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UAE's BlackBerry threat clouds RIM's future

A sign advertising the BlackBerry mobile phone is seen at a shopping mall in Dubai on August 01, 2010, as the Gulf business hub stated it will suspend key BlackBerry services from October because they are incompatible with local laws and raise security concerns.

-/AFP/Getty Images

Research In Motion's overseas expansion strategy - critical to the company's long-term success - has suffered a serious setback as the United Arab Emirates' government appears poised to block BlackBerry services from the country over concerns the communication device cannot be reliably monitored by local authorities.

After raising complaints previously, the UAE government said Sunday it may ask the state telecommunications carriers to suspend BlackBerry e-mail service because the communications traffic could be used for purposes that run afoul of social or legal regulations in the conservative Middle East nation.

The move comes less than a week after Indian authorities raised similar concerns, and the Saudi Arabian government is also reportedly considering blocking BlackBerry service. For RIM, such markets are of vital importance.

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"The issue is RIM's expansion plans," said IDC telecommunications analyst Kevin Restivo. "If RIM's growth is to continue, it is dependent in a big way on the countries we're talking about."

Although the UAE is considered one of the less conservative of the gulf countries - the city of Dubai, for example, contains many of the same staples of leisure and nightlife as big European cities - security officials there have nonetheless been growing increasingly concerned about the threat of unmonitored communication. The country regularly blocks websites, such as photo-sharing sites, that don't meet local social codes.

But the government is also likely concerned about the potential for BlackBerry communication to become an enabling tool for political opposition in the country.

Even though a service shutdown could impact millions of dollars in BlackBerry sales within the UAE, the bigger threat to RIM may well be the wider impact: many multinationals have headquarters in the country and BlackBerrys are still the smart phones of choice in much of the business world.

In addition, analysts note, the threat of a service shutdown could impact the purchasing decisions of users in the wider Gulf region.

"It's bad for the market because it may put a chill not only on anyone in the country, but in the region, who may be considering buying a BlackBerry," said independent technology analyst Carmi Levy.

Mr. Levy notes the UAE's threat is the latest in a growing trend of aggressive movement by foreign governments against large, mostly Western, technology firms over geopolitical issues. Over the past few months, China and Google have been caught up in a very public battle about Beijing's demand the company censor its search results within the country. It is also widely believed that the U.S. State Department asked Twitter to postpone a period of maintenance downtime during the height of the Iranian post-election protests - the microblogging site was one of the biggest hubs of anti-government activity by Iranian dissidents.

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But while companies such as Google may be able to reach a compromise with some foreign governments, RIM's challenge may be greater. The UAE government's central issue is the high level of security on RIM's e-mail traffic, which is routed through overseas servers called Network Operating Centres. To compromise, RIM could be forced to dilute the security for which its devices are perhaps best-known.

"The whole business model is predicated on the NOC," said Mr. Restivo. "But that's the primary concern of the UAE authorities. It would be very unusual for RIM to develop an alternative solution for one country. It would be a slippery slope."

But it is yet unclear whether authorities in the UAE actually plan to go ahead with the threat to shut down BlackBerry e-mail - something that would seriously disrupt business at many of the large global firms the government tries very hard to please. Indeed, Mr. Levy notes, the UAE may simply be sounding the war drums in an effort to get RIM's attention - following through on its threat may be easier said than done.

"This is how somewhat less-than-democratic governments negotiate," he said.

"But it's like saying you're going to cut off e-mail: in the Internet age, you just can't do it."

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