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>> this week "the communicators" looks at the fast group of apps from mobile phones and some of the issues raised by them. our guests are julie brill and california congresswoman mary bono mack. >> host: well, recently the federal trade commission issued new guidelines when it comes to apps on mobile phones, and joining us is federal trade commissioner julie april as our -- julie brill as our guest on "the communicators." commissioner brill, first of all, what were the guidelines that were issued by the ftc, and why now? >> guest: so, um, the guidelines are designed to inform the app community, and, of course, it's a very diverse community. there are lots of different players in the mobile app space. designed to inform them that there are laws that apply to them in the consumer protection and privacy realm and to help them figure out how to insure

that their products are in compliance with our laws. so that's the overall goal of the guidelines. why now? the app economy is booming, as everybody knows. there are many, many consumers who are using apps on their smartphones, and in particular kids and teens are taking up apps in droves. um, apps have a unique ability to collect information, very detailed information about consumers, um, geolocation, they can access content from the phone such as contact lists, user id, um, all sorts of information that require careful thinking by app developers. so as this economy is booming, as there's a tremendous amount of innovation in this space, we want to insure that the players understand that there are consumer protection laws that apply to them. >> host: now, these are

guidelines, or do these have the effect of law? >> guest: oh, no, no. these are guidelines. these are designed to inform the app community, app developers, third-party service providers, third-party players, the app stores, everyone in the space about the types of, um, things they should be thinking about to insure that they are in compliance with the law. and, frankly, we think that many of the aspects of our guidelines will help them produce better products that engender consumer trust. >> host: well, julie brill, if an app maker, an app -- yeah, an app maker is asking for contact lists or saying you have to have, you know, by downloading this app you have to give us your contact list, who you've called, your e-mails, and you agree to that -- >> guest: right. >> host: -- what's the purpose of getting that information? what's that company going to do with that information? >> guest: well, that's one of the things that we're asking the app developer to think about.

so you're raising a couple different issues. let me unpack that because the first point is that, um, consumers and parents who are downloading apps for their kids need to understand what kind of information is collected and why. and it's very important that this is, um, made clear to consumers before they download the app because once they download the app, information collection can start to happen. so one of the first and most important points that we make is, um, be clear to consumers up front either in the app store or on the landing page what information you're collecting and why. then the other point, part of your question is to, um, we are trying to encourage app developers to really think about what information they truly need to make the app functional. so, for instance, if you're playing a game, do they really need to collect geolocation information, precise information that will track the consumer if it's aggregated and collected,

can aggregate the consumer as she passes through the world the entire day and for all days? so this information, what information is really needed to make the app functional, who else should see it, in other words, should access be limited? um, how long do you need to retain it? and when you're done with it, what are you going to do with it? so those are the kinds of questions that, basically, go into a perspective about privacy and data collection that we call privacy by design. you can leave aside the fancy name and just say we want the app developers to be thinking about this up front. >> host: well, the problem is, though, from some perspective is that if you don't allow that information to be shared, you can't download the app. >> guest: you might not be able to. but to the extent this information -- short answer, you're right. the consumer will then, though, once she knows what information

will be collected and for what purpose and who will see it, she'll be able to make an informed choice as to whether or not she wallets to download -- she wants to download the app. and it might be the case as one very recent study by pew demonstrated that when consumers understand how much information is collected by apps, they have a tendency to not download them. so this kind of information, this truthful, transparent information about data collection practices, may have an effect on app developers who will then be able to think, well, if we have to disclose all this and we're afraid consumers might not download it, let's think about where -- whether we really do need all of this data. >> host: are all of the ftc guidelines dealing with privacy issues? >> guest: so the new guidelines are broken down into really two parking lots. one is privacy. the other aspect is really just about truthful advertising. to make sure that the app

