While the actual data on the number of Internet users in Sri Lanka shows a significant increase in the last few years according to ITU data, it is useful to understand the methodologies behind the numbers.  The ITU, which is the basis of Amis’ article, recommends the use of demand side data (i.e. data obtained from representative sample surveys of the population) to measure the number of internet users.  But user surveys are costly and difficult to organize.

When survey data is not available, the current method for  estimating the number of Internet users is to take the number of internet subscriptions (as reported by the country’s operators, or by the country’s telecom regulator) and multiply that by a number/ multiplier.  This is because each internet subscription is assumed to be used by more than one person: so the multiplier accounts for people who use Public Internet Access Points (PIAPs) or people who use the Internet at their work places, schools or other public locations.

As at 2010 there were 298,100 fixed Internet subscriptions and 2.503 million Internet users in Sri Lanka according to the ITU, with an Internet penetration rate of 12%. But according to the 2009 Household ICT Literacy Survey conducted by the Department of Census and Statistics, Sri Lanka had an “Internet using household population (aged 5 – 69)” of 13.1%.  It is estimated that there were 17.7 million people aged 5-69 in Sri Lanka according to UN Population Division, Department of Economic and Social Affairs.  In that case there were 2.3 million internet users in Sri Lanka in 2009.

The Telecommunication Regulatory Commission Sri Lanka (TRCSL) website gives 280,000 as the number of “Internet and email subscribers – fixed” as at Dec 2010, a rather mysterious and undefined indicator that does not seem to have international comparators.   Though ITU recommends use of demand side survey data, they do not seem to be taking the data of the 2009 ICT literacy survey into account, nor do they seem to be using the TRCSL data, so where ITU obtains its figures of 298,100 or 2.503 million is unclear.

LIRNEasia conducted a research to understand the relationship between the multiplier used to calculate the number of Internet users from the number of subscriptions and GNI per capita income ranking.  We found that a reverse correlation exists – that is, higher the GNI ranking, lower the multiplier. In other words in countries with a high GNI ranking, fewer  people share their Internet subscription and therefore the multiplier is expected to be closer to one, while in countries with a low GNI ranking more people use public Internet access points and share any other given connection, which would give a higher multiplier. We recommended to the ITU the use of this correlation to estimate the number of Internet users, instead of the current arbitrary method/multiplier. Using our method, with ITUs 298,100 Internet subscriptions as the base we get 2.17 million users.

Indi had estimated 2 million users in Sri Lanka in a previous post. While this is closer to the calculation of number of Internet users from our methodology, here too there maybe some issues with the data used to arrive at the estimation as the different sources of data such as ITU and TRCSL give different figures. Considering these different estimates, it seems very probable that the number of Internet users in Sri Lanka should be between 2 – 2.5 million, but due to the inaccuracy of the available data in Sri Lanka it is not possible to narrow it down further.  The only way to be certain is through regular demand side surveys and by ensuring that all official figures are consistent with each other.

The existing momentum of the mobile voice industry is such that we can expect considerable progress to be made in connecting most, if not all, of the world’s people through their own or neighbors’ and friends’ mobile handsets. Indicators 1 and 2 proposed by the ITU seek to document this progress at the country level. Indicator 2 in particular requires the use of demand-side survey data which is not uniformly available for all countries and for every year. The method proposed for calculating Internet users may also be used to synthesize demand- and supply-side data on mobile users and create incentives for national administrations to conduct demand-side studies.

Indicator 4 is a challenge. The only sources are demand-side household surveys. If they are conducted the ITU will be able to report results. But a backup to demand-side data does is not evident. Since it is unlikely that all countries will conduct demand-side surveys every year, it is doubtful that Indicator 4 can be reported.

The proposed solutions are interim solutions, appropriate for, and hastening, the transition from public-utility type forms of supplying ICT services to forms akin to those found in fast moving consumer goods industries that will require a complete shift from today’s supply-side dominated indicators to demand-side indicators.

