Tuesday, October 30, 2007

Expected low Internet rate to lure more users

There appears to be an opportunity for Indonesians to enjoy cheap Internet connections, with the entry of PT First Media Tbk. into the high-speed broadband Internet network access business. PT First Media Tbk, a subsidiary of the Lippo Group, has advertised its relatively cheap product, FastNet 384, at Rp 99,000 per month. For just Rp 99,000, a subscriber gets unlimited access to the Internet at a speed of 384 kilobits per second.

First Media provides cheap Internet services through what is called Triple Play. Triple Play consists of FastNet, which is a high-speed broadband Internet service, home cable and digital TV cable as well as datacomm, which is a communication data service for corporations.

First Media gives real broadband service because it is no longer based on shared network access, which is common practice and is purportedly called a broadband service. The low Internet connection rate is expected to lure more Internet subscribers, not only corporations but also students and housewives.

However, it may be some time before anyone can enjoy this particular service as the network infrastructure has yet to be established. According to First Media, the company will invest US$650 million in this service over the next four years.

First Media's low Internet subscription rate is indeed good news for prospective subscribers but it also poses a threat for other Internet providers, such as PT Telkom's Speedy, because they will have to reassess their position if they wish to continue engaging in the broadband business. The presence of FastNet will certainly spur massive price competition, which will have an impact on all other broadband businesses, including wireless services through the use of 3G technology.

Indications that Internet rates would drop became apparent in early February following the issuance of Communication and Information Ministry Regulation No. 3/2007 on network leases, which may lower the network lease rate by up to 50 percent. According to Association of Indonesian Internet Service Providers (APJII) chairperson Sylvia W. Sumarlin, the component of leased circuit in the form of bandwidth from abroad represents 50 percent of the total operational cost of an Internet service provider. "Other big costs are backhaul, access network to subscribers and taxes, the rate of which has yet to be fixed," she said.

According to her, following the lowering of the network lease rate as a result of the new regulation, it is expected that rates will decrease by up to 30 percent. Sylvia stressed that the reduced rate would have a significant impact on Internet usage, namely a 30 percent increase, although this would not mean a rise in Internet users. However, APJII has separately estimated that the number of Internet users would rise by 30 percent once the regulation on leased circuits was applied. At present there are about 20 million Internet users in Indonesia.

Indonesia still lags behind neighboring countries, such as Singapore, in providing cheap Internet access. Since January of this year, Singapore has provided free Wi-Fi access in many public places. Prime Minister Lee Hsien Loong has said that in 2007 the broadband Internet infrastructure network will reach all parts of Singapore. The public will enjoy 512 kbps wireless access for free at public Wi-Fi spots across the city through local telecommunications operators SingTel, iCell and QMax.

While ICell and QMax will provide free Wi-Fi services for two years, SingTel will offer free services for three years. Through a hot spot wireless Internet service program, called Wireless@SG, the Singaporean government will also raise the number of hot spots from 900 to 5,000, concentrated in town centers, business districts and shopping belts. To ensure a more equitable Internet penetration, Lee said, the government will, besides expanding the scope of the hot spots, also provide 10,000 subsidized computers to needy households with school-going children.

The Singapore government's initiative is intended to ensure that all Singaporeans can enjoy the same digital experience. "We must create digital opportunities for all Singaporeans, and never allow a digital divide in our society," Lee said.

Internet penetration is said to be a yardstick for the level of progress achieved by a nation. Indonesia has only 20 million Internet users or a penetration of 8.9 percent of the total population (See http://www.internetworldstats.com/). Viewed from the number of Internet Protocols (IP) in circulation or allocated, which stands at over 2.8 million, they can be estimated that the maximum number of subscribers is somewhere in the vicinity of two million.

Compare this with Malaysia, which has an Internet penetration of close to 38 percent and 2.8 million allocated IP numbers, or with Singapore, where 68 percent of the population has Internet access and the IP numbers stand at 2.6 million. As the need for bandwidth should be viewed not from penetration but from the number of users and IP numbers, it is strange that allocated IP numbers in Indonesia are greater than in neighboring countries. As the IP numbers are comparable with those in neighboring countries, Indonesia should therefore have Internet rates comparable with those in neighboring countries. Unfortunately, many countries have no intention of introducing low rates and broad bandwidth.

In terms of economic calculation and needs, the Internet is indeed a necessity. The biggest constraint for Internet users is the rate. If the government is aware of this condition, it must introduce policies to ensure that the Internet is cheap.

Indonesia is a country with a host of anomalies. Creativity has become increasingly challenged with so many constraints being faced. Once a company expressed an intention to provide free Internet access, other companies boycotted this in a variety of ways. What is worth asking now is, given the fact that First Media can set a rate of Rp 99,000 per month, what is the actual rate of gateway access abroad, something that has until now been used as an excuse for high Internet rates in Indonesia. (Arif T. Syam)

The Jakarta Post, October 30, 2007

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