Subj: Online Privacy: Perspectives of America Online From: Jen Jacobsen, America Online, 202-530-7888, jgjacobsen@aol.com To: Internet Caucus Advisory Committee PRIVACY AND CONSUMER CONFIDENCE ISSUE OVERVIEW Online privacy is one of the most important issues facing the Internet community today. While the online medium provides previously unforeseen opportunities for personalized interactive experiences that benefit consumers, it also brings with it concern about the protection of personal information that may be collected online. For AOL, protecting our customers' privacy is essential to earning their trust, which is crucial to the success of our business. Recognizing the importance of this issue, AOL has taken a number of steps to create an environment where our members can be certain that their personal information and their choices regarding the use of that information are being respected: from creating and implementing our own privacy policies and educating our members about them, to promoting best practices among our business partners, to engaging in industry- wide initiatives and enforcement mechanisms that will raise the bar for all companies who do business online.. The tremendous growth of e-commerce has brought the online privacy issue to the fore, as consumers, policymakers, and businesses work to determine how best to protect the personal information of online users. In addition, online privacy has become the subject of international debate, as the U.S. and the European Union negotiate over the appropriate implementation of the European Directive on Data Protection, which imposes strict requirements on the handling of personal data and could ultimately disrupt data flows between the EU and U.S. if policy differences are not resolved. WHERE ARE WE NOW? AOL is committed to protecting our users’ privacy and building consumer confidence in the online medium. Building on the lessons we've learned and the input we've received from our members, we have adopted privacy policies that clearly explain to our users what information we collect, why we collect it, and how members can exercise choice about the use of that information. We have based our policies on core principles that reflect consumer needs and expectations. For example, we will not read a member's private email; we will not disclose to anyone any information about where a member goes online; and we will not give out a member's phone number, credit card information, or screen name without consent. We also make sure that our policies are well understood and implemented by all our employees. We provide training about our privacy policy and require all employees to sign and agree to abide by the policy, as a condition of employment. We continually review state-of-the-art technology to ensure we use the most advanced technologies possible to defend our customer data security. AOL takes extra steps to protect the safety and privacy of children online. We do not collect personal information from children without their parents' knowledge and consent. We have created a special environment just for children -- our "Kids Only" area -- and we carefully monitor all of the Kids Only chat rooms and message boards to make sure that a child does not post personal information that could allow a stranger to contact the child offline. Furthermore, through AOL's "Parental Controls," our members are able to safeguard their children's privacy by setting strict limits on whom their children may interact with and what they see online. AOL supported the Child Online Privacy Protection Act (COPPA), which became effective on April 21 of this year, as an important step toward protecting children online, because we believe that extra safeguards are necessary when it comes to the highly sensitive area of children’s data. In addition to adopting and implementing our own policies, AOL is committed to fostering best practices among our business partners and industry colleagues. One of the strongest examples of this effort is our "Certified Merchant" program, which guarantees that our members will be protected and satisfied when they are within the AOL environment. Through this program (which currently has nearly 200 participating merchants), we offer a money-back guarantee program to dispel consumer concerns about shopping security and to increase consumer trust in this powerful new medium. We believe that the more we are able work with our business partners and require high standards of them, the more likely it is that these standards will become the marketplace norm. Indeed, we think that protecting privacy is just one piece of our larger responsibility to help ensure that consumers are treated fairly and safely when they go online. AOL and several other industry leaders have created the Electronic Commerce and Consumer Protection Working Group, which is working to draft a code of online business practices that we hope will be endorsed by all companies doing business online. The online industry as a whole has taken positive steps toward protecting online privacy in recent months. To strengthen industry's commitment to online privacy, AOL joined with other companies and associations in 1998 to form the Online Privacy Alliance (OPA), which has since grown to include more than 85 recognized industry leaders. A study conducted last year by Georgetown University Professor Mary Culnan shows that, in a sample drawn from a pool of the 7500 most visited websites, more than 65% of the sites have posted a privacy policy or a statement about their information practices. This number demonstrates a tremendous increase from the number of sites posting policies just one year earlier, when the FTC conducted a similar study. WHERE DO WE GO FROM HERE? We believe that private sector leadership in developing fair information practices is the right approach to assuring broad privacy protection online, but we also realize that there is still more work to be done. In order to build on our preliminary success, the OPA has renewed its commitment to reach out to businesses nationwide to explain the importance of protecting online privacy and posting meaningful privacy policies. As technology becomes faster and better, privacy protection will become even more essential, since information will be collected and processed at an even faster rate. In part, we think that technology holds the key to ensuring a safe and secure online environment. We believe it is critical for us to provide the most sophisticated security technologies to our members so that they can take steps to protect their own privacy online. That's why we will continue to advocate the widespread availability and use of strong encryption, both in this country and abroad. Industry initiatives are helping to craft the “rules of the road” that will dictate online business practices, and we believe that it is important to see how those rules will develop, rather than imposing a sweeping regulatory framework on the Internet and electronic commerce. The challenges that lie ahead will give us the chance to prove that we can work together to promote effective online privacy through industry-led, market-driven initiatives. In the meantime, AOL remains committed to protecting the privacy of our consumers and taking part in industry efforts to promote online privacy, security, and consumer confidence.