BT and TalkTalk back down on Phorm

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Shares in Phorm plummeted by 40% following BT's announcement yesterday.

After TalkTalk said that they were unwilling to proceed with Phorm without BT's backing it's likely they'll fall again.

Online privacy campaigners greeted the news with elation, even though both providers insisted that their decision wasn't related to consumer dismay at the targeted advertiser's methods.

"I was unable to hold back the tears of joy," Alexander Hanff of the 'No DPI' (Deep Packet Inspection) blog wrote.

No apology for secret tests

BT have come under fire for helping to develop the controversial Phorm WebWise service and testing it on unwitting BT broadband users in 2006 and 2007.

Those secret tests are now being investigated by the European Commission as a possible breach of EU privacy laws.

To stave off that possibility, an all-party parliamentary group on communications are currently debating the issue of online privacy and, unsurprisingly, have heard a lot about Phorm's business model.

Peter John, a campaigner against Phorm, described the company as "mass industrial espionage" to MPs.

John has previously testified to MPs that the company doesn't offer enough consent for internet users.

"Desktop 'spyware' can be freely installed by people who so wish," he said. "Evidence to date suggests that, given informed choice, people reject such intrusive surveillance."

However, BT's press release insisted that the decision to drop the company was purely based on the fact that scant resources needed to be directed to other sections of their business.

"We continue to believe the interest based advertising category offers major benefits for consumers and publishers alike." BT claimed.

"However, given our public commitment to developing next generation broadband and television services in the UK we have decided to weigh up the balance of resources devoted to other opportunities."

What next for Phorm?

Phorm, meanwhile, expressed little upset at the news saying in a statement that they would "... continue to focus considerable effort on faster moving overseas opportunities."

That strongly implies that Virgin Media, which has also been involved with Phorm, will also drop their relationship in the coming days.

That leaves WebWise buried in the UK for the foreseeable future.

Now, however, eyes will turn to the reputations of the three ISPs involved, who between them make up two thirds of the UK broadband market.

Amazon, Wikipedia and UK directgov websites have already definitively opted out of WebWise scanning and Google is also said to be considering doing the same.

That three of the UK's biggest ISPs took so long to see which way the wind was blowing is, at the very least, serious cause for concern.

At worst, as in the case of BT's secret tests, it's a serious contravention of broadband users' privacy.

It remains to be seen whether BT will face prosecution for their actions.

In the short term it seems unlikely that consumer approbation will have a significant effect on any of the ISPs who've worked with Phorm thus far.