The latest issue features an e-interview with LIRNEasia’s CEO Rohan Samarajiva, but it is not the only reason why we thought of highlighting the issue. The content is interesting and very readable. We publish two e-interviews from July 2010 issue here fully, as they are not available on public domain.

Apart from Samarajiva, This issue carried e-interviews with Alison Gillwald, Indra de Lanerolle, Christoph Stork and Muriuki Mureithi.

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The need for competitive research for policy influence
e-interview with Alison Gillwald

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“High quality, rigorous research…is required to compete and complement with each other for policy influence… In mature economies researchers from multiple universities would be debating and refining the positions governments should be taking on everything from regulating next generation networks to demand stimulation for broadband.”
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Alison Gillwald is Executive Director of RIA. She is also Adjunct Professor at the UCT Graduate School of Business, Management of Infrastructure Reform and Regulation, and a member of CPRafrica’s organisation and selection committee.

CHAKULA: You have just held the CPRafrica conference in Cape Town. What are you hoping to achieve through the conference?

ALISON GILLWALD [AG]: There is almost no scholarly research being undertaken in the field of ICT policy and regulation on the continent. A Google scholar search on the subjects throws up around five scholars on the continent who are published in peer reviewed or accredited journals. It is this kind of high quality, rigorous research that is required to compete and complement with each other for policy influence. In mature economies researchers from multiple universities would be debating and refining the positions governments should be taking on everything from regulating next generation networks to demand stimulation for broadband. Although there are pockets of applied research being undertaken there is no tradition of critical intellectual engagement in this area on the continent. The purpose of CPRafrica is to provide a forum for nurturing and showcasing research in the area of ICT policy and regulation on the continent and enhancing its quality through rigorous academic review and debate. The conference is complemented by a young scholars programme to expose young scholars who may be excluded from such peer-review, paper-acceptance-only style conferences without such a category. Some of these are part of the IDRC- [International Development Research Centre] funded PhD programme to encourage doctoral research in ICT policy and regulation. The idea here is to build a cadre of policy intellectuals on the continent able to critically engage government on the basis of relevant research and contribute meaningfully to research and policy excellence. This will further enhance Africa’s standing in international research and governance fora, in which its participation has historically been suboptimal.

CHAKULA: Reviewing some of the papers presented at the conference, it strikes me that there are a couple of threads that are emerging. Two in particular stand out: the notion of “innovation” in the telecommunications space, and the challenges around convergence and policy when two distinct sectors with different ways of doing things are brought into conflict with each other. I also went back to Research ICT Africa’s 2008 M-banking policy paper, which raises similar themes, and I would like to use that as a starting point. First, on the issue of ‘innovation’. In the M-banking paper, the following assertion is made: “Policy-makers and regulators need to ensure that evolving systems serve the broader objectives of economic growth and development as well as protect consumer interests, while creating an environment that encourages and rewards innovation”. In what ways can policy inhibit or encourage innovation in the telecommunication’s sector?

AG: Indeed, providing certainty to investors and operators while retaining the levels of flexibility to enable innovation in a fast-changing environment is one of the most difficult balancing acts that policy-makers and regulators have to perform. I think the linkages and catalysts between technology, market and regulatory innovation are becoming clearer all the time. New technologies and service offerings have prized open markets and the entry into less policy and regulatory constrained markets has made taking certain technologies to market more viable. This has triggered further possibilities across historically distinct platforms, not only between broadcasting and telecommunications, but between fixed and mobile services and even entirely separate sectors such as telecommunications and banking. The challenges to the expansion of such services are really regulatory now rather than technological – and that is not to say that one does not want or need public interest regulation either in the telecommunications or banking sector, but it has to be done in new, innovative ways that enable to extension of these services to those who currently don’t enjoy them. Once these various forces are unleashed they are able to intersect and create new opportunities and innovative ways of doing things that have not been done before.

CHAKULA: Innovation here seems necessarily to be tied to market gain – the objective is to increase or capture market share. In both your M-banking paper, and the case study of the mobile operator One Network in Kenya, preconditions exists that facilitate innovation. With M-banking there are low-income earners who are ‘unbanked’ and who could benefit from some kind of low-cost transactional instrument, and with One Network, there is a significant level of cross-border traffic that makes a seamless network attractive.
AG: It is true that innovation is often driven by market forces and pursuit of profits, and, traditionally, with new technologies have focused on high-end markets. But much of the ICT innovation we are witnessing in developing markets is focused on what has been referred to as the ‘gold at the bottom of the pyramid’ – very profitable turn-over of high volumes of sometimes minuscule margins on products that, by breaking them up or making them available at cost, the masses at the bottom of the economic and social pyramid can enjoy things like pre-paid phone vouchers, or transferable airtime vouchers. And many of these products have been commercialised innovative practices by the poor in order to access and affordably use communications services – such as missed calls, multiple sim card usage that allows for same net rates, or ‘plastic roaming’.

CHAKULA: If we consider Indra de Lanerolle’s fascinating case study on the South African convergence scenario, we see two sectors (broadcast and telecommunications) in conflict with each other because policy decisions are made according to different frameworks: simply put, economic versus public interest. In fact, Indra does seem to suggest that these are in competition with each other, and resolves this in an interesting way. It feels hard to believe that ‘consumer interest’ is the same as ‘public interest’?

AG: I think with the shift from public utilities to competitive markets many of the public interest objectives of delivery and service are met through serving the consumer interest. Nevertheless there is public interest regulation that is required to improve wider and collective consumer welfare – to provide access to ‘uneconomic areas’ for example – though with new more cost-effective, rapidly deployable wireless services, this concept in markets that enable competitive entry is regularly not proving to be the case. But as long as we have the large number of poor that we do, we will need some level of social regulation – even though a lot of the current pent-up demand could be met with greater market efficiency (more competitive markets offering better prices). And then there are the more traditional content regulation issues either to restrict certain ‘harmful’ content or activities or to enable it, such as local content regulation. That too may be found to be highly profitable, but may need either protection or encouragement.

CHAKULA: Indra’s paper, like your M-banking policy paper, shows that regulating convergence is tricky because of the ‘convergence’ of two or even more sectors; whether broadcast/telecommunications or telecommunications/banking etc. What are some of the key challenges that policy-makers can expect to face in Africa?

AG: The key challenge for African regulators is that they are still trying to deal with legacy regulation around first and second-generation infrastructure and access. At the same time, if they do not want the agenda to be set for them in international fora, they need to deal with next-generation issues, not only of converged IP [internet protocol] networks and services and the next-generation regulation issues of network and service-neutral regimes, but of cross-cutting issues of electronic commerce frameworks, intellectual copyright rights, security and privacy issues, and so on. And you have to do it all or be left behind…

CHAKULA: One frustration is that when one reads a good paper that seems to offer a solution to a problem, one is also met with the feeling that those with decision-making powers are probably not going to read that paper, or seriously consider its arguments. Do you feel the same? If so, how do you think CPRafrica picks up on this challenge? Is it just a case of repeating issues until policy-makers take them on board?

