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`Page 1 of 5
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`Before the
`Federal Trade Commission
`Washington, D.C.
`
`Children's Online Privacy Protection Rule Amendment -- Comment P994504
`
`Comments of
`
`AOL Time Warner
`Sony Pictures Entertainment Inc.
`The Walt Disney Company
`Twentieth Century Fox Film Corporation
`Vivendi Universal
`Viacom
`
`November 30, 2000
`
`AOL Time Warner, Sony Pictures Entertainment Inc., The Walt Disney Company, Twentieth Century
`Fox Film Corporation, Vivendi Universal, and Viacom (the "Companies"), hereby state their support
`for the Federal Trade Commission's proposal to extend the period during which web sites directed to
`children can use the sliding scale approach to obtain verifiable parental consent for the collection of
`personal information about children.(1) In their view, the Commission should retain the current sliding
`scale regime unless and until cost-effective digital signature technology is widely available. Therefore,
`whereas the Commission proposes to extend the sliding scale regime for an additional two years,
`they urge an indefinite extension "until the development of secure electronic mechanisms and/or
`infomediary services become widely available at a reasonable cost."(2)
`
`The Companies maintain Web sites directed to children. Therefore, they not only have a direct
`interest in the Commission's action in this proceeding, but also offer a first-hand understanding of the
`capabilities and costs of the presently available technologies for securing verifiable parental consent.
`
`The Companies agree with the Commission that "expected progress in available technology has not
`occurred."(3) In the meantime, firms have invested heavily in necessary technology to assure
`compliance with the sliding scale system. Moreover, the sliding scale system now appears quite
`adequate in protecting the interests of children. Therefore, the Companies support not only the two-
`year extension proposed by the Commission, but also an indefinite extension pending development,
`deployment, and widespread consumer acceptance of cost-effective digital signature technologies.
`
`The Commission has determined correctly that the development, deployment, and consumer
`acceptance of digital signature technologies has lagged expectations.
`
`The basic premise of the Notice is correct. Two years ago when the Commission adopted the sliding
`scale mechanism as a "short term" measure, it believed that "more reliable methods of obtaining
`verifiable parental consent would soon be widely available and supportable."(4) The Commission then
`recognized that, "[W]ith advances in technology, companies will soon be able to use more reliable,
`verifiable electronic methods in all of their transactions."(5) In particular, the Commission envisioned
`use of technologies permitting e-mail accompanied by a valid digital signature.(6) As many
`commenting parties then concurred, digital signature systems might provide a parental consent
`mechanism "in the future."(7) Now, however, the Commission has realized that "the expected
`progress in available technology has not occurred."(8)
`
`The Commission is right. The promise of new digital signature technologies remains largely that - a
`promise. Progress has been slower than expected. Businesses are experimenting. Consumers are
`uneducated.(9) Costs are unpredictable. Widespread deployment and consumer acceptance of digital
`signature technology remains at best a very fuzzy speck on a very distant horizon.
`
`The same may be said irrespective of the specific technology at issue.(10) Biometric verification
`systems like Cyber-SIGN are relatively costly, especially from a consumer perspective. Encryption
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`key systems, like Verisign PKI, are less costly, but still enjoy no widespread deployment.(11) Few
`parents have been willing to invest the time and money to obtain an encryption key. As is apparent
`from the comments of Verisign Corporation regarding the ESIGN Study, wide-scale deployment of
`their Verisign PKI software has not occurred and "may be slow in developing."(12)
`
`Furthermore, no evidence suggests that consumers have or will become comfortable with the newer
`digital signature technologies or find them sufficiently useful and valuable to justify the expense in the
`foreseeable future.(13) As noted by Thomas Greco of the Digital Signature Trust Company at the
`ESIGN Public Workshop, "There are going to be a number of applications that we're going to be
`attacking with this electronic technology. Some will merit the use of certain technology, some will not
`merit the use of certain technology."(14) At this point, no one may say with certainty that parents
`would invest in digital signature capability just to allow their children to provide information to a Web
`site.
`
`Similarly unknown is what types of applications will induce consumers (including parents) to make
`that investment for other purposes. Even businesses have moved slowly in embracing digital
`signature technologies.(15) As observed by Ben Dayanim at the ESIGN Public Workshop, "[B]
`usinesses are trying to figure out the best way they want to approach e-commerce generally."(16)
`Thus, when all is said and done, much more is unknown than is known about the pace of deployment
`and acceptance of digital signature technologies at the consumer level. As Mr. Greco emphasized,
`"[We're at the very beginning stages of being able to answer some of the questions, what do
`businesses need, what do consumers need to make this kind of thing happen."(17)
`
`Therefore, as the Commission now acknowledges, "more reliable methods" of securing verifiable
`parental consent remain unavailable.(18) Furthermore, consumer acceptance of such technologies
`remains unpredictable. Consequently, the Commission's decision to extend the sliding scale regime is
`sound and supported by the current state of technological development and deployment.
