As newspapers expand their efforts in the digital world, publishers find themselves at the intersection of technology and policy. So far, lawmakers and policy leaders in Washington, D.C., largely have taken a hands-off approach to this fast-changing marketplace, wary of passing broad regulations that could limit innovation. But as content and delivery systems become more sophisticated, federal agencies and Congress are considering regulations that would protect content providers, consumers and other digital businesses.

“Decision makers are beholden” to many forces, says Blair Levin, who served as chief of staff to Federal Communications Commission Chairman Reed Hundt from 1993 to 1997 and is now managing director of Stifel, Nicolaus & Co. (www.stifel.com), an investment banking firm, where he specializes in telecommunications, media and technology policy.

Three policy issues in particular—online behavioral advertising, network neutrality and copyright protection—are of interest to newspapers. Although the outcome of the U.S. presidential election and how the new administration will influence the debate on these issues was not known at presstime, Washington leaders are closely following them. Here is a look at the issues, where they stand and what’s likely to happen next.

Targeted Ads, Content
A consumer looks on the Web for information about airfares to New York City and then checks the travel section of a newspaper online, where he reads an article about Hawaii.

Thanks to online behavioral advertising, that consumer is soon likely to see an ad for a Hawaiian vacation on a Web site that belongs to the same advertising network as the newspaper and travel site.  Behavioral advertising targets consumers with ads based on their interests, as determined by cookies—files that contain information that identifies each user and can track which Web sites that user has visited. This allows advertisers to target ads based on a reader’s interests through nonpersonally identifiable information. 

Behavioral advertising, which has attracted attention from Congress and the Federal Trade Commission because of concerns about privacy, allows newspapers to help advertisers reach the audiences most interested in their products and services while increasing the newspaper’s online revenues. Without the advertising revenues that support news-gathering costs, “down the road, we are not going to be able to provide free online content,” says Paul Boyle, NAA senior vice president of public policy.

Adds Jonathan Hart, a partner at the law firm of Dow Lohnes PLLC (www.dowlohnes.com), who specializes in media and technology, “Congress needs to be very careful, as it approaches privacy legislation, not to stifle the innovative ad technologies that might otherwise help rescue the newspaper industry.”

Online-only advertisers account for 59 percent of ad revenue at the largest newspaper Web sites, the first time online advertisers have surpassed print advertisers, according to a local online revenue survey released in May by Borrell Associates (www.borrellassociates.com).  

Several studies have shown that behavioral advertising is more popular with consumers than other types of online ads. An April 2007 JupiterResearch (www.jupiterresearch.com) survey of 2,035 people showed that 63 percent of online consumers are receptive to online behavioral advertising, compared with 49 percent of online consumers who are receptive to contextual ads, which relate directly to the content of the page the user is viewing. Additionally, consumers who respond to online behavioral ads are likely to earn more money, spend more money online and shop online more often than other users, the survey showed.

“If you take the relevancy out of advertising, it becomes more like spam,” says Mike Zaneis, vice president of public policy for the Interactive Advertising Bureau (www.iab.net).

Washington’s recent interest in this issue was sparked in part by the $3.1 billion merger between Google and DoubleClick Inc. (www.doubleclick.com), an online ad technology company. Google announced its intent to purchase DoubleClick in April 2007, and the FTC approved the deal last December.

But a month before the FTC approved the merger, Sens. Herb Kohl (D-Wis.) and Orrin Hatch (R-Utah), the chairman and ranking member of the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, respectively, warned then-FTC Chairman Deborah Platt Majoras that allowing the merger of two companies that track and collect individuals’ search requests “raises fundamental consumer privacy concerns worthy of serious scrutiny.”

Advocates of behavioral advertising respond that browsing online is largely anonymous. For instance, Zaneis says, if he orders a home-delivery subscription to The Washington Post, the company would have his name, address and billing information. But if he looks at the newspaper online, he can do so without revealing his personally identifiable information.

A poll released in September by the Consumer Reports National Research Center (www.consumersunion.org), however, showed that 72 percent of Americans are concerned that companies track and profile their online behavior.

After holding public hearings in 2006 and 2007, the FTC proposed voluntary online behavioral advertising guidelines in December (“Off Target,” May, p. 12). Although the FTC was still weighing public comments and had not issued final guidelines at presstime, the agency appears likely to make the suggestions voluntary rather than issue regulations, according to testimony in July from Lydia Parnes, director of the FTC’s Bureau of Consumer Protection, before the Senate Commerce, Science and Transportation Committee.

