How to Disable Phorm

I looked at Phorm in February and again in June, but not really wearing my consumer hat. Now I have an unwelcome opportunity to do just that.

You see, I'm a BT broadband subscriber with multiple users at home, some of whom may not be all that, ahem, technologically inclined. So I'm a bit paranoid that, while I'm not aware of having been asked or consented to using Phorm (branded "WebWise"), other users may have inadvertently switched it on in the course of a BT trial.

Why I am paranoid? Well the service is basically designed to track the browsing habits of all users of the broadband-connected PC or laptop and use this to send more targeted advertising, so that BT and Phorm can make money out of you. But I don't just "browse", I research stuff, work and look after my financial affairs. Other users in the house from time to time will do the same. I don't want this stuff tracked, scanned or whatever else Phorm or BT plan to do with it. And I don't want to be pestered by ads, especially ones that may have nothing do with my real interests. I don't consider that I have a relationship with BT when I use my broadband to access the internet. I permission or de-permission cookies or accept marketing bumph from each of the site I'm happy to deal with. And so on.

I've now done what any good consumer should do. I've looked at the BT WebWise site and even the audit report from Ernst & Young (the mere fact that an audit report is felt necessary chills me to the bone). While these purport to tell me what Phorm is or isn't doing, it doesn't explain BT's role or the data it has access to and retains, or what BT is getting out of using Phorm. The BT terms and conditions (clause 18) aren't exactly encouraging on this point. In fact they are so lacking in material information that they deserve further consideration in light of the Consumer Protection from Unfair Trading Regulations 2008 (which I perhaps rather hastily lampooned - but hey, if they're there, use them). The killer is that the mere presence of this unwelcome "service" casts on me an obligation to constantly police my own computer and all its users to ensure that we're opted-out and remain opted-out. It would be too much to hope that the anti-virus software providers will create a Phorm-killer.

Let's be clear. BT needs to persuade me, as its customer, to opt-in to taking this additional "service". It's not for BT to use my broadband connection to build relationships with people who aren't the accountholder, and get me to police their opt-in/opt-out. It must be BT's problem to ensure that if I don't opt-in (or if I do, but opt-out later) that the effective opt-out works for everybody on my connection all the time.

And to have any chance of persuading me to opt-in, BT must specify in more detail the nature of the data that will be obtained, all the proposed uses of that data, what I am going to receive in return (and don't say targeted ads - show me the reduction in the price of broadband to reflect your opportunity to gain ad revenue), and how I can opt-out and have that data deleted. From a personal standpoint, the "WebWise" service doesn't go far enough in this regard for me to trust it. Nor should the current level of disclosure be enought for BT to be able to claim they have my consent to thing under the Data Protection Act - I simply don't consent, anyway.

So, not trusting BT on the particular issue of how to stay opted out, I did a quick Google search hoping to learn how you would really know that you were not signed up, and how to switch it off completely. No luck.

The Register, which has done a lot of digging on Phorm in the past, and got a very concerning post from Chris Williams on 3 October. According to Chris' discussions with BT, they seem to track your usage whether you're opted in or out... so they can record whether you have opted in or out. You then simply have to trust that they won't sell or otherwise use your data to get extra ad revenue, fall victim to organised criminals, or allow the authorities to mash it with the Communications Database (you'll recall that the UK government has been particularly supportive of Phorm).

All the technical detail is in Richard Clayton's excellent piece on Phorm. His research suggests that you can add the Fraud Act, Computer Misuse Act and the Regulation of Investigatory Powers Act to your reading list before deciding whether or not to sign up to WebWise. And even intellectual property rights owners have a serious set of bones to pick, as Nicholas Bohm and Joel Harrison have fulsomely discussed in their excellent September article for the Society for Computers and Law. But none of that is going to occur to the average consumer, so why is the government not taking their corner instead of Phorm's..?

Who knows. For my money, it's time to switch broadband providers.

Speaking of which, I see that Orange is attempting to make a virtue out of not using Phorm.

LinkedIn Goes Social

LinkedIn has just added various collaborative, work-oriented applications to its platform. But I'm struggling to get beyond it as a fairly static place to hold your CV and network in a fairly basic, formal sense. I do receive requests for my services via LinkedIn, and it's useful for making introductions and learning a bit about someone you're scheduled to meet or call – the whole reason they published their profile. I guess people might use it as a “work” platform, add their blogs stc and yet retain the air of formality. But not all of that seems compatible. We'll see.

