Global Economics

India Wants to Eavesdrop on BlackBerrys


Due to terrorism fears, the Indian government demands access to calls and e-mails from every BlackBerry in the country

BlackBerry users, beware of the snoops. On Mar. 28, India's Telecommunications Dept. told telecom carriers, Internet service providers, and officials at Research In Motion (RIM), the Canadian company that makes BlackBerrys, that it wants to eavesdrop on transmissions from every BlackBerry phone in the country. To comply, RIM might have to route calls and e-mails through government computer servers based in India. The reason: Intelligence officials worry that terrorists using BlackBerrys might avoid detection.

Indian telecom authorities already intercept the signals between BlackBerrys and other companies' cell phones but not those just between RIM's phones. That's because RIM's encrypted signals pass through its servers in Canada, which the Indian government can't touch. Telecom carriers have agreed to comply, but RIM officials, says a carrier, have asked for time to decide. RIM couldn't be reached for comment.

The issue comes three years after RIM entered India. Today, four cellular carriers offer BlackBerry services in India to about 400,000 users. Bharti Airtel, a leading Indian carrier, was the first to start BlackBerry services in 2004; BPL and Britain's Vodafone (VOD) soon followed suit. Reliance Communications joined with its own services a couple of months ago.

Making an Example of the Smartphone Leader

New Delhi can make life tough for RIM if the company doesn't cooperate. That would be a headache not only for RIM officials but also for the senior executives, entrepreneurs, and wealthy who make up a large proportion of BlackBerry customers. In February, the government rejected Tata Teleservices' application for a license to offer BlackBerry services. When the telecom arm of the $50 billion Tata Group protested, the Telecommunications Dept. summoned all BlackBerry service providers for a meeting. "The BlackBerry hasn't changed, but we were prevented from starting the service as it didn't allow the government to intercept calls between BlackBerrys," says Anil Sardana, managing director at Tata Teleservices. Last week the carriers unanimously agreed to support the authorities' demand that RIM set up its servers in India.

Why is New Delhi singling out BlackBerry? After all, there are other smartphone brands in India such as Treo, HTC, Nokia's (NOK) E-series, and Sony Ericsson's p910i. Analysts say the government might be trying to make an example of the biggest smartphone brand. "BlackBerry's the target as it's the most visible and widespread of push e-mail devices and services," says Prasanto Kumar Roy, chief editor of CyberMedia, a New Delhi-based technology publications group.

The number of BlackBerry subscribers in India is growing 30% every year, far outstripping that of other brands. Analysts estimate the user base of RIM's rivals is growing far more slowly, with all other smartphone brands combining for a measly 20,000 compared with BlackBerry's 400,000.

Data Storage Solution

BlackBerry's popularity among the business community's upper crust has been the key to its success. These movers and shakers are constantly e-mailing from their phones. That's a blessing for telcos looking to boost their revenues from monthly data and phone charges. While India has 250 million mobile subscribers, the average person spends just $5 a month on airtime. BlackBerry users spend about $28 a month for unlimited data usage. That beats even the global average revenue per user of $22 a month. (BlackBerry users in India generally have a second handset for ordinary phone calls.) "This puts the BlackBerry users on top of the food chain of mobile users," says CyberMedia's Roy.

How RIM plans to appease the Indian government remains unclear. Analysts say the issue is nothing new for the company, which has fielded similar requests in the U.S., France, and Russia. For now, New Delhi says there are no plans to ban BlackBerrys but it theoretically could if RIM rejects the government's demands.

One possible solution might be to have RIM and carriers use a proxy server where e-mails and data from BlackBerrys in India would be stored for six months. That's how RIM has appeased officials in China and Singapore, analysts say. RIM has never explained those arrangements. "The Telecom Dept. might look at a more holistic approach to address the security concerns of encryption," says Alok Shende, technology practice head at research firm DataMonitor in Hyderabad, in southern India.

The good news is that industry insiders think BlackBerry subscribers would probably prefer to see the issue resolved than have their mobile e-mail services suddenly go dark. "Users are happy with the way RIM is cooperating with the government to help solve the issue," says Anshul Gupta, principal analyst for mobile handsets at research firm Gartner (IT).

Lakshman covers India business for BusinessWeek .

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