In their rush to create more customized services that capitalize on knowing more about consumers, service providers may find themselves forced to slow down and proceed with caution through a veritable minefield of privacy issues. Knowing more about a consumer — viewing habits, recent online purchases and even physical location via a cell phone's GPS — may open the door to more targeted ads and more convenient and meaningful service offerings, but that door could be slammed shut if consumers believe they are being exploited. In this staff report, Telephony examines the opportunities for new services, both wireline and wireless, the concerns and planned actions of consumer groups seeking to protect privacy, and the recent Web-based initiatives to enable consumers to manage their identities and personal data online.

THE TRIPLE- AND QUAD-PLAY VIEW

By Ed Gubbins

(Part 1 of this Telephony special report. Click here for the other parts.)

Combining data from multiple services will make telecom providers irresistible to advertisers — if they don't mess it up.

As telecom carriers get their hooks into American homes, they will gain an unprecedented view into our lives, gathering more comprehensive and detailed information on subscribers than perhaps any other sector of the business world. Controlling that information can be a windfall in advertising and other revenue if carriers use it wisely — and a firestorm if they don't.

“In the old days, there was a lot of information on the Web and on TV, but you couldn't get it in one place and do correlations,” said Len Feldman, director of IPTV analysis for MRG. “The triple play allows you to break down those silos and merge all that information. If you've got a quad play, you can do that with information on your phone as well. Now you're taking all that demographic information and putting it into the same data warehouse. Now you can start doing very sophisticated searches for subscribers.”

The first and easiest opportunity for carriers to crank up advertising revenue is by combining user demographics with video viewing habits, or “user-state” data, said Keith Wymbs, senior product manager for IP open set-top boxes (STBs) for Motorola. “That's when advertising rates shoot up astronomically.”

For example, some apartment landlords may grant triple-play providers access to the information on tenant lease applications. That way, Wymbs said, “You know [users'] sex, their FICO [credit] scores because you get Social Security data, you get credit checks. You know whether or not they have cats or dogs.” Combining that information with viewing habits brings everything full-circle: If, say, a woman with a very high credit score has a cat and watches Animal Planet a lot, an IPTV provider might sell ads for a local pet spa on that channel.

Digital video recorder (DVR) services offer even more detail — letting carriers know not only the shows users watch but the commercials they skip and the ones they don't. And the technology is only getting more granular: Companies such as Visible Measures track rewinds and fast-forwards to tell advertisers the exact second viewers lose interest.

Motorola has shown an STB-based version of the online music service Pandora, employing an open-source operating system to connect to the same application programming interface used to access Pandora on other devices. In addition to a more limited free version, Pandora offers a subscription-based service over mobile phones in which the operator (and, perhaps in the future, the IPTV provider) receives a cut. The data on musical tastes that Pandora provides could be used to sell music to users or potentially to sell ads; service providers could tell advertisers which of their subscribers like rap and which like '60s music.

When it comes to building personal profiles, however, TV always has been at a disadvantage in that multiple people in a home often use the same device, and it's not easy to know which behavior fits which person. There are ways to handle the problem — by reverse-engineering the data (for example, reasoning that the person watching ESPN at midnight isn't the same person watching Scooby Doo at dawn) or by allowing parents to limit the channels their kids can watch (something TiVo has done). Perhaps future apps such as videoconferencing or in-TV text messaging will further delineate the individual.

But there is already a device intimately tied to individuals: a mobile phone. And so quad-play providers may have an even greater edge in monetizing subscriber information.

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