12/12/2011 04:08 pm ET Updated Feb 11, 2012

Schmidt on Carrier IQ: Good PR, Bad Business

At the end of last week Eric Schmidt, Google's executive chairman, made a major move in totally distancing his company from the Carrier IQ software installed by American mobile phone operators on its Android devices. Of course, it might in part have been a bit of crisis PR. In condemning the software as 'keylogger', he was directly referring to security researcher Trevor Eckhart's recent study into the frightening capabilities of the software. Eckhart's findings reveal it to allow the distributors to monitor pretty much anything and everything that the user does, from where he/she is, to what apps are installed on his/her phone to every single keystroke on the device itself (allowing the network operator to see every text message and email etc.). The study sparked controversy and a spate of lawsuits throughout last month.

Eric's comments, therefore, are ingenious: the remark's appeared in the context of Schmidt's address at a Google-backed conference on internet freedom. Schmidt not only asserted firmly, to an audience of democracy and freedom activists, that Google 'don't support' keylogging or other nefarious aspects of Carrier IQ's software, but he managed to paint the company as a victim along with every man and woman on the (tracked, monitored and logged) street.

The Android software, and the deals by which it is licensed to mobile operators, is extremely open allowing code like Carrier IQ's to be added easily to devices. As Schmidt said -- probably truthfully -- there is nothing his company can do to keep it off their handsets. PR-wise, he can shift the blame to the big, bad operators while he tuts ineffectually from a distance. And when he tuts, Google tuts with him.

However, from a long-term business perspective, what does this mean for Android? Schmidt's comments have drawn a stark contrast between Google's almost frighteningly exposed software and the much safer offerings of its competitors. Apple's iOS has allowed the software to run on their handsets, however, following the controversy, the company has released a statement stressing that they no longer support it on 'most' of their iOS 5 devices, and have promised to totally remove it in future. It's also easily possible for the user to disable its less appealing functions.

Microsoft have gone one better, stating simply that "the Windows Phone operating system does not include the Carrier IQ software." As a ruthlessly closed source developer, they're now reaping the benefits of a policy formerly criticised by some as archaic. Apple, of course, are in a unique position in that they own their entire ecosystem. Nobody moves without their say so.

While Schmidt may have salvaged the company's reputation with journalists and others focused on the moral issue at hand, this could spell disaster from a business perspective. In the eyes of both consumers and potential partners, they're powerless, perhaps even incompetent. Carrier IQ may be only the first of many undesirable mechanisms using the openness of Android for more sinister means.