Indicators Paper

In a previous essay, Heeks interrogated the numbers emanating from the ITU on “mobile subscriptions.” It is a pity the same was not done in the recent piece on Internet and broadband.

For example, the ITU reports that Afghanistan had 2,000 Internet subscriptions and 1,000,000 Internet users, indicating the use of a multiplier of 500. In other words, the Afghan administration is asking us to believe that each Internet connection is used by 500 people, in addition to asking us to accept nice round numbers on the subscriptions indicator.

This illustrates the biggest weakness of the ITU’s definition of an Internet User: each national administration is allowed to use a multiplier of its choice to derive the number of Internet users from the number of Internet subscribers, in the absence of demand-side surveys, the first-best way of obtaining the indicator. No low-income countries have reported demand-side survey results. Therefore, the Internet user numbers reported by the ITU are tainted by the use of arbitrary multipliers such as the 500 used by Afghanistan (this is the most outrageous multiplier we found; most are more reasonable). But the point is that it is wrong to permit national administrations which may have incentives to look good in terms of Internet connectivity to use multipliers without any rational basis. LIRNEasia is in the process of developing a practical solution to the problem of the multiplier that will be published shortly.

The Internet User number is further flawed by definitional and reporting weaknesses in the base indicator of Internet Subscriptions.

Total Internet users = Multiplier * Total Internet subscriptions
Total Internet subscriptions =Total fixed subscriptions + Total wireless broadband subscriptions

According to the recently revised World Telecommunication/ICT Indicators Definitions (2010) the definitions of these terms are below.
Total fixed (wired) Internet subscriptions = total number of Internet subscriptions with fixed (wired) Internet access, which includes dial-up and total fixed (wired) broadband subscriptions.
Total fixed (wired) broadband subscriptions = total number of subscriptions with high-speed access to the public Internet (a TCP/IP connection), at downstream speeds equal to, or greater than, 256 kbit/s.
Total wireless broadband subscriptions = sum of satellite, terrestrial fixed wireless and terrestrial mobile wireless subscriptions.

Surprisingly, even the recently improved ITU definition does not include prepaid mobile broadband subscriptions. Considering the growing number of prepaid mobile data subscriptions, especially in developing countries, this omission alone will yield significantly lower numbers of Internet subscriptions and thereby, total Internet users.

Preliminary investigations showed that in some countries such as the Maldives, even postpaid mobile data connections are not reported by operators to the administrations and therefore do not reach the ITU. In Sri Lanka, all the SIMs provided by a major operator are data-enabled. Therefore, even without a specific data plan, any customer with a data compatible mobile phone can use the Internet. These ad hoc users are not counted as Internet users by mobile operators. Therefore, the number of mobile subscriptions is underreported. As a result, the overall Internet user number is also lower than it should be.

It is necessary, before engaging is sophisticated manipulations of data to assess the quality of the data. The above discussion indicates that the current Internet User figures published by the ITU are seriously flawed because of problems in the formula, the definitions and reporting practices. Not all the problems can be resolved immediately, but they should at least be noted.

Given the policy was almost fully formulated, I decided to focus on performance indicators, a subject I was working on for both UNCTAD and one which had preoccupied me since the time I was a regulator. It is also a subject that LIRNEasia has developed considerable expertise in. My guess was correct. Decisions had been made on the policy instruments that would be used and the ends that were desired, but not on how to figure out whether the policy instruments were working or not. Brazil_May10.

I first raised the standard criticisms about “teledensity” and such, where the failure of the ITU to recognize the qualitative change from a government-dominated monopoly service to a vibrant competitive industry had led to continuing reliance on supply-side data that came through multiple steps (operators to regulatory agency to ministry to ITU) with all the attendant delays and errors, had resulted in a mess. The flaws in the data increased from fixed lines to mobile to Internet, with massive problems caused by non-standard definitions and flawed data collection. For example, no one knows what an active SIM is, despite their numbers being bandied around. Broadband lacks common definition and in some cases, arbitrary multipliers have been used (10 in the case of Indonesia) to arrive at numbers of Internet users.

