In the not-very-distant future, consumers’ set-top boxes will allow them to pause live TV to answer the phone, speed through commercials and digitally record at least 30 hours of programming. The ‘smart’ program guide in their cable or satellite box will recommend other programs based on the type of shows the consumer has been watching. The viewer will even be able to order pizza, get a mortgage, or find a date.

On the other side, there will be an ability to target different advertisements simultaneously to different households. Ultimately, the cable and satellite industry, in a relationship yet to be defined, will customize the consumer’s television and ad viewing to specific areas of interest. But before the proliferation of these boxes, the industry must decide just how much one company can know about the consumer and what they can do with that information.

The Market Explorers’ Survey 2000 concluded 37% of consumers provide false information over the Internet to protect their privacy. TV, a medium more trusted by consumers, has a better opportunity to generate new revenues for the communications industry. But if a transparent privacy policy is not put in place, the consumer will not participate in iTV e-commerce, leaving the Canadian broadcast community looking for ways to pay for the additional iTV content – much like the dilemma of dot-coms today.

With the creation of an interactive relationship between consumer and advertiser, the value chain changes and therefore so too does the business model. The consumer will continue to pay, but whom they pay will change.

Today, the consumer buys from a retail outlet whose shelves are stocked by a manufacturer who, through mass advertising, persuades consumers they need a product. Now, imagine a consumer ordering a pizza via his cable or satellite box. In the most obvious model, the order will be sent to a local pizza maker. The pizza advertiser will pay royalties on that order to any one or all of: the broadcaster; the satellite or cable operator; a software licensee such as WINK; and any others who have inserted themselves into the value chain.

In this one transaction, the consumer has agreed to give some credit information, his name and address, likes and dislikes, eating habits, etc. The fragmented and therefore more privacy-protected way a consumer purchased his goods will now be de-fragmented and streamlined.

Will the cable operator or satellite provider have access to all this consumer data, or will there be partitions in place whereby the ‘what’ and ‘how much’ of a purchase is recorded by an operator, while the ‘who’ and ‘where’ are partitioned directly to a fulfilment house? What’s at issue is the appropriation of private facts.

In the U.S., privacy advocates are beginning to take notice. The Privacy Foundation, for example, recently launched a series of public complaints around how TiVo was handling privacy. Additionally, the (TV) Network Advertising Initiative has created a self-regulatory code around notice and enforcement. It is hoped that with a voluntary privacy code the industry can stay ahead of legislation. This code considers current legislation regarding children, e-mail, video rental, financial data, medical records, credit, electronic funds and other industries. However, its mandate does not yet include iTV.

Privacy in iTV is batted around on many committees in Canada, but it takes a back seat to discussions about value chain and delivery ownership. Canadian Digital Television, a non-profit organization looking at technical, regulatory and other issues around digital broadband, offers some hope but lacks a balanced membership. It needs to expand to represent the interests of advertisers, content creators, producers, new media, investors and other industries that will have a stake in iTV.

While there are many things we have yet to learn about e-commerce and the consumer in iTV, including value chains, new business models, technology and delivery, we do know the TV medium is most trusted by the consumer. The huge revenue opportunity this industry is looking at can just as easily be lost if the consumer perceives a misuse of this trust.

(Beverley Milligan is the development executive for the Interactive Broadcast Development Group at Ryerson Polytechnic University in Toronto. Her work brings together industry members and researchers in interactive broadband to formulate technical, business and content strategies.) *