End Telkom monopoly<\/p>\n
A potentially ugly confrontation between PT Telekomunikasi
\nIndonesia (Telkom) and consumers appears to have been defused by
\nthe government's decision to review the increases in domestic
\ntelephone rates. Bowing to public pressure, the government has
\ncut the phone rate increase to an average of 15 percent from the
\n24 percent announced earlier by Telkom. The government has also
\ndecided to impose a single rate for all local calls within
\nGreater Jakarta and Bandung, instead of the two rates which had
\nbeen proposed.<\/p>\n
The looming consumer revolt against the company which has a
\nvirtual monopoly over the domestic telephone service was a real
\nthreat. PT Telkom's hardheaded response to the potential consumer
\nboycott -- or of a rash of consumers refusing to pay their
\ntelephone bills -- was to counter that it would simply cut off
\ntheir telephone lines.<\/p>\n
Ironically, the row did not begin when Telkom first announced
\nthe new telephone rates just before they were to take effect on
\nFeb. 1. A 24 percent hike was stiff indeed, but few people
\ncomplained at the time. There may have been some grumbling, but
\ngenerally the increase was accepted.<\/p>\n
Complaints only began to arise in the middle of this month
\nwhen some subscribers in Jakarta realized that, for them, the
\nactual increase was not 24 percent, as Telkom would have had them
\nbelieve, but more like 24 fold. This was because Telkom had
\nquietly divided Jakarta into two zones and dictated that calls
\nfor distances exceeding 30 kilometers were long-distance, not
\nlocal.<\/p>\n
Telkom argued that since all subscribers outside of Jakarta
\nalready paid long-distance rates for calls exceeding the 30 km
\ndistance, it saw no reason to treat Jakartans differently. While
\nTelkom's argument makes sense from a purely economic point of
\nview, the telephone monopoly is guilty of failing to inform, or
\nalert, its subscribers of the serious implications of this sudden
\nchange.<\/p>\n
Besides owing an explanation for such a hefty increase, Telkom
\nshould also have given subscribers a period of adjustment,
\ngradually phasing in the rate increase over a period of time.
\nInstead, Telkom kept silent. This silence could be interpreted as
\nTelkom hoping that subscribers would overcome their shock at the
\nsize of their new phone bills and pay up because it was too late
\nfor them to fight the hikes. Whether this silence was deliberate
\nor not, Telkom's actions bordered on deception. For a state
\ncompany whose main business is communications, Telkom's
\nmanagement is guilty of failing to properly communicate its new
\npolicy to subscribers.<\/p>\n
Telkom holds a very special role in Indonesia's corporate
\nworld. It is a publicly listed state-owned firm which ranks among
\nthe country's top corporate income taxpayers. As the single
\nlargest company traded on the Jakarta Stock Exchange and one of
\nthe few Indonesian firms listed on the New York Stock Exchange,
\nTelkom is indeed a blue chip company. As such, changes in the
\nprice of its stock are bound to affect the overall performance of
\nthe local market.<\/p>\n
The government, the largest shareholder in Telkom, is only one
\nof many shareholders in the company. Investors who bought shares
\nin Telkom in Jakarta or New York are also owners whose interests
\nTelkom should serve. This means Telkom is responsible for
\nmaximizing profit and growth so that it can increase the value of
\nits stock and pay stock dividends. However, as a state-company
\nwith a virtual monopoly over a vital public service, Telkom also
\nhas an obligation to another group of unregistered shareholders:
\nthe Indonesian public.<\/p>\n
While we wait to see if the government's intervention will
\nplacate the angry public, this row has exposed the ugly side of
\nmonopolies.<\/p>\n
In the absence of competition, Telkom was able to dismiss,
\nsomewhat lightly, public complaints and threats of a boycott,
\nknowing that consumers had nowhere else to turn. When it
\ncountered threat with threat, Telkom became a textbook example of
\na big, bad monopoly.<\/p>\n
During the current economic recession, most companies have
\nfound it difficult to increase their prices. Telkom, because it
\nhad a monopoly and a captive market, had no qualms with jacking
\nup its rates. A small dose of competition would have forced
\nTelkom not only to rethink its pricing policy, but also to
\noperate more efficiently and strengthen its finances. As a
\nmonopoly, however, Telkom can afford inept management, as was the
\ncase when the company failed to hedge a huge portion of its
\nforeign debts, a failure which cut into its 1998 profits.<\/p>\n
Unfortunately, the new antimonopoly law still allows the
\ngovernment to monopolize vital public services. This, presumably,
\nincludes the domestic telephone service. In any event, Telkom's
\nmonopoly will likely remain intact for at least another decade
\nbefore Indonesia is obliged to open the domestic telephone market
\nunder rules established by the World Trade Organization.<\/p>\n
Yet, if anything, this episode with Telkom has destroyed the
\nmyth that public services are run more effectively and
\nefficiently under a government monopoly. There is one lesson
\nwhich we must take away from this episode: the sooner we end
\nTelkom's monopoly the better it will be for the public and for
\nTelkom's shareholders.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/end-telkom-monopoly-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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