AG: No. CPRafrica is one of several strategic strands towards having evidence-based ICT policy on the continent. This is about organic and indigenous knowledge creation and contribution, at the national level, at the level of regional association and continentally, and also about global engagement and influence. For too long have the solutions come from the developed world. Of course, there are lessons to be learnt and we don’t need to reinvent the wheel, but we also have different challenges and Africa has demonstrated remarkably innovative responses to these when they are informed by sound policy, effective regulation or thorough and appropriate business plans. The indicator research done by RIA and its analysis in order to assess policy and regulatory outcomes is fed into several initiatives, globally and locally. RIA provides the only comprehensive public domain demand-side data on ICT access and usage on the continent. This is used in national, regional and continental meetings on ICTs, and in the database and reports of multilateral agencies such as the OECD and the International Telecommunication Union (ITU), to better inform their understanding of developments in Africa. It is true that sometime decision-makers do not like to hear of the widespread policy and institutional failure on the continent, but many do – especially those that are rapidly improving and beginning to see the rewards of their reforms. This research is also used to develop training curricula that address the needs of policy and regulators in a developing country context. So, for example, as part of the global research and training collaborative LIRNE.net we conduct a professional development course on alternative regulatory strategies at the UCT Graduate School of Business Infrastructure Reform and Regulation Programme to build institutional capacity on the continent. So CPRafrica is just one arm of a multi-pronged strategy of research and education, institutional capacity building and technical assistance and dissemination and advocacy, through our website database, policy papers and workshop and public presentations.

CHAKULA: What is the way forward for the conference? Will there be more?

AG: Yes, in order to build and sustain this much-needed capacity we will have to find a way for CPRafrica to become an annual institution.

Related links:

M-Banking the Unbanked: RIA Policy Paper No. 4:

http://www.researchictafrica.net/new/images/uploads/RIA_Mobile-banking.pdf

CPRafrica conference details: http://www.researchictafrica.net/index.php/news/38-cprafrica-looking-back-at-a-decade-of-communications-reform-looking-forward-to-2020
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Innovation through competition: the budget telecom network model
e-interview with Rohan Samarajiva

Paper link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1564529

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“The status quo must be unbearable.”
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Rohan Samarajiva is the Chair and CEO of Lirnasia. His paper, “How the developing world may participate in the global Internet Economy: Innovation driven by competition” was presented at a workshop organised by the OECD and InfoDev in Paris, 10-11 September 2009.

CHAKULA: In your paper, you talk about the Budget Telecom Network Model (BTNM), which is brought about by competition allowing operators to reduce the transaction costs of low-end clients. This, as you point out, is different to the standard Average Revenue Per User (ARPU) model. How does it make the ARPU model redundant?

Rohan Samarajiva [RS]: ARPU is a short-hand that outside observers use to see if the firm is doing well, whether its prospects are good, etc. It is, like any indicator, imperfect. You get it by taking total revenue (preferably without extras like roaming) and dividing by number of subscribers. Of course no one really knows what a subscriber is any more, with even poor people holding up to five SIMs, foreigners having SIMs, no agreement on what an active SIM is and so on. You can get better results by looking at revenue per minute. Take total revenue (less roaming and other stuff) and divide by Average Minutes of Usage per User per Month (MOU). This is a better indicator. But investment analysts are still not used to this and it would require disclosing MOUs to calculate.

CHAKULA: Can ARPU be used as a business model?

[RS]: Operators do not actually do much with the ARPU. It is not a business model as such, just an indicator. But getting more from each subscriber (if this is known) is not a bad idea. Just that it does not predict whether the company will make money or not. The best indicator for that is EBITDA [Earnings Before Interest, Taxes, Depreciation and Amortization] margin. Sri Lanka in 2007 had an operator with LKR311 (approximately USD3 at the time) ARPU making close to 50% EBITDA margin. In the end, the success of a business model lies in whether it generates profit.

CHAKULA: What is your understanding of ‘innovation’ in the telecommunications space? You talk of “business innovation”, rather than, say, technological innovation?

[RS]: Tech innovation is important, but it is not the only thing. Pure tech innovation is done by manufacturers of network equipment and handsets. That is good. Business process innovations (e.g. lowering the costs of base stations through software) are done by operators. These include technical aspects, but are not limited to them. Shifting from one business model to another (discovering the latter) is also innovation, but it may or may not not have a tech aspect at all.

CHAKULA: What are the preconditions for innovation, do you think?

[RS]: The status quo must be unbearable. The BTNM innovation occurred when competition got so intense that there was no way to gain market share or even survive without doing something new.

CHAKULA: Does BTNM have implications for increased access to broadband internet for the majority of people on a continent like Africa?

[RS]: Yes. The latter part of the paper is entirely on the extension of BTNM to broadband. Some headlines are that operators must have enough money from voice that can be invested in the 3G plus networks. Once the overlay network is built out the operators have to offer low prices. Prepaid sachet pricing is best, where one buys packages of connectivity in minutes or in capacity. Here, because of lower transaction costs and prices there should be an influx of new customers. This is already on offer in Asia. Africa has to lower prices. Access will be over mobile networks, using dongles or built in modems, for laptops and other devices, including phones. ADSL will be a niche product. Wireless access is the future.

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As neither we nor most of our readers do not have access to the thread it was posted, we like to continue the discussion here.

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Hi people,

I come from one of the ten largest economies in the world, with nearly 200 million people, 8.5 million km2, and 5.564 municipalities, where 94% of the people do *not* have access to any form of broadband – the “B” in the famous BRIC acronym.

I am just coming out of the IGF workshop “Expanding broadband access for a global Internet economy: development dimensions”. I left the workshop a bit shocked with the concepts expressed, not by the AT&T representative (who not surprisingly said AT&T subdsidiaries countries other than the USA should be considered local companies because they employ local people), who as usual is just doing his job in defending the so-called “market”, but by other speeches which seemed to completely ignore that, in most of our contries, there is a de facto monopoly or cartel situation regarding the telco infrastructure, and that public policy ought to centrally take this into account if the aim is to universalize broadband access with quality to all families.

One of the speakers (from LIRNEasia) said that “lower prices require lower costs” and therefore one should just “phase out universal access levies and rationalize taxes”. I retorted that pricing per Mb/s of ADSL broadband in São Paulo might be 65 times higher than the same price charged by the same company in London — and therefore no amount of levies or taxes would justify such scandalous pricing difference, not to speak of the much lower QoS.

I suggested that, instead of eliminating the universal service funds (whose levies are a very small portion of price composition of broadband), we should insist on reforming policy regarding the use of these funds. The reply I heard was that it makes no sense to keep funds that are not used or are squandered (!!). Impact of the fund’s levy in Brazil is just 1% of the price of the fixed line telephone connection — its impact in the price of broadband (a separate bill even if the service is not unbundled) is zero.

