Pacific Research Institute developed Click Confidential: A Privacy Primer for the Social Web in June 2009 and released the document early in July 2009. The report was written by Daniel Ballon.

It outlines the detrimental affects of government regulated privacy policy on emerging online businesses. In addition, it provides effective strategies for empowering consumers while promoting choice and competition.

Dr. Ballon states, “The Internet landscape is rapidly changing, and regulators cannot predict which technologies will most appeal to consumers. Creating a patchwork of technology specific rules will distort the market, increase the power of special interests, generate confusion, and reduce choices.”

Privacy preferences on the Internet vary widely, and the diversity allows innovators to create abundant options for personalization, Ballon said. He recommended policy makers help consumers use these opportunities rather than abandon them for a one-size-fits-all solution.

Government Fears Leading Charge for Privacy Regulations

The report is the result of fears of policy makers at state and federal levels. They believe Internet advertising poses a grave threat to consumers’ privacy. However, the policy makers are unable to define the threat or identify specific harms they are doing to consumers, Ballon reported. The report provides evidence against broad regulations of Internet sites. Ballon makes these points:

  • Most American Internet users express concern about commercial use of personal information but make rational decisions to exchange personal data for free content.
  • Imposing blanket constraints on rapidly evolving technologies can have devastating effects on emerging business models.
  • Internet traffic flows seamlessly across borders and any state legislature has the ability to hamper innovation across the network.
  • Imposing restrictions on targeted advertising offers little protection against actual crimes.
  • Reputation and trust provide an essential competitive advantage for Internet businesses.
  • Government poses a far more serious threat to privacy than any private enterprise because it does not have to implement responsible data collection practices.
  • The Internet landscape is rapidly changing and regulations can’t predict the technologies that will appeal to consumers.
  • As consumers express a growing interest in privacy, emerging businesses are capitalizing on opportunities to meet the demand.

Internet Economy Requires Free-Flowing Information

As Congress, state governments and foreign countries consider regulations on how innovators collect and use information, they must consider the purpose and impact of every restriction, the report said. Free-flowing information is the life-blood of the Internet economy, and even minor restrictions could devastate the entire system. Placing technological limits on a rapidly evolving ecosystem could stop creative new business models and place the Internet’s development in the hands of bureaucrats and special interests, Ballon added.

However, policy makers can implement effective strategies for improving transparency in the market place while protecting consumers from the government itself, the report said. Abundant free tools and applications make collaboration and the Internet’s continued growth possible while keeping the social Web open to every user. The Internet’s unique characteristics of free real estate and unlimited speech, can lead to 300,000 new jobs, the report found.

Despite governmental goals of protecting privacy among Internet users, the Pacific Research Institute’s report on the social Web recommended policy makers takes a cautious approach to broad regulations. Otherwise, the growth of the Internet could be hampered, Ballon concluded.