Charter Communications, one of the nation's largest ISPs, plans to begin eavesdropping on customers' web surfing activity, to help web advertisers deliver targeted ads.

In letters being sent to some of its 2.7 million high-speed internet customers, Charter is billing its new web-tracking program as an "enhancement" for customers' web surfing experience. The letters were first reported by a BroadbandReports.com user on Sunday. The pilot program is set to begin next month.

"Browsing the web can become more like flipping through your favorite magazine, where you see ads that are appealing to you and enhance your enjoyment and the utility of the experience," the company's letters read.

Charter's system appears to be similar to a targeted advertising system in the U.K. developed by Phorm, a London company with alleged spyware roots.

Phorm is trying to strike deals with several large British ISPs to install a targeted advertising system to track the web-surfing patterns of broadband customers. Using modified browser cookies, Phorm's system would use surfing patterns to deliver closely targeted ads, and, the company claims, protect against online scams like phishing.

However, Phorm's proposal has set off a storm of consumer protest after it was revealed that British Telecom ran secret trials on thousands of broadband customers. Phorm's opponents include the inventor of the world wide web, Sir Tim Berners Lee, and several prospective advertisers. The U.K. government has said the system would likely be illegal unless explicitly opt-in.

Charter plans to test its program in four markets: Ft. Worth, Texas; San Luis Obispo, California; Oxford, Massachusetts; and Newtown, Connecticut, according to Charter Vice President Ted Schremp.

He described the system as capable of noticing when a user visits Honda.com or Toyota's website, for example, so when the user visits unrelated sites, he or she will be treated to automotive-related ads.

The company is aware of the privacy and transparency concerns, according to Schremp, but believes the program will benefit its customers and its own bottom line.

"The fact that we sent customer notification letters is indicative of the approach we are taking overall," Schremp said. "This is just another example of leveraging the latest technology."

Charter is partnering with a company called NebuAD to build profiles of its users. NebuAD will share the behavioral tracking results with third-party advertising networks like DoubleClick. Users can opt out of the system, but have to give their full name and address to get an opt-out cookie. The process would have to be repeated for every browser on every computer in a home to block the service, and would have to be reset if cookies are ever deleted.

Charter is entering tricky territory with the program, which effectively turns the ISP into the ultimate third-party tracking network. Conventional ad delivery networks like DoubleClick use a third-party cookie to build profiles of users across different websites, but can only track visits to sites that serve the company's ads. In contrast, Charter will know every URL its customers visit.

Charter's move comes at a sensitive political moment for ISPs, as Congress and the Federal Communications Commission revisit net neutrality – the idea that ISPs should treat all content fairly and without interference.

The move also highlights the increasing determination of ISPs to carve out new revenue streams, as they discovered that the traffic-delivery business –- simply being a dumb pipe –- isn't as lucrative as being a content provider. ISPs like Earthlink and Verizon are now redirecting requests for nonexistent domains to pages with ads, while others are talking about ways to charge companies like YouTube higher fees to put their content on the fast lane to subscribers.

But Schremp says Charter isn't affecting other companies' websites or inserting their own ads, and is instead benefiting the ad networks by helping them target customers better.

"We don't see it as related to net neutrality," Schremp said.

Charter says it will not be tracking personal information, such as medical websites. Schremp said he did not know how long surfing histories were stored by NebuAD, but said it was long enough that the company's profile of customers can learn and evolve over time.

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Correction: The original version of the article inaccurately described some aspects of Charters' plans, based on a misreading of the company's descriptions of the program. Threat Level regrets the error.

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