The iPhone Kill-Switch Kerfuffle

And you thought Google's (GOOG) got the goods on you. Sure, the Web search leader keeps tabs on the searches that emanate from your PC. But consider the data dossier that could be drawn up on users of Apple's (AAPL) iPhone. Subscribers use the music-playing mobile phone not just for storing music, photos, and contact lists, but also for e-mail, Web surfing, and software downloads from Apple's iTunes.

Concern over how Apple and software developers that work with it might use some of that intel surfaced in recent days with reports that the company built in a "kill switch" that lets it disable applications it considers malicious, even after they've been downloaded onto a subscriber's phone. "The idea that Apple can choose what functionality my applications should have frightens me," Jon Zdziarski, who discovered the existence of the kill switch, recently wrote on his blog. "How about legislation that requires a mandatory kill switch be integrated into every human being, so that the police can kill an individual without even needing to dispatch an officer to a scene?"

But for all the unease over the kill switch, concerns over how Apple may use iPhone subscriber data may be misplaced, industry experts say. Apple isn't alone in monitoring the applications used on its phones. Carriers keep close tabs on what's being downloaded onto users' handsets. Mobile software retailer Handango regularly removes offending games and utility applications from its site if they appear to infringe on another company's copyright. "We have to do this all the time," says Handango CEO Bill Stone.

Overriding Privacy Laws?

Companies across the industry already collect oodles of user data. Handango, for instance, knows which phone model its customers use and which applications they buy, so it can recommend additional products. Microsoft (MSFT) and Nokia (NOK) gather information on people who sign up for their newsletters and mobile online communities. Windows Mobile devices come with an application that lets users volunteer to participate in market research. Phones of people who opt in send the Redmond (Wash.) giant information on how and when they are used. Microsoft uses the data to regulate the wireless bandwidth usage of phones.

Members of the Windows Mobile Total Access community provide Microsoft with name, location, phone purchase date, e-mail address, and job information. And both Nokia and Microsoft have their own "kill switch" tools—though they're more limited in scope than Apple's.

But as a rule, companies that collect user data comply with stringent privacy laws, and can typically view only aggregate user data. Apple didn't respond to multiple requests for comment but says in a disclaimer on its Web site: "We collect information regarding customer activities" through sites, including iTunes. "This helps us to determine how best to provide useful information to customers and to understand which parts of our websites, products, and Internet services are of most interest to them."

Apple's "Holy Grail"

Though Apple is hardly alone in gathering user data, it has the potential to collect more data than rivals. According to a survey of 460 iPhone users by market researcher Rubicon Consulting, 40% of the device's owners plan to download additional software. That means a huge percentage of iPhone users are now making purchases through the iTunes App Store. Thanks to iTunes, Apple already knows their tastes in music. Now it also knows which games they like to play, and which productivity applications they like to use.

Other handset makers rely more on piecemeal data shared by carrier partners or collected from small focus groups. The extra information could help Apple more quickly develop features and software its users want.

Apple can also track the quality of wireless networks its devices use by noting how fast downloads occur. "No one's been able to do that before," says Richard Doherty, director of consulting firm Envisioneering Group. "That's the holy grail. By continually monitoring how consumers are using the phone, they are able to be super-responsive to glitches." Apple can also push software updates onto phones. Users of some other mobile devices have to seek out software updates themselves.

Don't be surprised if those other manufacturers start following suit