“At this time, the commission believes that self-regulation may be the preferable approach for this dynamic marketplace because it affords the flexibility that is needed as business models continue to evolve,” she said.

Under the agency’s proposal, Web sites would have to provide a “clear, concise, consumer-friendly and prominent statement” letting users know that data is being collected for advertising tailoring purposes and give consumers a chance to opt out of the data collection.

Additionally, companies that collect customer data “should provide reasonable security for that data,” let customers know whether the data will be used in a “materially different” manner than that for which it was collected and obtain express consent from consumers before sending advertising that uses sensitive data, such as about health conditions, for online behavioral advertising.

In comments submitted to the FTC in April, NAA noted that online behavioral advertising allows newspapers to support news-gathering costs while offering free content to readers; it also provides readers with ads more closely tailored to their interests. Additionally, “the First Amendment severely limits governmental efforts to regulate the editorial judgment of newspaper publishers, editors, reporters and advertisers,” NAA argued.

The comments also noted that 80 percent of adults visit newspaper Web sites primarily for local or regional news, while an almost equal number say local advertising drives them to newspapers online, according to NAA’s 2006 Consumer Usage of Newspaper Advertising Survey.

Congress also is looking at this issue—the House and Senate held hearings this summer. Rep. Edward Markey (D-Mass.), who chairs the Energy and Commerce Subcommittee on Telecommunications and the Internet, has pledged to introduce a bill next year to protect consumers’ online privacy rights.

In August, top Democrats and Republicans on the House Energy and Commerce Committee sent letters to 33 Internet and broadband companies asking them what information they collect from consumers and how they use it to target advertising. A week later, Yahoo! announced a new policy that lets users opt out of targeted advertising. And at a Senate committee hearing in September, AT&T Inc., Time Warner Cable Inc. and Verizon Communications Inc. announced they would not track consumers’ online behavior for advertising targeting without their consent.

Internet service providers’ response to the lawmakers’ inquiry could affect what happens next in Congress; if they show they can effectively regulate themselves, lawmakers may feel less urgency to act, experts say. NAA will be active on Capitol Hill “talking about the value of online advertising to support free content to consumers who want to receive it and want targeted advertising to make purchasing products easier,” Boyle says.

Equal Internet Speeds
Another digital issue that has drawn considerable interest is network neutrality. FCC Chairman Kevin J. Martin recently used a bricks-and-mortar analogy when describing the issue: How would you feel if the U.S. Postal Service opened a letter addressed to you, opted not to deliver it because the mail truck was full at the time and decided that your letter could wait?

Network neutrality, or the ability of a user to access all legal content online at equal speeds, regardless of the content provider’s relationship with the broadband provider, is pitting content providers against Internet service providers.

Content providers say net neutrality fosters innovation without allowing broadband operators to dictate what gets through and what doesn’t, while Internet service providers say businesses offering services through the pipes that the ISPs paid to lay down should help to cover the costs of those pipes. In other words, companies may charge higher prices or provide slower service to companies that do not do business with them.

Net neutrality is a “clash between companies used to defining what happens on their networks and companies used to anything goes,” says Tim Wu, a professor at Columbia Law School in New York City and chairman of the board of Free Press (www.freepress.net), which favors net neutrality and filed a complaint with the FCC that led to an investigation into whether Comcast Corp. violated net neutrality principles.

Three years ago, the FCC issued a set of nondiscrimination principles, saying it would ensure all content was treated the same; it reviews complaints case by case. The FCC announced these principles without going through a formal rulemaking process, which includes public comments and review of those comments. The principles give the FCC “the tools it needs to punish a bad actor” without regulating the Internet, Martin noted in an August statement, when the FCC ruled 3-2 that Comcast violated net neutrality principles by slowing consumers’ use of BitTorrent, a peer-to-peer file sharing communications protocol.

In that ruling—in which Martin, a Republican, was joined by Democratic Commissioners Jonathan S. Adelstein and Michael J. Copps—the agency found Comcast used its network to monitor and selectively block customers’ peer-to-peer connections on applications such as BitTorrent, which competes with Comcast’s own services. As a result, users could not share music, watch video or download software, and many consumers blamed the application rather than Comcast, the agency found.

