BT has dropped the controversial internet tracking ad-delivery system WebWise, dealing out a huge blow to its developer Phorm.
BT had long been a supporter of Phorm's Webwise system. WebWise tracks the sites internet users visit, in order to then deliver relevant adverts. This is seen as an invasion of privacy by many, vocal campaigners.
Before ditching Phorm, BT secretly tested WebWise in 2006 and 2007, a move that has resulted in an EC investigation into the UK government's failure to protect web users' privacy. Last year BT carried out a less controversial consumer trial. Virgin Media and TalkTalk have both expressed tentative interest in WebWise or similar technology - despite its unpopularity, targetted advertising is perceived to be a key revenue generator for online players, in a world where most content is delivered free of charge.
BT's stated reason for not proceeding with WebWise is cost saving. But the company was known to be nervous of the scale of consumer opposition to Phorm's technology, and speculation is rife that BT is shying away from offending its customers.
In a public statement BT said: "We continue to believe the interest-based advertising category offers major benefits for consumers and publishers alike.
"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.
"Given these commitments, we don't have immediate plans to deploy Webwise today. However, the interest-based advertising market is extremely dynamic and we intend to monitor Phorm's progress ... before finalising our plans."
Phorm appeared to play down the significance of BT's move, releasing a soothing statement to investors. The Phorm statement said: "We continue to focus considerable effort on faster moving overseas opportunities. In so doing we have already minimised our dependency on the deployment by any single ISP or in any particular market."
In response to BT's decision, Virgin Media also released a statement, saying: "We continue to believe interest-based advertising has potentially important benefits for consumers, internet service providers and website owners.
"However, given the fast moving nature of the sector, Virgin Media intends to extend its review of potential opportunities with suppliers, including Phorm, prior to making any commitment to launch any of these technologies.
"We recognise some consumers have significant concerns about the potential implications of interest-based advertising for their privacy.
"Virgin Media is committed to ensuring that any future deployment complies not only with the relevant legal requirements but - as an absolute minimum - the best practice guidelines contained in the Internet Advertising Bureau's recently published code of practice."
This year Phorm announced a trial of its technology with KT, South Korea's largest ISP.