LIRNEasia’s WiFi Study in Indonesia Influences Policy Process

Posted on October 14, 2005  /  6 Comments

Findings from Indonesian study WiFi Access Innovations by LIRNEasia researchers, Divakar Goswami & Onno Purbo were presented at a press conference at the Jakarta Hilton, Indonesia on October 1. The results from the study have been covered by Indonesian newspapers. The news story by Rakyatmerdeka is online and can be found here. The study findings can be found here.

Divakar and Onno identified high leased prices as the main factor forcing ISPs to deploy their own WiFi-based networks to connect customers to the last mile. Leased line prices in  Indonesia are about three to four times the price for similar bandwidth in India or the European Union. In the case of a 2mbps local link, Indonesian prices are more than 48 times the price compared to India. This is the primary reason why Internet service in Indonesia is also three to four times as expensive compared to many other Asian and European countries. Internet penetration in  is 0.4%, much lower than its ASEAN counterparts and the Asian average of 2.4% (ITU 2003).
According to the researchers, non-independent regulation coupled with a non-competitive market environment for telecommunication services are the contributory factors for high leased line prices and consequently of low penetration of the Internet in Indonesia. The silver lining is that Indonesia may be sitting on the cusp of explosive Internet growth if conducive regulatory and market conditions are created.


  1. Another media outlet that covered the press conference in Jakarta on findings from the Indonesia WiFi Study:
    Warta Ekonomi weekly magazine

  2. The findings from the WiFi study are being used by MASTEL, the organization of telecom operators, equipment suppliers, and civil society groups, to pressure the Indonesian government  to lower high leased line prices. A number of newspapers and magazines have covered the findings of the study listed below:

    The premier business paper in Indonesia, Bisnis Indonesia:
    Mastel: Turunkan tarif saluran sewa Internet (Scan jpeg)

    The incumbent PT Telkom in their newsletter [ironical because PT Telkom is the one of the reasons why leased line prices are so high in Indonesia] 

  3. Another substantive coverage of the findings from the WiFi Study by the leading English newspaper in Indonesia, Jakarta Post published on November 14, 2005.

    ‘Innovative’ approach promotes use of WiFi in RI
    Monday, November 14, 2005
    Leony Aurora, The Jakarta Post, Jakarta

    For Indonesians, the saying “where there’s a will, there’s a way” takes on a special meaning. Under pressure, their minds click creatively, finding nooks, crannies, bypasses and loopholes to attain objectives when the normal path is strewn with stumbling blocks.

    From such conditions, unusual practices and procedures emerge — some improper, but others quite inventive. The development in the use of Wireless Fidelity (WiFi) technology in Indonesia is an example of a little bit of both.

    Although the use of WiFi to surf the Internet using “hotspots” at hip cafes has yet to gain great popularity, the technology scores big time in other places.

    “In Indonesia, WiFi is not only used as an access network by Internet service providers (ISPs) to reach customers’ houses, but also as a backbone network to haul Internet traffic over large distances,” said director of organizational development and projects of LIRNEasia, Divakar Goswami, recently.

    “This situation is unique because in most countries, ISPs use wired options to reach customers and lease backbone networks from telecom operators,” he said, adding that at least 37 cities from Medan to Jayapura had been cataloged as utilizing WiFi as a backbone or access network.

    Goswami and information and communication technology (ICT) expert Onno Purbo, under LIRNEasia — a regional ICT policy and regulation capacity building organization — conducted a study on WiFi and Internet networks in Indonesia this August.

    WiFi is a broadband networking technology that allows people to connect various peripherals and share an Internet connection using the airwaves. Using transceivers operating at a frequency of 2.4 gigahertz (GHz) — recently unlicensed by the government — WiFi has the ability to transfer data at up to 11 megabits per second (Mbps) within a radius of 50 meters, and extendible to 15 kilometers.

    Internet users in other countries use the technology merely to stay online anywhere within a small specified area, called a hotspot, without the hassle of using cables, but are connected to their ISPs through reliable high-speed cable.