There was also a recommendation that we should be “gentle on QoS” to facilitate things regarding universalization of access — fascinating. Again, examples abound in which telcos guarantee only 10% of the nominal contracted rate, and in practice this might be even less. Should we just agree with absurds like this in the name of “it is better to have something than nothing”???

And then there is the crucial question of unbundling, central to the policy debate in the developed countries as it directly impacts universalization through an effective reduction of prices for the final user. It is a major challenge for broadband public policy in developing countries, where regulators are usually in the hands of the telco cartels. The word was not mentioned (not a single time) by anyone in the panel, as if irrelevant to the development dimensions of broadband.

The speaker also mentioned that the “need” to reduce costs for the big telcos would require reduction of international bandwidth costs. One of the two big carriers in Brazil, a Brazilian conglomerate, owns redundant fiber running from Brazil to Miami in rings passing through countries in the Caribbean and Central America. They own their own international link, in summary. So do the other carrier in the de facto duopoly — a major operator from Europe. This does not make any difference in pricing for the final user, although it does contribute to their profits in Brazil being far higher than in Europe for example.

Finally, the fascination with mobile. Of course the AT&T speaker started his talk by waving a fancy iPhone to the audience — mostly natural for a commercial wireless giant. But the infoDev representative and others mentioned mobile as a “solution” for the poor, and not even bothered to separate the discussion in the two main topics here: first, the mobile phone as a connectivity device to enable the user to fully use the Internet through a friendly human-machine interface, be it a common PC or special equipment for people with disabilities; second, the phone itself as *the* alternative to the full user experience that a PC or similar might provide. It seems the agency bureaucrats are satisfied with having two castes of users: a small minority of the ones who can fully use the Internet as it evolves requiring more and more multimedia capabilities on both sides (server and client), and the ones relegated to a small device on which it is barely possible to type small messages.

In the first regional LA&C preparatory meeting for the IGF, in 2008, a representative of a major telco said we should not worry about bringing the next billion to the Internet — they have cell phones, so they are connected already, problem solved. I wonder if this executive would take the place of a carpenter looking for a job, who has to compose and send by email his CV together with images of letters of recommendation to his would-be employer, and had nothing but a cell phone (smart or not) to do it. Not to speak of comparing the executive’s thin-fingered hands of a pianist with the big callous hands of the carpenter.

fraternal regards

–c.a.

The further you travel from Colombo, the more you wonder whether Sri Lanka too had been an ex-communist state. The roads get narrower and mucky – sometimes even 20 kmph is high speed – and mobiles work intermittently – only when you reach within a cell town. Still you have electricity – almost anywhere. Even at Pitakumbura Navodya School, where we are told some students bring an extra set of clothes to school, during the rainy season – they have to swim across a stream daily.

What about broadband? Yes, it is available, but only in pockets.

WiMax is available in both Bibile (13 km from Pitakumbura) and Ampara (65 km). ADSL is available only in Ampara. Pitakumbura in the middle, is covered by neither.

The solution? Build a 25 meter tower to host a micro-wave antenna at a cost of US$ 2,000 (right, above). This is not something an individual can afford – most of them are farmers. Fortunately for the student of Pitakumbura Navodya School, the monthly bill is currently being footed by the Ministry of Education under an ADB funded project. The day project funds run out, the school will be delinked. The students then might have to travel 13 km to Bibile for an entry point to the web.

This example illustrates Sri Lanka’s efforts of ‘taking ICTs to rural areas’. Broadband is available only in selected towns with some demand. Outside this, a handful of point to point links caters to a limited group of users – with a donor paying the bill. Such mechanism will survive temporarily, but may not withstand the financial pressures of a global recession.

The ideal long term solution will be broadband everywhere – at an affordable cost – just like electricity. It is in Colombo and may be in few other provincial towns, but under present circumstances it will only be a long dream for rural folk.

Why a Wi-Max broadband consumer should pay 100% more tax than any of her ADSL counterpart for the same service is an interesting question. Wi-Max technology does not pollute environment more or Sri Lankan government (or regulator) is not necessarily biased towards wired solutions over wireless. It is just that the two tax components 10% mobile tax and now 2% environmental levy are unique to ‘mobile’ services.

Wi-Max is very much a ‘fixed’ technology (compare with 3G) but one still get it from Dialog – better known to public as a ‘mobile’ telecom services provider. (Strictly speaking it should be Dialog Broadband Networks) So you are taxed additionally for ‘mobile’ services, while no such mishap when receiving ADSL services from SLT – most still know as the good old ‘fixed’ phone services provider!

Take this hypothetical case: If Dialog decides to sell their publication ‘Zero77’ (now given free) do we have to pay 30% tax for that too?

Should we just ignore this as another farce of the ridiculous tax structure?

Real broadband « Montage

So what do we want the operators to do? When you sell us a 512 Kbps residential connection or a 2 Mbps business connection, try to give us something approaching what you promised. Most of the time. We (most of us, at least) will understand if there are bad times; if the speed drops for a few hours in a day. But we won’t if the bad times are all the time.

Right now, many people don’t have much choice when it comes to broadband. Because the obsolete monopoly on drawing wire to homes and offices has not been removed, SLTL is the only supplier of ADSL, a technology that depends on splitting the copper wire, one part for voice and the other for data.

Everyone else is limited to wireless. Companies like LankaCom were created in the early 1990s to serve the “broadband” needs of export-oriented companies. They were the only game in town in the 1990s. They continue to be charged such high spectrum fees that they cannot compete with ADSL. The rules haven’t changed with the times.

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TelecomTV – TelecomTV One – News

Now, it just so happens that I was tracking a story on the junta’s plans for its very own cyber city just before the protests began. There have been quite a few reports across Asia recently that the Burmese “government” is building its 10,000-acre (4,050 hectare) “Yadanabon cyber city” project about 70 kilometres east of Mandalay, Burma’s second largest city.According China’s Xinhua news agency, not only is it going ahead as planned, but the first stage will be opening officially in January 2008 with some big-name tenants from China, Russia, Thailand and Malaysia headlining the propaganda event.

Back in June, “The Irrawaddy”, probably the best news source about Burma, filed a story that panned the grandiose ICT plans of the junta. In particular it quoted Reporters without Borders, which labels Burma an “Internet black hole”, and suggested that no foreign company in its right mind would risk going anywhere near “Myanmar”.

However, according to Xinhua last month, the list of companies signed up to be anchor tenants in the cyber city include the likes of ZTE and Alcatel Shanghai Bell (ASB) from China, Thailand’s Shin Satellite, IP Tel from Malaysia and Russian software outfit CBOSS. It also claims that an airport had been built “in” the cyber city and that “various systems including ADSL, CATV, Triple Play and WiMax are being installed, experts said, adding that the present stage before the soft opening deals with fibre cable installation.”

