• by Wendy Davis , Staff Writer @wendyndavis, November 3, 2016

When the FCC passed broadband privacy rules last week, the agency declined to ban controversial pay-for-privacy pricing schemes.

Instead, the agency decided to take a case-by-case approach to evaluating pricing models that charge higher fees to people who want to avoid receiving behaviorally targeted ads.

The FCC elaborated in its order, released late yesterday. "We will closely monitor the development of financial incentive practices, particularly if allegations arise that service prices are inflated such that customers are essentially compelled to choose between protecting their personal information and very high prices," the FCC wrote. "The approach we take today enables BIAS providers the flexibility to experiment with innovative financial incentive practices while ensuring that such practices are neither predatory nor coercive."

AT&T, which pioneered pay-for-privacy broadband subscriptions, halted the practice last month. Before then, however, AT&T charged some U-Verse subscribers up to $800 a year to avoid ad targeting based on their Web-browsing history.

It's not clear from the FCC's order whether regulators view that arrangement as "predatory" or "coercive."

Democratic Commissioner Mignon Clyburn, who supported the privacy rules, noted that the order "toughens our pay-for-privacy safeguards."

But Republican Michael O'Rielly, who voted against the new rules, stated in his official comments that he was "appalled" by the agency's approach.

"These are consumer incentives offered every day in the real world and now ISPs will need to obtain a blessing from an agency that has no privacy experience," he stated. "The result is that broadband providers will be reluctant to extend, and may even forgo, valuable offers and discounts that consumers would want for fear that they will fall into another zero-rating style abyss."

When the FCC passed the net neutrality rules, it said it would evaluate zero-rating -- the practice of exempting certain data from customers' caps -- on a case-by-case basis. Internet service providers including AT&T, Verizon and T-Mobile now zero-rate certain video streams. Consumer advocates criticize the practice, but the FCC has never ruled on whether it violates net neutrality principles.

O'Rielly says that the controversies over zero-rating plans shows the problems with using a case-by-case approach.

He adds: "Trying that again here in the privacy context does not make any sense, unless the real intention is to effectively ban pay for privacy offers without actually saying so in an attempt to avoid a legal challenge."