an effort to address some privacy concerns, the results from the consumer perspective appear to be a quilt of complex and inconsistent statements. The number of sites that provide consumers with the types of notices required by the Online Privacy Alliance, the Better Business Bureau and TrustE, and called for by the Federal Trade Commission and the Administration, is still relatively small (9.5%).

    The posting of privacy notices is not just a private sector issue. In a recent CDT study of federal agency Web sites, we found that just over one-third of federal agencies had a "privacy notice" link from the agency’s home page. Eight other sites had privacy policies that could be found after following a link or two and on 22 of the sites surveyed we could not find a privacy policy at all.

    The lack of widespread adherence to Fair Information Practices is undermining consumer confidence. A recent survey by the National Consumers League found that the majority of online users are not comfortable providing credit card (73%), financial (73%), or personal information (70%) to businesses online. Due to privacy concerns 42% of those who use the Internet are using it solely to gather information, while a smaller 24% actually venture to purchase goods online. A second study found that 58% of consumers do not consider financial transactions online to be safe, and 77% do not believe it is safe to provide a credit card number through a computer. Privacy has been rightly identified by the Federal Trade Commission, Congress, the business community, and advocacy organizations as a critical consumer protection issue in e-commerce.

    Establish Rules That Give Individuals Control Over Personal Information During Commercial Interactions

    We must adopt enforceable standards, both self-regulatory and legislative, to ensure that information provided for one purpose is not used or redisclosed for other purposes without the individual’s consent. All such efforts should focus on the Code of Fair Information Practices developed by the Department of Health, Education and Welfare in 1973. The challenge of implementing privacy practices on the Internet is ensuring that they build upon the medium’s real-time and interactive nature to foster privacy and that they do not unintentionally impede other beneficial aspects of the medium. Implementing privacy protections on the global and decentralized Internet is a complex task that will require new thinking and innovative approaches.

    The Georgetown Survey supports our belief that a combination of means — self-regulation, technology, and legislation — are required to provide privacy protections on the Internet. The study, as discussed above, shows that some progress has been made in making many more Web sites privacy sensitive, but substantive privacy protections are still far from ubiquitous on the World Wide Web. Because many Web sites need baseline policy guidance and because self-enforcement mechanisms, while emerging, may not always provide a viable remedy, we believe that legislation is both inevitable and necessary to ensure consumers' privacy on the Internet.

    To achieve real privacy on the Internet, we will need more than better numbers, redoubled efforts by industry, or a legislative mantra. We will need a good-faith concerted effort by industry, consumer and privacy advocates, and policymakers to develop real and substantive answers to a number of difficult policy issues involving the scope of identifiable information, the workings of consent and access mechanisms, and the structure of effective remedies that protect privacy without adversely affecting the openness and vitality of the Internet.

    As the Federal Trade Commission's rulemaking under the Children's Online Privacy Protection Act and industry's various efforts at self-regulation show, these issues are not easy. But armed with the findings of the Georgetown Internet Privacy Policy Survey, we believe interested parties are in a position to move forward on a three pronged approach — expanded self-regulation, work to develop and deploy privacy-enhancing technologies such as P3P, and legislation — all require a serious dialogue on policy and practice options for resolving difficult issues in this promising medium.

    In its testimony last July, the Federal Trade Commission stated that, "…unless industry can demonstrate that it has developed and implemented broad-based and effective self-regulatory programs by the end of this year, additional governmental authority in this area would be appropriate and necessary." Despite the considerable effort of Congress, the Federal Trade Commission, the Administration and industry to encourage and facilitate an effective self-regulatory system to protect consumer privacy, based on the survey results we do not believe that one has yet emerged. Like Commissioner Anthony, we believe that industry leadership and self-regulatory programs are a critical component of a privacy framework for the Internet, but that legislation is also necessary to establish a baseline and ensure consumers are protected from bad actors.

    Last year, the Federal Trade Commission offered a legislative outline that embodied a framework, similar to the one we suggest, building upon the strengths of both the self-regulatory and regulatory processes. This year several bills have been introduced on a wide range of privacy issues. The Online Privacy Protection Act introduced by Senators Burns and Wyden is substantially similar to the model recommended by the Federal Trade Commission last year. (Specific comments on the Online Privacy Protection Act can be found in subsection 3 below.)

