TalkTalk customers will get chance to decide if they want targeted ads
Broadband provider TalkTalk has confirmed that it will allow customers to 'opt in' to Phorm's controversial new advertisement system.
TalkTalk is one of three UK ISPs to sign up to the Webwise service which sees user's surfing habits tracked.
It has decided not to offer the service by default but rather to allow users to choose whether they want it.
It follows 1,000 people signing a Downing Street online petition saying the system breaches customer privacy.
"We will be endorsing and recommending take-up of the system but we want to ensure that customers make their own decision," said a spokesman for TalkTalk.
It believes that there is a two-fold benefit for customers.
"We feel customers will welcome the opportunity to get fewer irrelevant advertisements as well as benefit from the real-time anti-phishing alerts," he said.
Fans of Top Gear website will get motoring ads
Phorm works by placing a cookie on a user's machine that contains a randomised identifying number. That cookie tracks websites visited and draws conclusions about a user's behaviour in order to target more relevant adverts.
So, for example, someone who often visits the Top Gear website is likely to be served motoring advertisements.
The controversy over the system surrounds the fact that ISPs are "selling" information about users on to a third party.
Phorm, the US company behind the system, is keen to stress that the data it collects is 100% anonymous and no profile of the user is ever created, so that no-one could "reverse engineer" the information in order to establish identity.
Campaigner Simon Davies was asked to assess its privacy measures as part of the work he does for privacy start-up 80/20.
He believed the system "advances the whole sector of protecting personal information by two or three steps", although he was not sure that the public was ready to buy into behavioural advertising.
The fact that TalkTalk has decided to let consumers choose whether they want to sign up to the service is likely to be a blow for Phorm, thinks Nate Elliott, an analyst with Jupiter Research.
"Ideally Phorm would like to have automatic access to all users but TalkTalk has gone for the safe option of opt-in which could limit the number of consumers," he said.
For ISPs desperate to retain customers entering the untested world of behavioural targeted advertisng is "scary"., said Mr Elliott.
"If ISPs do something that consumers see as a violation of their privacy then they will simply change provider."
Kent Ertegrul, chief executive of Phorm, told the BBC News website that he was confused about why the issue of opt-in versus opt-out was causing so much controversy.
"There is no way of not knowing that this is switched on. There is a clear choice offered to consumers and I am surprised that there has been so many questions about this. I find it a bit bizarre," he said.
For him the service is a win win for consumers.
"Having advertising behind it allows for better, cheaper broadband," he said.
BT will start a trial of the Webwise system this month and said that it would be offering it as an opt-in service in so far as it would be inviting 10,000 broadband customers to trial it.
"We will look at the findings of the trial before we make a decision on how to go about a more widespread deployment," said a spokesman.
He believes that the anti-phishing tools will attract customers concerned by online safety although he stressed that other security measures would still be in place for customers who did not want to use the system.
He also said that triallists wishing to sign up to the system would have to agree to new terms and conditions. The details of this have not yet been finalised but it would not be a "material change", said the spokesman.
Virgin Media is also due to trial the system later in the year and is happy that it does not breach any existing privacy legislation.
"We have had a few customers get in touch with privacy concerns but these have been fairly comprehensively addressed by answers from Phorm," said a spokesman.
He believes the system sets a "new standard" in targeted advertising and is not convinced that there is any foundation for concern.
"Google and Hitwise manage and manipulate data and people generally don't have an objection to that," he said.
How the system was to be rolled out to Virgin Media customers was yet to be decided, he added.
"Deployment is months away but we will make sure that people know what it is about and exactly how it will work."
ISPs entering the lucrative world of online advertising could receive a big revenue boost. Proceeds from the advertising platform being set up by Phorm - known as the Open Internet Exchange - will be shared with any ISPs that sign up.
Some analysts predict that the deal could generate millions of pounds annually for BT and other ISPs but not everyone is so optimistic.
"Our figures show that only 10% of online advertisers currently use behavioural targetted ads," said Mr Elliott.