That’s quite a detailed list of development. As it turned out, I was at a satellite conference in Bangkok the same week and thus had a chance to ask a number of people at Shin Satellite, including the company president, directly about this.

Not one single person at that company had even heard of the mythical Yadanabon cyber city, never mind being listed as an anchor tenant there. I then contacted Alcatel about the Alcatel Shanghai Bell (ASB) involvement and got the same response – there were no plans to invest in the cyber city project.

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Speaking to the Daily News Business, Executive Director of Lirneasia Prof Rohan Samarajiva said there should be more serious policy and regulatory attention for broadband infrastructure in the country. In Sri Lanka broadband connectivity is now becoming necessary for businesses to function and for day-to- day life.

The most cost-effective broadband technology for ordinary people and small businesses is ADSL. Unfortunately ADSL is monopolised in the country.

This is a copper based technology and if authority is given only for one service provider to use copper it will automatically create a monopoly in providing ADSL service for that service provider, he said.

“Only one service provider in the industry is permitted to lay copper while others are not permitted to do so. This should be stopped and a level playing field created for the industry to improve competitiveness in the sector,” he said.

There is a wireless alternative too and it is important give all the players in the industry the option of using wireless broadband. If all the players were supplying the same services they will have the keenness to increase the quality of the broadband services to be competitive in the industry.

However, the quality of the broadband service in Colombo has now deteriorated.

The only solution for increasing the quality of the service is to provide a level playing field and raise quality through competitiveness. Local call charges have come down due to such competitiveness in the industry he said.

Talking about the connectivity charges in the country Samarajiva said that broadband residential connectivity charges were not too expensive compared with other countries in the region.

But when it comes to leased lines (DPLC) used by large businesses, the local charges are much higher than those of other countries in the region which could badly impact on attracting investments in IT related services to the country.

Recent research on the local BPO industry reveals that most of the BPOs are unhappy with the quality of their leased lines. “A Service Level Agreement (SLA) with the service provider is the solution to maintain the quality of this service. But there is no SLA culture in Sri Lanka,” he said.

The telecommunications watchdog also needs to focus on the undersea cables and on the ways all players in the industry could access them to increase the quality. “Only two companies in the county have access to these cables,” he pointed out.

The Nation Economist, Sunday 26 August 2007 | See Print version

I have to say that JHU does not know economics. What is the rationale behind taxing the only sector that is growing? The industry is giving government enormous amount of revenue. Twenty percent of every mobile rupee goes to the government. If you squeeze the goose for more eggs the goose will ultimately die. To my knowledge some of the taxes the government is thinking of will really kill the industry. We have got data which say people in the bottom of the pyramid are willing to spend Rs.500 per month on communication. So if the government put another tax these people will be discouraged to get themselves connected and as a result of that the government will lose revenue.

By Indika Sakalasooriya
The entry of the Indian business tycoon Sunil Miththal’s Bharti Airtel, India’s biggest mobile operator into the Sri Lankan market has left many players in the telecom sector to ponder on the harsh effects of severe competition in the future.

The existing mobile operators in the market seem to have appraised the impact even before the physical arrival of the Indian giant. The majority of the industry analysts are now of the view that the profit margins of the mobile operators will become thin due to the expected intense competition in the market.

However, amidst all these developments, from the government’s side we heard a story of further taxation of the growing mobile industry. The Nation Economist thought it opportune to get some insights from Professor Rohan Samarajeewa, a former head of the Telecommunications Regulatory Commission of Sri Lanka who is a keen observer of developments in the telecommunication sector in the Asian region to find out his assessment of the Sri Lankan mobile industry and where it is heading.

Here are the excerpts of the interview
Q : What is your general assessment of the Sri Lankan telecom sector as it stands today?
A : Doing well and could do much better. Why do I say doing well is compared with every other sector, the telecom sector is doing well. Its contribution to the GNP growth rates is considerable. Why do I say it can do better is Pakistan has overtaken us in mobile and our ADSL data situation is not really satisfactory in terms of people getting value for money. A lot of the BPO industry is not growing as fast as we expected. So in that sense we really could do much better than we are doing now.

Q : What kind of an impact will the arrival of Bharti Airtel have on SL telecom industry and to the mobile operators in the market?
A : Well, first we have to look at the Indian market and Bharti Airtel. India is one of the exciting markets in the world because every month 7 million new phones are added to the market. That means 7 million new subscribers. So now you get a sense of how big the Indian market is. And also India belongs to BRIC (Brazil, Russia, India and China). BRIC has the most happening markets in the world and we are sitting next to a BRIC. In the Indian telecom industry Sunil Miththal and Bharti are seen as innovators. He is getting awards and prizes in India. We have to find out for what he is getting prizes?

They are not getting those for being the biggest or for being profitable. We have to understand that there is no technological innovation but business innovation when Bharti is considered. The business innovation is how you make high profits on very low revenues per user. The company has pioneered very innovative techniques and that is they don’t run their networks. They outsource the whole thing down to the supplier. So what they are doing is basically brand managing. They own the brand and manage the interface with the government and they supervise the outsourcing process. Having the two facts in mind let us think of the size of Sri Lanka. Sri Lanka is about the size of greater Mumbai or greater Delhi. So, here we have is a company extremely good at managing costs and handling numbers. So here they come to Sri Lanka. I’ll be very concerned if I’m one of their competitors.

However there are two things that go against them. One is Sri Lanka has a few very efficient and sharp mobile companies and among them nobody is a sleeper. The second reason is Bharti is investing two little. It suggests to me that they are basically going to do a very conservative roll out. In 2004 the Central Bank of Sri Lanka in the Consumer Finance Service said 25% Sri Lankan households except in Mannar, Kilinochchi and Mulathiwe areas had some kind of phone. Now I’m willing to stick my neck and say it has gone up to 55% by now and that’s an extrapolation from some data we have. So we have to understand that this is a highly saturated market. At the same time we don’t have mobile number portability. The only country that has mobile number portability is Pakistan. So considering all these facts I’d say it is not easy for Bharti.

Q : Will the competition be healthy in terms of survival of the industry?
A : Yes sure. I’m always there for intense competition. Many think that the margins of the service providers will go down with the entrance of a new player. But I don’t think so. In 1994 when Dialog enter the market many people thought Sri Lanka was a tiny little market and there was no way that a fourth mobile operator can succeed. First it was said that Dialog would not succeed and secondly the margins will come down. But what happened? A fourth player came. Did the margins come down? Let us assume that what you are saying is correct. So the worst thing that can happen is the exiting of one player. The player who cannot give the enough commitment will exit the market. What is wrong in that?