I then moved on to discuss the work I had done with Haymar Win Tun of the LKY School at National U of Singapore, where we had organized the countries covered by the ERI, NRI, IDI and KEI by deciles. Here too the end results were problematic because they drew from the same poisoned wells of UN system indicator databases, but at least they recognized factors other than ICTs. The inclusion of other indicators in the mix diluted the errors in the ITU databases, though perhaps introducing additional errors. Haymar and I argue that it was more defensible to simply talk about deciles and not about positions in a ranked list because the existence of input errors makes the small differences between countries insignificant.

Brazil was in the third decile from the top in KEI and IDI, which posed the question as to what target they should adopt. Advancing a decile at the top of a league table is a lot more difficult than doing so at the bottom. To advance to the next decile, Brazil would have to displace an OECD country and or city-states such as Hong Kong, Macau and Singapore. The sense of the room seemed to be that they would like to set the country an ambitious target. It would be nice indeed for a BRIC to take out a European country. I pointed out that Cypress and the Slovak Republic seemed doable and that Greece, which was currently two deciles ahead was also vulnerable.

We discussed the ways in which the target could be achieved, including unpacking the indices to identify the subcomponents most amenable to increase and then concentrating policy attention on them. The value of relying on demand-side data that would allow the questions most pertinent to Brazil’s broadband policy was underlined, even if this meant that comparability and benchmarking would suffer.

Given the heavy reliance on subsidies and other interventions, I asked whether it would not be better to let market forces operate by allowing greater entry, thereby triggering a shift to the Budget Telecom Network Model. I wondered why Brazil was consistently at the bottom of the rankings in terms of Nokia’s mobile and mobile data TCO tables and why billion of USD were lying unspent in the Brazil Universal Service Fund. If these problems could be resolved there would be less need for subsidies, I said. I also pointed out the need to ensure cost-oriented and non-discriminatory access to fat pipes, not only within Brazil, but also under the sea. Unless these input prices declined, there was no point in lowering retail data and voice prices, which would only result in congestion and poor QoS. Without lower retail prices more people would not get connected and use would not increase.

Now we have a powerful ally: the New York Times.

With the majority of Internet traffic expected to shift to congestion-prone mobile networks, there is growing debate on both sides of the Atlantic about whether operators of the networks should be allowed to treat Web users differently, based on the users’ consumption.

While we were researching the subject, we did not take a position on net neutrality, but we now agree that its blind application in our settings will harm our constituents, the teleusers at the bottom of the pyramid. We do agree with the statement below, also excerpted from the NYT:

But there is a big flaw in the concept, according to the operators: Networks have never been neutral. They have always been actively managed to some extent since their inception in the 1980s to ensure that all customers get a basic “best effort” level of service.

If an operator could not restrain bandwidth hogs, who typically make up 15 percent of customers but who generate 80 percent of the traffic, most Internet users would experience poor service.

While net neutrality is an emotion loaded minefield that is not the most hospitable for evidence based discussion, we are at least happy that the mobile piece of the argument is running parallel with ours.

Computing: In future, most new internet users will be in developing countries and will use mobile phones. Expect a wave of innovation

THE World Wide Web Consortium (W3C), the body that leads the development of technical standards for the web, usually concerns itself with nerdy matters such as extensible mark-up languages and cascading style sheets. So the new interest group it launched in May is rather unusual. It will focus on the use of the mobile web for social development—the sort of vague concept that techie types tend to avoid, because it is more than simply a technical matter of codes and protocols. Why is the W3C interested in it?

The simple answer is that the number of mobile phones that can access the internet is growing at a phenomenal rate, especially in the developing world. In China, for example, over 73m people, or 29% of all internet users in the country, use mobile phones to get online. And the number of people doing so grew by 45% in the six months to June—far higher than the rate of access growth using laptops, according to the China Internet Network Information Centre.

 This year China overtook America as the country with the largest number of internet users—currently over 250m. And China also has some 600m mobile-phone subscribers, more than any other country, so the potential for the mobile internet is enormous. Companies that stake their reputations on being at the technological forefront understand this. Last year Lee Kai-fu, Google’s president in China, announced that Google was redesigning its products for a market where “most Chinese users who touch the mobile internet will have no PC at all.”