`
`The present investment in the technology necessary to comply with the sliding scale regime is
`substantial.
`
`Discarding the sliding scale mechanism at this time in favor of nonexistent new methods of securing
`verifiable parental consent not only is facially unreasonable, it also would impose a substantial
`financial penalty on operators of Web sites directed to children. Several of the Companies,
`undoubtedly like a large number of children's Web site operators, have spent thousands of dollars in
`site design, hardware and technology costs alone to implement the sliding scale mechanism. And this
`says nothing about the up front and ongoing personnel costs to put the requisite systems in place and
`maintain them. Furthermore, many Web based businesses are very much infant industries that are in
`no position to absorb unnecessary costs. Jettisoning the sliding scale mechanism and requiring
`immediate use of more advanced mechanisms of securing verifiable parental consent - assuming
`arguendo that they were available - would relegate these systems to the scrap heap and trivialize the
`investment many Web site operators have incurred to implement the sliding scale mechanism.
`
`No sound reason exists to extract such a financial penalty from Web site operators. They have
`complied in good faith with the new rules and hardly deserve to be penalized by a premature
`embrace of more sophisticated technologies. The Companies submit, therefore, that the Commission
`must take into account the present sunk investment in sliding scale mechanisms in assessing the
`ultimate cost effectiveness of newer parental consent technologies.
`
`No basis exists for concluding that the sliding scale regime is inadequate to protect the
`interests of children.
`
`Utilization of the sliding scale mechanism has proven to be an effective means of protecting children's
`privacy. The Commission has alluded to no rash of complaints from parents alleging breaches in their
`children's privacy by the operators of children's Web sites. The Companies, too, have fielded virtually
`no such complaints from parents concerning infringements of their children's privacy. In the absence
`of complaints or other record evidence that the sliding scale mechanism is inadequate, no sound
`reason exists to plunge headlong into the realms of still budding technology in search of a solution to
`a problem that does not exist.(19)
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`An indefinite extension of the sliding scale regime would promote innovative Web-based
`services for children.
`
`If the sliding scale regime is extended and thereby stabilized, many more positive applications for
`children may emerge. A permanent extension of the sliding scale would provide a predictable
`framework around which children's Web site operators can create children's content.
`
`Experience with only temporary short-term reliance on the sliding scale mechanism demonstrates
`that regulatory uncertainty has been counterproductive in some instances. The impending expiration
`of the sliding scale has chilled the development of new online content for children. While some
`companies have invested heavily in implementing the sliding scale technology, others have been
`skittish. They have refrained from employing the sliding scale at all because they are unwilling to
`invest in a regulatory scheme that will soon expire and render the investments obsolete. The reason
`is simple: it is difficult and risky to build a business model on a regulatory framework that may change
`in two years. How might a company justify making substantial investments in compliance methods
`that may not be legally permissible within a two-year period? The temporary nature of the sliding
`scale has inhibited many children's Web sites from making investments in costly infrastructure,
`fearing that a once appropriate means of obtaining consent no longer would be acceptable.
`
`Consequently, the limited short-term reliance on the sliding scale mechanism for compliance likely
`has inhibited the development of many features that would have been beneficial to children. For
`example, some child-directed Web sites have structured content and interactive functions around the
`collection of non-personally identifiable information. This chilling effect has reduced the content and
`interactivity that would have been available to children if the sliding scale had been made permanent
`in the original COPPA rule.
`
`On the other hand, providing Web sites with meaningful guidance on how to structure their activities
`around a preferred consent mechanism would encourage the types of investments in children's
`content that some to date have been hesitant to make. Therefore, the Companies submit that an
`indefinite extension of the sliding scale system would create a considerably better climate for
`investment in and implementation of creative Web-based services for children.
`
`Conclusion
`
`The Companies applaud the Commission's willingness to base regulatory decisions on a sound and
`realistic appreciation of the facts. Expected developments in digital signature technology have failed
`to materialize. Widespread consumer acceptance is beyond reliable prediction. Therefore, rather than
`demand the impossible, the Commission has made a demonstrably wise and amply supported
`decision to maintain the sliding scale mechanism.
`
`The Companies also urge the Commission to stay this course. It should insist that interested parties
`present substantial evidence that new, more reliable and cost-effective digital signature technologies
`are developed and deployed - with widespread consumer acceptance. Only then should the
`Commission even begin to consider supplanting the sliding scale regime.
`
`Respectfully submitted,
`
`________________________________
`Elizabeth Frazee
`Vice President, Domestic Public Policy
`
`Jennifer Jacobsen
`Director, Domestic Public Policy .