In the meantime, Facebook still seems more engaging and better aligned with the blurred social, business and academic blogosphere - it's the equivalent of meeting with the founders of a start-up in Starbucks, or with colleagues in a bar to talk shop and whatever else is going on. So that's where I prefer to share my blog, for example.

It will be interesting to see whether, and if so, how Facebook reaches out to the business community as LinkedIn evolves to be more engaging.

Travels in the Blogosphere

Phew! What a journey, and what a pleasure to have so much great stuff to consider and comment on over the past week, including:

• the iPod of financial services on Guillaume's blog;
  

• the European Commission's e-money plans on panGloss;
  

• the EC's consumer protection plans on Digital Law;
  

• discovering that European Commissioner Meglena Kuneva has launched her own blog;
  

• the future of cash at Digital Money Forum; and
  

• the impact of prescriptive regulation on financial services innovation at The Bankwatch.

Thanks, folks, please keep it coming!

In the meantime, I reckon I'll need another week off...

Be Careful Saving With Your Mortgage Lender

You'll be aware of recent concerns about how much of your deposits are covered by the UK's Financial Services Compensation Scheme.

Their general guidance on the subject is here, but there was a twist announced indirectly at a recent conference - hat tip to the Fool Blog:

• if you have an offset mortgage - where the bank agrees to credit your savings against your mortgage balance and only charge interest on the difference (if any) - then if the bank goes under, your savings will simply be deducted from the mortgage balance, even if those savings exceed £50,000. So you won't actually have access to the money anymore (unless, perhaps, the mortgage is taken over by another bank on the same terms and you can draw down again, or you remortgage, which will cost you interest).
  

• if you're an ordinary saver who just happens to have deposits with the same bank who has your mortgage, indications are that the FSCS will treat you the same as if you had an offset mortgage, although only £50,000 of your savings may be protected. Again, you could merely be treated as owing the bank less, and not actually get your savings paid back to you.

It does seem fair that the FSCS is able to offset deposits against mortgages or other loans in the event of bank insolvency, regardless of whether or not you agreed an offset mortgage. The higher deduction for offset mortgagors is also fair. Otherwise, people who've saved more than £50,000 and who were therefore able to take on a bigger mortgage than their income might have supported, could find themselves penalised. That would be inconsistent with the principles of recent mortgage regulation.

But this could be a disaster for anyone who's tried to set aside 3 to 6 months' net salary as "rainy day" money - as a buffer against unemployment, lengthy illness etc.

So, you should consider making sure that your rainy day money is not deposited with your mortgage lender. Worth checking with the FSCS before making the decision. Here are their contact details.

Consumers Paying For Services That Are Free

In these troubled times, we as individuals must take economics into our own hands - cut costs, repair balance sheets. And so on.

One needless expense is the purchase of complaints handling services from private suppliers when the alternative is free of charge.

Not only does that cost you money, but it also means your complaint may not be visible to the authorities. So there won't be as much pressure on the product provider to cure the problem you're complaining about.

Topical examples include:

• financial services claims management companies - why pay these guys, when the Financial Ombudsman Service (FOS) is free to consumers? The regulated product providers must pay FOS's fee for handling the dispute. That's an added incentive to resolve your complaint more quickly, and to avoid causing problems in the first place. But, as I've pointed out before, some claims management companies and law firms continue to promote services where the consumer bears the expense. There is even speculation within the industry that some product providers who've mis-sold financial services in the past are either starting up claims management companies or selling lists of affected consumers to them in order to profit from curing the problem they helped create. Your first complaint should be the product provider. But, if you aren't satisfied, then FOS is your best bet. Going to the media might sound attractive, but you shouldn't have to bear your soul in public to get a private financial matter resolved.
  

• call blocking services - sure, cold calls are annoying - especially those from an automated calling system that fails to connect anyone when we pick up the phone (known in the industry as "silent calls"). But rather than pay for a blocking service, the best solution is to help ensure the people using these systems get named, shamed and fined. That way, it's the perpetrators who will demand - and pay for - the improvements in technology that stops this happening, not you. So, before you pay for one of these blocking services, complain to Ofcom or the Information Commissioner. The Ofcom policy on the subject is here. You'll be comforted to hear that Ofcom fined Barclaycard the maximum fine of £50,000 for breaching the rules on silent and abandoned calls last month. It may not sound like much, but it will end up saving you money on a blocking service.
  

We all whinge when the Government doesn't act. But we only have ourselves to blame if they do act and we don't take advantage - and end up paying for it.

War on File-Sharers Spells D-o-o-m for Net Neutrality

The UK government is planning to promote "attractively packaged content" on the internet, bowing to pressure from copyright owners to prevent online piracy.

