Markey Touts Mobile Privacy Act at Hearing on App Economy

Longtime consumer privacy advocate Rep. Ed Markey has introduced legislation that would establish strict rules involving the collection and transmission of personal information on mobile devices. The legislation would carry far-reaching implications for marketers, advertisers and brands.

If enacted, the Federal Trade Commission and Federal Communications Commission would be tasked with enforcing new rules for monitoring software that is routinely downloaded to consumers’ smartphones without their knowledge or consent. Disclosures would have to be made to consumers throughout the lifetime of their mobile phone, from point of sale to each app download.

After introducing the bill, Markey (above) detailed his effort in a House subcommittee hearing on jobs in the mobile app economy.

“Apps very commonly access our sensitive information, our location, our phone books, photos, web browsing history, and apps often do this without prior notice and even when the app isn’t actively being used,” he said before the Commerce, Manufacturing and Trade subcommittee. Markey added that consumers “should know what’s happening. There are significant societal issues that have to be discussed, have to be debated.”

The Mobile Device Privacy Act (House Bill 6377) would require carriers, device makers, retailers, operating system providers and app developers to disclose all forms of tracking and monitoring, and obtain consent from each user prior to any collection or transmission of information.

Consumers would be notified when monitoring software is installed on their phone, what specific information is being collected, the parties to which the information is being transmitted and how the data will be used.

A study presented during the hearing by TechNet, a political advocacy organization comprised of numerous tech leaders, concluded that mobile app development supports 466,000 jobs nationwide. While the highest concentration of related jobs are in California and New York, two-thirds of the remaining jobs are spread around the remainder of the country, the study found.

“There are not a lot bright spots perhaps overall in our economy. One of brightest is the birth of the mobile app marketplace,” said Rep. Fred Upton, chairman of the Energy and Commerce Committee.

Rep. Mary Bono Mack, chairman of the Commerce, Manufacturing and Trade subcommittee noted that about one third of all mobile apps are developed by individuals or organizations with fewer than five employees, according to TechNet’s study. “Mobile apps have exploded in number and sophistication,” she said, adding that 15,000 apps are released every week, rapidly multiplying the 1.3 million apps on the market today.

“The revenues generated by apps include the purchase of the app, in-app purchases like game credits, in-app advertising, and app-enabled commerce such as the purchase of goods and services through an app. As a result, a new term, the apps economy, encompassing all such commercial activity, has now become a part of mainstream America,” she continued.

Peter Farago, VP of marketing at the mobile analytics firm Flurry, testified that app developers earned $5 billion worldwide last year, with 80 percent of that revenue attributed to premium app sales and in-app purchases. Flurry expects that number to double to $10 billion this year.

“Customers are able to pay, not just willing to pay. They’ve demonstrated they can. Every one of these devices has a credit card or a gift card associated with it on average,” Farago said. He also dismissed comparisons to the dot-com bubble, testifying that the mobile app economy has been footed in more sound economics from the beginning.

“In that era, the real way to make money was to get a bunch of eyeballs and hope that advertising revenue would follow. In this era, advertising really hasn’t kicked in as a revenue model,” he said. “Advertising will take off and add a layer so that will certainly help.”

Flurry estimates that 52 percent of all mobile app revenue came from in-app purchases last year, while the remaining 48 percent was evenly split between mobile advertising and app sales.

“It’s just the way to reach the consumer. This is being driven by consumers saying ‘meet me where I am and give me a service in the way I want that service,’ so it creates opportunities for anyone in business,” said Rey Ramsey, president and CEO at TechNet. “The lower barrier of entry means that the apps that you might see branded with a big name are actually written by a little guy.”

When asked what could be done to remove any barriers to job growth, Ramsey encouraged members of the subcommittee to pursue legislation that unlocks opportunities for a wider spectrum of potential employees. “What we have to do from a policy perspective is make information more available so that there are women, minorities and others, who but for not knowing what’s available to them, could be in business,” he said. “People just don’t know what’s out there.”