(See bottom of the story for a response from the City of London Corporation)

London’s ‘smart bins’ are tracking passerbys by identifying their smartphones’ wi-fi connections. First reported by Siraj Datoo for Quartz, the scheme is currently being trialled around Cheapside, with the intention to sell the data to brands to create targeted advertisements. However, with the technology in its infancy there are still unanswered questions over the legality of the scheme.

Renew, the startup that build and sell the pod-like recycling bins, installed the bins in the run-up to the 2012 Olympics . They currently have 200 units spread across the City of London equipped with wi-fi and LCD screens. Advertisers then buy time on the screens, with local councils and charities receiving “up to a third” of the screentime.

Download the new Independent Premium app Sharing the full story, not just the headlines

With each unit costing £30,000 to build and install and costing around half a million in maintenance costs over Renew’s 21-year contact, the bins are no small investment. However, these expenses are balanced out by the quality of the advertising space.

Broadcasting to ‘affluent AB professionals’ almost without competition, the bins can even offer live-updates to the displayed content. The decision to track individuals and offer targeted advertisement is a logical progression for the company.

The ‘Renew ORB’ technology looks for smartphones with their wifi turned on and logs their MAC address - a string of numbers unique to each device. From this it can calculate the “proximity, speed, duration and manufacturer” of each smartphone. Over the course of a week Renew reports that “4,009,676 devices captured with over 530,000 uniques acquired.”

The graph below shows the number of smartphones identified each day with repeated triple dips representing increases in foot traffic during morning, lunch and evening. Renew say that the data could allow them to track which stores individuals visit, how long they stay there (“linger time”) and how loyal customers are to particular shops.

The scope for new advertising methods offered by this data is remarkable. For example, If Costa Coffee knows that the iPhone with MAC address A8-23-RR-XX usually stops in around 8 in the morning for a coffee and a croissant (don't forget, this technology could be extended into the stores themselves) is now heading to Pret for a morning pick-me-up, then they might pay to flash an advert on a relevant bin just as the A8-23-RR-XX is approaching, reminding him of a loyalty scheme or a special offer.

This particular scenario may be overly elaborate, but the core concept of what this data could mean to companies is not unusual. This sort of tracking happens on the internet all the time, and similar technology is already used in the US in malls.

However, Renew are currently facing accusations that their scheme is violating individuals’ privacy and perhaps even UK law. Speaking to The Independent Renew CEO Kaveh Memari was keen to defend the technology: “The gist of it is that we are collecting anonymised, aggregated MAC details. We’re not really collecting a personal piece of data: we don’t know who anyone is.”

“This is just testing to see if the technology works. It’s been used before in indoor environments but not outdoors before. In fact, it’s actively used in a lot places and people don’t even know it.”

Whilst the collection of anonymised MAC numbers is legal, the UK and the EU have clear laws regarding cookies – tiny individual databases created by companies to track how individuals use their websites. As EU Directive 2009/136/EC states:

“Member States shall ensure that the storing of information […] in the terminal equipment of a subscriber or user is only allowed on condition that the subscriber or user concerned has given his or her consent.”

Essentially this means that websites that store cookies, that tracks users’ habits, have to tell people they’re doing so. The problem then is the grey area as to whether the information collected by Renew is the same as a cookie. It doesn’t help that the motto of Presence Orb, the company that provides the technology to track the smartphones, is ‘a cookie for the real world’.

Memari doesn’t think that the two are the same, stressing that the information collected by the trial schemes has essentially been a “people counter”. All the extrapolations from this data - about shopping habits and brand loyalty - would be processed by the brands.

“The data would be sold to advertisers in a raw form,” says Memari, “and then it would be their responsibility. Anonymised MAC addresses aren’t personal data but once you start enriching it - which we are not planning to do – that’s when you get into interesting [legal] areas.”

So far, this seems to be the consensus but there are still many unknowns. The Information Commissioner’s Office (the UK’s independent authority on information rights) have refused to comment until more details on the technology are known, and Renew too hope that they can establish themselves more firmly in the debate.

“We very much want to be involved in the privacy issue and be at the forefront because we know this is an area that isn’t well regulated,” says Memari. “We’re one of the first movers here, it’s all new.”

Update: The City of London Corporation has release the following statement regarding the bins:

“We have already asked the firm concerned to stop this data collection immediately. We have also taken the issue to the Information Commissioner’s Office. Irrespective of what’s technically possible, anything that happens like this on the streets needs to be done carefully, with the backing of an informed public.”