It is not just China. Opera Software, a firm that makes web-browser software for mobile phones, reports rapid growth in mobile-web browsing in developing countries. The number of web pages viewed in June by the 14m users of its software was over 3 billion, a 300% increase on a year earlier. The fastest growth was in developing countries including Russia, Indonesia, India and South Africa.

Behind these statistics lies a more profound social change. A couple of years ago, a favourite example of mobile phones’ impact in the developing world was that of an Indian fisherman calling different ports from his boat to get a better price for his catch. But mobile phones are increasingly being used to access more elaborate data services.

A case in point is M-PESA, a mobile-payment service introduced by Safaricom Kenya, a mobile operator, in 2007. It allows subscribers to deposit and withdraw money via Safaricom’s airtime-sales agents, and send funds to each other by text message. The service is now used by around a quarter of Safaricom’s 10m customers. Casual workers can be paid quickly by phone; taxi drivers can accept payment without having to carry cash around; money can be sent to friends and family in emergencies. Safaricom’s parent company, Vodafone, has launched M-PESA in Tanzania and Afghanistan, and plans to introduce it in India.

Similar services have also proved popular in South Africa and the Philippines. Mobile banking is now being introduced into the Maldives, a group of islands in the Indian Ocean where many people lost their life savings, held in cash, in the tsunami of December 2004.

For the W3C, M-PESA and its ilk are harbingers of far more sophisticated services to come. If mobile banking is possible using a simple system of text messages, imagine what might be possible with full web access. But it will require standards to ensure that services and devices are compatible. Stéphane Boyera, co-chair of the new W3C interest group, says its aim is to track the social impact of the mobile web in the developing world, to ensure that the web’s technical standards evolve to serve this rapidly emerging constituency.

The right approach, Mr Boyera argues, is not to create “walled gardens” of specially adapted protocols for mobile devices, but to make sure that as much as possible of the information on the web can be accessed easily on mobile phones. That is a worthy goal. But Ken Banks, the other co-chair of the W3C’s new interest group and the founder of kiwanja.net, which helps non-profit organisations exploit mobile technologies in the developing world, points out that simple services based on text messages are likely to predominate for some time to come, for several reasons. All mobile phones, however cheap, can send text messages. Mobile-web access requires more sophisticated handsets and is not always supported by operators. And users know what it costs to send a text message.

As countries work their way up the development ladder, however, the situation changes in favour of full mobile-web access. Jim Lee, a manager at Nokia’s Beijing office, says he was surprised to find that university students in remote regions of China were buying Nokia Nseries smart-phones, costing several months of their disposable income. Such handsets are status symbols, but there are also pragmatic reasons to buy them. With up to eight students in each dorm room, phones are often the only practical way for students to access the web for their studies. And smart-phones are expensive, but operators often provide great deals on data tariffs to attract new customers.

Xuehui Zhao, a recent graduate of the Anyang Institute of Technology in Henan province, explains that a typical monthly package for five yuan ($0.73) includes 10 megabytes of data transfer—more than enough to allow her to spend a couple of hours each day surfing the web and instant-messaging with friends. It is also much cheaper than paying 200 yuan per month for a fixed-broadband connection.

As this young generation of sophisticated mobile-web users grows up, what sort of new services will they want? Many NGOs and local governments are trying things out. Several examples were discussed at a workshop in June organised by the W3C in São Paolo, Brazil. The government of the Brazilian state of Paraná, for instance, is using text messages and voice-menu systems to notify the unemployed about job opportunities and farmers about agricultural prices.

But the workshop also highlighted the limits of what such efforts can achieve. It quickly became apparent that more or less identical services are being developed from scratch repeatedly in different parts of the world. There is clearly room for more co-ordination of such efforts, which is exactly what the W3C has in mind.

