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The Costs of Free on the Internet

How can free have a cost? Well a lot of different things are converging in Washington that could bring much more focus to -- "the costs of free" on the Internet.

  • Last month's Revised Behavioral Advertising Principles from FTC Staff are largely about making more transparent the privacy "costs" of "free" Internet products and services funded by online behavioral advertising.
  • This month's NYT news that House Internet Subcommittee Chairman Boucher now supports passage of new Internet privacy legislation requiring consumer "opt-in" permission in order to exploit consumer information, implicitly recognizes the substantial hidden privacy "cost" of behavioral advertising.
  • This week's privacy and security-related complaint to the FTC filed by EPIC against Google's free cloud computing services, further brings to the forefront the hidden "costs" of free on the Internet.

The common thread of these important and high-profile developments in the last few weeks is that "free" has costs on the Internet -- and at a minimum, they are real "costs" to privacy, security, and competition.

An interesting thing to watch for in this Washington convergence is if and how legislators/regulators define "free." In interstate commerce is "free" defined as:

  • Non-commercial?
  • Without monetary or other cost?
  • Not-for-profit?
  • Not requiring permission/payment to use? 
  • Or something else?

While the orginal FTC Staff behavioral advertising principles in 2007 established that there was indeed a privacy "cost" to consumers that needed to be acknowledged and addressed, the significance of the new EPIC complaint is that there are also big security and competition "costs" involved in "free" internet models like cloud computing that need to be acknowledged and addressed.       

More specifically, these three official developments above all are converging on the same fundamental unanswered question:

  • What responsibility or obligation do "free" online products/services that are offered to everyone for no monetary payment, have, or not have, to consumers in terms of: fair representation, truth in advertising, fair competition, and consumer protection?

Now that most Americans are online and the monetary "cost" efficiencies of cloud services will continue to increase the non-monetary "costs" to privacy, security and competition, recent developments strongly suggest we are entering a whole new Internet phase, where "the costs of free" on the Internet become much more "transparent" for the first time.