Indonesian Minister proposes new initiatives to stimulate Internet growth at ITU World 2006

Posted on December 8, 2006  /  2 Comments

The Indonesian Minister for Communication and Information Technology, Dr Sofyan Djalil, presented a number of new initiatives for removing the barriers to Internet growth in his country at Building Digital Communities forum session at the ITU World 2006 event in Hong Kong on December 7, 2006.

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.


  1. (08/12/2006) reported that Dr Yos Luhukay, a member of Indonesia’s newly-established National ICT Council, which is chaired by President Yudhoyono, stated that Internet is too expensive because telecom operators’ margins are too high.

    “We have let the operators put up high prices but only to serve a few”, he said at the Business Outlook 2007 at the Le Meredien Hotel, Jakarta.

    Translated from original article in:

  2. Who is to judge what margin is too high? To attract capital to countries with high regulatory risk sometimes it is necessary to allow high profits.

    Is this the first step on the slippery slope of regulating profit, a sure-fire way of killing initiative?

    My understanding is that 2005-06 has seen massive investments in the Indonesia telecom sector, exceeding USD 1 billion. It will be great pity if this investment dries up because responsible people like this gentleman and DG Postel attack profits.

    Focus should be on bringing down prices through lowering market-entry barriers and more effective regulation, not in loose talk about profit regulation.