Reaching Too Far?

Businesses can already collect all manner of data on the lifestyles and buying habits of customers and employees. Now, emerging technologies and location-based services make it possible to pinpoint a person's whereabouts by locating his or her vehicle, cell phone, or other wireless device. The new tools promise improved safety and convenience-but they also raise the stakes in the IT-privacy debate.

BMW of North America LLC last week said it will offer telematics-wireless location, emergency, and information services that leverage the global positioning system (GPS)-as an option on all its 2003 model vehicles. General Motors Corp. will offer telematics services provided by OnStar Corp. as options on all models later this year. All new Mercedes-Benz models, and nearly 40 of GM's, already have the capabilities.

Thanks in large part to a Federal Communications Commission mandate for Enhanced-911 that takes effect Oct. 1, the next generation of cell phones, due next year, is expected to include GPS chips to support location-based services. Wireless carriers are installing E-911 systems that, together with GPS, can identify within 50 meters the location of a cell phone when it's turned on.

The potential benefits are clear. A rescue squad could locate exactly where a vehicle swerved off the road, for instance, or respond to an E-911 caller who didn't know his or her location. The services promise benefits for businesses, too: Stores and restaurants will be able to use them to send promotions when customers are in the neighborhood. Some businesses already use tracking services to monitor their fleets and personnel to boost efficiency.

But there's also potential for abuse. For some, the fact that a person's location can be tracked is itself a breach of privacy. More worrisome is that someone with malicious intent could follow a person's every move. "When you start talking about having location-based services on every device, it's scary; it's Big Brother technology," says Amir Haramaty, chief operating officer of Nexus Telocation Systems Ltd., which plans to provide a service in Florida this year that will let people track vehicles, valuables, and even individuals. "This technology can help in emergency situations and improve efficiency, but we have to be careful."

Businesses and wireless carriers are aware of the concerns, and they're trying to address them. OnStar president Chet Huber will reiterate the company's privacy policies during a presentation to analysts this week. General counsel Ken Enborg acknowledges that OnStar wants to avoid the PR mess in which Acme Rent-A-Car in New Haven, Conn., found itself in June, when it billed customers for speeding after tracking them via satellite. Acme's use of the technology raised the ire of its customers and state officials. After an investigation by the Connecticut Department of Consumer Protection and a private lawsuit, American Car Rental, Acme's parent, is considering refunding the customers' money.

Carburetor Exchange Inc. knows firsthand the anxiety location-based services can cause. Last month, the Indianapolis wholesale distributor of auto parts installed a wireless tracking system from Raco Industries Inc. in eight of its vans to monitor the movements of delivery personnel. When drivers first heard about the system, there was some concern, says driver Larry Tate. But he and others quickly realized the system has its benefits: Carburetor Exchange can map optimal delivery routes on the fly. In a competitive market, Tate says, "this is one of the things that helps us."

The distributor can also hold drivers to more precise schedules and let customers know when a delivery will arrive. "It's helping keep our employees a little more honest," says Richard Gallagher, VP of Carburetor Exchange. "Sometimes they don't realize that swinging off to get a pack of cigarettes slows up the whole process."

Other companies are eyeing location-based services for personalized, real-time marketing, a capability that may be only a year away. But the opportunity carries risk: Hitting people with unwanted advertising can backfire. And wireless spam could degrade service, says Jeremy Green, a research director with Ovum Inc. Ovum estimates the worldwide market for location-based services will grow to $18 billion by 2006. About 1.5 million U.S. vehicles are equipped for wireless services, according to Cross Country Automotive Services, which is working with BMW.

Data collected from cell-phone users is protected by FCC rules, which require all carriers to treat that information-including a user's location-as confidential unless customers give their express permission to share it with third parties, or in emergencies. But FCC rules don't apply to data collected by other location-based services such as OnStar. Sen. John Edwards, D-N.C., last month introduced a bill that would close the loophole.

Most analysts agree that to be successful, location-based services must be "opt-in," letting consumers choose what data they'll share, and with whom. The danger comes when marketers abuse that privilege and blanket users with unsolicited messages.

Doug Nottage, director of advanced technologies at online auto store Autobytel.com Inc., says the technology could make it easier for on-the-move car shoppers to locate dealers who have the cars they're looking for. But he also says that until consumers clearly understand how location-based services will be used, "there will be enormous resistance."

Companies that now leverage location-based services say they're careful not to infringe on consumer privacy. With the OnStar service, "the only way and the only time we get location information is if the driver presses a button to initiate a call to the OnStar center," Enborg says.

BMW is equally cautious. "We don't track customers," says Francis Dance, product manager of telematics services for the German carmaker's North American business. Nor does BMW share any of the data it collects with third parties.

Stewart Baker, head of the technology practice for Steptoe and Johnson, a Washington law firm, expects carriers to act responsibly. "They're going to set it so they don't get complaints," he says. But not everyone is so optimistic. "We're going to get swamped with wireless spam," predicts MobileInsights analyst Tim Scannell. "Despite what the handset manufacturers and the carriers say, the onus is on you to filter that stuff out."

-- With Beth Bacheldor