RIM's Deal: Saudi Arabia Can Access BlackBerry User Data

Saudi Arabia's government announced it reached a deal with Research In Motion (RIMM) that will allow the Canadian maker of BlackBerry smartphones to continue operating its service there. Under the agreement, RIM will put a server in the nation that will allow the government to monitor messages to and from Blackberries. All of RIM's servers have been in Canada until now so the company could guarantee confidentiality for its customers though the encryption process on those servers.

According to several news sources, similar deals will probably be sought by other countries that have voiced concerns about the Blackberry encryption procedures. First among these is the United Arab Emirates, which threatened to shut down RIM's services there on Oct. 11. India and Indonesia have also said they're concerned about the RIM confidentiality system and their inability to track information that they claim may not be in the best interests of their governments.

AP reports: "Analysts say RIM's expansion into fast-growing emerging markets is threatening to set off a wave of regulatory challenges as its commitment to keep corporate e-mails secure rubs up against the desires of local law enforcement."

Desperate to Protect Market Share

The decision will open a Pandora's box for RIM. It will now have to weigh the attractiveness of its confidentiality systems for its customers with its desire to expand into markets outside the U.S., Canada and other democracies that have not made demands on the firm similar to those of the Saudis. It's possible that other large countries like China could make similar demands. The U.S. and Canadian governments seemed ready to support RIM's position on its clients' privacy, but the company elected to act in the interests of expansion.

RIM is desperate to keep market share, which has been eroded by competition from the Apple (AAPL) iPhone and Google (GOOG) Android-powered phones. Now, it's a question of how much RIM will give up to protect its revenue.