assess the impact of decline of leased line prices in Indonesia. It tries to capture this impact through qualitative as well as quantitative impacts. Since the decline in prices occurred recently (2008 April), the period post the decline is not large enough to do a meaningful time series analysis. However, qualitative assessment is made and the impact is compared with India, where decline in leased line prices led to substantial benefits to user industries. Of particular significance is the trigger to the price decline in Indonesia. The process was set in motion by a presentation of research results by LIRNEasia in Jakarta in October 2005 and culminated with the incumbent operator PT Telkom and others reporting a 69-83 per cent reduction in leased line prices in April 2008 . Annex I provides a chronology of the sequence and section 4 in the paper draws interesting comparisons with a similar process in India.

The paper is here.

The winners:

Best Achievement Award (Fixed Line): Bakrie Telecom, Runner up: PT Telkom
Best Achievement Award (Cellular): PT Indosat, Runner up: Excelcomindo Pratama
Award of Appreciation (Print Media): “Bisnis Indonesia”
Award of Appreciation (Broadcast Media): Metro TV
Award of Appreciation (Online Media): detikcom (detikINET)
Lifetime Achievement: Arnold P. Djiwatampu

(Reported by Juni Soehardjo in Jakarta)

Companies honoured (see below), says Frost & Sullivan, are forerunners in the ICT space in Indonesia whose best practices in operations are recognised as exemplary.

Vendor category
Telecom Equipment Vendor of the Year – PT Nokia Siemens Networks

Service Provider category
Broadband Service Provider of the Year – PT Indosat, Tbk
Mobile Service Provider of the Year – PT Excelcomindo Pratama, Tbk
Mobile Data Service Provider of the Year – PT Telekomunikasi Selular, Tbk

Best of the best category
Market Challenger of the Year -  PT Excelcomindo Pratama, Tbk
Service Provider of the Year – PT Telekomunikasi Indonesia, Tbk

See here for more details.

Jakarta Workshop Agenda

Jakarta HazInfo Workshop Report

Inauguration
Elements of a Community-Based Early Warning System | Rohan Samarajiva

Session I
From Emergency Response to Community Preparedness | Jan Sopaheluwakan
Methodology, Preparedness, Training and Community Organization: HazInfo Experience | Natasha Udu-gama

Session II
Tsunami Early Warning System: Lessons Learned from Padang City | Patra Rina Dewi
First Responder Action: Sri Lanka Experience | Nuwan Waidyanatha

Session III
Experience from Padang | Aim Zein
Transmission of Warning to Local Levels: Sri Lanka Experience | Nuwan Waidyanatha

Session IV
Determination of Hazard from the National Level: HazInfo Experience | Natasha Udu-gama
Tsunami and Disaster Mitigation Center at Syah Kuala University | Muhammed Dirhamsiyah

Session V
Roles of Policymakers, Regulators, Private Sector & Civil Society | Rohan Samarajiva

In his presentation titled Backbone of convergence: Getting the foundation right, Divakar argued that without sufficient “big pipes” (domestic and international backbone) the potential of convergence and NGN services will not be realized. Indonesia’s inadequate international backbone infrastructure and high prices have acted as a bottleneck to the development of the Internet in the country. For example, Indonesia’s international private leased line circuit (IPLC) to Singapore costs 21 times the price of equivalent service from India based on route kilometers. Divakar contented that the Government’s plan of licensing one additional international operator will neither stimulate international gateway infrastructure nor bring down international bandwidth prices sufficiently.

His policy recommendation was that Indonesia’s international gateway needed to be fully liberalized. It is a win-win for the Government that gains increased revenue from grey market traffic that comes into the legal channel, more international infrastructure gets built and more cables land into the country improving redundancy and resiliency of the network to outages (a la Taiwan earthquake of Dec 26, 2006), it lowers Internet connectivity and IDD prices for consumers and most operators gain from improved international access and lower wholesale prices.
About a week after the Summit, DGPOSTEL, one of two ICT regulatory bodies in Indonesia, proposed an amendment to Article 35 of Regulation 20 that would allow domestic leased line providers to connect directly to an international cable or set-up its own landing stations to land cables to provide international private leased circuits. Voice is excluded from this service for which one needs to have an IDD license. This amendment is targeted for international data connectivity to bring down international bandwidth charges. There are about four to five domestic leased line providers who can take advantage of this amendment.