Only figures for the music industry are cited in the consultation paper, yet various regulatory and co-regulatory solutions are proposed that will affect all copyright content online.

The paper claims that about 6.5m people in the UK (25% of UK internet users), engaged in illicit P2P file sharing in 2007. This is estimated to "cost" the "music industry" £1bn over the next 5 years, against revenues of about £1bn per annum.

So, where's the problem? The "music industry's" digital music sales increased by 28% in 2007. Sure, declining CD sales resulted in a loss, but that's like saying Ford made a loss because no one wants to by the Model T anymore. It is also conceded that the decline in CD sales wasn't due to piracy alone - supermarket discounting and the shift to digital purchases were chiefly responsible. In other words, the "music industry's" woes are born of consumer dissatisfaction.

Consumers are used to getting content for free online, knowing that providers are making money out of advertising. So it's no surprise that 91% of survey respondents file-share because the content is free. More telling is that 42% say it's because they could find everything they were looking for. In other words, constraining supply by "attractively packaging content" doesn't work, and the music industry needs to get with the programme.

Of course, file sharing isn't actually not free. File-sharers spend time and pay for wireless technology, proxy servers, encryption and communications to download the material. No figures are given for how much revenue this generates, but at 6.5m UK consumers, it seems to be a sizeable market. I wonder who's making money out of that?

The chief cause of music industry misery actually seems to be the cost of enforcing copyright via the clunky legal system. They say it can cost £10,000 for each court order to obtain the IP address for each file sharer. I'm prepared to believe that, and I'm all for reducing the cost of enforcement. But that problem shouldn't need a "memorandum of understanding" among the rights owners' associations, network service providers and goverment, paragraph 3 of which says this:

"Many legal online content services already exist as an alternative to unlawful copying and sharing but signatories agree on the importance of competing to make available to consumers commercially available and attractively packaged content in a wide range of user-friendly formats as an alternative to unlawful file-sharing, for example subscription, on demand, or sharing services."

One shudders to think what is meant by "attractively packaged content". But it's implicit that any such packaging will be done by, and must suit, the few industry players who signed the MOU.

And that implies we'll be forced to pay for premium content bundled with rubbish, like "albums" on CDs. A sort of packaged internet, chosen for us by cosy institutions.

The neutral, open internet appears to be doomed.

PS: The Society for Computers and Law response to the consultation can be viewed here, and the SCL's response to proposals to increase the penalties for criminal infringement of intellectual property rights can be viewed here.

Closure of Zopa's US Credit Union Program Contrasts P2P Model

It's a sad day at Zopa, which has announced the closure of its US credit union programme due to adverse market conditions for credit union deposits and loans. My sympathy to the whole team.

But, by comparison, the steadily growing success of Zopa's UK P2P model starkly demonstrates the benefits of enabling simple, capital-efficient, transparent lending directly between responsible individuals, as opposed to the intricacies of even a straightforward savings and loan operation like a credit union.

And it's ironic that the US regulatory system could permit everything from NINJA loans to CDOs riddled with unquantifiable risks, yet fail to accommodate a model that has maintained such low delinquency in the UK for over 3 years now, and seems to be repeating that success in Italy.

Maybe one day US regulators will be more receptive.

Nanny Home Office to Record Everything

The Home Office continues to build an all-seeing Nanny State at our expense, regardless of proportionality, competitive and low-cost communications or the need to conserve our taxes to support the financial system.

The proposed Data Retention Regulations require UK public network providers to retain data that identifes the source, destination, date time and length/size of every single phone call and email on their networks, as well as the type and location of the device involved. Using that data, authorities can of course find the content in, ahem, 'other systems'.

"... We [the Home Office] consider that these measures are a proportionate interference with individuals’ right to privacy to ensure protection of the public. Previous debates have concluded that the retention period is a significant factor in determining proportionality. In the draft Regulations at Annex A, we propose to continue with a retention period of 12 months."

Failing to mention, of course, that the Home Secretary can extend the retention period to 24 months, merely by written notice. And ignoring the fact that the cost is in secure storage, retrieval and deletion, for which the Home Office is now infamous.

