Closing Indonesia's gap in telecommunications

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?