Fear of Competition

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  • SIM Card packaging activity of the cellular phone operator Telkomsel in Jakarta, January 22, 2016. Tempo/Tony Hartawan

    SIM Card packaging activity of the cellular phone operator Telkomsel in Jakarta, January 22, 2016. Tempo/Tony Hartawan

    TEMPO.CO, Jakarta - These days, telecommunication has become a basic need. Without it, life would stop in its tracks. Thus, the government's plan to revise the regulation on network operators to make it more beneficial to both consumers and operators must be welcomed. 

    During the past year, Communication and Informatics Minister Rudiantara has been busy drawing up the revisions to Government Regulations No. 52/2000 on Telecommunication Operators and No. 53/2000 on the Use of Radio Frequency Spectrum and Satellite Orbit. One of the important changes to be discussed is the possibility of network sharing among operators.

    The topic alone implies that there are many interests at stake, perhaps the reason why President Joko Widodo has not signed the two regulations. Reportedly, State-Owned Enterprise Minister Rini Soemarno was not that happy with the revisions. At a glance, her concern that network sharing among operators might be disadvantageous to national companies seemed to make sense. 

    However, some have linked her reservations to the clash between Telkomsel, a subsidiary company of Telkom and Indosat Ooredoo, whose majority shares are foreign-owned. The acrimony between the two local network giants surfaced when Telkomsel turned down Indosat's request to rent the former's fiber optic cable network in Maluku, perhaps reinforcing Indonsat's assertion that Telkomsel wants to monopolize the market. Telkomsel currently holds 87 percent of the market outside Java. 

    Telkomsel has valid reasons for rejecting. Throughout the last 20 years, Telkom has painstakingly laid down cables both on land and undersea across many parts of Indonesia. No other operator has invested in such massive assets. It is therefore understandable if Telkomsel wants to shake off competitors wanting to ride on its tailcoat even at a price now that the network gateway has been built.

    Indosat on the other hand, also has a strong argument. Network sharing is a common practice in today's telecommunication world. The company is also prepared to collaborate with other operators to build fiber optic networks but the current government regulation does not facilitate this. 

    The IM2 case is one example of jurisprudence, a nagging issue for operators in the country. In 2013, IM2's CEO Indar Atmanto was sued for going into partnership with another Internet service provider that allegedly caused the state Rp1.3 trillion in losses. Indar was eventually convicted and still languishing in prison. His case is a stark reminder that network sharing needs clear and explicit guidelines.

    The government must prioritize consumers' interests first. Given the massive investment needed to build networks, sharing could trim production costs and ultimately consumers' spending. Operators need to come up with innovative measures to maintain efficiency in order to offer competitive tariffs and best services to attract customers who will have a variety of options. 

    Network sharing will inevitably become a trend amid increased global inter-connectedness and heightened business competition. The government as a regulator must ensure fair business practices that discourage monopoly through regulations that protect the interests of all stakeholders. (*)

    Read the full story in this week's edition of Tempo English Magazine