White iPhone 4: The antidote to Apple's privacy troubles?

Apple's release of a new iPhone – now in white! – comes just in time to distract attention from the company's denial, issued earlier this week, that it is using embedded technology in its iPhone and iPad products to stealthily track user mobility.

Like most new Apple products, the white iPhone 4 achieved celebrity status via blog chatter, which typically translates to streaming lines outside Apple stores the day the product is released.

This new launch follows less than a week after news broke that Apple may be storing a history of the physical mobility of its users – information that critics say violates user privacy and that the company, in previous statements, downplayed, saying it does not store data that can be tracked to any specific individual.

Will the revelations about Apple's iPhone tracking dampen the now-customary rabid interest in a new Apple product? Or will the company be able to shrug off the fresh concerns about user privacy?

Smartphone tracking controversy

In a statement released via its website Wednesday, Apple said it “is not tracking the location of your iPhone” and that it “has never done so and has no plans to ever do so.”

Apple isn't alone. A separate research team reported last week that Google’s Android operating system, the global market leader, has also been collecting location data from users, although on a more limited basis than Apple.

In their assessment of the iPhone and iPad devices, independent security researchers found that the devices stored location data that dated back at least a year – far more than what the company says it needs to help update its Wi-Fi and cell tower connectivity. On Wednesday, the company said it needs only seven days of location data to reinforce its database. It blamed a bug for going back further.

That's "a plausible scenario," says Chenxi Wang, a security and technology expert at Forrester Research, adding that waiting almost a week to offer an explanation did not help Apple's credibility in the matter.

“They should have just done this right when the story broke. If [the device] is still logging data due to a programming bug, they could have said they’re not intentionally logging users,” Ms. Wang says.

For Jacqui Cheng, senior Apple editor at Ars Technica, an online media site that covers technology news, Apple’s explanation “was kind of disingenuous” because it framed the location tracking as relating to only cell phone towers and not people’s physical movements.

“At that point, it’s a matter of semantics. They didn’t place a GPS chip on your head, but they were tracking the general area you were in,” Ms. Cheng says.

Apple said it will release a free software update “sometime in the next few weeks” that will reduce the size of the database used to store the data and give users the option of deleting the data entirely. Apple added that, with the next version of its iOS operating system, data would be encrypted, allowing it more protection from hackers.

Apple's moneymaker

Since its launch in 2007, the iPhone is Apple’s greatest moneymaker, accounting for $25.2 billion – 39 percent – of the company’s total net sales in 2010. Due to expanded distribution and hype related to the iPhone 4 released last summer, sales of the iPhone increased 93 percent in 2010 from the year earlier.

Sales are not diminishing. In the second quarter of this year alone, Apple sold almost 19 million iPhones, a 113 percent increase from the same period the previous year, making it the best-selling device in Apple’s stable.

Not only does iPhone lead the global mobile phone market, it has become emblematic of the shift in how consumers consume media, from stand-alone PCs to handheld devices. That kind of cultural cachet means that frequent updates – like a new color – get major attention from not just the media, but consumers.

It also means that when iPhones raise security concerns, Apple gets lawmakers' attention.

Legislative inquiries

Apple did not comment on the various requests from state and federal legislators – like the meeting that Illinois Attorney General Lisa Madigan requested with both Apple and Google to address the issue.

Sen. Al Franken (D) of Minnesota invited representatives from both companies to testify before the Senate's subcommittee on privacy, technology and the law on May 10 in Washington, DC.

But do consumers care?

Wang says she doubts that the location tracking controversy will gain momentum with consumers. “This may prove to be a small glitch in [Apple’s] marketing scheme. If they are quick to provide fixes to remediate these problems or complaints, I think it will be an issue that will soon be forgotten,” she says.

This week’s hyped launch of the white iPhone results from several delays going back to June of last year. Staggering release dates helped generate more buzz for the new device, which is essentially the same phone but shaded white – a marketing decision that analysts say will make it popular in the China, where consumers view personal technology as lifestyle accents.

“Apple knows what consumers want. They produce technology products that people consider fashion accessories," says Wang. "This has never happened before."