When rich marketroids ruin a poor-world winner

BlackBerry tries to save itself by ditching its most compelling competitive advantage: BlackBerry Internet Service.

Read time 5min 00sec

To be honest, I haven't been at the coalface of technology reporting or product reviews for many years now. However, in a small town, away from the glare of big-city lights and glitzy product launch invitations, the one-eyed journo is king, and many locals ask my advice on what handsets to buy.

My rule of thumb is simple. If you're a rich power user, pick an Android device. If you're not a power user, but you do have cash to burn, try an iPhone. And if you're like most people, especially outside the wealthy cities, and can't afford to throw money at rapacious network operators for confusing and inadequate data bundles, go for a BlackBerry.

The reason is not so much Blackberry Messenger (BBM), which, although a compelling free instant messaging service, can be replaced by cross-platform alternatives such as Mxit or WhatsApp.

The reason is BlackBerry Internet Service (BIS). Most ordinary Internet use (short of data-intensive applications such as video) you get for one low monthly payment. For all its faults, BlackBerry's flat-rate data plan has long been a killer feature.

This is why, in South Africa, it built an 18% market share, second only to Nokia, which owns half the market thanks to its feature phones, according to World Wide Worx research. In the smartphone segment, BlackBerry dominates, with 48% of the estimated 10 million handsets in the market. Nokia has 40%. The remaining 12% is split between various Android devices (8%) and Apple's iPhone (4%).

Clearly, BlackBerry does know where its most promising markets are, since it made a big palaver about simultaneous global launch events - including such emerging market cities as Johannesburg, Delhi and Jakarta - for its long-awaited (and much-delayed) new BlackBerry 10 phones. It's a far cry from the good old days when it was a powerful player in the corporate space, thanks to its secure communication features and push e-mail.

This is a last throw of the dice for the beleaguered company, which officially changed its name from Research In Motion to BlackBerry, nailing its colours to the mast. Its post-2008 share price peaked above $80 in 2009, before plumbing depths of $6-and-change in September last year. It had recovered to a promising $18 towards the end of January 2013, before heading down again. The day of its big launch, it plummeted by 12% to close at $13.78, and after-hours trading was looking none too promising for a blistering start in the morning.

For all its faults, BlackBerry's flat-rate data plan has long been a killer feature.

A snarky write-up in the Wall Street Journal, which promised handset roll-out delays until mid-March and made it sound like it was all proving a bit much for the embattled Canadian firm, couldn't have helped its cause.

Sadly, if the company fails in the US market, it now seems likely that emerging markets won't be there to save it. The marketroids that determined its new direction appear not to have figured out on which side its bread is buttered.

For its flashy new phones - one of which, the Z10, looks like a pretty decent large-screen multi-touch device, while the other, the Q10, sports the distinctive BlackBerry keyboard - it will reportedly keep BBM, but ditch BIS. This won't affect existing handsets and contracts, but if you want a BlackBerry 10 device, get ready to shell out the same sort of tom that iPhone and Android users have to part with every month.

Why BlackBerry seems hell-bent on competing with high-end handsets that between them command only 12% of the South African smartphone market is a mystery. Not that those kinds of handsets aren't desirable, or profitable to their makers and mobile networks, but everyone who can afford the exorbitant cost of mobile data probably already has one.

Ditching BIS has all the hallmarks of a decision made by foreigners who vaguely know emerging markets have the potential to save the company, but have no idea what such markets look like. Either that, or they caved to pressure from local mobile networks, who surely can't enjoy being unable to milk 4.8 million BlackBerry smartphone customers the way they milk their 1.2 million iPhone and Android users.

Whatever the reason, unless the BlackBerry 10 does well in the hotly contested high-end of the market, against well-entrenched rivals, it will have sacrificed its key competitive advantage - the low end of the market, which is an order of magnitude larger and which it used to dominate - for the chance.

Maybe I'm wrong. Maybe it will be worth it in the end for BlackBerry. Maybe its US delays won't hurt it, and maybe hundreds of thousands of South Africans (and rich Westerners) will ditch their Samsungs, HTCs and Apples for a new BlackBerry. But it sure won't be worth it for the millions of cash-strapped customers in emerging markets, for whom BlackBerry BIS has been a godsend, and whose loyalty and cost-consciousness kept the company alive these last few years.

If I were inclined to trade shares about which I write, I'd short the living daylights out of BlackBerry. As for what I'll tell my friends who can't afford the data charges that come with the latest iPhone or hot new Android handset, I just don't know. "Whatever you do, don't drop your old BlackBerry in your beer," I guess.

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