Panel Paper: Benefits and Costs of Regulating (Deregulating) Internet Privacy

Saturday, November 10, 2018
Wilson C - Mezz Level (Marriott Wardman Park)

*Names in bold indicate Presenter

Joseph Cordes and Daniel R. Perez, George Washington University

In 2015, the FCC, under the Obama administration, issued its Open Internet Order reclassifying broadband internet service providers (BIAS) as a “telecommunications service”—subject to regulation as a “common carrier.” Along with being subject to common carrier regulation by the FCC under Title II of the communications Act of 1934 (the Communications Act), this effectively changed which agency would be the regulator of data privacy. The FCC established a framework for regulating data privacy towards the end of the Obama administration which was later overturned by the Congressional Review Act (CRA).

Scholars working on the economics of data privacy argue that efforts to protect privacy by means of regulations such as those proposed at the end of the Obama Administration (or efforts to deregulate internet service providers) should be subject to formal analyses of economic benefits and costs. Doing so has proved difficult largely because of what appears to be a paucity of estimates of the economic value of privacy. Nonetheless, there are a number of studies that have estimated individual willingness to pay for greater privacy. The challenge is to develop a framework for transferring these estimates to the regulatory sphere.

Our paper applies the basic principles of benefit transfer analysis to estimate the economic benefits of providing regulatory protections of internet privacy. In addition to presenting what may be the first ever formal benefit cost analysis of regulating internet privacy, we also discuss the methodological issues raised by the benefit-transfer approach, as well as how to deal with the unavoidable uncertainty about the estimates of benefits and costs that result from the use of benefit estimates that are borrowed from other studies.