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U.S. Senate Votes to Eliminate FCC's Broadband Privacy Rules

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Recently, the U.S. Senate voted against a set of privacy rules for broadband service providers, previously proposed by the telecom regulator FCC (Federal Communications Commission) under the democratic administration of President Obama. On Oct 2016, the then FCC chairman Tom Wheeler had proposed these rules. However, the new FCC -- reconstructed by President Trump with Ajit Pai at its helm -- voted to stay the rules of the previous regime on Mar 1, 2017.

The U.S. Senate voted 50-48 to repeal the rules. The vote also prohibits the FCC from reintroducing the rules in the future. The matter will now move to the U.S. House of Representatives.

What Are Broadband Privacy Rules?  

The broadband privacy rules proposed by former FCC Chairman Tom Wheeler required ISPs to get consumers' explicit consent before selling or sharing Web browsing data and other private information with advertisers and other companies. Since ISPs (Internet Service Providers) have direct access to user database, they used to sell the data to digital marketing firms for targeted advertising. This was a major source of revenues for the ISPs.

It is important to note that ISPs like Verizon Communications Inc. (VZ - Free Report) , AT&T Inc. (T - Free Report) and Comcast Corp. (CMCSA - Free Report) are governed by FCC rules. On the other hand, Internet firms such as Facebook Inc. , Twitter Inc. and Alphabet Inc. (GOOGL - Free Report) come under the Federal Trade Commission (FTC) regulations. At present, there are no rules governing data disclosure by Internet firms.  As a result, the ‘Opt In’ ruling will be an advantage. However, the FCC had assured the ISPs that it will try to harmonize the regulations with the FTC.

Notably, all the stocks mentioned above currently carry a Zacks Rank #3 (Hold). You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

FCC in the Trump Era

Donald Trump already has had quite an impact on telecom policy parameters. On Jan 2017, Trump elected Republican commissioner Ajit Pai as the new Chairman of the FCC. Ajit Pai is a staunch opponent of several laws and rules adopted by the FCC under former Chairman Tom Wheeler’s regime, including Net Neutrality laws, rules to reform the business data market and set top box reform proposals. Importantly, all three major reform rules were going to hit the telecom operators and ISPs the most.

ISPs to Cheer Now

The digital advertisement market is an exponentially growing space, and ISPs have been increasingly investing resources to cash in on the bountiful opportunities in this space. However, the FCC’s previous directive stipulated that the ISP should notify its customers before sharing any user data for advertising. This was certainly going to mar ISPs prospects in this business. Therefore, a new FCC body with less regulatory intention will certainly bode well for the ISP industry.

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