KRETEK INTERNET: INDONESIA CASE STUDY
March 2002
INTERNATIONAL TELECOMMUNICATION UNION GENEVA, SWITZERLAND This report has been written by Michael Minges of the International Telecommunica- tion Union (ITU) It was edited by Vanessa Gray and formatted by Nathalie Delmas The report is based on field research carried out 30 April 4 May 2001 as well as articles and publications sourced in the document The Directorate General of Posts and Telecommunications (Postel) provided incalculable support; without its assistance the report would not have been possible Equally, the report would not have been possible without the cooperation of the many from the Indonesian public and private ICT sector who offered their time to the reports author Special thanks to Mr S Abdulrachman and Ms N Purwati of the Indonesian Infocomm Society (MASTEL) and Mr R Rusdiah of the Indonesian Internet Kiosk Association (AWARI) for their comments The report is one of a series of case studies examining the Internet in South East Asia carried out in 2001 Additional information is available on the ITUs Internet Case Study web page at http://www itu int/ITU-D/ict/cs/
Information in this report is valid as at December 2001
The report may not necessarily reflect the opinions of the ITU, its members or the government of the Republic of Indonesia
Kretek in the title is Indonesian for the word crackle This is the sound that burning cloves make In Indonesia, cloves are combined with tobacco to produce sweet smell- ing Kretek cigarettes Kretek is uniquely Indonesian and accounts for over 90 per cent of annual cigarette consumption in that country
© ITU 2002
ii Contents
1 The crisis effect 1 11 Demographics 1 12 Economics 2 13 Human Development 2
2 Telkom Territory 4 21 History 4 22 Mobile 5 23 KSO 6 24 Two domestic giants 6 25 Policy and regulatory issues 7
3 The End of the Free Internet Market 10 31 Market developments 10 32 Tariffs 11 33 Interconnection 11 34 Broadband 11
4 Mosques and Warnets 13
5 Bring me the applications 16 51 Government 16 52 Health 17 53 Education 18 54 Electronic Business 19
6 Archipelago@Crossroads 23 61 Recommendations 23
Annex 1: State of the Internet in Indonesia 27 Annex 2: Telecommunication statistics 29 Annex 3: Schedule of meetings 30 Annex 4: Abbreviations and Acronyms 31 Annex 5: Useful web sites 32 Annex 6: Bibliography 33
iii Figures
11 Map of Indonesia 1 12 Freefall 2 13 Human Development Gaps 2 21 Mobile subscribers 6 22 KSOs 6 31 Internet market 10 32 Internet dial-up tariffs 11 41 A mosque is never far away 13 42 We like Warnets 14 61 Indonesia's Potential Net Market 25
Tables
21 Mobile operators 5 22 Replita targets 9
Boxes
21 Indonesia's telecom history 4 22 IMF and Telecoms 9 51 Indonesian Silicon Valleys 20 52 News hungry 21
Annexes
11 State of the Internet in Indonesia 27
iv 1 The crisis effect
1 The crisis effect
For the past few years, the Republic This is a land of deep contrasts-more of Indonesia-the world's fourth most than a dozen ethnic groups speaking populated country-has over 100 languages spread across been through its biggest 6'000 inhabited islands (out of more turmoil since it declared than 13'000)# The sharp contrast independence from the between old and new, rich and poor Netherlands on the 17th is exemplified by packed shopping of August 1945# It has not malls while across the street, bare foot only had to contend with street vendors dispense satay, the a regional financial crisis ever present kretek clove cigarette beginning in 1997, but a dangling from their lips# socio-political one as well# Longtime President 11 Demographics Suharto left office in 1998# His departure Located in South East Asia, the unleashed political Republic of Indonesia is primarily uncertainty and internal water# Out of a total area of 9#8 million tension across this square kilometres, 81 per cent is sea# diverse nation# The The country is divided into Unfinished Jakarta effects of these crises are 33 provinces, 268 regencies, Skyscraper - May 2001 highly visible# The capital, 73 municipalities, 4044 sub-districts Jakarta, is littered with and 69065 villages# The population abandoned skyscrapers of the country was projected at and its previously metamorphic 210#5 million in 2000, a growth rate skyline basically unchanged since of 1#4 per cent compared to the 1997# previous year# The growth rate is down
Figure 11: Map of Indonesia
Source: Permanent Mission of the Republic of Indonesia to the UN
1 Indonesia Internet Case Study
from some two per cent in the period Figure 12: Freefall 1980-90 reflecting the success of family planning programmes# The United States Dollar middle rates distribution of Indonesias population against Indonesian Rupiah is heavily skewed# The capital Jakarta, located on the island of Java, had an estimated population of 9#6 million in Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Mar-01 1999, accounting for almost five per cent of the countrys total inhabitants# The island of Java is home to some 59 per cent of Indonesians but only 2’383 accounts for 6#6 per cent of the land area# At the opposite extreme, the 4’650 province of Irian Jaya, in the far east of the country, accounts for some 7’100 22 per cent of the territory but just 8’025 one per cent of the population# Some 9’595 60 per cent of the population lives in 10’400 rural areas# There are an estimated 51#2 million households or just over four members per household# Source: Bank Indonesia
12 Economics between 1983-92 and annual average Indonesias per capita income of growth of over seven per cent US$ 570 has plunged by almost half between 1992 and 1996# since its peak of US$ 1110, just before the economic crisis#1 The drop 13 Human Development was first a consequence of the Asian financial crisis, which began in In the year 2001, Indonesia found Thailand in July 1997 and then rippled itself ranked 102nd out of through the rest of the region# The 174 countries, placing it in the Indonesian Rupiah (Rp) plummeted medium human development (see Figure 1#2) as investors pulled grouping# Although one of the lowest out# The decline in Indonesias ranked South East Asian countries economy was its sharpest since (only above Myanmar, Cambodia and independence and awakened Laos), Indonesia is about where it suppressed political and social chasms# These in turn led to instability Figure 13: Human Development Gaps that has frozen foreign investment and kept the country in limbo, forcing it 1999 to turn to the International Monetary Fund (IMF) for a US$ 10#4 billion loan in November 1997#2 97.8 Jakarta 88.2 Indonesia 71.1 72.8 The crisiscapped by a decline of 65.5 NTB economic output of 13#1 per cent in 57.8 1998, the highest in Asiabrought to end several decades of impressive growth# Economic expansion was 9.7 6.7 initially sparked by oilIndonesia is 5.2 the only Asian member of the 11-nation Organization of Petroleum Life expectancy Adult literacy Mean years of Exporting Countries (OPEC)# Later, as schooling in most East Asian countries, Indonesia embraced trade Note: NTB refers to Nusa Tenggara Barat, the lowest particularly in manufactured goods ranking of Indonesia's 27 provinces in terms of human to diversify and grow its economy# The development results led to an annual average Source: BPS economic growth of 6#3 per cent
2 1 The crisis effect
should be in terms of human in poverty rising over the last few development given its per capita years (although there was a decline income# There is cause for concern in 1999)# There is also a national however as Indonesias rank has been human development divide, with a slipping, again caused by the notable gap in life expectancy, adult economic crisis# This is reflected in literacy and mean years of schooling national poverty statistics that show between Jakarta and other parts of the percentage of the population living the nation (see Figure 1#3)#
1 World Bank Indonesia Data Profile http://devdataworldbankorg/external/ CPProfileasp?SelectedCountry=IDN&CCODE=IDN&CNAME=Indonesia&PTYPE=CP 2 In support of the loan, Indonesia had to commit to a 48 point Memorandum on Economic and Social Policies See Indonesia Letter of Intent 31 October 1997 wwwimforg/external/np/loi/103197htm
3 Indonesia Internet Case Study
2 Telkom Territory
