• by Wendy Davis , Staff Writer @wendyndavis, August 14, 2008

AT&T and Google have been battling each for years on net neutrality issues. Now, that feud is extending into a Congressional inquiry about behavioral targeting.

"Advertising-network operators such as Google have evolved beyond merely tracking consumer web surfing activity on sites for which they have a direct ad-serving relationship," AT&T stated to Congress in response to an inquiry about behavioral targeting and privacy. "They now have the ability to observe a user's entire web browsing experience at a granular level, including all URLs visited, all searches, and actual page-views."

In the letter, made public today, AT&T attempts to cast itself as a privacy champion compared to Google and other Web companies. "The largely invisible practices of ad-networks raise even greater privacy concerns than do the behavioral advertising techniques that ISPs could employ, such as deep-packet-inspection," AT&T wrote.

At the same time, AT&T also said that if it deploys behavioral targeting, it will first seek subscribers' affirmative opt-in consent. While that sounds like a big concession, AT&T obviously knows that at least some Congress members are heading there anyway; Rep. Ed Markey, at any rate, is on record as supporting an opt-in standard for ISP-based targeting.

Of course, AT&T, like other Internet service providers, has every reason to want to sell information about subscribers' Web-surfing activity to companies like NebuAd, who will then serve ads to users based on their history.

Google has every reason to want to prevent this from happening, as the company only stands to lose ad revenue to startups like NebuAd. If ISPs know which users are conducting searches for particular products, at least some marketers might decide they want to reach those users on sites other than Google -- which could result in a direct shift of ad dollars from AdWords to NebuAd and its ISP partners.

ISPs apparently have been waiting for an opportunity to get a share of online ad dollars for a long time. Two years ago, a Verizon executive complained publicly that Google was getting a "free lunch," on the theory that the company's profits from online advertising were only made possible by networks such as Verizon's.

So it makes sense that Google would try to frame the policy debate underway in Washington as solely about ISP-based targeting, while AT&T would try to characterize it more broadly, as about consumer privacy overall.

At the same time, there are some real differences between network-based targeting, which only operates across a limited number of sites, and ISP-based targeting, which operates everywhere. No matter how much information Google has about a particular user, an ISP will always have more.