Liberalization message in telecoms law<\/p>\n
By Winahyo Soekanto<\/p>\n
DENPASAR (JP): The media recently raised again the issue of
\npossible acquisition of Indosat by state-owned telecommunications
\ncompany PT Telkom. The deal, if it comes through, could become a
\nsignificant financial source for the government as the value of
\nits 65 percent slice of Indosat shares could reach US$700
\nmillion.<\/p>\n
PT Telkom commissioner Rahardjo Tjakraningrat recently
\nspeculated about making the acquisition an option in the
\nrestructuring of the company.<\/p>\n
Post and telecommunications director general Sasmito Dirdjo,
\nhowever, opposed the option straight out, describing the move as
\ninappropriate to the sector's agenda of reform -- which put
\nemphasis on competition and a multi-operator and anti-monopoly
\napproach.<\/p>\n
PT Indosat's manager for investor relations Eddy Hadiyanto
\nadded that this is not in line with the letter of intent signed
\nby the government with the International Monetary Fund (IMF).<\/p>\n
In fact, the foundation for the restructuring of the
\ntelecommunication and multimedia industries has been laid with
\nthe issuance of the new telecommunication law (Law No. 36\/1999)
\nand the government regulation on the organizing of
\ntelecommunications (Government Regulation No. 52\/2000).<\/p>\n
The foundation also includes the shortening of PT Telkom's
\nmonopoly period to 2003, the granting of a national license GSM
\n1800 to Telkom and Indosat, the stipulation of both as full
\nnetwork service providers, while the licensing procedure is
\ncurrently being modernized.<\/p>\n
The government prepared a blueprint in September 1999 for the
\ndevelopment of the telecommunication sector, which consists of,
\namong other things, a campaign to establish a pro-competition
\natmosphere, and to separate business development activities from
\noperational activities.<\/p>\n
However, the controversy surrounding the possible acquisition
\nof Indosat has created the impression that the government was
\nmerely reacting to the vested interests of various parties. It
\nmight also steer the responsible parties away from the policies
\nenvisioned in the blueprint.<\/p>\n
The rapid technological development and the capital
\naccumulation among world telecommunication giants has highly
\naffected this industrial structure and compelled the government
\nto be sensitive towards the global trends.<\/p>\n
Many observers are of the same opinion that the main trends
\naffecting the telecommunication and multimedia sectors are
\ncompetition, convergency, consolidation and globalization.<\/p>\n
But the fast development often places the government in a
\nposition of only reacting toward the powers of the economic
\nplayers, in particular in the forming and carrying out its
\npolicies. This is especially true given the fact that the
\ngovernment is also a shareholder in the state-owned
\ntelecommunication corporations.<\/p>\n
This is why the public believes Indonesia needs an independent
\nregulating body which is capable of effecting competition and
\nfocusing its concern only on the growth of the industry and
\nimprovement of services.<\/p>\n
Leong Keng Thai, Director General of the Telecommunication
\nAuthority of Singapore, who was chosen by the readers of Telecom
\nAsia magazine as 1999's Best National Regulator in Asia and
\nAustralia, underlines that such an independent body should be
\nenhanced with an authority and clear mission to make fair
\nregulations.<\/p>\n
Given the presence of multi-operators in the industry, we need
\nregulations that can keep up with principles such as \"equal
\naccess\", \"inter-operability\" and \"inter-connectivity\", protection
\nin competing, security for interconnection with major suppliers,
\nthe establishment of criteria and the granting of impartial and
\ntransparent licenses. It is these principles that are emphasized
\nin the World Trade Organization (WTO) negotiations.<\/p>\n
The promulgation of Law No. 36\/1999 on Telecommunication in
\nlieu of Law No. 3\/1989 provides a solid basis for developing this
\nindustry if immediately followed by its implementing directives.<\/p>\n
The two laws are factually part of the government's answer to
\ndevelopments in the telecommunication technology and public
\ndemands for improvement of services in this sector.<\/p>\n
Private participations ranging from direct international
\nconnections, satellite utilization to cell telephones including
\nfixed lines through operation cooperation have started soon after
\nthe birth of Law No. 3\/1989.<\/p>\n
But they have been limited to concession sharing, slightly
\ntaking Telkom's exclusive rights as organizing agency. Therefrom
\nemerged the industrial structure as we observe today, but there
\nis still a monopoly at the fixed telephone, 'duopoly' at the
\ndirect international connection and oligopoly at the cell phone
\nservices.<\/p>\n
Whereas the new law sparks a strong liberalization signal.<\/p>\n
With a softer outlook on the trends of regional and global
\ndevelopments -- where the government's control is considered more
\nsimplified -- there is a new meaning in the government's policy.<\/p>\n
The new law provides arrangement, supervision and control by
\nheeding the views prevailing in the society and global
\ndevelopment.<\/p>\n
The law also does away with discrimination between state-owned
\nand private telecommunication operators. This means that although
\nstate operators still have their monopoly until a given time, now
\nany company can plunge into this industry as a full operator and
\neventually as a full network service provider without involving
\nthe shares of state operators.<\/p>\n
The new law aims at transparency in granting licenses.
\nPreviously the government tended to give priority to its cronies,
\nso there were groups of companies receiving more than one
\noperating license for different technology and their market share
\nbecame much bigger.<\/p>\n
The new law also shows a strong mission in improving services
\nfor clients, as indicated in provisions on the rights of claiming
\nindemnity by clients if inflicted by the operator and the
\noperators cannot prove that the client's loss is not due to its
\nmistake.<\/p>\n
This burden of reverse proving can hurt the operators,
\nespecially if the regulating body does not immediately establish
\nstandards of service.<\/p>\n
With the enactment of the Law on Consumers' Protection as of
\nApril, 2000 it's quite possible that operators will encounter a
\nnumber of consumers' claims either on the basis of direct losses
\nor consequential damages.<\/p>\n
The new law, however, must really be followed up by
\nimplementing directives. We should not leave a vacuum which in
\nthe past was often abused to enact policies that deviated from
\nthe spirit of the law.<\/p>\n
Among the needed directives are the government regulations
\n(PP) on licensing and requirements of telecommunication
\noperators, on the standard of services, on the procedure for
\nclaiming and settlement of indemnity, and on the interconnection
\nof telecommunication networks. No less important is the
\nestablishment of a regulation against unfair competition.<\/p>\n
The directives are needed, without delay, in order to provide
\nlegal certainty and incentives for foreign investors.<\/p>\n
The writer is a Denpasar-based lawyer and observer of
\ntelecommunication industry.<\/p>",
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