Big Brother Inside
March 15, 1999
While the computer industry applauded the release last month of Intel Corp.'s new Pentium III micro-chip processor, three advocacy groups were less than enthusiastic.
Citing privacy concerns related to the new identification numbers in the chip, the groups have taken their concerns directly to six funds within the estimated $92 billion, 128-fund socially-responsible mutual fund sub-culture. Intel should be advertising "Big Brother Inside," the groups say. The targeted funds are the Calvert Social Equity Fund, Citizens Emerging Growth Fund, the Domini Social Equity Fund, Dreyfus Third Century, the Parnassus Fund and the Smith Barney Concert Social Awareness Fund.
A March 1 letter sent to six of the largest mutual funds which invest under a socially-responsible mandate were asked to divest their holdings of Intel stock as soon as possible. The letter alternatively asked that Intel be added to the fund group's list of companies excluded from investment consideration, or that fund managers talk with Intel or PC manufacturers about their concerns. PC manufacturers, such as Compaq, Dell, Gateway, IBM and Hewlett-Packard, are now using the Pentium III chip in their computers.
The advocacy groups include the Electronic Privacy Information Center in Washington, D.C., Junkbusters Corp., a virtual corporation located in Greenbrook, N.J. and Privacy International, a human rights group headquartered in London with an office in Washington, D.C.
At the heart of the issue is a unique ID number, called a Processor Serial Number (PSN) that is imbedded in each Pentium III chip. The groups charge that this serial number allows marketers and others who want information about online customer behavior to trace surfers from web site to web site, often without the knowledge or expressed consent of the surfers, said the groups.
"The dangers to privacy are similar to those of the Social Security Number, but on an even larger scale due to the speed, richness and pervasiveness of the Internet in our society," said the letter to the six fund groups which range in size from $100 million to $1 billion.
The groups, which have been engaging in a month-long war against Intel, decided to aim their message at socially-responsible funds because, "they are the most likely to understand the impact of this and are used to responding to calls to divest, said Jason Catlett, president of Junkbusters. "They are the ones people look to as leaders."
Earlier in February, the groups collectively petitioned the Federal Trade Commission to compel Intel to change the chip's features. But the FTC said it did not believe it had the authority to force Intel to change the chip. The groups also sent letters to the ceo's of major PC manufacturers asking them to reconsider use of the Pentium III chip.
The Pentium III chip poses no real threat to consumers now because it requires users to agree to accept a special downloaded file which enables a website to read the PSN, said Lucas Graves, an analyst of web technology strategies at Jupiter Communications in New York.
"The real danger is down the road, when future operating systems (such as the next generation of Windows) incorporate the processor ID into core systems," he said. Then the process will be seamless and virtually invisible to users.
According to Howard High, an Intel spokesperson, the PSN, which is similar to ID numbers on cars or refrigerators, was Intel's response to requests from companies for a method of tracking computers themselves. Companies wanted a way to prevent machines from being stolen, High said. The PSN also helps companies keep track of software usage and licenses, he said.
"We have met with socially responsible stock funds on environmental issues...we are willing to meet with them and talk about this PSN and how it works," said High. "Then the funds will have to decide what makes sense for them."
Several fund companies said they were reviewing the objections to Intel. Joseph F. Keefe, executive vice president and general counsel at Citizens Funds, wrote in a letter to the advocacy groups that, "we are currently researching the issue and reviewing our holdings in view of the privacy issue..." Citizen's letter says that if Intel fails to pass the fund firm's socially-responsible screening process, "then we will indeed divest the company from our portfolios."
"We are looking very seriously at the issue," said Peter Kinder, president of Kinder, Lydenberg, Domini in Boston, the socially-responsible investment adviser to the Domini Social Equity Fund. It ranks its $800 million position in Intel as the fund's second largest holding behind Microsoft. KLD is expected to complete its Intel evaluation within two months. "We try to avoid rushing judgement," Kinder said.
Kinder said that emerging technologies may mean the social criteria funds use will have to continuously evolve.
"I'm surprised questions of privacy haven't been more prominent," he said.
A Dreyfus spokesperson said only that the letter was being examined. Calvert declined to comment. Smith Barney did not return a call seeking comment.