Vendors walk thin line

New breed mobile-commerce vendors, eager to send customers targeted ads and marketing offers based on the exact whereabouts of their cell phones, are tackling head-on some high-profile privacy concerns.

          New breed mobile-commerce vendors, eager to send customers targeted ads and marketing offers based on the exact whereabouts of their cell phones, are tackling head-on some high-profile privacy concerns.

          The ability to pinpoint the position of potential customers as they use their wireless phones is already a technical possibility, given systems developed for government emergencies and for the 911 service.

          But m-commerce application providers, wireless carriers, and government regulators are now working heatedly to address the privacy issues swirling around commercial use of ALI (automatic location identification) data.

          Specifically, the US Federal Trade Commission this week will hold a set of fact-finding discussions on m-commerce. Included on the FTC's agenda is a session on location-based services and privacy.

          Scrambling to get out front on protecting their customers' privacy, m-commerce vendors themselves acknowledge that the specter of privacy infringement could stymie their fledgling industry.

          "Any technology that threatens to be a tracking service without the knowledge or consent of the customer will turn concern into backlash," maintains Ken Arneson, CEO of Xypoint, in Seattle.

          Xypoint is one of a few key vendors working with carriers to supply mandatory ALI data to the Federal Communication Commission for E911 (Enhanced 911).

          But in limited trials, Xypoint, its partners, and a handful of other vendors are using ALI for commercial purposes. For now, they are doing so only with the express consent of a small number of wireless phone users.

          Go2Systems, in Irvine, California, is one of a swarm of vendors eyeing the use of ALI data. The company inked a five-year deal last week with Coca-Cola to steer wireless customers to stores selling Coke products. "We deliver information based on location today, but you have to tell us where you are," says CEO Lee Hancock.

          Not limited to retail applications, m-commerce vendors are also ready to pitch ALI-related applications to enterprises needing to transmit corporate data to an increasingly mobile workforce.

          Before the industry can get to that point, however, privacy wrinkles must be ironed out, says a spokesman for the Cellular Telecommunications Industry Association (CTIA), in Washington.

          "In the internet industry there have been a lot of horror stories. We took a look at these and asked, 'What can we do as an industry to reassure consumers their privacy will be protected?' " the spokesman says.

          To answer that question, CTIA -- which combined recently with Wireless Advertising Association -- put a proposed set of privacy and spam guidelines before the FTC last month. In the proposal, CTIA put forth a multipronged plan for protecting wireless consumers, mirroring some of the draft legislation hanging over the Internet industry at the end of the last Congressional session.

          Built around an opt-in model, CTIA's proposal supports requiring wireless location providers to tell every customer about the collection and use of ALI data. Those customers should then be offered a way into -- not out of -- the use of their ALI data.

          CTIA also calls for stringent security requirements for the entire m-commerce industry. And to avoid consumer confusion, the association wants a uniform way for vendors to communicate with consumers on privacy.

          Many m-commerce vendors seem to support those ideas. "We've got to get the sociology around location-based services running right by figuring out what consumers want and what they are comfortable with," says Steve Stutman, CEO of Click-A-Deal, in Boston.

          Wireless carriers also want to tread lightly into the commercial use of location-based services. "It's fair to say that carriers in general are examining mobile advertising strategies but are struggling with what consumer acceptance will be," said Joseph Assenzo, an attorney for Sprint PCS Group, in Kansas City, Missouri.

          Largely because of privacy concerns, Jupiter Media Metrix predicts only marginal growth for ALI-related applications. Calling privacy a "wild card," a New York-based market researcher says that applications requiring user input of address information will remain dominant for the next year.

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