Q: With the arrival of Bharti it was reported that some parties in the government had proposed to further tax the mobile industry as the sector is considered to be profitable. What is your reading on that?
A : I have to say that JHU does not know economics. What is the rationale behind taxing the only sector that is growing? The industry is giving government enormous amount of revenue. Twenty percent of every mobile rupee goes to the government. If you squeeze the goose for more eggs the goose will ultimately die. To my knowledge some of the taxes the government is thinking of will really kill the industry. We have got data which say people in the bottom of the pyramid are willing to spend Rs.500 per month on communication. So if the government put another tax these people will be discouraged to get themselves connected and as a result of that the government will lose revenue.

Q: Since you mentioned the issue of number portability, what are the pros and cons of number portability? Will the implementation of number portability lead to some perfect competition?
A : Competition has to be the basic rule we should be working on. An essential quality of competition is when a customer is not satisfied he or she should be free to go to another supplier. So now the question is if I’m not satisfied by my present mobile services provider I still have to bare it since I’m not ready to change my mobile number. But in a place where you have total competition you should be free to go to another service provider while keeping the same number. That is what mobile number portability is all about. People might ask me if the number portability is so important why didn’t you push for it when you were the DG of TRC? I had to deal with less than million phones and we had various problems such as interconnection. So during that time the idea of having number portability is very close to a dream. By now our telecom industry is growing and today mobile number portability has become a very important aspect of the industry.
There are two ways of doing number portability. One is call forwarding and the other way is to do it in a straight way through an intelligent network. It has costs and will take time. But it will definitely improve the market.

Q: As a former TRC DG and present advisor to the government of Bangladesh on telecom related matters, what are the reforms you are suggesting for the present telecom regulatory regime for the betterment of the industry?
A: I am a policy and regulation guy. For the industry to grow what we really need is a greater attention to be paid to what we call wholesale access. All the mobile operators should get the privilege to use the under sea cable going out from Mt. Lavinia on a non discriminatory cost oriented way. At the moment there are only three companies using the cable, SLT, GSNL and Dialog. But these other two companies get step motherly treatment from the SLT and that should be straightened. That’s a regulator’s job. Within the country majority of the fiber optic cables belong to SLT. But they should offer that facility to other companies at reasonable prices. Because it doesn’t make any sense in our country for every company to have their own fiber optic cables or to build microwave networks on top of already existing networks. So at a fundamental level I would put that as the highest priority because that can reduce the cost of a call. The other thing as I mentioned earlier is the mobile number portability.

Q : What are the key areas that the existing and the prospective telecom service providers should concentrate in carrying out operations?
A : The bottom of the pyramid is the place they should focus. I’m telling this because we have done research on the matter. The companies should understand that it is where the money is. As Professor Prahalag said, there is a fortune to be made at the bottom of the pyramid. The other fact is in Sri Lanka the main two growing sectors are telecom and banking. Why can’t we put the industries together since that is where the action is.

Q : Some say that the present regulatory system is in favour of the SLT of which the government still has the major stake. What is your opinion on this?
A : The Act we at the moment have is archaic and obsolete. The law is not very good and the staff is not very competent and it is possible that the regulatory authority is not doing well. What I can say is in my time Sri Lanka Telecom was fined for violating its licence condition. Therefore at least I can say during my period SLT was not favoured.

Q : As a person who is running a research body that overlooks the entire Asian region, can you explain why India still does not practise 3G operations?
A : Well the reason is the problem we also have. But India has it in a bigger way. Indian military is occupying a lot of frequencies. Therefore to start 3G operations the Indian Army and the other defence forces should be moved away to clear the frequency. We are not in bad shape as in India but we are close to it. We have not only military problems but also there are other parties who are using these frequencies for low value purposes.

However, yesterday’s Wall Street Journal (March 15, 2007) seems to suggest that high speed 3G wireless technology like HSDPA can bring broadband on a large scale to Indonesians. It (misleadingly) implies that since HSDPA is merely a software upgrade to 3G networks it will not require any new major telecom infrastructure investment in Indonesia. The fact is that 3G services have just been launched in the last quarter of 2006 in some urban areas concentrated in and around Jakarta. The Indonesian operators have a long way to go to upgrade all their base stations to support 3G. Even if the base stations were upgraded to 3G standards there are no shortcuts to building backbone infrastructure (preferably fiber optic) to connect the base stations. Furthermore, large parts of eastern Indonesia do not have any connectivity leave alone 2G or 3G.

Realistically, HSDPA will be a connectivity solution for those customers who have been starved off ADSL connectivity thanks to Pt Telkom’s “Dog in the manger” attitude. Those customers who can afford HSDPA compatible handsets will be a very small subset of potential Internet users in Indonesia. 2+G connectivity solutions will continue to remain relevant for a vast majority of Indonesians.
Indonesia Embraces 3G to Get Up to Speed on Web (Wall Street Journal March 15, 2007)
JAKARTA, Indonesia — Indonesia’s rapid adoption of cutting-edge cellphone technology for Internet access is helping Southeast Asia’s largest economy to catch up with its technologically savvier neighbors.

A sprawling nation of 220 million people and more than 13,000 islands, Indonesia has one of the least-developed communications systems in Asia. Getting a phone connection without echoes or distortion is a matter of luck, and Internet connections relying on cable networks are among the slowest in the region.

The arrival of High-Speed Downlink Packet Access, or HSDPA — a software upgrade to 3G mobile-phone technology that allows users faster access to the Internet through cellular networks — could help change that[..]

HSDPA technology, pioneered in Indonesia by PT Indonesia Satellite Corp., or Indosat, offers Internet download speeds at least six times as fast as connections relying on cable, a wider difference than in a more-developed economy. And because it’s an add-on to 3G technology, it doesn’t need any major new telecom infrastructure — just some equipment attached to existing mobile base stations.

Indonesia also is primed for expansion because less than 30% of its population currently uses cellphones, compared with 80% in Malaysia and 40% in the Philippines. Indonesia has 65 million mobile users; industry analysts forecast that number will reach 100 million by 2010.

Since starting its service in November, Indosat has signed 60,000 customers in Jakarta and Surabaya, Indonesia’s second-largest city. Working with Ericsson and Nokia, the company hopes to add coverage to eight other major cities by the end of March. “It’s going to be very popular,” predicts Djarot Handoko, a spokesman for Indosat.

Nokia is working with another local telecommunications company, PT Telekomunikasi Selular, to start an HSDPA service in Indonesia later this year. Indonesia is one of the biggest potential markets for 3G, says a Nokia executive advising the company[..]

Dev Yusmananda, an executive at PT Excelcomindo Pratama, which has just started a similar service, says the prospective Indonesian market is huge. “We’re talking about it [HSDPA] as a substitution for a broadband connection,” he says.

Ironically, the interest generated by the arrival of HSDPA is a consequence of Indonesia’s failure to build a decent national cable grid. The country had plans to lay an extensive network in the 1990s, but the Asian financial crisis in 1997-98 intervened, and many projects were shelved. Many of the cables that were installed were poorly laid. Recent flooding in Jakarta damaged networks and left many people without Internet access for days[..]

