Innovation is typically a good sign that will induce growth, but recent applications in wireless technologies may prove otherwise for telecommunications companies in exchange traded funds (ETFs).

After striking a potentially lucrative deal with Verizon Wireless (VZ), Walt Disney Co. (DIS) has plans to stay in wireless contact with theme park visitors, past and present, anywhere, reports Dawn Chmielewski for The Los Angeles Times. The plan allows visitors to download an application to their mobile phones that would allow Disney to pinpoint their location and recommend activities or restaurants to users.

The new service has broad implications for marketers and consumers, which may prove to be a controversial issue regarding privacy.

It is said that location-sensitive applications, such as the one Disney plans on using, are considered the next wave of marketing and advertising.

But will this help or hurt the telecoms? The industry’s reputation is already tarnished by their role in wiretapping scandals; will people really want them to be able to track them?

The Bush administration acknowledged in August American telecom’s role in domestic eavesdropping by the National Security Agency (NSA), writes Eric Lichtblau for The New York Times.

There are those who think it vital for Congress to give retroactive legal immunity to companies assisting in the NSA program. AT&T (T) and other major carriers are being sued over their reported roles in the program which permitted eavesdropping without warrants.

Will these events keep their marketing efforts from catching on?

Telecom ETFs affected by privacy issues in the telecom industry include:

• HOLDRS Merrill Lynch Telecom (TTH): down 39.5% year-to-date; Verizon is 27.1%; AT&T is 57.7%

• iShares Dow Jones U.S. Telecommunications Index (IYZ): down 48.6% year-to-date; Verizon is 15.9%; AT&T is 22%

• Vanguard Telecom (VOX): down 46% year-to-date; Verizon is 20.5%; AT&T is 18.7%

Tags: IYZ, Technology, Telecommunications, TTH, VOX