As part of the Six Country Indicators Project, Divakar presents the interim findings from the Indonesia country study. The study assesses Indonesia’s telecom sector and regulatory performance. It employs the common methodology and list of indicators adopted for the Six Country study.

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

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

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

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

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