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New privacy rules mean some companies will sue the government next year, report says

New regulations limiting how telecommunications companies can collect and use customer data are coming, and the uneven application of those restrictions will lead some companies to sue the government, says a new report from Forrester.

"2017 will be a year of legal battles — between the internet giants and against federal regulators — while the promised consumer protections will fall short on enforcement," said Fatemeh Khatibloo, lead author of Predictions 2017: 6 Ways Privacy Will Rock Global Business, scheduled for release on Tuesday.

At issue is how different regulatory authorities determine how different kinds of companies are legally allowed to use customer data. The distinction is worth billions of dollars.

Last Thursday, the Federal Communications Commission voted to severely limit how much customer data that cable and telecommunications companies like Comcast, Verizon and AT&T can share with advertisers. The new rules will force those companies to get permission from customers before selling sensitive personal information — like the websites you visit and devices you use — to advertisers.

While privacy advocates declared the ruling a victory, carriers argue that the FCChas created a double standard, since internet giants like Facebook and Alphabet's Google are under no such data restrictions because they are regulated by the Federal Trade Commission.

A huge amount of money is at stake. Digital ad spending is expected to top $103 billion by 2019, and the carriers are unlikely to just walk away from that without a legal fight, Khatibloo said.

Verizon and AT&T are in the process of acquiring Yahoo and Time Warner, respectively, and the potential for ad revenue is one of the primary rationales behind both deals. The FCC rules complicate those plans.

Not just the US

Ad tech companies are also facing similar restrictions in Europe, with the new European General Data Protection Regulation requirements scheduled to come into effect in 2017.

The regulations prohibit companies from tracking users and serving up ads without first obtaining consent. A European citizen can be in the U.S. and a company has to protect its data as if it were in Europe, according to the regulations.

"Most American companies don't think this European law is going to effect them, but in reality it does," said Khatibloo. "By the end of 2017, the ad tech landscape will have many fewer logos."


Staying a step ahead of regulators, marketers will adopt even more so-called surveillance technology to further blur the line between people's online and offline behavior in 2017, said Khatibloo.

All the of the bits of information people generate as they click around the internet are collected into dossiers that marketers use to deliver highly targeted ads, and they are getting better at it, said Khatibloo.

"The online ad world has been chipping away at people's ability to keep their online and offline habits separate for years because marketers love the idea of one-to-one marketing and believe hyper-targeting is the key to better return on investment," said Khatibloo.

New technology, and the fact that most people now use many different devices, has made it easier than ever for companies to build a detailed profile of an individual so they can target them with ads, said Khatibloo.

For example, marketers embed ultrasonic pitches in TV ads — which devices can detect but humans cannot hear — to send browser cookies to smartphones and tablets while the ad is playing, without them even knowing.

"In 2017, there will be a massive surge of these technologies as well as a flurry of merger and acquisition activity by the big marketing cloud vendors as they build their own identity graph capabilities," she said.

There are a few steps people can take to increase their privacy protections, said Khatibloo.

Use browser plugins and ad blockers to limit the amount of data you share; when out and about turn off the Wi-Fi and location tracking on your mobile device to limit the amount of data sent into the cloud; avoid websites with poor security; check privacy and app permissions before downloading and installing them.

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Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC.