NebuAd suspends Web-monitoring plans

Silicon Valley start-up NebuAd has suspended plans to deploy a controversial program that displays ads based on the monitoring of Web activity while Congress reviews privacy concerns, according to a report in The Washington Post.

The secretive company, which intercepts and performs deep-packet inspection of what's flowing through a company's network in hopes of delivering relevant ads, announced earlier this week that co-founder and CEO Bob Dykes was resigning. His departure comes as several Internet companies canceled or suspended trials of the tracking technique.

"Our platform was architected to be a multi-channel ad system," spokeswoman Janet McGraw wrote in an e-mail to the newspaper. "With the Internet service provider channel currently on hold with the events of the summer, we have broadened the focus of our business but continue to enhance our technologies for that ISP channel."

NebuAd supports the companies "who have put their trial deployments on hold so that Congress can spend additional time addressing the privacy issues and policies associated with online behavioral advertising," McGraw said.

In July, a trio of politicians in the U.S. House of Representatives opened an investigation into the concept of Web monitoring to display advertisements. Reps. John Dingell, Joe Barton, and Ed Markey focused their probe on a test of NebuAd performed by broadband provider Embarq.

The test involved 26,000 broadband subscribers and was based in Gardner, Kansas. Embarq subscribers were not given a written notice in the mail permitting them to opt out; instead, the only notification they received was a modification to the privacy policy saying "the Web sites that you visit or online searches that you conduct" may be used to "deliver or facilitate the delivery of targeted advertisements." Only 15 subscribers opted out of the test.

Embarq said it believed its "brief" test was consistent with current online advertising business models, and the Federal Trade Commission's voluntary best practices framework.

Markey convened a hearing in which politicians assailed NebuAd for alleged privacy violations, calling its opt-out practices "contemptible" and in violation of "everything the country's been founded on." Around the same time, he and the others had asked Embarq to answer a series of questions. Another NebuAd-testing company that had been pressured by Markey, cable operator Charter Communications, announced in June that it was suspending use of the technology.

Making matters complicated is that the legality of the type of monitoring that NebuAd does is not entirely clear; intercepting customers' communications as they flow through the network begins to look a lot like wiretapping.

The Electronic Communications Privacy Act of 1986 (ECPA); the Communications Act of 1934; and the Cable TV Privacy Act of 1984 all may apply. Cable providers may need to obtain affirmative opt-in consent from customers, putting them at a competitive disadvantage to, say, AT&T and Verizon. State wiretapping laws also may apply.

For its part, NebuAd had posted a legal memo (PDF) designed to defuse those criticisms. It argues that the 1986 changes to wiretap law have not been clarified by courts, and that the Cable Act may not apply to "any record of aggregate data which does not identify particular persons."

CNET News' Declan McCullagh contributed to this report.