Internet Providers Criticize Leased Line Tariffs

Bisnis Indonesia, Sept. 26, 2006, T2

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.