Comment by Zeeks.com on the impact to a small business of the proposed COPPA rule.
QUESTIONS FOR COMMENT TO ASSIST REGULATORY FLEXIBILITY ANALYSIS:
The Children's Online Privacy Protection Act, passed by Congress last October, authorizes the Federal Trade Commission to develop rules for regulating data collection on commercial Web sites targeted at children. Specifically, COPPA requires Web site operators to provide notice to and obtain verifiable consent from parents prior to data collection and use from children under thirteen.
In addition to the collection and use of personal contact information, the rule also regulates the disclosure of personal information by the child through the use of any of the collaborative tools of the Internet. The ruleís definition of disclosure reads in part:
Verifiable consent from parents is required under the Rule whether the site operator actually collects and uses personal contact information of children or provides any of the collaborative tools of the Internet to children who may then misuse the feature and disclose personal contact information.
The Rule, as proposed today, makes it very difficult for a small, child focused web business to survive. For Zeeks.com, the three most problematic areas are its high compliance costs, reduction in traffic to the site, and the loss of its business in schools.
Collection and Use vs Disclosure
Zeeks.com is supportive of the concept of gathering verifiable parental consent prior to the collection and use of personal contact information for marketing or other business purposes. This makes sense economically since a business can weigh the value of each child customer against the cost of complying with the data collection rules.
Where Zeeks.com, as a small business runs into difficulty is in a situation where the business model is based not upon an economic value of each child as a potential customer, but upon a model where its ability to sell advertising is based upon broad demographics of anonymous individuals. This model is very much the foundation of the Internet and is the core of Zeeks.comís business model. Traffic is the basis of the economic value in most Internet companies today. Without high traffic numbers, companies like Zeeks.com cannot survive.
This proposed rule imposes the same high data collection costs upon businesses who in fact do not collect or use the personal contact information of children as those companies who do have a model that supports such costs.
It is our position that a child's use of collaborative tools on the Internet should be treated very differently than the collection and use of personal contact information from children by marketers. We believe these fun and educational tools can be made very safe for a child's use on a child's site through adult monitoring, filtering technology, enforcement of safety policies, and instructing children on Internet safety. Making access to these tools designed and built for kids difficult, is exactly the wrong thing to do to promote safety.
Collection costs are prohibitive
Zeeks.com has performed a detailed cost analysis of various methods of acquiring verifiable parental consent. This analysis envisions several possible methods of data collection. Zeeks.com, with only 6 months of operating history, used the experience of its parent company, Pierian Spring Software (which is also a small business with 25 employees) to estimate overhead and other business costs. We believe this analysis is conservative (it is reasonable to assume costs will actually be higher). After analyzing each potential collection method, we assumed that all of the methods would be made available and would all be utilized to some extent by parents to transmit consent. The methods analyzed, and their forecast usage as a percentage of all methods are:
The analysis shows that with the methods above in place, and at the forecast usage levels, Zeeks.com would incur annual costs of $244,545.00 to secure 200,000 new members (200,000 being the minimum annual new member rate required to remain viable).
The detail of this analysis is attached as a worksheet called "COPPA costs.xls" A few key summary points are as follows:
Reduced Site Traffic
The largest, and most threatening "cost" from an economic perspective to a small, start-up business is the dramatic reduction in site traffic that will result from the implementation of these verification methods. Zeeks.com has already implemented a fax based parental consent system for the chat rooms on Zeeks.com. Since Zeeks.com was launched in April, we have received over 80,000 members between 6 and 13 years of age who contribute to over 5M page views (hits) per month. In that same time period, only 2800 (3.5%) have gone through the consent process to participate in chat rooms.
Communication and creativity applications are the most popular activities for kids on the web according to a Forrester Research report published in December of 1998. If the consent requirements are applied broadly to Zeeks.com for the other collaborative and creative tools we offer such as e-mail (filtered for obscenity and based upon a "pal list"), web authoring tools (all pages reviewed by an adult employee before posting), discussion forums (all pages reviewed by an adult employee before posting), e-cards (obscenity filtered) then the result will be a huge reduction in new members resulting in a decrease in site traffic to no more than 200,000 to 300,000 per month. This is far below the level required to sustain Zeeks.com as a viable business.
The second unintended effect will be that the 80,000 kids who have found useful and safe activities at Zeeks.com will seek out these activities at sites that do not subject them to consent requirements. General purpose "portal" sites offer all of these collaborative and creativity tools without consent. None is required because these sites do not "target" kids. They also do not build in safety features. The clear result will be a decrease in real safety for kids online.
Schools cannot provide consent
Zeeks.com comes from a long and distinguished background of developing educational software products for children to use in classrooms in the K-12 market. As the CD-ROM business has declined, it made sense for us to begin to deploy many of the products to a web based delivery mechanism.
A perfect example is a project creation tool called Digital Chisel (DC). DC has been purchased by tens of thousands of schools nationwide and has been bundled by several major PC manufacturers for over 5 years. DC permits kids and teachers to create rich, interactive projects (web pages) and post them to our server, or to their own. Software is not covered by COPPA.
We have created a web-based version of exactly the same tool and make it available freely through the Zeeks.com web site. COPPA will make that model almost impossible to support. Where the use of the software was unregulated, COPPA now requires parental consent before the kids can do exactly what they can do freely without consent using software; build projects and post them to web sites.
Since COPPA makes no provision for teachers supplying the required consent, they will have no choice but to either eliminate collaborative web sites from their curricula, or go through the burdensome task of encouraging parents at home to go online and supply consent for each child, for each and every web site they wish to use in their daily lessons.
We know that teachers as a group are pulled in many different directions. They are struggling to make the best use of the new technologies that have been thrust upon them. COPPA is a new hurdle that will be very difficult to overcome in the busy classroom environment. Our nation has spent over $1B to wire schools and provide Internet access to over 90% of US public schools. COPPA makes the active, daily use of those new resources very challenging indeed.
Web sites that collect and/or use the personal contact information of children under 13 should accept that parental consent is a fundamental responsibility. The Commission has done extensive research and seems well on track in describing what methods are reasonable in collecting this data.
Zeeks.com recommends that a provision be considered that would be less burdensome when sites in fact do not collect or use personal contact information, but instead provide children with the collaborative and creativity tools that make the Internet such a wonderful new educational resource.
Zeeks.com suggests an approach that allows operators who target children and do not collect and use personal contact information to use a parental notification and opt-out provision for the use of the collaborative tools at their sites.
A parental notification and opt-out provision would be cost effective, even for small businesses, and would retain the economic incentive to continue to build and enhance the safety features of these tools, and new tools that will be invented in the future. In addition, a notification and opt-out provision will enable schools to easily incorporate collaborative web based activities such as pen-pal projects, and creativity projects like web page creation into their daily curriculum while retaining parental notification of their childrenís participation in these exciting activities.
Zeeks.com commends the Commission for its thoughtful investigation into this important issue and is grateful for this opportunity to comment.
Steven G. Bryan