Costly leased lines hamper Internet

Leony Aurora, The Jakarta Post, Jakarta

High prices of leased lines for domestic and international links in Indonesia, which can be up to 48 times more expensive than other countries, is hampering the development of the Internet and should be regulated, a study shows.

The annual domestic leased line fee for a two-kilometer link with a capacity of 2 Megabits per second (Mbps) here is US$18,000, an overwhelming 48 times more expensive than the $376 applied in India, according to a study conducted by LIRNEasia, a regional ICT policy and regulation capacity building organization, in August.

The Indonesian price is quadruple the price applied in Europe, where an average person earns 25 times more than an average Indonesian in a year, said director of organizational development and projects of LIRNEasia Divakar Goswami, who conducted the study with Indonesian information and communication technology (ICT) expert Onno Purbo, recently.

The annual fee for an international link from the country's second biggest telecommunication firm PT Indosat of $108,528, according to the study, compares to $36,868 charged in Denmark and $29,555 in India.

"Such high leased line prices result in high Internet prices for customers, which in turn creates a barrier to rapid Internet diffusion in Indonesia," Goswami said.

Internet penetration -- measuring the ratio between the number of customers and population -- in Indonesia is estimated to be 0.6 percent by the end of this year.

Indosat president director Hasnul Suhaimi said high leased line prices were the result of not having sufficient numbers of users. "We have not reached the economic scale yet for the development of leased lines," he said.

He added that the international fee had declined by some 50 percent in the last four years due to competition with other providers.

"Indonesian prices are going down. It's just that (prices) in other (countries) are falling more rapidly," said Hasnul.

Goswami suggested that the government make a thorough effort to regulate fees for leased lines so that Internet could be provided more cheaply.

One obstacle may be that the government controls shares in the country's largest telecommunication firm PT Telkom and also Indosat. The supposedly independent Telecommunications Regulatory Body (BRTI) is chaired by the Ministry of Communications and Information's director general of Post and Telecommunications, Basuki Yusuf Iskandar.

"It would be hard for BRTI to make policies that could reduce revenues for the two companies," said Goswami.

Chairman of the Indonesia Infocom Society (Mastel) Giri Suseno Hadihardjono said that in India, such regulations did not put telecommunication companies out of business -- in fact, they developed instead.

"We cannot simply copy (India). We have to take into consideration the local conditions," said Giri. The government, he said, had to make up its mind on whether the initial decline in revenues caused by the lower prices was worth the boost in Internet usage.

"Of course, if it's cheaper, more people will use the Internet," he said.

Indonesia has adopted the United Nations' target to ensure that 50 percent of the population gets Internet access by the year 2015.

Table

Annual leased line prices in Indonesia and other countries ---------------------------------------------------------------- Domestic ---------------------------------------------------------------- 2Mbps* link Indonesia India EU benchmark ---------------------------------------------------------------- 2 km $18,000 $ 376 $4,802 200 km $45,000 $7,603 $9,219 ---------------------------------------------------------------- International ---------------------------------------------------------------- 2 Mbps $108,528 $29,555 $36,868 ---------------------------------------------------------------- Mbps: Megabits per second Source: LIRNEasia