Bloomberg News

RIM Spars With Indonesia Over Server as It Seeks Growth in Asia

December 15, 2011

Dec. 15 (Bloomberg) -- Indonesia may issue a rule next year requiring telecommunications companies, including Research In Motion Ltd., operating there to build local data centers, a move the nation’s biggest smartphone seller has resisted.

The government has informed the companies of the coming regulation, an element of the 2008 law concerning information and electronic transactions, said Tifatul Sembiring, Indonesia’s minister of communication and information technology.

“Building a data center isn’t easy,” Sembiring said in Jakarta. “And it is expensive. We have told them to be ready.”

The pending requirement highlights the mounting challenges RIM faces in expanding overseas as India, Saudi Arabia and the United Arab Emirates have expressed concern they can’t monitor e-mail traffic originating in their countries. The United Arab Emirates abandoned threats to ban BlackBerry traffic in October 2010, without saying whether the Waterloo, Ontario-based company had met its demands.

RIM will “work through” any issues the Indonesian government has to avert any potential service interruptions, David Paterson, RIM’s vice president of government relations, said in a Dec. 10 telephone interview.

Content Filters

Media reports last week said Indonesia’s government is threatening to cut BlackBerry data services if it doesn’t comply with commitments made in January. RIM sent a letter to the Indonesian government Sept. 23 saying it had “fully addressed” the government’s issues by adding content filters and speeding up its regional network, Paterson said.

RIM said in a separate e-mailed statement that it hasn’t been advised of any new specific requirements beyond the initial requests by the government.

“This raises a lot of concerns as these countries want to have it both ways - they want to claim they’re democracies and also control everything,” said Will Stofega, an analyst at research firm International Data Corp. in Framingham, Mass.

Indonesian police are investigating RIM’s country head after a sale on the company’s new BlackBerry Bold 9790 smartphone resulted in a stampede that injured more than 40 people.

More than 3,000 people lined up outside a Jakarta shopping mall on Nov. 25 to buy the newly released phone, which was being offered at a 50 percent discount to the first 1,000 customers, South Jakarta Police Chief Imam Sugianto said Dec. 9.

Not Blocking RIM

Three other people involved with the event also are being investigated, Sugianto said. All are cooperating and there are no plans to arrest anyone, he said.

Indonesia had at least 5 million BlackBerry subscribers as of the first half of this year, according to the nation’s telecommunications regulator.

RIM has led Indonesia’s smartphone market since the fourth quarter of 2010, Stofega said. IDC expects the market to grow 68 percent next year, he said.

Indonesia currently does not require companies to have servers in Indonesia, and the government has been discussing the regulation for about three years, a ministry spokesman, Gatot Dewo Broto, said Dec. 14. Once it is implemented, companies will have to comply, Broto said.

The new rule doesn’t mention any companies by name, he said.

“The regulation doesn’t have any intention to block RIM,” he said.

Earlier this year, the government urged RIM to build a regional network aggregator in Indonesia, saying it would benefit BlackBerry users in the world’s fourth-most populous country, enabling the government to secure customers’ data and to reduce costs.

“I don’t think anybody has any remote interest in doing anything negative for the millions of BlackBerry users in Indonesia,” Paterson said Dec. 11.

RIM installed some infrastructure in Singapore and Hong Kong that would speed up data flow for carriers, Paterson said.

--With assistance from Hugo Miller in Toronto. Editors: Greg Ahlstrand, Michael Tighe

To contact the reporter on this story: Femi Adi in Jakarta at fadi1@bloomberg.net

To contact the editors responsible for this story: Greg Ahlstrand at gahlstrand@bloomberg.net


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