BlackBerry's Indonesian Problems

Research in Motion, the Canada-based manufacturer of the popular BlackBerry communications device, faces growing trouble that appear to be coming to a head from government regulators in Indonesia, its second-biggest global market.

The Indonesian Telecommunications Regulatory Body is threatening to cut off RIM’s internet access after the company said it would establish its data center in Singapore rather than Indonesia.

The Ministry of Communications and Information Technology has the final say. Titaful Sembiring, the head of the communications ministry, said Tuesday that the government would issue a regulation requiring all telecoms companies operating in the country to house their servers domestically, a shot particularly aimed at BlackBerry. The regulation is likely to be completed in January, he said.

RIM has faced problems in other countries in Asia as well over question about the confidentiality of messages. It has been in complex negotiations for months with the government of India over access to messages and has faced threats in Saudi Arabia, Malaysia and other countries although there has been no concrete action. Even the United Kingdom has threatened action after mobs were thought to be communicating by smartphones in riots earlier this year.

India in particular has threatened BlackBerry’s operations because of what the government regards as the threat of terrorists being able to use the devices to transmit confidential messages between them. BlackBerry smartphones were found in the rucksacks of the terrorists who shot up Mumbai in November of 2008, killing 166 and wounding more than 200.

RIM has repeatedly argued that only the customers have the keys to unlock their devices.

RIM faces more problems as well, from a commercial standpoint. Apple’s iPhone and other manufacturers’ smartphones have been cutting badly into BlackBerry sales worldwide, particularly in the developed countries. RIM has turned for growth in developing markets, with Indonesia one of the few bright spots for the company. BlackBerry has been so popular, in fact, that a massive crowd assaulted the retail offices of the company in Jakarta’s Pacific Place mall in November when the BlackBerry Bellagio smartphone went on sale at deeply discounted prices. About 90 people fainted in the crush and several others were hospitalized with broken bones after it was reported that the store had run out of the discounted devices. Police were threatening to arrest the manager for causing the chaos.

The move by Titaful would give the government the legal grounds to end BlackBerry’s services in the country if RIM doesn’t comply. The telecommunications regulatory agency said it is crucial that the company move its operations to Indonesia for security reasons, and that RIM had reneged on its commitment to cooperate.

RIM has argued that it has complied with all of the government’s requirements, including an obligation to establish customer care and service centers, to allow lawful intercepts of pornographic content and to build a “regional data center.” The government, it said, had only stipulated a regional facility, not a domestic one.

Indonesia’s international and domestic business community has reacted with dismay to the confrontation, with Didie Suwondho, the deputy chairman of the Indonesian Chamber of Commerce and Industry quoted in the Jakarta Post as saying the threat to ban RIM from marketing their products in Indonesia could prove damaging to the investment climate at a time when foreign investors are looking at Indonesia with fresh eyes in the wake of the global economic problems in the United States and the Eurozone.

Indonesia Consumers’ Protection Foundation chairman Sudaryatmo also told the Post that government was being reckless by threatening RIM and had failed to take into consideration the damage to the business community if the services were stopped.

If issued, the regulation, which Titaful said was in the process of being drafted, would give the government legal grounds to terminate BlackBerry services in the country should RIM refuse to comply. He described the regulation as a “warning” that took into consideration the fact that a data center takes time to build.

And, although it appears targeted at RIM, observers said other telecommunications networks in the country could face similar problems from the regulation. Among those that could be vulnerable are such industry stalwarts as Google, Microsoft and Yahoo, which also offer instant messaging protocols.

Titaful told reporters his ministry has already notified the international telecommunications networks operating in Indonesia to be ready. “When the regulation is ready, we’re going to summon them,” he said.

RIM said last week that it “has not been advised of any specific requirements extending beyond what it has already satisfied,” which included “working with law enforcement agencies in Indonesia for the provision of lawful access as stipulated by national law.”

RIM added in a prepared statement that it had addressed all of Indonesia’s requests and in fact is investigating the possibility of additional new multimillion dollar investments in Indonesia and that it remains committed to the country.