Multiple American ISPs are sharing customer data with outside firms that deal in so-called behavioral ad targeting, and according to one of these firms, the Silicon Valley-based NebuAd, roughly 10 per cent of all US web surfers are affected.

These ad companies, which also include the Sonora, California-based Front Porch, won't say which ISPs have adopted their services. But two internet service providers, the Georgia-based Knology and the Sprint-spin-off Embarq, admit to using such platforms on a test basis, and according to multiple users who've posted their stories to Broadband Reports, NebuAd is tracking data on WOW!, an ISP serving the Chicago area.

Using deep-packet inspection hardware - similar to technologies used by anti-virus vendors - NebuAd tracks the search and browsing activity of net surfers. But it says this data is never matched to personally identifiable information.

"With a one-way hash, we turn your IP address and other data into an anonymous profile, and we use that to see if you qualify for innocuous categories," NebuAd CEO Bob Dykes told us. "We can track someone looking for a luxury car, not just a car - someone searching not just for travel but travel to the south of France or Las Vegas." NebuAd then uses this information as a means of targeting ads. And naturally, the ISPs take a cut of its profits.

Dykes - once chief financial officer at Symantec - also says that ISP customers are clearly notified before NebuAd begins tracking their behavior.

"We require our ISPs to give notice to the user directly, and we also allow for an opt-out. Our contract [with ISPs] has a paragraph that says we require direct notification...It says that 'Advertising that you may see may be based on your online activity, and you can opt-out.'"

He is adamant that a paragraph posted to an ISP's website or buried in its terms of service does not qualify as direct notification. But Knology - which is testing NebuAd in "multiple cities" - notifies customers with no more than a paragraph posted to its website.

"We are engaged in a trial with NebuAd," said Tony Palmermo, Knology's vice present of marketing. "We go through all the technical processes needed to support the [US] Privacy Act - to uphold the spirit and the letter of it. There is an opt-out, and it's on our web site."

When asked if the ISP should do more to ensure customers are aware of the practice, Palermo said "We're still in that test mode. Long term, we don't know how that will play out."

NebuAd declined to comment on Knology. "I'm not going to talk about any particular ISPs or acknowledge who we work with," Dykes said. "But I will say that if we hear about an ISP that isn't following the contract, then we will look into what actions we can take to enforce the contract."

Ten per cent of all US net surfers

As reported by The Washington Post, NebuAd is tracking data from roughly 10 per cent of all US net surfers - though the company has already signed contracts that would broaden this scope.

"We cover about 10 per cent today," Dykes told us. "But our contract could reach more than that."

Front Porch offers ISPs a service similar to NebuAd's, but it reaches little more than 100,000 US net surfers. Other operations that appear to be working on similar services include Adzilla and Project Rialto, a "stealth company" created by Alcatel-Lucent, but these firms did not respond to our interview requests.

Yes, Front Porch and NebuAd are also doing something similar to Phorm - the behavioral advertising firm with controversial ties to three British ISPs: BT, Virgin Media, and Carphone Warehouse. And like Phorm, they're quick to play down the controversy.