BlackBerry success has sour taste By Sara Schonhardt
JAKARTA - Indonesians are crazy about BlackBerry, the wireless handheld device
made popular worldwide for its ability to send and receive e-mail. They can be
seen poring over the gadgets at Starbucks or killing time confirming friends on
social networking site Facebook while waiting for the bus.
BlackBerry use has surged in Indonesia, rising 550% year-on-year in 2008. There
are now more than 350,000 users across the country, a number that could reach 1
million by the end of this year, according to Marc Einstein, an industry
manager at research and consulting firm Frost and Sullivan.
That's small compared with the estimated 28 million BlackBerry users worldwide,
but with its accelerating new user growth rate
amid a population of 240 million people, Indonesia offers a huge market
opportunity for mobile distributors looking to the developing world for growth.
BlackBerry users worldwide represent about 20% of all smart phone users, but in
Indonesia the devices dominate the market. Apple's iPhone, with about 15,000
users, pales in comparison, industry analysts note.
That fast growth prompted the government in June to clamp down on Research In
Motion (RIM), the Canada-based firm that developed BlackBerry, by requiring it
to establish a service center in Indonesia before it could import more devices
into the country. On September 8, Indonesia's Communications Ministry approved
RIM's Jakarta office and lifted a two-month freeze on the selling of new
BlackBerrys.
The overture could be largely symbolic because an estimated 80% of the devices
sold in the country trade hands on the greymarket. Smuggled electronics in
Indonesia can go for hundreds of dollars less than those offered by authorized
dealers, who must pay import duties on their products and increase their prices
accordingly.
"BlackBerry became popular in Indonesia because of the parallel market," said
Mas Wigrantoro, chairman of the Indonesian Telecommunications Society (Mastel),
a non-profit association representing the information technology (IT) sector.
While he blamed the government and RIM for not doing enough to stop the
greymarket supply of BlackBerrys, he also predicted that the device's
popularity would drop dramatically if cheaper versions were no longer
available.
RIM has only recently seized on growth opportunities in Indonesia, as sales at
licensed dealers have lagged those at places such as Roxy Mas, a five-story
mall in west Jakarta renowned for dealing in greymarket IT products. Consumers
can buy BlackBerry handsets through more than 50 distributors across the
country, but only four official operators are licensed to provide BlackBerry
services.
Underground sales
The Ministry of Communication and Information Technology, which has a decree in
place requiring phone producers to open service centers if they sell in the
country, had prior to June only loosely enforced its regulations on smart phone
importers. RIM was not expecting the government action to freeze its imports,
but reacted quickly by establishing the required service center.
Users who only purchase the handset and use the device through a prepaid
service are considered "non-enterprise" users, according to the industry
jargon. The situation is "not ideal" for RIM, according to Einstein, but in
certain ways having a strong presence is a good business strategy to eventually
convert non-enterprise users into those that pay license fees.
Einstein estimates that more than 40% of RIM's global base at present comes
from the consumer market, noting that even in the United States, non-enterprise
users make up 50% of the market. Achieving similar levels could take time in
Indonesia: the day after the government and RIM settled their spat, business
among Roxy's greymarket BlackBerry suppliers was still brisk.
At a popular kiosk on the fourth floor, a saleswoman named Lisa picked through
BlackBerry models with names such as "Bold", "Storm" and "Javelin". The
cheapest on offer was a new "Curve 8310", which sold for 2.4 million rupiahs
(US$240); the same model sells through licensed operators, who include customs
tax payments in their prices, for about 6 million rupiahs.
Researcher IDC defines the greymarket as second-hand and refurbished IT
devices, as well as those that come in through the parallel market. That trade
tends to start in Canada to licensed sellers in Singapore or Hong Kong, who
then pass the devices along to tax-evading unlicensed vendors in Jakarta,
according to Ashadi Cahyadi, research manager for Indonesian telecommunications
at IDC.
