Compensation clouds gather over BlackBerry outage

REUTERS - BlackBerry maker Research In Motion faced the prospect of a compensation bill from network providers on Thursday as the world's dominant provider of mobile email struggled for a fourth day with service glitches.

RIM said services were starting to improve in all affected regions, reducing disruption for the millions of users hit by delays and outages.

But many in the telecoms industry believe significant damage has been done to a business that already has its share of trouble. They see a risk that this week's disruption will tip already restless BlackBerry users into the arms of rivals like Apple.

Meanwhile the company's service provider partners were looking at how compensation might be handled.

"We are reviewing our options in terms of compensation," said a spokesman for Britain's Vodafone, adding that "no decisions have been taken."

Spain's Telefonica said on its web site it would compensate customers, in line with Spanish law. Spanish Consumer Association FACUA estimated that clients will receive 0.23-1.90 euros ($0.31-$2.62) for each 24 hours of service interruption.

The Vodafone spokesman would not be drawn on whether such costs might be passed on to RIM, but analysts said there was little doubt operators would try.

"In the past there have been outages but they've been limited to an hour here and an hour there and the operators have been tempted to let that go," said Will Draper, analyst at Espirito Santo.

"They haven't been happy about it but it's not the kind of thing you go to court over. But this is completely different. This is a three-day outage. This is 10 percent of your working month, so I'm pretty sure there will be compensation claims and I'm pretty sure they'll try and pass it on to RIM, but my feeling is it will be very difficult to make it stick."

RIM is unique among handset makers in that it compresses and encrypts data before pushing it to BlackBerry devices via carrier networks. Apple and other rivals rely on the carrier networks to handle all routing and delivery of content. However other providers are breathing down RIM's neck with smarter handsets and copycat service provision.

Apple has started rolling out new version of its iOS software which includes BlackBerry-like iMessage service.

One analyst said BlackBerry is a victim of its own success in that the huge increase in usage over recent years has made its centralised network architecture vulnerable.

"This is the first major disruption to the BlackBerry service since 2009, during which time the number of BlackBerry users has doubled," said Nick Dillon, analyst at technology specialist consultants Ovum in a note ..."Despite the benefits the network brings in real-time delivery of email and data efficiency, it remains significant risk for the company."

SERVICES RECOVER

RIM said there had been a significant improvement for services with users saying their services had started to work again, although there were still some delays.

"Service levels are also progressing well in the U.S., Canada and Latin America and we are seeing increased traffic throughput on most services, although there are still some delays and services levels may still vary amongst customers," RIM said in an update on its website.

Singapore employees of global news and data provider Thomson Reuters were still having problems on Thursday but colleagues in London, Beijing, Tokyo, Jakarta and Bangkok said BlackBerry service was normal.

The outages -- and RIM's sluggish communications with its customers -- have fanned rising dissatisfaction with its co-chief executives, Mike Lazaridis and Jim Balsillie.

Critics have called for a shake-up, saying the top managers have let the company fall too far behind Apple and other rivals in a rapidly changing market.

RIM's shares have already tumbled more than 50 percent this year on a series of profit warnings and product missteps - a sharp reversal of fortune for a company that once dominated the smartphone market.

This week's disruption - the worst since an outage swept North America two years ago - may have damaged RIM's once-sterling reputation for secure and reliable message delivery - its No. 1 selling feature.

Even before this week's disruptions, many companies had started to balk at paying a premium to be locked into RIM's service. Some are now allowing employees to use alternative smartphones, particularly Apple's iPhone, for corporate mail, and the outage could accelerate the trend.

($1 = 0.725 Euros)

Posted in: Mobile/Gadgets