Saved By Regulation: Verizon Meets the US Treasury Edition

At Techdirt, Mike Masnick notes a curious regulatory smack on the wrist handed telco behemoth Verizon by the FCC:

The big telcos don’t exactly have particularly good records protecting your privacy. And now the FCC has reached an agreement with Verizon to pay the largest ever fine to the FCC to settle a long-term practice of hiding the fact that customers could opt-out of having their private info shared with marketers. Even as the “largest” ever such fine, it’s still pennies for Verizon at $7.4 million.

To start out the fun, the big problem giving rise to this spanking is corporate use of its customers’ personal info to create a secondary revenue stream by selling it to as many other businesses as it can.

At issue was that Verizon is required to have either an opt-in system for sharing information on users with marketers or an opt-out system. But if they have an opt-out system, they have to clearly tell new customers that they can opt-out and how to do so. Not surprisingly, Verizon chose the “opt-out” method… and then conveniently left out the part where they tell customers they have the right to opt-out. And they did this for several years. To approximately two million customers.

Let’s be honest. Everyone (yes, everyone is hyperbole, as there is no doubt a grandma in Idaho who loves getting unsolicited email offering her incredible savings on goods and services she didn’t even realize she needed) hates spam.  Now the government could have, if it wanted to, just banned corporations from selling your personal information, because, grandma be damned, everyone hates it.  But nope, that would be un-American, so instead it required an opting provision.  You could opt-in or out, at the option of the nice people who sell you to spammers.  Verizon, shockingly, picked the opt-out option.

Americans love options, right?

For many of its customers, Verizon has used an opt-out process, sending opt-out notices to customers either as a message in their first bill or in a welcome letter. During its investigation, the Enforcement Bureau learned that, beginning in 2006 and continuing for several years thereafter, Verizon failed to generate the required opt-out notices to approximately two million customers, depriving them of their right to deny Verizon permission to access or use their personal information for certain marketing purposes. Moreover, the Enforcement Bureau learned that Verizon personnel failed to discover these problems until September 2012, and the company failed to notify the FCC of these problems until January 18, 2013, 126 days later.

No doubt everyone reads every word of every bill, email, whatever, sent to you from every entity with which you engage, because it gives us something to do between shoving bon bons in our yaps.  So had Verizon properly included its opt-out provision buried deep in the bowels of it’s “in order to serve you better” fee increases or service reductions, you would no doubt have seen it.

And then you would certainly have spent the half hour on the line with customer service in some beautiful foreign country with a temperate climates discussing your marketing options. No, it’s not really that hard since it can be done online, but I hate to pass up the chance for a gratuitous slam on outsourced customer service.

Had enough about Verizon?  Nothing new here?  Fair enough. Let’s move on the real point of this post, the government’s regulatory solution to all that ails you.  If there is any point to allowing Verizon to sell your personal information to anyone willing to pay (them, not you) while requiring Verizon to give you an ability to say no, then that means there are 2,000,000 customers who were injured by Verizon’s failure to adhere to the regulations.

So now that our government has nailed this miscreant, what happens?

To resolve the matter, Verizon will pay $7.4 million to the U.S. Treasury, which is the largest such payment in FCC history for settling an investigation related solely to the privacy of telephone customers’ personal information.

While Mike rightly focuses on the paltry $7.4 mil, which is lunch money to Verizon on a day when it ate too much for breakfast, I note a different piece:

…to the U.S. Treasury

So Verizon screws its customers, and the U.S. Treasury gets a windfall?  Anything else the government wants to regulate “to better serve us”?

Now some might respond, but that’s $7.4 million less that the government will need to collect in taxes, since it comes out of the pockets of this nasty corporate giant.  Except that $7.4 million will come out of the pockets of Verizon’s customers, since you know that Verizon doesn’t eat its mistakes, including the very same people it putatively harmed by its failure to follow the regulations.  On the bright side, no iPhones were harmed in the making of this settlement.

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