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Security-driven Blackphone to sell for $629; will people pay the premium?

Chip Reid reports on the Blackphone, which runs on a customized operating system that is entirely encrypted
Blackphone revealed: A look at world's first secure smartphone 04:00

Blackphone is being hailed as the cutting-edge technology that could help users reclaim smartphone security.

Unveiled at the World Mobile Congress in Spain this week, the Blackphone is advertised as a game changer in tech. One company advertisement says, "Technology was supposed to make our lives better; instead we have lost our privacy. Now it's time for a change."

Blackphone co-founder and Silent Circle chief executive officer Mike Janke says the world needs Blackphone "because the world needs privacy."

The phone may look like an Android on the outside, but on the inside, Blackphone runs on a customized operating system that is entirely encrypted.

Blackphone aims to protect its users from hackers, governments, and something else from which they might not even know they need protection -- smartphone apps.

"What they don't see is that those apps are accessing their contact list, they're accessing their phone usage, their data usage, their locations," Janke said.

Jason Hong, an associate professor at Carnegie Mellon's Human Computer Interaction Institute, said he looked at the top 100 apps currently on the Android in the Google Play store, and found roughly about 85 percent of them were collecting some kind of sensitive information.

"Most people don't expect Angry Birds to use location data, but in reality, it actually does," Hong said.

Angry Birds isn't the only app collecting information that may surprise you. The Federal Trade Commission accused the free Brightest Flashlight app -- with nearly 100 million downloads -- of selling user location information to advertisers. A popular Bible app also collects location and IP addresses.

"What Blackphone will do, the minute you download an app, any app, and you begin to use it, it will pop up and say, 'This app is trying to access your contacts'," Janke said.  

Last week, CBS News sat down with the company's chief product officer, Toby Weir-Jones, for a look at the Blackphone up-and-running for the first time.

The key to Blackphone's privacy capabilities lies in the phone's security center. 

"What we can do is we can say, 'I don't want photo gallery to get my really precise location from GPS,'" Weir-Jones said. "I'm gonna turn that off. The advantage here is that you're not forced to accept an all-or-nothing list of permissions. You can fine tune."

CBS News' Chip Reid remarked, "I've seen this phone described as NSA proof. Is anything really NSA proof with all their resources?"

"No, there is nothing in the world today that is NSA-proof, other than taking the phone and throwing it in the Potomac," Janke said.

Reid asked, "Do you envision everybody walking around with one of your phones in the near future?

Janke said the company is not looking for world domination with its phones, but added, "We know that we have customers from 130 countries right now."

But how many will be willing to pay the $629 price tag?

"I think that's gonna be a hard sell for typical smartphone users," said Hong, from Carnegie Mellon. "Historically, it's been very tough to try to convince people to pay for privacy."

Janke said, "What we're doing is absolutely shaking up this system. With it comes applause as well people wanting to steamroll us."

Asked who would want to steamroll them, Janke said, "I would suspect just about everybody who makes money off of your data."

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