On continuing discussion of municipal wireless there is a great quote in here: ‘Using municipal Wi-Fi for residential coverage, [Sanjit Biswas] said, was “the
equivalent of expecting street lamps to light everyone’s homes.” ‘

Wireless Internet for All, Without the Towers – New York Times

WiMax, which will be a high-power version of the tower approach, comes in two flavors: mobile, which has not yet been certified, and fixed, which is theoretically well suited for residential deployment. Unfortunately, it’s pricey. Peter Bell, a research analyst at TeleGeography Research in Washington, said fixed WiMax would not be able to compete against cable and DSL service: “It makes more economic sense in semirural areas that have no broadband coverage.”

An intriguingly inexpensive alternative has appeared: a Wi-Fi network that is not top-down but rather ground-level, peer-to-peer. It relies not on $3,500 radio transmitters perched on street lamps by professional installers but instead on $50 boxes that serve, depending upon population density, more than one household and can be installed by anyone with the ease of plugging in a toaster.

LIRNEasia researcher, Divakar Goswami, was also interviewed. The interview is featured in the online edition here. The interview is in bahasa. The English text of the interview is below:
1. How’s the growth of ICT in Indonesia for along 2006 (as we see from regulations, infrastructure development (hardware and software), human being, ICT industry etc)?

Information and Communication Technology sector (ICT) in Indonesia is one of the most dynamic sectors of the economy contributing most to GDP growth rate (around 16%) than any other sector. The ICT sector in Indonesia is dynamic, growing and profitable. Compared to the past, the regulatory environment is more transparent, pro-market, pro-growth and therefore pro-poor.

ICT Sector

Wherever competition has been introduced, growth has been spectacular; those sectors lacking competition have grown more slowly. Take the example of the mobile sector that has added 6.6 million subscribers during the first half of the year and where operators have aggressively invested in infrastructure. For the year 2006, we may see an investment of more than $2.5 billion dollars made in the mobile infrastructure as the existing operators gear up to face the challenge from Hutch and Maxis who are rapidly rolling out their infrastructure. The mobile operators have been expanding their network at a frenetic pace: Since the end of 2005, Telkomsel has increased its number of base stations from 7,741 to 12,156 a growth of 57 percent; Excelcomindo’s base stations during that same period have grown from 3,620 to 6,052, a growth of 67 percent. Despite making substantial investments, mobile companies continue to be profitable. Excelcom and Bakrie Telecom that had losses in 2005 have made profits this year.

The fixed sector’s performance on the other hand is poor. The growth of fixed line phones per 100 inhabitants will probably be negative this year as the number of fixed phones remain stagnant and the population increases. Because of Telkom’s de facto monopoly in the fixed line market it is unlikely that the company has any incentives to invest in this sector and nor can investment come in from other operators if the sector is not fully opened up to competition.

Many have argued that why bother with fixed if mobile is doing so well. Since most of Internet service provision is currently relying on fixed infrastructure, the lack of fixed line growth means that there is also no growth in Internet subscribers. According to BPS’ survey from 2005, there are an estimated 10.3 million Internet users who access the Internet from home, office, warnets etc. For a country of 222 million that is less than 0.05 percent of the total population that use the Internet. If one looks at Telkom’s broadband subscribers, it stands at a pathetic 35,000. What are the reasons for this and how can we bridge this digital divide?

The significant cost components of an Internet Service Provider (ISP) in Indonesia are its leased line and international bandwidth costs. As my WiFi study on Indonesia (available on www.lirneasia.net/projects) has shown, leased line prices in Indonesia are around 48 time the price in India for a comparable link. International bandwidth costs are also a couple of times higher compared to countries in the region. Both the domestic and international leased lines have limited competition and hence the prices tend to be high. This translates to nearly $4000 in monthly leased line and internet connectivity costs (512 Kbps) for an ISP. Taking into consideration the average income of an Indonesian, it is astronomical sum! No wonder Internet access in Indonesia is unaffordable to the vast majority and will continue to be so unless competition is introduced in the “big pipes”—in the domestic and international backbone infrastructure markets.

Broadband penetration will continue to be low as long as there is only one provider of ADSL. Hopefully, in the future, competition from wireless broadband providers will lower the prices and make it more affordable for Indonesian people.

ICT Regulation

The Ministry and BRTI have undertaken a number of pro-growth initiatives in the last year or two. It has successfully conducted 3G auction that has been widely perceived as the most transparent licensing in Indonesia’s history. Two new mobile operators have been introduced and the increased competition will hopefully drive down mobile retail prices and make them more affordable for those in the “bottom of the pyramid.” A new cost-based interconnection regime has been introduced, which mandates cost-oriented interconnection and provides enforcement “teeth” to the regulators. When implemented from 2007, it will hopefully promote fixed-line competition and ensure greater transparency in this contentious area.

BRTI’s regulation to implement a phased reduction of leased line prices based on cost calculations may help lower Internet retail prices and help diffusion of Internet connectivity.

However, there are a number of regulatory barriers that are preventing faster growth of the sector. Indonesia has an archaic licensing framework that may have been relevant 10 years ago, but not anymore. Converged services where voice, data, video may be combined blurs the boundary between traditional fixed and mobile services. Indonesia’s regulatory environment is simply not relevant to converged IP-based networks like the New Generation Network (NGN) that are being ushered in all across the globe. The current licensing framework is not technology neutral and has different rules and licensing requirements based on a particular technology. This has resulted, for example, in a situation where the regulator is trying to prevent Bakrie Telecom and Telkom Flexi from providing full mobility services because their license treats them as fixed operators although the CDMA technology can be used to provide full mobile services that will significantly enhance the utility of the service to customers.

Why Bakrie Telecom is licensed to provide service in only two regions is beyond my understanding. When a country does not have enough telecom infrastructure I would think it is in the interest of the Government and the public if an operator is allowed to build a network throughout the country. There are many other serious problems with the licensing framework which I will not get into, but this by far remains an area where more of the Government’s energies should be focussed.

Most of the operators I have spoken to, with the exception of Telkom, feel that although the current regulatory structure is better than what existed previously, it is still not independent in its decision-making. If you look at the structure of the organization it is apparent that BRTI is embedded within the Government that also controls two of the largest telecom operators in the country, Telkom and Indosat. The credibility of BRTI’s decisions will be considerably enhanced among the operators and other stakeholders if it were reformed and given more independent powers and separated from DGPT. The small degree of independence for BRTI has shown impressive results in terms of investment that has come into the sector. Imagine the investor confidence if a fully independent regulator can be put in place?

