Policy Papers

Privacy and the Commercial Use of Personal Information: The Case of Customer Proprietary Network Information

by and

Regulation of CPNI collected by telecom companies will limit their ability to share and use information. There can be no benefits from these proposals if the FCC is correct in its assessment that there is no consumer harm from use of CPNI data by outside contractors or partners. On the other hand, there will be substantial costs.

First, companies may do some restructuring or reduce the level of outsourcing in order to comply with these regulations. There are costs to in-sourcing. Moreover, since we can assume companies are now organized to do things as efficiently as they know how, any reorganization would be costly. In addition, some companies are restricted in their organization because they are remnants of the old AT&T and so are still restricted by the antitrust agreement that broke up the company. Thus, any attempts at restructuring would have asymmetric implications for different companies.

The other approach to complying with the regulations is to simply use less information. This would also be costly. Consumers benefit from the existence of new plans offered by the providers, from receiving information about these plans, from receiving other marketing information tailored to their needs, and from not receiving information they find irrelevant. CPNI data are used for all these purposes. If the data could not be so used, consumers would lose these benefits.