Currently there is a duopoly (PT Telkom and PT Indosat) in the IPLC market. This amendment falls short of full liberalization of Indonesia’s IGW but may be a baby step towards reducing the outrageously high bandwidth prices in Indonesia.

President SB Yudhoyono’s government came to power on the promise of eradicating corruption and the “deal culture” that has plagued Indonesia throughout much of its existence. Initially the government promised leased-cost subsidy auction and other open transparent methods for rolling out backbone infrastructure in the country. Now a sudden announcement in the media informs us that licenses for the Palapa Ring project have been granted.

The Palapa Ring has been a “dream” project of the Indonesian government even before the financial crisis of 1997. Before the crisis it was planning on funding it with government funds. Post the financial crisis and faced with empty coffers, the Government has been pressuring telecom operators in Indonesia to use their resources to realize the Government’s dream. The enthusiasm of PT Telkom to participate in the Palapa Ring Project (in news story below) is ironic considering that it had decades to build backbone infrastructure in the country when it was the monopoly provider of domestic fixed line services and it built little. I wouldn’t be surprised if the threat of regulatory retribution hung like Damocles’s sword over Indonesian operators when they decided to participate in the Palapa Ring consortium.

Least-cost subsidy auction would have been a more transparent way of eliciting participation of Indonesian operators in the Palapa Ring Project. In those islands/regions that are commercially viable, backbones would be deployed by private  sector without any government support. In islands/regions that are sparsely populated and where landing submarine cable may not be commercially viable,least cost subsidy auction would have provided the necessary subsidy to make it worthwhile for private sector to participate in infrastructure roll-out.

Although the sum of $1.5 billion is being bandied around as the total cost of the project the consortium has yet to commit to the backbone map that DGPOSTEL and the Indonesian government has been promoting. The map as can be seen below has submarine cables landing every few kilometers as they garland the various islands. The highest cost-component of a submarine cable system are the cable landing stations.The proposed design is not cost-efficient. It would make more sense to land a submarine cable at couple of points in an island and use terrestrial fiber optic or microwave to connect the rest of the island.

Indonesian group will build US$1.5 billion Palapa network

JAKARTA, May 10 (Reuters) – Seven Indonesian companies will join forces to build a $1.5-billion 34,000 km (21,100 mile) fibre optic cable network in the country aimed at improving telecommunication infrastructure, a government official said.

Indonesia’s director general for post and telecommunication at the communication and information ministry, Basuki Yusuf Iskandar, said the group will meet next Wednesday to discuss how to implement and finance the Palapa Ring Project.

“Seven companies have obtained the licence for the Palapa Ring,” Iskandar told reporters late on Wednesday. He said PT Telekomuniasi Indonesia Tbk, PT Indosat Tbk, PT Excelcomindo Pratama Tbk, and PT Bakrie Telecom Tbk were among the seven in the consortium.

The Palapa Ring is part of the government’s effort to refurbish the country’s ailing infrastructure to spur economic growth in the world’s fourth most populous nation. Its completion will open up telecommunication access to eastern
part of Indonesia, the less developed area of the sprawling tropical nation.

Telkom’s president director, Rinaldi Firmansyah, said the company will become the majority contributor to the project and lead the group as it would use most of the telecommunication traffic through the network.

“We are still calculating the numbers, but all this time we are accounted for about 50 percent of the country’s
telecommunication traffic, so we are likely to invest about 50 percent of the project (cost),” Firmansyah told reporters.

“Financially we are ready,” he said, adding that the company’s involvement was aimed at strengthening its network in the eastern part of Indonesia.

Separately, Excelcom’s president director, Hasnul Suhaimi, said the company’s contribution to the project would be around 10 percent of the total value of the investment. He said the fibre optic network could help lower the telecommunication costs from the current system that incorporates satellites.

