FOR MARKETING PERSPECTIVE -- INTERNET BUSINESS -- April 6

ISPs compete for corporate clients, combat viruses

Rudijanto Contributor Jakarta

This year, the Internet user population in Indonesia is expected to grow by around 50 percent. This may seem like a huge increase.

But with the number of Internet Service Providers (ISP) operating here -- currently some 70 companies -- competition will be tight, as each will certainly try to fight for a slice of the market. Hence, most may decide to focus more on the corporate market, which, for several reasons, means better revenue.

The local Internet user population has grown consistently, from about 600,000 in 2002 to 865,706 in 2003. The Indonesian Internet Service Providers' Association (APJII) estimates that there will be 1.3 million users within this year.

A couple of the reasons behind the providers' decision to concentrate more on corporate accounts are the relatively poor infrastructure available for residential areas and the tough competition in this segment coming from state-owned telecommunications firm PT Telkom's ISP, Telkomnet.

"Though some subscribers are still loyal to their ISP, once they experience problems caused by poor infrastructure, they will easily switch to Telkomnet. Thus, Telkomnet has succeeded in grabbing the largest portion of the residential market," said Ferry Prasetyo, APJII public relations officer.

Telkomnet has posed great challenges to local ISPs since its launch in June 1999, with its free subscription Internet service. Although it charges up to Rp 17,500 per minute, the no- subscription-fee offer has attracted residential users who want to avoid administrative hassles.

PT Cyberindo Aditama (CBN), which has a large number of residential subscribers who contribute significantly to the company's revenue, admits that its greatest and most powerful competitor is Telkomnet.

"We have about 45,000 residential subscribers while we now have 500 corporate subscribers. Although the two figures may appear vastly different in terms of quantity, the two segments contribute almost equally to our total revenue," said CBN chief commercial officer Sugiharto Darmakusuma.

The fierce competition has forced several providers to close shop, even state-owned Wasantaranet. The company, which was a subsidiary of PT Pos Indonesia, decided to shut down all of its 41 branches in April 2001. As for Meganet, an ISP based in Surabaya, initially downsized and closed several branches, but then terminated business in 2002.

Ferry revealed that almost 20 out of the 90 ISPs went out of business last year.

Local ISPs now realize that without a significant market share in the corporate segment, their survival will be moot. Telkomnet's solid, nationwide infrastructure is also a stumbling stone.

"This year, next to corporations, we will also focus our marketing on customers who have a different attitude and lifestyle, like those who use the Internet on the go, not only at home," said Sugiharto.

In line with this strategy, CBN has opened Internet hotspots in some cafes and hotels, for example at Plaza Indonesia, Plaza Senayan and Cilandak Town Square.

The company is also working with cellular phone service providers to provide the latest, third-generation (3G) Internet services. Sugiharto said CBN has successfully concluded the trial phase of the advanced system and plans to launch the CBN Mobile service in the next two or three months.

While a number of ISPs are expected to enter the lucrative and fast-growing corporate market, PT Supra Primatama Nusantara (Biznet), with offices in Jakarta and Bali, is one provider that has succeeded in tapping both medium- and large-scale enterprises.

"It does not mean that we do not welcome residential customers, but we are concentrating more of our efforts on this niche market. It is small, but the turnover from even a few companies means large revenue," said Biznet president director Adi Kusma.

Like CBN, Biznet has also established hotspots featuring broadband wireless facilities in various locations. Early this year, the company opened hotspots at 11 Starbucks outlets.

"Frankly, I was surprised to find out recently that so many professionals here lead an extremely mobile lifestyle. They carry notebook computers everywhere and can work almost anywhere, even in crowded places like cafes. That is why I believe targeting them is the right marketing strategy," said Adi.

Fighting for a large slice of the corporate or modern lifestyle niche is not easy, however, as each provider arms itself with the most advanced technology to offer superior features and services to try and beat out its competitors.

For example, PT Circleonecom is another professional player with a focus and strategy similar to Biznet's.

"Even so, the prospects are quite promising. More and more Indonesians are keen to have an Internet connection and many companies now -- medium and even small companies -- cannot do without the Internet," said Circelone senior operation engineer Indra M. Nainggolan.

Among the various services Circleone offers is the leased line and online access with different rates for uplink and downlink.

"We also offer email and web hosting," said Indra.

With more players flooding the corporate segment with their marketing strategies, Indra admits that competition among ISPs has become fairly tough, and subscribers frequently migrate from one ISP to another.

"We do our utmost to maintain customers, because in this tough climate of cutthroat competition, it is highly likely that customers move to other providers. They do not just stick to big- name providers ... they tend to compare services and rates," he added.

For any user -- but particularly businessmen -- security is a primary concern, so local ISPs are also vying to provide the latest security features and technology while keeping Internet access convenient and painless.

The growing number of subscribers also means ISPs must monitor bandwidth more carefully. For instance, Biznet's policy is to immediately expand its bandwidth capacity once 80 percent of its bandwidth has been taken.

Meanwhile, the issue of providing convenient Internet access has prompted CBN to increase by 8 Mbps its 26 Mbps bandwidth fiber optic link to the United States and install a new fiber optic link to Singapore. To date, CBN has a total bandwidth capacity of 163 Mbps.

Another major problem is protecting their subscribers computers from receiving various viruses. Battling viruses entail considerable efforts and even huge funds for ISPs.

"To protect our network from viruses, we have acquired a new Security Gateway equipment that costs between US$50,000 and US$100,000. This is the latest anti-virus device that probably only Biznet has in the country," said Adi.

ISPs have valid reasons to protect their network from viruses. A huge number of viruses can shrink the bandwidth and slow down the access to the Internet.

Like elsewhere, ISPs here have two battlegrounds. Winning the hearts of customers is never easy. The other ongoing battle is against the extremely unexpected foe, the viruses.