21 History The roots of liberalization can be traced to the corporatization of the Like many countries around the world, two state-owned companies for Indonesia has progressively liberalized domestic P#T# Telekomunikasi Indo- its telecommunication sector over the nesia (Telkom) and international last decade# Some of the steps it has P#T# Indonesian Satellite Corporation (Indosat) telecommunication services in the early 1990s# In October 1994, Indosat completed an initial global public offering of shares# This was followed by the partial privatization of Telkom in November 1995# Unlike many other developing countries, shares in both companies were sold to the public rather than a strategic investor# Today, the government remains the largest shareholder in both companies# PT Telkom - Jakarta A second international services competitor, PT Satelit Palapa taken are related to global trends, Indonesia (Satelindo), was granted others are specific to the South East a license in 1993 and began offering Asia region and a few are distinctly services in August 1994# However, Indonesian# The choices have been the degree of competition would influenced by the tension between the inevitably be limited# First, Indosat desire to protect entrenched interests owned 7#5 per cent of Satelindo (and on the one hand and the need for Telkom 25 per cent)# Second, private investment on the other# In Indosat and Satelindo were obliged this traditionally statist country, a to charge identical tariffs, reluctance to reduce government established by the government, with control also plays a role# competition to be based on quality
Box 21: Indonesia's telecom history
In 1884, the Dutch colonial government established Sumatera, which were transferred in the 1970s a private company to provide postal services and The Government separated postal and domestic telegraph services and, subsequently, telecommunications services in 1965 into two state- international telegraph services Telephone services owned companies, PN Pos dan Giro, and PN were first made available in Indonesia in 1882 and, Telekomunikasi In 1974, PN Telekomunikasi was until 1906, were provided by privately-owned further divided into two state-owned companies, companies pursuant to a 25-year government Perusahaan Umum Telekomunikasi (Perumtel) and license In 1906,the Dutch colonial government PTInti, to provide domestic and international formed a government agency to assume control of telecommunications services and all postal and telecommunications services in telecommunications equipment manufacturing, Indonesia In 1961, most of these services were respectively In 1980, the international transferred to a newly-established state-owned telecommunications business was transferred from company to provide postal and telecommunications Perumtel to Indonesian Satellite Corporation services in Indonesia, apart from services in (Indosat)
Source: PT Telkom
4 2 Telkom Territory
of service# Furthermore, at the time, 22 Mobile the government stated that no other licenses for international The roots of mobile communications telecommunications services would go back to 1989 when a Telkom joint be granted before the end of 2004# venture company, Mobisel, launched Satelindo was also awarded a an analogue NMT network# An nationwide mobile cellular license analogue AMPS network, Nacional and launched its digital GSM network (since split into Metrocel and in November 1994# Satelindo is Komselindo), was launched in 1991, unique in that it is the only fixed again partly owned by Telkom# In 1994 services operator that has had a two companies, Satelindo and foreign strategic investor since Telkomsel were awarded digital GSM Germanys Deutsche Telekom licenses# A third GSM license was acquired 25 per cent in 1995 for awarded to Excelcomindo, which US$ 676 million# launched its network in October 1996#
Telkom is by far the biggest and most At the end of 2000, there were seven influential operator in the country# mobile cellular operators: three Apart from its fixed-line and domestic nationwide GSM-900 networks and long distance monopoly, until recently, four regional analogue networks# They it owned shares in every other telecom served 3#7 million subscribers, or operator except Indosat# This is clearly 1#7 per cent of the population# Most shown in Indonesias mobile market subscribers use GSM, accounting for (see Table 2#1)# 96 per cent of all subscribers#
Table 21: Mobile operators
6XEVFULEHUVà *URZWKÃà 2SHUDWRUà 'HFÃà à 7\SHà &RYHUDJHà 2ZQHUV Ã Ã È Ã 7HONRPÃ È Ãà ,QGRVDWÃ È Ãà 7HONRPVHOà ¶¶ à à *60à 1DWLRQZLGHà .31à 1HWKHUODQGV Ã È Ãà 37Ã6HWGFRÃ0HJDFHOOÃ$VLDÃ È Ã 7HONRPÃ È Ãà ,QGRVDWÃ È Ã 6DWHOLQGRà ¶¶Ã à *60à 1DWLRQZLGHà Ã%LPDJUDKDÃ7HOHNRPLQGRÃ È Ã Ã'H7H$VLDà *HUPDQ\ Ã È Ã 7HONRPÃ È Ã 5DMDZDOLÃ È Ã ([FHOFRPLQGRà ¶Ã à *60à 1DWLRQZLGHà 9HUL]RQà 86$ Ã È Ã 2WKHUVÃ È Ã -DNDUWDÃ%DQGXQJÃ0HGDQà 7HONRPÃ È Ãà .RPVHOLQGRà ¶Ã à $036à 0DQDGRÃDQGÃ8MXQJÃ3DQGDQJà 37Ã(OHNWULQGRÃ È Ã 7HONRPÃ È Ã &36Ã È Ã 0HWURVHOà ¶ à à $036à &HQWUDOÃDQGÃ(DVWÃ-DYDà $VLDÃ/LQNÃ È Ã 7HONRP VÃ3HQVLRQÃ)XQGÃ È Ã RWKHUVà -DNDUWDÃ&HQWUDOÃ-DYDÃ(DVWà 7HONRPÃ È Ã 0RELVHOà ¶Ã à 107à -DYDÃ:HVWÃ-DYDÃ%DOLÃDQGà 7HONRP VÃ3HQVLRQÃ)XQGÃ È Ã /DPSXQJà Ã375DMDVDÃ È Ã 5HYHQXHÃVKDULQJÃVSOLWÃÈÈà %DOLÃ.DOLPDQWDQÃDQGÃ6RXWKHUQà 7HOHVHUDà ¶Ã à $036à EHWZHHQÃ7HONRPÃDQGà 6XPDWHUDà 7HOHVHUDÃUHVSHFWLYHO\à 727$/à ¶ ¶Ã à Ãà à Ã
Note: * Prior to announced share swaps by Telkom and Indosat Source: Telkom
5 Indonesia Internet Case Study
Figure 21: Mobile subscribers were granted in five of Telkoms seven operating regions to provide fixed-line ,QGRQHVLDÃPRELOHÃVXEVFULEHUVÃ V telephone service and 3HUÃÃLQKDELWDQWV share revenues with Telkom# The number of 'LJLWDO lines in service in the $QDORJXH KSO areas amount to just less than half the country total# The financial crisis has had a devastating effect on the KSOs, most of which are technically bankrupt# A series of transactions are underway, which will modify the KSO Source: ITU situation# These are described in the next section#
Seven regional and two nationwide GSM-1800 licenses were awarded in Figure 22: KSOs 2000 (the existing three GSM operators were also provided with Main telephone lines, 000s 1800 licenses)# Both Indosat and Telkom were awarded nationwide GSM-1800 licenses of their own for Indonesia: Main telephone lines (000s) these so-called Personal 7’000 3.5 Per 100 inhabitants Communication Systems (PCS)# It 3.1 6’000 2.9 3.0 also marks the first time that mobile 2.7 companies were established without 5’000 2.5 Non- 2.5 Telkom or Indosat having a share# In 4’000 2.1 KSO 2.0 addition, a number of Japanese 1.7 3’000 1.5 standard Personal Handyphone System (PHS) licenses were awarded 2’000 KSO 1.0 but it is unlikely these networks will 1’000 0.5 ever get off the ground# Some of the 0 0.0 new PCS operators are planning to 1995 1996 1997 1998 1999 2000 launch second and half generation (2#5G) networks# For example, Telkom plans to launch its network in the Source: ITU adapted from Telkom fourth quarter of 2001 with Wireless Access Protocol (WAP) and GPRS already enabled# Because of the recent PCS licenses and plans for 24 Two domestic giants 2#5 technology, it is unlikely that third generation cellular will be introduced Two factors are pressuring Indonesia in the country before the 2004/2005 to carry out additional tele- time frame# communication liberalization# One is the commitment Indonesia made 23 KSO under the World Trade Organizations Agreement of Basic Telecommuni- In an effort to attract foreign cations# Indonesias schedule for investment into the fixed-line opening its telecommunication market business, a joint operating scheme is seen as lengthy compared to other known by the Indonesian acronym developing countries (i#e#, a period of KSO (Kerjasama Operasi) was created exclusivity for local services until in 1995# Fifteen-year concessions 2011, for national long distance until
6 2 Telkom Territory
2006 and international long distance Indosat will indirectly control some until 2005)#3 Second, the economic 1#5 million operating telephone lines, crisis has required Indonesia to meet around one fifth of the nations total# a number of IMF conditions aimed at Surprisingly, Indosat rather than restructuring the economy in Telkom gained management control exchange for financial support# over Satelindo; this effectively once Indonesias commitments in the area again gives Indosat a monopoly over of telecommunications are highlighted international telephone traffic until in a memorandum sent to the IMF (see August 2003# Box 2#2)# 25 Policy and regulatory One step is ending the exclusivity of issues Telkom, Indosat and Satelindo earlier than planned# For example, a Telecom market changes have not led government decree issued in August to a specifically conscious and 2000 ends the exclusivity for local corresponding change in policy and services by August 2002 and for regulatory organizations# The national and international long Directorate General of Posts and distance services by August 2003#4 Telecommunications (Postel) is the New operators, rather than the nominal regulator# It is a unit of the government, are expected to ministry, the Department of compensate Telkom and Indosat for Communications# There are steps to their loss of exclusivity# convert Postel into an independent regulator, reiterated