What is the number of operators needed in the mobile market to trigger price competition? This question has been posed by regulators and others and there seems to be no definitive answers. What is certain is that by increasing the number of players it becomes harder for operators to collude. In Indonesia, the mobile market is highly concentrated with Telkomsel having more than half the subscriber base and a significantly larger share of revenues. The HHI for Indonesia’s mobile market is 5082, confirming that it is a highly concentrated market.

Hutch is a new entrant with significant experience in other emerging markets and comes in with deep pockets, especially after selling its India stake to Vodafone for more than $11 billion. Hutch is starting with 0 subscribers in Indonesia and is most likely to be the “disruptive” competitor by actively raiding the customer base of existing operators by offering lower prices and innovative service offerings.

Telecoms war hots up as ‘Hutch’ joins the fray

Andi Haswidi, The Jakarta Post, Jakarta April 6, 2007

With the services on offer mostly the same, the tight competition in Indonesia’s crowded wireless telecoms market has led to a no-holds-barred price war and massive ad spending. This month, the war is about to get even fiercer with the established operators set to react to the arrival of upstart Hutchison Charoen Pokphand Telecom (HCPT), dubbed “Hutch” in the business[.. ]

Local calls to other “3″ users cost Rp 150 (1.6 U.S. cent) per minute, while calls to other operators cost Rp 1,000 per minute. The new kid on the block is also running a “buy one, get three” promotion, meaning that if you buy Rp 10,000-worth of prepaid credit, you can make Rp 30,000-worth of calls. This promo means that a one-minute local call only costs Rp 50, which is the same price as a one-minute call from Esia, the CDMA operation of Bakrie Telecom

Telecoms war hots up as ‘Hutch’ joins the fray

Andi Haswidi, The Jakarta Post, Jakarta, April 6, 2007

With the services on offer mostly the same, the tight competition in Indonesia’s crowded wireless telecoms market has led to a no-holds-barred price war and massive ad spending.

This month, the war is about to get even fiercer with the established operators set to react to the arrival of upstart Hutchison Charoen Pokphand Telecom (HCPT), dubbed “Hutch” in the business.

HCPT is a subsidiary of Hong Kong-based global cellular giant Hutchison Telecommunications International (HTIL) and Thai agroindustry group Charoen Pokphand.

Through its GSM-based “3″ brand, HCPT offers wireless access throughout Java, to be followed soon by other areas, with promo tariffs so cheap that they make a mockery of the generally accepted price distinction between GSM and fixed wireless CDMA — CDMA has to date been cheaper due to its coverage limitations.

Local calls to other “3″ users cost Rp 150 (1.6 U.S. cent) per minute, while calls to other operators cost Rp 1,000 per minute.

The new kid on the block is also running a “buy one, get three” promotion, meaning that if you buy Rp 10,000-worth of prepaid credit, you can make Rp 30,000-worth of calls.

This promo means that a one-minute local call only costs Rp 50, which is the same price as a one-minute call from Esia, the CDMA operation of Bakrie Telecom.

Hutchison has also been spending big on advertising, including running full-page color ads in the country’s largest daily, Kompas, every day since the launch of “3″ on March 29.

The other operators have hit back by running similar ads and promos. For example, Indosat’s Mentari is offering a promo price of Rp 50 per 30 seconds until Aug. 31, while Excelcomindo’s XL Bebas is offering a flat rate of Rp 25 per second for all calls, Rp 40,000 in free credit upon SIM card activation, and 50 percent discounts on credit top-ups.

On its initial startup, Hutchison has so far invested $400 million, said president Rajiv Sawney during the launch of 3 on March 29, and said he expected the figure to increase to about $1 billion next year.

“Analysts are predicting some 30 million new subscribers in Indonesia in the coming years. We believe we can secure a good share of that market,” Sawney told the press during the launch ceremony.

At present, Telkomsel leads Indonesia’s mobile market, with some 35 million subscribers, followed by Indosat with 16 million and Excelcomindo with 9 million.

