From ripe to ruined: why cheap mobile data is what really killed BlackBerry

As an IT professional, I’ve been working with BlackBerry since its debut in black and white around the turn of the millennium. Once, BlackBerrys were the hottest property in my department, literally being worn out through overuse. Now? I’m seeing devices being returned by staff that are still in “as new” condition.

So what went wrong for the company formerly known as Research In Motion, or RIM? What has changed over the last decade to affect sales quite so dramatically? Here is my perspective.

Different times, different places

In the late 1990s, the world was a very different place. Most people didn't have a mobile phone. Those that did hardly knew how to send a text message. People used to buy contracts that gave them 15 or perhaps 30 minutes of free calls a month. No texts were included; crucially, neither was data. We paid through the nose for those "free" minutes, and they were precious. The massive profit on voice allowed the carriers to offer massive subsidies on handsets, like the "free" Nokias that everybody had back then.

If you wanted email on the move, your only option was a laptop and a dialup modem, which you would plug into a landline’s phone socket. Travelling sales reps would spend around half an hour each evening with their laptop plugged into a cable they had stolen from the hotel fax machine to avoid paying the ludicrous charges for using the phone in their hotel room. (Some things don’t change.)

There was no real money to be made in mobile data back then; it was too slow. A GSM adaptor in a laptop provided just 0.009 megabits per second in today’s speeds. (9,600 bits per second, since you ask. Downloading a megabyte of data took about 25 minutes.

Instead of data, all the telcos made their money from voice calls. A penny a minute for dial-up to the internet made millions for ISPs such as AOL and Freeserve. For mobile phone carriers, the core market was business users and their 100+ premium mobile minutes each month.

Then RIM created BlackBerry. It allowed people to get their email on the move and, critically, it also acted as a phone. Business users climbed over each other to get to this new product, happily ditching their primitive Nokia devices in the process.

Serve one, serve all

Once IT had set up the BlackBerry server, the only cost to the business user might be an extra tenner on their department's phone bill each month. Oddly, in many employers, phones had traditionally been supplied by Facilities or HR - not IT. Blackberry, in contrast, was purely an IT solution, like a laptop. The phone bills for the BlackBerry handsets therefore often ended up in a different cost centre, one with a much higher budget.

For IT managers the main attraction was that for this minimal charge, the BlackBerry devices also somehow came with global unlimited data. Imagine being in the early part of this century, when 3G had only just been auctioned off but not yet enabled (and certainly not put into use) and being the IT manager who realised that. Instead of supplying global freephone numbers to racks full of analogue modems, you could simply give the management team a BlackBerry device for £40 per month. Better still, they didn’t need a £1500 IBM Thinkpad because these things had a keyboard..

It was clearly a good harvest for BlackBerry. Suddenly RIM had this special, secure APN (Access Point Name - the gateway between the mobile network and the computer network) for which the carriers were prepared to pay a monthly fee on each connection. RIM didn't need to worry too much about handset profits; carriers would paying for those devices because they were desperate to get one of their SIMs into the BlackBerry of a global traveller.

Why? Because if they succeeded, all of his or her £1+ per minute voice call business was theirs. If you could give a £600/mth Orange mobile phone user a “free” BlackBerry on Vodafone, all that voice business changed hands. For carriers, the “unlimited data” BlackBerry business was effectively a loss leader for voice, and they were making millions from it.

Money for nothing, text for (almost) free

Then the SMS (aka texting) business took off and the carriers realised that, at 10p per text, there was millions more to be made. People were carrying over "free" minutes from one month to the next, but they simply couldn't get enough inclusive texts. The kids spent all day, every day, texting their friends; but for an extra tenner a month to BlackBerry, they could send unlimited text messages over BBM. BlackBerry became trendy and all the younger generation wanted one; they even started selling them in bright colours to meet the market.

RIM made its money through carriers who wanted to dominate the uncapped voice market. It made more money from those same carriers who then wanted a large chunk of the SMS market.

Fast forward to today, though, and I think the real problem BlackBerry have is not the consumers, it's those same carriers.

Not carried

In the current age - from the time since the “modern” smartphone has become available - and for carriers, voice minutes are worth nothing; all the money is in data. Likewise, texts have no value - which renders the advantage of BBM worthless. Everybody wants to boost their data business, as it's used by hungry apps on iPhone and Android smartphones. Customers now have rich email, using more data. They watch video on the bus. All this therefore makes the carriers more money.

Businesses didn’t buy BlackBerry; they were sold them by the carriers as a solution. Likewise, consumers didn’t buy BlackBerry; the networks recommended them to those who sent a lot of texts.

Unfortunately for Blackberry, it has lost its unique selling point (USP). Without one, it’s simply not going to be recommended by the sales representative at contract renewal time. The result - well, you can see for yourself. Any time you need to take out full-page ads to insist you're not dead, people are going to assume you're dying.