More than a million BlackBerry users may have key services in Saudi Arabia and the UAE cut off after authorities stepped up demands on smartphone maker Research In Motion for access to encrypted messages sent over the device.
BlackBerry's Messenger application has spread rapidly in the Gulf Arab region but because the data is encrypted and sent to offshore servers, it cannot be tracked locally.
Certain BlackBerry services allow users to act without any legal accountability, causing judicial, social and national security concerns, the United Arab Emirates' Telecommunications Regulatory Authority (TRA) said in a statement.
The UAE said it would suspend BlackBerry Messenger, email and Web browser services from October 11 until a fix was found, while industry sources said Saudi Arabia had ordered local telecom companies to freeze Messenger this month.
Sunday's moves cap wrangling with regulators over the issue, which first surfaced in 2007.
India raised similar security concerns last week, and Bahrain in April warned against using BlackBerry Messenger to distribute local news. As far back as 2007, France cautioned officials about using the services.
Indian security officials were concerned that BlackBerry's encrypted data could be used to coordinate acts against the state. They have clamped down on mobile phone operators in the wake of 2008 attacks that killed 166 people in Mumbai.
The UAE, home to Gulf financial hub Dubai, said it would halt BlackBerry services until an acceptable solution was developed and applied.
Users of the device said that could mean disruptions for companies and individuals who rely on the services, including almost 700,000 in Saudi Arabia and some 500,000 in the UAE.
It's a final decision but we are continuing discussions with them, Mohammed Al Ghanem, director general of the UAE's TRA, told Reuters.
Censorship has got nothing to do with this, he said, calling it instead a suspension due to RIM's lack of compliance with UAE regulations.
Authorities noted there is no such problem with services on smartphones from Nokia or Apple's iPhone.
This is an issue for RIM since all email traffic goes through its Network Operating Centers, said James Cordwell, an analyst at Atlantic Equities. Nokia and Apple do not route traffic in this way.
RIM officials were not immediately available to comment.
The Canadian company has more than 41 million BlackBerry subscribers, meaning the Gulf bans could affect fewer than 3 percent of its users.
The UAE market in and of itself is not significant to RIM. A bigger concern would be if it runs into similar issues in a large market such as China, which has similar security concerns, as Google is well aware of, Cordwell said.
In Saudi Arabia, BlackBerry handsets have become the must-have gizmo for Saudi youth, enabling them to connect with members of the opposite sex in a deeply conservative society.
About 80 percent of Saudi-based BlackBerry users are individual users and 20 percent are enterprises, while these ratios are basically reversed in developing nations, said one industry source.
This problem would not have emerged if the bulk of BlackBerry users were enterprises.
The governor of Saudi Arabia's telecom regulator declined to comment. An Interior Ministry spokesman could not immediately be reached to comment.
In the UAE, which is slowly emerging from an economic slowdown brought about by the global financial crisis and Dubai's property crash, some worried the move was aimed at curbing free speech.
If you want to eavesdrop on your people, then you ban whatever they're using, said Bruce Schneier, chief security technology officer at BT. The basic problem is there's encryption between the BlackBerries and the servers. We find this issue all around about encryption.
Wrangling over the issue included an incident last year in which a state-controlled local service provider, Emirates Telecommunications (Etisalat), introduced what it called a software upgrade. RIM said it was an unauthorized telecommunications surveillance application.
I think there will be such an uproar, it probably won't happen and a solution will be found, Irfan Ellam, Al Mal Capital telecoms analyst said, referring to the mooted BlackBerry services ban.
BlackBerry is seen as essential by many companies, so if you want to attract business to your country, it doesn't make much sense to ban these BlackBerry services, said Ellam.
He said RIM had been asked to set up a proxy server in India to allow the government there to monitor traffic from a security perspective and the same approach might resolve the issue in the UAE and elsewhere.
The UAE is asking them to have a server here and they are offering solutions other than that, a UAE source familiar with the matter told Reuters.
BlackBerry appears to be compliant in similar regulatory environments of other countries, which makes noncompliance in the UAE both disappointing and of great concern, UAE's regulator said.
RIM shares rose last week on speculation that it might unveil a new touchscreen BlackBerry this week to compete more effectively with the iPhone and models.
(Additional reporting by Matt Smith, Mahmoud Habboush in Dubai; Frederik Richter in Manama; Alastair Sharp in Cairo; Reed Stevenson in Amsterdam; Frank McGurty in Toronto; Writing by Amran Abocar; Editing by Jason Neely and Maureen Bavdek)