Telkomsel, with its pre-paid product Simpati, charges Rp 1,500 per 30 seconds during peak hours and Rp 300 during off-peak hours, while its other product, As, costs Rp 1,500 per minute during peak hours and Rp 300 per minute during off-peak hours.

For advertising in all media, Telkomsel was the biggest spender in 2005 on Rp 93 billion, followed by Rp 223 billion in 2006, and is expected to fork out even more this year as competition increases, according to a survey by AC Nielsen.

Meanwhile, Indosat’s other GSM product, IM3, costs Rp 500 per 30 seconds for local calls during peak hours and Rp 250 during off-peak hours. Last week, IM3 announced that it would invest up to $1 billion this year.

Following Hutchison’s arrival on Indonesian shores, major Russian conglomerate, Alfa Group, is set to invest up to $2 billion on setting up yet another wireless telecoms operation later this year.

“We see that a lot remains to be done in Indonesia in order to increase mobile penetration. The telecoms market is overly concentrated. There’s not enough competition in that sense, and that severely limits the development of the sector,” said Alfa vice president Andrei Zemnitsky.

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 March 16, the Director General of DGPOSTEL conceded that requiring new international operator to build 10 new gateways was a heavy burden on the new entrant especially when the two existing operators in total had six.

The tender for the telephone fixed line is postponed till June
March 16, 2007(Translated from Bisnis Indonesia, March 16, 2007)
Jakarta:[...] The director general of the Post and the Telecommunications, Basuki Yusuf Iskandar added that the government will lessen the requirements for the IDD tender by reducing the number of international gateways that must be built. “Before, one of the conditions followed the IDD tender was to have the commitment to be able to provide 10 units IDD Gateways. But afterwards the government reconsidered this obligation and it was reduced to five ,” he said.

According to the Director General of post and telecommunications, the decline in the obligation is because the provision of 10 IDD Gateways will be too heavy a burden for the operator since the existing operators currently only have approximately six units.

LIRNEasia‘s input to the White Paper issued by the Indonesian government on introducing a new license for local, long distance and international telecom is available here.

The tender for the telephone fixed line is postponed till June
March 16, 2007(Translated from Bisnis Indonesia, March 16, 2007)
Jakarta:The Government will postpone the tender schedule for fixed line telephone to June which was earlier expected to be issued this month. The postponment is due to legal delays and readiness of operators to participate in the tender.

The director general of the Post and the Telecommunications, Basuki Yusuf Iskandar, said the government hoped the tender will go well and successfully. The legal instrument will take the form of a Ministerial
Decree. There is a “big possibility” that the “tender would be carried out this coming June although in principle the government will try to do that as soon as possible,” he stated to the reporter, yesterday.

The Tender for the provision of fixed local, long distance and international was originally scheduled for March 2007. At this time the government is carrying out the finalisation of the new licensing of the three services. Depkominfo (DGPOSTEL) is currently drafting the Ministerial Decree regarding the opening of new opportunity
to provide the Local, IDD & DLD services.

Basuki added that the government will lessen the requirements for the IDD tender by reducing the number of international gateways that must be built. “Before, one of the conditions followed the IDD tender was to have the commitment to be able to provide 10 units IDD Gateways. But afterwards the government reconsidered this obligation and it was reduced to five ,” he said.

According to the Director General of post and telecommunications, the decline in the obligation is because the provision of 10 IDD Gateways will be too heavy a burden for the operator since the existing operators currently only have approximately six units.

For international connectivity, Telkom and Indosat are the incumbent operators. Telkom has Internet hubs in Malaysia, Batam, and Hong Kong, while Indosat had optic fibre links between Jakarta-Japan, Jakarta-Australia,
Jakarta-the Middle East, and Europe.

Although the International Gateway market is not yet opened officially, there are several companies that have expressed interest in the tender. The interested companies are PT Excelcomindo Pratama Tbk and Telematika
Indonesia. The chairman of the Association of the Cellular Telecommunications Indonesian, Johnny Swandi Sjam considered the government should NOT open the new opportunity for providing Fixed telephony services (IDD, DLD & Local) since currently the service are still under “duopoly” status (ie. PT Telkom and Indosat).