community understands that they are marketing a product, they are often making promises to consumers or telling consumers that their app will do something, and they need to be able to insure that every claim that they make about their app is truthful. so just as one example, we recently did a case involving, um, b an app that claimed if you held it up to your skin, it could treat acne through light emission, and the app developer was unable to substantiate that claim, and that's a problem in truthful advertising. so we just want to make sure the app community understands that when they say their app can do something, they have to be able to substantiate that. >> host: prior to taping this show i went on my phone and tried to download an app, and it was for a simple flash light. but they wanted to know location, they said they would have location, contact list, etc., etc. what would be the possible purpose besides marketing of

that application knowing where i am, who i am and who i'm calling? >> guest: well, um, i think that there probably is not a purpose that is, um, related t to the app -- related to the app functionality per se. but if the app developer were here sitting with us, i think the app developer would say, listen, we provide that app for free. we have to be able to monetize our effort in some fashion. so what we do is we provide data for the purpose of advertise, and we may help others advertise to you, or we may advertise to you or some of our service providers may advertise to you. the most important point, though, is that you as a consumer understand that that's going to be happening. in other words, if all this data's going to be collected for the purpose of providing advertisement to you, targeted advertisement to you, that you are okay with that, and you'll download the app knowing that. >> host: julie brill, are you getting a lot of consumer complaints at the ftc about apps and privacy?

>> guest: um, we get complaints and concerns about, um, all sorts of activity online. privacy is something that is certainly growing in consumers' consciousness, and we're starting to hear a lot more about it. but privacy is also one of those issues that consumers may not understand as easily as they would, for instance, if they bought a product and were unable to get aefund, right? i mean, there's some interactions that consumers have with businesses that are very obviously, potentially problematic, and we hear about those in the debt collection area, telemarketing scams, things like that. but when it comes to privacy, consumers don't always have all the tools that they need to truly understand what's happening with their data collection. but, for instance, what you experienced this morning when you tried to download the flashlight app, consumers are wondering why is all that information needed, and should i download the app, and what can happen to it.

so we are standarding to hear a ground-- starting to hear a groundswell of concerns about what's happening with data, but i don't know that it's in the same way that we see complaints about scam artists. >> host: the ftc has also been investigating the information marketing, correct? you've also been looking into the people that sell this information and where it goes? >> guest: so, for instance, data brokers? yes. we, um, have in a report that we issued several months ago we have highlighted some concerns around the data broker community. and data brokers are entities that collect vast amounts of information about all of us both online and offline. compile them into profiles about each of us and then sell that information for various purposes to be used by various entities for marketing, sometimes to make eligibility determinations for

things like credit, insurance, etc. , and sometimes for other purposes. we, i in particular as one of five commissioners, but i think the agency as a whole has expressed concern over whether consumers really understand what's happening in this industry. um, we think that data brokers, um, some of them actually provide to consumers information about what they do, but consumers have no idea who they are because they're not interacting directly with consumers. they're gathering the information and selling it to third parties, and they don't really interact with the consumers, so consumers don't know who they are, how to find out what their data collection practices are and how to determine what the data -- what information the data broker has about them and whether or not it needs to be corrected. so there are lots of transparency issues that we think need to be addressed in this data broker industry. >> host: commissioner brill, if

an app maker disregards the guidelines, is there a stick at the end of that? >> guest: um, if an app maker disregards the guideline, there's no -- we're not going to bring an enforcement action against them simply for disregarding the guidelines. the guidelines are best practices. if they're followed, an app developer, app maker will really be on the road towards not only complying with the law, but we think, also, as i said, engendering consumer trust which will help them with their marketing and with the growth of their, of their product. if some of the, um, elements of the guideline, though, are not followed, an app developer could find themselves under our scrutiny because they might cross the line into an area that does violate the law. and so it's not just, look, if they don't follow the guidelines, okay, it's not that we'll bring an action against them right away, but not following the guidelines means that they could run into trouble

