Phone bills to bulge, DPR approves hike

Phone bills to bulge, DPR approves hike

Tantri Yuliandini, The Jakarta Post, Jakarta

The House of Representatives finally approved on Monday the
government's proposal to raise phone rates, but asked the
government to delay the imposition of the rates until next year
and reduce the increase to a level affordable by the public.

Amri Siregar, vice chairman of House Commission IV overseeing
infrastructure and transportation affairs, said that the House
deemed the government's initial plan of raising phone rates this
year as inappropriate, as the economy had not yet improved.

"But Commission IV can accept the government's proposal to
increase telephone rates in 2002," he said at the conclusion of a
meeting with the government here.

The government has proposed to raise phone rates by 21.67
percent in the first phase, as part of a three-year plan to crank
up rates by 45.49 percent.

However, Amri said, the increase was too steep and burdensome
for the public.

"We will not dictate by how many percent the rate should be
increased, but we of the Commission think that about 15 percent
is reasonable," he said.

State telecommunications company PT Telkom's director of
operations Komarudin Sastrakoesoemah said he hoped the new rates
could be implemented by January next year, as they had already
been taken into account in Telkom's budget for 2002.

The House's ruling is the most recent in the long, drawn-out
controversy over the telephone rate increase, which began almost
a year ago. The last time the government imposed a telephone rate
hike was in 1999.

The government had initially planned to increase telephone
rates by 21.67 percent in 2001, another 15.6 percent in 2002, and
8.22 percent in 2003.

The plan was thwarted by the House in June this year when
telecommunications experts said that they had found the increases
to be a lot higher than 21.67 percent.

The government, as well as Telkom, has also been under fire
from the Indonesian Consumer Foundation (YLKI) as the rate scheme
was considered "too confusing".

Despite recording profits from one year to the next, Telkom
and the government claimed that an increase in telephone rates
was crucial for future expansion of the telephone network and to
attract new investors to the sector.

Telkom recorded a 17 percent increase in net income, to Rp
2.54 trillion last year, compared with 1999.

Telkom, as a state-owned company, stopped receiving funds from
the state budget from 1985 and had to generate sufficient profit
from its own operations to meet the government's demand for
telephone lines across the country.

The company is obliged to install 1.2 million telephone lines
by the end of 2004, including 257,990 lines this year.

However, according to Telkom, without a rate increase this
year, the company would only be able to build a maximum of
129,000 telephone lines.

As of Sept. 30, 2001, Telkom had installed a total of 7.1
million telephone lines across the country, an equivalent of 3.24
telephone lines for every 100 people.

Director general of posts and telecommunications Djamhari
Sirat said on Monday that the approval given the House for the
new rate scheme would encourage investment in the
telecommunications sector, as continued disputes over phone rates
would have deterred foreign investors from entering the sector.

"The rate increase was meant to begin breaking entry barriers
before the market was opened up for competition," he said,
explaining that open competition was to be introduced by 2005.

The government will revoke Telkom's monopoly over local
telephone services in 2002, its domestic long-distance call
services in 2003 and state-owned Indosat's exclusivity rights
over international direct-dial services in 2003.

Djamhari said a clear-cut increase in phone rates and the
government's goodwill to increase rates would also help
facilitate the government's privatization plans for Telkom and
Indosat, as these would attract investors to buy shares in the
companies.

"At current rates, it would take investors about seven years
to make a return on investment; this is the main problem that has
been keeping investors out of the sector," Djamhari said.

The government plans to divest 14 percent of its 66.19 percent
shareholding in Telkom and its 65 percent shareholding in Indosat
as part of its privatization of state-owned companies.