Indonesia will hold limited tenders for unused capacity in the 2.1 and 2.3 gigahertz radio frequency bands by the middle of this year, Communications and Informatics Minister Rudiantara said on Monday (20/02). (ID Photo/Emral)

Limited Tender by Mid-Year for Unused 3G and 4G Frequency: Minister

BY :MUHAMAD AL AZHARI

FEBRUARY 21, 2017

Jakarta. Indonesia will hold limited tenders for unused capacity in the 2.1 and 2.3 gigahertz radio frequency bands by the middle of this year, Communications and Informatics Minister Rudiantara said on Monday (20/02).

The minister said existing mobile operators are expected to make their bids in the upcoming tender to secure additional bandwidth, which will allow them to improve their capacity to serve customers in densely populated areas.

"The winner [of the tender] must be named by the middle of this year," said Rudiantara, who is a veteran telecom industry player. He added that a ministerial regulation to guide the tender process is expected by the end of March.

Rudiantara said only existing operators will be targeted in the limited tender, which means that the government will not open the door to newcomers in the industry.

The 2.1 GHz band is used by mobile operators like Telkomsel, Indosat Ooreedoo, XL Axiata and Hutchison 3 Indonesia, to provide 3G mobile services.

The 2.3 GHz band is used for broadband wireless services by companies such as Internux – the operator of Bolt! 4G LTE, which is available in limited areas in the greater Jakarta area and Medan in North Sumatra – and Berca Hardaya Perkasa, which mainly operates in Denpasar (Bali), Makassar (South Sulawesi) and Pekanbaru (Riau).

During the discussion on Monday, Rudiantara explained that mobile phone operators are facing pressing challenges in what he called "spectrum crunch" in major cities in Java, such as Jakarta, Bandung (West Java), Semarang (Central Java), Yogyakarta and Surabaya (East Java).

He was referring to a condition where operators struggle to provide telecommunication services to their customers due to a rapid increase in data traffic and limited radio spectrum to accommodate the increased traffic.

The mobile phone industry in Indonesia has seen growth in data traffic surpass that of telecommunication traffic from voice calls and short text messaging services. One of the culprits is increased use of video by mobile phone users.

Rudiantara said the additional bandwidth will allow operators not only to better serve customers, but also lead to savings in both capital and operational expenses.

The minister said after the re-arrangement of operators holding 3G and 4G spectrum assets in the 2.1 GHz and 2.3 GHz band is completed, the tender winners are expected to start operating on their newly acquired bandwidth.

The tender for unused capacity in the 2.1 GHz band has been delayed since 2015, despite two unused frequency blocks that were vacated when by Saudi Arabia-backed Axis Telekom handed back 10 MHz of bandwidth capacity to the government in 2014, following a successful merger with XL Axiata, the Indonesian unit of Malaysia's Axiata Group.

Rudiantara said technical difficulties are among the problems that have delayed the tender.

In the 2.3 GHz band, which offers a total capacity of 100 MHz of bandwidth, 30 MHz of capacity is currently unused. Rudiantara said only half of the idle capacity in this band will be put on limited tender, but he did not give a reason.

Smartfren Telecom, the telecommunications arm of the Sinar Mas Group, currently controls 30 MHz in this band, while regional BWA providers control 30 MHz. The remaining 10 MHz is reserved for the Universal Service Obligation, which is a government-backed program to provide telecommunication services, including internet, to the public.

During Monday's event, Hutchison vice president director Danny Buldansyah said operators expect no further delays from the government in holding the tender.

"We are really interested. It doesn't matter if the scheme uses a tender," Danny said.

The government may rake in as much as Rp 700 billion ($52 million) in non-tax revenue from just one operator seeking to secure only 5 MHz bandwidth capacity in the first year of operation, based on the previous tender, Danny said. This includes up-front fees.

Ivan C. Permana, vice president of technology and systems at Telkomsel, Indonesia's biggest mobile phone operator, echoed Danny's comments, putting more pressure on the government to ensure that there are no more delays in the tender this year.

He said spectrum is a limited resource for the country and that it should benefit the community at large.

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