If you have AT&T’s gigabit Internet service and wonder why it seems so affordable, here's the reason—AT&T is boosting profits by rerouting all your Web browsing to an in-house traffic scanning platform, analyzing your Internet habits, then using the results to deliver personalized ads to the websites you visit, e-mail to your inbox, and junk mail to your front door.

In a few select areas including Austin, Texas, and Kansas City, Missouri—places where AT&T competes against the $70-per-month Google Fiber—Ma Bell offers its own $70-per-month "GigaPower" fiber-to-the-home Internet access. But signing up for the deal also opts customers in to AT&T’s “Internet Preferences” program, which gives the company permission to examine each customer’s Web traffic in exchange for a price that matches Google's.

AT&T charges at least another $29 a month ($99 total) to provide standalone Internet service that doesn’t perform this extra scanning of your Web traffic. The privacy fee can balloon to more than $60 for bundles including TV or phone service. Certain modem rental and installation fees also apply only to service plans without Internet Preferences.

It wouldn’t be accurate to say that paying extra gives customers "enhanced" privacy; paying those monthly fees that add up to hundreds of dollars more per year simply provides the same level of privacy customers would get from other Internet providers, or from AT&T’s slower DSL and fiber-to-the-node services.

AT&T says Internet Preferences tracks "the webpages you visit, the time you spend on each, the links or ads you see and follow, and the search terms you enter.” This helps AT&T serve ads targeted to each user based on that person’s interests. And advertisers are willing to pay more when they know their ads will be shown only to the people most likely to be interested in their products.

Because AT&T can see almost everything you do online, no matter what websites you visit, the company may be in even better position to serve targeted ads than Web behemoths like Google and Facebook. While Google apparently doesn't impose anything similar to Internet Preferences on its fiber Internet, the company's cable service is delivering targeted TV ads based on its customers' viewing history.

As a side note, AT&T's best pricing may not be available in cities where it doesn't compete against Google Fiber. In Dallas, where Google Fiber hasn't arrived, AT&T was charging $120 a month for gigabit service and still requiring the customer to opt in to Internet Preferences.

“AT&T watches everything”

Some Ars readers think AT&T has gone too far. "Google watches you use Google services, AT&T watches everything and only matches Google's price. Scumbag AT&T," Ars forum member arkiel wrote.

“A customer may receive an ad or a promotion on behalf of an advertiser—through an ad network placement on a website or otherwise,” an AT&T spokesperson told Ars. “Customers’ personal information is never given to that advertiser.”

The personalized offers don't just appear on websites, they also come "via e-mail or through direct mail," AT&T says. "If you search for concert tickets, you may receive offers and ads related to restaurants near the concert venue. After you browse hotels in Miami, you may be offered discounts for rental cars there. If you are exploring a new home appliance at one retailer, you may be presented with similar appliance options from other retailers... if you search for a car online, you may receive an e-mail notifying you of a local dealership's sale."

You can't opt out from AT&T's e-mail spam without paying the higher price, so worried customers should make sure not to give AT&T a preferred e-mail address. "Based on your consent to receive ads and offers through AT&T Internet Preferences, we will continue to send you marketing e-mails related to the program. You may opt-out of receiving these e-mails by choosing not to participate in the AT&T Internet Preferences and switching to GigaPower Standard pricing," AT&T says.

AT&T describes Internet Preferences as “opt-in,” but its website advertises the lower price without mentioning the traffic scanning unless you click “See offer details.” Even then, you have to click another link to find out what Internet Preferences actually is. Take a look:

















Is it legal?

US laws against wiretapping have exceptions for cases in which there is “consent.” If Internet Preferences was ever challenged in court, the question would be whether AT&T’s disclosures and opt-in system provide enough information to users.

“There are always questions about consent being willful and informed,” Electronic Frontier Foundation (EFF) Senior Staff Attorney Lee Tien told Ars. “The reason legally it's important is under federal law it won't be unlawful for them to look at this stuff if you consent to them looking at it.”

Federal regulators could examine the program to see whether it breaks privacy laws, but “AT&T has tried very hard to cover its bases” by disclosing the basic parameters of the data collection, Tien said. “I think they’ve done a decent job… they would have an argument that they have made reasonable disclosures. I think that someone challenging it would have arguments that they didn't really get consent in the right way.”

AT&T’s website certainly pushes customers to opt in to Internet Preferences. Even if you read the disclosures and understand exactly what Internet Preferences consists of, declining the offer makes Internet, TV, and phone service significantly more expensive.

To find out exactly how much it costs to opt out of traffic scanning and personalized ads, you have to go through AT&T’s checkout process. GigaOm’s Stacey Higginbotham tested this last month and found that for bundled services including TV, the privacy fee was actually as high as $66 per month.

Prices change over time. When testing this out directly last week, we found price differences ranging from $29 to $62 a month—up to $744 a year. But it's actually worse than that. Only service with Internet Preferences can be hooked up without installation or activation fees. Declining Internet Preferences thus adds another $49 or $99 in up-front costs.

Additionally, service with Internet Preferences comes with a three-year price guarantee (with a one-year contract required). There is no such guarantee without Internet Preferences, so AT&T could raise your bill whenever it wants.

One Ars reader viewed the lack of a one-year commitment as a positive: "[T]he surcharge also eliminates the annual contract requirement," TexasFight wrote. "I refuse to sign up for GigaPower for a year at a time, so I pay the surcharge." Still, the pace at which Internet and TV prices rise makes three-year price guarantees attractive to many consumers.