in the Indonesian A second step is a severing of ties governments memorandum with the between Telkom and Indosat through IMF# While some countries have a series of financial transactions responded to convergence by approved by their shareholders in May adopting a revised law creating a 2001# This calls for: unified IT, telecommunications and broadcasting ministry and regulator, Telkom purchasing all of this has happened by accident in Indosats shares in the largest Indonesia# The word Information mobile operator, Telkomsel, for Technology was simply tacked on to US$ 945 million# the unit in Postel responsible for telecommunications# Postels Indosat purchasing Telkoms shares broadcasting responsibilities came in Satelindo for US$ 186 million# about when it absorbed the staff of the former Department of Telkom transferring its rights and Information, which was abolished in obligations in KSO IV in Central Java early 2001 for political reasons# to Indosat for US$ 375 million# A number of laws, ordinances and Indosat purchasing Telkoms shares decrees regulate the Indonesian in PT Lintsarta, an important data telecommunication industry# Other service provider# forces also have a bearing on telecommunications policy: In addition, Telkom is buying out or renegotiating with its KSO partners# 1 Telecommunication laws and For example, it has repurchased the regulations# In July 1999, a KSO in Region VI serving Kalimantan# Blueprint of the Indonesian The results of these transactions Governments Policy on essentially create two major players, Telecommunications was issued# Telkom and Indosat, that will for the The Blueprint calls for improving near term form a duopoly# With its telecommunication sector purchase of Telkoms telephone lines performance; liberalization in Central Java, Indosat adds to its through competition and an end foothold in the local service market# to monopolies; increasing When combined with its part regulatory transparency; ownership in the KSO in Sumatra, enhancing strategic alliances with
7 Indonesia Internet Case Study
foreign investors; and creating and the government# In business opportunities for small August 2000, the government and medium enterprises# These issued a decree that contains goals are to be carried out through early termination of Telkoms the Telecommunication Law exclusive rights for local (No# 36/1999)# The law eliminates services in August 2002 and the concept of organizing entities domestic long-distance thus terminating the requirement telecommunication services in that Telkom have a stake in all August 2003# A Ministry of telecommunication operators# Communication decree announced that Telkom had o The law also classifies been awarded an international telecommunications operations telecommunication services into three categories: (i) license to commence in 2003# network operations; (ii) services The same decree awarded operations; and, (iii) special Indosat a local service license telecommunications to begin in 2002 and a operations# Telecommuni- domestic long distance cations network operation or telecommunication license provision of telecommuni- beginning a year later# cations services may be carried out by any legal entity# 2 Telecommunication-related A network provider can aspects of the governments provide telecommunications agreement with the IMF and services, while a service other international provider can use its own organizations# A Letter of network or lease network Intent (LoI) signed between the facilities owned by other Indonesian government and the network providers# Individuals, IMF stipulated the requirement government institutions, special that Telkom and Indosat resolve agencies and legal entities may their cross-ownership conflicts provide special telecommuni- (see Box 2#2)# The LoI also cations operations for the requires Telkom and Indosat to purpose of self-interest, divest their ownership in non- national defense and security, strategic companies by the end and broadcasting# of 2001#
o Under the New Telecom Law, a 3 Overall ICT policy as outlined license is required from the in a recent Presidential Minister of Communications# Decree# In addition to laying out Operators determine intercon- general government policy for nection rates and end user ICT in several areas, the decree tariffs based on government includes an Action Plan with guidelines# Telecommunications projects relating to network operators are obligated telecommunication policy and to interconnect their network to infrastructure# It also calls for the other network operators on Indonesian Coordinating Team request# Telecommunication on ICT (TKTI) to take the lead in operators are obliged to pay a managing the development of license fee based on a ICT programmes and initiatives percentage of revenue# as well as among relevant government agencies# This is o The new law does not discussed in more detail in terminate the existing Chapter 5# In August 2001, a exclusive rights of Telkom# new Communication and However, it does allow early Information Ministry was termination of the rights created# This suggests that subject to a compensation formulation of ICT policy may be agreement between Telkom carried out by the new ministry#
8 2 Telkom Territory
Table 22: Replita targets
Development targets according to Indonesian government plans (Repelita)
5HSHOLWDÃ Source: Bappenas 4 Infrastructure development service# Although the within government plans# government has a majority The Governments national stake in Telkom, and the development policies were set company considers the targets forth in five-year development when establishing its own plans, plans known as Repelitas# The it is not formally required to plans are developed by the meet the government targets# National Development Planning The government established Agency (BAPPENAS Box 22: IMF and Telecoms The Government continues to give priority to the full-service providers, and to requiring these rapid restructuring and privatization of the companies to divest their stakes in all non-core telecommunications sector The GOI plans to issue businesses Each company will be expected to shortly regulations needed in areas including divest its holdings in at least two such businesses tariffs, interconnection, and universal service by end-2000, and all non-core holdings will be obligations, and to provide for the early divested by end-2001 An inter-ministerial team establishment of an independent regulatory on telecommunicationsestablished on May 30 agency The Government remains committed to will be strengthened and will develop a detailed transforming Telkom and Indosat into competing reform action plan for the sector by end-October Source: Government of Indonesia Letter of Intent to IMF, September 2000, 3 Regarding telecommunications, it sought clarification on Indonesias intention in respect of the review of exclusive rights in telecommunications, which has rather long transition periods compared to other Members WTO Trade Policy Review Indonesia Minutes of Meeting WT/TPR/M/51 27 January 1999 4 See Sunil Devmurari Indonesia: Impact of Market Liberalization Plans Reduced Pyramid Alert 10 August 2000 9 Indonesia Internet Case Study 3 The End of the Free Internet Market 31 Market developments TelkomNet calculates subscribers based on usage over the last month# Indonesia connected to the global Ironically, Telkom had been prevented Internet in 1994, as a result of from entering the ISP market prior to pioneering efforts by the academic and 1997# At that time, the government research community# One of the first wanted to promote new players in the links was a 64 Kbps line to the US, market, especially Small and Medium opened in May 1994 by the Indonesian Enterprises (SMEs)# However the SMEs Science and Technology Network did not perform well so the law was (IPTEKnet)# PT Indo Internet (Indonet) changed to allow bigger companies in claims to have been the first commercial and to attract investment# ISP, launching services in 1994# By the end of 1995, there were some 16 ISPs, Indosat also provides ISP services and 20'000 users and 640 Kbps of had over 40'000 dial-up subscribers international Internet connectivity#5 At at the end of 2000# Growth was the beginning of 2001, there were some stagnant in 2000# Indosat claims that 150 licensed ISPs of which about 60 this was partly related to delays in obtaining leased lines from Telkom# Another factor was the launch of 'free' (users still have to pay telephone dial- up charges) Internet access by LinkNet in April 2000# By the end of 2000, LinkNet had signed up 197'000 subscribers, making it the country's largest ISP# LinkNet had hoped to make money through advertising and e-commerce transaction fees since Telkom refused to share telephone usage charges# Night