Here’s FCC Chairman Tom Wheeler latest challenge to cable and phone companies: He said today that he’s circulating a rulemaking proposal designed to help Internet users keep private data about who they are, where they go, the sites they visit, and the applications they use.

“Every broadband consumer should have the right to know what information is being collected and how it is used,” he said in a piece on the Huffington Post. “Every broadband consumer should have the right to choose how their information bits are used and shared. And every consumer should be confident that their information is being securely protected.”

While Internet Service Providers (ISPs) will be able collect data to improve service, consumers could bar them from sharing the information.

“This isn’t about prohibition; it’s about permission,” Wheeler says. The FCC is scheduled to vote on March 31 about whether to begin the rulemaking process, including seeking public comment.

Wheeler’s proposal asks for input about specific practices including whether ISPs should be allowed to charge consumers more if they choose to keep their personal information private.

The FCC already limits the way traditional phone providers use data. Wheeler’s proposal would extend its authority to Internet communications. It also would only apply to ISPs — not sites such as Twitter and Facebook, or sites owned by broadband providers. They’re regulated by the Federal Trade Commission.

The proposal would give consumers opt-out rights to to stop ISPs from using personal data to market other services, or share the information with affiliates.

ISPs would have to ask users to opt-in, or give their permission first, before using data for other purposes.

The rules also would require them to take specific steps to protect customers’ privacy. If there’s a data breach, then ISPs would have to inform customers within 10 days, and the FCC within a week. If more than 5,000 people are affected, then the FBI and Secret Service also would have to be told within a week.

The proposal would not affect government surveillance, encryption or law enforcement.

Last week several cable and phone trade groups including the National Cable and Telecommunications Association proposed a framework for new FCC privacy rules. They urged Wheeler, in a letter, to provide “flexibility for [Internet] providers to implement and update their practices as consumer expectations and technologies evolve.”

After Wheeler unveiled his plan, the NCTA said it’s “disappointed” that the rules on ISPs “are at odds with the requirements imposed on other large online entities. As the full Commission considers further action, we hope that it will engage in a more sober assessment – one guided by facts and not demonstrably false claims and fears – to promote an approach that will ensure greater consistency in consumer privacy protection and fair competition among all Internet participants.”

Consumer and free speech advocates — including the American Civil Liberties Union, the Center for Digital Democracy, and the Consumer Federation of America — urged Wheeler this week go farther.

They’re alarmed by a number of developments, they said in a letter to the chairman this week. For example cable companies such as Comcast and Cox are using set top box data to profile subscribers for targeted advertising.

Internet service providers — led by cable and phone companies — also are “leveraging their position as gatekeepers to the Internet to harness [Web usage] data in powerful and invasive ways.”

Today the Center for Digital Democracy’s executive director, Jeffrey Chester, called Wheeler’s proposal “a major step forward for the U.S., which has lagged behind other countries when it comes to protecting consumer privacy rights.”