Government liberalizes telecoms sector

Government liberalizes telecoms sector

Rendi A. Witular, The Jakarta Post, Jakarta

State-owned international telecommunications provider PT Indosat
will be allowed to start up local call services as of Thursday,
marking a change for the country's fixed-line telecommunications
sector from a monopolistic structure to one based on competition.

But Coordinating Minister for the Economy Dorodjatun Kuntjoro-
Jakti said during a press conference on Wednesday that Indosat's
local call business for the time being would be limited to
Jakarta and Surabaya.

The move is part of the government's deregulation policy in
the fixed-line telecommunications sector. For many years, both
local and long-distance domestic services have been subject to a
monopoly enjoyed by state-owned PT Telkom, while international
calls have been the exclusive preserve of Indosat.

Under the plan, Telkom will be allowed to enter the
international call business in August of next year.
Simultaneously, Indosat will be allowed to start operating long
distance call services.

Dorodjatun said that a special independent team had been
assigned to complete the technical details of the new policy,
including settling the vexed question of compensation packages
for both Telkom and Indosat for losing their exclusive rights.

He said that a final decision was expected in November, after
which Indosat would be allowed to fully operate its local call
services.

The government is also set to appoint a team to draft the
necessary regulations and to oversee the new structure in the
fixed-line telecoms industry.

Indosat is apparently ready for the local call business as it
has already hooked up 8,000 and 5,000 local fixed telephone lines
in Jakarta and Surabaya respectively.

The government expects the liberalization move would benefit
consumers as competition would result in better service and
cheaper phone tariff. But analysts doubted this, saying that in
the near term, Indosat's entry into the local call service would
mainly cater demand which had not been fufilled by Telkom.