down the road. >> host: do you think that the laws regarding privacy are succinct enough or clear enough or modern enough, or would you like to see other action by congress? >> guest: i believe and other of my colleagues believe that congress should enact a privacy law here in this country. i think that we have good protections, but we could have better protections in this country, and especially if technology has been advancing so rapidly. it's time to be clear about what the rules of the road are. we do the best we can. we issue guidelines, we do education, i go around to businesses all the time and speak, we do law enforcement, we issue reports. but at the end of the day, i think a law would provide clearer rules of the road for everybody which i think would benefit business as well as consumers. i also think there's some particular laws that congress could act in general to an additional -- in addition to general privacy laws, for

example, the transparency aren't data broker practices we discussed a few minutes ago. >> host: how does the ftc work with the ntia, congress, etc., when it comes to privacy? who takes the lead? >> guest: um, we do what congress tells us to do. congress has given us a very expansive law dealing with privacy. it's, um, an unfair and deceptive acts and practices law is the general, um, law that we enforce. we also have laws in particular areas that we enforce involving children's privacy, financial privacy, some medical information, and when i said financial, it's in some context. some medical information in some context. so, um, we are very much in privacy and in many ways we at the federal trade commission are the nation's leading privacy law enforcement entity. the fcc has a very important role when it comes to the carriers. and when it comes to other

entities in the mobile space. so we work with our sister agency on these issues. >> host: and would it be possible to have a dual system where, okay, if you want this app, you can pay a buck a month for it, and we won't track you, or you can get it for free, and we get your information? is that in our current world? >> guest: i think it exists in our current world. i mean, i, you know, amazon's kindle to begin with, there are lots of other, um, entities that say we will target you with advertising, you know, for one price, maybe free or a lower price, but if you don't want to be advertised to, here's what the product will cost you. i think we may move into an app world that is more as long as the disclosure is clear to consumers, as long as it's up front and as long as the type of

data collection that we're talking about isn't so invasive that it really requires extra affirmative consent by the consumer. as long as what we're talking about is sort of the normal tracking for the purpose of targeted advertising, for instance, that might be something that, um, we'll be seeing relatively soon. >> host: if you would like to read the guidelines, go to ftc .gov. they are published online at the federal trade commission's web site. julie brill, one of the democratic commissioners on the federal trade commissioner, has been our guest for the first half of that "the communicators" coming up next, representative mary bono mack who is also looking at this issue. and now joining us as we consider our conversation about apps is representative mary bono mack who is the chairman of the commerce, manufacturing and trade subcommittee for energy and commerce committee, and, representative bono mack, you just held a hearing recently

on apps. what was the point of your hearing? >> guest: well, the point was to make sure we explore what's going well in this area. there are so many jobs that are being created there, we want to make sure any policies we put forward in washington don't squash a blooming industry, a blooming, you know, ten years ago, fifteen years ago, nobody thought of this. it's a relatively new industry that has been unleashed because of great ideas, and we certainly don't want the government to come in and i do that. >> host: and what were some of the problems that you saw in this area that you'd like to address? >> guest: you know, one of the biggest problems is the work force, that they're still looking for more and more people to move into this industry to develop apps, to work on creating apps, all that goes into it. basically, that's the biggest problem, i think, the fears people have, of course, are somehow that we're going to in washington, we're going to decide to come in and tell everybody how to do their business and not to do their business and hurt a growing business. but the only real fear was, you

know, work force issues. the rest of it is nothing but optimism. they're recognizing there's so much growth in this industry, that people are more and more turning to apps. i used the example in the hearing sort of as a lighter moment. the other night i was baby sitting my grandson, and he started to dry. i went right to the -- he started to cry. i went right to my ipad and tried to find the app that would soothe my baby. >> host: were you successful? >> guest: he was not going to have any of it. if there's a problem, there's an app on the market that we should go look for and see how good it is. that was what was very exciting about the hearing is that people are very optimistic about the growth in this industry. >> host: well, the name of your hearing was where there's economy or something like this? >> guest: where the jobs are -- >> host: there's an app for that. >> guest: right.

