In response to EU questions about its legality, it said that it was happy Phorm conformed to EU data laws.
But any future deployments of the system must be done with consent and make it easy for people to opt out.
The European Union had demanded clarification about the system which tracks web habits in order to provide better targeted ads.
The controversy over the Phorm ad-serving system
blew up following revelations that the system had been trialled by
telecoms firm BT without the consent of users.
Clarifying how the system will be used in response to the EU
request, the UK government said future trials must be done with consent
from those being targeted.
In its statement sent to the EU it said: "Users will be
presented with an unavoidable statement about the product and asked to
exercise choice about whether to be involved. Users will be able to
easily access information on how to change their mind at any point and
are free to opt in or out of the scheme."
In response a spokesman for the office of Information
Commissioner Viviane Reding, which first called on the UK government to
clarify the legality of Phorm, said it was analysing the reply and
preparing a legal assessment of the situation.
Commissioner Reding's request for more information was sent to the
Department for Business, Enterprise and Regulatory Reform (Berr) in
Berr, which has co-ordinated the UK response, asked for an
extension to the original end-of-August deadline and finally filed its
response last week.
It told the BBC that it was not making the entire letter public
but instead outlined the main reasons why it considered Phorm to be
"After conducting its enquiries with Phorm the UK authorities
consider that Phorm's products are capable of being operated in a
lawful, appropriate and transparent fashion," said a Berr statement.
The fact that profiles are based on a unique ID rather than the
identity of users coupled with the fact that Phorm does not keep a
record of actual sites visits are cited as reasons for its legality.
It also pointed out that Phorm's search terms have been widely
drawn so they do not reveal a user's identity and that Phorm has no
information which would enable it to link a user ID and profile to a
But it stressed that any profiling must be done "with the knowledge and agreement of the customer".
Critics say this agreement was notably absent in the first two trials conducted by BT.
The EU was prompted to send its letter following controversy
over the trials and future deployment of the Phorm system. Berr made no
mention of these trials or their legality in their statement.
Three internet service providers have showed initial interest in
using Phorm but, so far, only BT has conducted widespread trials.
The City of London police is currently investigating the trials, following a dossier of evidence handed to it by angry users.
BT initially said a further trial would happen "in the summer" but has given no firm date for when this will take place.
A Phorm spokesman said the delays were necessary.
"We continue to work with BT but it is a complex technology and
has taken a bit longer than originally intended as it needs to be
introduced in a way that is 100% right," he said.
One of the other original partners, Virgin Media said it was
"still evaluating the system". Carphone Warehouse said it would only
run Phorm on an opt-in basis.
Some believe systems such as Phorm are the only way to keep internet service providers afloat in the future.
"There is a good economic argument for it and it can help fund better content and services," said a Phorm spokesman.
But others have suggested that content owners might issue legal challenges to the system.
"For the Googles and the Amazons of this world the system could
be seen as using their customer information as a foundation for someone
else's targeted advertising," said lawyer Nicholas Bohm who has been a
fierce critic of Phorm.