Current Issue
There are not many companies operating in ISP industry in Indonesia. There are 190 ISP players registered in the industry but only 50 of them are operational this year and among the 50 players only 20 have the category as a big player. The ISP industry has a big market potential with the large population of more than 220 million. The internet penetration is still low, among the lowest in this region. The low ISP penetration is attributable to high internet tariff and low penetration of computer.
The tariff is high because of the prevailing condition related to infrastructure networks business of copper cable, fiber optic, satellite and hybrid fiber coaxial (HFC), which are controlled by a few players. Most internet connections have to use the networks controlled by the few players.
Among the few controlling networks is state-owned PT. Telkom, which is very dominant as it controls copper cable networks all over the country. In addition, Telkom has optical fiber networks much larger than ones owned by Indosat and Excelcomindo.
This condition, makes it difficult to reduce the tariff of bandwidth in the networks. Currently the government is seeking to regulate leased lines through a decision of the state minister for communications and information No. 3 in 2007. The regulation is expected to be effective in reducing the internet tariff by 30%.
The present regulation still burdens ISP industry with high costs as the regulation still fails to cope with alleged monopoly in the leased line business, which is the backbone in the operation of internet connection.
For the sake of example, in 2005, the cost paid by an operator in for internet connection of 2 kilometers was US$ 3,760 a year as against US$ 18,000 in Indonesia. The respective tariffs for a distance of 200 kilometers were US$ 7,603 in India and US$ 45,000 a year in Indonesia.
Internet Services in Indonesia
In Indonesia, internet was first used widely in 1996. Since then the internet service industry has grown fast. Currently internet traffic in Indonesia is around 80 gigabyte per second (Gbps) covering all connection media of very small aperture terminal (VSAT), leased line (Telkom and Indosat), and Indonesia Internet Exchange (IIX).
Internet Service Provider (ISP) industry could not stand independently as in its production process it uses telecommunication networks either cable or wireless. The cable networks generally used at present are those of PT. Telkom and optical fiber networks of PT. Telkom, Indosat and Excelcomindo. Meanwhile, wireless networks are used through VSAT.
Dial up
Internet connections through dial up is made by connecting computer with a certain number through fixed cable telephone networks of PT. Telkom. This product has weakness in access speed, which is no more than 56 Kbps) and could not be used for voice communications at the same time.
The product of dial-up is offered by most ISP companies in Indonesia. The main player is PT. Telkom with its product of "TelkomNet Instan" launched in 2004.
This service offers an advantage over its competitor because of its control of fixed cable telephone networks that the price it offers is very competitive at Rp 165 per minute for networks and internet connections.
Connections to "TelkomNet Instan" do not need registration of subscribers and without subscription fee. Meanwhile other players like CBN puts up tariff based on the access time depending on the type of selected package.
Other ISP subscribers also have to make registration which will cost some money together monthly fee. Apart from the two kinds of cost subscribers have yet to pay local telephone pulse to Telkom as the owner of fixed cable telephone networks.
With the expansion of high speed internet connection technology users of dial up connections declined in number. Only Telkom with Telkomnet Instan still has the potential to grow.
Asymetric Digital Subscriber Line (ADSL)
Dial-up connection is no longer seen adequate considering the growing and varying requirement. If in the beginning internet is used to present only text it is now transmit voices even picture. For that purpose internet connections is needed with higher speed to transfer data.
The requirement could not be met by dial up connections through copper cable, but with the advancing technology of Asymetric Digital Subscriber Line (ADSL), the same copper cable could transmit data with larger volume (broadband).
Not of all of the same cable networks with dial up could access ADSL. This service could be accessed through fixed copper cable telephone networks of Telkom which has been modified into Multi Media Access (MMA).
In the beginning this broadband service was introduced only in Jakarta and its satellite cities Tangerang, Bekasi, and Bogor, but now it could be accessed from 27 cities in Indonesia including in Sumatra, Java, Bali, Kalimantan, and Sulawesi.
ADSL could receive data (downstream) as much as 512 Kbps and transmit data (upstream) as much as 64 Kbps. In addition, ADSL also could separate internet channel from voice channel that fixed line could be used in the same line even when it is being used by internet.
The product as the capacity with the use of modem technology, which works on a frequency between 34 kHz and 1104 kHz, while dial up uses modem which works on a frequency of below 4 Khz that could only transmit data with a speed of 56 Kbps.
