Fixed-line phone service stagnant, cellular service soar<\/p>\n
Tony Hotland, The Jakarta Post, Jakarta<\/p>\n
In spite of the rapid development of the telecommunications
\nindustry over recent years, tens of millions of people in the
\ncountry have yet to benefit from even the basic mode of
\ncommunication: fixed line services.<\/p>\n
Data at the Directorate General of Post and Telecommunications
\nindicate only 9.1 million fixed lines have been installed, mostly
\nin developed cities, for a population of over 220 million.<\/p>\n
When the government abolished in 2002 state company PT
\nTelkom's monopoly over the sector, hopes were high that the
\nnumber of fixed lines would increase significantly.<\/p>\n
However, despite the entry of a new player, PT Indosat, no
\nmarked progress has been made, as the two firms are reluctant to
\ninvest in fixed line services.<\/p>\n
This year, Telkom installed less than 100,000 new fixed lines,
\nwhile Indosat installed no more than 20,000 -- all in major
\ncities, particularly new business areas.<\/p>\n
Many argue that the low rate for domestic calls and the slow
\nreturn on investment made the sector unattractive. Meanwhile, the
\ninfrastructure for fixed lines is far costlier to develop than
\nthat for mobile phone services using Global System for Mobile
\nCommunications (GSM) or Code Division Multiple Access (CDMA)
\nfixed wireless technologies.<\/p>\n
Installing one fixed line base station costs operators around
\nUS$500, while it costs only about $150 to install one cellular or
\nfixed wireless station.<\/p>\n
In addition, call rates and demand for fixed wireless and
\ncellular services are comparatively much higher, which means the
\ninvestment begins to pay off even sooner.<\/p>\n
Given this situation, some experts have begun to question the
\neffectivity of the duopoly in the sector and to suggest a more
\nopen market. Others say that if the telecommunications sector was
\nliberalized further, none of the entering operators would be keen
\nto develop the fixed line network, as it was no longer considered
\nlucrative.<\/p>\n
To solve the problem, the government launched the Universal
\nService Obligation (USO) program last year upon a recommendation
\nfrom the International Telecommunications Union conference.<\/p>\n
Under the USO program, the government plans to install
\ntelephone lines in 43,000 villages using various types of
\ntechnology, such as satellite, radio, cellular and Internet
\nprotocol, depending on the local geography.<\/p>\n
Since its initiation, the government has installed phone lines
\nin 3,010 villages, mostly in Sumatra and eastern Indonesia. By
\nthe end of this year, the government expects to have covered
\n3,500 more with funds of only Rp 45 billion ($5.56 million).<\/p>\n
The USO is a two-phase program: In phase one, running from
\n2003 to 2010, the government must provide each village with at
\nleast one fixed line; in phase two, it must develop more
\nsupporting facilities.<\/p>\n
With extremely limited financing, however, even the government
\nis unsure of how to make the project succeed. A presidential
\ndecree, which is to oblige operators to set aside 0.75 percent of
\ntheir annual revenue toward the program, has yet to be issued
\nyears after the proposal was submitted.<\/p>\n
Regardless of the rapid use of advanced telephone services,
\nsuch as cellular and the relatively new fixed-wireless access
\n(FWA), the fixed line is still seen as important and vital.<\/p>\n
Unlike cellular or FWA services, which are more private, the
\nfixed line is considered a perfect choice for providing
\ntelecommunications access to as many people as possible, as a
\nsingle line can be used by many.<\/p>\n
\"This is really important, since Indonesia is not really a
\nwealthy country, and not everyone can or even want to subscribe
\nto cellular services. The fixed line is more flexible and
\nestablished,\" said Susilo Hartono, head of USO implementation at
\nthe post and telecommunications directorate.<\/p>\n
Besides, he said, the government did not want to waste its
\nlimited radio frequency, which is used for cellular and FWA
\nservices.<\/p>\n
The growth of cellular and fixed wireless services has been
\nfairly remarkable over the course of the year, with the number of
\ncellular subscribers increasing faster and recording 25 million
\nby October, up by about six million from end of 2003.<\/p>\n
Giants PT Telkomsel and Indosat dominated the sector with a
\ncombined market share of 83 percent, followed with PT
\nExcelcomindo Pratama (XL) and a few new players like PT Bakrie
\nTelecom and PT Mobile-8 Telecom.<\/p>\n
The astounding growth was triggered by more sophisticated and
\ninnovative features on offer, combined with declining tariffs
\nprompted by a price war among operators and greater ease in
\nprocuring a cellular number.<\/p>\n
A whopping $1 billion was invested this year by cellular
\noperators to build new infrastructure and upgrade services,
\nincluding launching new products and brands.<\/p>\n
Amid tougher competition, cellular operators introduced new
\nbrands such as Kartu As, Jempol and Bebas, which charge lower
\ncall rates than previous brands.<\/p>\n
Analysts say the introduction of the new brands was to attract
\nconsumers from the low income bracket, as the initial market
\nsegment of cellular phones -- middle and high-income groups --
\nhad inched toward saturation.<\/p>\n
The FWA also boomed this year, spearheaded by Telkom's Flexi,
\nfollowed by Indosat's StarOne. The two brands have collected a
\ncombined two million subscribers, with Flexi serving the majority
\nat some 1.7 million.<\/p>\n
Given this trend, strong growth in the cellular industry is
\nprojected to continue in coming years.<\/p>",
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