1 August 2010

UAE Blackberry tension rises

Wow. Less that a week after I wrote about the UAE and Blackberry, and they're in the news again. Only this time it looks like the gloves are off.

Reports indicate that the United Arab Emirates (a sovereign federation of seven Emirates including Abu Dhabi and Dubai) has announced they will suspend "messaging, e-mail and Web browsing" services to Blackberry users in the UAE with effect from 11 October 2010 "until a solution compatible with local laws is reached". Here are the reports from the BBC, Bloomberg, and the AP courtesy of Google.

Here is a statement from a service provider in the UAE with their understanding of the shut-down order, which includes helpful added details. They make it clear that domestically managed services, such as voice telephony, SMS, MMS, and carrier-provided web browsing, will continue as normal. The shut-down order relates only to value-added services provided by Research in Motion (RIM), the Canadian company that designs Blackberry devices and operates the back-office service that makes them all work so smoothly. These are the services that really make the device a hit with customers such as Blackberry email and Blackberry system web browsing. Without those services, the device becomes just another web-enbled mobile phone - and not a great one. (I'm a biased iPhone user.)

So here is the problem in a nutshell.
The UAE wants to enforce its laws within its sovereign territory. Some of those laws give authority to some government agencies to intercept communication and/or restrict importation of certain content. The UAE clearly feels, as a technical matter, that it cannot exercise this sovereign authority with respect to this major source of communication and content importation managed from an off-shore service location.

In other words, the UAE wants to enforce its border.

Now that RIM (a publicly traded company) has been threatened with the loss of 140,000 paying customers in the UAE, they are going to need to make some hard decisions.

Option 1: They could sit safe and secure at home in Canada and simply bid these customers (and their money) "farewell". Perhaps they will feel that all of their other global customers produce enough revenue that they shouldn't care. Of course the risk here is that other countries could (and I believe will)  follow the UAE's lead on this and threaten similar shut-downs. Result? RIM becomes a "Western" company and some other competitor launches a competing (and regulator-friendly) service.

Option 2A: RIM have until October to reach some form of compromise with the UAE. They could, for example, re-architect their system so that UAE customer communications are handled by service infrastructure physically resident in AbuDhabi or Dubai. Of course this will cost money. Perhaps RIM will have a commercial discussion with the UAE about what to do about that. Perhaps the cost of Blackberry service in the UAE will go up to compensate. If a deal can be done quickly enough, perhaps RIM can avoid the impending shut-off.

Option 2B: Same result as Option 2A, EXCEPT that the UAE service infrastructure will be operated by a UAE-based and locally owned company which operates the Blackberry service under license, paying a royalty to RIM for the privilege.

(RIM could also go half-way to Option 2, giving the UAE the tools necessary to monitor and or interdict Blackberry traffic within the UAE.)

I predict we'll see Option 2A in the short term (within 12 months) and Option 2B in the long term (within 10 years).

Lesson to Businesses: If you think that you are going to be able to operate a "global" data communication or cloud service system, then think again. Start planning your revised "de-globalised" service offering now.