Apple, hackenomics, and the waning anonymity (and obsolescense) of cash

The noose is slowly tightening. A hundred years ago -- heck, even ten years ago -- for the most part, we didn't have to sacrifice our privacy just to participate in some transaction.

The noose is slowly tightening. A hundred years ago -- heck, even ten years ago -- for the most part, we didn't have to sacrifice our privacy just to participate in some transaction. Lots of merchants tried (some still do) to shake us down for our personal information before allowing a purchase. Radio Shack used to be notorious for this practice until it realized how many customers it scared away (including me.. that was one reason I hated going in there).

Earlier this year, while buying a digital photo frame at Micro Center in Fairfax, VA, I was accosted for all of my personal information (including e-mail address). When I declined to provide it (mostly fearing junk mail), the cashier conveniently didn't know how to continue with the transaction (as if no one else declines). A manager came over to take care of business. But it was an uncomfortable moment. As the minutes ticked away, the stares of the people in line behind me were burning holes in the back of my head. They no doubt felt as though my privacy wasn't worth nearly as much as their time. Screw them. If Micro Center doesn't want fidgety people in its lines, it knows what to do.

A lot of places ask for my zip code. I don't feel too violated when asked for this bit of data (it's probably for research). But to be honest, when I'm paying cash, I'd rather not be asked for anything but my cash.

I don't remember the exact context, but I think it was in the early 80's when I heard Johnny Carson crack a joke about how the day might come when cash wouldn't be accepted. Back then, he was kidding. Today, no one is kidding about it. For example, according to a recent InfoWorld report, Apple is apparently refusing to accept cash as a form of payment for its iPhones. Wrote IW's Elizabeth Montalbano and Steven Schwankert:

People looking to walk into an Apple retailer and buy an iPhone with cash will be out of luck. The company is now accepting only credit or debit card payments for the devices so that it can track who purchases the phone, according to an employee at the Apple Store in New York's SoHo neighborhood.

The new policy is Apple's attempt to prevent people from purchasing and then unlocking and reselling iPhones, a situation that has been a problem for the company. Apple won't let anyone without a credit card or debit card in their name purchase iPhones, according to an unidentified Apple Store employee in a phone interview.

The part about "tracking who purchases the phone" really caught my eye. When Radio Shack, Micro Center, or some other merchant asks(ed) for my personal data, it's not as much about giving them the information as it is about what they plan to do with it. If for example, the cashier said, "Hey, where ya from?," I'd be happy to tell him/her. But, when the data is being programmatically absorbed into some database, that's when I begin to envision all sorts of dasterdly usage scenarios. But tracking in the context of the iPhone unlocking debacle (which the IW story says is costing Apple millions)? Suddenly, Micro Center isn't looking so bad.

Unfortunately, the IW story doesn't contemplate Apple's rationale for this so called tracking and what might happen should a phone connected with a credit card end up unlocked or in the hands of someone other than the original buyer. What makes this even worse is Apple's complete lack of transparency regarding such an unorthodox policy. Nothing about Apple's credit/debit card requirement has been published by the company and the InfoWorld report says the following:

Apple's public relations team did not respond to multiple requests for comment on the new policy.

We're left to assume that the requirement is indeed about some form of tracking --- an idea which is quite frightening. What might Apple be thinking? Here are some guesses:

  • Ultimately, it's just a fear tactic. There isn't much Apple can do with this information from a tracking perspective. It would have to go through an iPhone's buyer's card issuer to get at anything more personal than your name and credit card number at which point the trail would end. But that doesn't mean Apple can't create a perception that it has more access to your personal information that it does, thus scaring away would-be abusers of the iPhone ecosystem.
  • Credit cards are a means of authenticating your identity which in turn serves Apple's current maximum of 2 phones per person policy. Theoretically, through its systems, the policy could be enforced by either (a) keeping count of the number of phones purchased by credit card or (b) keeping count of the number of phones purchased by name (the name that appears on the credit card). The latter would be less reliable because of (1) people with common names and (2) people with more than one credit card. But maybe Apple looks for it anyway and will red flag it until one John Smith can prove he's not the John Smith that's already in the system.
  • Whenever an iPhone is purchased with a credit or debit card, the serial number of the iPhone is married to that credit card in Apple's database. If that iPhone should become unlocked or should Apple discover that it's in someone else's possession, it will charge your credit card with some sort of penalty fee. I don't think this is legally allowable. But (1) Apple has traditionally been very litigious and (2) it could be contemplating a change to the legal language (if it isn't already there) that comes in the box with the iPhone that paves the way to legally impose such financial penalties.
  • Sort of a variant on the last bullet point, if you purchase one iPhone with your creditor debit card and Apple discovers that you've done something with the iPhone that it would rather you not have done, it can blacklist your credit card from (a) being used to buy any more iPhones or (b) being used in any Apple Store.
  • Another variant on the previous two punitive bullet points; Apple could share the credit/debit card data with AT&T which in turn could terminate the existing services that it's providing to any customer already associated with that credit card.

To better understand what Apple can and cannot do with your credit/debit card information, I've placed a call to my contacts at Visa who have promised to get back to me one way or another (so expect an update if not an entirely separate blog post on the issue shortly).

But, in the bigger picture, it's already bad enough that our governments (federal, state, and local) are able to, with near impunity, take advantage of our digital breadcrumbs. But forcing us to leave such breadcrumbs behind as a means of controlling buyers is an act of seller indignance and buyer abuse that deserves a swift and unbending response from buyers. What's next? Will Apple require credit cards to purchase both Apple systems and Leopard? That way, only authenticated owners of Apple systems can acquire Leopard (to offset the chances of it being hacked to run on a PC)? Under no circumstances should we allow such treatment by a merchant. Any merchant. Furthermore, Apple's move sets an ugly precedent that undermines the longstanding tradition of cash as legal tender and the freedom it not only exemplifies, but stands for. Shame on any company that, because of its own inadequacies, strips us of that right.

Just like the way hackers have proved fallible the digital rights management schemes used by Apple to protect its grip on the music industry and the portable digital media player market, Apple's technology has once again proven itself to be an impotent tool in the struggle to enforce its contractual obligations (for example, with AT&T). Strangely, it continues to make this bed and gets away with asking us to sleep in it. Go figure.

Update: I went to an Apple Store to double check the policy. See Undercover Video: Why Apple only takes credit cards for iPhones & the legal questions raised.

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