House backs cell phone operators' policy on rates

House backs cell phone operators' policy on rates

JAKARTA (JP): The House of Representatives agreed on Thursday
to a proposal from local cellular phone operators to change their
current government-regulated charge scheme to a market-driven
one.

"We agree that the government should relinquish its stiff
control over the telecommunications sector, particularly the
charges," Sudjarwo Sukardiman, the chairman of the House
Commission IV for infrastructure and transportation affairs, said
at the conclusion of a hearing with cellular phone operators.

He added, however, that the government's role was still needed
in setting the maximum price for call charges.

Sujarwa said a market-driven charge scheme would have a
positive impact on customers because it would push operators to
compete with each other in providing the best service for the
most reasonable price.

The hearing on Thursday was attended by representatives from
the country's seven operators: PT Satelindo, PT Telkomsel and PT
Excelcomindo, which use the global system for mobile
communications (GSM); PT Telesera, PT Metrosel and PT Komselindo
use the advanced mobile phone system (AMPS); and PT Mobisel which
use the Nordic mobile telephone system (NMT). The seven operators
currently serve around 2.4 million subscribers.

The operators acknowledged that it would take time for the
government to change the tariff system. "But at least the
existing charges should be increased," one of the
telecommunications operators said at the hearing.

The operators want the government to increase the call charge
for regular mobile phone calls from its current level of Rp 325
(about 4.5 U.S. cents) per minute to a more reasonable level.

The Ministry of Communications agreed in September last year
to raise airtime rates for regular cellular phone services by 23
percent -- from Rp 325 per minute to Rp 400 -- an increase which
was supposed to be implemented by October the same year. The
decision, however, has never been put in effect.

The operators are free to set call charges for their pre-paid
services.

President of Excelcomindo Gerald F. Rossi said the government
should increase call charges because the current tariff was no
longer sufficient to cover operators' expenses, which were mostly
paid in U.S. dollars.

"It's just about time to increase the call charge. The last
time the government raised the call charge for cellular services
was in February 1998," he said.

Satelindo president Kadir Assegaf said operators were finding
it very difficult to make major investments to upgrade
facilities, let alone build new lines, because their income was
not sufficient.

A report by the Association of Indonesian Cellular
Telecommunications Operators (ATSI) shows that the amount of
total investment by the seven operators has declined sharply from
between $600 million and $800 million a year in 1995 and 1996 to
only $100 million a year since 1997.

No major investments were made by any of the operators on new
facilities in 1998 and 1999. This has resulted in poor services,
including frequent bad transmission and reception "black spots".

ATSI executive Rudiantara said the ideal call rate for
Indonesia's cellular phone industry was around 11 U.S. cents per
minute.

"The current tariff for mobile phone call services of Rp 325,
or only about 4.5 cents per minute, is much cheaper than the
average international charge of 15 cents per minute," he said.

He said that if operators could set their own charges, they
would be able to accumulate funds needed to invest in more
infrastructure to accommodate growing demand.

ATSI predicts the number of mobile phone subscribers will
reach over three million by the end of this year as against 2.05
million registered at the end of 1999.

Rudiantara said operators were very pleased to receive the
commission's support and would immediately submit their proposal
on the change in the overall tariff scheme and increase in the
current airtime charge to the government.

The rate for regular cellular telephone services is currently
set by the government based on proposals from telephone
operators, but the change is subject to House approval. (cst)