food stall - Jakarta This model provided unsustainable# LinkNet was forced to terminate its were actually providing service and over 150 Mbps of international Figure 31: Internet market bandwidth# For the year ending 2000, there were an estimated 400'000 Internet dial-up subscribers translating to roughly two million users, or just ,QGRQHVLDQÃ,QWHUQHWÃXVHUV under one per cent of the population#6 3HQHWUDWLRQ È The number of users has doubled over the last two years, following a period of 8VHUV 6XEVFULEHUV stagnancy during the brunt of the È financial crisis# È È È È Despite the large number of ISPs, the market is dominated by a handful of companies# The largest paying ISP is Telkom's TelkomNet with just over 100'000 subscribers at the end of 2000# Many of these users are utilizing TelkomNet's Instan service# As no Source: APJII, ITU prior registration is required, 10 3 The End of the Free Internet Market free service in March 2001, and it now network and connect to the charges like other ISPs# It has lost international network# Indonesian most of its subscribers who chose not ISPs are allowed to have their own to stay on a pay plan# international connections# However, they must lease lines (primarily 2Mbps Thus far there has been scarce foreign E1s) from the local telephone investment in the ISP sector# One exchange to their modem banks to exception is M-Web of South Africa provide dial-up access# Several have that purchased 35 per cent (maximum complained about delays and the foreign investment allowed at that terms for leasing lines from Telkom# time) of Cabinet in August 2000# For example, according to one ISP, the Cabinet in turn owns Satunet, which connection charge for an E1 is claims to be one of the leading Rp 13 million# The monthly Indonesian portals with some half a subscription is Rp 13 million# Although million daily page views and Telkom receives the local telephone 80000 e-mail users# charge for dial-up Internet traffic, if an ISP does not deliver a certain 32 Tariffs amount of traffic per month over the E1 line, then it must pay Telkom the There are two Internet dial-up options difference# Postel is aware of this issue in Indonesia# One is Telkoms ISP, but has not done anything about it# TelkomNet, which has a nationwide dial number and charges Rp 160 per The Indonesian ISP Association minute (1#5 US cents)# This amount (APJII), a non-profit organization, includes the telephone usage charge# operates a domestic traffic exchange The other model is a regular ISP plan (Indonesian Internet Exchange or to which telephone usage charges IIX)# Virtually all ISPs are members#7 apply# The prices basically work out There are two nodes to which ISPs can the same# Indonesias Internet pricing connect# The IIX has a 100 Mbps is relatively high considering the low backbone# There are no port or traffic levels of income in the country (see charges; ISPs simply pay the cost of Figure 3#2)# their connection to IIX# The IIX reduces the cost of international 33 Interconnection connections by keeping local Internet traffic within Indonesia# In addition, ISPs require local, national and several of the larger ISPs maintain international connections to provide private peering arrangements# access to customers, create a national 34 Broadband Figure 32: Internet dial-up tariffs Until recently, leased lines or VSATs satisfied demand for fast Internet 30 hours per month, US$, May 2001 access# However these solutions have proven expensive and Indonesia is 34.69 now turning to broadband access technologies such as ADSL and cable modem# Telkom is conducting ADSL 26.18 trials and expects to launch the service soon# Telkom plans to install around 6000 ADSL lines within the next year in the Jakarta area# Meanwhile Indosat 11.84 10.73 has plans to install a wireless DSL network in Surabaya, and, through its Lintasarta subsidiary, in another 15 cities#8 The Indonesian market for fast Internet access has been Singapore Malaysia Indonesia Vietnam estimated at 1#2 million#9 Source: ITU Kabelvision 11 Indonesia Internet Case Study subscribers, launched its Kabelnet Telkom also provides broadband Internet access through cable modem satellite delivery through a service service in Jakarta in September 1999# dubbed Turbonet# This hybrid solution At the beginning of 2001, there were downloads data at speeds up to 1#5 some 4000 subscribers# Forecasts call Mbps via the Telkom 1 satellite to an for some 300000 cable modem 80-centimetre antenna# Data is subscribers in the Jakarta area alone uploaded via a dial-up telephone by 2004#10 Thus far, Kabelvision is the connection# Bandwidth is shared only cable television company in the depending on the number of country, but there are plans for others# customers# It costs around Rp eight Telkom recently concluded an million per month (around US$ 700)# agreement with Alcatel for the latter A number of Internet cafés in remote to supply a Hybrid Fibre Coax (HFC) areas are using it# One drawback is and cable modem network to be that rain has an effect on service constructed in Jakarta and quality# Surabaya#11 5 Soegiardjo Soegijoko, Onno W Purbo, Widiadnyana Merati, Priyono Sutikno, Intan Achmad Computer Networking in Indonesia: Current Status and Recommendations for its developments Institute of Technology Bandung January 1996 12 4 Mosques and Warnets 4 Mosques and Warnets Indonesia has made whereby private entrepreneurs resold impressive strides in telephone service through call enhancing access to centres#12 By May 2001, there were communications over around 2'500 Warnets in Indonesia# the last decade# Prior to There is no need for an Internet the financial and license to operate a Warnet# Some political crisis of 1997, companies are planning to franchise, Indonesia had one of giving their Warnets a common name the fastest growing and look# fixed networks in the world# Teledensity The Indonesian Internet Kiosk quintupled between Association (AWARI) is working with 1990 and 2000, from Warnets to do more than just provide 0#59 to 3#14# The simple Internet access# One promising percentage of with a area is distance education# AWARI has telephone jumped from a Memorandum of Understanding with just over one to over the Open University (Universiti Mosque - South Jakarta ten# Although fixed Terbuka) for distance learning# There telephone line growth are some 300000 distance-learning has slowed since the students in Indonesia so the potential crisis, it is almost a miracle that is immense# AWARI is also working there has been any expansion at all# with the Ministry of Education to put Nonetheless, significant barriers to Internet kiosks in vocational schools# universal service remain with some Another area is e-commerce where 90 per cent of Indonesian homes small businesses are using the without a fixed telephone# Warnets to exchange e-mails with customers# This could be extended to Almost 90 per cent of Indonesia's provide more sophisticated electronic population practices Islam, making it capabilities such as assistance with the country with the largest Muslim design of web pages hosted by Community in the world# This is Warnets, creation of online transaction significant, since according to national capability, etc# statistics, Indonesians are closer to mosques than public telephones Figure 41: A mosque is never far away (see Figure 4#1)# The challenge is to make public Internet access as predominant as Approximate distance to facility (km) mosques, and maybe 100% % of households, 1998 even in mosques as well Place of Worship 80% as other public Public Phone locations# 60% Two initiatives are 40% helping to promote 20% public Internet access# The "Warung" Internet 0% (Warnet) is a public <1 1-2 3-4 >5 Internet kiosk# Warnets grew out of the Source: ITU adapted from BPS successful Wartel model, 13 Indonesia Internet Case Study W-Net has around 20000 subscribers (inclu- ding 70 corporate custo- mers)# Unlike most other ISPs, 70 per cent of W-Nets subscribers are located outside Java# Despite the fact that most users are not in Jakarta, W-Net focuses on corporate and government users rather than the consumer market# The Post Office also has its Warnet - South Jakarta own Internet cafés called Warpostnets# They are mainly located in big post Future projects include expansion of offices in large cities and provincial services in rural areas# In most rural capitals# Warpostnets usually have areas, dial-up access is used so that around five PCs although the central applications cannot be too post office in Jakarta has 29# The sophisticated# AWARI is working to Warpostnets charge Rp 6000 educate Warnets about broadband (US$ 0#53) per hour# Those in remote access# Wireless access seems areas are staffed to assist users# promising in rural areas but the spectrum