In Indonesia, ADSL connection is monopolized by Telkom. Other ISP such as CBN, Biznet, and Centrin also offer ADSL product but only as a reseller of ADSL of Telkom. Telkom alone offers its ADSL service with Speedy brand.
The monopoly held by Telkom makes the ADSL service in Indonesia more expensive than in other neighboring countries like Singapore. The price of ADSL internet connection offered by non Telkom ISPs for unlimited access package in Indonesia is Rp 5 million a month as against only Rp 2.07 million in Singapore.
Recently Telkom itself reduced its tariff from Rp 2 million to Rp 700,000 serving a big blow to other players, which offer other broadband services. The non Telkom players seek to cope with the problem they face by providing better services to keep their subscribers from leaving them.
The difficulty in expanding ADSL in Indonesia is the fact that there are few networks that have he quality needed to transmit data optimally. Most copper networks of Telkom have been too old. Only 25% of the total number of subscribers or 2 million line units of fixed cable telephone of Telkom in Indonesia could be used for ADSL networks. Telkom has continued to make revamping by replacing the old networks with new ones, but only in large cities. The number of subscribers of ADSL internet of Telkom in 2006 totaled 93,200 or up 204% from the previous year.
Meanwhile, investment needed to provide ADSL service from upstream to downstream was around US$ 380 per line unit in 2004. The investment included for digital subscribers line access multiplexer (DSLAM), which becomes the data service central for all subscribers. However, the investment has continued to decline with the cheaper price of DSLAM.
Cable internet
High speed internet access could also be obtained through optical fiber and through Hybrid Fiber Coaxial (HFC) cable networks or better known as cable internet. In Indonesia this internet service has become one with cable television service.
A number of players offering this service are PT Indonusa Telemedia, which is a subsidiary of PT. Telkom (Telkom Vision) and Kabel Vision, a subsidiary of PT Broadband Multimedia. Telkom Vision which uses HFC networks could transmit data from 64 Kpbs to 512 Kbps. Meanwhile, Kabel Vision could transmit data with a speed of 2 Mbps.
Kabel Vision cooperates with 7 ISPs including MyNet, LinkNet, Indosat Net, CBN, UniNet, IndoNet, and Centrin. The subscribers of the 7 ISPs could use Kabel Vision channel. The number of subscribers of Telkom Vision totaled 42,351 in 2006. Kabel Vision targets to have 120,000 subscribers by the end of 2007 and 1 million in 2010.
Dedicated
Most of the users of Dedicated service are corporate subscribers as it provides continued internet access service with high speed and efficient with minimum trouble. Dedicated connections service could be channeled through a number of types of media such as copper cable, microwave, fiber optic, and satellite.
Almost all ISPs offer this service, but only a few of them have own networks. Most ISP provide only connections but the networks are provided by the consumers. Among the players such as CBN and Biznet have networks in copper (wiring) and optical fiber in the Greater Jakarta. CBN has copper networks in the Sudirman-Thamrin area and Pondok Indah in Jakarta.
Meanwhile, Biznet has expanded optical fiber networks in Kuningan-Sudirman-Gatot Soebroto-Slipi-TB Simatupang-Pondok Indah area often called Metro Ethernet. Until now there are 108 buildings in that area connected with Metro Ethernet.
WiFi
The advancing wireless technology has its effect on internet connections. In the past several years, the technology of wireless fidelity (WiFi), which enables internet access without wire by using networks card of Wi-Fi 802.11 a/b/g, has been applied in internet connections.
Wireless access through WiFi technology which is called hot spot is generally provided in strategic locations such as large shopping malls, kafes, airports and public facilities like, hotel, apartment in large cities in Indonesia. Until now the number of hot spots established by ISPs in Indonesia has reached hundreds.
Starbucks Kafe units, which are located in tens of large cities in Indonesia are among the locations of hot spots. In Starbucks, there are a number of ISPs providing hot spot access.
Users of WiFi could choose to be a subscribers or user of pre paid voucher. Users of hot spots of Telkom could buy access card called iVAS Card with a nominal price of Rp 27,500; Rp 55,000; and Rp 100,000 sold in Plasa Telkom or in hot spots of Telkom and through SMS Telkomsel 4827.
More Hot Spots are installed in various areas especially in large cities. Several players like Telkom, Indosat, Biznet and CBN offer this service.