2. Is there any progress in 2006 than 2005? If yes, what is the indicator?

The following graph indicates quite clearly the progress of the ICT sector from 2005 till half of 2006:
The number of mobile phones in Indonesia per 100 inhabitants has increased quite significantly from 21.6 in the end of 2005 to 24.32 in the middle of this year. The number will probably go up by the end of the year, although growth from 2005 to 2006 may not be as rapid as from 2004 to 2005. However, with the introduction of Hutch and Maxis in the mobile sector, we should see more rapid growth in the number of mobile subscribers who are added to the network at the end of 2007. More competition in the mobile sector will lower mobile retail prices that are quite high compared to the region and make it more affordable to those on the “bottom of the pyramid.”

Although the penetration of fixed wireless access (FWA: CDMA) seems to grow slowly from 2005 to 2006, it does not reflect the impressive performance of Bakrie Telecom that has grown its network from 0.3 million to 1.3 million in less than a year. The slowing growth of FWA is primarily because Telkom Flexi shed a significant number of non-revenue generating subscribers from its network.

3. If no progress or stagnant, would you please to explain it?

Fixed wireline penetration has been negative because of a lack of competition in that sector. In a country with such low penetration one does not expect to see negative growth rates. Telkom, the monopoly provider, has no incentive to invest in fixed line infrastructure in the absence of competition.

Internet penetration numbers from 2006 are not available although growth in the number of Internet subscribers will continue to remain low because Internet prices remain unaffordable to a vast majority of Indonesian. Furthermore, only 3.74 people out of 100 own a PC in Indonesia. Of those PC owners only 27 percent use their PCs to access the Internet. Low PC ownership and low Internet use even among those who own PCs are also other factors that are contributing to stagnant Internet growth.

4. What do you think about the commitment of Indonesia’s government or Information Communication Department (Depkominfo)?

In view of the past year’s performance, I believe that the Minister Sofyan Djalil is someone who would like to reform the ICT sector and bring more competition to develop ICT infrastructure and lower prices. However, as an outsider, one gets the impression that not everyone in the Depkominfo is on the same page as the Minister. Furthermore, since the Indonesian government is dependent on dividends it receives from Telkom, it is probably hard to take decisions that may affect the profitability of the company. It is therefore crucial to separate the policy and regulatory functions. Let the Depkominfo develop policy and leave the day to day business of regulating the ICT sector to the BRTI.

5. What is the important think in this year that must be done by the government but not yet finished?

The Government has been collecting Universal Service Obligation (USO) funds from operators to roll out basic telephone service to 40,000 villages in Indonesia that do not have any connectivity. A least-cost subsidy auction was supposed to be held this year to disburse the USO funds in a transparent manner. However, a Ministerial decree is awaited to launch this very critical program to extend access to the digital “have-nots.” It is hoped that the auction will be held soon and will be open to all network operators (fixed and mobile).

6. What do you think about Dewan Teknologi Informasi (Information and Technology Council) formed by The President SBY? Are you optimist or pessimist with this council?

The formation of the National Information and Communication Technology Council (NICTC) by the President Susilo Bambang Yudhoyono, is a very important development for Indonesia’s ICT sector. It signals the recognition at the highest level of government that the ICT sector is important for Indonesia’s development and growth. Since the lapse of the 1999 Blueprint, the ICT sector in Indonesia is rudderless. Although the Government has good intentions, many of the policy/regulatory actions have been taken on an ad hoc basis without the guidance of a coherent vision. So a number of decrees have been issued that are overlapping and licensing is being done on an ad hoc basis. For infrastructure sectors with high sunk costs and long gestation periods, like for telecoms, there must be continuity and coherence in the Government’s policies.

Clear vision informed by the views of the various stakeholders can make the Council a guiding hand that can lead the sector to a higher trajectory of growth. The leadership can remove many hurdles imposed by bureaucracy and narrow vested interests.

The first meeting of the Council will be key in defining the objectives that the Government and other stakeholders aim to achieve for the ICT sector. The success of the Council will depend on it developing a time-bound road map or action plan that lays out what the Government would like to see achieved and in what time frame. When the Technical Coordination meeting is held every three months, they would be in a position to evaluate the implementation of the action plans. The biannual Council meeting led by the President would ideally evaluate progress of the action plans, make changes when required and bring to task parties that are responsible for delays in implementation. If that happens, watch the Indonesian ICT sector take-off like a rocket!

8. According to you, what must they do to make a good ICT implementation? And what improvement we can do next?

Good implementation of ICT projects must take into consideration sustainability of the projects when funding stops. For example, it is laudable that Qualcomm has provided wireless access to high schools in Way Kanan in Lampung and plans to connect 59 villages with “warcells,” cellular kiosks. However, the key to success to these projects is to develop a financially viable model to sustain this initiative when Qualcomm stops funding this program. As Grameen in Bangladesh has shown with the Village Phone Program, it is possible for a company to provide connectivity to rural villages in a profitable manner. Because Grameen is making profits from providing telephone connectivity to villages it is in its own interest to expand the service to more villages and in turn help bridge the digital divide.

These disruptions have major consequences for any business that relies on telecom for delivering their services, including, banking, trading, call centers, remotely managed services etc. This event also underlines the necessity for redundancy and why policymakers and regulators must liberalize international gateways to allow a number of different submarine cables connecting different destinations to land in a country.
From Bloomberg:

Damaged cables include the APCN2 cable and Sea-Me-We3 cables, Chunghwa’s Leng said. Eight STM-1 cables from Okinawa off Japan and 4 STM-1 cables to Shanghai are acting as backup, Chunghwa said in a statement. The company may also use the ST-1 satellite.
Singapore Telecom, France Telecom SA and Pakistan Telecommunication Co. are among companies that own the Sea-Me-We3 cables linking Europe to Asia. Operators in the APCN2 cable network that connects Japan, Korea, China, Taiwan, Hong Kong, Philippines, Malaysia and Singapore include China Unicom Ltd., StarHub Ltd., Telekom Malaysia Bhd. and Telstra Corp.
[..]“The repairs could take two to three weeks,” said Leng Tai-feng, president of Chunghwa Telecom Co.’s international business. The Taipei-based company, Taiwan’s largest phone operator, said two of its undersea cables were cut.
HSBC Holdings Plc said its online banking services were down, while Chunghwa said almost no calls could be made to Southeast Asia, causing disruption to companies including First State Investments in Singapore.
“I can’t trade if I don’t know the prices,” said David Leong, who heads the Singapore trading desk at First State, which manages $15 billion in equities in Asia and emerging markets. “I’ve put in limit orders to try to minimize the damage, but even then you need to have the basic information.”

(Note: Price data is not yet included; will be done as the tariff data is collected)
The Indonesian telecom sector has seen three waves of liberalization.

