Apple Denies Tracking IPhone Locations, Will Update Software

Apple Inc. (AAPL), facing scrutiny from consumers and lawmakers over data collection on its iPhone, said it isn’t tracking customers’ location while acknowledging it gathers information about wireless gear near a user’s handset.

“Apple is not tracking the location of your iPhone,” the Cupertino, California-based company said in a statement today. “Apple has never done so and has no plans to ever do so.”

The iPhone saves information on Wi-Fi hot spots and cellular towers near the device’s current location and accesses the data when needed by users, Apple said. The company can’t locate a user based on the hot spots and tower data, and the information the company receives on locations is anonymous. Apple also said it will fix a software bug that let handsets store more of this information than necessary.

Privacy advocates disputed Apple’s contention that it isn’t tracking location. Hot-spot and cellular-tower information shows where a device is, said Marc Rotenberg, executive director of the Electronic Privacy Information Center, a group seeking more disclosure about the location data.

“That’s exactly how they determine the location of the device,” Rotenberg said in an interview with Bloomberg Television. “They are keeping location data and the statement is a little misleading on that point.”

Software Update

The company plans a free software update that will reduce the amount of data stored on the iPhone and let customers delete hot-spot and cell-tower information by turning off location services, Apple said. Rotenberg commended Apple for making the changes.

Natalie Kerris, a spokeswoman for Apple, declined to make Chief Executive Officer Steve Jobs or other executives available to elaborate on the statement.

Apple and Google Inc. (GOOG) have been at the center of a growing debate over whether mobile-phone location technologies breach privacy rules. The companies’ current practices, which can be used to deliver more targeted advertising and to help users find nearby services, have sparked consumer lawsuits and inquiries in the U.S. Congress.

Motorola Mobility Holdings Inc. and Samsung Electronics Co. are among the companies that make phones using Google’s Android software.

Beyond Location Data

The broader issue is that smartphones carry a tremendous amount of information beyond just location data that consumers aren’t aware of, said Chenxi Wang, who studies security issues at Forrester Research.

“More and more so, that is going to be the reality,” Wang said. “Users need to be a little bit more concerned about what they do on their phones and what they enable and disable.”

Wang said Wi-Fi hot-spot and cell-phone tower information doesn’t provide as accurate a read on a person’s exact whereabouts as global-positioning coordinates would.

Apple said the use of Wi-Fi hot spots and cell-tower locations helps the iPhone more quickly calculate its location compared with using a global position system, which can take as long as several minutes. The information, sent to Apple in a form that’s unintelligible to unauthorized users, is used for map features and to target advertising through Apple’s iAd platform. Apple also said it’s building a crowd-sourced database for a new a traffic service in the next couple of years.

Apple will face more questions at a U.S. congressional hearing. The company will testify at a Senate Judiciary Committee hearing on privacy and mobile devices on May 10, Apple’s Kerris said.

‘More to Come’

Apple’s statement today, its first since criticism emerged, probably won’t immediately assuage consumers, said Andy Hargreaves, an analyst with Pacific Crest Securities.

“There’s more to come,” said San Francisco-based Hargreaves, who rates the shares “outperform” and doesn’t own any. “It will take a little bit of time for them to be able to educate consumers.”

Apple fell 27 cents to $350.15 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have climbed 8.6 percent this year.

The privacy concerns started after an April 20 report by two computer programmers, including a former Apple software engineer, said Apple’s operating system logs users’ coordinates along with the time a spot is visited. Two Apple device users sued the company two days later, accusing Apple of invasion of privacy and computer fraud.

Questions From Congress

This week, five Republican Congress members sent letters to the companies with questions about how they store location data and who can ask for it, the House Energy and Commerce Committee said on its website.

U.S. Representative Edward Markey, a Democrat from Massachusetts who had questioned Apple about the practice, said he was “pleased” by the changes. The company needs to answer more questions about the use of location data for advertising, he said.

Apple said its iAds mobile-advertising system can use a handset’s location in directing ads to users, though it doesn’t share location with outside companies without a user’s consent.

French, German, Italian and South Korean regulators also are investigating the location feature, authorities in those countries said. Attorneys general in Illinois and Connecticut also have sought information about tracking practices.

Apple has sold more than 108 million iPhones since the device debuted in 2007. White models of the iPhone 4, the device’s newest iteration, will be available starting tomorrow, the company said today in a separate statement.

To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net; Katie Hoffmann in New York at khoffmann4@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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