BT opts not to deploy Phorm behavioral ad system

BT says it wants to invest in broadband technology instead but is still interested in Phorm's Webwise

BT will not deploy a controversial behavioral advertising system from Phorm, but said it is still interested in the technology, the company said Monday.

BT, the U.K.'s largest Internet service provider with 4.8 million broadband subscribers, said it will continue to monitor the experience of other ISPs that are working with the Webwise system from Phorm, which is based in London.

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"Given our public commitment to developing next-generation broadband and television services in the U.K., we have decided to weigh up the balance of resources devoted to other opportunities," a BT statement said.

Advertisers and marketers have high hopes for behavioral advertising systems, which monitor a person's Web browsing in order to serve targeted ads. The rates charged for those ads can be much more since companies know they are reaching consumers that may be more receptive to their products. ISPs can also shared in the revenue.

However, behavioral advertising has been fraught with privacy and data security concerns. Whether consumers should have to opt in themselves, or be enrolled automatically by their ISPs, has also been an issue.

Phorm determines what people are interested in by examining their Web traffic, tracking them with identifying numbers stored in browser cookies. The browsing habits of each number are associated with categories of interest, which advertisers can then place ads for. While many Web sites or advertising networks track surfers in this way, Phorm's strength is its ability to track every site visited. The company maintains, however, that its system is designed so as to not retain personally identifiable information.

But the privacy concerns have been too great to overcome in some areas. Nebuad, a U.S.-based rival of Phorm, withdrew from the market last year after ISP partners decided against using its behavioral advertising system.

Earlier this year, the European Commission pressed the U.K. government to provide information about Phorm after concerns that the system may violate European regulations.

BT did three trials of the Webwise system, but ran intro controversy after it was found the company did a limited trial of the system without consent of customers in 2006 and 2007. The latest technical trial of Webwise started about a year ago but the results have not been released, according to a BT spokesman.

Without mentioning BT, Phorm said in a statement that it would help other U.K. ISPs move toward deploying its system as well as looking for other opportunities outside the U.K.

"We have already minimized our dependency on the deployment by any single ISP or in any particular market," the statement read. "In addition to making excellent progress in South Korea, we are engaged in more than 15 markets worldwide including advanced negotiations with several major ISPs."

Phorm and Korean ISP KT said in May that KT would undertake a market trial of Phorm's technologies.

Carphone Warehouse, another major ISP that recently acquired the U.K. activities of Tiscali, is considering deploying Webwise but has not set a schedule, according to a spokesman. The company has about 4.25 million broadband subscribers.

Virgin Media, which has 3.8 million subscribers, said it is talking to Phorm as well as other companies about behavioral advertising systems but has no deployment plans, a spokesman said.