New law to reform telecommunications sector

New law to reform telecommunications sector

By M. Suwarso

This is the second of two articles on the new
telecommunications bill passed by the House of Representatives.
The first article examined the changes in the world of
telecommunications that led the government to enact the new bill.

JAKARTA (JP): No doubt the new telecommunications law is a
radical departure from the old law No. 3/89, which was based on
state monopolies that for so long resisted the path to market
liberalization in the provision of basic telephone services. The
following aspects of sector reform are addressed by the relevant
provisions in the new telecommunications law.

With the provision on the prohibition of monopolistic
practices and unhealthy competition in the telecommunications
sector, the law pertinently forbids such practices. While Law No.
5/99 on competition deals with the same subject for the
commercial world in general, the stipulation in the new
telecommunications law forms the basis for preventing
anticompetitive behavior in the provision of telecommunications
services.

It will be interesting to see how in practice both laws will
interoperate. Furthermore, the new telecommunications law
provides specific measures to prevent anticompetitive safeguards,
including rulings on interconnections and the licensing and
allocation of scarce resources like frequencies and numbers.

With the liberalization of the sector, multiple networks
emerge and interconnection -- especially interconnection with the
already existing networks of PT Telkom and PT Indosat -- becomes
a critical issue in creating an open and competitive
telecommunications market.

Given these two companies' decades-long head start, new
entrants cannot succeed if their networks are operated as a
stand-alone entity or an "island". They need to reach the
customers of the established companies and in turn be reachable
by them. Thus, to encourage competition with an established
incumbent with extensive service coverage, interconnection with
the incumbent's network on fair and nondiscriminative terms has
to be assured. This is exactly what the new telecommunications
law stipulates in its provision on interconnection.

To ensure an impartial licensing process, the new
telecommunications law stipulates that basically all
telecommunications operations will be based on licenses.
Furthermore, the process of awarding licenses shall be fair,
transparent, nondiscriminative, uncomplicated and the period from
application to announcement of the outcome shall be as short as
practicable.

An explosive demand for wireless communications, in particular
mobile telecommunications, will cause considerable pressure to an
effective and interference-free frequency spectrum, which is a
finite natural resource. The new telecommunications law
stipulates that each frequency usage shall require prior
assignment by the government and it shall be in accordance with
its intended purpose. Furthermore, charges shall be payable for
frequency assignments.

Assignments are to be based on availability of the applied
frequencies. Where the number of applications exceeds the
available frequency spectrum, the elucidation of the concerning
provision states that frequency assignments be preceded by
proceedings that may include auction.

According to the new telecommunications law, the government is
responsible for the structuring and configuration of the finite
numbering space so that the requirements of users and network and
service providers can be satisfied. Numbers shall be assigned
upon the application of network or service providers on a fair,
transparent and nondiscriminative basis.

The shift of the government's role in the telecommunications
sector from network operation and ownership to policy making,
regulation, supervision and control is clearly spelled out by the
concerning provision of the new telecommunications law. In
addition, it specifies who is eligible for the provision of
telecommunications networks and services. They are legal entities
that include private companies. This is in sharp contrast to the
old law No. 3/89, which stipulated that the operation of
telecommunications was the responsibility of the state and could
be delegated (only) to a nominated state-owned company.

Furthermore, the new law mentions the possibility of
entrusting the function of regulation, supervision and control to
a regulatory body. Also an independent forum representing the
industry, users associations and academia is to be formed. The
function of this forum will be to advise the government on policy
making and regulatory issues. Conversely, the government shall
consult the forum before drawing up regulatory rulings, including
tariff issues.

The telecommunications, broadcasting, information technology
and content sectors are undergoing an increasing convergence, as
evidenced by the Internet, among other examples. This convergence
raises a number of important policy and regulatory issues.

The technological convergence of networks which supply similar
services in the form of digital data is now a reality. But no one
can specify the speed and scope of its impact on markets and
services.

The position taken by the new law is apparently to recognize
that sector-specific rules will continue to be necessary, while
at the same time a distinction should be drawn between "networks
or infrastructure" and "content".

Networks or infrastructure should be governed by a single set
of regulations as specified in the new telecommunications law,
while content provisions could continue to be subject to existing
and separate legislation on broadcasting. In this context, the
law includes the broadcasting network in its regulatory domain as
"special telecommunications".

A number of provisions in the law are intended to protect the
interests of consumers. These include provisions on provider
liability, users' damage claims, telecommunications secrecy and
rate regulations.

In addition, penal and administrative fine provisions are
included for offenses or violations against obligations or
prohibitions as stipulated by the new telecommunications law.

Given the title of this article, the enactment of the new
telecommunications law by no means signifies that
telecommunications sector reform is approaching its final
destination. Numerous ordinances to guide the implementation of
the new law have still to be crafted.

In addition, regulation needs to be strengthened. But
strengthening regulations in a country where resources are not so
plentiful will practically mean building regulatory competence
from scratch. Even though it is a daunting task, the momentum
created by the enactment of the new law will hopefully provide
the Indonesian telecommunications sector sufficient stimulus to
meet the challenges.

The author is a member of the Indonesian Telecommunications
Society (MASTEL).