Mobile privacy is once again making headlines and attracting the attention of regulators in the wake of revelations that a software company as well as wireless carriers are tracking how mobile phones work.

Privacy advocates, consumers and regulators are up in arms over the revelation last week that software from company Carrier IQ is tracking what people are doing on their smartphones without permission. While it appears that the information is not being used for marketing purposes, the attention that the situation is getting could add urgency to efforts to impose new regulations on mobile marketing.

?The Carrier IQ revelation has helped catapult mobile phone privacy to the highest levels of policy scrutiny,? said Jeffrey Chester, executive director of the Center for Digital Democracy, Washington.

?It's a critical flashpoint for the industry because it provides a rare x-ray into their consumer data collection practices that threaten personal privacy,? he said.

?We expect the FTC to become more aggressive addressing mobile marketing over the next year, with Carrier IQ serving as a key test case.?

Growing concern
According to the Center for Digital Democracy, the Carrier IQ technology is not about network management ?as the company and wireless carriers insist ? but user targeting and is representative of the mobile marketing business model.

Carrier IQ claims that the software is used only to track errors that can be used by wireless carriers to improve their networks. The company as well as w wireless carriers and handset manufacturers have denied any wrongdoing and insist that users? personal information is being protected.

Consumers, privacy advocates and regulators are concerned because they did not realize that there was a customer application tracking their experience.

This is the latest hit to mobile marketing on the privacy front in a year when it was also revealed that Google and Apple?s mobile tracking practice were broader than consumers and legislators had previously realized.

?This could set back any more benefits that were moving into the marketing realm,? said Sheryl Kingstone, director of the enterprise research group at Yankee Group, Boston. ?Mobile marketing could potentially be stalled.

?The benefits to improve the network?everyone agrees with that,? she said. ?What people don?t have the stomach for is what?s going on [in the mobile space] in terms of location-based services.?

Lawmakers take note
The latest mobile privacy scandal erupted last week when a video on YouTube by programmer Trevor Eckhart showed how the Carrier IQ software works, claiming that the software records keystrokes from mobile phones and sends personal information off the phone.

In a statement, Carrier IQ said it measures and summarizes the performance of devices to assist carriers in delivering better service. It does not record, store or transmit the contents of SMS messages, email, photographs, audio or video.

Several lawsuits have stemmed from the allegations, including ones that targets Carrier IQ as well as phone makers HTC and Samsung. The suits claim that the companies are gathering private consumer data without consent and that the information could be transmitted to third parties.

The claims have caught the attention of lawmakers, with Rep. Edward Markey (D-Mass.) asking the FTC to investigate the Carrier IQ situation and Sen. Al Franken (D-Minn.) asking Carrier IQ to answer questions about its data gathering practices.

?The carriers are trying to do the right thing here,? Ms. Kingstone said. ?Everyone is taking the Big Brother approach to what is happening but what the carriers are really trying to do is improve the customer experience.?

While many would agree with attempts by carriers to improve network reliability ? especially consumers who have experienced dropped calls ? the Carrier IQ scandal is raising questions about exactly what kind of information is being gathered and what is being done with it.

Better education
While carriers have their own technology for understanding how their networks are performing, they do have some blind spots when it comes to understanding how devices are performing in the network.

?A lot of users complain about dropped calls ? more than carriers are seeing,? Ms. Kingstone said. ?They need this technology to understand where the problem is ? is it on the device or somewhere else.

?This is not about collecting data to sell for marketing purposes ? the goal is network management and customer care,? she said.

The issues with Carrier IQ point to the need for mobile companies to do a better job of explaining what information is being used to manage the experience for mobile devices.

?Consumers are nervous that their personal information is being shared,? Ms. Kingstone said.

?Consumers want the carrier to fix their problems but they don?t want their personal information being at risk,? she said. ?They need to be educated about what is at risk and what is not at risk and why it is being used.

?There has to be more transparency ? carriers realize they need do this.?

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York