Connecting more people in more liberal market

Connecting more people in more liberal market

I. Christianto, Contributor, Jakarta

This special page is specially published in observance of the
World Telecommunications Day which is worldwide celebrated on May
17 (today). Hopefully, this special report will give readers
valuable information about the development of the country's
telecommunication sector.

Indonesia's telecommunication sector has shown impressive
growth during the past few years and this trend will continue in
the coming years with the rapid increase in the demand either for
the conventional fixed-line telephone services or mobile phones.

The high demand and the removal of the exclusive rights held
by PT Telkom in domestic telephone services will undoubtedly make
the competition even fiercer.

Dozens of small and large companies are now involved in the
business.

With the removal of its monopoly, Telkom has to compete
directly with Indosat which was previously allowed only to
provide international telephone calls.

Besides Indosat, Telkom has also to compete with other
operators such as PT Radio Telepon Indonesia (Ratelindo) and PT
Batam Bintan Telekomunikasi (BBT) in the fixed line market.

Ratelindo and BBT, which were operating before Indosat
received its permit, hold regional permits to operate in Jakarta
and West Java, and Batam and Bintan respectively.

Indosat obtained the license to operate nationwide only last
month. Indosat was licensed to operate its fixed network in
August last year in Jakarta and Surabaya.

Having more than one operator for a huge country like
Indonesia is a positive development. With such multiplayers,
Indonesia -- with a population of more than 215 million but with
a telephone penetration of only 3.5 percent -- will have a
greater chance to have better telephone coverage.

With the introduction of the CDMA-based wireless local loop
(WLL) operators will now have an easier task in increasing their
coverage. Some of them plan to install more telephone lines using
the latest technology/system, the CDMA2000 1X.

The CDMA2000 1X is an International Telecommunications Union
(ITU) standard that supports both voice and data services over a
standard Code Division Multiple Access (CDMA) channel. This
technology provides up to twice the capacity of earlier CDMA
systems, with peak data rates of up to 153 kbps, which could be
further increased up to 307 kbps.

CDMA2000 1X, also known as CDMA Multi-Carrier (1xMC) or IS-
2000, is a third-generation CDMA version of the IMT-2000 standard
family. The first phase of CDMA2000 1X supports an average of 144
Kbps packet data in a mobile environment. The second release of
CDMA2000 1X, called 1xEV, supports data rates of up to 2 Mbps on
a dedicated data carrier.

Indosat's director for network infrastructure, Wityasmoso Sih
Handayanto, said that his company planned to install 450,000
lines in Jakarta and 250,000 lines in Surabaya in a three-year
period with the new system.

Indosat appointed a consortium named Mega Asia in March, which
comprises Bakrie Communications Company, Tomen Corporation, PT
Asiabumi Piramida and PT Saranainsan Muda Selaras, to handle and
finance the installation project.

Previously, with its fiber optic network, Indosat installed
8,000 lines in Jakarta and another 5,000 lines in Surabaya. The
company has decided to focus on the CDMA-based wireless local
loop (WLL)

"We're very optimistic with the development of the fixed
wireless network and there will be good prospects for the future.
Our target is to launch the network by August," he said.

Ratelindo reportedly plans to invest up to US$36 million to
install up to 150,000 CDMA2000 1X lines in Jakarta and West Java
and has appointed Nortel Networks to carry out the project.

However, the company, which received a supply from Hughes
Network System for its maiden fixed wireless digital telephone
system 10 years ago, refused to disclose the latest status of the
project.

"We are still in the post restructuring ordeal. We will be
ready to meet the media by, hopefully, mid this year," said
Ratelindo's public relations executive Novita Nuzwar.

Telkom, in the meantime, has selected a number of vendors
including Samsung, Ericsson and Motorola to deploy the CDMA 2000
1X networks in various cities including Surabaya, Balikpapan,
Denpasar, Greater Jakarta and Sumatra.

Suryatin Setiawan, Telkom's director of network business, said
the company planned to install one million lines this year, and
expected to see the total phone lines in service reaching 8.8
million by the end of 2003.

"The growth in the fixed line service in Indonesia will remain
slow. In the short term, new subscribers will enjoy the fixed
wireless technology, while we will upgrade the copper technology
to carry broadband data and Internet services. In the longer
term, the fixed line network will be able to accommodate fully-
integrated services," he said.

Telkom's current exchange capacity now reaches 9.25 million,
with a total of 8.5 million installed lines and 7.8 million
subscribers.

Out of the total subscribers, 71.7 percent are located in
Java, 14.52 percent in Sumatra, 4.46 percent in Kalimantan and
9.27 percent in eastern Indonesia. Based on the economic
classification, the subscribers comprise of households (80
percent), businesses (19.6 percent) and the remaining users are
from the social services category.

According to Suryatin, Telkom currently faces a number of
challenges in expanding its networks. The problems include the
unresolved disputes with its joint-operation (KSO) contractors,
the autonomy policy, rate structure and fragmented demands.

Suryatin and Wityasmoso said the development of
telecommunications sector in Indonesia must be supported by solid
regulations.

"The government should immediately issue regulations on some
important matters such as those related to tariff rebalancing
which splits the long-distance and local calls; interconnection
charges; the clear implementation of the Universal Service
Obligation (USO); the establishment of an independent regulatory
body; and the frequency allocation for the 3G," Suryatin said.

According him, in the current business atmosphere where the
monopoly no longer exists, each player in the telecommunication
sector should be given a more conducive climate to carry out
their business and at the same time to exercise fair competition.
Players must be encouraged to complement each other and to deal
with fair competition.

"This is the era to accelerate the telecommunications sector,
therefore any regulations should be implemented clearly and
transparently," he said.

The development in information technology and
telecommunications business is apparently much faster than the
revision of the regulations.

In such a multiplayer era, when regulations, particularly
their implementation, are not strong, there are other potential
problems threatening the country's telecommunications sector,
which may include charges and installation fees, monthly
subscription charges, the numbering scheme such as local phone
numbers, domestic long-distance access code, international access
code and the Internet telephony network (Voice over the Internet
Protocol/VoIP) code.