is not always available# One sign of popularity of Warnets and Some Warnets are using VSAT Warpostnets is that around half of technology and redistributing Indonesian Internet users access the bandwidth to others over microwave Internet through Internet cafés (see links# Figure 4#2)# One main reason is the lack of the necessary infrastructure at One complaint is that Warnets are home or at work# Another reason is treated just like any other customer that Internet cafés tend to be cheaper and therefore pay the full price of than a personal Internet account# telephone connection to Telkom# Warnets argue that they are providing The government is keen to leverage an important community service and the Internet kiosk experiment by should get a discount such as Wartels# introducing Community Teleservices The Indonesian Post Office (PT Pos Indonesia) has its own ISP called Figure 42: We like Warnets Wasantara-Net (Wawasan Nusantara Network, W-Net) 14 4 Mosques and Warnets Centres (CTC, out of the digital revolution# More than "Balai Informasi just an Internet café, the CTCs would Masyarakat" provide a range of services as well as (BIM))# The CTCs training and assistance# In addition, the are primarily in- government is looking for funding to tended for meet a target of half a million Warnets Indonesia's large by 2004#14 This would include retro- rural population fitting the existing 187'000 Wartels to that has been left provide Internet service# Warpostnet user at Jakarta Post Office 12 Pradhan, Rajesh and Smith, Peter Franchising telecom service shops: meeting demand from nonsubscribers in Indonesia Viewpoint March 1996 http://www-wdsworldbankorg/servlet/WDSServlet?pcont=details&eid=000009265_3980420172858 13 One irony of the Post Office being involved in the Internet is that conventional letters in Indonesia are on the decline as people use e-mail instead See The Internet takes business away from the post office Jakarta Post 15 October 2000 14 Govt targets 500000 Internet kiosks by 2004 Jakarta Post 4 July 2001 15 Indonesia Internet Case Study 5 Bring me the applications Imagine a system with the simplicity, from three PC dial-up mom and pop interactivity and cheapness of a plain operations to larger places with old telephone getting married to the dozens of computers and high speed, sophistication of ICT# Rather than leased line access# Yet it is rare to see dialing numbers, icons representing locals using them# At around different functions are pushed# For US$ three an hour, Internet access is example, instead of the number 1 on not particularly cheap# On the other the telephone, there is a picture of a hand, the one-minute it might cost to cow, representing agricultural send an e-mail (Rp 500) is four times information# When pressed, a wealth less than what it would cost to call of information ranging from from Bali to Jakarta (Rp 2'010)# commodity prices to farming techniques is delivered through an The problem is that the majority of interactive voice system# This is a Indonesians just do not know what the project being developed by Telkom for Internet can do for them or what they illiterate rural dwellers for whom a PC can do with the Internet# Even among is too expensive and too complicated current users, it is often suggested and for which mass media devices that the main applications are chat, such as radios or televisions do not e-mail and browsing news sites# provide the needed interactivity# A Locally relevant applications are rare# clever blend of the old and the new# Indeed, it is amazing that for a country This is precisely the type of application Indonesia's size, there is no Indonesia needs more of# standardized Indonesian spell checker for Microsoft Word or a sophisticated A lack of infrastructure is not strictly web-based English-Indonesian the major barrier to ICT use in the translator# For the Internet to establish country# Take the tourist island of Bali, deep roots in Indonesia, locally the most wired place in Indonesia# The relevant applications in areas such as provincial capital Denpasar has government services, education, 33 telephone lines per health and business must be 100 inhabitants, ten points above the developed# national capital, Jakarta, and ten times the national average# Hundreds of 51 Government cyber-cafés dot the island# They range The economic and political crisis has distracted the Sculpture shop - Bali governments attention from ICT# There are signs that this may be changing# In April 2001, Presidential Decree No# 6 was issued (Guidelines for the Development and Implementation of Information and Communication Technologies in Indonesia)# The decree is a statement of the governments general policy towards ICT# It calls 16 5 Bring me the applications on the Indonesian Coordinating Team connections for government on ICT (TKTI) to drive ICT institutions# It has around 50 leased line development# TKTI, an inter- and some dial-up clients# It leases lines ministerial group, was formed in 1997 for its backbone and has a 128 Kbps and headed by the Vice President# If connection to IIX# As it is become more TKTI is to succeed, it will need commercial, IPTEKnet is examining the additional resources including the possibility of two tariffs: one for creation of a secretariat# Its leadership corporate, and one for government status will also have to be resolved clients# especially its relation with the new Ministry of Communication and Most ministries have a web site though Information, created in August 2001# there is not yet a central government portal# Almost all of them use the A detailed five-year action plan was #go#id domain name# One area for also issued as part of the Presidential improvement is civil service ICT Decree#15 This plan identifies projects training# Of the some three million and associated timetables in four people working for the government, areas: policy and legal framework, training is available on only a sporadic human resources, infrastructure and basis# It is estimated that less than applications# It is unclear where the ten per cent of government workers resources for carrying out the have some awareness of ICT# numerous projects will come from# A lack of funding has been a recurring Another problem is the lack of ICT problem in government ICT drives# For expertise at the provincial level# Few example, in 1996 the National Steering provinces or districts have their own Committee for IT Competitiveness (so- web site# There are a number of called Nusantara-21) was created to projects underway at the local level# drive Indonesias ICT development# It One is e-province, a system to benefited from a US$ 35 million World computerize applications for local Bank loan to carry out its tasks# This identification cards# Another project included the creation of a national is Simtap in Sulawesi and East information infrastructure, development Kalimantan to computerize common of multimedia applications and forms such as building permits, etc# establishment of public access points# There is also assistance for helping The combination of funding running out local governments set up their own and the Asian financial crisis severely web sites# Examples include affected the programme# www#takalar#go#id (Sulawesi) and www#kutaitimur#go#id (District of East There are a number of on-going Kutai in Kalimantan)# However there projects and networks supporting are major barriers including a lack of government ICT use and delivery# funding and awareness# For example Siskom Dagri (Communication few local administrations can afford Network) is the national governmental the cost of ICT# Furthermore, network coordinated by the Ministry experience has shown that if high- of Home Affairs# It connects the level local officials such as mayors or central government to district governors do not have ICT awareness, governments# The network uses then projects will not be successful# 2#4 metre VSATs connected to the Palapa 2E satellite# There are some 52 Health 300 nodes in 26 provinces as well as the central government (Jakarta), the The Ministry of Health has its own web Ministry of Home Affairs plus the site 17 Indonesia Internet Case Study around 20 have home pages# There operators (who provided discount is a pilot project to connect health communication access rates), banks sub-centers (around 21000) to (to provide school loans), and private district ones (this already exists in sponsors such as Cisco and Oracle Central and West Java)# Less than to provide hardware and software# ten per cent of the 1148 regional APJII worked with the Ministry of hospitals have the necessary ICT National Education to develop a hardware# portal for the project# By the end of the year 2000, the project had Telemedicine is planned in top connected 1180 