Report: Online Privacy Crisis Yet To Come

A new report by Forrester Research suggests that the online privacy debate will temporarily subside and then reach a crisis point by 2004.

“First, businesses under continuing relentless competitive pressure will increase the power and the scope of their information handling abilities,” Forrester analyst Jay Stanley writes. “Second, the privacy issue will spill outward from Web sites to offline data collection, privacy threats built into software and the aggregation of data by marketers and personal information brokers.”

Stream of Scandals

According to the report, the third factor that will ignite this second wave of privacy problems will be a “steady stream of privacy mini-scandals” uncovered by the media that will create a sharp sense of the harm that can come from privacy violations.

Forrester believes that public concern about privacy violations will quickly move from theory to reality when a myriad of stories about the inappropriate use of online information by stalkers, ex-spouses and employees start dominating the evening news.

‘Weblining’ Underscores Digital Divide

Moreover, Forrester believes that “Weblining” will become a burning issue as companies increasingly turn to profiling online customers.

“A teen profiled as an inner-city minority, for example, will get offered the worst prices for online goods (because he’s unlikely to be an affluent high-valued customer) and dumbed-down content (because his demographic isn’t seen as sophisticated),” Forrester predicts.

The result, according to the report, is that the controversy over such practices will add much weight to the “digital divide” component of the privacy issue.

Congressional Action

By 2005, Forrester believes the online privacy battle will come to a head, as anti-government conservatives begin to join forces with anti-corporate liberals — injecting new life into the controversy.

According to the research firm, momentum for a new privacy bill will crest by 2005, and U.S. Congress will be forced to pass sweeping legislation that establishes unified privacy principles applying to the Internet, financial institutions and medical providers.

“The measure will require genuine opt-in for the sharing of personal information with third parties, including any business partners and affiliates,” Forrester adds.

Offline Policies

An additional consequence of the robust legislation is that companies will also be forced to monitor their offline data polices, the report says.

“Cashiers at Radio Shack will have to tell you what will be done with your ZIP code when they ask you for it at the register,” Forrester predicts. “Catalog retailer operators will need to offer a good reason for why they need your e-mail address to deliver a sweater to your home.”