This particular initiative has been handed to us (with Home Office complicity) by European Directive 2006/24/EC, conceived amidst the panic of the 'war on terror'. So, of course, it must be well considered and completely necessary today. It's also a natural extension of the Regulatory of Investigatory Powers Act 2000 (RIPA!) which David Blunkett introduced to such a warm welcome and which has been critical to Local Authorities' success in their war on dog-fouling [checks shoes for 3rd time today]. But just to add weight to its claim of proportionate impact on our human rights, the Home Office cites a vast empirical study undertaken by independent experts:

"During a two week survey in 2005 of data requirements placed by the police, there were 231 requests for data in the age category between 6 and 12 months old. 60% of these requests were in support of murder and terrorism investigations and 86% of the requests were for murder, terrorism and serious crime, which includes armed robbery and firearms offences."

So, we need this giant database and retrieval system for names, dates and places for every single communication on a British network in order to support about 200 data requests a month. Well, clearly the new regulations weren't needed to enable these requests to be made in 2005. And history appears not to record how critical the results were to solving a crime. Murder is an ironic justification, given how firmly the Home Office is holding the pillow over our faces. However, while the unsolved murder rate has nearly doubled over the past decade to 52, the Tory response missed a golden opportunity to justify investment in some enormous database to prove the exact time I called last night to say I'd be home to read stories. Instead, they merely blamed this rampant surge in mayhem on "police being overwhelmed with red tape, bureaucracy and government targets that distract officers from protecting the public." I feel their pain.

Ah, yes, the cost. The good news is that the taxpayer is to reimburse the network providers the "additional costs for retaining and disclosing all communications data". The Home Office claims this will amount to a suspiciously precise "£68.44m capital, £39.40m resource over 8 years", whatever that really means. Is the £39.4m perhaps an annual figure? Is it inflation adjusted? It assumes no investment in public sector systems, so that must be hidden elsewhere. Weirdly, it also assumes that electronic communications will cease in the UK in 8 years time, rather than grow exponentially. Perhaps the database will enable Plod to figure out whodunnit.

In the meantime, the Home Office claims it will avoid the disproportionate impact of all this on small firms. This assumes that either (a) there will be no more small firms providing network services in the UK (sad, but now plausible) or (b) small firms will be able to carry the cost of investing in the additional storage and retrieval systems until their requests for reimbursement are lodged with the Home Office, processed, approved and finally paid. Either way, start-ups and other competitive, low-cost network providers can't afford to play in that sort of bureaucratic game.

Next: average speed camera networks.

PS: the Society for Computers and Law response to the proposals can be viewed here.

It's Double, Not Quits, for UK Bank CEOs

Guess who said this yesterday:

"Our strategy is clear. It is to achieve good growth through time by diversifying our business base and increasing our presence in markets and segments that are growing rapidly."

Clue: he's a chief executive of one of the banks that has today asked the UK taxpayer for a helping hand.

Give up?

You're right. Perhaps he should, along with the other heads. Surely it's worth considering that the CEOs who oversaw the unbridled expansion of recent years are the wrong people to restore confidence to the banking system? Citigroup made the change almost a year ago, after all.

Where is shareholder activism when we need it most?

I'd also argue that banks (and insurance companies, for that matter) have demonstrated that they are in fact ill-equipped to commit very much in the way of capital, if any, to 'rapid growth' opportunities...

The Great PPI Robbery

It's stunning enough to see yet another hefty fine for misselling "payment protection insurance", or "PPI", let alone one that costs Alliance & Leicester £7m of precious capital in these troubled times.

But, worse still, the findings suggest that the FSA let this go undetected for 2 years, leaving 210,000 consumers to find the extra £1200, plus interest in the meantime.

Meanwhile, the Competition Commission has also waited until now to get tough on banks who it alleges have raked in a combined £1.4bn in "excess profits".

Given the pace of enforcement to date, is it conceivable that A&L will be the last bank caught ignoring financial regulation?

PS: the FSA fined Egg £721,000 in December 2008, for mis-selling 106,000 PPI policies to its card customers at an average of £156 each for the period Jan 2005 to Dec 2007.

A Rower's Revenge

Finally, after about 50 weeks of steady training, I had my revenge yesterday. It was indeed a dish served cold, with lashings of rain and mud. White kit would not have been my first choice, but then I'm raising money for Prostate UK, not a rehab unit for super models.

I'm pleased to say that the rain and local flooding did not prevent me beating my 2005 time - run on a cool dry day - by about 10 minutes, coming in 49th in 1:42:50.28. Proving not only that you can get younger, but also that a 2007 Bianchi road-racer with clip-in shoes is a much faster mode of transport than a 1997 Trek hybrid, even with mud guards and pannier racks removed.

And I must add that it was a special pleasure to repair (quite literally) to the warmth and hospitality of the George and Dragon with my father, on his much anticipated visit from Oz, for an excellent steak and ale pie and about 7 years worth of aimless conversation.