schools# Today, hospitals such as one using VSAT in 1800 schools are connected# This Denpasar (Bali) and Soetomo translates into half a million new Hospital in Surabaya# One factor Internet users from high schools# holding this back is the high cost of satellite communications# Distance education is an attractive technology for Indonesia due to its There are some e-commerce-like large youth population, lack of applications such as online purchase educational infrastructure, shortage orders between hospitals and of highly trained teachers and spread pharmacies# There is also ASKAS, a out land mass# Over a dozen computer system used to manage institutions provide distance private health insurance claims# education programmes# Universitas Terbuka (UT) 18 5 Bring me the applications 54 Electronic Business custom regulations and allows companies to download trade Indonesias demographic and documentation software# It recently geographic situation would appear to hooked up with its Malaysian make it an ideal location for e- counterpart, the Royal Malaysian commerce# There is a large market Customs and Excise, to exchange spread over many islands# However, export data electronically# the countrys level of innovation is not sufficient to have the expected impact# The Ministry of Justice is responsible This is borne out by comparative for Intellectual Property Rights# studies that typically rank Indonesia Indonesia has a copyright law and is at the low-end of e-commerce also a signatory to the Berne readiness#20 The value of e-commerce Convention 19 Indonesia Internet Case Study Box 51: Indonesian Silicon Valleys In Indonesia, there has been scant government programmers are Indonesian, the attractions of Bali support for the development of software parks may create a reverse brain drain by drawing foreign Instead, initiatives have come from the private programmers BaliCamp has around sector The Lyman Group, which started as a trading 100 programmers that generated around US$ two and timber business and has now diversified into million of sales in 200024 Main services include property and telecommunications, has proposed the around the clock software development for West Java Digital Corridor to, among other things, international clients Sigma has established an office kick-start the development of IT industry in the in Canada to seek out customers and promote the country The corridor would extend from Jakarta service It is forecasting a staff of 1000 and sales of to the university city of Bandung and would include US$ eight million in 2001 enhancements to existing transport and communication links Within Bandung, a high-tech One issue that Indonesia must address if it is to be valley is proposed that would include a learning successful in software development is a lack of e-village housing educational and research skilled IT human resources Though precise institutions Kota BNI is to be a new Intelligent statistics are not available, there is general City within a city that would feature state-of-the- agreement that there is a shortage of skilled ICT art housing and recreational facilities Links would staff25 Proposals to remedy the situation include be created with the universities and research preferential communication access pricing for centers situated in Bandung The proposal also calls educational facilities, links between companies and for the creation of a venture capital fund as well as academic institutes for on the job-training, tax breaks and other inducements for businesses development of training centers and creation of an located in the cyber area Funding for the project ICT industry certification is expected to come from the government, multilateral agencies and the private sector One strategy for ICT training is to encourage private sector involvement In March 2001, Cisco Systems BaliCamp The lack of business connectivity has Many are using the popular Warnet not discouraged some SMEs from Internet cafés to exchange e-mail with conducting business over the Internet# potential buyers# 20 5 Bring me the applications Box 52: News hungry One of the countrys most popular television stations Unlike other countries, none of the leading portals is Metro TV, Indonesias answer to CNN Indonesias in Indonesia spring from the broadcast media first non-stop television news channel broadcasts Instead, apart from Detikom, they are online in Indonesian as well as in English and Mandarin, versions of popular newspapers or magazines The which was previously forbidden This is possible due main government-owned television stations have to press liberalization that has taken place since a reputation of stodginess and one-sidedness In the downfall of President Suharto A pent-up hunger an effort to revive the television industry and for information has led to an explosion of media inject badly needed funds, a bill allowing foreign outlets Today the country has some 700 news investment is being debated in Parliament Foreign publications, close to 1000 radio stations and a investment in broadcasting has been banned to dozen television stations protect Indonesian identity even though exactly what that meant was never adequately explained The information hunger has driven Internet use with In any case, in a country as diverse as Indonesia, Indonesians eagerly browsing the web for news there is no one identity and a flourishing of media This is readily evident in a list of the most frequently outlets is the best reflection of the nations variety visited web sites by Indonesian Internet users (see Despite the lacklustre image of the state-run Box Figure 52, left chart) The three local sites in channels, television is still one of the most popular the top ten are news portals The top Indonesian information outlets in the country Some 60 per site, Detikom Box Figure 52: Indonesian Top Ten web sites and where Indonesians get their information from Yahoo 47% Percentage of 69% Hotmail 15% population aged 50% MTV 12% 10 years and over who Detikom 7% Kompas 6% Mailcity 6% 18% Altavista 5% Most frequently visited Netaddress 3% web site, March 2000 Gamefaqs 3% Read Listen to radio Watch TV Jawa Pos 3% newspaper Source: ITU adapted from Tempo Magazine (left chart) and BPS (1996) (right chart) 21 Indonesia Internet Case Study 15 Five Year Action Plan for the Development and Implementation of Information and Communication Technologies (ICT) in Indonesia http://wwwbappenasgoid/bap_enghtml 16 Information Technology in the Health Sector 23 January 2001 http://infoserv2itadocgov/ocbe/ ForeignMnsf/679c088699b484498525674e0000eb9f/bc56785cfff06377852569de0069fd3d!OpenDocument 17 Ministry of National Education Indonesia Education Statistics 1999/2000 September 2000 http://wwwpdkgoid/serba_serbi/Fact&Figureshtm#Tabel%2013 18 Hardhono, A P and Belati, T Baseline Surveys for the Utilization of Fax-Internet Integration Technology for Distance Learning Support; a study conducted with funding assistance from Pan Asia Networking 1999 http://wwwpanasiaorgsg/grants/awards/98221shtm 19 See World Bank Indonesia-Global Development Learning Report No PID10214 12 April 2001 20 For example, The Economist Intelligence Unit/Pyramid Research e-readiness rankings places Indonesia 54th out of 60 countries Of the ASEAN countries ranked, Indonesia is placed ahead only of Vietnam See http://wwwebusinessforumcom/indexasp?layout=rich_story&doc_id=367 21 Zuraida Boerhanoeddin E-Commerce in Indonesia http://wwwisocorg/inet2000/cdproceedings/7c/7c_3htm 22 Business Software Alliance BSA Unveils 2000 Global Software Piracy Study Press Release 21 May 2001 http://wwwbsaorg/usa/press/newsreleases//2001-05-21566phtml 23 See Outline of Tentative Policy Recommendation for SME Promotion in Indonesia at wwwjicaorid/FOCI_uratahtml 24 Warren Caragata Bali High-Tech Paradise AsiaWeek http://wwwasiaweekcom/asiaweek/technology/article/0,8707,106825,00html 25 Currently there is a shortage of ICT human resources in Indonesia to satisfactorily cater to the demand of the ICT industry Indosat Development of Human Resources in Information and Communications Technology (ICT) in Indonesia Document 48-E Presented at the ITU Asia Pacific Preparatory Meeting for the World Telecommunication Development Conference, Bali, April 2001 http://wwwituint/ITU-D/asp/WTDC02/PDFs/48-epdf 22 6 Archipelago@Crossroads 6 Archipelago@Crossroads Indonesia is at a crossroads in the Indonesian invention and if the path to becoming an Information Internet is to be widely permeated in Society# Ironically, the socio-economic the country, it too will have to be crisis has created demand for Indonesian in content, focus and instantaneous access to information, applications# Refreshingly, the country manifested in an explosion of recognizes its huge domestic potential Indonesian web