    Historically, for privacy legislation to be successful, it must garner the support of at least a section of the industry. To do so, it generally must build upon the work of some industry members–typically binding bad actors to the rules being followed by industry leaders–or be critically tied to the viability of a business service or product as with the Video Privacy Protection Act and the Electronic Communications Privacy Act. Several companies have staked out leadership positions on the issue of online privacy and several self-regulatory programs have formed to drive industry best practices online. Numerous surveys have documented that consumers are concerned about their privacy in e-commerce.

    In addition to work on policies, there is important activity in the technical community on how to develop the tools necessary to implement fair information practices on the World Wide Web. The World Wide Web Consortium’s Platform for Privacy Preferences ("P3P") is a promising development. The P3P specification will allow individuals to query Web sites for their policies on handling personal information and to allow Web sites to easily respond. While P3P does not drive the specific practices, it is a standard designed to promote openness about information practices, to encourage Web sites to post privacy policies and to provide individuals with a simple, automated method to make informed decisions. Through settings on their Web browsers, or through other software programs, users will be able to exercise greater control over the use of their personal information. Regardless of how policies are established, an Internet-centric method of communicating about privacy is part of the solution.

    As Congress moves forward this year, we look forward to working with you and all interested parties to ensure that fair information practices are incorporated into business practices on the World Wide Web. Both legislation and self-regulation are only as good as the substantive policies they embody. As we said at the start, crafting meaningful privacy protections that map onto the Internet requires us to resolve several critical issues. While consensus exists around at least four general principles (a subset of the Code of Fair Information Practices) — notice of data practices; individual control over the secondary use of data; access to personal information; and, security for data — the specifics of their implementation and the remedies for their violation must be explored. We must wrestle with difficult questions: When is information identifiable? How is it accessed? How do we create meaningful and proportionate remedies that address the disclosure of sensitive medical information as well as the disclosure of inaccurate marketing data? For the policy process to successfully move forward these hard issues must be more fully resolved. We would welcome the opportunity to work with Senators Burns and Wyden, and other members of this committee, to explore these issues and develop a framework for privacy protection in the online environment. The Online Privacy Protection Act could serve as a starting point for this discussion. The leadership of Internet-savvy members of this Committee and others will be critical as we seek to provide workable and effective privacy protections for the Internet.

  3. Preliminary Comments on the Online Privacy Protection Act (S. 809) and suggested changes<

    The Online Privacy Protection Act is closely modeled on the Children's Online Privacy Protection Act enacted last year. It establishes baseline practices for commercial Web sites handling personal information and provides the Federal Trade Commission with authority to enforce violations of the Act.

    Legislation to protect privacy should be based on the Code of Fair Information Practices which has served as a model for privacy legislation and self-regulatory codes in the United States and across the globe for twenty-five years.

    The Code of Fair Information Practices requires that businesses collecting personal information (record keepers):

    The Code of Fair Information Practices says that individuals should have the right to:

    To bring the Online Privacy Protection Act (S. 809) in line with the Code of Fair Information Practices we recommend the following changes.

Conclusion

No doubt, privacy on the Internet is in a fragile state. Providing protections for individual privacy is essential for a flourishing and vibrant online community and marketplace. It is clear that our policy framework did not envision the Internet as we know it today, nor did it foresee the pervasive role information technology would play in our daily lives. Our legal framework for protecting individual privacy in electronic communications, while built upon constitutional principles buttressed by statutory protections, reflects the technical and social "givens" of specific moments in history. Crafting privacy protections in the electronic realm has always been a complex endeavor. Reestablishing protections for individuals’ privacy in this new environment requires us to focus on both the technical aspects of the Internet and on the practices and policies of those who operate in the online environment.

However, there is new hope for the restoration of privacy. Providing a web of privacy protection to data and communications as they flow along networks requires a unique combination of tools–legal, policy, technical, and self-regulatory. We believe that legislation is an essential element of the online privacy framework and we look forward to working with this committee on the Online Privacy Protection Act (S. 809) and other proposals. Whether it is setting limits on government access to personal information, ensuring that a new technology protects privacy, or developing legislation all require discussion, debate, and deliberation. We thank the Committee for the opportunity to share our views and look forward to working with the members and staff and other interested parties to foster privacy protections for the Digital Age.