    In Indonesia, said Goswami, many ISPs used WiFi at the 5.8 GHz frequency, suitable for long range communications of up to a 60-km radius, to connect customers to cyberspace — a free but illegal practice, as the government has yet to liberate the frequency.

    “One reason for this ‘innovative’ use of WiFi in Indonesia is the high annual leased-line fees charged by Telkom or Indosat,” said Goswami. According to the study, most of the 174 licensed ISPs, in addition to some 50 unlicensed ISPs, use WiFi to avoid paying high prices.

    The annual domestic leased-line cost for a 2-kilometer link with a capacity of 2 Mbps here, for example, was US$18,000, almost four times the $4,802 applied on average in Europe, and a whopping 48 times more costly than the $376 applied in India.

    The annual fee for an international link from Indosat of $108,528, according to the study, is almost triple the $36,868 charged in Denmark and quadruple the $29,555 in India.

    Expensive leased-lines translate to high retail prices for customers. To recoup the costs, a customer — a school, office, or neighborhood — can sublet the connection further to other customers, which then share the already-limited connection.

    “Many people make use of it, as it is cheap (as compared to leased-lines),” said Michael S. Sunggiardi from the Indonesian Wireless Local Area Network and Internet Association.

    As a result, he said, there can be much interference to connections, especially as the technology uses radio signals that can be influenced by weather conditions and other disturbances.

    “WiFi, however, plays a big role in advancing the Internet network in Indonesia as an alternative (medium),” added Michael, who also runs an ISP in Bogor.

    Read article here.

  4. The article “Costly leased lines hamper Internet” from Jakarta Post on high leased line prices in Indonesia was published on November 15,2005.

    Costly leased lines hamper Internet
    Tuesday, November 15, 2005
    Leony Aurora, The Jakarta Post, Jakarta

    High prices of leased lines for domestic and international links in Indonesia, which can be up to 48 times more expensive than other countries, is hampering the development of the Internet and should be regulated, a study shows.

    The annual domestic leased line fee for a two-kilometer link with a capacity of 2 Megabits per second (Mbps) here is US$18,000, an overwhelming 48 times more expensive than the $376 applied in India, according to a study conducted by LIRNEasia, a regional ICT policy and regulation capacity building organization, in August.

    The Indonesian price is quadruple the price applied in Europe, where an average person earns 25 times more than an average Indonesian in a year, said director of organizational development and projects of LIRNEasia Divakar Goswami, who conducted the study with Indonesian information and communication technology (ICT) expert Onno Purbo, recently.

    The annual fee for an international link from the country’s second biggest telecommunication firm PT Indosat of $108,528, according to the study, compares to $36,868 charged in Denmark and $29,555 in India.

    “Such high leased line prices result in high Internet prices for customers, which in turn creates a barrier to rapid Internet diffusion in Indonesia,” Goswami said.

    Internet penetration — measuring the ratio between the number of customers and population — in Indonesia is estimated to be 0.6 percent by the end of this year.

    Indosat president director Hasnul Suhaimi said high leased line prices were the result of not having sufficient numbers of users. “We have not reached the economic scale yet for the development of leased lines,” he said.

    He added that the international fee had declined by some 50 percent in the last four years due to competition with other providers.

    “Indonesian prices are going down. It’s just that (prices) in other (countries) are falling more rapidly,” said Hasnul.

    Goswami suggested that the government make a thorough effort to regulate fees for leased lines so that Internet could be provided more cheaply.

    One obstacle may be that the government controls shares in the country’s largest telecommunication firm PT Telkom and also Indosat. The supposedly independent Telecommunications Regulatory Body (BRTI) is chaired by the Ministry of Communications and Information’s director general of Post and Telecommunications, Basuki Yusuf Iskandar.

    “It would be hard for BRTI to make policies that could reduce revenues for the two companies,” said Goswami.

    Chairman of the Indonesia Infocom Society (Mastel) Giri Suseno Hadihardjono said that in India, such regulations did not put telecommunication companies out of business — in fact, they developed instead.

