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RIM likely to withdraw BlackBerry sales

Following Saudi Arabia and UAE's decisions to ban BlackBerry services, Ovum analyst says the phonemaker might pull sales of its device from both countries to show its commitment to providing secured communications.
Written by Kevin Kwang, Contributor on

Research In Motion (RIM) is likely to withdraw the sale of its BlackBerry smartphones from Saudi Arabia and United Arab Emirates (UAE) after the device was banned in both countries, to show its commitment to upholding its brand of secured communications, according to an analyst.

Tim Renowden, an Ovum analyst based in London, told ZDNet Asia in an e-mail that the two Middle East markets are "very small" compared to North America and Western Europe. With that in mind, he said it is likely the Canada-based phonemaker will sacrifice sales in the two countries rather than risk the "reputational damage" it would incur if they acceded to both governments' request to access RIM's encrypted data.

Asked if there were any quick solutions the BlackBerry maker can employ to comply with regulations, Renowden noted that creating a technical workaround would be "trivial" for the company but it is "unlikely to happen".

He said the issue goes much deeper into RIM's whole proposition for the mobile device which is built on the secure connection the company's NOC-based (network operations center) architecture provides.

"The secure handling of customers' data traffic has been such a key selling point for BlackBerry, particularly with enterprise and public sector customers in the U.S. and Europe, that relaxing this security would significantly erode trust in the brand," the analyst said.

Last Sunday, the UAE's Telecommunications Regulatory Authority (TRA) announced it would block e-mail, instant messaging and Web browsing on BlackBerry devices beginning Oct. 11. Fellow Gulf state Saudi Arabia soon followed suit, with its telecom regulator ordering mobile operators to disable the phone's instant message function starting this Friday.

TRA said in a statement: "The suspension is a result of the failure of ongoing attempts, dating back to 2007, to bring BlackBerry services in the UAE in line with [the country's] telecommunications regulations."

Both UAE's TRA and Saudi telecom operator, Saudi Telecom Company, did not respond to ZDNet Asia's queries.

A channel to monitor content
Steve Hodgkinson, research director at Ovum, also weighed in with his comments, noting that the TRA had adopted its position because RIM's secure telecommunications service prevented the UAE, and other governments, from monitoring messages and e-mail and restricting access to forbidden Web content.

"Suppliers such as RIM can now freeze governments out of the regulatory loop by enabling citizens to have secret conversations--the kind that are taken for granted as essential by any corporation or business, and [even] by government agencies themselves as users of the BlackBerry," Hodgkinson said in a statement.

When contacted, RIM told ZDNet Asia in its statement: "RIM respects both the regulatory requirements of government and the security and privacy needs of corporations and consumers. RIM does not disclose confidential regulatory discussions that take place with any government, however, RIM assures its customers that it is committed to continue delivering highly secure and innovative products that satisfy the needs of both customers and governments."

RIM co-CEO Michael Lazaridis had earlier hit out at governments seeking to ban the BlackBerry, arguing that such efforts undermine the growth of economic commerce by demanding access to users' secure communications and transactions.

A Wall Street Journal report quoted Lazaridis as saying: "This is about the Internet. Everything on the Internet is encrypted. This is not a BlackBerry-only issue. If they can't deal with the Internet, they should turn it off."

He added that the company is holding discussions with the regulatory authorities of various governments to persuade them that the Internet requires secure communications and is asking them to back off with their demands to monitor user data and traffic.

Increasing international pressure
Despite RIM's assurances to uphold service integrity in the two Middle East countries, Ovum's Renowden predicted that if bigger emerging economies such as China and India adopted a similar regulatory stance, then RIM might "compromise" and grant these governments their wishes.

"There have been rumblings in several other countries about monitoring wireless communications more closely and some of these countries may feel that, collectively, they can pressure RIM into meeting their demands to make BlackBerry users' data traffic available for monitoring," noted Renowden. If such a compromise were to take place, he added, RIM's brand damage would be high.

Various news agencies had reported that countries such as India, Indonesia, Kuwait and Egypt were also looking to broker deals with the phone maker to gain access to users' mobile data.

RIM's Lazaridis also stated that the company's devices were being "unfairly singled out" by foreign officials trying to score political points, alluding to the fact that other mobile devices could potentially run afoul of these governments' regulations, too.

Spamhaus Project CIO Richard Cox said in a report by ZDNet Asia's sister site ZDNet UK that Apple's iPhone can now be legally jailbroken and users may install applications on the smartphone to gain the same security features that BlackBerry users have.

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