Interconnection charges may be lowered

Interconnection charges may be lowered

Anissa S. Febrina, The Jakarta Post, Jakarta

Trying to keep his phone bill as low as possible, Fajar, a 25-
year-old police officer stationed in Semarang, Central Java, has
to subscribe to two different cellular service providers.

"My girlfriend (in Jakarta) uses Telkomsel and I have to pay
more whenever I call her using my first number (provided by a
different operator)," he said.

So he subscribed to Telkomsel too, for love ... and for money.

"By subscribing to the same operator, I can significantly save
every month. But it's not comfortable carrying two cell phones
all the time," said Fajar.

Well, there's good news for him and other telecommunications
consumers: interconnection costs will be lower starting Jan. 1,
2006, although the largest telecommunications firm, PT Telkom,
has yet to sign up to the proposed new charges.

Currently, a Telkomsel cellular subscriber, for example, pays
Rp 813 (8 U.S. cents) for a one-minute local call in Jakarta to a
fellow Telkomsel subscriber. But the charge is higher at Rp 938
per minute if the call is made to a non-Telkomsel subscriber,
with the difference being the interconnection cost.

Interconnection is a system that enables a telephone user of
one network operator -- be it fixed-line or cellular, local,
long-distance or international -- to call a person on a different
network.

The Ministry of Communications and Information's directorate
general of posts and telecommunications is designing a new cost-
based interconnection charge formula with the help of the
telecommunications regulator (BRTI) and European
telecommunications consultant Novum.

"The draft is ready, but Telkom is still objecting to the
origination cost formula. We hope this will be settled before the
start of next year," said BRTI member Suryadi Azis on Tuesday.

He said the different charge formulae could result in lower
revenues for Telkom, the parent company of Telkomsel. Telkom's
operations director Garuda Sugardo refused to comment.

According to the BRTI, the new regulation would not affect
operators' incomes. In fact, it would make a positive
contribution as consumers would make more calls if the costs were
lower.

Interconnection calls contributed 48.7 percent to Telkom's Rp
11.24 trillion revenue last year. Of the total of 11.2 billion
minutes of interconnection, 95 percent came from cellular calls.

Meanwhile, the second largest telecommunications company, PT
Indosat, received Rp 707 billion from interconnection fees, or
only 7 percent of its total revenue in 2004.

Previously, telecommunications service providers applied the
revenue sharing approach, by which charges were set through a
bilateral agreement among operators. This led to domination by
the incumbent operators with larger networks and subscriber
bases.

Samuel Tarigan from the Telematics Policy Research Group said
that the high interconnection charges set by the incumbent
operators could serve as a barrier to entry on the part of new
operators.

With the cost-based method, the government will decide on a
formula based on the cost that an operator bears in providing
interconnection for other operators.

It would also create the sort of perfect-competition market
structure applied in developed countries such as Australia,
Canada and the United States.

The lower charges would result in lower costs that consumers
had to pay in making calls, both fixed-line and cellular, to the
operators.

"We are intensifying the process and hope it will be made
official as soon as possible," communications minister Sofyan
Djalil said.