Northwest Herald – Asian nations remember those killed in 2004 natural disaster

Indonesia said its tsunami drill on Bali was aimed at raising the public’s awareness of safety measures and testing technology deployed over the last two years.Warnings were sent from the capital, Jakarta, to radios along the beach. Sirens wailed and crowds, many of them school children, briskly walked inland, accompanied by Indonesia’s minister of research and technology and a handful of foreign tourists.

“The biggest challenge is working with the people to make them aware,” said German geologist Harald Spahn, who is helping Indonesia set up its alert network. “It is a really complex job that many people underestimate.”

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.”

Indonesia’s telecom industry association and regulatory authority requested the participation of LIRNEasia at a seminar in Jakarta to address two key issues: 1) what telecom investors are looking for from the regulatory and policy environment in the country; 2) a review of current policy and regulatory challenges facing the Indonesian telecom sector.

Prof Rohan Samarajiva, Executive Director addressed the first issue in his presentation Enabling Investment: Lessons from the Region [PDF] and Divakar Goswami, Director of Organizational Development & Projects made a presentation, Telecom Reforms in Indonesia: Current Achievements and Challenges [PDF] to address the second issue. The final report from the presentations are available here [PDF].

The Seminar was organized by MASTEL, representing a wide spectrum of ICT industry representatives and by BRTI, the Indonesian regulatory authority. The audience consisted of commissioners from BRTI, policymakers from the Ministry of Communication and Information, representatives from the operators, industry associations and civil society groups.

This invitation to address burning telecom policy issues in Indonesia comes in the context of LIRNEasia’s significant engagement with telecom policy issues in Indonesia during the last year and interactions with key players in the sector in various forums, including the participation of Indonesian regulatory and operator staff at a regulatory course organized by LIRNEasia.

Divakar Goswami, LIRNEasia’s Director, Organizational and Projects, who was moderating the panel asked the following question:

One of the first achievements of your government was to delicense the 2.4 GHz frequency that allowed communities to use Wi-Fi extensively in the country. Despite that, Indonesia currently has Internet penetration of 0.69 percent. You have about 124 ISPs that operate in Indonesia. How do you explain the low penetration and what are the barriers preventing Internet from growing faster in Indonesia? When we look at broadband sector we see that penetration is even lower. What are the barriers that can be lifted so that this sector can grow?

Minister Sofyan Djalil:

There are a number of barriers to Internet growth that we have identified and we will solve in short period of time. One of the bottlenecks is international fiber optic cables. Right now the international capacity is low and price of international bandwith in Indonesia is very high. Currently international backbone is on the basis of half-circuit and Indonesian operator cannot determine the price as they wish. Next month we will invite investors to come to Indonesia, and several have shown interest, to lay fiber optic from Jakarta to any destination in the world. To Hong Kong, Sidney or to any other country especially where the destination has liberalized international bandwidth market and no discriminatory pricing. So this should take care of the bottleneck of international fiber optic in a very short period of time.

The second problem is we have limited access to domestic backbone. Right now several operators have fiber optic based network in the country. But they don’t share with others. So we are going to introduce a new regulation to force all operators to share fiber optic facilities. In addition to that, we will invite investors lay down domestic fiber optic to come and connect all our cities in Indonesia. We have an objective that with the Palapa Ring project we want to connect all the cities, about 500 cities all over Indonesia with Internet.

To solve the problem of last mile, next week may be this Friday, we will issue a tender for interested parties to bid for 2.3 MHz frequency for broadband wireless. We hope that it will be deployed very soon in Indonesia.

By introducing these three initiatives, we believe that by next year or no later than one and a half years from now the problem of broadband in Indonesia will be solved.

The other problem of course is like other developing countries, we have many people living in rural areas. Right now 30,000 islands have no access to telecommunications as yet. We have a very ambitious program to connect them. We charge universal service obligation from any operator, 0.75 percent of their gross income. We believe that by using this USO fund by 2010 all these villages will be connected. After that we start providing Internet service to those villages.

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.