Year in review 2011: Lawmakers and consumers anguish over mobile data security.

The news: Even as subscribers have grown increasingly reliant on their smartphones to help them navigate all facets of the human experience, they remain wary of how operators, device makers, content providers and developers might leverage mobile interactions to gain insight into their private lives. When British researchers reported in April that Apple's (NASDAQ:AAPL) iPhone and iPod devices had recorded location and time-stamp data since the mid-2010 release of the iOS 4 software update, effectively creating a comprehensive log of all user movement and activities during that time, the reaction from consumers and activist groups was predictably hostile, and the aftershocks rippled all the way to Washington D.C.

The fallout culminated in two bills introduced in the U.S. House of Representatives and Senate in mid-June, each proposing new restrictions on how both government agencies and private firms can collect and implement user location data. Specifically, the bills--The Location Privacy Protection Act, spearheaded by Sen. Al Franken (D-Minn.), and The Geolocation Privacy and Surveillance (GPS) Act, proposed by Sen. Ron Wyden (D.-Ore.) and Rep. Jason Chaffetz (R.-Utah)--mandate that companies including Apple, Google (NASDAQ:GOOG) and their software developer partners obtain express consent from smartphone and tablet users before sharing their information with third- parties. In September, the Federal Trade Commission additionally outlined a series of revisions to the decade-old Children's Online Privacy Protection Act, proposing to revamp the legislation to cover smartphone apps, social media sites and other recent technological advances inadequately addressed by existing regulations.

All hell broke loose again at year's end when a security researcher discovered startup Carrier IQ's mobile analytics measurement software installed on an Android smartphone manufactured by HTC, alleging that the app secretly records user behaviors like location data and web browsing across more than 140 million handsets. Carrier IQ denied the claims, stating "The metrics and tools we derive are not designed to deliver such information, nor do we have any intention of developing such tools. The information gathered by Carrier IQ is done so for the exclusive use of that customer, and Carrier IQ does not sell personal subscriber information to third-parties." Carrier IQ adds that all information derived from devices is encrypted and secured within the operator customer's network or in its audited and customer-approved facilities.

Carrier IQ has since denied reports that it is the target of a Federal Trade Commission investigation but confirmed that executives have met with FTC and Federal Communications Commission officials. The firm faces lawsuits in multiple U.S. states, and Sprint Nextel (NYSE:S)--one of three nationwide U.S. operators to admit to using Carrier IQ software, alongside AT&T Mobility (NYSE:T) and T-Mobile USA--has since disabled the application across all devices on its network. Look for Carrier IQ to continue making headlines in the year ahead.

Why it was significant: Twenty-eight percent of American adults use their phones to access location-based mobile and social services according to a survey issued in September by the Pew Internet & American Life Project. Usage rises when the study focuses exclusively on smartphone owners: Fifty-five percent of smartphone users have accessed a location-based information service, and one in 10 have used a geo-social check-in tool like foursquare, Pew reports.

But for location-based mobile services like advertising and daily deals programs to achieve mainstream acceptance and experience significant revenue growth, the vast majority of subscribers must feel comfortable sharing their whereabouts and related personal data. The Apple and Carrier IQ controversies prove that level of comfort remains far away.