Telecom firms mine for gold in big data despite privacy

Some telecom firms have decided to press on with developing their data business since former NSA contractor Edward Snowden’s disclosures

Latest Blog: An Abney And Associates Technology News
Barcelona: Last year’s revelations over the US tapping of phone and internet data gave telecoms firms pause for thought over whether they should sell their “big data” for gain, but the commercial potential could prove irresistible.

Although figures are scarce, analysts think selling data on mobile users’ locations, movements, and web browsing habits may grow into a multi-billion dollar market for the business.

Big carriers like Telefonica, Verizon, Orange and Singapore’s Starhub warn that they are only just starting to test the waters and pledge to market only anonymous crowd information to protect customers.

They are also promoting their big data products as being helpful well beyond the realms of advertising—for credit card companies wanting to detect fraud, for ambulance operators plotting routes to avoid traffic, and for public health officials responding to outbreaks of flu.

But while some carriers have decided to press on with developing their data business since former US National Security Agency contractor Edward Snowden’s disclosures, others have started pitching themselves as their customers’ best allies in seeking to hide from any prying eyes.

Verizon’s Precision Marketing Insights product, which offers businesses statistics about mobile users in a given area, was in commercial trials with sports teams and billboard owners when the Snowden allegations hit. After fresh debate by top management and the board on whether selling even anonymous data on customers was a good move, the company decided to go ahead with it, said Colson Hillier, a Verizon executive.

“Privacy is a hot button issue right now, but we think we can take a leadership stance,” Hillier said. “It’s not a reputational risk if you do it right and are pro-active in communication with consumers and policy makers.”

Other telecom companies took the opposite tack, casting themselves as better guardians of customer data than internet companies like Google, which use it to target advertising.

Deutsche Telekom, for example, last year launched an encrypted “Email made in Germany” service and a secure communications link for small businesses to ward off hackers or spooks. “Protection of the private sphere is a valuable commodity,” its CEO said.


Data trove
As they shift to treating customer data as an asset to be mined instead of a mere incidental to running networks, telecom operators must tread carefully.

People are used to giving Facebook and Google their personal information and generally accept that the trade-off for free services is that their data is used to target ads. But people could be irked if tracking extends into the real world, said a telecoms industry consultant who declined to be named because of client sensitivities.

Surveys show people trust telecom providers more than internet companies to safeguard their personal data, although overall confidence in companies was very low. In a poll commissioned by Orange, 41 percent of respondents said they trust mobile carriers to keep their information safe compared with 20 percent for social networks like Facebook or Twitter.

“All it takes is one mis-step on data monetisation for some customers to decide they don’t want to stay with you,” the consultant said.

To collect the data, telecom operators place probes in mobile networks to capture the millions of records per day generated when people send texts, make calls and surf the web. The data is stripped of personal information then pooled so it can be analysed for patterns useful for business or governments. It identifies a person’s location to about 200 to 300 metres.

Privacy advocates and regulators say that if the data is anonymous and about groups not individuals, it is legal for telecom companies to sell it.

Meanwhile companies are taking different approaches to user consent. Orange collects data for its Flux Vision data product from French mobile users without offering a way for them to opt-out, as does Telefonica’s equivalent service.

Verizon told customers in 2011 it could use their data and now includes 100 million retail mobile customers by default, though they can opt out online.

More intrusive programmes that drive location-based advertising to people’s mobiles usually require users to agree and some companies offer rewards in loyalty schemes in exchange.


Finding the market
In one project, Telefonica worked with Morrisons , Britain’s fourth-largest supermarket chain, to study where residents of an area in southwest England did their food.

It parsed data on where shoppers at Morrisons’ stores came from and did the same for nearby rival stores, so as to identify which households should be targeted for promotions.

Out of 11 million households in the area, Telefonica advised Morrisons to send coupons to 400,000 of them, leading to a 150 percent rise in store visits without a revenue drop-off that accompanies some discount schemes.

“We spotted postal sectors where there was a genuine battle ground between Morrisons stores and their competitors,” said Phil Douty, who runs Telefonica’s Smart Steps. “This was the most fertile ground for their marketing efforts.”

Smart Steps has dozens of clients in Britain, said Douty, and the firm will start pilots inBrazil this year. Telefonica speaks to regulators early so as to avoid a repeat of a flap inGermany last year in which data protection regulators slammed the programme before it was even introduced there.

Yet turning a data trove into a product companies will buy is not easy for telecoms carriers, since they do not know exactly what transportation, manufacturing, or travel companies actually want in terms of data, telecom executives admit.

Some are turning to partners such as marketing specialists, advertising agencies or consultants like IBM.

Verizon’s Hillier said the carrier is now in talks with advertising technology companies and other possible partners to help with distribution and aimed to have a range of big data products on the market in the second quarter.

German software specialist SAP also in talks with a number of telecom operators to have their data feed into a centralised platform that businesses or advertisers would buy subscriptions to access. Revenue would be shared between SAP and the telecom operator. REUTERS