• by Wendy Davis  @wendyndavis, June 6, 2011

A federal judge has dismissed a portion of a potential class-action lawsuit alleging that the Internet service provider CenturyTel violated a federal wiretap law by testing NebuAd's controversial ad targeting platform.

But U.S. District Court Judge Richard Cebull in Billings, Mont. left alive a claim that CenturyTel violated the federal computer fraud law.

Cebull ruled that CenturyTel was entitled to dismissal of the wiretap-violation claim on the theory that it adequately informed subscribers about its partnership with NebuAd.

CenturyTel, one of six ISPs to test NebuAd's technology in 2007 and 2008, had sent emails to subscribers informing them that its privacy policy had been updated and offering a link to the new policy. That document said the company had partnered with a third party to deliver online ads, but users could opt out.

"There is no reasonable expectation of privacy when a plaintiff has been notified that his Internet activity may be forwarded to a third party to target him with advertisements," Cebull wrote.

NebuAd used controversial deep-packet inspection technology to monitor subscribers' Web activity and serve targeted ads based on the data collected. The company's tests sparked criticism by privacy advocates and lawmakers, who said the technology was intrusive because ISPs could provide data about everything consumers did online -- including their visits to noncommercial sites and searches. Older forms of behavioral targeting only collected information from a network of commercial sites.

NebuAd said its data collection was anonymous and that consumers could opt out of the program. But complaints about the company from lawmakers spurred other ISPs to cancel tests of NebuAd's platform. After the details of the tests emerged in congressional hearings, a group of consumers sued the six ISPs that tested the platform and NebuAd for allegedly violating federal and state laws with the program. NebuAd itself went out of business several years ago.

Most of the ISPs that tested NebuAd's service only provided notice of the program by quietly revising their online privacy policies -- a method that critics called inadequate, given that consumers had no reason to suspect the change in terms. CenturyTel appears to have gone beyond that by also emailing subscribers about the program.

Cebull is presiding in another of the lawsuits stemming from the tests -- a case against Bresnan Communications. In that matter he also dismissed a claim that the ISP violated the wiretap law, but allowed further proceedings on potential violations of a computer fraud law on the theory that NebuAd's activities on Bresnan's network went beyond what consumers had authorized.

Meanwhile, U.S. District Court Judge Thelton Henderson in the Northern District of California recently dealt a blow to NebuAd in a lawsuit about its ad-targeting tests. Thelton ruled that consumers who are suing can proceed with claims that NebuAd violated California's relatively stringent privacy laws.