June 28, 2012

My last three fillips made three points. Personal data is a genuine kind of property. As such it belongs to an owner and economic efficiency requires this owner to be none other initially than the person who originates it in the first place. Similar to other kinds of intellectual property, personal data must be protected by a regulated monopoly, designed to minimize the risks of blackmail inherent to negotiations involving monopolies.

Critics are entitled to point out these principles are highly theoretical. It is true I dismissed them in advance by recalling the practical proposal I made some five years ago. But will my critics be far off the mark if they praise my proposal as hopelessly idealistic? As long as entrenched powers ensure no attempt is made to try something they rightly perceive as dangerous to their interests, is putative practice any different from academic theory?

Still, even if my theory of eprivacy has not yet been put into practice, it can still prove itself useful by its ability to bring insight into existing facts.

Much for instance has been written on the two ways in which advertisers currently communicate with consumers, either by asking them to opt-in before the communication occurs or to opt-out after it has started.

While the practice in the United States relies on opt-in, Microsoft has recently upended the status quo with its "announcement [...] that the next version of its web browser, Internet Explorer 10, will send a so-called do-not-track request to all advertisers, unless users turn the feature off" (*).

The ensuing brouhaha described by Richard Waters is best viewed in terms of how not to regulate a negotiation between monopolies.

Despite the refusal to grant consumers clear legal ownership of their personal data, the whole notion of opt-in and opt-out expresses the desire to base online marketing communications on the consent of the consumer. Whether you find this discrepancy irrational or pragmatic is irrelevant, in theory the consumer is called to exercise a natural monopoly through his consent.

If consumers shared the optimistic view that targeted ads are good for them, there would be no issue. Monopolies promptly act in their own interest. As this is not the case, a real opt-in would lock advertisers out. Since pronoacracy lets advertisers buy the laws they like, in practice a real opt-in is out of the question. In Europe, opt-in is neatly bundled with access to the offer desired by consumers, in the United States, opt-out is the norm.

Advertisers are right to fear free opt-ins as pure blackmail by consumers. Their solution is to regulate the corresponding monopoly out of existence. Bundled opt-in is like binding each hiring decision with a consent for sex, opt-out like letting the victim of a rape free to call for a stop after the fact.

My comparison is purely focused on how consent mechanisms work or not. Obviously no equivalence between the underlying acts is intended.

In this context, the announcement by Microsoft amounts to a coup d'état.

Who cares about the laws on fake opt-in and true opt-out? Under cover of what is ironically presented as an "opt-out", allbeit a preemptive one, Internet Explorer version 10 will give a real opt-in to consumers and doing so reestablish them into a de facto monopoly. "Advertisers who comply with the request [from Explorer] would be unable to send tailored advertising based on a user's browsing habits".

Of course "people warned that advertisers would refuse to abide by the blanket "do not track" requests coming from Internet Explorer browsers". Internet browsing from a computer is definitely not the kind of tethered experience described by Jonathan Zittrain. But, assuming consumers access Internet exclusively through Explorer version 10 since it is to their own benefit, I do not see why Microsoft could not catch the scofflaws.

Without speculating on Microsoft's ulterior motives, let us say its announcement promises to re-regulate the consumer monopoly back into full force.

At this juncture my theory parts with observable practices. It may be idealistic to hope otherwise but to accept negotiations lead to a diktat by one or the other party is hopelessly destructive of value. The solution ought to lessen the stakes for both parties as in the method I advocate, whereby advertisers can target personal profiles and yet all personal profiles remain inaccessible to all parties but the persons whom they represent (1).

This negotiation scheme is designed to let the negotiating parties share the benefit of targeting, rather than assign it whole to either one. Naturally, it requires granting privacy to consumers and Jenna Wortham timely reminds us "on the Web, privacy is easily promised yet often breached" (**).

"Start-ups sometimes use [privacy] as a differentiator, but quickly are willing to compromise it to gain users or if it doesn't help". I agree with this sober assesment from "David Tisch, an angel investor and the managing director of the New York branch of TechStars, a start-up incubator".

And although Microsoft hardly qualifies as a start-up, I would be equally suspicious of its declarations. If Internet Explorer were to force its competitors, starting with Google Chrome and Apple Safari, to share the dustbin of history with Netscape Navigator, who can guarantee a resurgent Microsoft would not change tack? This is why my approach to eprivacy is to replace promises all too easily broken by their authors with decentralized mechanisms which can only be broken by hackers one consumer device at a time.

Meanwhile I am left to lament the present value destruction which comes from the underexploitation of personal property by freeloading pirates. I am not alone in assigning it to the prevalence of pronaocratic corruption. In his latest column (***), John Kay draws a telling parallel between contemporary Egypt and the West. "Before we congratulate ourselves on our free-enterprise system, we should recognise how vulnerable our own societes are to extractive activity".

At Facebook, one among many, the main extractive activity is less to mine our personal data than to ensure the US Congress will protect its piracy.

Philippe Coueignoux

• (*) ..... Microsoft's web ad opt-out attacked, by Richard Waters (Financial Times) - June 4, 2012
• (**) ... Privacy Please, This Is Only For the Two of Us, by Jenna Wortham (New York Times) - June 3, 2012
• (***) . Lessons on rent-seeking from Hosni Mubarack to Louis XIV, by John Kay (Financial Times) - June 27, 2012
• (1) see my US patent portfolio, US Patents Number 6,092,197 and 7,945,954 and US Patent Application 2009/0076914.