>> host: do you know how many people or what this contributes to our economy at this point? >> guest: i know the projected growth is that it's going to be a $100 billion a year business by 2015. projected, again. but, you know, that's -- i don't know if that's a target good number or whether it's going to be higher than that because, again, people are more and more and more adapting to the fact that there's an app for anything. you know what is most amazing is truly if you think of something and you go look for an app for it, somebody's probably a few steps ahead of you already, and it's already on the market. but more and more people are going to turn to this, and i think a lot more software developers are going to recognize that the mobile app platform is the logical praise for people -- place for people to go. >> host: in your opening statement, you said nearly 400 million apps were downloaded last christmas eve and christmas, on that day alone worldwide. so many of the apps are free. how are the app makers making money? >> guest: well, you know, i think that's a good question to

ask them. i think that there are various business models out there. some probably aren't making money, some are perhaps losing money. i think one of the big questions that congress is going to ask is, you know, is our privacy and our data how you're monetizing your app? and, you know, representative markey brought up a bill that he has now looking at privacy in the mobile app space, but that is one of the questions that you do have to ask. nothing's really free, what are we giving up for a free app? but many are making a lot of money. if you look at the huge successing of something like zynga, anybody who plays words with friends knows, for example, that zynga is a hugely successful company. but i think there's various business models that they've all used to become successful. >> host: um, representative mary bono mack, we talked with julie brill earlier, and -- from the ftc, and she talked about their new guidelines, and so many of them deal with privacy. have you reviewed those guidelines, and what are your

views on them? >>ing well, i think the real decision between the ftc and the congress is how much of it should be voluntary or industry-based, how much should they self-regulate or how much should the congress step in? i think there's always a pressure that the congress can put on the voluntary guidelines that industry uses, so, and, i think the ftc is constantly evolving, too, with their viewpoint on privacy. i think over the past year or two we've done a very good job of sort of slowing the need to regulate in the space, and i think we've proven the case that we can stifle innovation if we come in too heavy-handed. so i appreciate that the ftc has taken a sort of this approach that let them self-regulate, let's give them guidelines to follow, but, you know, industry themselves will tell you, tell us that they also know that it's in their best interests to provide something for the consumer that also doesn't go too far. so the real issue is how much of it is guidelines, how much is

self-regulated or how much is heavy government regulation. >> host: what's your philosophy when it comes to pryce issues? >> guest: well, to move slowly. there are a lot of things, i know we've talked about this before, there are a lot of things -- i called it last time i was here the yuck factor. it's gone too far. but to this day it's still, you know, the american consumer is recognizing often times they're giving up their privacy for convenience. the consumer is choosing, again, you know, in many of these cases and a lot of these apps specifically, right off the bat will say in order to proceed further you need to, you know, enale your tracking d.c., are you okay with that, and the american consumer will say, yes, because i want this app so bad ri, it's going to make my life better. i think the congress, if we step in and stifle innovation before any harm is done to the public, my fear is we can hurt a

struggling economy further if we're not careful. >> host: last week on this program we talked with your fellow energy and commerce committee member joe barton, and we talked about the need or potential need for a more comprehensive telecom rewrite or privacy bill. what are your viewpoints on that? >> guest: well, you know, joe barton's a great member of the committee and, certainly, former -- you know, his term as chairman taught him an awful lot, but i think in this space joe tends to be a lot more heavy regulatory than i believe is wise. and, you know, certainly as a california member i care about california companies and so much of thissic novation -- innovation is driven out of california. perhaps i hear more from these companies and the start-ups who are saying don't regulate in this space. i think, you know, joe barton tends to believe that some things are perhaps technologically feasible when i'm not sure that they are. so these are questions and good

