Rep. Markey releases draft of cellphone privacy bill

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“Consumers have the right to know and to say 'no' to the presence of software on their mobile devices that can collect and transmit their personal and sensitive information,” Markey said.

Markey serves on the House Energy and Commerce Committee and is the co-chairman of the Congressional Privacy Caucus.

Carrier IQ, which is embedded in millions of smartphones, is designed to help cellphone companies track the performance of their devices. The software first made headlines in November, when a researcher posted a YouTube video claiming to show that Carrier IQ records users' every keystroke, including the websites they visit, the contents of their text messages and their location.

Carrier IQ argues that most of the personal information it collects stays in the user's cellphone and is not transmitted back to the company. The company says it only gathers information that would be helpful to evaluate the phone's performance.

"As we have previously indicated, opt-in / opt-out is a capability that we are able to provide and have been doing so in a number of markets," Andrew Coward, vice president of marketing for Carrier IQ, said in an email. "Utilizing this option is a decision for each network operator balancing a number of factors including the critical need to ensure optimal network and device performance and consumer concerns about privacy."

--Updated at 1:51 p.m.