Indosat has so far installed Hot Spots in 19 cities in Sumatra, Java, Bali Kalimantan, and Sulawesi. Meanwhile, Biznet has installed hot spot in 27 locations including four in hotels, restaurants and office building and 23 units in Starbucks Kafe.
Mobile
Meanwhile mobile access is made through cellular telephone networks both GSM through Global Packet Radio Service (GPRS) technology and Enhanced Data rate GSM Evolution (EDGE). Mobile internet service is also available in cellular telephone with the CDMA technology.
ISP company cooperate with cellular networks owners in making access. Telkom launched connections through Telkom Flexi (CDMA). Some players cooperate with Fren (Mobile-8) such as CBN and Radnet also has launched similar product.
With the 3G technology, players like Telkomsel, Indosat M2 and XL could serve internet access through GSM cellular telephone through high-speed downlink packet access (HSDPA) technology.
Number of ISP companies down
The country has quite many licensed players in ISP industry, but most of the players have not used their license. In 2007, the number of ISP companies totaled 196 but only 50 of them are active in operation.
The decline in the number of ISP companies is attributable to expansion by PT Telkom and other big players pushing aside small players. Many ISP have recorded a decline in the number of their subscribers such as Idola (dial up) now only have 500 dial-up subscribers in Jakarta, down from more than 5,000 subscribers in 2005. In June 2007, the directorate general of post and telecommunications revoked the license of 11 ISP companies and 1 Network Access Provider (NAP).
The reasons for the revocation included failure to make adjustment of their modem licensing, failure to pay telecommunications BHP telecommunications, failure to send annual report of their operation.
Main players
There are many players in ISP industry but he industry is dominated by a few big players. Telkom is one of he big players in addition to IM2, CBN, Biznet, etc. The coverage of the main players are almost the same. The main players have almost all types of internet connection service. His indicates that this industry is seeking expansion of capacity of internet connections.
PT. Telkom to gain domination in internet business
PT. Telkom, was originally fully owned by the state having an exclusive right to operate telecommunications in Indonesia. PT. Telkom began to expand operation to ISP business with its product of Telkomnet Instan.
Telkomnet Instan, is an internet connections dial up through fixed cable telephone networks of PT. Telkom with an access code of 080989999. In line with the expansion of cellular business PT. Telkom expanded Telkomnet Instan access through fixed wireless telephone called Flexi.
In the following development, PT. Telkom launched broadband service namely Telkom Speedy in 2005 Telkom Speedy is connected through the channel of fixed cable telephone which is modified into Multi Media Access (MMA).
Telkom gained domination in the business of internet connections after the launching of Speedy using the technology of Asymetric Digital Subscriber Line (ADSL).
ADSL has an advantage over other cable connection as this dial-up is made through its own networks.
Telkom monopolizes ASDL business in Indonesia. Telkom also has launched business in mobile service aimed a the subscribers of subscribers Telkom Flexi (CDMA).
The potential of the internet connections business has prompted Telkom to plan service expansion with wireless service through hot spots. So far Telkom already has hot spots established in hundreds of locations.
Indosat Mega Media (IM2)
When ISP industry began to expand in 1996, PT. Indosat, then a state company operating in telecommunication business, established PT. Indosat Mega Media (Indosat M2) as a subsidiary to operate in ISP business in Indonesia.
In December 2002, Indosat M2 was merged with Indosatcom and began to operate B2B e-commerce, and had a new subsidiary namely PT Mediagate Indonesia.
In 2003, Indosat M2 expanded service of internet connections by opening dial up access with the code of 080988001 that could be accessed from 180 cities in Indonesia. The number of its dial-up subscribers dial up until 2006 reached 27,027.
In the same year, Indosat M2 expanded its internet access through the networks of GSM cellular in cooperation with Indosat (Mentari, Matrix, and IM3). Indosat also serves dedicated internet connection the subscribers of which totaled 1,199 in 2006 up from 751 in the previous years.
Expansion of service is also made through cooperation with Beyond The Network (BTN) to implement IP VPN, which is based on MPLS (Multi Protocol Label Switching) that it could be accessed in all southeast Asia, China, Japan, Australia, Europe and the United States.
Through this cooperation Indosat became Indonesian ISP with the largest coverage. The subscribers of this service until 2006 totaled 217 up from 170 in the previous year.
Indosat offers internet access in isolated areas with the DVB RCS technology through satellite starting 2005. The expansion of wireless access has also prompted Indosat to launch hot spot service in large cities in Indonesia.
