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There are lot of privacy problems with essentially having every iphone phone home with where it is all the time.

I'd wager that the phone sends back "areas" rather than GPS coordinates. So rather than the phone reporting "My owner was at (lat,long) at 3:21PM!" it would instead report "My owner came within range of Starbucks' Wifi Hotspot at 3:19PM, and left at 3:23PM!"

In reality Apple has been doing exactly this type of thing since iOS 4 was deployed[1], so unfortunately the privacy problems are apparently very easy to sidestep.

[1] http://www.dailytech.com/Apple+is+Tracking+its+iPhone+iPad+U...

Weren't they going to use user locations in their traffic update service?

Not to mention battery problems from having the GPS and wireless data going constantly.

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