reasons for committee hearings and discussion amongst ourselves as members. >> host: if -- how would you grade the health of the tech industry today? being from california? >> guest: oh, i would grade it as extremely strong and growing. again, if we can meet the demand of the people who are looking for these apps developers. yesterday i asked a very important question, are we headed towards a bubble, sort of another tech bubble, are we risking, this is just too good to be true? and there's pretty good unanimity that, no, this is entirely different. this is a strong, robust economy that is developing and people are optimistic that it is a solid economy, and i believe that to be true. >> host: last time we talked with you you were holding hearings about the sony, the playstation, um -- >> guest: the data breach. >> host: the data bleach. >> guest: yes. >> host: what's the status of that? >> guest: it's a work in

progress. unfortunately, you know, it should be moving, in my view, quicker than it is. every week there's a new breach, and in my view there's more reasons to bring the consumer onboard, to have the consumer be a part of the process of stopping these data breaches. but in the congress there's still some give and take. i've had to sort of, you know, weave through i a little bit of the personalities within congress to find the right bill, and i think we have that right bill. but for a lot of members still they question the need for one federal regime or one federal law as opposed to all of the different states having their individual patchwork laws. this is probably one of those examples that something's going to have to happen that people are, you know, we're proving why we're trying to pass this bill before some lawmakers get us. >> host: do you see cybersecurity coming back in the next congress or potentially in the lame duck session? >> guest: well, i think the issue of cybersecurity's here to stay.

i think it's the future of national security and our protections. the issue specifically on the table right now, i think, is going to be around a little bit longer yet. i don't know whether it'll be a lame duck session. i think in the senate there certainly is a lot of debate and discussion on how we move forward. in my view, you know, i support senator mccain, his there philoy that the best way to do this is not to strap private industry to the government, for the government to decide and to mandate what technologies are. because one thing for sure, the government, and especially the congress, tends to be much slower in this space than the private industry. and if government is already, finally passing what is antikuwaited and sending it out into the private market, i mean, it's useless. it actually can be a problem rather than a solution. >> host: representative mary bono mack is chair of the commerce manufacturing and trade

subcommittee, republican from california. when it comes to children, is that a different -- do you view privacy legislation, any type of tech legislation differently or not? >> guest: well, we all do of course. we all agree that the children, our children need to be protected differently. the problem is, for example, with facebook. let's take facebook as an example. when we talk about trying to regulate differently for children, we have to recognize that children are often given tools to participate as older children or as adults by their parents. so we're trying to prevent a problem that is already being, you know, circumvented by parents and parental controls that parents are saying i think this facebook tool is so useful for my children, i'm going to help them get onboard. and we're trying to establish, you know, members of congress, some are saying we need to change the age when parents have

already said they reject that. so i think there's -- the problem here is to ask what are we stopping? i know there's a brand new tool coming out, i guess toys r us has a brand new tablet designed for children, and, you know, we should look at it. are there harms that are potential for children, or is this actually a wonderful tool for kids. and if congress becomes too heavy-handed, are we preventing useful new quites like this -- devices like this tablet from coming to the market in. >> host: recently, there's been some articles in the paper about the data sellers, the data brokers, taking this information from apps or whatever and then selling it. do you think -- do you agree with looking into where that information is going? >> guest: i, i have a, practice, a little bit different philosophy. i think every piece of data we put out on the internet is being collected many places anyway, and i think the consumer should always be very careful about

what they're willing to put out there. data brokers who sort of build the databases and combine all of the data and put it together, one does have to ask, you know, there a healthy purpose for that or not. but, again, to me, the consumer needs to recognize if you're putting it out there, somebody is collecting it, period, the end. whether it's a data broker or whether it's an individual app, and, you know, if the consumer cares, they should educate themselves about what might happen to their data and be careful about what they put out there. >> host: if republicans retain control in the next congress and you remain chair of your subcommittee, where -- what type of issues would you like to look at in the next congress? >> guest: well, again, job creation in the space that we're talking now, you know, apps are, i think, a very exciting place to go, as i've said. it's almost as if somebody invented the microwave oven in the app space, but there are a million offshoots of a microwave oven that