Furthermore, many clever systems are being developed by NGOs with no apparent interest in setting up commercial services. As Mr Boyera points out, this raises the issue of sustainability. What happens when the NGO’s funding runs out? One conclusion from the workshop was that promoting social development through the mobile web will mean engaging with businesses. Regulators can also help by fostering cheap mobile access.

The developing world missed out on much of the excitement of the initial web revolution, the dotcom boom and Web 2.0, largely because it did not have an internet infrastructure. But developing countries may now be poised to leapfrog the industrialised world in the era of the mobile web.

Recent International Telecommunication Union (ITU) data reveals that the success of India’s telecom revolution is restricted to mobile voice with very little to showcase in fixed line and internet access, or high-speed broadband. For a country that is the global IT and ITeS capital or the world’s back office, its own internet penetration remains one of the lowest in the world. Forecasts are equally uninspiring, projecting high-speed internet access to remain abysmal till 2012.

Internet broadband penetration will limp along to eventually reach a measly 3.9 connections for every 100 citizens by 2012. Even though internet users may be multiple times higher, actual broadband penetration will not exceed 18.1 million at the beginning of the next decade. In contrast, mobile telephony will add as many as 350 million subscribers during this five-year period to end at roughly 615 million by mid 2012.

These forecasts fall short of the government’s conservative target of 20 million high-speed internet subscribers by 2010-end. India’s broadband penetration is roughly 4.5 million subscribers. Even with a 300% growth rate over the next five years, the sector will fall short of the 50 million mark by 2012.

Read the full story in The Times of India here.

“The characteristics of these new Internet users will be vastly different from the first billion users,” the report concludes, adding that the majority of the new Internet users will be accessing the Internet on wireless networks and will have incomes of less than US$2 per day.   

While the report sees encouraging signs from developing markets that have adopted market liberalisation and who are now starting to enjoy the employment, micro- entrepreneurial and social development benefits of increased competition, there remain many countries that need to catch up.  

According to the report, “more than 70 countries still have monopolies over international gateway services,” which “raise the prices for accessing international capacity, far beyond costs, and reduce the affordability of Internet access for end-users.”  Read more.

Investment is being invited from the private sector for the establishment of public access centers in villages and power source is being sought either from battery or solar energy to operate the internet in some remote villages in short of electricity as an alternative, the Association added.

According to the MPT, the number of internet users in Myanmar has reached nearly 300,000, up from merely 12 in four years ago.

The authorities have projected to introduce 400 public internet service centers in 324 townships in the country within three years to facilitate communication links.

To attract foreign investment in the aspects, Myanmar has offered to grant both foreign and local entrepreneurs to be engaged in ICT business in the cyber city project and separate plots will be allotted for foreign and local companies with equal rights to be offered to develop the silicon mountain town, according to the CEA.

Myanmar has been launching an ICT development master plan under the Initiative for ASEAN Integration (IAI) and detailed programs to link international networks are also being carried out in accordance with the master plan drafted by the Myanmar Computer Federation.

(Xinhua)

–>

Such bizarre underwater international telecoms infrastructure robbery occurred on March 25 and since then Vietnam’s Internet users have been struggling with far slower speed.

The broken cable system, named TVH, was built in 1993-1995, connecting Thailand, Vietnam and Hong Kong with a capacity of 560 megabits per second.

The Vietnam Telecom International (VTI) got puzzled when the cable went down. It occurred soon after the Asia Pacific region recovered from prolonged bandwidth crisis as earthquake snapped bunch of submarine cables in the Taiwanese coast

VTI called a submarine cable fixing ship from Singapore. But its crew went bonkers after detecting 11-kilometres of the cable was missing from the floor of Ca Mau Sea. The maintenance vessel went back as it never carries that many cables in the first place.

Baffled VTI already lost four million dollars revenue and it will incur further 2.6 millions dollars to fix the underwater missing link. Vietnam’s Ministry of Defence, Ministry of Public Security, the Naval Command and military commands joined hands to catch the fishy fishermen.

Authorities have not discovered who initially cut the cable. But last Wednesday, police in the southern coastal town of Vung Tau said they captured a boat carrying 60 tons of undersea optical fibre cable, reported cellular-news.com quoting German news agency dpa.

