Expert calls for better cellular phone service

By Christiani Tumelap

JAKARTA (JP): Twelve years ago, Indonesia was one of the first among ASEAN nations to introduce a cellular telephone system. Despite the slow growth in the number of users compared to other countries in the region, Indonesia now has 1.6 million people enjoying this convenient form of wireless communication.

The fact that the cellular phone users have increased beyond the capability of operators -- especially GSM services -- to provide lines has become a serious concern for Garuda Sugardo, a keen observer of the cellular telecommunications industry.

He said the country's cellular network is currently in chaos.

The future of the country's cellular telecommunications is in fact very promising, he said. But a lot of things need to be done by operators to anticipate the predicted rise in cell phone and service demand, said Garuda, a former executive at the country's first GSM cellular operator, Telkomsel.

Garuda, now vice president and coordinator for new business development at state telecommunications firm PT Telkom, shared his views on the expansion of the cellular telecommunications and its future in the soon-to-be liberalized industry in an interview with The Jakarta Post.

Following are excerpts from the interview:

Question: Briefly describe the development of cellular telecommunications services in the country

Answer: The cellular telecommunications system was first introduced here in 1987.

We have three systems now. The first to be introduced is the Nordic Mobile Telephone (NMT) by the country's only NMT operator Mobisel. The Advanced Mobile Phone Service (AMPS) followed in the late 1980s, introduced by three operators Metrosel Nusantara, Komselindo and Telesera. The Global System for Mobile Communications (GSM) was the last to enter the market in the early 1990s. There are three GSM900 operators so far, Telkomsel, Satelindo and Excelcomindo.

The country's cellular phone industry experienced its "golden age" from 1992 to 1994, when the AMPS system dominated the market. Investors took full control of the marketing and distribution of the handsets and services. Cell phones were very expensive and considered as status symbols. Despite the skyrocketing prices, the demand for handsets usually went beyond available supply.

The monopoly in the cellular business was changed for good with the entrance of the first GSM player Telkomsel in 1996. The industry then became an open competition market, with many operators playing the open distribution channel. Competition between the three GSM operators benefited customers and coverage expanded to 27 provinces. The price of handsets also started to fall and fluctuate according to real market demand.

Q: How would you describe the current cellular phone users?

A: People who use cell phones should actually be distinguished into two groups: the subscribers, who register themselves to cellular operators and pay the monthly membership fee, and the users, who enjoy cellular services without any regular administration obligations to the operators.

Based on the intensity of cell phone usage, cellular operators classified their customers into four groups: those who spend below Rp 300,000 a month, between Rp 300,000 and Rp 1 million, between Rp 1 million and Rp 3 million, and over Rp 3 million.

Customers with post-paid cards use their cell phones for between 15 and 20 minutes a day and contribute more to operators with an average of Rp 250,000 per month, compared to the pre-paid card users who on average spend only around Rp 125,000 or less each month.

Due to the uncomplicated administration and zilch obligations, the sales of the pre-paid cards have outstripped the post-paid since they were introduced in 1998 as part of operators' strategy to offset the plunge in the number and usage productivity of the traditional post-paid customers amid the economic crisis. Over 60 percent of total cell phone users use the pre-paid cards.

Q: Does the large number of cell phone users also reflect the degree of demand for an advanced telecommunications system?

A: Along with the decline of the price of cell phones, more people can now afford to buy the device, claiming it as a utility item and a necessity for modern daily life.

But, I'd say that many people still consider cell phones as part of fashion and style. Many Indonesians like to show off.

They want to be considered up-to-date. They often buy the new model available on the market to replace their current one, modify their handsets with all the attractive accessories or get themselves handsets that are compatible with computer systems or operate in dual-band, even tri-band.

They are so easily lured by the promotion and advertisements and buy things they don't really need. Only incredibly busy professionals and executives, who deal a lot with computers, really need a handset with in-built infrared and a modem. For the rest of us, an ordinary handset is enough, really.

Q: The Indonesian Consumers Protection Foundation said most of the existing cell phone users cannot be counted as real users, because only 8 percent of the estimated 60 percent of people in big cities that are potential customers have the real financial capacity to use their cell phones productively. Do you agree?

A: I agree that many cell phone users, the pre-paid card users, can be called 'unreal' users because they are not registered as subscribers with any operators.

Cellular operators everywhere in the world tend to say that they get a lot of customers. It's hard to tell the real number of active cellular customers an operator has, unless we see it from the company's tax documents.

It is good for an operator to have a large number of customers. But, it is more important for them to develop their customer base by encouraging people to be registered customers, not just cell phone users.

In the future, when real high-tech telecommunications swarm the country, operators with no solid customer base will find it difficult to follow the development because high-tech telecommunications cannot be offered to just any cellular users, but to the registered customers, due to administration obligations.

Q: What's your prediction for the future supply and demand of cellular services?

A: If only there was no economic crisis, the number of cell phone users could be expected to have reached around 2.2 million in 1998, up to 3.2 million in 1999 and to reach up to five million in 2000. (Telkom recorded only 1.38 million cell phone users as of March 31 this year.)

We were quite optimistic when making the predictions because we believed the market would surge in line with the immediate entrance of the dozens of newly licensed cellular operators to offer the other systems like GSM1800 and PCN CDMA. CDMA or Code Division Multiple Access is a digital communication technology used by some operators to provide the PCN, a newer class of digital wireless communications service using a different radio frequency of cell phone recently authorized by the American Federal Communications Commission.

None of the new players, however, have started business, due to the economic crisis.

Now, speaking of future supply and demand, I believe that both customer buying-power and market supply capacity will surge.

With regard to the continued increase in the demand for SIM cards despite the slow economic recovery, it is very important to GSM operators to seriously expand their service capacities.

I suggest that GSM operators simultaneously increase their line capacity by 1.5 million phone numbers each within the next six months, and then regularly add one million new numbers each every six months, so that Indonesia will have around 7.5 million cellular users by 2003.

Q: How would you rate the services currently provided by the cellular operators?

A: I don't see that any of the existing cellular operators do really care about the doctrines for cellular operators: coverage, capacity, cost, quality and service. They don't really comprehend the importance of fulfilling the doctrines, which are the guidelines toward being able to provide customer satisfaction.

I also don't see that any of the local partners in the three GSM operators have experienced a real transfer of skills, know- how, expertise and networking from their so-called "world class" foreign partners. They need it to improve service quality.

Q: A new telecommunications bill is to be passed on Aug. 25 by the House of Representatives to replace the existing Telecommunications Law 3/1989. How will this new law affect the country's cellular telecommunications industry?

A: The new bill, which aims particularly to eliminate the monopoly currently held by the government in the sector through Telkom, will make customers the king with its stricter requirements for network and service providers to uphold the customers' rights.

Cellular operators will not be too affected by the new law actually, because they are already used to the competitive setting. What they need to do to anticipate the application of the new law is to seriously improve their services.

The new law will be more beneficial to new players as they will have the freedom to enter the telecommunications business without necessarily collaborating with Telkom.

As for Telkom, it should improve and prepare its human resources to get used to the open competition environment. With all the experience it has gained over years, I believe Telkom will still place itself as the leading operator.

Q: Will the presence of new cellular operators help boost development of the industry?

A: A multi-operator system will only work well as long as the new players use the same basis of technology used by the existing players. Similar technology will make it easier to apply options such as mergers and collaboration.

The problem is, these new operators offer different systems, the GSM1800 and PCN CDMA.

Another big question is whether these new operators will keep their pledged commitment to really provide a new and better service and not instead commercialize their licenses to profit from it.