Cellular operators and antimonopoly law<\/p>\n
Winahyo Soekanto, Lawyer, Consumer Care Foundation, Jakarta,
\nwinahyo@yahoo.com<\/p>\n
Indonesia has again proven to be the fastest growing cellular
\nmarket in Asia Pacific, with its 2002 market share exceeding 25
\npercent and 2003 growth projected to be twice as high with a
\nmarket share exceeding 40 percent.<\/p>\n
Statistics show that the number of cellular telephone users in
\nthe country reached 6.5 million in 2001, with this number
\nexpected to reach 10 million by the end of 2002. This growth is
\ntaking place in Indonesia, a country where millions of people are
\nstill reeling from the 1997 economic crisis and unemployment is
\ncalculated to exceed 40 million people.<\/p>\n
Indeed, consumption rates in the country remain high as
\nevidenced by the mushrooming of newly opened, bustling
\nsupermarkets and the fervor with which credit card companies are
\nexpanding their services.<\/p>\n
Cellular telephone operators, too, have continued to increase
\ntheir development budgets. Telkomsel, for instance, has allocated
\nUS$700 million for 2002, Satelindo $250 million and Excelcomindo
\n$150 million.<\/p>\n
All these signs of robust growth are welcome, as they imply
\nbetter access to telecommunications services for the public,
\nwhich could be compensation for the slower-growing fixed-line
\ntelephone communications services.<\/p>\n
This growth, however, has to be taken with a grain of salt as
\nit has the potential to violate Law No. 5\/1999 on monopolies and
\nunfair trade practices.<\/p>\n
Let us study the first case, that of Telkomsel's control of
\nthe market. The company controls 51 percent of the market share,
\nfar exceeding Satelindo with its 25 percent share of the market
\nand Excelcomindo with 16 percent. This gap, certainly, is already
\nreflected in the gap in the companies' development budgets.<\/p>\n
With the lion's share of the market under its control,
\nTelkomsel is at risk of violating the antimonopoly law. Chapter
\n17, Paragraph 2, of the law stipulates that business entities can
\nbe suspected or accused of controlling the production or the
\nmarketing of a good or service if their share exceeds 50 percent
\nof the market.<\/p>\n
The Anti-Monopoly Commission (KPPU) is authorized to take
\npunitive measures, either by halting an activity that is
\nclassified as a monopoly or unfair trade practice, or by imposing
\na fine of Rp 25 billion. Other punitive measures on the books
\ninclude a maximum fine of Rp 100 billion and a jail term of up to
\nsix months, as well as additional measures in the form of
\nbusiness closure and\/or a prohibition on the entrepreneurs to
\nbecome directors or commissioners of the company for up to five
\nyears.<\/p>\n
The second case is the national agreement on the \"roaming
\nfacility\" between Satelindo and IM3 (a mobile cellular brand of
\nIndosat), which came into effect on Sept. 19, 2002. This
\nagreement benefits IM3 in such a way that it is now able to
\nprovide services to consumers without having to build its own
\nnetwork. This is certainly unfair to the other operators such as
\nLippotel, which does not have a national \"roaming capacity\".<\/p>\n
Despite Satelindo and IM3 being the subsidiaries of one group,
\nagreements on the use of a telecommunications network must be
\ncarried out in accordance with the existing commercial
\nregulations. Satelindo must, therefore, offer the same access it
\naccords IM3 to other operators wishing to enjoy the same
\nfacility. Otherwise, the agreement would be a violation of the
\nantimonopoly law.<\/p>\n
It is true that Indosat, as the holding company of Satelindo
\nand IM3, launched a publicity drive prior to the agreement. The
\ncompany has openly stated the agreement was meant as an
\nefficiency measure, enabling it to save 20 percent of the capital
\nexpenditure (capex) that would have had to been spent had
\nSatelindo and IM3 built their own infrastructure. The two
\ncompanies also promised that they would concentrate on different
\nsegments of the market.<\/p>\n
The KPPU, however, should study whether the agreement can be
\nclassified as a violation of the Chapter 11 of the antimonopoly
\nlaw on cartels, Chapter 12 on trust or Chapter 20 on providing
\nservices with very low prices. These chapters stipulate against
\nforging cooperations by forming cartels with the aim of
\nmaintaining the existence of the original company by controlling
\nproduction and\/or marketing of goods and services which lead to a
\nmonopoly and\/or unfair trade practices.<\/p>\n
The Telkomsel case presents a dilemma for Indonesia, where the
\nmarket penetration rates for both cellular and fixed-line
\ntelephone services are still very low. This difficult situation,
\nhowever, was brought about by the failure of the existing
\nmechanisms designed to prevent unfair business competition.<\/p>\n
For instance, only one of the seven holders of a regional
\noperator license for DCS 1800 (Digital Celluar System), namely
\nLippotel, is now operating commercially. And it is operating with
\nlimited capacity because it does not have access to a national
\nroaming facility.<\/p>\n
In the meantime, the existing AMPS operators, namely
\nKomselindo, Metrosel and Telesera, have now lost the momentum to
\nenter the digital Code Division Multiple Access (CDMA) service
\nmarket.<\/p>\n
No wonder that the three national GSM operators -- Telkomsel,
\nSatelindo and Excelcomindo -- have been racing full-speed ahead
\nand are now in control of more than 93 percent of the entire
\nmarket share.<\/p>\n
Some may have interpreted the situation as market
\nconsolidation, with the end result only a limited number of
\nsurviving operators. Among these are the proponents for a
\nlimitation on the number of operators in order to create a good
\neconomic scale for investment in the sector.<\/p>\n
For the sake of consumer interest, however, it is better to
\nopen the market to more, new operators because that could help
\nensure better rates and services. Take Hong Kong, for example,
\nwhich as of 2001 had issued 31 licenses for various services in
\nthe cellular telephone industry, despite having a population of
\nonly 10 million people. Their stated guideline is to provide
\nconsumers with good services and rates.<\/p>\n
Why limit licensing, as long as licenses are being given in a
\ntransparent manner and in compliance with the principle of public
\naccountability?<\/p>\n
However, the two cases involving Telkomsel, Satelindo and IM3
\nare indeed a cry for a firm hand from the government. The
\nregulator of the telecommunication industry, in this case the
\ngovernment, has to show leadership and an ability to tread the
\nfine line between an act that could be misconstrued as curbing
\ngrowth, and another that could lead to violations of the
\nantimonopoly law.<\/p>\n
The regulator should make haste and do its homework for its
\nmasters, namely the consumers, whose taxes pay the regulators'
\nsalaries.<\/p>",
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