Earlier the police also captured three boats and recovered 40 tons of similar cables. Same man, a Vung Tau resident, allegedly owns all the four boats.

But VTI’s deputy director Lan Quoc Cuong said the cable seized by police in Vung Tau does not match the cable his company owns, and they must have come from a different severed line.

He said finding the cable would have been difficult for the thieves. “The cable is located in different locations and at different depths,” he said. “Maybe, while using an anchor, they found the cable by accident and started cutting it.”

Meanwhile the Vietnamese media has made a disturbing revelation. The country’s defence ministry contracted few companies last August to salvage the decommissioned undersea copper cables. The US-backed former South Vietnamese government deployed them before the country became independent in 1975.

Reports said some of these companies apparently went for legitimate undersea treasures hunt but they may have struck the operational undersea fibre optic cables instead.

Whatever the case may be, robbing the submarine cable is getting rampant in Vietnam, said VietNamNet Bridge. So far this year, five undersea optical cable theft cases have been detected.

The latest case was on May 3 when border guards of the southern province of Kien Giang detected two fishing boats carrying 80 tonnes of cable. A boat owner said that while catching fish offshore, his boat caught the cable and they cut the cable and brought it to the mainland to sell.

Earlier on April 15, three fishing boats loaded with 80 tonnes of cable were caught in the southern province of Soc Trang. Fishermen on those boats said that they found the cable offshore and stopped catching fish to cut the cable to sell as waste.

Authorities of Kien Giang, Bac Lieu, Soc Trang provinces have seized hundreds of tonnes of telecom cable from fishing boats. Police say they have broken up five rings selling some 500 tons of illegally salvaged cable since the beginning of this year, cellular-news.com said.

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.

Leased Line Tariffs to be Regulated

Bisnis Indonesia, September 27, 2006
JAKARTA: The Indonesian Telecommunication Regulatory Body (BRTI) will regulate the tariffs for leased lines through a ministerial decree, which is expected to be signed end of this year. The regulator most likely will force network operators to lower leased line tariffs by more than 50 percent to push internet penetration in Indonesia.

BRTI said this in a public meeting with Mastel, internet service providers, and network operators yesterday. Heru Sutadi, a member of BRTI, expected a decline of more than 50% in the tariffs will increase ICT usage, internet interconnection, telephone penetration and increase the number of internet users in Indonesia.

“The regulator expects the decline in leased line tariffs will be followed by the acceleration of local internet content, so that bandwidth doesn’t get used outside the country and internet tariffs can drop significantly,” he said yesterday. Leased line is the network that connects internet service provider with retail customers, also called E1.

BRTI said investment estimate during the network construction 10 to 15 years ago had to include depreciation. Fifteen years ago, the price for each kilometer of E1 was about 90 million rupiah, which has drastically declined to about 3 million rupiah at present.

According to the post and telecommunication directorate general (DG POSTEL), Telkom, Indosat and Excelcomindo are the major operators in the sector.

Mastel estimated that the leased line tariffs in Indonesia is 48 times more expensive than India. Internet service operators have said that the high tariffs made internet costs for customers. The Association of Indonesian Internet Service Providers expects the decline in leased line tariffs will push for a healthy competition in providing internet to retail customers.

Heru said the decline in leased line tariffs will be followed by the plan to build domestic optic fiber network (Palapa ring), while the line to outside the country is currently being tendered. “The number of internet users will rise significantly considering that retail tariffs will surely fall,” he said.

According to data from the internet association, there are between 16 million and 20 million internet users in Indonesia, or about 8 percent of the population. Sarwoto Atmosumarno, head of long distance division at PT Telkom, said that the company basically approves of BRTI plan, especially in the era of multi-operators, when the prices for telecommunication services should be competitive.

“The regulator must see whether leased line service is a monopoly or not that needs to be regulated,” he said
to Bisnis yesterday. Sarwoto also said that regulator in determining the tariffs should not violate the law, which stipulates that BRTI has the right to establish the formula, and not the tariffs itself. Thus far, the regulator has not applied this rule, for example in the fixed telephone tariffs, he said.

