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Verizon Wireless “Booked” by FCC for Planting Supercookies

by User Not Found | Mar 09, 2016

After more than a year’s investigation, on March 7, 2016, the FCC handed out a fine of $1.35 Million to Verizon Wireless to settle the latter’s failure to disclose that it had been inserting Unique Identifier Headers (UIDH) into consumers’ Internet traffic over its wireless network, the so-called “supercookie”.

We think the FCC is correct to set a precedent by penalising Verizon Wireless in this case, not on the gathering of user data, but on gathering user data behind the users’ back as well as the failure to clarify what the tracked data would be used for, in this case, reselling to at least one advertiser. While conventional cookies stay on the device, supercookies could provide the websites a permanent track back to the customers who visit them as long as they remain a Verizon customer. It should be noted that initiatives like Verizon 'Smart Rewards' and Verizon 'Selects' legitimately enable Verizon to provide value to customers the form of exclusive offers, in exchange for accessing their usage data to support targeted third party advertising. However, schemes like Smart Rewards and Selects will be effective in the long run if Verizon is able to attract a sizeable portion of their customers.

On the other hand, in-app advertising is gaining more  importance compared with ads on  mobile websites, as increasingly more tasks that would have needed a visit to the websites can now be carried out inside different apps, which are optimised for the smaller screens of the smartphones (in comparison with the PC screens, which are better suited for browsing). The data returned by Strategy Analytics’ consumer telemetry platform, AppOptix, which tracks real-time user behaviour of more than 3000 smartphone users, is showing the difference between the time spent in apps and in browsers. For example, in Q4 2015, an average user spent more time inside Facebook (24 minutes) per day than he spends on Google’s Chrome and Samsung’s Internet, by far the most popular mobile browsers, combined (22 minutes). The more active users spent 42 mins inside Facebook per day, compared with 28 minutes spent browsing with Chrome and 25 mins with “Internet”.

In addition there is also the added factor of (controversial) ad-blocking software which reduces the value of mobile browsers as an advertising channel. An upcoming report by Wireless Media Strategies to accompany our recently published mobile advertising forecast will provide more detailed discussion on ad-blocking on mobile. This, combined with the traffic lost to mobile apps, is projecting a less comprehensive picture of the customers’ online behaviours on mobile.

In essence, we agree that FCC was correct to penalise Verizon  for gathering user data without users’ explicit consent, to ensure that Verizon Wireless and other carriers do not contravene telecom regulation in how they use customer data.  Meanwhile, growing app use combined with ad-blocking means that the mobile browsing cookies on their own, be they stored locally or on the network, are not as effective at tracking what users do on their mobile phones, though clearly still valuable. In other words this is already behind the curve of the mobile advertising industry’s latest trend. That is probably why the FCC is quite  lenient with the punishment given to Verizon Wireless. To use a football analogy (“soccer” for the American readers), this was a bookable offence, not a send-off foul, unlike the severity reflected in the penalty FCC handed out to AT&T for bandwidth throttling.

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