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How serious is Pentium III's privacy risk?

Is the new chip, with its controversial ID number, this generation's Edsel? Probably not, but Intel could learn a lesson from the way it has been promoted.

Is the Pentium III, with its much-criticized processor serial number, this generation's Edsel?

Probably not, say marketing experts, but Intel's experience with promoting the chip is a lesson in what can go awry in an ambitious marketing campaign.

Like Ford with its Edsel, Intel included a number of fancy new features in its product to improve performance, including a processor serial number designed to improve a major roadblock to e-commerce: security inside electronic transactions.

But instead of the dazed gleam of consumer acceptance, the Pentium III processor has been attacked by privacy groups, who have called for consumer boycotts and legal action, while hackers and software companies have directed their energies toward cracking the safeguards imposed by Intel to make the serial number more secure. Adding insult to injury, despite the controversy, very few of the opponents have outlined scenarios under which consumers could be harmed if their serial number is taken.

Intel could have done a better job of communicating the benefits of the feature, conceded Howard High, an Intel spokesman. "Privacy has gotten intermingled with anonymity-- which is different."

Because the Pentium III has only just been released, it is difficult to assess whether the calls for boycotts are resonating with consumers. There is scant evidence that the protests have hurt sales, especially since the chip just came out, and many believe that the controversy will blow over. Still, the company certainly isn't getting the PR outcome it probably wanted. The serial number has sparked a definite negative emotional core with segments of the population.

"I don't think it would be the least bit fair to accuse Intel of making a stupid decision. We're not privy to the research they had," said David Montgomery, Kresgie professor of marketing strategies at Stanford Graduate School of Business, in Palo Alto, California. "There's a difference between a good decision and a good outcome--you might introduce a new product with 2-to-1 odds it will be a winner," he added. "There's still a one-third probability it will turn out to be a loser."

Privacy advocates concede that there are more pressing concerns today than processor serial codes, and that Web sites already gather and share information about their users.

"To the extent that a product like the Pentium III can get people thinking about these issues?that is good for the cause of privacy," said David Sobel, general counsel to Electronic Privacy Information Center. "Frequently, people don't think about those questions."

EPIC, along with the Center for Democracy and Technology and other groups, is asking the Federal Trade Commission to enjoin Intel from continuing to manufacture and distribute the Pentium III.

By including the serial code, Intel is ostensibly appealing to its corporate customers, who can more easily track technology assets because of the identifying serial code. But the decision may alienate individual consumers, who tend to be more sensitive to privacy concerns.

"Privacy is a much stronger concern within the consumer market," Sobel said. "Employees have less of an expectation of privacy in the workplace than the consumer does in the home."

For its part, Intel acknowledges that the serial code may be more welcome in a corporate environment. But a company spokesman disputes the contention that consumers as a group are up in arms over the feature.

"If I was hearing great concern from the general public, I might buy into that theory," said High. "But I'm hearing it from privacy organizations, believing what they think is best for the average user."

"Preaching to the converted"
Montgomery agrees. "It is incorrect to infer that there is a general public upswelling on the basis of the public advocates," he said. Privacy groups are "preaching to the converted."

This is not the first time that high-tech companies have stumbled when trying to market a product with a complicated feature. Montgomery cited an anecdote from the Beta-VHS war of the early 1980's as an example of convoluted technology marketing:

Sony's Betamax format videotapes were outsold by Matsushita's longer-play VHS tapes, despite the fact that Beta was widely regarded as offering superior quality, Montgomery said. "Spin forward 20 years, and Sony has learned the lesson they needed longer tape play," he said.

Sony subsequently began offering video cameras which could tape for up 10 hours, far longer than most consumers would need--or want. "They learned the lesson from Betamax that long life is absolutely vital," he said, although most consumers were probably not even taking advantage of the longer taping capabilities.

Intel may have made a similar miscalculation in adding a feature that many consumers won't even use. Most major PC makers are shipping Pentium III computers with the serial code disabled.

Misjudging the response
Like Sony, Intel responded to a consumer trend--the skyrocketing growth of ecommerce--and developed a chip which purports to secure these online transactions. But the company may have underestimated the cultural importance placed on privacy among American consumers.

It's likely that the controversy surrounding the serial code will repeat itself as technology companies attempt to find secure solutions for e-commerce, analysts warn. As online transactions become more prevalent, security measures which compromise user secrecy will become more widespread.

"Until we get to a point where we have a standard way of identifying people, vendors will try to solve the problem in other ways, and many more people will get excited," predicted Rob Enderle, an analyst at Giga Information Group. "In the end, there will be need to provide a high level of security for transactions--and some information will have to be shared. People will have to get over this for the most part."