• 1st Wave: 1991-1996 (Private investment in sector-financial
  crisis)
  Creation of Satelindo, 2nd International service provider in 1993.
  Partial privatization of PT Indosat (65% Govt retains control) in
  1994
  Exclusivity granted to PT Telkom for fixed local 2010 and long distance 2005 before it was partially privatized in 1995 (66% but government retains control).
  GSM licenses provided to Satelindo & Telkomsel subsidiaries of two incumbents in 1994.
  GSM license issued to PT Excelcomindo in 1996, competitive provider with no financial links to government.
  ISP licenses issued
• 2nd Wave of Reforms
  1999-2004 (Post crisis-Change of guard)
  Telecom Act of 1999 separating policy & regulatory functions, allowing increased private participation
  Ending of cross-ownership between government owned telcos
  Premature ending of PT Telkom’s exclusivity
  Creation of duopoly for fixed sector
  Ministerial decree (KM 31/2003) creating BRTIRegulatory Body
  Merger of Satelindo with PT Indosat, Telkomsel with
  PT Telkom
• 3rd Wave of reforms
  2005- present (New government of Yudhoyono)
  Unlicensing of 2.4 GHz
  Licensing of three Fixed Wireless Access (FWA) providers, two incumbent and Esia (Bakrie Group).
  Auction of 5 3G licenses to Telkomsel, Excelcom, Indosat, Hutchinson, Lippo-Maxxis
  Licenses granted to 15 VoIP operators including major operators
  USO fund established (Regulation No. 15) in 2005 where all operators contribute 0.75% of gross revenue.
  Government regulation (GR2/2006) on mandated cost-based interconnection
  Reference Interconnect Offer to be submitted by all operators to
  BRTI, dominant operators’ RIO will be published.
  Tariff regulation for leased lines

What were the drivers of growth?
Initially the government allowed domestic investment. Then the government decided to attract foreign investment via concessions with the promise of reform.
Lorraine Carlos Salazar says: who exactly are these stakeholders who supported entry of FDI in the sector? 
DG: Mastel, the Ministry
Before the Asian Crisis, there was a lot of interest in Eastern Asia, however after the Crisis, much of the Investment dried up. Government was then forced to undergo reform (driving the 2nd wave of reform).
Lorraine Carlos Salazar says: Did the incumbent wanted FDI?
Payal Malik says:  lack of domestic resources were the drivers for the incumbent being open to FDIs, as in the case of Thailand.  They were not averse to FDIs because it went into their own networks and it wasn;t competition
Divakar: Incumbent benefited from the FDI b/c it allowed them profit from the other companies, without risk. Lack of domestic resources were the drivers for FDI
Third wave of reforms driven by the promise by the current government to end corruption. Unlicensing of the 2.4Ghz band was driven by a civil society campaign. Recognition of merits of competition due to the success of the mobile sector) also added to the motivation.
2006 has seen a lot of growth, and investment in infrastructure. E.g no. of base stations has doubled since the start of the year.
absence of interconnection regime led to pvt companies choosing to invest in mobile rather than fixed.
fixed wire-line growth has not changed since 2005; given falling population, fixed teledensity is likely to fall.
PT Telekom’s fixed wireless subscriber has actually dropped – because many signed up for the ‘Flexi’ package for free minutes; once the free minutes were all used up, many discontinued use (and moved to Easia which have very low rates).
Fixed wireless operators are only allowed to operate within certain area codes. To circumvent restricted mobility for the fixed wireless subscriber, operators allow call forwarding and temporary roaming.
While many argue that Java has ‘all the phones’, its teledensity is actually fairly low; the issue is Java has a high population.
The graph on Slide 19 shows Easia’s ARPU increasing (unlike what is normally seen), however the data is being checked.
Easia’s spends a lot on advertising; they are a highly recognized brand.
Payal Malik says: Just for reference, Fixed wireless is not important in India so no separate data on ARPUs
Lorraine Carlos Salazar says: yes, same with Philippines and Thailand I think
In the mobile sector, Telkomsel, Indosat and Excelcomindo are the main players. the other companies are starting up.

Although mobile service is cheaper in Indonesia in absolute terms, it is relatively expensive (relative to monthly GNI).
When mobile market share is calculated as % of sector revenues (as opposed to subscribers), there is a change in the shares. The incumbent has a 68% share, as opposed to 55%. Directionally, the market share doesn’t change, but exact shares do.
Vasana – how practical is it to calculate in this way?
Divakar  – it’s a controversial issue.
Distribution of telecom access (Slide # 27) shows that there are a multiple mobiles within households.
When Indonesia is compared to the other ASEAN countries, its performance is quite poor.
Harsha de Silva: Singapore – Internet penetration is higher than fixed line penetration; why?
Divakar: access is through WiFi (ubiquitous WiFi coverage in Singapore) as well as mobile Internet.
ADSL is almost invisible (Slide 29) b/c the incumbent owns all the infrastructure.
Household PC ownership is low; Internet access via those PCs is EVEN lower.
Telecom regulatory performance:
Lorraine Carlos Salazar says: please clarify– the regulator is separate from the Dept of Telecoms? What does the latter do? still own the former fixed line monopoly is it?
Divakar: Not really separate, b/c of Chairman BRTI is also the Director of Dept of Telecoms.
Most of regulatory activity is done by BRTI.
Not telecom policy to guide the decisions and direction that the ministry is taking. Although the ministry is quite active in making decisions, there is a lack of coherence in the actions / decisions that are being taken.
Lorraine Carlos Salazar says: with regards issuances– are they hiring external consultants? who are writing these issuances?
Divakar: consultants are being hired to do various things; but in terms of writings and decrees, they are competent enough to do these on their own.

Lorraine: Is there really a plan or policy on telecoms lib, which provides guidance on the issuance of licenses? or is to ad hoc and open to  or lobbying, rent-seeking, etc.?
It is actually an opportunity if licenses are given in an ad hoc manner, b/c there is opportunity to illustrate to the Minister where a license will be useful, and there will be a hope that the Minister will give that license.
Rohan: Yes, but there is also another side of ‘ad hoc’ behavior (eg giving a license to your brother)
Divakar: the process is much more transparent now than before, and public consultations are mandatory by law.
TRE assessment:
Mobile sector has scored well on Mkt entry – this is b/c entry has been open; auctions were held as recently as last year. 3G operators are also allowed to provide 2G services
Bottlenecks in the fixed sector cause problems in other sectors, such as banks not being able to have points of presence (via credit card sales points).

:: Daily Mirror – FINANCIAL TIMES ::
SLT is also shifting its focus to non-voice data services and delivering broadband technologies.

“SLT Chief Corporate Officer Mrs. Pat Abeysekara stressed that plans are underway to roll out 100,000 ADSL connections in all 32 regional telecommunications areas. A request for a tariff revision for ADSL has also been submitted to the TRCSL.

Trials will also be conducted with newer technologies like IP TV (Internet protocol TV allowing users to access pod casts and internet TV). This shift from providing telecom services to multimedia services is expected to expand SLT’s business scope and increase usage levels.

SLT is also expecting to conduct 2 Wimax trials in Colombo and Kandy, in collaboration with two vendors. Once the trials prove successful, the challenge would be to obtain commercial frequencies for a mass scale rollout.”