Saudi, RIM in last-ditch talks; India takes hardline

The makers of the BlackBerry smart phone held last-ditch talks with Saudi Arabia yestersday to avert a threatened cut-off of a key service, while India took a tough line with the Canadian company.

Research In Motion is facing mounting demands from governments around the world for access to its vaunted encryption system on national security grounds.

The spat, which has highlighted the access some states seem to have in comparison to others, threatens to cut off some 2 million BlackBerry users in the Gulf and India.

RIM shares fell as investors weighed the potential impact. Its Nasdaq-listed stock sank $2.14 to $53.39 on Wednesday, representing a 7% drop so far this week. The shares fell C$2.53 to C$54.24 on the Toronto Stock Exchange.

Security officials in India, a giant growth market for mobile communications, warned the service would be halted if the company failed to meet its concerns, a newspaper reported.

"We are very clear that any BlackBerry service that cannot be fully intercepted by our agencies must be discontinued," The Economic Times quoted an unnamed security official as saying.

"Offering access to data is part of the telecom licensing guidelines and has to be adhered to."

An Indian government source said that RIM had proposed to share some details of its BlackBerry services but security agencies were demanding full access to a messaging service it fears could be misused by militants.

RIM has said BlackBerry security is based on a system where customers create their own key and the company neither has a master key nor any "back door" to enable RIM or third parties to gain access to crucial corporate data.

The company said yesterday that it has never provided anything unique to the government of one country and cannot accommodate any request for a copy of a customer's encryption key.

The Saudi telecoms regulator met senior RIM officials before a Friday deadline to cut BlackBerry Messenger text messaging service on August 6 in the kingdom, the world's biggest oil exporter.

"(The ban) is only for the Messenger. Negotiations are still going on, the deadline is final," said Sultan al-Malik from the Communications and Information Technology Commission (CITC).

CITC said on Tuesday it had informed the kingdom's three mobile operators of the ban.

"The instructions for this ban are coming from high up, it's not like any decision that has been issued by CITC before. They will have to stop it, period," said another CITC official, speaking on condition of anonymity.

RIM officials Frenny Bawa and Khaled Kefel are in the talks which also include technical and regulatory experts from Saudi Arabia''s three mobile telecoms firms, a source at one of the telecoms firms said.

"The talks are still ongoing," the source said. The cut-off threat has hit shares of Saudi telecoms providers Etihad Etisalat, Saudi Telecom Co  and Zain Saudi Arabia, as well as RIM's own stock price.

The United Arab Emirates, which plans a ban on BlackBerry Messenger, email and web browser services from October, said RIM is flouting its regulations. It maintains the planned suspension follows three years of discussions with the company.

The UAE regulator plans no furthers talks with RIM and has told the company to comply by October or be cut off.

The UAE says it does not have the same kind of surveillance rights to BlackBerry messages as US officials do.

Security experts say that many governments enjoy the ability to monitor BlackBerry conversations as they do communications involving most types of mobile devices.

"The ability to tap communications is a part of surveillance and intelligence and law enforcement all over the world," said Mark Rasch, former head of the computer crimes unit at the US department of justice.

US law enforcement agencies need a court order signed by a judge to access BlackBerry call logs, email traffic or other data from RIM. US intelligence agencies do not discuss what capabilities they have to spy on BlackBerry users.

RIM is in an unusual position of having to deal with government requests to monitor its clients because it is the only smart phone maker which manages the traffic of messages sent using its equipment.

RIM chief technology officer David Yach said on Tuesday he believed governments were unlikely to follow through on their threats because state officials themselves depended heavily on the BlackBerry.

"I believe they'll have trouble pulling the trigger to shut down BlackBerry. Most governments in the world rely on BlackBerry."

Indeed, analysts said RIM's prospects as a major smart phone maker are tied more to the success of its new Blackberry Torch, designed to stem an erosion of market share to Apple's iPhone and handsets using Google's Android software.

"This is a political issue that, over time, has gone back and forth, and it's not just RIM that has to deal with this. Google has had to deal with this kind of stuff in China," said Duncan Stewart." Deloitte Canada's director of research in technology, media and telecommunications.

The Dubai launch of the Torch handset planned for Wednesday at the exclusive Armani hotel in Burj Khalifa, the world's tallest tower, was postponed, however.

"It will not be taking place. It was postponed due to the current attention in the media," a hotel employee said.

Russian security concerns held up import of the BlackBerry for years. The state security service FSB was concerned that RIM's strong encryption software, and the presence of servers outside Russia, contravened anti-terrorist laws and limited its ability of monitoring traffic.

In November 2007, the FSB finally granted permission to Vimpelcom and MTS to start shipping BlackBerrys on condition that the servers be installed in Russia.

According to a source with one of the companies, Russian operators still have to secure FSB permission before they can introduce each new BlackBerry service.

The European Commission said it rejected the BlackBerry in favour of the iPhone and HTC smart phones during a 2008 review against certain criteria, including security and cost.