 Welcome to Newsdesk on SiliconANGLE TV for Thursday, October 11th, 2012. I'm Kristen Folletti. Senator Rockefeller, Chairman of the Commerce Committee, announced yesterday they are asking for detailed information on the practices of data brokers that compile and sell information about consumers. What does this mean for companies targeted in this inquiry? Here with his breaking analysis on the data broker investigation is Wikibon chief analyst Dave Vellante. Welcome Dave. Morning Kristen. Rockefeller believes that consumers deserve to know what's being collected about them and how companies profit from their information. What types of consumer information do data brokers typically collect and how do they use that data? So the range of information that data brokers collect is pretty vast from financial information, oftentimes social graphs and buying patterns or more frequently buying patterns will get in there. All types of information on credit card history, net worth, things of that nature that start to become gray areas or cross the line in terms of things that would be considered private. Now of course there's regulated industries like financial services and healthcare and there are laws in place to protect consumers, but there's much more of a gray area that seems to be expanding of course as a result of the Internet. The Senate investigation represents the second congressional inquiry into the industry's practices this year. In July the bipartisan congressional privacy caucus began a housing query into data compliers which is ongoing and the Federal Trade Commission has been looking into the practices of about a dozen major data brokers. Why is this happening again now and do you think these investigations have merit or are they well founded or is this just big brother feeling like his toes are being stepped on? Well I think it's happening now because this seems to happen every 10 or 12 years. We had the email marketing crackdown about 10 or 12 years ago and before that you had the spam mail and so the do not call lists. These are frequent over the course of time that tend to track technology so the reason why it's happening now is the Internet and big data has come to for privacy is much more of an issue. We certainly hear it a lot with Facebook so that's really the why. Does it have merit? I think so. I think that Congress is their job to really try to understand these things. The issue becomes a lot of the information that consumers receive is beneficial to those consumers. They want to receive offers that are relevant to them so things like opting into various activities are considered good things by consumers. When we're on our smartphone and we're in New York City and we want to find a location we want the smartphone to know where we are. While I think this has merit I think that there's a fine line that the lawmakers have to walk between intruding upon the rights of brokers and others to use this information for the benefit of consumers and the rights of consumers to protect their privacy. The other thing I'll say is the good news here is that this is not a knee jerk reaction to a scandal. For example like Enron brought about Sarbanes-Oxley which oftentimes brings unintended consequences. So I think the good news here is that Congress has some time to be thoughtful to collect the information and hopefully make the right decisions. Senator Rockefeller sent letters of inquiry to nine different companies including the three main credit bureaus Experian, Aquifax and TransUnion as well as Epsilon and Datalogix just to name a few. What did the letters ask for and how have these companies responded to the inquiry? Yeah so this is an early inquiry. This is very common that Congress will do this. They'll send a letter which will basically ask and these letters ask what information they're collecting on consumers. So that's a starting point and that's kind of an obvious question. What do they know? And so these organizations are going to have to figure out what data they actually have you know as outside observers certainly Congress and we may think it's just easy for people to pull together that information at the click of a button but it's not necessarily easy to make sure that it's complete. So essentially Congress is asking for an inventory and audit of what's being collected and the response has been you know generally supportive. You know people are going to from a marketing standpoint say we welcome such inquiries. The inside baseball is they certainly don't welcome such inquiries. These inquiries are intrusive and believe me they will pretend changes down the road but nonetheless I think these data brokers are doing the right thing. They have absolutely no choice but to comply with Congress's requests. They'll have their industry advocates say that this is a witch hunt and things like that but this is inevitable. There's no way that Congress is going to back off from this. Once the Senate has information from these companies what do you think will come out of this investigation? What kind of action could they take if any? Well my opinion I think there is going to be an investigation around the regulated industries and the non-regulated industries and I think the regulated industries are pretty clear. There are laws on place maybe they have to be tweaked a little bit to deal with some of the expanding you know data graphs that people have but in general there are pretty good laws on place in place for things like health care and financial services. I think where it gets tricky is the unregulated industries and that's where I think it's really hard to predict but my crystal ball says that you will absolutely see changes in the way that this information is going to be utilized and I think one of the things you'll see is that consumers will get access to the information so that I think a big step will be to provide consumers in a portal for example where they can go in and look at information that's being collected about them and then the big question is okay what kind of restrictions will Congress put on place in terms of how that data is going to be used and that's very hard to predict but I would say that there will absolutely be some kind of consumer transparency and potentially even control over how that data is used. So how is this different from other privacy efforts initiated by the government? I think it's very similar and I mentioned before the you know the email laws and the do not call laws and the spam mail laws and things of that nature I think they started in a in a similar way people were concerned about abuse and so there's there there are similarities in that respect I think the differences are the massive amounts of data and the the diversity of data is so great and that's really what's different here the volume of data the different types of data of the complexity of that data makes it a much harder problem to solve. So what's the big data angle on all of this? The interesting thing about big data is a lot of times you don't actually need to provide that specific information so you know the classic example is the the case of Target that solicited a young pregnant teen who you know was through her searching patterns or other social patterns was you know tipped off Target that uh that she was pregnant they made an offer the father got all concerned and you know got very angry and then turns out the girl was pregnant now Target really didn't do anything wrong in that instance this is using mining data uh now as an example I'm using that but big data draws inferences from people's patterns from things that they do so you don't necessarily need a smoking gun in the big data world so the interesting thing will be how will Congress regulate the use of of data where it might be second or third hand data that's inferred upon to draw a conclusion about a probability of a consumer and that is really a lot fuzzier than okay you can't collect an email without an opt-in or you can't you know send or make a phone call to a home at you know 6 p.m. if somebody's on a do not call list those are binary those are black and white big data is a lot fuzzier do you feel there's actually the possibility of privacy on the internet well I think the notion of privacy on the internet is pretty much gone away I think there really is no privacy on the internet and I think it's again it's a balancing act between the consumer's willingness and desire to provide private information so that they get benefit you know versus the the need to protect consumers privacy as I said several times there are you know good laws in place around HIPAA and financial services and things of that nature but things are changing as I said the big data inference problem and so I think that the the notion of opting in to get some kind of benefit changes a little bit in the internet and I think I think organizations could be more transparent about that but I think in general you know this ain't your daddy's privacy you know policy anymore I think things have changed forever well Dave thanks so much for your time today we appreciate you joining us thanks for having me Kristen for information on news of the day and the latest breaking analysis stay tuned to news desk right here on SiliconANGLE.tv