The government should revise Indonesia's outdated telecommunication laws to accommodate the needs of players and new developments in the information and communication technology sector, instead of forcing operators to share their backbone networks and radio frequency licenses, experts say. (JG Photo/Yudhi Sukma Wijaya)

Experts Tell ICT Minister to Revise Outdated Laws Instead of Shaking Up Operators

BY :MUHAMAD AL AZHARI

DECEMBER 16, 2016

Jakarta. The government should revise Indonesia's outdated telecommunication laws to accommodate the needs of players and new developments in the information and communication technology sector, instead of forcing operators to share their backbone networks and radio frequency licenses, experts say.

The government, spearheaded by Communication Minister Rudiantara, seeks to liberalize the country's $14 billion telecommunications industry with a limited revision of Government Regulation No. 52 of 2000 and Government Regulation No. 53 of 2000.

The planned revision will force telecom operators to share radio frequency licenses and backbone infrastructure with rivals – with rental rates to be decided by a third-party valuator – in a bid to accelerate the roll-out of broadband coverage in the archipelago. Radio frequency spectrum transfers will need the minister's approval and further provisions on this will be governed by a ministerial regulation.

Telecom operators are currently not obligated to share their backbone infrastructure, while radio frequency spectrum licenses are not transferable.

Dimitri Mahayana, a lecturer at the Bandung Institute of Technology (ITB), said in a discussion in Jakarta last week that Indonesia is facing a far bigger challenge in its ICT sector, rather than just slow broadband penetration.

He believes the over-the-top content industry, such as mobile applications, is currently "under-regulated" while on the other hand, the traditional telecommunication industry, which involves voice call services, short text messaging and mobile broadband, is "over-regulated."

Dimitri, who is also the chief of telecommunication research company Telematika Sharing Vision, said the sector will descend into "chaos" if Indonesia fails to streamline its laws and policies.

He said Finance Ministry officials and Rudiantara himself have been telling giant global OTT players with a strong presence in Indonesia, such as Google and Facebook, to establish "permanent status" in the country and pay more taxes.

"If the government is still unable to release regulations for these OTTs, then it should relax regulations on the telecommunication sector. Just let the industry grow naturally," Dimitri said.

He pointed out that OTTs with subscribers in Indonesia do not pay the various tax-related charges or license fees, such as what is required from telecom operators.

Heavily regulated telecommunication industry players pay operating rights fees, known as BHP, to offer telecommunication services. They also pay radio frequency spectrum utilization rights fees, known as BHP Pita Spektrum, value-added tax and corporate income tax. They are also liable for the so-called Universal Service Obligation, which sees the government collect a 1.25 percent levy on the gross revenue of all telecommunication operators in the country.

These charges are not applicable to OTTs.

Economic expert Faisal Basri meanwhile urged the government to revise Law No. 36 of 1999 on Telecommunications, instead of shaking up the industry.

The outdated law has been criticized for resulting in overlap charges and causing confusion among telecommunication players that offer both conventional telecommunication services and internet-based services, such as video on demand.

"If the law itself needs many updates, why not change the law first?" Faisal said.

While the outlook for Indonesia's telecommunication sector next year looks promising, another price war and policy risks, triggered by the government's plan to push operators to share networks, may carry downside risks, an equity report released earlier this month showed.

The sector's rating has been cut to "neutral" from "overweight," according to research by Brokerage Bahana Securities, in partnership with the Daiwa Securities Group.

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