RPT-Telecom firms mine for gold in big data despite privacy concerns

* Data from mobile networks is anonymised, pooled

* Telcos weigh up reputational risk vs. business opportunity

* Target markets include retailers, transport, governments

* Analysts see potential revenue in the billions

By Leila Abboud

BARCELONA, Feb 23 (Reuters) - Last year's revelations overthe U.S. tapping of phone and internet data gave telecoms firmspause for thought over whether they should sell their "big data"for gain, but the commercial potential could prove irresistible.

Although figures are scarce, analysts think selling data onmobile users' locations, movements, and web browsing habits maygrow into a multi billion-dollar market for the business.

Big carriers like Telefonica, Verizon,Orange and Singapore's Starhub warn thatthey are only just starting to test the waters and pledge tomarket only anonymous crowd information to protect customers.

They are also promoting their big data products as beinghelpful well beyond the realms of advertising - for credit cardcompanies wanting to detect fraud, for ambulance operatorsplotting routes to avoid traffic, and for public healthofficials responding to outbreaks of flu.

But while some carriers have decided to press on withdeveloping their data business since former U.S. NationalSecurity Agency contractor Edward Snowden's disclosures, othershave started pitching themselves as their customers' best alliesin seeking to hide from any prying eyes.

Verizon's Precision Marketing Insights product, which offersbusinesses statistics about mobile users in a given area, was incommercial trials with sports teams and billboard owners whenthe Snowden allegations hit. After fresh debate by topmanagement and the board on whether selling even anonymous dataon customers was a good move, the company decided to go aheadwith it, said Colson Hillier, a Verizon executive.

"Privacy is a hot button issue right now, but we think wecan take a leadership stance," Hillier said. "It's not areputational risk if you do it right and are pro-active incommunication with consumers and policy makers."

Other telecom companies took the opposite tack, castingthemselves as better guardians of customer data than internetcompanies like Google, which use it to targetadvertising.

Deutsche Telekom, for example, last year launchedan encrypted "Email made in Germany" service and a securecommunications link for small businesses to ward off hackers orspooks. "Protection of the private sphere is a valuablecommodity," its CEO said.

DATA TROVE

As they shift to treating customer data as an asset to bemined instead of a mere incidental to running networks, telecomoperators must tread carefully.

People are used to giving Facebook and Google theirpersonal information and generally accept that the trade-off forfree services is that their data is used to target ads. Butpeople could be irked if tracking extends into the real world,said a telecoms industry consultant who declined to be namedbecause of client sensitivities.

Surveys show people trust telecom providers more thaninternet companies to safeguard their personal data, althoughoverall confidence in companies was very low. In a pollcommissioned by Orange, 41 percent of respondents said theytrust mobile carriers to keep their information safe comparedwith 20 percent for social networks like Facebook or Twitter.

"All it takes is one mis-step on data monetisation for somecustomers to decide they don't want to stay with you," theconsultant said.

To collect the data, telecom operators place probes inmobile networks to capture the millions of records per daygenerated when people send texts, make calls and surf the web.The data is stripped of personal information then pooled so itcan be analysed for patterns useful for business or governments.It identifies a person's location to about 200 to 300 metres.

Privacy advocates and regulators say that if the data isanonymous and about groups not individuals, it is legal fortelecom companies to sell it.

Meanwhile companies are taking different approaches to userconsent. Orange collects data for its Flux Vision data productfrom French mobile users without offering a way for them toopt-out, as does Telefonica's equivalent service.

Verizon told customers in 2011 it could use their data andnow includes 100 million retail mobile customers by default,though they can opt out online.

More intrusive programmes that drive location-basedadvertising to people's mobiles usually require users to agreeand some companies offer rewards in loyalty schemes in exchange.

FINDING THE MARKET

In one project, Telefonica worked with Morrisons,Britain's fourth-largest supermarket chain, to study whereresidents of an area in southwest England did their food.

It parsed data on where shoppers at Morrisons' stores camefrom and did the same for nearby rival stores, so as to identifywhich households should be targeted for promotions.

Out of 11 million households in the area, Telefonica advisedMorrisons to send coupons to 400,000 of them, leading to a 150percent rise in store visits without a revenue drop-off thataccompanies some discount schemes.

"We spotted postal sectors where there was a genuine battleground between Morrisons stores and their competitors," saidPhil Douty, who runs Telefonica's Smart Steps. "This was themost fertile ground for their marketing efforts."

Smart Steps has dozens of clients in Britain, said Douty,and the firm will start pilots in Brazil this year. Telefonicaspeaks to regulators early so as to avoid a repeat of a flap inGermany last year in which data protection regulators slammedthe programme before it was even introduced there.

Yet turning a data trove into a product companies will buyis not easy for telecoms carriers, since they do not knowexactly what transportation, manufacturing, or travel companiesactually want in terms of data, telecom executives admit.

Some are turning to partners such as marketing specialists,advertising agencies or consultants like IBM.

Verizon's Hillier said the carrier is now in talks withadvertising technology companies and other possible partners tohelp with distribution and aimed to have a range of big dataproducts on the market in the second quarter.

German software specialist SAP is also in talkswith a number of telecom operators to have their data feed intoa centralised platform that businesses or advertisers would buysubscriptions to access. Revenue would be shared between SAP andthe telecom operator.