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Industry rushes to form Net group

Nearly 50 U.S. companies and associations create a cross-industry coalition to protect users' online privacy.

On the eve of online privacy conference in the nation's capital, nearly 50 U.S. companies and associations announced they have formed the Online Privacy Alliance, a cross-industry coalition to protect the privacy of individuals in cyberspace.

Backers include America Online, Hewlett-Packard, IBM, Microsoft, and several major high-tech associations.

As reported earlier by CNET NEWS.COM, many of the same organizations also announced they will back a privacy initiative of the Better Business Bureau called BBBOnline, which expects by year's end to issue privacy marks to companies that meet policies backed by the Online Privacy Alliance.

BBBOnline also will issue implementation rules to be sure companies have internal controls in place to protect users' information. In addition, the organization would require Internet companies to train employees in the proper ways to disclose information and put in place management to oversee privacy operations.

This eleventh-hour flurry of activity comes as the Commerce Department convenes two-day hearings tomorrow on online privacy. Those hearings are a prelude to the department's report, due July 1, to the White House on the effectiveness of industry self-regulation for privacy.

The Online Privacy Alliance represents major players on the Internet, and counts former Federal Trade Commissioner Christine Varney as an adviser. A year ago, Varney chaired FTC hearings on privacy, pushing the industry to police itself. But in February, she declared that self-regulation wasn't working, in part spurring the two industry initiatives announced today.

In a list of principles outlined by the Online Privacy Alliance, the guidelines ask companies to post their privacy policies clearly and easily, letting consumers choose how their information may be used (including a choice to opt out). The guidelines also request that participants take measures to prevent the misuse of personal information when given to third parties.

The new policy has not established a system to penalize companies that violate the terms of the agreement. However, in the spirit of free enterprise and industry self-governance, architects of this initiative believe that the marketplace will be the ultimate enforcer of these principles.

"The best players [in the alliance] want to be with one another and they want to do business with one another," said Connie Heatley, senior vice president of the Direct Marketing Association, an architect of the new alliance and one of the chief opponents of government intervention regarding online privacy.

"When someone is put out of an alliance because they're a bad actor, that gets noticed in the marketplace. Companies don't want to do business with bad companies like that," she added." The marketplace force [for following the group's principles] is on business-to-business regulation."

But public advocacy groups quickly declared that the new efforts at industry self-regulation are too little, too late and called for federal legislation to protect online privacy.

Privacy advocates agree that the results by these fifty companies to establish their own privacy policy have been disappointing at best, and that the policies skirt the real issue of upholding consumer anonymity whenever anyone surfs the Web. Advocates also point out that companies are more reluctant to introduce measures to provide user anonymity because it cuts off their pipeline to user demographic information, which is valuable to marketers and advertisers.

"We recognize that the industry groups are addressing privacy issues, but the real goal here is not self-regulation: The real goal is privacy protection," said Marc Rotenberg, director of the Electronic Privacy Information Center. He added that the alliance failed to ensure any form of consumer anonymity, which he says is the crux of privacy protection on the Internet.

"You have better protection in video rental records than in what the privacy alliance is proposing today," noted Rotenberg.

Nonetheless, in the perspective of some alliance members, the question of anonymity undermines the basic nature of the Internet: an interactive medium where users are willing to share personal information in chat rooms and community environments.

For example, using personalization features--one of the most popular features on Internet portal sites like Yahoo, Excite, and Lycos--require users to submit information about themselves to access these services.

Making everyone nameless and faceless would go against the interactive appeal of the Internet, according to Heatley.

"If you really want to be anonymous you can hide yourself," she maintained. "You don't want companies getting back to you? You don't want news bureaus to push information to you? OK, fine. I'm sure you won't be a company's best prospect.

"There's just too much wonderful stuff that can come to you by giving very little information, like an email address. That's not a lot to give up. For those who don't want it, then they don't want to participate in the interactive medium. That's what it's all about."