U.S., RIM Talk With Governments as BlackBerry Bans Loom

The U.S. and Canadian governments have started talks with authorities in countries including the United Arab Emirates to try and head off possible bans on the use of Research In Motion Ltd.’s BlackBerry.

Canadian Trade Minister Peter Van Loan told reporters yesterday his country’s officials are working with Waterloo, Ontario-based RIM and foreign governments to find a solution to disputes over the device. The U.S. government is discussing a proposed ban in the U.A.E. with that country’s government, U.S. Secretary of State Hillary Clinton said yesterday at a press conference.

“There is a legitimate security concern,” Clinton said, “but there’s also a legitimate right of free use and access.”

RIM faces growing scrutiny over its BlackBerry e-mail and messaging services in countries from the U.A.E and Saudi Arabia to India and Lebanon. Indonesia, the world’s fourth most- populous nation, became the latest country to express concern about BlackBerry services.

The Indonesian government doesn’t plan to limit BlackBerry services in the country, the Ministry of Communication and Information Technology said yesterday.

“So far, there is absolutely no plan to implement a similar ban policy pursued by the United Arab Emirates as we don’t see an urgent or strong reason to impose it,” the ministry said in a statement on its website.

The statement counters earlier comments by Heru Sutadi, a member of Indonesian Telecommunications Regulatory Body, an independent regulator, who said the country may ban BlackBerry services over security concerns unless the company sets up a server in the nation.

Protect Customers

“There’s no decision yet on the ban, but we raised similar concerns as other countries over the security of data traffic,” Sutadi said by phone. “We just wanted to protect the customers and our country from any misuse of the content of communication using BlackBerry devices.”

RIM spokeswoman Marisa Conway didn’t immediately return a call or message seeking comment.

The U.A.E. said in a statement this week that it wouldn’t be changing its decision to ban BlackBerry service in October.

Final Decision

“The Telecommunications Regulatory Authority’s decision to suspend certain Blackberry services from October 11th is final,” Mohammed Al Ghanim, director general of the authority, told the state-run Emirates News Agency Aug. 4. “We remain open to discussions in order that an acceptable, regulatory-compliant solution might be developed and applied,” he said, according to the state news agency.

Yousef Al Otaiba, the U.A.E. ambassador to the U.S., said in a statement Aug. 2 that his country “is asking for exactly the same regulatory compliance, and with the same principles of judicial and regulatory oversight, that BlackBerry grants the U.S. and other governments, and nothing more,” and “for the very same reasons: to protect national security and to assist in law enforcement.”

State Department spokesman Philip J. Crowley said yesterday the U.S. has been in touch with RIM and will have further meetings “to try to understand fully the issues that have been raised” and “determine how to meet both the security needs that these countries are expressing and also ensure the free flow of information as we are advocating,” Crowley said.

Security Concerns

The U.S. is also in touch with all the countries involved, Crowley said. “We are reaching out to those countries -- the U.A.E., Saudi Arabia, India and others -- to understand, you know, the security concerns and see if we can’t work collaboratively to find solutions.”

Conversations with these countries are taking place at multiple levels of government, Crowley said.

The problem is one of “genuine complexity,” Crowley said. In a reflection of that complexity, State Department experts on technology, innovation strategies, commerce, economic and regulatory issues and information technology are working on the problem, he said.

RIM said Aug. 4 it can’t meet requests from governments that it reveal codes for reading some users’ communications. The BlackBerry corporate service was designed to prevent RIM, or anyone else, from reading encrypted information and any claims that RIM provided “something unique to the government of one country” are unfounded, it said.

Saudi Arabia, UAE, India

Saudi Arabia, the Arab world’s largest economy, ordered phone companies operating in the kingdom to suspend BlackBerry instant messaging from tomorrow. That came after a decision this week by the U.A.E., home to Middle East business hub Dubai, to shut BlackBerry e-mail and messaging functions the government can’t monitor in October.

The Indian government is still in talks with RIM over BlackBerry services in the country and is hopeful agreement can be reached, Telecommunications Minister A. Raja said in New Delhi this week. India may ban RIM services in the country unless the Canadian company agrees to resolve security concerns, a government official with knowledge of the matter said last week.

Mike Abramsky, an analyst at RBC Capital Markets in Toronto, said he met with RIM Aug. 4. While the company declined to outline possible resolutions, “it seemed as if all the parties are working intensely to resolve the issues,” he wrote in a note.

Potential Impact

The company has about 1.2 million subscribers in Indonesia, 1.1 million customers in India and the United Arab Emirates and Saudi Arabia together 1.2 million subscribers, Abramsky said. RIM had 46 million subscribers globally at the end of May.

RIM yesterday slipped $1.16, or 2.2 percent, to $52.23 on the Nasdaq Stock Market, extending its drop this year to 23 percent.

The government of Lebanon has expressed concerns about RIM’s service, Reuters reported yesterday. The Telecoms Regulatory Authority will begin discussions with the company yesterday, Reuters said, citing Imad Hoballah, the acting head of the regulator.

“The growing list of governments taking this stance is worrisome and could create an ongoing headwind to the stock if it does not get resolved quickly,” Ehud Gelblum, an analyst with Morgan Stanley in New York. He has an “overweight” rating on the stock.

Local Operations

Many governments want RIM to establish a networks operations center in the country if they operate there, said Gelblum. It would be “economically impractical” for the company to do that and focusing on building so-called NOCs in larger potential markets like India and China makes the most sense, he said.

Indonesia asked RIM to set up a data center in the country last year, the ministry said.

“All telecommunications companies, local and foreign, are obliged by the law to set up a data center in Indonesia,” Tifatul Sembiring, Communication and Information Technology Minister, told reporters in Bogor, West Java, yesterday. “We have appealed to RIM but there’s no answer yet.”

The Indonesian government ended a two-month freeze on licenses for new models of RIM’s BlackBerry devices in September last year after the company opened a repair center in the country. The center was set up to repair all models of BlackBerry devices sold through RIM partners in Indonesia, the company said in September 2009.

RIM’s service for large corporate customers routes e-mails through its own servers, which are often physically located in a country different from the user, with the data encrypted throughout the system. The company also provides an Internet- based service for smaller customers and consumers.

To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net; Hugo Miller in Toronto at hugomiller@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.