JAKARTA: The Association of Indonesian Internet Service Providers urge network operators to lower leased line tariffs to allow a healthy competition in providing Internet services for retail customers. Chairman of the Association Sylvia W. Sumarlin said that network operators, which also provide direct internet services to customers, have disturbed ISP
businesses.

“Every day, a lot of ISP customers switch to network operators because they provide cheaper tariffs to access Internet,” she said to Bisnis yesterday. Internet tariffs from network operators are cheaper than ISP’s because those operators apply very high leased lines, forcing ISPs to charge higher retail prices, she said. Leased line is the network that connects ISP with the customers. This network is hired by ISPs from network or telecommunication operators with a specific rate.

A study of Learning Initiatives on Reforms for Network Economies (LIRNE) Asia showed that high leased line price is the main factor that pushes ISPs to use wireless fidelity (WiFi) network to connect Internet users. LIRNE Asia noted that leased line prices in Indonesia are three to four times more expensive than in India or Europe. In the local network with the capacity of 2 Mbps, Indonesia’s price is even 48 times more expensive than India.
Sylvia emphasized that the association doesn’t object network operators providing direct internet access for users, as long as they also apply low rates for ISPs, so both can compete on a level playing field. “The number of customers of each (ISP or network operator) will then depend on services with relatively equal tariffs,” she said.Not to Compete Separately, Teddy A. Purwadi, president director of Access.Net, said that the government should draft
conducive policies to ensure that network operators don’t compete with telecommunication service providers for similar products, such as multimedia and Internet.

Network operators are companies that provide local telecommunication network, closed network, cellular network, and satellite network which also provide multimedia services like ISP. Teddy asserted that telecommunication network operators should not provide Internet services, because it would guarantee unfair competition.

The Indonesian Infocom Society (Mastel) estimated that leased line tariffs that each Indonesian ISP has to cover annually reach US$18,000. According to the ISP association, the costs reach 13.5 million rupiah per 2 Mbps per month, or equal to 10 Mbps provided by one of cable TV operators.

The ISP association projects that the ISP businesses are worth 200 billion rupiah this year, not including the businesses of the network operators which provide Internet services. According to the association, there are about 200 ISPs in Indonesia. Only about 100 companies are still active in serving their customers. Twenty of these are categorized as big ISPs, while the rest are medium- and small-scale ISPs, with some not even operating yet.

The Indonesian government’s ambitious Palapa Ring project to create a fiber ring connecting the major islands had been shelved post the 1997 Asian financial crisis. Recently, however, efforts have been made to revive a modified version of the earlier vision. In an earlier discussion on LIRNEasia (click here), we described as unviable the Indonesian regulator’s proposal to build backbone infrastructure funded primarily from government coffers: “From the outset, this proposal seems doomed. Although the intention is a noble one (to reduce Internet prices) the means are neither the most efficient nor feasible. For one thing, there is no budgetary support for this and under the tight financial constraints that the Indonesian govt is in, it seems unlikely that it will be supported.”

Hence, it is heartening to note that a few days ago (August 28, 2006), the Indonesian Communication Minister, Sofyan Djalil, has announced a proposal to open up the backbone market to private investment. The Ministry plans to use the mechanism of least-cost subsidy auction to encourage potential investors to roll-out backbone infrastructure throughout the country. LIRNEasian researchers have been involved in designing a similar auction for the eSri Lanka project to extend backbone in provinces of Sri Lanka that currently lack such infrastructure. A number of pitfalls and challenges of least-cost subsidy auction have been identified in earlier studies conducted by LIRNEasia researchers in India and Nepal. Generally, when necessary regulatory reforms have not been carried in a country, the auction results in sub-optimal outcomes that benefit the incumbent and other parties rather than the unconnected.

