Indosat strains to make way in telecom duopoly

Indosat strains to make way in telecom duopoly

Evi Mariani, The Jakarta Post, Jakarta

One year after the government officially lifted the decades-
long monopoly held by state telecommunications firm PT
Telekomunikasi in the domestic call business, the firm still
controls the business.

Meanwhile, PT Indonesia Satellite Corporation (Indosat), which
the government granted a license to engage in the local call
business a year ago, is still struggling to get a foothold in the
business.

So far, data show that Indosat has only managed to sell about
5,000 of its 20,000 fixed phone line capacity in Jakarta,
Surabaya, Medan and Batam, while Telkom has 7.8 million phone
lines across the country.

Last year, in an effort to boost competitiveness in the
country's telecommunications sector, the government unveiled a
plan to create a duopoly, in which both Indosat and Telkom are
allowed to engage in the domestic and the international call
business.

Previously, Telkom monopolized local and long-distance calls,
while Indosat had a monopoly over international calls.

In the first phase of creating a duopoly, the government
granted Indosat a license to engage in local calls last year.

The second phase was scheduled to start on Aug. 1 this year,
when the government was supposed to grant a long-distance call
license to Indosat and an international call license to Telkom.

However, I Ketut Prihadi, spokesman for the Ministry of
Transportation's Directorate General for Post and
Telecommunications, told The Jakarta Post on Friday that the
license issuance had been indefinitely delayed.

Ketut refused to specify the reason behind the delay.

Meanwhile, Indosat's corporate secretary, Indar Atmanto,
acknowledged that the company's effort to develop its domestic
call business had been hampered by stalled talks about
compensation for the premature loss of its monopoly over
international calls.

The firm, which is thus far only allowed to provide local
services in certain areas, will be allowed to provide services
nationwide only if it, Telkom and the government come to an
agreement over compensation.

Compensation is related to the early termination of both
operators' exclusive rights.

Under a previous agreement, Telkom was to have the exclusive
right to operate local call services until 2010, long-distance
call services until 2005, and Indosat was to have the exclusive
right to international calls until 2004.

However, the government decided to introduce the duopoly by
giving a local call license to Indosat in 2002, long distance
calls in 2003, along with an international call license to
Telkom. The compensation packages were therefore based on the
projected profits of Telkom and Indosat had the duopoly not been
introduced ahead of originally planned.

In December, the Directorate General for Post and
Telecommunications announced that an independent appraisal team
had finished calculating the compensation packages, and were
expected to be approved by relevant ministries in January this
year.

However, the government has yet to announce the compensation
packages.

While Indosat is still struggling to get a foothold in the
domestic call business, Telkom cleverly introduced its
international call number, 017, despite not yet being issued a
license for the service. The government cannot ban the new
service since Telkom uses voice over Internet protocol (VOIP)
technology, which remains unregulated.

It was reported that last year some telephone users were
unable to use Indosat's 001 international call number, and that
when they reported the problem to Telkom, the operator told them
to use 017.

Commenting on the situation, Indosat's corporate secretary
director Sutrisman said: "In my opinion, the problems hampering
the duopoly process are policies, regulation and preparedness of
both operators (Telkom and Indosat) to enter the duopoly
arena.

"The question is: Does Telkom support the duopoly process?" he
asked.

Sutrisman expected the newly established Telecommunications
Regulatory Body (BRTI) to find a remedy for the situation and
"push for fair competition" in the industry.

Last December, the government sold its 41.9 stake in Indosat
to Singapore Technologies Telemedia (STT). The privatization
sparked protest from several parties and raised speculation that
Indosat's new owner would focus on Indosat's profitable mobile
communications service.

But STT was quick to respond that it was still interested in
the fixed domestic call business.

Duopoly's timeline

August 2002: The government issues a fixed phone call license to
Indosat. Duopoly in the telecommunications sector begins.

October 2002: Telkom launches international call number 017 using
VOIP. Later, phone users reportedly had trouble using Indosat's
001 international call number.

November 2002: Telkom and Indosat sign interconnection fee
agreement.

December 2002: The government announces an independent team has
finished calculating the compensation packages.

July 2003: The Telecommunications Regulatory Body is established.
It is expected to unravel problems in the telecom sector.