    “We cannot simply copy (India). We have to take into consideration the local conditions,” said Giri. The government, he said, had to make up its mind on whether the initial decline in revenues caused by the lower prices was worth the boost in Internet usage.

    “Of course, if it’s cheaper, more people will use the Internet,” he said.

    Indonesia has adopted the United Nations’ target to ensure that 50 percent of the population gets Internet access by the year 2015.

  5. LIRNEasia strives to produce actionable research that changes the policy and regulatory environment enabling productive use of ICTs by users and entrepreneurs in the Asian region. The Indonesian WiFi study is an example where the findings and policy recommendations have been covered by the domestic media and other stakeholders  in a sustained manner, ultimately goading the Indonesian government to action.
    Below is a brief description of the process by which this was achieved:
     A number of media reports (some of them reproduced above) were the result of a press conference in October 2005 where LIRNEasia researchers presented findings from the WiFi study on Indonesia in Jakarta. The Indonesian media highlighted the benchmarked data on leased line prices that showed that Indonesian prices were many times higher than prices in India and the EU. The media also reported the recommendations of the study that called for regulatory intervention for reducing domestic and international leased line and prices which are prerequisites for lower Internet retail prices and faster Internet growth in Indonesia. Telecom stakeholders like MASTEL took up this issue in a separate press conference asking the government to lower leased line prices. A number of additional stories in the leading newspapers (Bisnis and Jakarta Post) followed. Finally, on November 17, 2005, the Indonesian government swung into action and asked telecom operators to lower leased line prices. The following is a brief translation from Bisnis Indonesia (original in Bahasa is available here as a JPEG):
    The government has asked operators to lower its profit margin to enable lower leased-line prices for Internet and boost information technology development in the country.  "Operators need to cut their EBITDA to only 30 percent to assist the government in promoting cheap Internet usage in the country," said Cahyana Almadjayadi, director general for telematics application.  He said that a cut of at least 15 percent from the profit margin would boost internet users to five times more than now.
    According to data from APJII, there are 16 million internet users in Indonesia, meaning that this number
    will rise to 80 million users should the government’s suggestion be followed. […]
    Mastel has urged the government to lower leased line prices to 1/48 of the current prices to promote internet development and push economic development [the journalist misunderstood the results of the LIRNEasia study and drew the conclusion that the price should be as low as India, which was of course not suggested by Mastel].
    According to Cahyana, even a cut of only several percent of the operator’s EBITDA margin would be enough to lower internet leased line prices significantly. […]

  6. The Indonesian Communication Minister has obviously seen the newspaper coverage of the WiFi study since he cites figures from the findings from our study and reiterates some of our key recommendations. The news story tells of the government’s plan to decrease broadband tariff. The Minister says that he wants a revolutionary regulation in two months’ time.

    The original Bahasa news story is here, the English translation is below:

    The Government Studies Method of Lowering Broadband Tariff

    Achmad Rouzni Noor Ii – detikInet
    Jakarta, March 14, 2006

    The government promises to conduct a study to lower broadband internet tariffs. If required, it is ready
    to issue revolutionary policies.

    Minister of Communication and Information Sofyan Djalil admitted that internet rate in Indonesia is
    more expensive than other countries. “Broadband (rates) is 45 times more expensive than other
    countries. Therefore, we will try to reduce monopolistic regulations,” he said on Tuesday.

    “Bottom line is, our regulation must promote equal level playing field. What important is that it is
    pro-consumers,” Sofyan added.

    “We will conduct a study on how to lower broadband costs. If the study concludes that new licenses need
    to be issued, we will, especially for international communications,” he said.

    “Fibre optic owners object to lowering their prices. Therefore we will create a competitive environment
    with the regulations.”

    Sofyan added, however, that if broadband tariffs can be lowered by themselves, the government will not
    launch new regulation. “The policy will probably be revolutionary. If we need new licenses, we need a
    revolutionary policy,” he said. “We will announce more in two months.”

    According to Sofyan, the study will observe about the expensive broadband tariffs in Indonesia and what
    could be done to lower them. Aside from that, the study will also see about last mile access.