sites# Unprecedented and is not obsessed, such as many liberalization unleashed by the open developing countries, with building up political environment has also a software export industry# Rather it resulted, whether intentionally or not, knows that it must build up domestic in one of the freest Internet markets applications and usage# If this can be in Asia# There are no limits on the done, then an Indonesian Internet will number of Internet providers nor is take root# If this can happen in one of content restricted in any way# The the worlds largest developing country has also made noteworthy countries, then it could serve as a strides in public communication relevant model for many other access# The successful Wartel model developing nations# for public telephone centers has been transplanted to Warnets for public 61 Recommendations Internet access# The Post Office has also been leading a drive for expanded Presidential Decree No# 6 issued in public access# Despite these trends, April 2001 addresses in general terms Internet access at the end of the year many of the areas affecting 2000 remained very low, at less than Indonesias ICT development# It lacks one per cent of the population# And specificity about concrete steps to be even that figure masks a large Digital taken# While the Action Plan attached Divide within the country with the to the Decree outlines actual majority of Internet users in the large programmes, these will take some cities of Jakarta, Bandung and time to be implemented and they do Surabaya# not go into a great deal of detail# The recommendations below outline short- For the Internet to go further in term measures without major Indonesia, for it to become rooted and resource implications that would help sustainable and for it to permeate all enhance ICT diffusion in the country# strata of the society, will require government support# Until lately, the Level playing field# There is an government has been distracted by obvious conflict of interest when the countrys serious economic and the incumbent local telephone political situation# The recent monopoly, Telkom, also provides Presidential Decree covering ICT Internet access# A number of development in the country illustrates ISPs have complained about government recognition of the problems obtaining high-speed growing national Digital Divide and lines from Telkom# Whether this signals its intention to do something problem is an infrastructure about it# It remains to be seen if the constraint or whether Telkom is intention can be translated into exploiting its competitive concrete actions and, more advantage, the remedy is the importantly, if the financial resources same: opening up the market for will be available# the provision of domestic infrastructure# Although there The title of this report is Kretek are plans to open the market Internet# The kretek is a uniquely soonand indeed Telkom and 23 Indonesia Internet Case Study Indosat will already be competing create and disseminate in some areasit will take a while information, particularly for before true competition illiterate users# materializes# In the meantime, it might be useful to allow ISPs to Another area that could drive provide their own infrastructure Internet awareness and usage is when needed# Alternatively, the the development of a few killer regulator could review the terms applications# These could apply and conditions of Telkoms leased to government-related services line offerings to ISPs to try to that are widely used# One ensure a level playing field# example would be the local identity card that is required of Local applications# The every adult and typically time majority of Indonesian Internet consuming to obtain# Allowing use constitutes e-mail or citizens to complete the information searching# There is application for the identity card not generally a lack of local online would save time, make the content as there are a growing process more transparent and number of web sites in the just might be the sort of thing Indonesian language# What is that drives people to the lacking are local applications that Internet# Arrangements could be would generate more demand for made with Wartels to assist users Internet access and really help in completing the form, take and it take root in the country# There upload digital photos and are a number of areas where distribute the completed application development could identification card when it is yield gains# One is the ready# development of applications for rural communities# This includes Parallel to this effort, the the creation of agricultural government might want to portals that provide pricing designate a number of flagship information, weather forecasts, applications and provide support transport schedules, farming for the local Research and techniques and other related Development community to build information# In addition to them# This could include help for Indonesian, these applications special software centers# should be developed in languages that are used in the The development of dot-com rural areas# Programmers should companies should also be work closely with the local facilitated# This could include tax community to find out what kind breaks and other incentives for of information they need# This content creators# Dot-com could be in the form of a sort of incubators could also be Indonesian Digital Scout explored, perhaps as part of the programme where ICT-skilled development of software youth go to rural areas to work development parks# Partnerships with local communities to with Singapore, Brunei and develop applications and train Malaysia where the Malay local users# While traditional web language is used and closely access via a PC will be important, related to Indonesian, could be other innovative ways of explored as these countries could disseminating information may provide expertise and resources# be appropriate# This can include relaying information downloaded Flexible pricing# Indonesian from the web via photocopies or Internet prices are relatively high broadcasting over a local compared to other South East loudspeaker system or local Asian nations# This is radio# Another technique is to use exasperated by the lower audio and video streaming to incomes in Indonesia, which 24 6 Archipelago@Crossroads makes access expensive# The access# The potential for price of 30 hours of Internet expanding Internet access access in Indonesia is more than through public locations such as twice the average monthly per schools or Warnets is immense# capita expenditure# If Internet According to Postel, the potential use is to increase, then the price size of the Internet market in of access must be reduced# One Indonesia is over 60 million users component of the dial-up (i#e#, 30 per cent of the Internet charge is the telephone population), some 30 times tariff# According to one higher than it is today# Most of Indonesian Internet expert, if these new users would access telephone tariffs were lowered, the Internet from schools and the number of Internet Warnets if the facilities were subscribers could reach 20 available# As a first step, the million in the country#26 It is same agreement that allows recommended that telephone Wartels to purchase wholesale usage charges for dial-up airtime from Telkom should be Internet access be waived or extended to the Warnets# This reduced# Another idea is to share will allow them to reduce their the telephone usage charge costs and make service even between ISPs and Telkom# This more affordable# Other would allow ISPs to provide free incentives such as tax breaks Internet access# The example of should be provided to Warnets LinkNets free ISP plan is that locate in rural or pertinent here# In less than one underserved areas# The year, LinkNet acquired almost government should also deploy 200000 subscribers, making it some of its education budget for the largest ISP in the country# the purchase of ICT equipment However this model provides and Internet access# In addition, unsustainable since Telkom it should devise a universal would not share the telephone access policy that includes charge# discounted Internet access to schools# Universal access# The majority of Indonesians cannot afford Foreign investment# The individual Internet access# government will be hard pressed Additionally, roughly 90 per cent to both provide adequate social of homes do not have telephone services as well as provide the lines let alone computers# Thus if the Internet is to Figure 61: Indonesia's Potential Net Market become wide- spread in the country, it will have to be through High public locations# School Potential Internet Indeed, statistics 18% Offices Users in indicate that the 16% Indonesia majority of Indo- Total: 61 million: nesians already Religious 