3G Euphoria, Where to from Here?

How is 3G faring in Indonesia? While it is still being promoted, this third-generation cellular telephone service seems to be losing its sheen. The presence of this latest technology in the mobile phone industry, advertisements of which feature a number of celebrities ranging from Gigi and Krisdayanti to Muslim religious teacher Jefry, it appears to be a wilting flower.  

It is true that when 3G technology was first introduced in Indonesia, users lacked proficiency in this technology. It calls for a change in the habit of making a telephone call, namely from merely speaking and listening to speaking, listening and viewing.  

However, it is not the lack of proficiency in this latest technology that is responsible for the very slow development of 3G in Indonesia. According to several observers, 3G operators seem to pay more attention to video calling services while in fact subscribers need speedy data access.  

Obviously, GSM operators in Indonesia have invested hundreds of millions of U.S. dollars to develop 3G service. A year after its introduction here, however, the number of 3G subscribers stands at fewer than 3.5 million people. Telkomsel, who had 3.2 million subscribers up to July 2007, claims to be among the 10 biggest operators in the world. Meanwhile, XL claims to have 100,000 subscribers making video calls every day (HandPhone magazine, October 2007).  

These figures, however, are far from the estimate by International Data Corporation, a leading data institution, which has predicted that Indonesia will have 300,000 3G subscribers using video call-up by late 2008. The 3G euphoria in Indonesia, which operators have plugged since September last year, has failed to gain a proper response. GSM operators initially set a minimum target of 15 to 20 percent of their subscribers being users of 3G mobile phone technology. This means by 2008, there would be a potential for 10 to 12 million 3G subscribers.  

The question is, how willing are these subscribers to spend money using 3G technology, which is certainly more expensive than using the ordinary mobile telephone? The number of subscribers may be real but they are not active users as they have simply registered. “My cell phone is 3G equipped, but I very rarely use it for video calls. I use this technology only when it is really necessary,” said A. Baihaqi, director of Tactic Communications.  

Baihaqi is just one example. In fact, over the past year, the average revenue per user rate has continued to drop. It therefore comes as no surprise that some people question the future of 3G in Indonesia. Will it fizzle?  

In 2003, the director of Pyramid Research, Ross O’Brian, predicted that 3G in the Asia-Pacific region would sell well only in Japan, South Korea and Australia. As for countries like Hong Kong, Singapore and Taiwan, he said it was not time to implement 3G serviced because the markets in these countries were not ready for 3G technology, plus the income level of Asians was still relatively low.  

Perhaps the promotion period needs to be longer so that 3G investments in Asia will increase. In addition, in most Asian countries teledensity is still below 50 percent, while there is more concern about augmenting the capacity of the network for voice rather than building a new service based on 3G technology. Operators may claim that they are on the right track in developing 3G services, but facts illustrate the opposite, if not indicate that they have used the wrong tactic.  

At the initial stage, operators prioritize the video calling service to lure the public. In fact, what subscribers need is not a video calling or video streaming service but high-speed data access, or an Internet service using HSDPA technology.  

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