Charter previously acknowledged that it delayed a planned mid-June launch, but said it did so for "technological" reasons. Tuesday's announcement marks the first time the company has admitted that the NebuAd deal raises concerns.

"As we do with all new service launches or initiatives, we conducted focus groups well in advance, which told us that most broadband consumers would look upon this service favorably," Charter said in a statement. "However, some of our customers have presented questions about this service as well as suggested improvements. As such, we are not moving forward with the pilots at this time." Charter gave no indication of when it might go ahead with the program.

Charter's plan to work with NebuAd generated intense scrutiny in Washington. Reps. Edward Markey (D-Mass.) and Joe Barton (R-Texas), recently asked Charter CEO Neil Smit to hold off on implementing the deal pending an investigation.

Digital rights groups and net neutrality advocates condemned the plan, which they viewed as more invasive than other types of online ad targeting, or serving ads to people based on their Web-surfing history. Older behavioral targeting companies only know when users visit specified sites that are part of the same network, which means they can collect only a limited amount of information. But Internet service providers have access to users' entire clickstream data, including every site visited and every search query entered.

With that much information, it's possible to compile detailed user profiles, and in some cases, identify people even without knowing their names. And, while users can opt-out of these ad platforms, advocates question whether an opt-out mechanism will adequately protect subscribers.

NebuAd says privacy advocates have no cause for concern because its data-gathering practices are anonymous, in that the company doesn't collect names or addresses. "NebuAd remains committed to delivering strong value to advertisers, publishers, and ISPs while setting the gold standard for privacy in online advertising," the company said in a statement. NebuAd added that it has met with members of Congress, and intends to continue talks with the government, trade groups and privacy groups.

Markey Tuesday praised Charter's decision. "Given the serious privacy concerns raised by the sophisticated ad-serving technology Charter Communications planned to test-market, I am pleased to hear that the company has decided to delay implementation of this program, which electronically profiled individual consumer Web usage," he said in a statement.

Marvin Ammori, general counsel of net neutrality group Free Press, also cheered the news. "We think that both the public and policy makers should have the chance to look at this technology before it's deployed," Ammori said Tuesday.

Last week, Free Press and another advocacy organization, Public Knowledge, issued a report criticizing the technological aspects of the Charter/NebuAd deal. The report said that NebuAd's data mining methods, which rely on Charter's deep packet inspection technology, violate Web users' basic expectations about online privacy.

Ammori added that the issue isn't likely to go away, although Charter is at least temporarily halting its plans. "NebuAd and their ad-serving proposal is just the first iteration," he said. "There will be dozens of attempts to use deep packet inspection for commercial advertising."

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