This story is interesting. A computer hacker, Trevor Eckhart, discovered logging software on his smartphone. That software tracked everything that the user did, and reported it back to the phone company.
It is possible that this software was placed at the urging of the NSA. The phone companies will publicly take the blame. There will be a slap-on-the-wrist settlement, or a class action lawsuit where the only people who profit are the lawyers.
Class action lawsuits are a waste time. One legal principle is “Damages never cripple a corporation!”, making it at worst a slap on the wrist. Damages are usually less than a year of profits. Each customer may get $10, with the lawyers getting a huge windfall.
Even without keystroke logging software, phone corporations get a ton of information. They can record every phone call, every text message, and every website you visit. Under recent wiretapping law “enhancements”, they are obligated to save that information for awhile, and turn it over if asked. Allegedly, the NSA has spying computers colocated with every phone corporation. A judge doesn’t even have to rubberstamp the search warrant. Under the Patriot Act, police can write their own search warrants, and nobody can ever tell you that there was a search.
Collecting information is not, by itself, evil. The problem is that our “justice” system falsely classifies many things as crimes. If many things are crimes, then you don’t want the State spying on you. An overzealouus prosecutor can indict practically anyone, and make your life miserable with a phony investigation. In a Police State, you don’t want the police spying on you, because they will abuse that information.
For example, suppose Verizon tracked me and discovered that I was using a GameBoy emulator. They could tell Nintendo and then Nintendo could sue me for copyright infringement. Some “enhancements” to copyright law give ISPs an obligation to police IP. The correct answer is “‘Intellectual property’ is not property. These are old out-of-print games.”, but that wouldn’t be accepted by a judge, if I were sued for copyright infringement. Under proposed copyright law “enhancements”, copying old games could also be considered criminal.
Another problem is that “smartphones” are actually crippleware. You can’t install whatever you want on your phone, unless you hack/root it. The iPhone is completely locked down. You can only install apps that are approved by Apple.
Android is more open, but still locked down. You can publish Android apps without Google’s approval, by putting the .apk file on your website. Android is Linux-based, but still crippleware. All user apps run in a Java virtual machine. If there’s an open-source C/C++ program (like MAME), it can’t be easily ported to Android, because users can’t run Linux binaries natively (unless they hack their phone).
There is an open alternative, maemo/meego. For that, the user gets Linux and full root access to his phone. It hasn’t caught on in the USA. Cell phone companies like captive users. They won’t offer a phone that gives users full control. The phone corporations have a State-granted bandwidth monopoly. With this monopoly, they can decide to offer users crippled phones with spyware rather than a phone that gives users full control.
All smartphones in the USA are locked-down crippleware. The phone corporations have a State-backed monopoly/oligopoly. This enables them to only offer crippled phones and phones with spyware. Even if you’re angry at the big phone corporations, there’s nothing you can do about it. There’s only a handful of choices and they have a monopoly. Even if customers get angry over the “Carrier IQ” scandal, they don’t have any alternatives to the State telephone monopoly/oligopoly.
This also shows the risk of secretly installing spyware on people’s computers. Some clever hacker will notice the problem.
The “Carrier IQ” problem is a symptom of the monopoly-driven economy. If a large corporation does something bad, there’s nothing you can do about it. It’s likely that the NSA is actually behind the software, but they won’t publicly admit it.