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Cyberspace confidential: Tech companies in emerging markets like Saudi Arabia, pictured, and the UAE can face vexing ethical issues and dubious associations (STR/AP)
Cyberspace confidential: Tech companies in emerging markets like Saudi Arabia, pictured, and the UAE can face vexing ethical issues and dubious associations (STR/AP)

Détente with Saudis buoys hope for RIM's future in Arab world Add to ...

In a move that will almost certainly set a precedent for similar negotiations with a host of other countries, BlackBerry-maker Research In Motion appears to have reached an agreement with the government of Saudi Arabia to give local authorities greater monitoring powers over BlackBerry communications.

The Associated Press reported over the weekend that RIM reached an agreement with the Saudi government. Under the reported terms, which have not been confirmed by the company, RIM would place one or more local servers within Saudi Arabia. Until the specifics of the deal are known, however, it won't be clear just how much more monitoring access such a move gives Saudi authorities.

If the agreement to place a server in the country has, in fact, been reached, it represents a "compromise" between the two sides, IDC telecommunications analyst Kevin Restivo said. "RIM allows itself to presumably maintain … routing traffic in [its network operating centre in Waterloo, Ont.]and cedes some local control to the government," he said. "But a lot of it depends on what is sent to local servers and what access the government really has."

During the past week, several nations, including the United Arab Emirates, Indonesia, India, Lebanon and Algeria, all have expressed some degree of concern over their inability to monitor BlackBerry traffic. The UAE has been the most vocal, threatening to shut down some BlackBerry services on Oct. 11 if RIM doesn't provide it with greater access to wireless data.

Mr. Restivo said if the Saudi agreement is true, it likely sets up a domino effect, with other countries asking for the same concessions.

"I think you'll see this replicated in other countries."

BlackBerrys operate in one of two ways: the corporate side, which falls under the BlackBerry Enterprise Server, and the consumer side, which falls under the BlackBerry Internet Server. BES traffic, which includes virtually all BlackBerry communication used by major corporations, is usually far more secure than BIS traffic. The former is encrypted from the moment the data leaves the BlackBerry and routed through RIM's own network operating centres.

A former RIM employee, who was not privy to the details of the RIM-Saudi deal, said even if the company places servers in Saudi Arabia, it may still be able to say its BES traffic in the country is secure, thus assuaging its important corporate customers.

Even though a server would allow local authorities to pick up the data that passes through it, any BES messages would still be encrypted, meaning the authorities would still have to decipher the messages - something that may be very difficult to do in a short time frame, if not impossible - said the former employee, who spoke to The Globe and Mail under condition of anonymity. In effect, he added, the RIM-Saudi compromise may simply make it easier for local authorities to monitor BIS, or consumer, traffic.

It's not clear, however, whether all messages would be automatically decrypted at the Saudi server before they are passed on to the recipient, in which case local authorities would be able to see them. Until at least one of the parties involved fully explains the deal, users, analysts and investors are left to speculate.

RIM has an estimated 1.2-million BlackBerry customers in Saudi Arabia and the UAE combined. Although the company has increasingly focused on targeting the consumer market, where Apple's iPhone and other smart phones powered by Google's Android operating system provide stiff competition, its business clients include virtually every major company in the world - clients who place heavy emphasis on data security.

"RIM really can't bend on the corporate part of it," Mr. Restivo said. "It would be risky to do so."

Still, he added, the downward pressure on RIM's stock price during the past week may well start to lift now that it appears the company can avoid getting shut out of one or more foreign markets.

"The RIM ecosystem will be buoyed by the agreement - the first domino has fallen."

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