RIM bumps into the politics of global business

Disputes in the Middle East and elsewhere are a cost of running a global service

Research in Motion is getting a tough lesson in geopolitics.

Its problems in the Middle East and Asia this week show the challenges technology companies face when they expand into parts of the world where ideas about security and the right to privacy are very different from those back home.

"It's an interesting example of how different cultures can create challenges as new technologies become popular and expand around the world," said Gerry Purdy, principal analyst at Mobiletrax.

Saudi Arabia and the United Arab Emirates both threatened this week to suspend BlackBerry services if RIM doesn't provide a way for them to access its customers' messages, which they say they need for security reasons. The Saudi ban is due to start Friday and the U.A.E. ban in October.

India and Indonesia have made similar requests in the past, and talks with those countries are ongoing. Indonesia said Thursday it won't ban the BlackBerry service, but it wants RIM to put a server inside the country to handle communications there.

Observers see it as a political and cultural issue as much as a technology one -- something that was borne out Thursday when U.S. Secretary of State Hillary Clinton got in on the act.

"We are taking time to consult and analyze the full range of interests and issues at stake because we know that there is a legitimate security concern, but there's also a legitimate right of free use and access," Clinton said at a news conference Thursday, according toreports.

Canada's trade minister said his government will be "standing up for RIM as a Canadian company," the reports said.

RIM's problem is that it designed the BlackBerry system specifically to be immune to snooping. The company insists that even RIM can't access the messages of its large enterprise customers, which have BlackBerry Enterprise Servers with encryption keys on their premises.

"This kind of puts them between a rock and a hard place, because they can't really share this data even if they wanted to," said analyst Jack Gold of J. Gold Associates. BlackBerry traffic also passes through RIM's network operation centers, but they don't handle the encryption and are "really just big routers to ensure delivery," Gold said.

RIM has tried to take a firm stand on the issue, saying it won't bow to government demands and that "customers of the BlackBerry enterprise solution can maintain confidence in the integrity of the security architecture without fear of compromise."

But the company hasn't said how it plans to resolve the issue.

The problems aren't entirely unique to RIM, as its co-CEO Michael Lazaridis tried to argue this week. "Everything on the Internet is encrypted," he told the Wall Street Journal in an interview Wednesday. "This is not a BlackBerry-only issue. If they can't deal with the Internet, they should shut it off."

As information and communications technologies start to blanket the world, they are running into a patchwork of ideals and regulations about security, privacy and censorship.

"The rise of the Internet and global wireless communications is challenging the each-country-to-its-own scenario -- introducing notions of global freedom expectations that appear to transcend the sovereignty of governments to regulate what their citizens will and will not see, hear, and say," Ovum said in a research note.

Purdy sees a parallel between RIM's position and those of the big search providers. "It's similar to the Google search challenges in China," he said. Google, Yahoo and Microsoft all are required to censor results as a condition of operating in China. They incurred a public relations backlash in the West for doing business there, and Google eventually stopped censoring its results at the risk of being ejected from the country.

Other companies have run into problems as they expanded services worldwide. Facebook was banned in Pakistan recently because of Web pages that depicted the Prophet Mohammed, and just this week YouTube was banned in parts of Russia because of a video deemed "ultra-nationalist." Services including Twitter are routinely blocked in China.

RIM must now resolve the disputes in a way that doesn't appear to compromise the security of its service, nor expose it to criticism that it yielded to governments with questionable human rights records.

"While the security architecture is tighter for enterprise customers, there will be a 'guilt by association' impact for RIM if it is too accommodating of the demands of countries such as Saudi Arabia and the UAE -- or if it is seen to be 'flexible' on security when governments threaten to close market access," Ovum said.

While RIM has said explicitly that it won't compromise its BlackBerry enterprise service, it did not immediately say whether the assurances apply to consumer services delivered through wireless operators. Any compromise at all would be a "slippery slope," both Gold and Ovum said.

"What happens if they say they've figured out a way to do this for the United Arab Emirates? Everyone else is going to say, 'Well, you've been lying to us about your security for years.' Once they start down that path, it's a very dangerous route to take," Gold said.

One possible solution is for governments concerned about RIM's security to simply turn to a different service provider, who can build them a custom solution using software from e-mail vendor Good Technology, for example, Purdy said.

That's not a solution RIM would welcome, especially for large markets such as India. But Ovum said it may be the best option. "RIM would be better to withdraw from countries that do not yet see the value of its unique, globally secure, service offering," the research firm said.

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