29% of 2000 schools access the population 11% Internet from Warnet public locations 50% such as Warnets# Universities This has happened 5% despite few government poli- cies for supporting Source: POSTEL, 2000 public Internet 25 Indonesia Internet Case Study needed expenditures to promote about a number of important ICT development# One important indicators such as users, user source of funding could be profiles or web sites visited are international investors that are based on irregular media reports attracted by Indonesias large that are typically limited in market source and potential# coverage or of questionable There is legitimate concern that methodology# Thus far, the opening markets too quickly limited number of operators in might affect weaker domestic the telecommunication sector companies# However the has facilitated the aggregation of government must resist the national statistics# However this temptation to champion local will change as new operators companies over foreign ones in enter the market# It is order to attract badly needed recommended that BPS and investment# It must explore ways Postel jointly develop an online to attract investment while ICT statistical system# This would ensuring widespread access# include collection of key market indicators from Market research# There is a telecommunication operators serious shortage of ICT market and ISPs and aggregation at a information for Indonesia# This country and provincial level# It ranges from reliable surveys on is also recommended that BPS the number of Internet users to include a number of questions the current ICT workforce# The about ICT equipment ownership national statistical agency (BPS) in household surveys# It is further does not collect ICT indicators recommended that the nor does the government agency government sponsor ongoing responsible for surveys to obtain ICT-related telecommunications, Postel# information about key sectors of Although some market research the economy such as the value firms occasionally compile ICT- of e-commerce, ICT human related data for the country, resource situation and these are scarce or costly to requirements, ICT usage in the obtain# Therefore information educational sector, etc# 26 ISPs Show Promising Future, As Subscriber Numbers Increase Detikworld 19 April 2001 http://wwwdetikworldcom/inet/2001/04/19/2001419-180116shtml 26 Annexes Annex 1: State of the Internet in Indonesia The Mosaic Group Figure 11: State of the Internet in Indonesia Dimension Value Pervasiveness 4 Pervasiveness 3 3 Geographic Dispersion 3 Sophistication 2 Dispersion Sectoral Absorption 15 1 0 Connectivity Infrastructure 25 Organizational Infrastructure 35 Organizational Absorption Sophistication of Use 2 Connectivity TOTAL 155 Note: The higher the value, the better 0 = lowest, 4 = highest Source: ITU adapted from Mosaic Group methodology 27 Indonesia Internet Case Study Geographic Dispersion is rated at levels of international connectivity# level 3, at Highly dispersed# Internet The main domestic operator has a access is available from all provincial nationwide fibre/microwave/satellite capitals# Nationwide dial-up access is backbone that operates at various available via a four-digit telephone speeds# There is a domestic traffic number at a standard tariff of Rp 160 exchange with two connection points# per minute (0#92 US cents per hour)#1 In addition, the larger ISPs also peer The main constraint to nationwide amongst themselves# High-speed local connectivity is local access since most access is growing with leased line households do not have a telephone, being the main access methods# ADSL let alone a personal computer# is being tested and access via cable modem access has several thousand Sector Absorption is rated at level 1#5, users# High-speed satellite between Rare and Moderate# This connections are also being used# ranking is a function of the type of connectivity in education, government, The Organizational Infrastructure health care and business# There is a is at level 3#5, between Competitive good degree of connectivity at the and Robust# There were around university level# Connectivity at the 60 operational ISPs at the end of primary and secondary level is less 2000# There is no limit on the number profuse# Less than 2000 out of 13000 of licenses that can be granted to secondary schools are connected and provide Internet access service very few primary schools have an (around 150 have been issued)# There Internet connection# A number of is an ISP association that runs a public government ministries are on the web traffic exchange# However the market although there is no central portal# is dominated by a few ISPs including Few provincial governments have a the main telecom operators# Most ISPs web site# The Ministry of Health has are not allowed to provide their own its own web site and an Intranet with national infrastructure and must lease about 80 users# Around 20 of some from telecom operators# There have 400 government hospitals have a web been allegations from some ISPs that page# Large businesses have web sites the largest telecom operator has an but few Small and Medium Enterprises advantage since it dictates the (SMEs) do# availability and conditions of leased lines# The Connectivity Infrastructure is at level 2#5, between Expanded and Sophistication of Use is at level 2, Broad# International connectivity of Conventional# The most popular the three largest ISPs is over applications among most users appear 146 Mbps; other ISPs have varying to be e-mail and information retrieval# 1 Using a conversion rate of Rp 10 785 to US$ 1 at 20 April 2001 28 Annexes Annex 2: Telecommunication statistics INDONESIA Area: 1919443 km2 National currency: Rupiah ÃÃÃ (1) Source: UN (1991, 2000); 1995-1999: BPS 1999 excluding East Timor (2) 1995:1999 BPS Other years: ITU estimate 1999 excluding East Timor (3) Source: IMF (4) UN From 1998, unofficial estimates, source US Department of Commerce (5) Excluding payphones and mobile cellular phones (6) Telkom and Indosat (7) Yearly estimate from monthly data (8) Maximum tariffs not including taxes (9) Telkom and Indosat (10) ITU estimates (11) Source: Computer Industry Almanac, ITU estimates (12) Source: Internet Software Consortium (13) APJII 29 Indonesia Internet Case Study Annex 3: Schedule of meetings 'DWHÃ 7LPHÃ 3HUVRQÃ 0RQGD\ÃÃ$SULOÃÃ Ã 0UÃ3DQGMLÃ&KHVLQÃ$3-,,Ã 0UÃ*DQGXQJÃ0XUGDQLÃ37Ã,QGRVDWÃÃ 0UÃ$JXVÃ$EGLOODKÃ37Ã7HONRPÃ 0RQGD\ÃÃ$SULOÃÃ Ã 0UÃ2WWRÃ0XUGLDQWRÃ3RVÃ,QGRQHVLDÃ :$6$17$5$1(7 Ã 7XHVGD\ÃÃ0D\ÃÃ Ã 'UÃ,PURQÃ%XONLQÃ%$33(1$6Ã 'UÃ=DLQDOÃ+DVLEXDQÃ8QLYHUVLWDVÃ,QGRQHVLDÃ .$',7%,17(/Ã'$1Ã,1)250$7,.$Ã 6XU\DWLQÃ6HWLDZDQÃ.D'LYÃ5,67,ÃÃ37Ã7(/.20Ã 7XHVGD\ÃÃ0D\ÃÃ Ã 0UÃ$L]LUPDQÃ'MXVDQÃÃ7.7,ÃÃ 0DVÃ:LJUDQWRURÃ0DVWHOÃ 0UÃ5XGLDQWDUDÃ([FHOFRPLQGRÃÃ0DVWHOÃ 0UÃ$ULIXGLQÃ0DVWHOÃ 6GUÃ.HSDODÃ%LURÃ3XVDWÃ6WDWLVWLNÃ %36 Ã 6ULÃ 30 Annexes Annex 4: Abbreviations and Acronyms ADSL Asymmetrical Digital Subscriber Line APJII Indonesian ISP Association AWARI Indonesian Internet Kiosk Association B2C Business to Consumer BAPPENAS National Development Planning Agency BPS National Statistical Office GoI Government of Indonesia GPRS General Packet Radio Services ICT Information and Communication Technology IMF International Monetary Fund ISP Internet Service Provider IT Information Technology KSO Kerjasama Operasi (Joint operating scheme) LoI Letter of Intent MITI Ministry of Industry and Trade PC Personal Computer PCS Personal Communication Systems PoP Point of Presence Rp Indonesian Rupiah, the national currency# At June 30 2001, the rate was Rp 11400 to US$ 1# Note that the Rupiah has been subject to wide variation and US$ figures in this report should be treated with caution# SME Small and Medium Enterprises TKTI Indonesia Coordinating Team on ICT UT Universitas Terbuka 31 Indonesia Internet Case Study Annex 5: Useful web sites *RYHUQPHQWÃ Ã 3RVWHOÃ 7HOHFRPÃUHJXODWRU Ã ZZZSRVWHOJRLGÃÃ %$33(1$6Ã 1DWLRQDOÃ3ODQQLQJÃ$JHQF\ Ã ZZZEDSSHQDVJRLGÃÃ %36Ã &HQWUDOÃ%XUHDXÃRIÃ6WDWLVWLFV Ã ZZZESVJRLGÃÃ 0DLQÃWHOHFRPÃRSHUDWRUVÃ Ã ,QGRVDWÃ ZZZLQGRVDWFRPÃÃ 6DWHOLQGRÃ ZZZVDWHOLQGRFRLGÃÃ 7HONRPÃ ZZZWHONRPFRLGÃÃ /HDGLQJÃ,63VÃ Ã &%1Ã ZZZFEQQHWLGÃÃ ,QGRVDW1HWÃ ZZZLQGRVDWQHWLGÃÃ /LQN1HWÃ ZZZOLQNQHWLGÃÃ 7HONRP1HWÃ ZZZWHONRPQHWLGÃÃ ,&7ÃLQGXVWU\ÃDVVRFLDWLRQVÃ Ã $3-,,Ã ,QGRQHVLDQÃ,63Ã$VVRFLDWLRQ Ã ZZZDSMLLRULGÃÃ 0DVWHOÃ ,QGRQHVLDQÃ,QIRFRPPÃ6RFLHW\ Ã ZZZPDVWHORULGÃÃ 0HGLDÃÃ Ã .DEHOYLVLRQÃ ZZZNDEHOYLVLRQFRPÃÃ 'HWLNRPÃ ZZZGHWLNFRPÃÃ .RPSDVÃ ZZZNRPSDVFRLGÃÃ 7HPSRÃ ZZZWHPSRFRLGÃÃ 7KHÃ-DNDUWDÃ3RVWÃ ZZZWKHMDNDUWDSRVWFRPÃÃ 32 Annexes Annex 6: Bibliography APJII, others# Indonesia Cyber Industry & Market# 2001# Jakarta# PT Indosat# Annual Report# Various years# National Statistical Office# Statistical Yearbook# 1999# PT Telkom# Annual Report# Various years# USAID# Indonesia: ICT Assessment# 33