Cyberindo Aditama (CBN)
CBN was established in 1995 having 9 Points of Presence (POP) in several cities--Jakarta, Bogor, Bandung, Bali and Samarinda.
CBN services consist of dial up and broadband including cable TV, DSL, dedicated, wireless, mobile, and satellite. CBN has launched the wiring service, by connecting its special subscribers in several areas in Jakarta with its copper cables.
Biznet
Biznet was established in 2000. Though relatively new, it has fairly large number of subscribers thanks mainly to its Metro Ethernet service which is an optical fiber networks in Jakarta.
The optical fiber networks of Metro Ethernet is installed in the expensive business district area of Kuningan-Sudirman-Gatot Soebroto-Slipi-TB Simatupang-Pondok Indah in Jakarta. With this service, Biznet is expected to be able to attract large subscribers in the coming years.
In 2007, Biznet launched Fiber To The Home (FTTH) service to attract more personal subscribers. So far its subscribers are mainly in the corporate sector.
Number of subscribers
In the past five years, the number of subscribers and users of internet services in Indonesia has increased rapidly--from 400,000 subscribers and 1.9 million users of internet service in 2000 to 2.5 million subscribers and 20 million users in 2006.
The number of subscribers of Telkom in 2006 totaled 893,200 including 680,000 dial up subscribers, 120,000 cable internet subscribers and 93,200 ADSL subscribers. The numbers do not include subscribers using mobile (CDMA) of Telkom Flexi.
The number of subscribers of Indosat M2 totaled 28,443 consisting of 27,027 dial up subscribers, 1,199 dedicated subscribers and 217 subscribers VPN.
The number in 2007 is expected to increase as Indosat M2 has provided mobile internet service in cooperation with Mentari, Matrix, IM3 in GSM technology and Mobile 8 (Fren) in CDMA technology.
CBN had 50,000 corporate subscribers and 850 personal subscribers personal. Most CBN subscribers are in Jakarta and served with copper cable connections called CBN wiring service.
Biznet had 20,000 subscribers served with optical fiber networks. Most of its subscribers are from the corporate sector. Its personal subscribers include telecenters in South Jakarta.
Income of major players tend to increase
Players having telecommunication networks generally posted an increase in income. Telkom, which posted the largest income from the ISP business, recorded an increase in income from Rp 554.9 billion in 2004 to Rp 907.5 billion in 2006.
Indosat and XL also posted an increase in income respectively from Rp 289.1 billion and Rp 13.9 billion in 2004 to Rp 422 billion and Rp 28.7 billion in 2006.
Meanwhile, players having no own networks such as Centrin and Dyviacom recorded a decline in income. Centrin recorded a decline from Rp 58.9 billion in 2004 to Rp 44.9 billion in 2005 as shown in the following table.
The launching of Speedy by Telkom has caused wider gap between big and small players.
The aggressive promotional drive by Telkom with its Speedy product will certainly put heavier problem for small player not having networks. Telkom has cut the price for its Speedy service by 60% this year.
Competition
The success in competition in the ISP industry in Indonesia is very much determined by the availability of telecommunications networks. Player like Telkom will easily emerge as the winner in the competition with its wide networks. It is especially superior in the ADSL service as its copper cable networks are much wider that those of other players.
When Telkom cut the tariff of its ADSL (Telkom Speedy), the players which have the position as resellers suffered as the tariff of the leased networks was unchanged.
Those managing to survive under the pressure from Telkom are players which have their own networks such as Biznet, CBN, and Lintasarta. However, these players operate more in the corporate sector as their networks are located only in business districts in Jakarta.
Attempts by these players to expand market to cover personal subscribers will not be easy as Telkom is already very dominant in copper networks connected to personal subscribers in massive scale. Expansion to personal subscribers could be made only in areas around their networks.
Players other than Telkom could make expansion of business in mobile service through CDMA-based cellular telephone for those having no 3G license, and 3G GSM for those holding 3G license especially as he technology of HSDPA of 3G service has a speed of up to 2.6 Mbps much speedier than ADSL which is effectively only at 512 Kbps. This market is highly potential with the large number of cellular subscribers if the price of mobile connection could be reduced.