Owning a BlackBerry was first seen as a sign of status among Indonesian
businessmen, but the device is increasingly prized because in a country where
most people still don't have home access to the Internet, it allows users
mobile access to text messaging and online social networking sites such as
Facebook.
When mobile service operators such as Indosat began to offer a prepaid option
in mid-2008, which reduced the cost of using BlackBerry's services by around
US$30 per month, the market opened up to a new segment of young professionals.
Local mobile operators such as Indosat and Telkomsel have since marketed
strongly to individual consumers rather than just businesses, said Einstein.
The local launch of BlackBerry Connect, a push e-mail service that can be used
with other phone brands and lets users send and receive e-mail anywhere they
receive a mobile phone signal, has also helped to drive the popularity of
BlackBerry. Add in low-cost mobile Internet plans and many people are finding
it more affordable to have a BlackBerry than buying a computer and using it at
home, estimates Mastel's Wigrantoro.
Three of Indonesia's main telecom service providers - Telkomsel, Indosat and
Excel (XL) - offer prepaid subscriber fees that allow for unlimited data and
e-mail service for around $16 a month.
Arbitrary regulation
RIM began selling BlackBerrys through its main provider Indosat in late-2004.
The government did not take issue with RIM's lack of a service center until
this June, after users started complaining there was nowhere to go locally for
services and repairs. The nearest after-sales center was in Singapore, and
because there were suddenly so many BlackBerrys on the market, the potential
for problems grew, said the IDC's Cahyadi.
A decree from the Ministry of Communication and Information Technology was
already in place requiring phone producers to open service offices once they
began selling products in the country. It wasn't until BlackBerry's growth took
off that the ministry decided to enforce the standing regulation for RIM as
well.
"We need customer protection in Indonesia," said ministry spokesman Gatot S
Dewabroto, claiming that the BlackBerry case sets a precedent for how the
regulation will be applied to all companies in the future.
He admitted that the ministry took action against RIM because of the huge jump
in its subscriber base. In comparison, the US$1,100 price tag for Apple's
iPhone is too costly for most Indonesians, while other brands from China and
Taiwan haven't enjoyed the same popularity because many lack push e-mail
capabilities.
Cahyadi, for one, believes increased awareness of the benefits of buying
BlackBerrys from an official distributor will eventually drive consumers away
from the greymarket. When customers buy from a licensed provider, he notes,
they are guaranteed support if they encounter a technical or software problem.
For its part, RIM said it is working to stem the illegal trade of its devices
in Indonesia by encouraging customers to purchase BlackBerry smart phones and
services only through authorized carriers.
Wigrantoro, however, is less optimistic. "If the regulation is good for the
customer and assures the company's reputation, then there shouldn't be a
problem with enforcing this kind of measure," he said. "But it doesn't have the
intended effect if companies don't comply with it 100%."
The Communications Ministry, meanwhile, is working with the ministries of Trade
and Finance to wage what Gatot has called a "war against illegal products". The
campaign will entail periodic spot inspections of shops that sell BlackBerrys.
Currently, only four operators are legally licensed to sell BlackBerrys in
Indonesia, according to Cahyadi.
That leaves nearly 50 additional traders who import the devices and they must
soon prove, according to the government's regulations, that they have
appropriate service and repair facilities. According to Gatot, since the
crackdown on RIM in June, the government has started to enforce its regulations
with other traders.
Unless BlackBerry comes out with a new, more affordable model, greymarket
vendors will continue to lead the market, some analysts predict. Cahyadi
expects the new lower-priced BlackBerry model "Gemini 8520", which sells for
closer to US$400, to go some way toward closing the price gap.
But according to a local news report quoting Indosat's chief operating officer,
Guntur Siboro, even that low-end model will be priced higher than the going
rates on the greymarket.
Sara Schonhardt is a freelance writer based in Jakarta, Indonesia. She
has lived and worked in Southeast Asia for six years and has a master's in
international affairs from Columbia University.
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