Closing Indonesia's gap in telecommunications

Winahyo Soekanto, Lawyer, Consumer Care Foundation, Jakarta, winahyo@yahoo.com

The recent unveiling of an international call deal between Indonesia's state-owned PT Telekomunikasi Indonesia and Deutsche Telekom unit T-System International Carr Services to provide international services through access to each other's networks, signified a new stage in Indonesia's plans to liberalize its telecommunications market. The deal is expected to pave the way for Telkom's efforts to enter the international call services market.

This is a step as important as the planned cessation of Telkom's monopoly license for domestic call services and PT Indonesian Satellite Corp's (IIT) monopoly on international call services, which is to commence next year. It means that both Telkom and Indosat would be able to operate domestic as well as international call services.

These developments could be the partial answer to a long- standing concern of ours and the rest of the world for the past few decades: The chasm separating 3 billion people on earth who make less than US$2 per day, and those who make more than US$20,000 per day -- a chasm which has now materialized into the telecom gap and digital divide.

At least 80 percent of the world's 6 billion people today has yet to hear their first telephone ring.

The proof is in the world most populous countries. Take China, where only 10 percent of its population has access to fixed-line telephones despite having 11 percent of the population owning cellular telephones. India has only 3 percent of phone lines in service with less than 0.5 percent of the population owning cellular phones. In Indonesia, only 3 percent of its population has access to fixed-line phones while its cellular ownership is also 3 percent.

A study by the International Telecommunication Union (ITU) has found that for every one percent growth in the telecommunication industry, the economy would grow by 3 percent, helping ease the economic gap and open isolated regions to the rest of the world.

Should land farmers and shrimp pond farmers in Lampung or those in West Bali, for example, have good access to telecommunications they would not only be able to monitor prices but also do away with selling rice to buyers before it is grown. When their rise in profits is returned to and consumed in their own regions, a multiplier effect is thus created for the local economy.

Indonesia may yet have to see the end of its crisis, but the telecommunications industry sector has taken steps to continue expansion with the cellular telephone industry being the prime mover.

Cellular operators have projected a growth of 50 percent from last year's 7 million consumers, meaning a total investment of Rp 11 trillion (at Rp 9,000 per 1US$) for the provision of 3 million new lines at $400 per line.

If out of the 3 million projected consumers, some 60 percent buy new handsets, mobile handset vendors could sell 1.8 million units that would equate to Rp 1.8 trillion if the average price of handsets is Rp 1 million. If the remaining 40 percent would be seized by the secondary market where a used handset is sold for Rp 500,000 the projected sale could be Rp 600 billion.

Telkom has also planned to increase its capacity by 1.2 million fixed lines by 2004. Indosat, which has obtained the principal license to act as a fixed phone operator, is projected to build 1.6 million lines. All these are in addition to the other operators's projected development of 1.2 million lines. At US$1,000 per line, a total investment of Rp 40 trillion is being organized for the development of the telecommunication sector in the country.

Now Indonesia has large, isolated and economically backward areas despite fast growth in the telecommunication infrastructure in the past five years, and predictions it will continue to do so in the next five years. This gap is typical of developing countries.

In view of its geographical mapping and demography, the government would do well to issue more licenses to both regional and local telecommunications operators. Experience shows how slow national operators are in trying to achieve national coverage despite having been in operation for at least five years. Many operators, including the incumbent Telkom, prefer to remain in the crowded Java island.

No wonder that some of the administrations of some resource- rich outer regions have become impatient and started cooperating with certain investors to develop their own telecommunications infrastructure. In Kutai Kartanegara regency, East Kalimantan, some local and regional administrations have launched e- government by opening their own websites and public services such as online ID application.

This development should be enough to convince Jakarta to start encouraging potential regional and local operators. Mindful, of course, of each region's suitability. Severely isolated regions would benefit from the establishment of analog mobile cellular infrastructure which is a relatively cheaper technology and is proven able to open telecommunications isolation.

The success of such an option has been proven by operators such as Telesera, Metrosel and Mobisel in their regions of operation in Lampung, Central Java and Bali. Or the success of Pasifik Satelit Nusantara whose service has opened many isolated spots in many regions, though of course its weakness is its expensive rate.

In addition, the closure of analog cellular services in several countries such as Australia, Korea and Taiwan means that Indonesia could purchase the used equipment (including those already refurbished) in the forms of main switching, radio base stations and other equipment, hopefully at much cheaper prices. The Indonesian government should be able to facilitate the purchase of those refurbished equipments by our operators.

Indonesia does not need to buy new, expensive telecommunication technology especially for its rural areas.

The government, as the regulator, should free itself from the pressure of brokership or that of vendors/suppliers in the procurement of technology for telecommunication operators, especially in the technology era.

The government should also redefine what constitutes telecommunication disparity and mind that solutions do not automatically mean the purchase of new technology which has yet to be proven to provide efficient service for the community.

The government needs to not only encourage investment in the telecommunications industry by regional administrations, but also by smaller-scale enterprises who already know how to optimize the existing system. In Bali and Kalimantan we have CV Bali Multi Seluler and CV Multi Solusi Teknik who, in cooperation with Telesera operator, have succeeded in expanding coverage of the existing network and broken telecommunication isolation in many spots at minimum cost. The firms have now developed into software development houses.

Further, the government needs to review its 1999 blueprint of the telecommunication industry which is fast becoming obsolete, and reaffirm the level of competition to be applied in various subsectors such as: Local services, domestic long distance, international long distance, wireless local loop, mobile analog, mobile digital, lease lines, data transmission, paging, mobile satellite, fixed satellite, cable TV, and Voice Over Internet Protocol (VoIP).

The government needs to also develop clear priorities. India has opened its VSAT services monopoly; China is now concentrating on its cellular industry development in order to enjoy an acceleration in the telecommunication industry growth.

Indonesia could enjoy the same acceleration if it concentrates in developing its cellular phone development which has proven to be able to open up isolation at relatively cheap prices. Who needs expensive new technology when cheaper ones, even in the form of refurbished equipment, are enough for our needs to open isolation, thus reducing telecommunications disparity?