Comcast has until Dec. 31 to share with the FCC how it intends to stop its discriminatory practices. In September, Comcast announced it would cap monthly residential users’ online usage at 250 gigabytes. The company also appealed the FCC’s decision to the U.S. Court of Appeals for the District of Columbia Circuit, questioning the FCC’s jurisdiction to hand down a decision “in the absence of pre-existing legally enforceable standards or rules,” David Cohen, Comcast’s executive vice president, said in a statement.

Net neutrality shows the challenges  policymakers face in keeping up with a constantly changing business, noted Commissioner Robert M. McDowell, a Republican, in his dissent in the Comcast decision. “The majority has thrust politicians and bureaucrats into engineering decisions,” he said. “It will be interesting to see how the FCC will handle its newly created power because, as an institution, we are incapable of deciding any issue in the nanoseconds of Internet time.”

The FCC’s next move will depend not only on the court’s decision but also on whom the next U.S. president nominates, and the Senate confirms, as its chairman. Still, the fact that the agency took action may satisfy Congress for the time being. “The FCC said [it has] the authority to develop nondiscrimination principles and enforce them,” NAA’s Boyle says. “They’ve delivered on that.”

In the 110th Congress, lawmakers introduced net neutrality bills in the House (H.R. 5353 and H.R. 5994) and the Senate (S. 215), but none made much progress. The Bush administration made clear its opposition to  a regulatory approach.

Markey, who co-sponsored the House bill, is expected to offer net neutrality legislation again in 2009. In introducing his bill in February, Markey said it was important that the United States adopt net neutrality rules into law “because of the vital role that broadband networks and the Internet fulfill in exercising our First Amendment rights to speak.”

If Markey does introduce new legislation, look for continued opposition from some lawmakers. A day before the FCC announced its decision, House Minority Leader John Boehner (R-Ohio) warned Martin in a letter that if the FCC ruled against Comcast, “your heavy-handed attempts to inject the FCC into the middle of that process threaten to hijack the evolution of the Internet to everyone’s detriment.”

Protecting Content Rights
A third digital issue attracting attention from lawmakers is how to protect copyright content online.

In September, the Senate passed the Enforcement of Intellectual Property Rights Act (S. 3325). The House also passed the bill by a 381-41 vote, and, at presstime, President Bush was expected to sign it.

The bill, aimed largely at the music and movie industries but also applicable to newspaper content, instructs the Justice Department to assign at least 10 FBI agents to track copyright crimes and allows the  department to bring criminal and civil action against individuals who infringe on copyrights. In addition, states and local governments would receive grants to work with federal agents to enforce copyrights.

Congress also is looking at the issue of “orphan works,” or copyright works whose authors cannot be located. In May, the House Judiciary Subcommittee on Courts, the Internet and Intellectual Property passed the Orphan Works Act (H.R. 5889), which would allow users who try to find authors of such works, but cannot do so after a “diligent effort,” to use them. However, users who do not make good-faith efforts would face penalties. The Senate passed a companion bill (S. 2913) in September.

Another copyright issue involves electronically posting articles written by freelancers. In 2005, a group of 21 freelance authors and three writers’ groups reached an $18 million settlement with database owners and publishers, including Dow Jones & Co. in New York City, The New York Times Co., and The Copley Press Inc. in La Jolla, Calif. (“Publishers, Freelancers Ask Court to Uphold Settlement,” March, p. 15).

Although the freelancers had given permission for their work to appear in print, they had not approved the appearance of their work in electronic databases. A district court judge approved the class-action settlement, which took three years to negotiate.

Last November, a three-judge panel of the 2nd U.S. Circuit Court of Appeals in New York City ruled 2-1 in overturning the district court decision approving the settlement, saying the district court did not have jurisdiction to approve a settlement that included works never registered with the U.S. Copyright Office. The full appeals court refused to hear the case.

In August, the parties asked the U.S. Supreme Court to review the case. At presstime, the court had not decided whether to take the case.

Absent a public policy solution, publishers are trying to protect copyright on their own through ACAP, the Automated Content Access Protocol (www.the-acap.org). More than 400 publishers have joined ACAP, which gives publishers a way to instruct search engines on how they want their content used (“Publishers Await Search Engines to Implement ACAP,” May, p. 14).

Although none of the major search engines had implemented ACAP as of presstime, its leaders are “in regular contact with them and are confident this is simply a matter of time,” says Heidi Lambert, ACAP marketing manager.

On all three digital issues, expect players to remain active in the policy debates. As Levin, the former FCC chief of staff, notes of the policymaking process, “If it were easy, it would already have been done.”