Telecommunications in Indonesia

Indonesia is an archipelago of more than 17,000 islands. It spans an area that extends some 5,000 km from east to west and 1,700 km from north to south. The population is now more than 220 million, making it the fourth most populous country in the world.

The country was one of the second wave of Asian tigers, with its economy growing rapidly from the mid-1980s to the mid-1990s. However, it was hit badly by the Asian economic downturn that began in 1997, and is still suffering as a result. The economic turmoil highlighted a range of systemic weaknesses in the country’s political and economic structure and these have not yet been fully remedied.

Furthermore, the country has suffered considerably from a range of problems in recent years, caused by terrorist activity, regional unrest, religious conflict and natural disasters.

Despite all these negative issues, the country is starting to show progress in a number of areas. Those that relate to the telecom industry are noted in this Executive Summary.

Indonesia has long had an inferior telecom infrastructure, the principal cause being that the industry suffered for years from neglect and corruption. As a result, even by the early 1990s there were only one million lines serving nearly 200 million people.

At that time, the government realised that its plans to develop the country could not be accomplished with such an inadequate telecom system. However, instead of opening the industry to competition, as was happening elsewhere, the government extended the incumbent operators’ monopolies and allowed them to recruit private investors to fund their operations.

This may have seemed a good idea at the time, protecting as it did the interests of the two incumbents and many others involved. However, in the event, most of these investments collapsed and resolving the many issues that arose became a time-consuming and messy business.

is the ADSL service provided by the main fixed line operator. Although it has now been available for more than four years, it has attracted only a small number of subscribers so far. This is partly the result of it having been available in only a few areas, notably Jakarta and Surabaya, though coverage is now being extended to other parts of the country.

The Internet is not used very widely at present, there being a substantial number of inhibitors to its use. One such inhibitor is the lack of access lines. This problem is being rectified to some extent in the urban areas, but it will remain a problem in the rural parts of the country. A second inhibitor is the low level of disposable income. The Internet comes well down most people’s priority lists.

E-commerce has not developed much in Indonesia so far, and e-government has not made much impact. One of the difficulties faced by customers wishing to buy a product or service online is the absence of any legislation that can be relied upon if problems occur. The government has been considering the introduction of cyber laws, but little progress has been made.

Until 1998, paging was growing quickly, albeit from a small base, but it declined rapidly once cellular services became established. The number of subscribers is now minimal. Trunked Radio Services (TRS) also were initially seen to have particular value in providing services to the country’s large and dispersed rural population, but the service did not develop as expected.

While the country has a high penetration of TV sets, most are used for free-to-air (FTA) stations. The number of Pay-TV subscribers is still very small. However, competition is developing among the operators with a number now entering the market. No doubt, the low penetration of Pay-TV in a country with 59 million households leads companies to perceive there to be a great deal of untapped potential.

Overall, the Indonesian telecom industry is emerging from the doldrums. Competition is being introduced and new services are becoming available. Some segments of the industry are showing particular promise, especially the mobile sector, fixed wireless access and VoIP. However, these developments are taking place in an economic and political climate that is still extremely fragile. Hopefully the country will experience a period of calm that will allow all industries, including the telecom sector, to develop in a rational and healthy manner.