International calls: Competition getting tough

Rudijanto, Contributor, Jakarta

International callers might have gained some benefits of cheaper overseas rates as PT Indosat Tbk (Indosat) and PT Telkom Tbk (Telkom) engage in a tough battle to grab significant market share, but the public has a legitimate right to expect more benefits from the competition.

Unlike in the recent past when they had to rely on Indosat and its newly acquired company Satelindo for overseas calls, nowadays callers have Telkom International Call (TIC) 007 and Telkom Global (TG) 017 and even cellular operators, including Bakrie Telecom E-Asia SLI 1188 and SLI 888 as alternatives.

As a long-time and still dominant player in overseas call services, Indosat have to accept the reality that they cannot force they own terms on consumers like they did in the past without risking losing customers.

The opening up of the market in overseas calls to Telkom has already eaten into Indosat's market share. The company even predicts that this downward trend in market share will stabilize only in two years after Telkom's onslaught with its TIC 007 ad TG 017.

"We believe that the competition will make the market grow though, currently, the downward movement of market share looks faster than the growth of market share," Indosat's senior vice president of marketing and sales Bambang Priantono said in an interview last week.

As of the end of last year, Indosat's 001 market share dropped to 63 percent, while its second tier long distance service 008 dropped to 11 percent.

Bambang expects the downward trend in Indosat's market share to stabilize in around April 2006. But without good marketing strategies, the downward trend may continue even longer.

The strategy includes creating a third tier product to protect Indosat's first and second tiers, namely the premium 001 and second line 008. The third tier Indosat 016 is expected able to engage VoIP-based operators, including Telkom's TG 017, in a budget-conscious market.

Though applying similar method of channel compression as that of VoIP, Indosat insists that Indosat 016 has a different quality to VoIP since a channel is only shared by four users.

"VoIP usually provides one channel that is shared by up to 20 users so that the quality of voice suffers. In our Indosat 016, we maintain the quality so that the voice is similar to that of the clear channel," Bambang said.

Telkom itself had set an aggressive target of grabbing 50 percent market share of international calls with TIC 007. The company even boasted of its international call performance by saying that barely six months after launching TIC 007, it has grabbed 25 percent market share.

"We are quite optimistic of being able to grab long-distance market share, based on our performance since the launching of TIC 007 on June 7 of last year," said the head of Telkom's long- distance division Sarwoto.

Like Indosat's 016, TG 017 also claims to compress the channel by one to four. This means that one channel can only be shared by four users at the same time.

"We manage the bandwidth of TG-017 so that the quality will not drop and the traffic will not pass by public Internet," added Sarwoto.

Having practically similar products, both Indosat and Telecom can hardly avoid head-to-head competition in the market. Already, Indosat has accused Telkom of engaging in unfair competition.

Indosat has even reported the alleged blocking of its international call service codes, 001 and 008, by Telkom to the Commission for the Supervision of Business Competition (KPPU).

Though Telkom had previously denied the allegation, the company later admitted that it forced its subscribers to make a request if they wanted to have access to Indosat's 001 and 008.

This 'normally closed' policy has made Indosat's 001 and 008 difficult to access from Telkom's fixed lines and Telkom's Telkom Kiosks (Wartel).

Certainly, Telkom feels it has the right to protect its existing customer base in its nation-wide networks. Having built costly and vast telecommunications infrastructure, Telkom seemed to consider that Indosat was only taking advantage of the existing infrastructure.

The fact is Indosat as a long established player in overseas call services has not developed infrastructure such as fixed lines like that of Telkom. Indosat only has gateways for its overseas call services.

Under previous monopoly arrangements that placed Telkom as the only provider of domestic calls, Indosat as the provider for overseas calls certainly felt no need to develop its own infrastructure for fixed lines.

Facing such a tough challenge in the field, Indosat is now relying on government regulations and its existing cellular customers. The issuance of ministerial decrees, including Ministerial Decree Number 28, 2004, was certainly welcomed by Indosat.

The decree states that every telecommunications network operator is obliged to provide interconnection to any service provider that requests it.

But the battle for interconnection was not going to be an easy one. In early May of this year Telkom employees demanded that the Minister of Communication and Information revoke decrees numbers 20, 29, 30/2004 concerning the opening up of SLI codes in Telkom's network. The decrees were deemed to inflict losses on Telkom.

Not wasting time in the battle for interconnection, Indosat has shifted its campaign to focus on their own cellular customers that have reached 10 million.

"We will use all our network of customers as we already have cellular users, including those using Mentari and StarOne. Instead of using fixed lines, we encourage people to use cellular phones for overseas calls as the price of cards is getting cheaper and cheaper," Bambang said.

But Indosat will not be the sole player in the overseas call service via cellular market since other mobile phone operators also provide such services. Bakrie Telecom's E-Asia, for example, has recently offered a similar service, which enables its subscribers to make international calls to 22 countries in Asia Pacific regions as well as Europe, the U.S. and Canada.

Consumers certainly benefit from the competition among players as their rates are getting more competitive. However, the public may gain more if the competing operators battle fairly and responsibly.

By opening up the telecommunications market to competition, Indonesia certainly has a right to expect faster development of telecommunications infrastructure.

According to data from the Post and Telecommunication Directorate General, the number of fixed-line telephones in Indonesia was only 8.7 million, while cellular phones amounted to 23 million.

Without opening the market to investors, Indonesian fixed-line penetration of 4 percent will lag behind that of Malaysia's 19.79 percent, 46.36 percent in Singapore, 9.87 percent in Thailand, and 6.85 percent in Vietnam. (Telephone penetration is calculated based on the number of telephones for every 100 people).

Although is looks large, the cellular phone population is mainly concentrated in big cities, leaving most of the country's towns and rural areas still way behind. Combining cellular phone and fixed-lines, Indonesia only recorded 10.45 percent penetration in 2004.

While opening the country's international call and long distance call sectors to competition is a good start, the public as the recipients of the benefits of competition has the right to expect that it will speed up the development of the country's telecommunications infrastructure. Otherwise, the government should review its policies.