Last week, Apple delivered another tremendous quarter to Wall Street,
and it also delivered a tremendous firestorm in the form of a
highly-public revelation that the iPhone and iPad store location data in an
unencrypted file. The data from this file can be used to effectively
retrace the steps their owners have taken.

The billion-dollar question: do consumers really care? Or, more
specifically, do consumers really care enough to trade in their smart
phones for dumb phones that do less?

The answer may not matter. Spurred on by media reports that paint a picture of Big Brother-like corporations, government agencies and officials around the world are starting to make noise about mobile location data and how it’s being used.

While it remains to be seen what, if anything, they’ll do, it would seem that the privacy concerns being raised are attracting the kind of front-page attention that will give regulators every incentive to do something. And that has a number of implications for the mobile space.

Companies like Apple and Google say that some of the data being collected helps improve mobile services, or is applied to other applications that consumers find useful, such as traffic maps.

In some instances, there’s a strong argument to be made that data being collected and/or shared probably doesn’t need to be, but even so, new rules and regulations on this sort of data gathering could conceivably hamper the ability of the Apples and Googles of the world to improve their mobile offerings and develop innovative new services.

For companies that provide location-aware apps, it would not be surprising to see new restrictions that make business more challenging.

For example, if the EU thinks giving consumers the ability to approve every cookie during a browsing session is a good idea, who is to say they won’t want consumers to given the same courtesy when a mobile app wants to submit their location to a third party? It might sound crazy, but proposals that are technically unworkable usually aren’t ruled out by bureaucrats on technical grounds alone.

So what’s going to happen?

Ideally, mobile players will take a more proactive approach to addressing privacy concerns. Transparency is a good thing, and superfluous data collection probably isn’t. In Apple’s case, an unencrypted file that stores where a device’s owner has taken the device was probably a bad idea from the start.

This one file has created a controversy that could and should have been avoided, but at the same time, companies like Apple probably shouldn’t retreat in fear.

Realistically, it’s going to be necessary for players in mobile industry, pointing out that some of these privacy uproars are little more than red herrings that distract from other, more important issues.

While some government regulators may seek to demonize Apple and Google as greedy corporations spying on consumers’ every move behind their backs, the truth of the matter is that if you use a mobile to make a call, your carrier has data that can be used to pinpoint where you were at the time.

Government agencies and law enforcement seek this information from carriers all the time. Obviously, this is almost always done for legitimate purposes (eg. criminal investigations) but the potential for abuse exists, particularly now that in some countries, information can be obtained with little to no oversight. For obvious reasons, regulators don’t seem at all motivated to limit the data carriers collect because they want it too.

From this perspective, it’s worth keeping in mind that the fight over mobile privacy isn’t really a fight over privacy. That cat is out of the bag and consumers have decided: the vast majority of us will gladly give up some privacy for the conveniences afforded by their mobile devices, just as hundreds of millions of consumers have decided to trade privacy for social networking.

This is a fight over the who and how of location data. Who will have access to it? How can it be used? If our mobile phones are going to become smarter and more useful to us, the answers to these questions matter.