`AOL Time Warner
`800 Connecticut Ave., N.W.
`Suite 800
`Washington, DC 20006
`
`______________________________
`Leah Weil
`Corporate Senior Vice President and General
`Counsel
`Sony Pictures Entertainment Inc
`10202 W. Washington Blvd
`Culver City CA
`
`
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`_______________________________
`Richard Bates
`Vice President, Government Relations
`The Walt Disney Company
`1150 17th Street, N.W, Suite 400
`Washington, D.C. 20036
`
`________________________________
`Matthew Gerson, Esq.
`Vice President Public Policy
`Vivendi Universal.
`1401 Eye Street, N.W.
`Suite 1220 Suite 1100
`Washington, D.C. 20005
`
`November 30, 2001
`
`[Endnotes]
`
`________________________________
`Ellen S. Agress
`Twentieth Century Fox Film Corporation
`1211 Avenue of the Americas - 4th floor
`New York, New York 10036
`
`________________________________
`Anne Lucey
`Vice President, Regulatory Affairs
`Viacom
`1501 M Street, N.W.
`Washington, DC 20005
`
`1. The Companies submit these comments in response to the Commission's Notice of Proposed Rule Making,
`(http://www.ftc.gov/os/2001/10/coppafrn.htm), 66 Fed. Reg. 54963 (October 31, 2001) [hereinafter cited as Notice].
`
`2. Notice at 3.
`
`3. Notice at 2.
`
`4. Notice at 2.
`
`5. Final Rule, RIN 3084-AA84, 64 Fed. Reg. 59888, 59902 (November 3, 1999).
`
`6. Notice of Proposed Rule Making, 64 Fed. Reg. 22750, 22756 (April 27, 1999)
`
`7. See http://www.ftc.gov/reports/privacy/privacy5.htm at 4.
`
`8. Notice at 2.
`
`9. See ESIGN Public Workshop, Proceedings (April 3, 2001) at 14 (Jeff Wood)("[C]ustomers are a little leery of e-commerce at the
`beginning stage of the relationship.").
`
`10. Furthermore, the Commission should appreciate that P3P technology in its present form, while deployed, is irrelevant to the matter
`of verifiable digital signatures.
`
`11. Identity verification also is only a secondary use of encryption key systems, which were designed to protect document security
`during transmission. Indeed, encryption key technology is not a fully secure means of parental verification. The key works well only to
`verify that a transmission has come from a particular computer on which the key is stored. It is nonspecific as to the particular user of
`the computer (e.g., parent or child) because anyone with access to the area of the computer in which the key is stored can use the
`key.
`
`12. Comments of Verisign Corporation, ESIGN Study, Comment P004102,
`http://www.ftc.gov/bcp/workshops/esign/comments/Verisign2.htm (March 16, 2001).
`
`13. Id. at 2, n.6, citing 146 Cong. Rec. S5216 (daily ed. June 15, 2001) (statement of Senator Wyden)("At the heart of these provisions
`is the concern - shared by many in the industry as well - that electronic communication, e-mail, is not as reliable or as ubiquitous as
`traditional first-class mail. Until advances in electronic mail technology eliminate such concerns and until the vast majority of
`Americans are comfortable using the technology of the New Economy, consent to use electronic records requires special care and
`attention.); see also Comments of the Cartoon Network et al., http://www.ftc.gov/privacy/comments/pauley.htm (June 11, 1999) at 7
`("[D]igital signatures impose a potential financial and technological burden on consumersJ. For example, Cyber-SIGN's biometric
`verification system costs $850 for 10 users, and 435 for each additional user. Users must purchase a special digitizing pad and
`pressure sensitive pen."). At the same time, technologies based on encryption key technology may be more affordable, but raise even
`more critical issues in terms of effectiveness and availability.
`
`14. ESIGN Public Workshop, Proceedings (April 3, 2001) at 31.
`
`15. See, e.g., Letter of March 27, 2001, to the Commission from Thomas J. Greco, Digital Signature Trust Co.,
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`http://www.ftc.gov/bcp/workshops/esign/comments/dstc.htm ("At the present time, it is premature to say how this requirement of
`ESIGN ultimately affects electronic commerce since the level of such commerce is relatively low and businesses are just beginning to
`deploy applications that address these issues. Systems are currently being designed to meet the consent requirement, but we believe
`it is far too early to say that any particular approach is being taken.").
`
`16. ESIGN Public Workshop, Proceedings (April 3, 2001) at 6.
`
`17. Id. at 32.
`
`18. Notice at 2.
`
`19. Home Box Office v. Federal Communications Commission, 567 F. 2d 9, 36 (D.C. Cir. 1977) ("[A] regulation perfectly reasonable
`and appropriate in the face of a given problem may be highly capricious if that problem does not exist. ").
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