Table-1 Types of product ISP Types of product Connections Network provider Dial Up Fixed cable telephone PT Telkom (copper) ADSL Fixed cable telephone PT Telkom (copper) Cable Networks fiber optic, Telkom Vision, Kabel Hybrid Fiber Coaxial Vision, IM2 (HFC) Dedicated Fiber Optic, Microwave, Biznet, CBN, etc. Satellite Wireless WiFi Telkom, Indosat, Biznet, CBN, etc. Mobile GSM, CDMA Telkomsel, XL, Indosat, Mobile 8, Telkom, Source: Data Consult Table-2 Number of ISP and NAP players in Indonesia, 2002 -2007 Year 2002 2003 2004 2005 2006 2007 Number of ISP companies 180 190 228 232 201 190 Network Access Provider 18 22 36 36 36 35 (NAP) Source: APJII, Data Consult Table-3 Service coverage of main ISP players in Indonesia Types and names of service Players Dial Up ADSL Cable Telkom Telkomnet Speedy Instan Indosat Mega INDOSATnet IM2 Pay TV Media (IM2) Dial-Up, Internet Instan (through Phone) PT. Indonusa Pay TV cable Telemedia TELKOMVision PT. Broadband Kabel Vision Multimedia Excelcomindo Telkomsel CBN CBN Dial Up CBN CBN Cable ADSL Internet BizNet Biznet Dial Up Biznet Metro DyviaCom Dyvia Dial Up Centrin Centrin Dial Up Centrin ADSL Kabel Net (via Kabel Vision) Lintasarta IdOLA Radnet Net Dial, LAN Net DSL Pacific Link Pinter Dial Up Pinter ADSL Indonet Personal Dial Limited ADSL, Cable Internet Up, Nighteyes Unlimited ADSL (via Kabel plus Vision) Infoasia Personal Dial Up, Corporate Dial Up Melvar Dial Up Nusa Personal, Dial Up Corporate Types and names of service Players Dedicated Wireless Mobile Telkom Astinet Telkom Hotspot Telkomnet Flexi (CDMA) Indosat Mega IM2 IM2 Indosatnet Media (IM2) INDOSATnet Hotspot Mobile Dedicated (StarOne, Fren: CDMA), Indosat broadband 3.5G PT. Indonusa Telemedia PT. Broadband Multimedia Excelcomindo XL GPRS, XL 3G (GSM) Telkomsel Telkomsel GPRS, 3G (GSM) CBN CBN CBN Mobile DirectNet through XL, CBN Mobile through Fren, CBN Mobile through StarOne BizNet Metro Ethernet, Biznet Biznet Mobile Metro Fiber To Wireless Access (CDMA The Home (FTTH) :Fren) DyviaCom Dyvia Wireless Centrin Centrin Centrin Unlimited Dedicated Hotspot, Wireless (GPRS, 3G: XL), Mobile Access (CDMA: Fren) Lintasarta Mega Xpress, Super Xpress, Smart Xpress, Value Xpress, Lite Xpress, VSATXpress Radnet LAN Dedicated, LAN ISDN, One Way Satellitee, Two Ways Satellitee Pacific Link Pinter Direct Pinter Wireless Pinter Mobile Access (CDMA: Fren) Indonet Indonet Mobile (CDMA: Fren) Infoasia Corporate Lease Infoasia One Network Melvar Melsa Kabel Melsa Wireless Nusa Source: Data Consult Table-4 Number of Subscribers & Users of Internet (cumulative) in Indonesia 1998-2006 *) Years Subscribers Users 1998 134,000 512,000 1999 256,000 1,000,000 2000 400,000 1,900,000 2001 581,000 4,200,000 2002 667,002 4,500,000 2003 865,706 8,080,534 2004 1,087,428 11,226,143 2005 * 1,500,000 16,000,000 2006 ** 2,500,000 20,000,000 Note: *) estimate of APJII, **) estimate of Data Consult Source: APJII, Data Consult Table-5 Number of subscribers of ISP in Indonesia 2006 Number of Players subscribers Telkom 893,200 Indosat 28,443 CBN 50,000 Biznet 20,000 Pacific 5,000 Source: Data Consult Table-6 Income of several ISP players in Indonesia, 2004-2006 (Rp billion) Players 2004 2005 2006 Telkom 554.9 711.4 907.5 IM2 289.1 390.2 422.0 XL 13.9 19.9 28.7 Centrin 58.9 44.9 na Dyviacom 10.7 10.5 7.5 Source: Data Consult
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