Middle East business: Blackberry brinkmanship

FROM THE ECONOMIST INTELLIGENCE UNIT

The United Arab Emirates (UAE) and Saudi Arabia have upped the ante in their effort to secure monitoring access to communications via Blackberry. The threat to pull the plug on the service may be a negotiating gambit, and a compromise is likely to be thrashed out eventually. However, there could be a downside for the two Gulf Arab countries in terms of perceptions of ease of doing business. More broadly, Canada’s RIM faces a potential setback in its quest for expansion of its Blackberry services in emerging markets.

The pitfalls of operating in authoritarian countries have become very apparent to Western companies over the past few months. In the technology sector, the most high-profile case was that of Google in China, where the government could not stomach the Internet giant’s refusal to self-censor search queries on its site. But another case involving Research in Motion (RIM) could dwarf even that. Regulators in the United Arab Emirates (UAE) have taken a dim view of the Canadian manufacturer’s security practices, announcing a ban on the use of messaging services on the company’s iconic Blackberry device. And if copied by other countries in the Gulf region and beyond, the ban could seriously hinder the progress of a company facing a slowdown in its older markets and a challenge from a plethora of other device makers that have not been similarly targeted—yet.

Reasonable access

UAE authorities insist their position is entirely reasonable, essentially complaining that messages sent using RIM’s technology cannot be monitored by the state. The ostensible concern is that subversives or criminals using Blackberry devices may pose a threat to public order and national security. In an effort to convince the world it is not out on a limb, the regulator has published a comparison of its own telecoms regulations with those in the US and the UK, which appear to be equally demanding of tech companies. “The UAE requires compliance for the very same reasons as the US: to protect national security and to assist in law enforcement,” the UAE ambassador to the US, Yousef al-Oteiba, said in response to critical remarks from the US State Department of his government’s move. Its response to RIM’s infraction has been to suspend the use of Blackberry messaging services from October 11th.

RIM, however, has not been acting any differently in the UAE from in its core Western markets. Its technology essentially means that messages are sent in an encrypted form to RIM’s servers in Canada, making it difficult for telecoms operators or governments to monitor them. The security of the system is actually touted by the manufacturer as one of its strengths, and is one reason why Blackberry messages are delivered more speedily and efficiently than other types. Similar complaints to those of the UAE regulator have not been heard in the US and the UK, where national security is as big a concern as anywhere.

Surveillance and censorship

To critics of the UAE, then, this further shows how governments in certain parts of the world are struggling to accommodate the freedoms brought about by the use of new technologies. State monitoring and censorship of the Internet is widespread in parts of the Middle East and Asia, and led to the effective termination of some of Google’s services in China last month. In the UAE, specifically, the OpenNet Initiative, which aims to “investigate, expose and analyse Internet filtering and surveillance practices in a credible and non-partisan fashion”, claims that Internet censorship is on the rise. Because it cannot be controlled in the same way as the Internet, Blackberry’s technology poses a particular quandary.

The UAE has not done much to convince the sceptics that its concern is genuinely about national security. Its statements on the Blackberry issue refer to the “social” problems that could be caused by unfettered use of messaging the RIM way. And recent history makes it look untrustworthy. About a year ago, Etisalat, the government-controlled telecoms operator, told all of its Blackberry customers to install software on their devices, lying that it would improve performance. When the software was subsequently revealed by RIM to be spyware, allowing the government to monitor messages sent on Etisalat’s network by Blackberry users, the government tried to feign ignorance, blaming Etisalat and telling customers to remove the upgrade.

Containment or proliferation

Popular protest could force the UAE to back down in this case, claiming to have found some compromise that would allow it to save face (after having made so much noise on the subject). Around half a million Blackberry devices are thought to be used in the country, and consumers will not take kindly to the disabling of key features. What’s more, the customer base is likely to include many important Emiratis who will not take kindly to having to be weaned off their Blackberries. The ban will also affect Blackberry-using businesspeople visiting the UAE from abroad, sending out the entirely the wrong kind of signal to the international business community. There is also precedent for backing down. While effectively crushing Google.cn, China allowed Google to continue operating its Hong Kong site in uncensored form. Concerns about the unpopularity of an outright ban, and its impact on foreign investment, were somewhat responsible.

But the Blackberry ban could always spread. Indeed, Saudi Arabia is also reported to be considering its position on the use of Blackberry messaging services. More worryingly, for RIM, is the news that officials in India—a massive market with a democratically elected government—are also considering a ban on Blackberry services unless RIM sets up a proxy server in the country allowing the telecoms regulator to monitor messages.

Agreeing to that, and finding technical fixes in other markets, could be problematic and costly for RIM. Nor would it do the company’s reputation much good among those who feel Western tech companies should take a principled stance against this sort of thing. Yet withdrawing from these markets would deal the company’s prospects a major blow. Growth in the core markets of Canada, the US and the UK is tapering off, and emerging markets represent the company’s best chance for resurgence. It will hope some governments blink first.