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).