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The Bell building in Toronto.

Bell Canada says it is reversing its policy on tracking the Internet browsing habits of cellphone customers in response to a report from the country's privacy watchdog that chastised the company's "opt-out" approach.

Bell charges third parties a fee to deliver ads targeted at customers' specific interests using the information it collects as part of its "relevant ads program."

A report from the Office of the Privacy Commissioner of Canada (OPC) said Tuesday that Bell fails to obtain adequate consent from its customers by requiring them to opt out from being tracked, rather than giving them the option to opt in in the first place.

(Bell is owned by BCE Inc., which also owns 15 per cent of The Globe and Mail.)

The OPC received an "unprecedented" 170 complaints about the program and, after an investigation that spanned more than a year, said Bell agreed to several recommended changes – such as not including credit score information in customer profiles and switching to partial postal codes – but failed to "adequately address the critical issue of consent."

The federal watchdog, which does not have the power to order private companies to comply with privacy legislation, said it would consider taking the issue to the Federal Court. Shortly after the report was released, however, Bell said it will change its policy after all.

"Bell will abide by the privacy commission's decision including the opt-in approach," spokesman Mark Langton said in an e-mail. "We're dedicated to protecting customer privacy and thank the commission for clarifying the rules."

In an interview Tuesday, Privacy Commissioner Daniel Therrien said he is scheduled to meet with representatives from Bell on Wednesday and said he would refrain from commenting on whether the company "is indeed reversing their position," until then.

"We've done a number of polls in the past few months which clearly suggest that Canadians are concerned that they're losing control over their personal information," he said in an interview. "With our findings today, we're confirming that consumers need to give their express consent before a program like this can be implemented."

"Behavioural advertising" is widely used on the Web, where advertisers track people's behaviour online to show them ads directed at their interests. And they pay a premium for information that helps them target their messages to specific kinds of consumers. OPC guidelines issued in 2011 require advertisers to ensure people know they are being tracked, notify them before collecting personal information and allow them to opt out of being tracked.

But the watchdog's report says opt-out consent is not appropriate in all cases. The Bell program raised additional concerns in part because the company has access to user information it already collects in order to deliver telecom services, for which, the OPC notes, customers pay up to hundreds of dollars per month. (To date, the targeted ad program has only applied to wireless customers, but Bell has said previously it plans to expand it to television, Internet and home phone customers in the future.)

"Bell is able to track every website its customers visit, every app they use, every TV show they watch and every call they make using Bell's network," the OPC said in a statement on the report.

"When that information is combined with account and demographic information – such as age range, gender, average revenue per user, preferred language and postal code – which the company has long collected, the end result is a rich multidimensional profile that most people are likely to consider highly sensitive."

Mr. Therrien said the OPC is "not aware of other telecom providers who have or are planning to have a similar program," but said the report would give the commission a chance to have discussions with other companies about how the findings could apply to them.

Bell announced the targeted ad program in November, 2013, prompting complaints that led to the OPC investigation as well as a challenge the Public Interest Advocacy Centre and the Consumers' Association of Canada (PIAC-CAC) lodged with the Canadian Radio-television and Telecommunications Commission.

In a filing as part of the CRTC application, Bell said in February that it modified its policy to stop tracking users' browsing behaviour once they opt out of the program. Previously it stopped delivering the targeted ads but continued collecting information about what users viewed.

Critics said that was a positive step but insisted the standard should be that customers have the choice to opt in to such programs in the first place.

PIAC-CAC praised the OPC report Tuesday, noting the findings show "what Bell is doing ... is inappropriate."

"We look forward to the CRTC's decision on our complaint, and are optimistic that the CRTC will impose further constraints on telcos looking to try to monetize the confidential information they collect from their customers as they communicate through the network," John Lawford, executive director of PIAC, said in a statement.

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