Make no mistake: BT’s decision to drop Phorm is a cataclysmic blow for the advertising firm (as reflected by the sharp drop in its share price this morning). In one stroke, it’s lost the UK’s single biggest ISP and its closest ally.

Phorm’s three UK ISP partners – BT, Virgin Media and TalkTalk – have been playing a cowardly game of chicken over the past 18 months. The service has attracted so much negative publicity that all three have sat on the fence, hoping that one of the others would be brave enough to roll out the service, so they could judge just how much of a PR disaster it would be.

BT was the only one of the three to have completed a full public trial of Webwise and has long been the favourite to deploy first. Now, it’s decided it’s perfectly comfortable collecting splinters on the fence. “The interest-based advertising market is extremely dynamic and we intend to monitor Phorm’s progress with other ISPs and with Webwise Discover before finalising our plans,” the company claims.

The harsh truth is Phorm has made startlingly little progress with either of the other ISPs. Virgin has been repeatedly forced to deny stories that its interest in Phorm was waning over the past couple of months, while its customer service team has (unofficially, according to Virgin) been sending out letters reassuring worried customers that it has no plans to roll out Phorm.

TalkTalk, meanwhile, has just bought Tiscali and its associated ISPs, and faces months of complicated integration work ahead. A distraction like Phorm is the last thing it needs. Neither Virgin or TalkTalk have even tested Webwise with their customers, let alone committed to a rollout.

BT has also undermined Phorm’s chief selling point: that it’s a money-spinner for ISPs. “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,” BT claims, suggesting that it views Phorm as a cost rather than a pot of gold. So much for the service that was going to help boost the finances of ISPs.

In short, despite a public relations onslaught and concerted attempts to convince everyone from ISPs, to politicians, to advertisers about the merits of its technology, Phorm seems no closer to rollout in the UK than it was 18 months ago, when it first arrived on these shores.  In fact, its chances of success have never looked weaker.

Last week BT turned down an invitation to defend Phorm and its like at the House of Commons, using the excuse that it was “too close” to the technology. Presumably, BT will be gracefully bowing out every time broadband is discussed at Government level in the future… 

Today, when asked to comment on Phorm’s claim that making the service opt-out would be enough to pacify the data watchdogs, BT could hardly be less committal. Just look at the obsfucation, in the following, verbatim comment from a BT spokesman.

“The situation for us is… if we roll out, because we’re not fully committed yet, we’re still deciding, we’re looking at reviewing the trial results still… and we’ll be announcing next steps in due course. Suffice to say, if we do roll out we’ll give customers a clear choice.”

BT denies it’s trying to distance itself from Phorm, but its public pronouncements read like those hastily prepared statements issued by Hollywood couples, insisting everything’s fine in their marriage… just before they announce their divorce.

Maybe I’m wrong, maybe I’m reading far too much into far too little, but I’ll certainly be checking the tone, as well as the content, of BT and Phorm’s announcements over the coming weeks.

It’s not often I find myself defending Phorm, but at the House of Commons today the behavioural advertising service was genuinely hard done by.

Liberal Democrat peer Baroness Miller invited a hand-picked panel of internet experts and politicians to a roundtable discussion entitled: The Internet Threat: Who needs privacy when we can have relevant ads?  A title that makes its stance on behavioural advertising pretty damned clear. And there were only two companies mentioned in the press release: BT and Phorm.

She further loaded the dice by picking a selection of renowned Phorm critics including Sir Tim Berners-Lee, who’s spoken out against Phorm and its like in the past; Dr Richard Clayton and  Nicholas Bohm from the Foundation for Information Policy Research, the organisation that branded BT’s secret Phorm trials “illegal”; and Jim Killock from the Open Rights Group.

Nothing wrong with that, and the credentials of the panel are beyond dispute. But for some reason, Baroness Miller wasn’t prepared to give Phorm a seat at the table, relegating its CEO Kent Ertugrul and various flunkies to the back of the room with us journalists. BT were invited to speak, but declined.

Phorm eventually had its say:  Ertugrul sat waving like the smart kid in the classroom that the teacher deliberately avoids, until finally Baroness Miller relented and let him speak, but he certainly wasn’t given the same “airtime” as the rest of the panel.

It was, to some extent, a kangaroo court, with the defendant struggling to get a word in edgeways, while the prosecution generally repeated the same charges. It only served to invoke a degree of sympathy for Phorm – former Shadow Home Secretary David Davis even asked Ertugrul for his business card, as he clearly wanted to get both sides of the story.

The sad thing was Miller didn’t need to gag Phorm. The most interesting exchanges occurred when Berners-Lee and Ertugrul were briefly allowed to debate openly with one another. There were highly intelligent, articulate people on the panel: they didn’t need protection. They more than held their own when they were allowed to directly exchange views with Phorm.

Democracy is best served by an open debate. Of all people, you’d have thought the Liberal Democrats would have grasped that. 

“BT did not discuss these trials with the ICO as they were technical in nature,” the ICO claims in a statement sent to PC Pro.

Considering that pretty much every piece of personal data  is now held on a computer database somewhere, is there anything left that isn’t too “technical in nature” for our poor Information Commissioner, which is presumably waiting for Mrs Miggins from the corner shop to lose her paper-round book before clamping down with the full force of our stringent data laws?

Having previously hailed Phorm as the solution to all our phishing nightmares, the company is now claiming it’s the answer to Britain’s rural broadband divide.

Phorm claims that a new survey showing London has broadband speeds that are twice as fast as regions such as Northern Ireland proves that “the model for funding the internet is broken.”

The answer? Allow ISPs to benefit from Phorm’s advertising revenue, of course. “Billions are needed for higher-speed networks yet currently ISPs only have income from broadband subscriptions,” Phorm’s CEO Kent Ertugrul claims.

“Today ISPs don’t tap the £2.8 billion UK internet advertising market which pays for most of the other services on the web. But brand owners would pay a premium for the highly-accurate targeted advertising systems that ISPs could offer.

We are developing those technologies – in line with people’s privacy expectations – to provide the extra income for ISPs to invest in the improved broadband services that users want.”

Sadly, this argument has more holes in it than Paula Radcliffe’s trainers.  First, the £2.8 billion of potential extra revenue is only a drop in the ocean of the estimated £15 billion BT claims it would cost to fibre the entire country, which is the only viable way of truly bringing rural areas up to speed.

It’s also a mighty assumption that ISPs would plough any additional income into improving the network. Most seem quite happy to sit back and let BT pick up the tab, while those that are putting their own equipment into exchanges are doing so in the built-up areas that already benefit from nippy broadband.

There are also a few who might take issue with Phorm’s claims that its service is “in line with people’s privacy expectations”. The Foundation for Information Policy Research, for one,  which has branded the scheme illegal in the UK, based on its interpretation of the Regulation of Investigatory Powers Act 2000.