Although it is too much to hope for regulatory reforms to take place in Indonesia before auctions are held, incorporating certain safeguards in the auction design may mitigate some potential ill-effects. We would strongly recommend to have an access regime in place that specifies modailities for access to the new backbone infrastructure that would be rolled out. The license should also specify conditions and procedures for raising backbone access fees.
For news story, see below.

Indonesia to Ask Investors to Bid on Building Fiber-Optic Links

By Wahyudi Soeriaatmadja
Aug. 28 (Bloomberg) — Indonesia will ask investors to bid to lay fiber-optic cables in the world’s largest archipelago and
help reduce the cost of high-speed Internet connections, Communications Minister Sofyan Djalil said. The government is preparing tender papers and will ask companies to bid for the project in two months. Phone companies interested in bidding will be given incentives, including licenses for overseas calls, Djalil said. The government won’t charge any fee for allowing companies to lay the network.

“Information technology dominates almost all economic activities as it boosts productivity, improves education process,” Djalil told reporters in Jakarta today. “This project will help in reducing Internet and information
technology costs.”

The government is trying to bring down Internet and phone costs for companies and individuals, which are among the highest in Southeast Asia. The fee for a high-speed Internet connection using cable television lines in Jakarta starts at about $55 a month, or 27 percent costlier than in Thailand. There were 1.5 million Internet users in Indonesia in 2005, according to the Indonesian Internet Service Provider Association.

“Those that offer the cheapest rates will win the tender,” Djalil said. “The cheaper, the better for Indonesian
people.”

–Editor: S. Collins

LIRNEasia made a short, but productive call on Nepal’s High-Level Commission for Information Technology (HLCIT) last week, to advise on jump-starting its e government and reform processes. The visit came within less than ten days of a request for Rapid Response assistance by Mr. Sharad Chandra Shah, HLCIT’s Vice Chairman.

In his three day visit, executive director Rohan Samarajiva conducted two key sessions, with HLCIT and decision making level representatives of government, private sector and civil society.

The first was a seminar, concerned with how Nepal can rapidly implement e-government initiatives, drawing on experience from Sri Lanka. Samarajiva discussed with the participants different approaches that Nepal could take and what would be most suitable for Nepal, whilst stressing the importance of strategic communication to support the entire process [see presentation slides ]. This sparked off an active discussion, resulting in HLCIT expressing its satisfaction at the fruitful outcome of the meeting, and that it would reconvene the group on a monthly basis to keep the implementation going. In attendance were over 20 senior officials including 13 at secretary level (including Secretary, Office of the Prime Minister and Secretary, Defense), the Managing Director of Nepal Telecom Co (incumbent) and the President of the private operators’ association.

The second was a strategy/brainstorming session with two members of the high-level commission and several other members of the HLCIT, to discuss the feasibility of an integrated ICT strategy similar to eSri Lanka in Nepal. More controversial and divisive issues such as interconnection and ensuring cost-based and non-discriminatory access to the backbone of NTC were discussed, with what appeared to be some of the first open airings of divergent views on the continuation of the de facto monopoly.

HLCIT will follow-up this program with a report on the efficacy of the visit and any actions resulting from it in a month’s time.

Samarajiva also spoke on the importance of ICTs for higher education and research at the roundtable discussion between GoN representatives and the Academic Advisory Council of the Asian Institute of Technology, which was holding its meetings in Kathmandu.

Nepal is in the process of developing and implementing IT-enabled products and services, to enable e-government. This will include computerized government accounting systems, citizen records, driving licenses, passports, etc. Whilst building relationships between the public and private sector, Nepal aims to ultimately improve the efficiency and accountability of government and enable better access to government services for its people.

HLCIT was set up just over one year ago, to provide ‘crucial strategic direction’ and assist in the formulation of policy for the development of Nepal’s ICT sector, as well as to harness these technologies to meet key developmental challenges such as reforming governance and catalyzing economic growth for poverty reduction. Nepal currently has one of the lowest number of Internet users in the Asia-Pacific region, with an estimated Internet penetration rate of 0.3 users per 100 inhabitants and had a per capita income of USD 240 in 2003.

Presentation slides